LONDON- A subsidiary of the world’s largest planemaker, Airbus, is preparing to launch a new financial product to aid the airline customers to hedge against risks to revenue.
Skytra Ltd is set to launch listed financial futures and options this year to represent airline revenue and to aid the industry in the efficient management of risks.
Typically, airlines hedge fuel costs and exposures to foreign exchange. Skytra exchange is unique and the first of its kind in the industry.
According to a statement of Skytra, airline infrastructure and operational commitments are planned in advance while a majority of the tickets are sold just five weeks ahead of take-off.
Airline ticket prices constantly change as a result of external factors including supply-demand surges, political issues or tax and economic uncertainty.
Without an existing financial instrument for the management of air travel revenue volatility, in spite of a fixed cost base, airlines become financially vulnerable. This is what Skytra’s product is directed towards addressing.
The London-based firm developed regional and global indices to track daily changes in air travel prices in each geographic market. This is based on a measure of demand in the industry called RPK (revenue per passenger kilometre) which measures kilometre count travelled by passengers paying.
This instrument for risk management is tailor-made for the air travel industry which allows them to manage exposure to ticket price volatility more efficiently.
Indices for the six most active geographic sectors will be launched by Skytra, with an eventual rollout to other sectors.
(Photos syndicated via Reuters)
This story has been edited by BH staff and is published from a syndicated field.