Aer Lingus 2012 Annual Report Download - page 51

ANNUAL REPORT 2012
49
Dear Fellow Shareholders,
Introduction
2012 was another excellent year for Aer Lingus Group plc. It represented
the third consecutive year of profitability and further affirmation that
the Aer Lingus management team, and indeed its entire employee base,
has successfully transformed Aer Lingus into a leaner, more efficient
and profitable organisation. Aer Lingus recorded an improvement in
performance against almost every key financial measure in 2012 as well as
against a range of key non-financial measures.
We set out below and on the following pages our 2012 Remuneration
Report. Our remuneration policy at Aer Lingus incentivises both the
Executive Directors and the broader management team to deliver
on stretching performance targets and aligns with the interests of all
shareholders.
In addition to aligning remuneration with shareholder interests, we remain
committed to comprehensive disclosure in our Remuneration Report.
This provides shareholders with clarity and transparency on remuneration
arrangements at Aer Lingus. In addition, to allow shareholders the
opportunity to provide feedback to the Group, and in line with good
governance, the Group is, for the fourth time, putting forward a resolution
at the Annual General Meeting to allow shareholders to vote on the 2012
Remuneration Report.
2012 Review
During 2012, Aer Lingus delivered an excellent trading performance and
recorded an operating profit, before net exceptional items, of €69.1 million.
The 2012 operating profit is 40.7% above 2011. This was achieved against
the backdrop of a third Ryanair offer for the Group in 2012 which was a
financial drain on your Group and had it not been well managed, could
have represented a significant distraction to the Aer Lingus management
team. The 2012 operating result is also remarkable in light of substantial
fuel and airport cost inflation and continuing weakness in our key Irish and
UK markets. This third consecutive year of strong profitability is a validation
of Aer Lingus’ value carrier business model and again demonstrates that our
strategy is delivering a leaner, more efficient and profitable airline, to the
benefit of all our stakeholders, staff and shareholders.
69.1
49.1
52.5
(81.0)
Operating profit/(loss) before net exceptional items – turnaround
(€m)
2012201120102009
Aer Lingus also delivered improved performance in respect of non-financial
metrics which are central to the Group’s business strategy and consistent
with the Aer Lingus promise of “Great Care, Great Fare”. In particular, there
has been a significant improvement in punctuality, which is critical to our
customers and central to their decision to fly with Aer Lingus.
88%
83%
77%
On Time Performance (arrivals within 15 minutes)
201220112010
The Remuneration Committee has worked hard to ensure that remuneration
for the Group’s Executive Directors and senior management is aligned with
the interests of shareholders and motivates them towards, and rewards
them for, superior performance. In addition to fixed pay (salary, pension
and related benefits), executives have the potential to receive an annual
bonus and awards under a Long Term Incentive Plan (LTIP). As outlined
over the past two years, the Remuneration Committee also put in place a
special incentive scheme, the “Transformational Performance Scheme” to
incentivise the Chief Financial Officer and other senior managers to deliver
targeted savings under the Group’s Greenfield savings plan. This plan was
central to the successful turnaround of Aer Lingus.
2012 Fixed Pay
In line with the challenging market backdrop, and a broader market
expectation for public companies generally to exercise pay restraint at
a senior level, there were no changes to fixed pay arrangements of the
Executive Directors in 2012.
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’ REMUNERATION Aer Lingus Group Plc
REPORT OF THE REMUNERATION COMMITTEE ON DIRECTORS’
REMUNERATION
Letter from Chair of the Remuneration Committee