Treasury solutions revolutionise aviation sector

The aviation sector in the Middle East has evolved rapidly, with treasury operations embracing digitisation through the adoption of new technologies.

As a global digital transformation leader, HSBC invited regional aviation treasury and banking experts to discuss how solutions such as Application Programming Interface (API) and virtual accounts can help unlock new possibilities and make treasuries more efficient.

The aviation industry has historically been very traditional. But the pandemic has shown this once-analog sector the need for resilience and agility, with aviation treasury functions adopting digital solutions to enhance their capabilities and adapt to the fast-changing business environment.

“We are seeing a huge rise in digital and cashless payments, as well as sophistication on the receivables management side away from physical bank accounts into virtual accounts and API solutions,” said Russell Roberts, HSBC.

A key area of focus has been in treasury centralisation giving aviation treasuries more control and better visibility of their operations, along with economies of scale.

Over the last two years, Saudia, the kingdom’s flag carrier, has made digital transformation a top priority, integrating all hubs with the holding company and looking for ways to give decision makers a real-time view of treasury operations.

These efforts have led to a greater ability to deal with macroeconomic shocks. Over the last year, inflation has surged to historical highs, fueled by a sharp rebound in consumer demand following the pandemic as well as the conflict in Ukraine, which pushed up energy and food prices.

“Even under the most optimistic forecasts, markets are not expecting to see inflation go below 3 percent by the end of this year compared to the Fed’s 2 percent target,” said Brendan Doyle at HSBC.

The Fed has hiked its policy rate by a cumulative 450bps in the space of 11 months since March 2022, with further rate hikes priced in for 2023.

Against this backdrop of macroeconomic uncertainty, streamlined treasuries like Saudia’s are now much better placed to react to external shocks.

With innovative tools such as HSBC Evolve, an award-winning intelligent and interactive post trade portal, aviation sector treasurers can benefit from smarter management of foreign exchange (FX) risk with trading, hedging and settlement all in one place.

The customisable platform, available to all HSBCnet customers, has advanced execution capabilities, providing access to over 1,500 currency pairs and designed to simplify FX confirmation and enhance the reporting and trade experience.

Its powerful Trading Blotter offers a complete overview of all the trades executed with HSBC, while its Post Trade Portal helps reduce manual input with a pre-populated trade blotter and easier management of settlement instructions and third-party payments.

The substantial amounts that airlines might need to trade on the FX market can be processed in tranches throughout the trading day, to minimise slippage costs and help avoid moving the market.

HSBC’s carbon trading operations are set to go live in the first half of 2023 with spot and short-term forwards on the voluntary carbon market, with the next phase to include building capacity to trade longer dated forwards.

In cash management, the aviation sector has been grappling for years with reconciliation and visibility of a large number of physical client accounts. These are exactly the problems that innovative solutions such as APIs and virtual accounts help tackle.

With its bespoke, flexible and adaptable API and virtual account solutions, HSBC has been working with clients such as Jazeera Airways to streamline and optimise their treasury operations.

HSBC’s tailored API solutions led to a significant reduction in resource hours and improved accuracy of data, while automation and visibility slashed processing costs, eliminated duplication of records and increased the ability to facilitate electronic payments. ¹

“In India and in the UAE, we are dealing with around 300 to 400 agents. Thanks to the solution that HSBC offered, we managed to cut down on a lot of personnel effort as it runs seamlessly,” said Silveria at Jazeera Airways.

“We hope to extend this solution to other geographies,” she added.

Having spent some U.S.$2.3 billion on enhancing its digital solutions over the past 10 years, HSBC is the right partner for companies looking to transform their treasury operations to fit the future, while also benefiting from its global presence providing customer support across multiple countries.

Along with Virtual Accounts, HSBC’s Corporate and Treasury APIs help unlock new possibilities for businesses, making it easier to manage cash and make more informed daily treasury decisions. They also reduce the risk of fraud and improve overall corporate governance.

Planning to streamline your treasury operations or want to learn more about how APIs and virtual accounts could help your business? Talk to one of our specialists today.