Singapore Airlines 2011 Annual Report Download - page 184
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SINGAPORE AIRLINES
182
NOTES TO THE FINANCIAL STATEMENTS
31 March 2011
38 Financial Risk Management Objectives and Policies (in $ million) (continued)
(f) Credit risk (continued)
There are no significant concentrations of credit risk other than on derivative counterparties where
transactions are limited to financial institutions possessing high credit quality and hence the risk of
default is low.
The sale of passenger and cargo transportation is largely achieved through IATA accredited sales
agents. The credit risk of such sales agents is relatively small owing to a broad diversification.
In specific instances, the contract may require special collateral.
Unless expressly stated otherwise in the contract, receivables and payables among airlines are settled
either bilaterally or via the IATA Clearing House. Receivables and payables are generally netted and
settled at weekly intervals, which lead to a clear reduction in the risk of default.
For all other service relationships, depending on the nature and scope of the services rendered,
collateral is required, credit reports or references are obtained and use is made of historical data
from previous business relations, especially with regard to payment behaviour, in order to avoid
non-performance.
Collaterals requested from debtors include bank guarantees, cash-in-lieu of deposit and security deposits.
Allowance is made for doubtful accounts whenever risks are identified.
(g) Counterparty risk
Surplus funds are invested in interest-bearing bank deposits and other high quality short-term
liquid investments. Counterparty risks are managed by limiting aggregated exposure on all
outstanding financial instruments to any individual counterparty, taking into account its credit rating.
Such counterparty exposures are regularly reviewed, and adjusted as necessary. This mitigates the
risk of material loss arising from the event of non-performance by counterparties.