The national Algerian flag air carrier operates a web of 63 routes mostly to Europe and the

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The national Algerian flag air carrier operates a web of 63 routes mostly to Europe and the Middle East. Its fleet is financed in euros to the tune of €2.5 billion, and ticket sales are overwhelmingly to Algerian nationals

(80 percent). The Algerian currency—the dinar (DZD)—is currently pegged to the euro at DZD 100 = €1.

a. How would a 25 percent devaluation of the dinar impact Air Algérie’s cash flows?

b. In 2012 Air Algérie sold 10 aging airplanes and used the proceeds to pay down partially its € debt. It decided to lease rather than purchase its new fleet of seven jumbo jets. Would Air Algérie’s new exposure to currency risk be materially altered as a result?

c. Would you advise Air Algérie to negotiate lease payments inversely tied to the price of jet fuel?

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a A 25 percent devaluation of the dinar means that each dinar is now worth 25 percent less relative to the euro This would impact Air Algries cash flo...View the full answer

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Question Posted: Mar 09, 2024 01:01 AM

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The national Algerian flag air carrier operates a web of 63 routes mostly to Europe and the

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a A 25 percent devaluation of the dinar means that each dinar is now worth 25 percent less relative to the euro This would impact Air Algries cash flo...View the full answer

International Corporate Finance Value Creation With Currency Derivatives In Global Capital Markets

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