Cathay Pacific 2011 Annual Report Download - page 93

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Notes to the Accounts SUPPLEMENTARY INFORMATION
33. Financial risk management (continued)
Group Company
2011
HK$M
2010
HK$M
2011
HK$M
2010
HK$M
Variable rate instruments
Liquid funds 19,597 24,198 8,848 9,140
Long-term loans (18,032) (16,078) (10,797) (11,361)
Obligations under finance leases (14,135) (11,200) (18,109) (11,849)
Interest rate and currency swaps 19,192 11,762 18,542 11,236
Bank overdrafts –(4) –(4)
Net exposure 6,622 8,678 (1,516) (2,838)
Sensitivity analysis for interest rate exposure
An increase of 25 basis points in interest rates at the reporting date would have decreased profit and loss
and increased other equity components for the year by the amounts shown below. These amounts
represent the fair value change of interest rate swaps and financial liabilities designated as at fair value
through profit and loss at the reporting date and the increase in net finance charges. This analysis assumes
that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on
the same basis for 2010.
2011 2010
Profit
and loss
HK$M
Other equity
components
HK$M
Profit
and loss
HK$M
Other equity
components
HK$M
Variable rate instruments (108) 230 (88) 167
(iii) Fuel price risk
Fuel accounted for 41.5% of the Group’s total operating expenses (2010: 35.6%). Exposure to fluctuations
in the fuel price is managed by the use of fuel derivatives. The profit or loss generated from these fuel
derivatives is dependent on the nature and combination of contracts which generate payoffs in any
particular range of fuel prices.
Sensitivity analysis for jet fuel price derivatives
A net increase of five percent in the jet fuel price at the reporting date would have increased profit and loss
and other equity components while a net decrease of five percent in the jet fuel price at the reporting date
would have decreased profit and loss and other equity components for the year by the amounts shown
below. These amounts represent the change in fair value of fuel derivatives at the reporting date.
2011 2010
Profit
and loss
HK$M
Other equity
components
HK$M
Profit
and loss
HK$M
Other equity
components
HK$M
Net increase in jet fuel price 97 119 13 453
Net decrease in jet fuel price (74) (118) (14) (444)
Cathay Pacific Airways Limited Annual Report 2011 91