How Fuel Price Sensitivity Impacts Asian Airlines

The video tutorial explores factors influencing airlines' sensitivity to fuel prices, focusing on fuel hedging, average flight length, and cost structure. It highlights the differences in how Chinese and Japanese carriers are affected by oil price changes, noting that Chinese carriers are unhedged and have shorter flight lengths, making them less sensitive to fuel price fluctuations. The discussion also covers the impact of these factors on stock prices and the financial performance of airlines.

Which of the following is NOT a factor affecting an airline's sensitivity to fuel prices?

• Overhead cost structure

• Average flight length

• In-flight meal quality

• Fuel hedging

How does the average flight length affect an airline's sensitivity to fuel price changes?

• Longer flights increase sensitivity.

• Flight length has no impact.

• Only cargo flights are affected.

• Shorter flights increase sensitivity.

Why have Chinese carriers shown significant stock price reactions to oil price changes?

• They have the longest flight routes.

• They are fully hedged against fuel price changes.

• They are 100% unhedged.

• They have the highest overhead costs.

What is a characteristic of Chinese carriers that reduces their sensitivity to fuel price changes?

• They have high staff costs.

• They are fully hedged.

• They have a significant cargo business.

• They fly long distances.

What percentage impact does a $1 rise in jet fuel prices have on the 2018 bottom line of Chinese carriers?

• 6-8%

• 4-6%

• 2-4%

• 1-2%