Cathay Pacific 2002 Annual Report Download - page 21

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18 Cathay Pacific Airways Limited Annual Report 2002
•Exposure to foreign currencies, interest rates
and jet fuel price movements are regularly
reviewed and positions are amended in
compliance with internal guidelines and limits.
•To manage credit risk, transactions are only
carried out with financial institutions of high
repute and all counterparties are subject to
prescribed trading limits which are regularly
reviewed. Risk exposures are monitored
regularly by reference to market values.
Management of currency and interest
rate exposures
•As an international airline, the Group’s revenue
streams are denominated in a number of foreign
currencies resulting in exposure to foreign
exchange fluctuations.
•To manage this exposure assets are, where
possible, financed in those foreign currencies
in which net operating surpluses are anticipated,
thus establishing a natural hedge. In addition,
the Group uses currency derivatives to reduce
anticipated foreign currency surpluses.
•The use of foreign currency borrowings and
currency derivatives to hedge future operating
revenues is a key component of the financial
risk management process. Exchange
differences realised on the repayment of
financial commitments are effectively matched
by the change in value of the foreign currency
earnings used to make those repayments.
•Derivative financial instruments are used to
manage the interest rate profile of foreign
currency commitments.
Financial Review
0201009998
0
20
40
60
80
100
68
69
70
71
72
73
74
0
30
60
90
120
150
180
%
Cathay Pacific: fuel hedging
Effective into wing fuel price
Volume hedged
US cents
per
American
gallon
American
gallon
in million
Group interest rate profile:
borrowings
Floating
Fixed
2H20052H2004 1H20051H20042H20031H2003