Annual Report 2008-2009 - Emirates.com

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24. Financial risk management Dnata has limited exposure to financial risks by virtue of the nature of its operations. In the areas where financial risks exist, the aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on Dnata’s financial position. Dnata’s risk management procedures are designed to identify and analyse these risks, to set appropriate risk limits and controls and to monitor the risks and adherence to limits by means of reliable and up-to-date information systems. Dnata reviews its risk management procedures and systems on a regular basis to reflect changes in markets. Risk management is carried out by Corporate Treasury under procedures that are approved by a steering group comprising of senior management. Corporate Treasury identifies and evaluates opportunities for hedging financial risks in close cooperation with the operating units. Senior management is also responsible for the review of risk management and the control environment. The various financial risk elements are discussed below. (i) Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The market risks relevant to Dnata’s operations are interest rate risk and currency risk. Interest rate risk Dnata is exposed to the effects of fluctuations in the prevailing levels of interest rates on its long term borrowings and cash surpluses placed on short term deposits. Cash surpluses are primarily held in UAE Dirhams, the functional currency and US Dollars to which the UAE Dirham is pegged. Long term borrowings have been taken at variable rates and thus expose Dnata to cash flow interest rate risk. No hedging cover is taken due to the stable interest rate environment that exists in the countries where the loans are contracted. The key reference rates based on which interest costs are determined are CHF LIBOR for Swiss Francs and SIBOR for Singapore Dollars. Summarised quantitative data is available in Note 15 for interest cost exposures. Currency risk Dnata is exposed to the effects of fluctuation in the prevailing foreign currency exchange rates on its long term debt obligations denominated in Singapore Dollars and Swiss Francs. Cash flows from the Singapore and Switzerland operations are adequate to meet the repayment schedules. 135
Dnata 136 24. Financial risk management (continued) The following sensitivity analysis shows how profit and equity would change if the market risk variables had been different on the balance sheet date with all other variables held constant and has been computed on the basis of assumptions and indices used and considered by other market participants. Interest cost - 100 basis points Singapore Dollars Swiss Francs + 100 basis points Singapore Dollars Swiss Francs Interest income - 100 basis points + 100 basis points Currency - Singapore Dollars + 1% - 1% Currency - Swiss Francs + 1% - 1% (ii) Credit risk AA- to AA+ A- to A+ Lower than A- Effect on profit 2009 AED'000 2,436 2,919 5,355 Effect on equity 2,436 2,919 5,355 Effect on profit 2008 AED'000 2,698 1,204 3,902 Effect on equity 2,698 1,204 3,902 (2,436) (2,436) (2,698) (2,698) (2,919) (2,919) (1,204) (1,204) (5,355) (5,355) (3,902) (3,902) - - (473) (1,054) 473 1,054 (2,031) - 2,031 - (2,660) 2,660 22,979 1,325,926 167 - - (2,609) 2,609 Policies are in place to ensure that sales are made to customers with an appropriate credit history failing which an appropriate level of security is obtained, where necessary sales are made on cash terms. Credit limits are also imposed to cap exposure to a customer. The table below presents an analysis of short term bank deposits and cash and cash equivalents by rating agency designation at the balance sheet date based on Standard & Poor's ratings or its equivalent for the main banking relationships: (473) 473 - - (1,054) 1,054 (3,186) 3,186 Dnata is exposed to credit risk, which is the risk that the counterparty will cause a financial loss to Dnata by failing to discharge an obligation. Financial assets which potentially subject Dnata to credit risk consist principally of deposits with banks and trade receivables. Dnata uses external ratings such as Standard & Poor's, Moody's or their equivalent in order to measure and monitor its credit risk exposures to financial institutions. In the absence of independent ratings, credit quality is assessed based on counterparty's financial position, past experience and other factors. Dnata manages limits and controls concentration of risk wherever they are identified. Exposure to credit risk is managed through regular analysis of the ability of counterparties and potential counterparties to meet their obligations and by changing their limits where appropriate. Approximately 28% (2008: 33%) of cash and bank balances are held with financial institutions under common control. 2009 2008 AED'000 AED'000 48,214 1,334,510 -
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Annual Report 2008-2009 The Emirate
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The Emirates Group Emirates is the
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4 The Emirates Group Chairman and C
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6 The Emirates Group Chairman and C
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8 The Emirates Group Executive Vice
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First Class Suite 10 Emirates Presi
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12 Emirates The Airline Emirates A3
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14 Emirates The Airline 15 Emirates
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Other firsts included: The implemen
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A series of relief charter flights
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In West Asia, the total number of f
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Public, International, Industry and
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the aircraft had a direct impact on
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Creek extensions, and finally linki
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In Dubai, Dnata Travel Services ope
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coordination between them. This has
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Government Travel Services (GTS) ex
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XDAS also provided support for the
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EmQuest EmQuest is a travel distrib
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airport by serving 99,000 flights d
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Creation of the Customer Knowledge
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Tanzania; oversee Dnata Travel’s
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external agencies such as Dubai Imm
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- An enhanced version of flightcrew
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3 was heavily advertised, This incl
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was attended by officials of the Ba
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Contents Financial Report 2008-2009
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Consolidated financial statements T
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Profitability Group net profit for
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Value added Value added is a measur
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Fuel and oil 14,443 Employee (see (
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Capacity, traffic, load factor and
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At 31 Mach 2009: Fleet information
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Expenditure 067 2008-09 2007-08 AED
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Employee strength and productivity
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Independent auditor’s report to t
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Consolidated balance sheet as at 31
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Consolidated cash flow statement fo
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2. Summary of significant accountin
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3. Critical accounting estimates an
Page 86 and 87: 4. Revenue (continued) Transport re
Page 88 and 89: 10. Property, plant and equipment C
Page 90 and 91: 11. Intangible assets Cost 1 April
Page 92 and 93: Movement of investments in associat
Page 94 and 95: 14. Other investments (continued) (
Page 96 and 97: 18. Capital Capital represents the
Page 98 and 99: 22. Term loans Balance brought forw
Page 100 and 101: 24. Provisions (continued) (i) Fund
Page 102 and 103: 27. Trade and other payables Trade
Page 104 and 105: 32. Derivative financial instrument
Page 106 and 107: 34. Related party transactions The
Page 108 and 109: 35. Financial risk management Finan
Page 110 and 111: 35. Financial risk management (cont
Page 112 and 113: 36. Capital risk management Emirate
Page 114 and 115: Consolidated income statement for t
Page 116 and 117: 1 April 2007 62,615 Currency transl
Page 118 and 119: 1. Establishment and operations Not
Page 120 and 121: 2. Summary of significant accountin
Page 122 and 123: 2. Summary of significant accountin
Page 124 and 125: 8. Property, plant and equipment Co
Page 126 and 127: 10. Investments in subsidiaries, as
Page 128 and 129: 12. Trade and other receivables Tra
Page 130 and 131: 14. Employee end of service benefit
Page 132 and 133: 17. Trade and other payables Less t
Page 134 and 135: 23. Related party transactions The
Page 138 and 139: 24. Financial risk management (cont
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Annual Report 2008-2009 - Emirates.com

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