Blue Star Airlines Risk Management

Paper Summary:

This paper discusses risks and treasury activities for Blue Star Airlines. It particularly discusses how managing risks is one of the core activities of the treasury. It focuses on interest rates, exchange rates and volatile fuel prices and how they can affect an airline. The paper also discusses a crisis management program and a hedging strategy for Blue Star Airlines.

Table of Contents:
Policy Statement
Risk Management Department's Responsibility
Direct Property Loss Potential
Business Income Loss Potential
Liability Loss Potential
Key People Loss Exposure
Crisis Management Program
Hedging/Advanced Risk Transfer Program
Appendix

From the Paper:

"The loss of luggage is one of the most common issues that an airline could face. Usually luggage is handled by external companies and not the airline's personnel. However, it falls into the airline's responsibility to insure the luggage's safe transportation to the destination. The airline has to be prepared for cases in which an entire batch of luggage is lost or delayed and deal with potential legal claims. Thus, many airlines limit their liability in the legal statement required to purchase the plane ticket. The customer has to agree not to exceed a certain value for the personal items left in the luggage, as above the threshold there will be no compensation. However, the airline has to pay a certain amount of money to the passengers enough to cover their necessaries for at least the next 48 hours and that amount has to be established beforehand. The airline has to warn the passengers no to let in their luggage items that are vital to them, so that a potential loss would not harm their health."

Sample of Sources Used:

• Daily Star (London) May 31. 2006. Seven Bags Lost on Every Jet. p. 25.
• Franks, M. R. 2007. Remedies for Loss, Damage or Delay of Airline Luggage. Louisiana Bar Journal, vol. 54(4): pp. 256-261.
• Franks, M. R. 2006. Airline Liability for Loss, Damage or Delay of Passenger Luggage. Fordham Journal of Corporate & Financial Law, vol. 12: pp. 735-752.
• Luckett v. Delta Airlines, 171 F.3d 295, 297 (5th Cir. 1994).
• Marsh, J. 2004. Hedging on the Fly. www.solarc.com

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