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Utilising evidence from research. Answer these questions. British Airways, a UK based airline operates flights to destinations all over the world. Among all destinations, British

Utilising evidence from research. Answer these questions. British Airways, a UK based airline operates flights to destinations all over the world. Among all destinations, British Airways flies to 27 cities in the US. International Airlines Group (IAG) is the parent company for British Airways. Focusing on British Airways, in your 1500 word essay, you are required to: Q1.Identify and explain the commodity price risk associated with British Airways, taking OIL as the key commodity in your analysis. You may analyse the commodity risk based on political or economic situations in the UK and US or key events around the world that may affect the oil price. Q2. Explain and evaluate options, futures, forwards or swaps as a hedging strategy to minimise British Airways oil price exposure as explained above. Based on your research on British Airways and IAG, you may discuss some hedging strategies they have adopted before, critically analyse the strategies, and provide your suggestions on hedging strategies for future transactions. The task also involves the discussion of the Commodity Risks:
Discussion on Oil Price changes in recent years. Political and economic reasons on oil price changes? Transaction barriers? Tariffs? Some major events around the world?
Why BA is exposed to risks of oil price changes?
Have they ever considered any derivatives (of your choice: analyse on of the following: futures, forwards, options etc.) to hedge oil price risks? How did they do?
Critically discuss the hedging strategy and outcome of their previous hedging decisions.
Make reasonable predictions on future oil prices and how hedging strategies can be adopted.
You may choose to use the suggested structure of:
Introduction
Discussion on Currency Risk
Discussion on Commodity Risk
Predictions and analysis for future hedges
Conclusion

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