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            september 20, 2019

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Air cargo sector mulls derivatives market


Weak investment, rate volatility and low transparency are leading some in the air cargo world to consider a derivatives trade as exists in shipping and in commodities trading, reports London's Loadstar.
NYSE Euronext sales chief Eric Hasham told the recent World Cargo Symposium in Dohargued that the air cargo sector could only benefit from creating a commodity index that allowed trades in forward contracts.
"Indices play an important role for companies seeking forward planning certainty around prices, by allowing, for example, industry players to sell spot and forward contracts based on present pricing," he said.
"Such selling can enable companies to more reliably project future revenue streams and earnings. Such pre-sold revenue streams can even be used, in some cases, to finance asset purchases."
Thus far, there are no such indices in the air cargo market which lend themselves to futures trading, because such an index requires daily trades and an input from a wide spectrum of industry participants.
Still, Ram Menen, head of Emirates SkyCargo, liked the idea. "It's a good thing, but the mindset has to change. It can help with the planning process and could decrease volatility. It would also allow both forwarders and shippers to hedge - it would open the field completely and create more transparency."
But first, he said the industry needs to create an index "when the marketplace is normal".

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