Fuel Hedging Masterclass

FUEL HEDGING MASTERCLASS
by trueventus
11 - 12 July 2012 | Singapore
INDUSTRY OVERVIEW
Some companies do not hedge its fuel because they are con dent that fuel
WHO SHOULD ATTEND
prices are going to fall, and therefore, become at ease paying for a higher price
Airlines:
for fuel.
* Treasurers
* Chief Financial Officers
Another is the tendency to pass on all upturns in fuel price with no e ect to the
* Other members of fuel risk management committees
company's bottom line. However, if you look at the bigger picture it proves to be
* Fuel procurement management
unsuccessful.
* Corporate finance
* Financial reporting
For some large companies such as Airlines, Maritime, Railways, etc., Fuel Hedging
* Investor relations (hedging can be a reportable issue during
is part of the nancial risk management and is used to reduce exposure to unpre-
quarterly and annual conference calls with analysts and
dictable and potentially rising fuel costs.
investors)
Other transport concerns that are intensive end-users of fuel,
The common practice of companies is to make advance purchases of fuel at a
including:
xed price for future delivery in protection with expected price hike-up in the
* Railways
market.
* Maritime shipping companies
* Ferry operators
A well-constructed fuel hedging program will support treasury's liquidity
* Road-haul/trucking firms
targets, preserve cash ow, maximize earnings, and improve budgeting and
Fuel suppliers:
forecasting accuracy. Fuel price hedging represents an important component to
* Oil company suppliers and third-party re-marketers of jet fuel.
the overall fuel management and forms an integral part of enterprise-wide risk
Financial services:
management. It can materially a ect the nancial position of industries, and as
* Investment banking counterparties involved with fuel and
such demands careful management attention.
foreign currency hedging
* Retail bank partners involved with cash and working capital
If your company is uncovered to oil price uctuations, a fuel hedging tool will
support for airline
help you eliminate the threat to your fuel budget to get out of control.
Does your company have an o cial fuel hedging tactic? The best fuel hedging
PRE COURSE QUESTIONNAIRE
scheme is often to drive a best result game plan. This training will dissect the
importance of fuel oil expenses and its impact on operational costs.
In order to clarify your learning objectives and ensure you get the
most out of this training, you will need to complete a Pre-Course
Questionnaire stating your knowledge of the subject, level of
experience and other relevant issues. The course leader will analyse
WHY YOU CANNOT MISS THE EVENT
your form to ensure that the course covers your needs accordingly.
Each participant will have somewhat di erent expectations of a fuel price hedging
program. Overall, participants will leave the training course with a better under-
standing of hedging strategies and structures.
PROGRAMME SCHEDULE
0830 Registration and co ee
KEY BENEFITS OF ATTENDING
0900 Morning session begins
* Understanding the oil and how they relate to the industry
1030 Morning networking break
* Developing an e ective fuel hedging and commercial strategies in order to keep one
1300 Networking luncheon
step ahead of the competition
1400 Afternoon session begins
* Gaining an in-depth knowledge of the mechanics of fuel hedging products
1530 Afternoon networking break
* Benchmarking assessment of airline fuel hedging programs globally and in Asia-Pacific
1730 Course concludes
* Using of trading risk management ("ETRM") to track fuel hedging portfolios
* Comprehending of "hedge accounting" under International Financial reporting
Standards (IFRS)
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T: +63 2 575 1426
F: +63 2 846 3587
E: andren@trueventus.com
Session Eight: Accounting principles under IFRS and session
wrap-up
DAY 1 - 2
Many countries globally have or are transitioning from local GAAP to
Session One: Overview of energy markets
International Financial Reporting Standards (IFRS). As well, many airlines
that do hedge fuel also practice what is known as hedge accounting. This
It is of particular importance that participants understand the dynamic
session will provide an overview of hedge accounting, upcoming changes
and interrelated nature of local and global energy markets, supply-
to the standard from International Accounting Standard (IAS) 39 to IFRS 9,
demand fundamentals, key jet fuel markers and other proxy commodities
and a benchmarking of network carriers and low cost carriers globally that
such as crude oil and heating oil, plus an assessment of recent and
practice hedge accounting.
forecast price movement. This session will include the following:
* Overview of "hedge accounting" and why it should, or should not, be practiced;
* Review course outline, objectives and any unique participant requests.
* Impact of the transition from IAS 39 to IFRS 9;
* Dynamics of global energy markets and their impacts on jet fuel prices.
* Benchmarking of airlines globally that practice and do not practice hedge
* Jet fuel market outlook.
accounting; and
* Main jet fuel price benchmarks.
* Question and answer session.
Session Two: Hedging objectives and benchmarking
This session will outline and discuss some of the more important
objectives that underpin a fuel hedging program. As well, participants will
ABOUT YOUR COURSE LEADER
be given a wide-ranging exposure to various benchmarking e orts to
understand the extent and types of fuel hedging practiced worldwide.
Robert J. Kokonis has 23 years of leadership experience in
* Primary objectives in fuel price hedging, including the question of
the broader aviation and travel sectors, acquired with
whether airlines should or should not hedge their fuel price risk.
major airlines such as Air Canada where he headed nances
* Benchmarking assessment of airline fuel price hedging programs globally
for commercial and operational divisions, with the latter
and in Asia-Pacific.
including fuel and pilot labour. Airline postings included
Session Three: Hedging fundamentals I
Finnair and Royal Jordanian. Related senior postings saw
At the core of any fuel hedging program are the fundamental mechanics
Robert with travel management leader Carlson Wagonlit
to be considered, including types of hedging, hedging channels, underly-
Travel, global distribution system Worldspan and travel
ing commodities, di erent types of hedging-related risks, and metrics
technology pioneer CharterHub Inc.
used to determine results. This session will cover the following:
* Fundamentals of fuel price hedging, with an introduction to key hedging
Since founding AirTrav Inc. in 2001, Robert has provided commercial,
concepts such as:
nancial, fuel management, operational, regulatory and travel management
- Financial hedging, versus quasi-operational and quasi-commercial hedging;
guidance to airlines, airports, armed forces, governments and other transport
- Over-the-counter ("OTC") versus commodity exchange trades;
concerns worldwide. He has conducted due diligence and research for
- Hedging jet fuel with proxy underlying such as crude oil and gasoil;
private equity rms and banks on airline investments, and spearheaded an
- Basis risk and crack spreads;
airline start-up plan and investment search.
- Key global fuel price hedging counterparties;
- Tactics that vary with market price and market volatility;
Robert works at a senior executive level, guiding Managing Directors, Chief
- Metrics used to track fuel hedging success;
Financial O cers, Treasurers, Chief Operating O cers, Chief Commercial
- Fuel hedging budgets;
Officers, and Board Audit Committees at airlines worldwide. Currently, Robert
- Overlap of other required hedging such as foreign currency.
sits on the Advisory Boards of several start-up travel technology firms.
Session Four: Hedging fundamentals II
Over the past six years Robert pioneered new fuel management (hedging,
Understanding the key concepts and elements to be considered in a
strategic fuel procurement) and commercial gap analysis (sales, product
hedging program, participants will be ready to learn some of the classic
distribution, revenue management and e-commerce) practices for airlines
hedging structures. Examples to be covered include:
worldwide and for the consulting division of the International Air Transport
* Overview of the types of fuel price hedging instruments and structures;
Association (IATA), identifying attainable cost and incremental revenue
* Margin instruments - futures and swaps;
opportunities. In late 2009 he helped exit a fuel consulting firm to GE
* Premium instruments - vanilla options; and
Aviation and its new OnPoint Fuel & Carbon Solution division. Robert has also
* Non-premium/zero cost/low cost instruments - collared options,
provided business planning and crisis support to airlines and banks
three-ways, four-ways, call spreads, knock-out/in structures, and more; and
worldwide.
* Select deals analyzed.
Session Five: Critical hedging strategies and tactics
A hallmark of Robert's career has been his corporate-entrepreneurial mix. A
There are many other considerations that go into the proper construction
signi cant accomplishment was his creation of an airline start-up plan that
and maintenance of a solid fuel hedging program. This session will
covered all nancial, commercial, operational, and regulatory elements and
consider critical hedging strategies and tactics:
which progressed to the point of an investment road show. More recently
* Pitfalls to avoid when hedging;
Robert helped start a company that introduced western business leaders to
* Hedging coverage ("hedge ratios");
the emerging market powerhouses of China and India.
* Tenor - contract lengths and forward hedging time horizons;
* "Matrix" hedging;
An acknowledged airline authority, Robert is the primary airline and
* Dynamic hedging portfolio management; and
aerospace analyst for Canada's 24-hour Business News Network (BNN). His
* Critical components of a proper fuel price hedging policy.
comments are also frequently solicited by other A-list TV, newswire, radio and
print media.
Session Six: Independent fuel price assessment
Airlines must often rely on guidance from market makers, brokers and oil
He regularly addresses in uential gatherings such as the Canadian Airline
companies with regards to future price direction. A Risk Management
Investment Conference, National Business Travel Association, Association of
Committee should consider methods to come up with its own indepen-
Corporate Travel Executives and the Aircraft Commerce FlyOps Conference.
dent market price view. This session will focus on one such approach.
He also lectures globally on airline topics such as airline fuel hedging to the
* Importance of developing an independent market view; and
Air nance Journal New York School of Aviation Finance and to IATA's Training
* An introduction to a fuel forecast model to develop price views indepen-
& Development Institute on airline finance and fuel hedging.
dent of market makers.
Session Seven: Automation and organization
Robert has provided expert testimony to regulatory bodies such as EuroCon-
trol, the pan European air tra c control agency, Transport Canada, the
This session will look at the importance of backing up a fuel hedging
program with automation tools, and then goes on to consider roles, respon-
Canadian Transportation Agency on bi-lateral air service agreements, public
sibilities and governance within the organization. Topics will include:
hearings on global distribution system (GDS) deregulation, and Canada's
* Why a fuel hedging program needs automation support;
Competition Bureau regarding an airline merger.
* Fuel price hedging automation assistance such as:
- Use of a live Bloomberg data feed; and
He has a proven track record in the delivery of services that are characterized
- Energy trading risk management ("ETRM") software to track fuel hedging
by their high degree of inherent quality and value-added insight. He can be
portfolios, including an overview of key vendors worldwide and a list of
rapidly deployed worldwide to complex, multi-disciplinary projects.
airline users by vendor.
* The role of corporate nance and treasury in managing a fuel price
Robert holds an International M.B.A. degree (Honors Finance) from the
hedging program;
Helsinki School of Economics in Helsinki, Finland and a B.A. from The Univer-
* Participants and structure of a Risk Management Committee; and
sity of Western Ontario in London, Ontario, Cana
* Corporate governance: alignment of management and the Board of
Directors; and
* Accountability and responsibility for communications, reporting and results.
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REGISTER NOW
Andrea Naguit
T: +63 2 575 1426
FUEL HEDGING MASTERCLASS
F: +63 2 846 3587
E: andren@trueventus.com
by trueventus
11 - 12 July 2012 | Singapore - AV08
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