annual report 2009 - Aer Lingus

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86 Financial Statements Aer Lingus Group Plc – Annual Report 2009Notes to the Consolidated Financial Statements [continued]27 Share premium, capital conversion reserve fund and other reserves [continued]Shares awarded under the Group’s LTIP are equity settled share-based payments as defined in IFRS 2 Share-Based Payments. The IFRSrequires that a recognised valuation methodology be employed to determine the fair value of shares awarded and stipulates that thismethodology should be consistent with methodologies used for pricing of financial instruments. The expense of €Nil (2008: €735,000)reported in the income statement has been arrived at through applying a Monte Carlo simulation technique to model the combinationof market and non-market based performance conditions of the plan.Impact on income statementThe total expense is analysed as follows:2009 Long-Term Incentive PlanStaff costsExpense in the consolidatedincome statementNilThe 2009 awards will expire in 2011.The fair value of the shares awarded were determined using a Monte Carlo simulation technique, taking account of peer group totalshare return volatilities and correlations, together with the following assumptions:2009 2008Risk free interest rate 2.83% 4.23%Expected volatility 50.59% 35.00%Dividend yield 0.00% 0.00%Expected volatility was determined by calculating the historical volatility of the Company’s share price.Share optionsOn 8 September 2009, Mr Christoph Mueller was granted share options in respect of 1,500,000 shares. The exercise price in respectof the options over 500,000 shares which may become exercisable on or after 7 September 2012 and are exercisable until 7 September2019 is €0.573 per share; the exercise price in respect of the options over 500,000 shares which may become exercisable on or after7 september 2013 and are exercisable until 7 September 2019 is €0.677 per share and the exercise price in respect of the options over500,000 shares which may become exercisable on or after 7 September 2014 and are exercisable until 7 September 2019 is €0.886.The share options granted during the period are equity settled share-based payments as defined in IFRS 2 Share-based Payments. TheIFRS requires that a recognised valuation methodology be employed to determine the fair value of share options granted and stipulatesthat this methodology should be consistent with methodolgies used for the pricing of financial instruments. The expense of €46,336reported in the income statement has been arrived at through applying a Binomial lattice option-pricing model. The weighted averagefair value of the share options granted during the period at the measurement date was €0.37 per share. The inputs used in the optionpricingmodel included a share price of €0.58 per share, a dividend yield of 0%, a risk free rate of 4.70% and volatility of 50.63%. Theoptions were assumed to be exercised when optimal in the Black-Scholes sense.Impact on statement of financial positionALG Trustees Limited (the “Trust”) was retained during the year to manage the LTIP. The Trust purchased 2,396,959 shares in May2008 at a cost of €4,862,133. The Trust purchased a further 152,709 shares in April 2009 at a cost of €116,450 and 5,690,969 sharesin May 2009 at a cost of €4,041,726. In September 2009 the Trust sold 5,605,347 shares to the Company for nil consideration. As at31 December 2009 the Trust held 4,446,658 ordinary shares.The Trust was consolidated in the Group accounts and these shares were accounted for as treasury shares in the consolidated statementof financial position.
Financial Statements Aer Lingus Group Plc – Annual Report 20098728 Employee participationEmployee share ownership plan (“ESOP”)Aer Lingus ESOP Trustee Limited (“ESOT”) acts as the sole trustee of the Aer Lingus Employee Share Ownership Plan (“ESOP”). TheESOP was established by a Trust Deed executed on 28 April 2003. Through a combination of an issue of shares to ESOT, the purchase ofshares under an option granted at the time of the IPO, and its position as trustee of shares held by staff under an Approved Profit SharingScheme (“APSS”), ESOT held 12.47% of the issued share capital of the Company at 31 December 2009 (31 December 2008: 12.47%).ESOT is also trustee of the Aer Lingus Approved Profit Sharing Scheme and, at 31 December 2009, 9,188,781 shares (1.72%) (31 December2008: 9,397,900 shares (1.76%)) were held in the Company on behalf of beneficiaries. Certain of these shares are subject to a minimumholding period requirement specified by the Irish Revenue Commissioners.Profit sharing schemeAt the time of the IPO a new profit sharing scheme was established whereby the Group agreed to transfer to ESOT, depending on the returnon average shareholders’ funds, between 0% and 7.5% of the Group profit before taxation and exceptional items annually, commencingon 1 January 2006. The profit share is to be used by ESOT to pay any expenses and to repay all borrowings arising from the exercise ofthe option granted at the time of the IPO. No profit share was payable for 2009 or 2008 as a result of the losses incurred in those years.29 Pensions and other post employment benefitsThe Group operates a number of externally funded pension schemes for the majority of its employees. The Irish Pension Schemes meetthe definition of defined benefit schemes under the terms of the Pensions Act 1990 (but are defined contribution schemes for accountingpurposes). One of the Irish Pension Schemes, the Irish Airline (General Employees) Superannuation Scheme (the “Main Scheme”) isoperated in conjunction with a number of other employers.The Group and employees contribute a fixed percentage of salaries each year to these schemes, which does not vary accordingto the funding level of the Irish Pension Schemes.The rules of the Irish Pension Schemes provide for the following in the event that there is an actuarial surplus or deficiency in the schemes:SurplusIf an actuarial valuation discloses a surplus, it shall be applied by the trustees, after consultation with the Actuary, for the purposeof increasing the benefits to members or reducing the rate of contribution by the employers and/or members.DeficiencyIf an actuarial valuation discloses a deficiency, the trustees shall take such measures as they think appropriate, having regard to therecommendations of the actuary, to remedy any such actual or anticipated deficiency provided that no such measures shall, withoutthe consent of the employers, make provision for payment of any increased contribution by the employers, or, without the consentof the members, make provision for the payment of any increased contribution by the members.The costs and liabilities of the schemes are assessed in accordance with the advice of a professionally qualified actuary. The mostrecent actuarial review was carried out at 31 March 2009.The Group’s contributions charged for the year were €24.9m (2008: €29.3m), based on rates specified by the schemes’ rules.The actuarial reports are not available for public inspection.At the time of the IPO, the Group reached agreement with the trade unions representing the majority of staff to establish two supplementalfunds. The purpose of the supplemental funds is to seek to provide, insofar as available funds permit and subject to their trustees’ discretion,increases to pensions in payment for those members of the Main Scheme who are also participants in the supplemental funds wherethe trustees of the Main Scheme do not grant increases to pensions in payment in line with rises in the Consumer Price Index.The Group and current eligible employees who have opted to become members of the funds pay ongoing annual contributions.As is the case with the Main Scheme, the two supplemental funds were established on the basis that neither the Group nor aparticipating employee can be obliged to pay more than the specified contribution to the funds without their written consent and,therefore, are accounted for as defined contribution schemes.
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annual report 2009 - Aer Lingus

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