Credit risk


The sale of passenger travel and freight documents mostly takes place via agencies. These agencies are mostly connected to national clearing systems for billing passenger and freight sales. The creditworthiness of the agents is reviewed by the clearing system responsible. Due to the broad diversification, credit risk for the agencies is relatively low worldwide.

Receivables and liabilities between airlines are offset through bilateral arrangements or via an IATA clearing house, insofar as the contracts underlying services do not explicitly specify otherwise. Systematic settlement of weekly receivables and liability balances significantly reduces the default risk. Fidelity guarantee insurance also covers partial risks within a certain range. Service contracts occasionally require collateral for miscellaneous transactions.

All other contractual relationships are subject to credit rules, which, depending on the type and volume of the contract involved, require collateral, credit ratings/references or historical data from prior dealings, particularly payment history, in order to avoid defaults.

Counterparty risks in connection with credit card companies are monitored closely and incoming payments reviewed daily. Credit terms were tightened for some credit card issuers to reduce risks even further. In addition to the monitoring of receivables at company or segment level there is also counterparty monitoring at Group level, with individually assigned limits, in order to identify the accumulation of portfolio risks across the entire Group and take appropriate action if necessary.

If risks are identified receivables are written down accordingly.

As of 31 December 2011 the maximum credit risk from the potential insolvency of debtors for loans and receivables was EUR 4,013m, made up as follows:

 

in €m

31.12.2011

31.12.2010

Loans

190

170

Non-current receivables

386

450

Trade receivables and other current receivables

3,437

3,401

 

4,013

4,021

Impairments on loans and receivables developed as follows:

 

in €m

1.1.2011

Gross amount

193

Impairment charges

–171

Carrying amount 1.1.2011

22

 

 

 

in €m

31.12.2011

Gross amount

195

Impairment charges

–172

Carrying amount 31.12.2011

23

A further EUR 124m (previous year: EUR 116m) was already overdue, but not yet written down.

The term structure of overdue receivables is as follows:

 

in €m

 

Up to 90 days

101

Between 90 and 180 days

11

Over 180 days

12

There is a credit risk on available-for-sale financial assets in the amount of the securities which do not represent equity instruments. Securities classified as non-current and current are made up as follows:

 

in €m

31.12.2011

Debt instruments

3,073

Equity instruments

172

Total securities

3,245

Securities representing debt are rated as follows (Standard & Poor’s):

 

in €m

 

AAA

1,253

AAA –

AA+

45

AA

55

AA –

371

A+

268

A

518

A –

359

BBB+

106

BBB

35

Below BBB or unrated

63

Total

3,073

The credit risk from derivative financial instruments is that of a counterparty’s insolvency. The maximum credit risk is the sum of transactions with the business partners in question for which the market values are on balance positive.

As of 31 December 2011 the credit risk from derivative financial instruments, which are an effective part of a hedging relationship, was EUR 458m (previous year: EUR 543m). The counterparty default risk for financial market transactions is limited by defining a maximum risk, taking the credit score given by recognised rating agencies into account.

Positive market values on the balance sheet date exist for transactions with business partners rated as follows (Standard & Poor’s):

 

in €m

 

AA –

10

A+

218

A

128

A –

29

BBB+

54

BBB

19

Total

458

The credit risk arising from financial derivatives shown at fair value through profit and loss amounted to EUR 299m as of 31 December 2011, and consisted of the total amount of business with contractual partners that on balance showed a positive market value. This figure includes EUR 174m for the time values of options used for hedging, changes in which must be recognised in the financial result as from 1 January 2010. The contractual partners have the following ratings (Standard & Poor’s):

 

in €m

 

AA –

2

A+

115

A

100

A –

29

BBB+

8

BBB

30

Below BBB or unrated

15

Total

299

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