As part of broader cost series of cost-cutting measures Airbus’ has scaled back ambitions for its wholly-owned Skytra derivatives trading venue, which aimed to provide hedging services to airlines for tickets prices, and is instead focussing on developing indices and tradeable benchmarks.
Skytra had applied to the UK’s Financial Conduct Authority to be registered as a Benchmark Administrator of its air travel price indices and for a licence to operate a Multilateral Trading Facility (MTF), where derivatives based on the indices would trade. Skytra announced in January that it had selected Nasdaq to provide the technology for the planned derivatives trading venue.
A number of trading venues already exist globally that offer related services such as oil derivatives at ICE in Atlanta and the Singapore Exchange, which also owns the Baltic Exchange whose Dry Index provides a composite of global shipping rates that was in part the inspiration for Skytra’s aviation-specific approach.
In a statement Airbus said it was still “fully supporting” Skytra and the benchmarks and data products side of the business, but it had now decided to review how it brought its indices to market and appears to have dropped the idea of creating a bespoke trading venue.
“We now are re-evaluating whether that is the best route and considering partnerships, licensing agreements or in-house solutions. It is currently too early to say which route will be chosen and we can provide more information on this in due course,” the Airbus statement said.
COVID 19 has hit Skytra’s parent Airbus’ business hard with the company announcing redundancies across its business and the statement said that the current crisis facing aviation underlined the need for “revenue visibility and risk management tools”.
“Given the current climate we see it as our responsibility to find the best possible way to bring our products to market in the fastest and most cost effective way and as such have contributed…to this by re-evaluating the way the venue is delivered - we are not closing down the whole concept of providing a means of trading.
It is an essential part of the overall value proposition that Benchmark customers are able to place hedging trades based on the value of the Indices. The original plan was to provide that venue wholly in-house. “
Skytra is attempting to create a new class of futures and options contracts, underpinned by IATA, and secondary sources of data, that would enabling the $1 trillion per annum air travel industry to manage its exposure to revenue volatility for the first time. Skytra had previously said it intended to start trading at its venue in late 2020, subject to regulatory approval.