301 O N E R E P O R T 2 0 2 2 OVERVIEW BUSINESS OVERVIEW AND PERFORMANCE CORPORATE GOVERNANCE FINANCIAL INFORMATION SUSTAINABLE BUSINESS DEVELOPMENT 38.2 Financial risk management objectives and policies Financial Instruments principally comprise cash and cash equivalents, trade and other receivables, amounts due from related parties, trade payables, other payables, amounts due to related parties, short-term borrowings from financial institutions, short-term debentures, long-term borrowings from financial institutions, long-term debentures, and lease liabilities. The financial risks associated with these financial instruments and how they are managed is described below. Credit risk The Group is exposed to credit risk primarily with respect to deposits with banks and financial institutions, trade receivables, deposits for lease of aircraft and other financial instruments. Except for derivatives, the maximum exposure to credit risk is limited to the carrying amounts as stated in the statement of financial position. The Group’s maximum exposure relating to derivatives is noted in the liquidity risk topic. TheGroupmanages the credit risk bymaking investments only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors. The credit risk on debt instruments and derivatives is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies. The Group generally has no concentration of credit risk arising from trade receivables. Market risk There are 3 types of market risk comprising fuel price risk, interest rate risk and currency risk. The Group enters into a variety of derivatives to manage its risk exposure, including: • Fuel price swap agreements to mitigate the risk of fuel price fluctuation • Interest rate swaps to mitigate the risk of rising interest rates • Cross currency swaps to mitigate the risk of rising interest rates and foreign currency rates Fuel price risk Fuel price fluctuation depends on demand and supply of global economic situation and political uncertainty worldwide. Fuel price has direct impact on the Company’s operating results as fuel plays a vital factor in airline industry. The subsidiary is exposed to the fluctuation of fuel price. To manage the risk of fuel price fluctuation, a related party is carried out the risk management on behalf of the subsidiary. As at 31 December 2022 and 2021, the subsidiary has not obligations from fuel price hedging. Interest rate risk The Group’s exposure to interest rate risk relates primarily to its deposits at financial institutions, short-term borrowings from financial institutions, short-term debentures, long-term borrowings from financial institutions, long-term debentures and lease liabilities. Most of the Group’s financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate. The Group uses interest rate swap agreements as a risk management instrument for the future interest payments on certain long-term borrowings and lease liabilities that carry interest at floating rates. As at 31 December 2022 and 2021, significant financial assets and liabilities classified by type of interest rate are summarised in the table below. Consolidated financial statement Fixed interest rates Floating interest rate Non-interest bearing Total Effective interest rate (% p.a.) For the year ended 31 December 2022 Financial assets Cash and cash equivalents - 590 208 798 0.04 - 0.35 Trade and other receivables - - 854 854 - Amounts due from related parties - - 2,540 2,540 - Other current financial assets - 93 92 185 4.97 - 5.72 Other non-current financial assets - 640 259 899 2.29 - 7.23 - 1,323 3,953 5,276 (Unit: Baht Million)
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