Financial Risks

Question 1

What financial risks are Qantas exposed to?

Answer 1

Interest rate changes
Credit risk
Foreign exchange rates fluctuations
Fuel price fluctuations

Question 2

Interest rate management

Answer 2

Qantas group has a portfolio of interest rate sensitive assets and liabilities and is exposed to movements in interest rates.
Borrowings in AUD, USD, JPY
Manages using fixed v floating and debt within specified band

Question 3

Credit Risk management

Answer 3

Loss from a transaction if the counterparty defaults.
Minimised by undertaking transactions with a range of customers in various countries.
Qantas has stringed credit policies and accreditation of travel agents.

Question 4

Foreign currency hedging

Answer 4

Qantas group Earns revenue and incurs costs mainly from fuel (USD), maintenance and aircraft leasing.
Managed by,
Foreign currency costs netted against revenue in the same currency

Question 5

Fuel hedging

Answer 5

Qantas uses derivatives such as options and swaps on aviation fuel, gas oil and crude oil to hedge exposure to fuel price movements.
Hedging in accordance with Board approved risk management policy.
Can hedge up to 80% for the next 12 months and 40% for subsequent 12 months.