Air New Zealand 2011 Annual Report Download - page 37

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17. FINANCIAL RISK MANAGEMENT (CONTINUED)
Equity price risk
Equity price risk is the risk of loss to Air New Zealand arising from adverse fluctuations in the price of an equity investment.
Air New Zealand has exposure to equity price risk arising on the equity investment held in Virgin Blue Holdings Limited. This investment
is held for strategic rather than trading purposes. The Group does not hedge this risk.
Equity investment price risk sensitivity on financial instruments
Other comprehensive income is sensitive to changes in the quoted price of an equity investment. The sensitivity to a reasonably possible
change in such prices with all other variables held constant, is set out below:
Equity investment price change:
2011
$M
+ 25%
2011
$M
- 25%
2010
$M
+ 25%
2010
$M
- 25%
On other compehensive income
Group 30 (30) - -
Company - - - -
Sensitivity analyses
The sensitivity analyses shown above are hypothetical and should not be considered predictive of future performance. They only include
financial instruments (derivative and non-derivative) and do not include the future forecast hedged transactions. As the sensitivities are
only on financial instruments the sensitivities ignore the offsetting impact on future forecast transactions which many of the derivatives
are hedging. Changes in fair value can generally not be extrapolated because the relationship of change in assumption to change in
fair value may not be linear. In addition, for the purposes of the above analyses, the effect of a variation in a particular assumption is
calculated independently of any change in another assumption. In reality, changes in one factor may contribute to changes in another,
which may magnify or counteract the sensitivities. Furthermore, sensitivities to specific events or circumstances will be counteracted
as far as possible through strategic management actions. The estimated fair values as disclosed should not be considered indicative of
future earnings on these contracts.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will be unable to meet its obligations as they fall due. Air New Zealand manages the risk by
targeting a minimum liquidity level, ensuring long term commitments are managed with respect to forecast available cash inflow and
managing maturity profiles. Air New Zealand holds significant cash reserves to enable it to meet its liabilities as they fall due and to
sustain operations in the event of unanticipated external factors or events.
The following table sets out the contractual, undiscounted cash flows for non-derivative financial liabilities:
GROUP
AS AT 30 JUNE 2011
STATEMENT
OF FINANCIAL
POSITION
$M
CONTRACTUAL
CASH FLOWS
$M
< 1 YEAR
$M
1-2 YEARS
$M
2-5 YEARS
$M
5+ YEARS
$M
Trade and other payables 369 369 369 - - -
Secured borrowings 154 163 62 16 62 23
Finance lease obligations 1,101 1,246 113 131 408 594
Amounts owing to associates 2 2 2 - - -
Total non-derivative liabilities 1,626 1,780 546 147 470 617
AIR NEW ZEALAND ANNUAL FINANCIAL RESULTS 2011