Airlines have little visibility into future revenues. Ticket prices are volatile and up to 90% of the tickets are only sold in the last 90 days before take-off (1). Yet they have long-term investment decisions with multi-year financial commitments to manage.
Today airlines already use financial instruments to reduce risk exposure to unpredictable changes in the cost of fuel, interest rates on loans and foreign currencies. Currently hedging is only available on the cost side of the balance sheet, as there have been no products available to do the same on the revenue side – until now.
Skytra’s risk management products will help the air travel industry manage revenue risk and help predict future income.
To undertake these activities, Skytra is applying to be regulated by the United Kingdom’s Financial Conduct Authority (FCA) as a Benchmark Administrator (BA) and operator of a MTF.
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.
Christine Rovelli, Head of Treasury at Finnair