Westjet 2009 Annual Report Download - page 48

18 WestJet 2009 Annual Report
shares were acquired through the open market. For 2009, our
matching expense was $47.0 million, a 9.5 per cent increase
from 2008, driven primarily by an increase in salary expense,
as well as a greater number of participating WestJetters in the
ESPP versus a year ago.
Employee profit share
All employees are eligible to participate in the employee profi t
sharing plan. As the profit share system is a variable cost,
employees receive larger awards when we are more profi table.
Conversely, the amount distributed to employees is reduced and
adjusted in less profi table periods. Our profi t share expense for
the year ended December 31, 2009, was $14.7 million, a 56.1
per cent decrease from $33.4 million in 2008. This decline was
directly attributable to lower earnings eligible for profi t share,
due primarily to the decrease in revenues versus the prior year.
As a result of our continued profi tability, we were pleased that
our WestJetters earned a bonus payout of almost four per cent
in 2009. This brings our total profi t share payout since 1996 to
approximately $178 million.
Stock option plan
Pilots, senior executives and certain non-executive employees
participate in the stock option plan. As new options are granted,
the fair value of these options, as determined by the Black-
Scholes option pricing model on the date of grant, is expensed
over the vesting period, with an offsetting entry to contributed
surplus. Stock-based compensation expense related to stock
options for the year ended December 31, 2009, was $12.0
million, representing a decrease of 4.4 per cent over 2008. This
decrease in stock option expense related primarily to the vesting
of options granted under the 2006 pilot agreement, in which a
signifi cant number of stock options were granted. This was offset
Salaries and benefi ts are determined via a framework of job
levels based on internal experience and external market data.
During 2009, salaries and benefi ts increased by 9.3 per cent to
$392.7 million from $359.2 million in 2008. This increase was
due primarily to higher pilot salaries and benefi ts resulting
from the new pilot agreement effective July 1, 2009; a cash
payout relating to an executive’s departure from the Company;
incremental salary costs associated with the challenges posed by
the reservation system implementation, as previously discussed;
and annual market and merit increases. Salaries and benefi ts
expense for each department is included in the respective
department’s operating expense line item.
Employee share purchase plan (ESPP)
Our ESPP encourages employees to become owners of WestJet
shares. Under the terms of the ESPP, WestJetters may acquire
voting shares of WestJet at the current fair market value, and
these acquisitions will be matched by us up to a maximum of
20 per cent of their gross pay. As at December 31, 2009, 84 per
cent of our eligible active employees participated in the ESPP,
contributing an average of 15 per cent. During the year ended
December 31, 2009, we matched contributions for every dollar
contributed by our employees. Under the terms of the ESPP, we
have the option to acquire voting shares on behalf of employees
through open market purchases or to issue shares from treasury
at the current market price, which is determined based on the
volume-weighted average trading price of the common shares
for the fi ve trading days preceding the issuance. For the year
ended December 31, 2009, we elected to issue shares from
treasury for a portion of our matching contribution. A total of
977,459 shares were issued from treasury at a total market value
of $11.1 million for which no cash was exchanged. The remaining
Three months ended December 31 Twelve months ended December 31
($ in thousands) 2009 2008 Change 2009 2008 Change
Salaries and benefi ts $ 100,012 $ 91,353 9.5% $ 392,749 $ 359,231 9.3%
Employee share purchase plan 12,173 11,366 7.1% 47,030 42,937 9.5%
Employee profi t share 2,297 6,648 (65.4%) 14,675 33,435 (56.1%)
Stock option plan 2,264 2,460 (8.0%) 12,045 12,597 (4.4%)
Executive share unit plan (185) 172 (207.6%) 1,395 888 57.1%
$ 116,561 $ 111,999 4.1% $ 467,894 $ 449,088 4.2%