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122 Qantas Annual Report 2009
Notes to the Financial Statements
for the year ended 30 June 2009
24. Share-based Payments
The DSP Terms & Conditions were approved by shareholders at the 2002 AGM. The DSP governs the provision of equity benefits to Executives within the
Qantas Group. There have been no modifications to the DSP Terms & Conditions during the year.
Eligible employees may be awarded equity benefits under the Qantas Profitshare Scheme.
Further details regarding the operation of equity plans for Executives are outlined in the Directors’ Report.
The total equity settled share-based payment expense for the year was $59 million (2008: $62 million).
LONG TERM INCENTIVE PLAN (LTIP)
The LTIP is specifically targeted to Senior Executives in key roles or other participants who have been identified as high potential Executives.
All Rights are redeemable on a one-for-one basis for Qantas shares, subject to the achievement of the performance hurdle. Dividends are not payable
on the Rights.
Number of Rights
Performance Rights Reconciliation 2009 2008
Rights outstanding as at 1 July 6,121,033 5,038,800
Rights granted 3,117,000 2,545,000
Rights lapsed (1,301,362) (288,276)
Rights vested (1,020,579) (1,174,491)
Rights outstanding as at 30 June 6,916,092 6,121,033
Rights exercisable as at 30 June 1,311,949 1,041,633
No Rights expired during the year. Based on the performance hurdle tested as at 30 June 2009, 242,400 Rights will expire from the 2004/05 award.
All Rights were granted with a nil exercise price. No amount has been paid, or is payable by, the Executive in relation to these Rights.
During the year, 1,020,579 Rights were exercised (2008: 1,174,491). Based on the performance hurdle tested as at 30 June 2009, 1,140,681 Rights for
the 2006/07 award will vest after 12 August 2009. A further 135,124 Rights may vest from the 2005/06 award over the next year, subject to achievement
of the performance hurdle. At 30 June 2009, 27,535 Rights are available to be exercised at the request of the Executive under the 2004/05 award and a
further 143,733 Rights under the 2005/06 awards. For more information on the operation of the LTIP, see pages 71 and 72.
Fair Value Calculation
The estimated value of Rights granted with the TSR performance hurdle component was determined at grant date using a Monte-Carlo model.
A Black Scholes model was used to value the Rights with the EPS performance hurdle. The weighted average fair value of Rights granted during the year
was $1.64 (2008: $3.34).
Inputs into the Models 2009 2008
Weighted average share value $2.13 $4.58
Expected volatility 50% 25 – 30%
Dividend yield 3.5% 6.2%
Risk-free interest rate 3.6% 6.2%
The expected volatility for the 2008/09 award was determined having regard to the historical one year volatility of Qantas shares and the implied volatility
on exchange traded options. The risk-free rate was the yield on an Australian Government bond at the grant date matching the remaining life of the plan.
The yield is converted into a continuously compounded rate in the model. The expected life assumes immediate exercise after vesting.