Cathay Pacific 2003 Annual Report Download - page 22

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20 Cathay Pacific Airways Limited Annual Report 2003
Financial Review
Group interest rate profile: borrowings
%
0302010099
0
20
40
60
80
100
Floating
Fixed
Cathay Pacific: fuel hedging
US cents
per American
gallon
American
gallon
in million
1Q05 2Q054Q043Q042Q041Q04
65
67
69
71
73
75
0
10
20
30
40
50
60
70
80
Effective into wing fuel price
Volume hedged
•Exposures to movements in foreign exchange
rates, interest rates and jet fuel prices are
regularly reviewed and positions are amended
in compliance with policy guidelines.
•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 exposures
•As an international airline, the Company’s
revenue streams are denominated in a
number of foreign currencies resulting in
exposure to fluctuations in foreign
exchange rates.
•To manage this exposure assets are, where
possible, financed in those foreign currencies
in which net operating surpluses are
anticipated, thereby establishing a natural
hedge. In addition, the Company 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.