European airliner manufacturer, Airbus, and Nasdaq are partnering to launch Skytra, a London-based platform, that will help airlines to manage their revenue risks and accurately forecast future ticket sales. The platform will allow airlines to trade futures and options contracts by leveraging proprietary indices.
Airlines use oil futures all the time to hedge against fuel price volatility. Now, they may start hedging against volatile swings in ticket fares. Ticket fares tend to see their highest fluctuations during holidays, major events, and weather changes.
Airbus said it’s been working to track day-to-day changes in air travel prices over the past two years.
For its part, Nasdaq will be providing the required technology to ensure adequate functioning of the platform, including tasks like risk management, matching, regulatory reporting, and surveillance.
Adena Friedman, Nasdaq’s President and CEO, said that Nasdaq “tracks every ticket price, pre-trade and after-trade. They can look at certain routes and certain regions in the world, and they can say how much the price has changed, and they create an index on that.”
Friedman also pointed out that the data is helpful for travel agencies. “They are not offering this right now to consumers. It’s definitely a professional market, but at the same time, the consumers use travel agencies.”
Christian Scherer, Airbus’ CCO, said: “Skytra has been created in collaboration with the air travel industry and players outside it to enable more financial predictability in a volatile market.”
It’s a well-known fact that short-term revenue is a big concern for airlines, as shorter revenue cycles have a lot of uncertainty. The majority, up to 90 percent of airline tickets, are booked within 90 days before the flight. If there is an increased supply of seats or demand is lower, sales can be significantly affected and negatively impact revenue.