Transcript EMIRATES (Gr. Violet).pptx

EMIRATES AIRLINE RISK MANAGEMENT STRATEGY
FINANCE 406 ( RISK MANAGEMENT AND INSURANCE)
• LARISSA MIGUE KAMGA 128585
• IFEDOTUN OGUNDIPE 132799
• OLOGUNDUDU TITILOPE 138750
INTRODUCTION
Emirates is an airline based in Dubai, United Arab Emirates. The airline is a subsidiary of The
Emirates Group, which is wholly owned by the government of Dubai's Investment Corporation of
Dubai. It is the largest airline in the Middle East, operating over 3,300 flights per week from its
hub at Dubai International Airport, to more than 148 cities in 78 countries across six continents.
It commenced operations on the 25th of October 1985, from Dubai international airport, with a
current fleet size of 251 Airplanes. The chairman is Ahmed Bin Saeed Al Maktoum. As at the
year ending 2015 Emirates employed about 56,725 staffs from 160 different nationalities.
BACKGROUND INFORMATION
•
Emirates airline commenced operations in 1985 with two leased airlines from Pakistan
international airlines and also received training from them, the airline was designed to
function without government subsidy and be a profitable outfit on its own, currently
Emirates is the world’s third largest international carrier by scheduled passengerkilometers flown, the seventh largest airline in the world in terms of revenue, and the
largest airline in the Middle East in terms of revenue, fleet size, and passengers carried.
The airline is also the fourth-largest airline in the world in terms of international
passengers carried. Emirates has orders for 76 Airbus A380s and is the largest A380
operator. Emirates also has orders for 150 Boeing 777-X and 36 Boeing 777-300ER
aircraft, and is the world's largest Boeing 777 operator.
EMIRATES RISK MANAGEMENT STRATEGY:
•
According to Tim Clarke, Emirates airlines operate a risk management
strategy which can be defined as proactive and risk eliminating, the company
invests well in analysts which analyze all the business processes of the
company both internal and external with the information available to them
and predict what the outcome will be on each decision taken. This helps to
minimize the risk emirates airline faces. We can reduce this risks to the
following but not limited to them:
RISKS FACED BY EMIRATES
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POLITCAL & LEGAL RISKS
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OPERATIONAL RISKS
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FINANCIAL RISKS
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MARKET RISKS
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SAFETY RISKS
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ENVIRONMENTAL RISKS
POLITICAL & LEGAL RISKS.
• Firstly lets define political risks, this is a type of risk multinationals face in
their host countries due to the decisions made by the governments in those
countries.
• Politcal instability/ wars and terrorism
• Legal cases against the airline
• Lobby against the company by competitors.
• Lobby against the airlines by Airlines Alliances
• eg. Star alliance, Skyteam & oneworld.
• New legislations.
OPERATIONAL RISKS:
Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it attempts
to operate within a given field or industry. Operational risk is the risk that is not inherent in financial,
systematic or market-wide risk. It is the risk remaining after determining financing and systematic risk, and
includes risks resulting from breakdowns in internal procedures, people and systems.
• Supply chain risks:
• Fuel quality risks:
• Compliance risks:
• Accident Risk:
• Scheduling risks:
• Human Errors.
FINANCIAL RISK
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THE MAIN FINANCIAL RISKS THAT MAY HAMPER AN AIRLINE CARRIER TO
OPERATE SMOOTHLY ARE THE HEDGING RISKS.

HEDGING DECISIONS ARE THE PIVOT ON WHICH FUTURE PRICING WILL
HAVE TO BALANCE BUDGET DECISIONS, SUBSEQUENTLY AFFECTING
FORECASTED PROFITS.

THERE ARE TWO VERY IMPORTANT HEDGING EXERCISES WHICH HAVE TO BE
CONTINUOUSLY MONITORED AT HIGH LEVEL; OIL PRICE HEDGES AND
CURRENCY HEDGES.
.
FINANCIAL RISKS
• Both currency fluctuations and oil price fluctuations may on their own tip the scale to a
profitable situation or one of a loss.
• In today’s airline operations, fuel makes up for 30% of the total costs while currencies are
instrumental for the purchasing of fuel (usually done in USD) and for collection of fares which
are negotiated in various countries.
• Credit control risks are also paramount in that they may easily affect the liquidity position of
the company
MARKET RISK
•
Market risk is the fluctuation of returns caused by the macroeconomic
factors that affect all risky assets.
• Market Risk is also referred to as systematic risk or non-diversifiable risk.
• The most basic strategy for minimizing market risk is diversification.
MARKET RISKS
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Competition Risks: Increased competition leading to reduced sales and
lower fares
• Flight emirates is competing beside the America’s
three mayor domestics such
as : AMERICAN AIRLINES , DELTA , UNITED
• The competition have been very hard because of the prodigious of the airlines
which flight emirates is not in rest.
MARKET RISKS.
ENVIRONMENT RISK
CONCERNED WITH AIR, WATER, SOIL… THESE ARE RISK THAT
OCCURS AROUND US
External areas/seating
Parking _ there are car parks located near the airport terminal.
Welfare facilities _ cool and quiet vicinity.
Eating facilities _ picnics, independent food outlets.
SAFETY RISK
THE CONDITION OF BEING PROTECTED FROM INJURY OR RISK
CABIN LOADING _ MANAGING THE WEIGHT OF LUGGAGE IN EACH FLIGHT, ADDITIONAL CHARGES, TAGS
FIRE SAFETY
FIRST AID _ EMIRATE AIRLINE DOESN’T HAVE SPECIFIC MEDICAL FACILITIES E.G. DOCTORS NURSES ETC.
WEATHER PROTECTION/SUN SAFETY _ DRESS ACCORDING TO THE WEATHER, WEATHER FORECAST
SECURITY RISK
A PERSON OR SITUATION WITH POSSIBLE THREAT TO THE SECURITY
OF SOMETHING.
Security _ security team who are able to deal with issue on site
Emergency planning
In-flight behavior _ check all signs and obey verbal instruction, its not permitted to stand during
the flight
Travelling _ time experience during the flight
Lost children _
please report to member of staff or security officer
CONCLUSION
Emirates is exposed to a variety of risks which involve the analysis, evaluation,
acceptance and management of some degree of risk or combination of risks. Emirates 'aim is,
therefore, to achieve an appropriate balance between risk and return and minimize
potential adverse effects on Emirates' financial performance. Emirates' risk management
procedures are designed to identify and analyze these risks, to set appropriate risk limits
and controls, and to monitor the risks and adherence to limits by means of reliable and upto-date information. Emirates regularly reviews its risk management procedures and systems
to reflect changes in markets, products and emerging best practice. Emirates uses derivative
financial instruments to hedge certain risk exposures.
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