Aer Lingus 2010 Annual Report Download - page 70

Financial Statements Aer Lingus Group Plc – Annual Report 2010
68
9 Net exceptional items
2010 2009
€’000 €’000
Northern European airspace closure costs (a) 4,283 -
Profi t on disposal of property, plant and equipment (b) (3,108) -
Payment to discharge ESOT profi t share obligation (c) 25,691 -
Gain on exit of line maintenance contract (d) (11,780) -
Restructuring (e) (8,628) 88,630
Statutory redundancy government refund (f) (4,971) -
Leave and return settlement (g) 29,500 -
30,987 88,630
(a) Costs of compensating passengers incurred as a result of the closure of northern European airspace following the eruption of a volcano
in Eyjafjallajoekull, Iceland.
(b) Profi t on disposal of aircraft.
(c) Once-off payment to the Aer Lingus Employee Share Ownership Trust (“ESOT”) to fully extinguish the Group’s obligations to pay any
further share of profi ts to the ESOT.
(d) Gain realised following the exit of line maintenance contract with SR Technics.
(e) Re-measurement of provisions for restructuring costs associated with early retirement, voluntary severance and migration schemes
offered prior to 2010. The 2009 charge consists of a provision for net redundancy payments of €51.9m and a provision for a deferred
payment to staff of €25.0m for the 2009 Cost Reduction Programme and a remeasurement of the 2008 restructuring charge of €11.7m.
(f) Statutory redundancy refunds relating to redundancies effected during 2009.
(g) In 2008, Aer Lingus proposed to outsource the majority of its Dublin based ground operations as these operations were uneconomic by
reference to prevailing norms in the airline industry. Discussions with the SIPTU union, facilitated by the National Implementation Body
and later the Labour Relations Commission, led to a collective agreement in November 2008 on a signifi cant restructuring of ground
operations. This restructuring was agreed by Aer Lingus management at the time on the basis that the severance payments made to staff
under the restructuring programme would qualify as a redundancy under the relevant legislation, with related rebates for Aer Lingus and
termination of employment tax relief for affected staff.
In 2009, 913 staff were made redundant and 715 of those employees successfully applied for new roles within the Group, with changed
duties and lower salaries.
By late 2010, it had become clear that both Revenue and the Department of Enterprise Trade & Innovation were seriously questioning
whether the members of staff who left and subsequently applied for new roles and returned to Aer Lingus should be considered to be
redundant under the relevant legislation. A review was commenced of the terms on which these redundancies were agreed by all of the
parties involved at the time.
Having reviewed the matter and taken appropriate advice, Aer Lingus concluded that it was in shareholders’ and the Group’s best
interests to seek a settlement of the matter. In negotiations on 23 February 2011, Revenue confi rmed their intention to seek to recover
PAYE and PRSI which they considered should have been deducted from termination payments to employees in 2009. Aer Lingus
concluded following that meeting, that it should make an exceptional provision of €32.5 million in its fi nancial statements in respect
of the likely cost of dealing with this matter. In making this provision, Aer Lingus was conscious of the risk that in disputing an
assessment issued by Revenue, the Appeals Commissioner could impose a higher liability if the case were found against the Group.
A settlement of this matter has now been agreed and the exceptional provision amount has been revised to €29.5m. The revised
provision is incorporated in these fi nancial statements.
Notes to the consolidated fi nancial statements (continued)