Airbus to launch financial product for airlines to hedge against revenue risks

LONDON: A subsidiary of Airbus, the world’s largest planemaker, is preparing to launch a financial product aimed at helping its airline customers hedge against risks to revenue, officials said.

Skytra Ltd, a fully owned subsidiary, plans to launch listed financial futures and options on exchanges this year that will represent airlines revenue and help the industry manage risks more efficiently.

While airline infrastructure and operational commitments are planned years into the future, the majority of airline tickets are sold in the five weeks before take-off, according to a statement from Skytra.

Even those airline ticket prices are subject to constant change due to external factors including supply or demand surges, political issues, or tax and economic uncertainty.

But with no existing financial instrument to manage air travel revenue volatility effectively despite a fixed cost base, airlines remain financially vulnerable which Skytra’s product offering aims to address.

The London-based firm has developed a suite of global and regional indices that will track the daily changes in the price of air travel in each geographic market, based on an industry measure of demand called revenue per passenger kilometre which measures the number of kilometres travelled by paying passengers.

“Finally we will have a risk management instrument tailor-made for the air travel industry that will help us manage our exposure to ticket price volatility more efficiently,“said Christine Rovelli, head of treasury at Finnair. – Reuters