Air New Zealand 2008 Annual Report Download - page 31

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AIR NEW ZEALAND
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS AT 30 JUNE 2008
16. FINANCIAL INSTRUMENTS (CONTINUED)
GROUP
AS AT 30 JUNE 2007
In NZ$M USD AUD EUR JPY GBP OTHER
On profit before taxation
5 cents appreciation 7 - (1) - - (3)
5 cents depreciation (8) - 1 - - 3
On cash flow hedge reserve (within equity)
5 cents appreciation (98) 19 5 7 17 6
5 cents depreciation 112 (22) (6) (8) (20) (7)
COMPANY
AS AT 30 JUNE 2008
In NZ$M USD AUD EUR JPY GBP OTHER
On profit before taxation
5 cents appreciation (51) 1 (1) - - (1)
5 cents depreciation 58 (1) 1 - - 1
On cash flow hedge reserve (within equity)
5 cents appreciation (168) 29 10 8 22 10
5 cents depreciation 191 (34) (11) (9) (25) (11)
COMPANY
AS AT 30 JUNE 2007
In NZ$M USD AUD EUR JPY GBP OTHER
On profit before taxation
5 cents appreciation (31) 1 (1) - - (2)
5 cents depreciation 36 (1) 1 - - 2
On cash flow hedge reserve (within equity)
5 cents appreciation (95) 19 5 7 17 6
5 cents depreciation 108 (22) (6) (8) (20) (7)
SIGNIFICANT FOREIGN EXCHANGE RATES USED AT BALANCE DATE FOR ONE NEW ZEALAND DOLLAR ARE:
2008 2007
Australian Dollar 0.7921 0.9096
European Community Euro 0.4822 0.5723
Japanese Yen 80.92 94.81
United Kingdom Pound 0.3817 0.3843
United States Dollar 0.7612 0.7698
Fuel price risk
Air New Zealand has entered into fuel swap and option agreements to reduce the impact of price changes on fuel costs in accordance with policy
mandated by the Board of directors. Between 75% to 95% of estimated fuel costs for the next 3 months may be hedged, with progressive reductions in
percentages hedged in subsequent months out to 1 year. The intrinsic value component of these fuel derivatives is designated as a cash flow hedge. All
other components are marked to market through earnings, as are any short-dated outright derivatives. As at 30 June 2008, the Group had hedged 3.7
million barrels (30 June 2007: 4.5 million barrels) with a fair value of $176 million (30 June 2007: $22 million). The agreements mature within 1 year
(30 June 2007: 1 year).
Fuel price sensitivity on financial instruments
The sensitivity of the fair value of these derivatives as at reporting date to a reasonably possible change in the price per barrel of crude oil is shown
below. This analysis assumes that all other variables, including the refining margin, remain constant and the respective impacts on profit before taxation
and equity are dictated by the proportion of intrinsic/time value of the options at reporting date as well as the proportion of effective/ineffective hedges.
In practice, these elements would vary independently. This analysis does not include the future forecast hedged fuel transactions.
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