AI & Computational Analysis of Currency Risk – The Airbus Case
Business Scenario
You have recently joined YieldCraft Treasury Advisory Pvt. Ltd. as a Senior Treasury Risk Analyst. One of your largest international clients is Airbus, one of the world's biggest aircraft manufacturers. Unlike many companies that earn and spend money in the same currency, Airbus faces a unique challenge.
The Airbus Business Model
Most commercial aircraft are sold globally and are priced in US Dollars (USD) because aviation is an international industry. However:
Most commercial aircraft are sold globally and are priced in US Dollars (USD) because aviation is an international industry. However:
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Engineers work mainly in Europe.
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Manufacturing plants are located across France, Germany, and Spain.
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Employee salaries are paid in Euros (EUR).
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Suppliers are also largely paid in Euros (EUR).
Therefore:
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Revenue Mostly USD
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Expenses Mostly EUR
This creates a currency mismatch. If the US Dollar becomes weaker against the Euro, Airbus receives fewer Euros after converting its sales revenue. As a result, revenue falls (after conversion), costs remain high, and the profit margin reduces.
To avoid this problem, Airbus uses professional treasury management techniques, including:
Pre-Lab Preparation
Topic : Commodities market
1) Commodity categories (energy, metals, agriculture)
2) Spot vs futures
3) Clearing and settlement
4) Operational relevance of commodity trades
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Forward Contracts
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Currency Options
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Natural Hedging
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Long-term Hedging Programs
Your task is to investigate Airbus's strategy using AI and perform analysis to measure the financial impact of exchange rate movements.
Software Required
| Tool | Purpose |
|---|---|
| Claude AI / ChatGPT | AI analysis of Airbus Annual Report |
| Wolfram Alpha | Currency calculations |
| Internet Browser | Access Airbus Investor Relations |
Task 1: AI Analysis of Airbus Currency Risk
Understanding Currency Risk Through a Simple Calculation:
Imagine Airbus signs an aircraft contract worth USD 10 Billion today.
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Today's Exchange Rate: 1 USD = 0.90 EUR
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Revenue becomes: USD 10 Billion EUR 9 Billion
Suppose six months later, the USD weakens.
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New Exchange Rate: 1 USD = 0.85 EUR
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Now Airbus receives: EUR 8.5 Billion
Loss due only to exchange movement = EUR 500 Million No aircraft prices changed. No manufacturing costs changed. Only the exchange rate changed. This is called Currency Risk.
AI Analysis of Airbus Currency Risk
Objective: Use Artificial Intelligence to understand how Airbus manages foreign exchange risk using their official financial disclosures.
Access the Portal
1
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Open your internet browser and navigate to the Airbus Investor Relations page:
Download the Correct Document
2
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Scroll to the "Annual Reports" section and select the year 2025.
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Locate the document titled "FY 2025 Financial statements" and click Download. Or use the below link :
Locate the Treasury Risk Section
3
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Open the downloaded PDF.
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Scroll directly to Page 57 of the document, or press Ctrl + F and search for the exact section heading: "37.1. Financial Risk Management".
Extract the Data
4
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Starting on Page 57, locate the subheading "Market Risk" and the subsequent section titled "Foreign exchange risk".
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Highlight and copy the text starting from here, continuing through Page 58 and Page 59, capturing their detailed explanations of hedging strategies, forward contracts, and options.
Run the AI Analysis
5
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Open Claude AI and click Continue with Google
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Paste the 2–3 pages of text you copied from the Airbus report into the chat.
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Immediately below the pasted text, copy and paste the following strict prompt to instruct the AI:
AI Prompt:
You are a Corporate Treasury Expert.
Read the following Airbus financial report section.
Explain in simple language:
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Why Airbus is exposed to USD/EUR exchange rate risk.
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What percentage of revenue is mainly earned in USD?
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Which costs are mainly paid in EUR?
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Which financial derivatives are used by Airbus?
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Explain Forward Contracts.
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Explain Currency Options.
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What is Natural Hedging?
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If USD depreciates by 5%, how would Airbus's operating profit change?
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Summarise Airbus's complete currency risk management strategy.
Give the answer in bullet points with simple explanations.
Interpret the AI Output
The Big Problem: Airbus sells airplanes in Dollars, but pays its European workers and factories in Euros. If the Dollar loses value, Airbus's revenues are suddenly worth fewer Euros, which destroys their profit.
Forward Contracts (The Fixed Price): Airbus signs a contract today to guarantee they can trade Dollars for Euros at a specific rate next year. Even if the market crashes, their rate is locked and safe.
Currency Options (The Insurance Policy): Airbus pays a fee for the choice to swap currencies at a set rate. If the market rate is terrible, they use the option. If the market rate is great, they ignore the option and take the better market rate.
Natural Hedging: Instead of converting Dollars to Euros, Airbus simply takes the Dollars they earn from selling planes and uses them to pay their American suppliers. No conversion means no currency risk.
What happens if the Dollar drops 5%? If Airbus did nothing, they would lose a massive amount of money. But because Airbus has already locked in their exchange rates years in advance (using forwards and options), their profits are shielded from the sudden drop.
Task 2: Compute Currency Impact using Wolfram Alpha – Airbus
Computational Currency Analysis
Given Information:
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Revenue: USD 10 Billion
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Operating Costs: EUR 8 Billion
Scenario 1: Exchange Rate (1 USD = 0.85 EUR)
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Revenue: 10 × 0.85 = EUR 8.50 Billion – Operating Cost EUR 8 Billion
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Profit: 8.50 − 8.00 = EUR 0.50 Billion
1. Go to www.wolframalpha.com
2. In the search bar, type your query exactly like this:
10,000,000,000 * 0.85 EUR
3. 10 billion USD in EUR at 0.85 exchange rate
Wolfram Alpha will generate a "Result" box. It will automatically handle the currency conversion and give you a clean, professional output 8.5 billion euros.
Scenario 2: Exchange Rate (1 USD = 0.90 EUR)
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Revenue: 10 × 0.90 = EUR 9.00 Billion
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Profit: 9.00 − 8.00 = EUR 1.00 Billion
· In the search bar, type this exact command: 10000000000 * 0.90 EUR.
· The engine will return a "Result" box confirming the value is 9 billion euros.
Scenario 3: Exchange Rate (1 USD = 0.95 EUR)
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Revenue: 10 × 0.95 = EUR 9.50 Billion
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Profit: 9.50 − 8.00 = EUR 1.50 Billion
Step-by-Step Calculation Summary
| Exchange Rate | Revenue | Operating Cost | Net Profit |
|---|---|---|---|
| 0.85 | EUR 8.50 Billion | EUR 8 Billion | EUR 0.50 Billion |
| 0.90 | EUR 9.00 Billion | EUR 8 Billion | EUR 1.00 Billion |
| 0.95 | EUR 9.50 Billion | EUR 8 Billion | EUR 1.50 Billion |
Interpretation of the Results
The calculations clearly demonstrate how exchange rate movements directly affect Airbus's profitability.
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When the exchange rate is 0.85 EUR per USD, Airbus converts its USD revenue into only EUR 8.50 billion, resulting in a relatively low profit of EUR 0.50 billion.
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As the US Dollar strengthens to 0.90 EUR, the converted revenue increases to EUR 9.00 billion, and the operating profit doubles to EUR 1.00 billion.
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When the exchange rate further strengthens to 0.95 EUR, Airbus earns EUR 9.50 billion after conversion, increasing its profit to EUR 1.50 billion.
This example shows that a stronger US Dollar increases Airbus's revenue in Euros while operating costs remain unchanged because they are already denominated in Euros. Consequently, Airbus's operating profit increases as the USD appreciates. Conversely, if the US Dollar weakens, Airbus receives fewer Euros for the same aircraft sales, reducing profitability. This is why multinational companies use hedging instruments such as forward contracts, currency options, and natural hedging to protect themselves from adverse exchange rate fluctuations.
Activity
Student Hands-on Computational Analysis
Given Information
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Revenue: USD 15 Billion
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Operating Costs: EUR 11 Billion
Using Wolfram Alpha or manual calculations, complete the table below.
| Exchange Rate (1 USD = EUR) | Revenue (EUR Billion) | Operating Cost (EUR Billion) | Net Profit (EUR Billion) |
|---|---|---|---|
| 0.80 | 15.00 | 11.00 | |
| 0.86 | 15.00 | 11.00 | |
| 0.92 | 15.00 | 11.00 |
Interpretation
- At which exchange rate does Airbus earn the highest operating profit?
- Calculate the difference in net profit between the 0.80 and 0.92 exchange rate scenarios.
Congratulations on completing this lab!
You analyzed Airbus's foreign exchange risk using AI, explored its currency risk management strategies, and calculated the impact of exchange rate movements on operating profit. You also learned how forward contracts, currency options, and natural hedging help multinational companies reduce currency risk. These concepts provide a strong foundation for understanding corporate treasury management and foreign exchange risk analysis.
Checkpoint
Congratulations on completing this lab!
You analyzed Airbus's foreign exchange risk using AI, explored its currency risk management strategies, and calculated the impact of exchange rate movements on operating profit. You also learned how forward contracts, currency options, and natural hedging help multinational companies reduce currency risk. These concepts provide a strong foundation for understanding corporate treasury management and foreign exchange risk analysis.