Foreign exchange risk
The Group's policy is to eliminate the identified foreign exchange risk caused by foreign currency surpluses or deficits. Apart from receivables and payables and other commercial commitments, the estimated 6-12 month cash flows in foreign currencies are as a rule included in exposed foreign currency positions.
At the end of financial year 2003, the majority of the Group's interest-bearing liabilities were denominated in US dollars and euros. The exchange rate risk of the loans was almost fully covered. Around 75% of Group turnover is denominated in euros. The other key foreign sales currencies are the US dollar, the British pound, the Japanese yen and the Swedish crown.
Approximately 30% of the Group's operating costs are denominated in currencies outside the euro zone.
The main purchasing currency is the US dollar, which accounts for almost half of all operating costs denominated in foreign currency. Acquisition of aircraft and their spare parts also takes place mainly in US dollars.
Clearly the biggest foreign currency risk to Finnair arises from the dollar. Significant dollar-denominated operating expenses are aircraft leasing fees and jet fuel purchases. The dollar risk is diminished by sales in dollars and in Asian currencies which correlate strongly with the dollar. Without the hedging programme, a one per cent decline in the dollar rate has a positive impact on the result of 2.0-2.5 million euros. |