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Cathay Pacific Airways Limited Annual Report 2008 27
Financial Review
Fuel expenditure and hedging
A breakdown of the Group’s fuel cost is shown below:
2008
HK$M
2007
HK$M
Gross fuel cost 39,347 25,557
Realised hedging losses/(gains) 309 (719)
Unrealised mark to market losses/(gains) 7,661 (214)
Net fuel cost 47,317 24,624
The Group’s policy is to reduce exposure to fuel price risk by hedging a percentage of its anticipated fuel
consumption. As the Group uses a combination of fuel derivatives to achieve its desired hedging position, the
percentage of anticipated consumption hedged will vary depending on the nature and combination of contracts
which generate payoffs in any particular range of fuel prices. The chart above indicates the estimated maximum
percentage of projected consumption covered by hedging transactions at various settled Brent prices.
The Group’s maximum fuel hedging exposure and a sensitivity analysis of both the cash and the profit and loss
impact of fuel price movements on fuel hedging contracts as at 31st December 2008 are set out as below:
Fuel hedging
coverage
0%
20%
10%
30%
50%
40%
70%
60%
80%
90%
2009 2010 2011
Maximum fuel hedging exposure
$30 $40 $50 $60 $70 $80 Brent
(US$/barrel)
$90 $100 $110 $120 $130