British Airways is the largest airline in United Kingdom dealing with both international destinations and flights. It is the second largest airline behind easyjet measured by passengers carried. It was founded in 1972 and privatized in 1987. The company has been involved in various alliances with companies like Oneworld Airline, American Airlines Qantas and Canadian Airlines. In 2011 it merged with Iberia creating International Airlines Group (IAG) and listing it on the stock exchange. Since then it has purchased British Midland International (BMI). The company has maintained a stream of subsidiaries in various countries including BA CityFlyer, OpenSkies and hence developed its fleet size to 262 with 169 destinations excluding code-shares and subsidiaries. Its hubs are in London Heathrow Airport and Gatwick Airport. The company has also maintained several codeshare agreements and partnership with other companies like WestJet, Loganair, Finnair and several others. The company has employees represented by a number of trade unions with each employee segment having a different trade union representing it. The company as per 2011 fiscal year indicated an increasing revenue registering 10.827 billion pounds).
Exposure of foreign exchange is that sensitivity regarding a real value of domestic currency of the assets, operating incomes and liabilities to changes unanticipated that may occur in rates of exchange. The risk of foreign exchange can be determined by of value of variance of domestic currency of all liabilities, assets and operating income which is attributed rates of exchange that are unanticipated.
Table of Contents
- Company Overview
- Exposure
- Transactional Exposure
- Translation Exposure
- Economic Exposure
Objectives and Key Themes
This text analyzes British Airways' exposure to foreign exchange risk, examining the various types of exposure and outlining strategies for risk management. The goal is to provide a comprehensive understanding of how fluctuations in exchange rates impact the airline's financial performance and market competitiveness.
- Foreign Exchange Risk Management in Multinational Corporations
- Types of Foreign Exchange Exposure (Transactional, Translation, Economic)
- Impact of Exchange Rate Fluctuations on Profitability and Market Value
- Strategies for Mitigating Foreign Exchange Risk
- The Importance of Comprehensive Risk Assessment and Policy Development
Chapter Summaries
Company Overview: This section provides background information on British Airways, highlighting its size, history, alliances, and global operations. It establishes the context for the subsequent analysis of the company's foreign exchange exposure, emphasizing its multinational nature and extensive international activities which inherently create significant exposure to currency fluctuations. The substantial revenue figures cited underscore the scale of potential financial impact from exchange rate volatility.
Exposure: This chapter delves into the various types of foreign exchange exposure faced by British Airways. It begins by defining foreign exchange exposure as the sensitivity of a company's assets, liabilities, and operating income to unexpected changes in exchange rates. The chapter then differentiates between transactional exposure (arising from international transactions), translation exposure (relating to the translation of financial statements), and economic exposure (the impact of exchange rate changes on a company's long-term competitiveness and market value). The discussion emphasizes the high transactional exposure faced by British Airways due to its numerous international operations, partnerships, and joint ventures. The complexities and potential costs of managing these risks are also highlighted, underscoring the importance of proactive risk management strategies.
Keywords
Foreign exchange exposure, British Airways, transactional exposure, translation exposure, economic exposure, risk management, exchange rate fluctuations, multinational corporation, hedging, profit margins, market value, international transactions, financial statements.
British Airways Foreign Exchange Risk: A Comprehensive Analysis - FAQ
What is the purpose of this document?
This document provides a comprehensive preview of an analysis of British Airways' exposure to foreign exchange risk. It includes the table of contents, objectives and key themes, chapter summaries, and keywords.
What are the key themes explored in this analysis?
The analysis focuses on foreign exchange risk management in multinational corporations, specifically examining the types of foreign exchange exposure (transactional, translation, and economic) faced by British Airways. It explores the impact of exchange rate fluctuations on the airline's profitability and market value, and outlines strategies for mitigating this risk. The importance of comprehensive risk assessment and policy development is also emphasized.
What types of foreign exchange exposure are discussed?
The analysis differentiates between three main types of foreign exchange exposure: transactional exposure (related to international transactions), translation exposure (related to translating financial statements), and economic exposure (the impact on long-term competitiveness and market value). The analysis highlights British Airways' significant transactional exposure due to its global operations.
What is the significance of the Company Overview chapter?
The Company Overview chapter provides background information on British Airways, including its size, history, alliances, and global operations. This context is crucial for understanding the company's significant exposure to currency fluctuations given its multinational nature and extensive international activities. The chapter emphasizes the potential financial impact of exchange rate volatility on the airline's substantial revenue.
What does the Exposure chapter cover?
The Exposure chapter details the various types of foreign exchange exposure affecting British Airways. It defines foreign exchange exposure and elaborates on transactional, translation, and economic exposures, emphasizing the complexities and costs associated with managing these risks. The high transactional exposure due to British Airways' numerous international operations, partnerships, and joint ventures is highlighted, emphasizing the need for proactive risk management.
What are the key takeaways from the analysis?
The analysis emphasizes the significant impact of exchange rate fluctuations on British Airways' financial performance and market competitiveness. It highlights the importance of proactive risk management strategies to mitigate these risks, including a comprehensive risk assessment and the development of a robust risk management policy.
What keywords are associated with this analysis?
Key terms include: Foreign exchange exposure, British Airways, transactional exposure, translation exposure, economic exposure, risk management, exchange rate fluctuations, multinational corporation, hedging, profit margins, market value, international transactions, and financial statements.
What is the overall goal of this analysis?
The goal is to provide a thorough understanding of how exchange rate fluctuations affect British Airways' financial performance and market competitiveness, offering insights into effective foreign exchange risk management strategies for multinational corporations.
- Citar trabajo
- kents Ashely (Autor), 2012, British Airways: Foreign Exchange Exposure, Múnich, GRIN Verlag, https://www.grin.com/document/270807
