Icelandair Group Annual Report 2007

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96 Notes, contd.: 38. contd.: Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Notes 2007 2006 Long-term receivables and deposits 22 1,788 2,689 Trade and other receivables 24 7,284 6,149 Receivables from sale of aircrafts 25 1,753 1,094 Cash and cash equivalents 27 2,006 2,776 12,831 12,708 Impairment losses The aging of trade receivables at the reporting date was: Gross Impairment Gross Impairment 2007 2007 2006 2006 Not past due 4,643 0 4,333 0 Past due 0-30 days 266 0 484 0 Past due 31-120 days 40 (10 ) 61 (14 ) More than one year 450 (231) 393 (248) 5,399 (241 ) 5,271 (262) The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Balance at January 262 200 Impairment loss (reversed) recognised (21) 62 Balance at 31 December 241 262 Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of trade receivables not past due or past due by 30 days; a significant part of the balance relates to customers that have a good track record with the Group. The allowance account in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amount is considered irrecoverable and is written off against the financial asset directly. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group policy is to divide liquid assets into two classes depending on duration and match them against the Group’s liquidity preferences laid out by the management on annual basis. Tier one includes the estimated minimum of accessible funds for operational liquidity. Tier two includes assets of longer duration for strategic liquidity, such as shorter term investments. The amounts in each class of assets are targeted once a year with reference to a number of economic indicators such as the estimated turnover, the annual amount of fixed costs and the interest rate levels. In addition to limit its risk, the Group maintains lines of credit amounting to ISK 250 million at year end. Amounts are in ISK million
Notes, contd.: 97 38. contd.: The following are the contractual maturities of financial liabilities, including estimated interest payments and payments of off-balance sheet items. Carrying Contractual Within 12 1-2 2-5 After 2007 amount cash flows months years years 5 years Non-dervative financial liabilities Unsecured bond issue 8,358 (8,383) (8,383) 0 0 0 Secured bank loans 14,851 (17,895) (3,501) (1,836 ) (8,247 ) (4,311 ) Convertible notes 1,889 (3,411 ) (304) (336) (2,771) 0 Trade and other payables 12,591 (12,591 ) (12,591 ) 0 0 0 Operating lease payments 0 (26,053) (6,272) (5,951) (12,612 ) (1,218 ) Pre delivery payments 0 (12,712 ) (2,943) (3,156 ) (6,613 ) 0 37,689 (81,045 ) (33,994) (11,279 ) (30,243) (5,529) 2006 Non-dervative financial liabilities Unsecured bond issue 1,945 (1,955 ) (1,955 ) 0 0 0 Secured bank loans 30,961 (37,633 ) (5,556) (6,212 ) (20,609) (5,256) Convertible notes 1,860 (3,435) (350) (294) (2,791) 0 Trade and other payables 12,428 (12,428 ) (12,428 ) 0 0 0 Operating lease payments 0 (24,308) (4,979) (4,709) (11,019 ) (3,601) Pre delivery payments 0 (14,486 ) 0 (3,354) (11,132 ) 0 47,194 (94,245) (25,268) (14,569 ) (45,551 ) (8,857) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and fuel price will affect the Group’s operations. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. The Group uses derivatives in order to manage market risks. All such transactions are carried out within the guidelines set by the Board of Directors. Generally the Group seeks to apply hedge accounting in order to manage volatility in profit or loss. Currency risk The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities. The Group seeks to reduce its foreign exchange exposure arising from transactions in various currencies through a policy of matching, receipts and payments in each individual currency. Then internal trades across the range of subsidiaries are arranged by the Group as far as possible. Nevertheless, the USD cash inflow falls short of USD outflow due to fuel costs, lease and capital related payments which are to a large extent denominated in USD. This shortage is financed by a surplus of European currencies, most importantly EUR and Scandinavian currencies. The Group follows a hedging policy of 40-80% of net exposure with a 12 month horizon and uses a portfolio of instruments, mainly forwards and collar options. Amounts are in ISK million
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Icelandair Group Annual Report 2007
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4 2007 Calendar January February Ma
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2007 Calendar 6 July August Septemb
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8 Dear Shareholder The principal ai
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10 CEO’s Comment It is both a gre
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Another charter for today. TF-FIT d
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15 An Extraordinary Shareholders Me
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18 Board of Directors Gunnlaugur M.
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Market Overview 21 The Aircraft Mar
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Icelandair Group Fleet 23 2 Boeing
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Financials 25 FINANCIAL INCOME AND
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Shareholder Information 27 the tota
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30 Risk Management Risk Management
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32 Senior Management of Icelandair
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34 Senior Management Hjörtur Þorg
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36 Senior Management Árni Gunnarss
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38 Our Roots in the Community Icela
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40 Scheduled Airline Operations Sch
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42 Icelandair Icelandair is the lar
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44 and New York to Keflavik and nig
Page 48 and 49: 46 Icelandair Ground Services Inter
Page 50 and 51: 48 Global Capacity Solutions Icelan
Page 52 and 53: 50 Loftleiðir Icelandic Global Cap
Page 54 and 55: 52 Bluebird Cargo Global Capacity S
Page 56 and 57: 54 Chefs at the Hilton Reykjavik No
Page 58 and 59: 56 Air Iceland Travel & Tourism Ope
Page 60 and 61: 58 Icelandair Hotels Outlook Icelan
Page 62 and 63: 60 Iceland Travel At Iceland Travel
Page 64 and 65: 62 Endorsement & Statement by the B
Page 66 and 67: 64 Independent Auditors’ Report T
Page 68 and 69: 66 Consolidated Balance Sheet as at
Page 70 and 71: 68 Consolidated Statement of Cash F
Page 72 and 73: 70 Notes, contd.: 2e. contd.: begin
Page 74 and 75: 72 Notes, contd.: 3c. contd.: (iii)
Page 76 and 77: 74 Notes, contd.: 3. contd.: i. Imp
Page 78 and 79: 76 Notes, contd.: 3. contd.: p. Inc
Page 80 and 81: 78 Notes, contd.: 3t. contd.: •.
Page 82 and 83: 80 Notes, contd.: 5. contd.: Busine
Page 84 and 85: 82 Notes, contd.: Operating expense
Page 86 and 87: 84 Notes, contd.: 14. contd.: Aircr
Page 88 and 89: 86 Notes, contd.: 18. contd.: Trade
Page 90 and 91: 88 Notes, contd.: Long-term receiva
Page 92 and 93: 90 Notes, contd.: 28. contd.: Hedgi
Page 94 and 95: 92 Notes, contd.: 32. Contractual r
Page 96 and 97: 94 Notes, contd.: 35. contd.: The n
Page 100 and 101: 98 Notes, contd.: 38. contd.: Expos
Page 102 and 103: 100 Notes, contd.: 38. contd.: Equi
Page 104 and 105: 102 Notes, contd.: 43. contd.: Sala
Page 106: 104 Notes, contd.: Pro forma 2007 2
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Icelandair Group Annual Report 2007

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