Virgin Atlantic is looking at using interest-rate and foreign exchange derivatives for the first time, and is also setting up an in-house risk management center to advise heads of departments how to control business risks. Virgin has decided to systematically manage these risks because as the airline has grown, they have become more significant, said Reiner Siebert, manager of insurance and risk management. Virgin Atlantic's revenue in 1999 was GBP1.067 billion (USD1.554 billion).
Richard Childs, treasury systems analyst in Crawley, U.K., told DW the airline already uses foreign exchange forwards to hedge currency exposure but is talking to banks about using options to employ leverage in covering its net short dollar position. Although it reports in sterling, Virgin has large dollar exposures because it purchases aviation fuel and aircraft in dollars.
The new risk management department will use derivatives to hedge business risks, including oil prices, Siebert said. It is looking to hire a head for the department, he added. Childs and Siebert referred further questions to Andrew Avann, group treasurer, who did not return repeated calls.
