Aer Lingus 2012 Annual Report Download - page 30

PRINCIPAL RISKS AND UNCERTAINTIES Aer Lingus Group Plc
ANNUAL REPORT 2012
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IT systems The Group is dependent on IT systems for most of its
primary business processes. The performance and
reliability of these systems is critical to our ability to
operate and compete effectively. Any failure of a critical
IT system or inability of a software supplier to support a
critical IT system for example in the areas of passenger
bookings and yield management could adversely impact
revenue generation and financial performance. In
addition, Aer Lingus has identified the need to upgrade
important parts of its core revenue management,
passenger management and staff rostering system.
These projects are complex and will require substantial
third party support. The passenger management system
covers the basic applications around customer services,
reservation and check in: any problems encountered in
upgrading this system could have a significant adverse
effect on customer experience, sales across all channels,
distribution and workflow efficiency.
The Group has put in place and continues to invest in,
technology security initiatives and disaster recovery and
business continuity arrangements to mitigate the risk of a
critical system failure. Project teams have been established
to manage the IT upgrades and third party support will
be sought where Aer Lingus lacks the necessary skills
or resources, including in relation to project and risk
management. The Group will give high prioritisation to the
upgrade of its passenger management system. This project
will be very tightly managed and controlled.
Capital Reduction
Failure to obtain court approval of the capital reduction
would substantially reduce the Group’s financial
flexibility and ability to pay dividends or buy back shares
in the future. The Board continues to believe that it is
in the best interest of shareholders to enable Aer Lingus
to have greater flexibility to consider a return of capital
to shareholders (or the redemption or repurchase of
ordinary shares) in excess of the limits currently imposed
by the Company’s balance sheet.
Aer Lingus Group plc sought and received shareholder
approval to increase its distributable reserves by means of
a capital reduction in an Extraordinary General Meeting
held on 4 November 2011 and the matter was heard by
the High Court in July 2012. Objections were made by the
trustees of both the Irish Airlines Superannuation Scheme
and the Irish Airlines (Pilots) Superannuation Scheme.
Since the judgement was issued, a hearing to allow further
submissions as to the appropriate order to be made
has been adjourned on a number of occasions to allow
progress to be made in discussions regarding the funding
shortfall in the pension schemes. On 26 February 2013,
the High Court set 6 March 2013 as the date on which it
would hear submission as to the appropriate order to be
made. Submissions were made on behalf of the parties on
6 March 2013 and the High Court is expected to deliver
its judgement regarding the form of the order on 13 March
2013.
Reliance on third parties
The Group is dependent on third party suppliers for
certain important parts of its operation. Services provided
range from aircraft heavy maintenance and technical
support to airport facilities to ground handling outside
the Republic of Ireland to the franchisee operating
Aer Lingus Regional. Any failure or inability of a major
supplier to provide the contracted services could cause
significant disruption to the Group’s operations and
result in financial loss.
Each of these key relationships is actively monitored by a
nominated manager.