ABSTRACT
An airline’s treasury has the task of managing revenues, expenditures, assets and liabilities in both local and foreign currencies, and thus minimising the risks of exposure to large currency movements. Airlines buy fuel at the major airports around the world from the major multinational fuel companies or their subsidiaries. Airlines often report the adverse effect of foreign exchange movements on profits, but rarely the converse. The initial position is one of zero local currency trading profit at the rate of exchange of $2 to the £. The effect on revenues will generally take longer because of the advance nature of ticket sales. It will also depend on whether the airline uses the depreciation as an opportunity to lower local currency fares, or offer more attractive discount fares, and the price elasticity of its potential markets.
