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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE YEAR ENDED 30 JUNE 2015
84
QANTAS ANNUAL REPORT 2015
34. FINANCIAL RISK MANAGEMENT CONTINUED
Qantas Group
2015
$M
Less than
1 Year 1 to 5 Years
More than
5 Years Total
FINANCIAL LIABILITIES
Payables 1,881 – – 1,881
Bank loans – secured1383 1,481 885 2,749
Bank loans – unsecured111 313 –324
Other loans – unsecured1472 613 777 1,862
Lease and hire purchase liabilities1135 553 1,150 1,838
Derivatives – inflows (370) (58) (4) (432)
Derivatives – outflows 334 109 8451
Net other financial assets/liabilities – outflows (152) (22) –(174)
Total financial liabilities 2,694 2,989 2,816 8,499
2014
$M
FINANCIAL LIABILITIES
Payables 1,851 – – 1,851
Bank loans – secured1556 1,616 1,039 3,211
Bank loans – unsecured1486 611 –1,097
Other loans – unsecured1168 693 1,096 1,957
Lease and hire purchase liabilities1262 402 946 1,610
Derivatives – inflows (122) (409) (19) (550)
Derivatives – outflows 152 459 29 640
Net other financial assets/liabilities – outflows (14) (8) –(22)
Total financial liabilities 3,339 3,364 3,091 9,794
1 Recognised financial liability maturity values are shown pre-hedging.
(B) MARKET RISK
The Qantas Group has exposure to market risk in the following areas: interest rate, foreign exchange and fuel price. The following
section summarises the Qantas Group’s approach to managing these risks.
i. Interest Rate Risk
Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market interest rates. The Qantas Group has exposure to movements in interest rates arising from its portfolio of interest rate
sensitive assets and liabilities in a number of currencies, predominantly in AUD, GBP, USD, JPY, NZD and EUR. These principally
include corporate debt, leases and cash. The Qantas Group manages interest rate risk by using a floating versus fixed rate debt
framework. The relative mix of fixed and floating interest rate funding is managed by using interest rate swaps, forward rate
agreements and options.
For the year ended 30 June 2015, interest-bearing liabilities amounted to $5,562 million (2014: $6,483 million). The fixed/floating
splitis 37 per cent and 63 per cent respectively (2014: 31 per cent and 69 per cent).
For the year ended 30 June 2015, other financial assets and liabilities included derivative financial instruments relating to debt
obligations and future interest payments totalling $5 million (asset) (2014: $64 million (liability)).
ii. Foreign Exchange Risk (Revenue and Capital Expenditure)
Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes
inforeign exchange rates. The source and nature of this risk arise from operations, capital expenditures and translation risks.
Cross-currency swaps are used to convert long-term foreign currency borrowings to currencies in which the Qantas Group has
forecast sufficient surplus net revenue to meet the principal and interest obligations under the swaps. Where long-term borrowings
are held in foreign currencies in which the Qantas Group derives surplus net revenue, offsetting forward foreign exchange contracts
have been used to match the timing of cash flows arising under the borrowings with the expected revenue surpluses. These foreign
currency borrowings have a maturity of between one and 12 years. To the extent a foreign exchange gain or loss is incurred, and the
cash flow hedge is deemed effective, this is deferred until the net revenue is realised.
As at 30 June 2015, total unrealised exchange gains on hedges of net revenue designated to service long-term debt were $12 million
(2014: $54 million).