Aer Lingus 2013 Annual Report Download

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2013 ANNUAL REPORT

Table of contents

  • Page 1
    2013 ANNUAL REPORT

  • Page 2
    ... 2013 Financial Review Quarterly Trading Review of 2013 Principal Risks and Uncertainties Board of Directors Executive Management Team Safety and Security Statement Corporate Social Responsibility Statement Directors' Report Corporate Governance Statement - Year ended 31 December 2013 Report...

  • Page 3
    Financial Highlights For the year ended 31 December 2013 2013 Results Revenue EBITDAR Operating profit before net exceptional items Net exceptional items Operating profit after net exceptional items Net finance expense Share of profit/(loss) in joint venture Income tax charge Profit for the year ...

  • Page 4
    ... by Aer Lingus The Group now generates approximately half of passenger bookings outside Ireland. This results in more of our total passenger fare revenue being receivable in currencies other than the euro, our reporting currency. Movements in FX rates cause variances in total passenger fare revenue...

  • Page 5
    ...direct services from Ireland to two new locations in North America, namely San Francisco and Toronto. All in all, our 2014 transatlantic seat capacity will be more than 40% greater than in 2012. Shareholding structure In August 2013, the UK Competition Commission (the "UKCC") issued its final report...

  • Page 6
    ...form part of Aer Lingus' ongoing programme of Board refreshment, renewal and commitment to best practice in corporate governance. Andrew Macfarlane informed the Board in March 2014 of his intention to step down from his roles as Chief Financial Officer and Executive Director to take up a new role in...

  • Page 7
    ... Lingus on an extended codeshare with United Airlines on a Washington - Madrid route) was used to increase frequencies on our Dublin to Boston and Chicago routes and in this way provide a double daily service to both US destinations, improving choice and connectivity opportunities for our passengers...

  • Page 8
    ...our website with a re-designed booking portal; Improve our mobile app; Have all our transatlantic flights from Dublin pre-cleared for the Summer schedule (for the first time); Introduce fully lie-flat seats on our long haul flights by Q1 2015; Move to the Queen's Terminal at London Heathrow offering...

  • Page 9
    As always, I would like to thank our staff and management team for their hard work in 2013 and their continued focus in 2014. Also, I would like to express my thanks to our shareholders for their support of our efforts in recent and future years. CHRISTOPH MUELLER Chief Executive Officer 27 March ...

  • Page 10
    ... fares; discretionary add-ons (e.g. assigned seating); connectivity through our Dublin hub; extensive use of partnerships to offer destinations to which we could not fly profitability using our own aircraft; manage capacity to increase revenue per seat while controlling cost Specific 2013 business...

  • Page 11
    ... + 5.8% 2011 2012 Passengers ('m) 2013 VFR Main holiday Additional Business holiday Aer Lingus Other Dublin Airport Note: VFR is an abbreviation for visiting friends and relatives The Irish travel market continues to be dominated by passengers travelling for leisure and non-time sensitive...

  • Page 12
    ... main Irish airports has increased more than 5% since 2011. Several long haul carriers launched new transatlantic services from Dublin and Shannon in 2013. Total seat capacity on Irish routes over the North Atlantic market increased by approximately 12.0% as United Airlines, American Airlines and...

  • Page 13
    ... and yield. Our long haul priority in 2014 will be to successfully sell the incremental seat capacity deployed on our new routes directly serving San Francisco and Toronto from Dublin and which are scheduled to commence in Spring 2014. 2. Continue retail revenue growth 2013 priority: Introduce the...

  • Page 14
    ...services (including Lisbon and Malaga). Summary of increased Aer Lingus transatlantic capacity in 2014 ASK Growth Overall long haul growth in 2014 This growth may be analyzed as: Dublin to San Francisco Dublin to Toronto Other (Shannon to New York/Boston) 13% 6% 5% 8% 6% 6% 24% Seat Growth 20% 2014...

  • Page 15
    ... benefits to our customers in accessing over 40 destinations across the US from New York and Boston. In March 2013, we announced an expansion of our code-share agreement with United Airlines, adding United's services between Washington and Dublin and Shannon and Chicago to the Aer Lingus booking...

  • Page 16
    ...) A330 aircraft in our mainline long haul fleet which allowed us to increase the frequency of services from Dublin to Boston and Chicago (providing double daily services to both destinations and supporting network connectivity), and ï,· The earlier commencement of our Summer 2013 schedule which...

  • Page 17
    ... routes which Aer Lingus also operates). Our long haul capacity will expand by approximately 24% in ASK terms as we launch new direct services from Dublin to San Francisco and Toronto in April 2013 and expand existing services from Shannon to New York and Boston. 9. Effective fleet management 2013...

  • Page 18
    ... website and a renewed mobile app in Q3 2014, provide an enhanced passenger experience with our move to London Heathrow Terminal 2 in July 2014 and upgrade our existing long haul business class seats to offer fully "lie flat" capability by Q1 2015. 11. Address pension funding issues 2013 priority...

  • Page 19
    ... and related matters. Aer Lingus Limited has also engaged directly with the IASS Trustee in order to (i) confirm its agreement to move forward on the basis of the IASS Proposal (including changes and reductions to future benefits); (ii) seek confirmation that the IASS would be closed to new members...

  • Page 20
    ... Trustee, the Pensions Board, Aer Lingus Limited, Aer Lingus Group plc shareholders, DAA, trade unions, active and deferred members, all of which needs to be achieved in order for the IASS Proposal to be successfully implemented. Given the nature of the proposed reductions in benefits payable by the...

  • Page 21
    ...event that Aer Lingus Limited achieves the requisite agreements with the IASS Trustee, ICTU and the trade unions and the necessary steps outlined above are completed, the directors of Aer Lingus Group plc plan, as outlined above, to issue a circular to all shareholders which sets out full details of...

  • Page 22
    .... Passenger revenue In 2013, our short haul markets were softer than expected, particularly in the second half of the year. We responded by actively promoting our services while carefully making tactical capacity reductions to manage fare revenue per seat and load factor. Long haul performance in...

  • Page 23
    ... of the additional A330 aircraft in summer 2013. Market conditions were positive and we sold the extra seats very effectively resulting in a 12.2% increase in passenger numbers and a 0.6 percentage point increase in load factor to 83.1%. Overall mainline long haul fare revenue increased 11.1%. This...

  • Page 24
    ...by 3.1% on a per passenger basis reflecting a positive performance on our "fare family" pricing options, online booking fees, seat selection and excess baggage charges. While retail revenue was ahead of 2012 in both H1 and H2 2013, retail revenue performance in the second half of the year was not as...

  • Page 25
    ... the re-deployed seventh A330 long haul aircraft. In addition, we had an A320 designated as held for sale in 2012 which was subject to an impairment charge and was not depreciated. This aircraft was returned to our operational fleet at the end of 2012 to support our contract flying business and was...

  • Page 26
    ...the Company under the 2013 VSP. 119 staff had left as at 31 December 2013 with a further 5 staff committed to exit in 2014 ï,· â,¬6.1 million of professional and legal fees. These fees relate to bid defence costs associated with Ryanair's third takeover for Aer Lingus (which was launched in 2012 but...

  • Page 27
    ... year (2012: â,¬75.2 million) due to lower net capital expendi ture and lower exceptional item cash flows. These favourable movements were offset by higher net interest payments owing to a decline in interest rates on deposits as noted above. Other movements impacting gross cash for 2013 included...

  • Page 28
    ... December 2013 US$/EUR FX rate, is as follows: 159 114 84 65 27 29 2014 2015 2016 2017 2018 2019 to 2023 Finance lease repayments (â,¬'million) Fuel, currency and emissions hedging In order to achieve greater certainty on costs, we manage our exposure to fluctuations in the market prices of...

  • Page 29
    ... as non-distributable reserves in that company's balance sheet. On this basis, the directors of Aer Lingus Group commenced a process in 2011 to create additional distributable reserves in Aer Lingus Group plc's balance sheet through a capital reduction. On 4 November 2011, Aer Lingus shareholders...

  • Page 30
    ...US$ exchange rate. Retained earnings (and therefore distributable reserves) has increased by an additional â,¬500 million over retained profit for the year following the order by the High Court on 15 March 2013 confirming a corresponding reduction in certain of the other reserves of Aer Lingus Group...

  • Page 31
    ...ahead of Q1 2012 driven primarily by a 14.4% increase in long haul fare revenue. Operating costs however increased by 6.1%. This increase was attributable to significant changes to our business in the quarter which included the introduction of the additional A330 aircraft into our mainline fleet. In...

  • Page 32
    ... to support the additional A330 long haul aircraft and contract flying operations. Other costs increased by 1.3% as a result of higher depreciation. We also reported a reduction in gains generated by our foreign exchange hedging. At the end of September 2013, our cumulative year to date operating...

  • Page 33
    ...Group's strategic and business objectives. The Risk framework adopted by Aer Lingus can be summarised as follows: Board of Aer Lingus Board Audit Committee Board Risk Committee Board Safety Committee Flight and Flight Safety Non-Flight Risks Corporate Safety and Risk Office All key non-flight...

  • Page 34
    ... Group's markets. The Group attempts to compensate for weakness in the core Irish market by stimulating and competing for inbound traffic and by using its relationships with other airlines, including Aer Lingus Regional, to flow transfer passengers through its network. FINANCIAL Risk Cost & Revenue...

  • Page 35
    ... of our markets can make it very difficult to pass cost increases on to passengers without an adverse impact on traffic volumes. Therefore our ability to compete for new business is directly related to our ability to promote a cost effective, high quality product in a price sensitive market. In...

  • Page 36
    ... by the Irish Pensions Regulator (the "Pensions Board") of a funding proposal to implement the benefit reductions proposed by the IASS Trustee Assuming that the above outlined agreements are concluded, Aer Lingus Group plc will then issue a circular to its shareholders setting out full details of...

  • Page 37
    ... is likely to be generated. The purchase of second hand aircraft or older technologies could actually result in higher financial returns for the business over time. The Group undertakes significant modelling and review prior to aircraft and aircraft related purchase decisions. Change from 2012 35

  • Page 38
    ... of issues including but not limited to: pay, rosters and pensions. Aer Lingus needs staff and union support to move the business forward. A breakdown in the bargaining process could have the potential to result in industrial action, disrupting operations and adversely affecting business performance...

  • Page 39
    ... and revenue, additional cost and damaged customer confidence The Group has established a centralised Strategic Sourcing function that is responsible for oversight and management of key relationships and for the implementation of corporate procurement policy across the full range of business needs...

  • Page 40
    ... of Ireland. In 2009 he was awarded an honorary CBE by Queen Elizabeth II for services to UK-Irish relations. Laurence has vast experience as both a chartered accountant and board member. This experience enables him to make a significant contribution to the Board as both Non-Executive Director and...

  • Page 41
    ... Ireland Working Committee 2009 - 2011. He is a member of the Irish Government's Global Irish Network advisory group and the Global Irish Economic Forum. John has over 25 years of executive level experience leading global sales, marketing, and operations. Previously he was Chief Executive Officer...

  • Page 42
    ... Chief Financial Officer of Ferrovial from 1993 to 2009. During his tenure at Ferrovial, he held numerous international board positions, including at BAA, now Heathrow Airport Holdings, from the time of Ferrovial´s acquisition in 2006. He was also a member of its Audit Committee, its health, safety...

  • Page 43
    ... is provided directly to the Executive Team and the Board on the legal, regulatory, compliance and reputational implications of their decision making. Dónal is a solicitor and was Company Secretary at Aer Lingus from early 2009 to September 2012. Prior to joining Aer Lingus he spent 9 years with...

  • Page 44
    ...empower people to work safely. Aer Lingus' SMS is directed by the Corporate Safety and Risk Manager ("CSRM"). This role reports directly to the Chief Execut ive, ensuring continued accountability and awareness of these issues and their importance within the Group. The CSRM has responsibility for the...

  • Page 45
    ... continuing high level of compliance and adoption of best security practice. The Corporate Security Office is responsible for development and implementation of the Aer Lingus Air Carrier Security Programme, which sets out the security policies and processes by which regulatory requirements are met...

  • Page 46
    ... the airline, Aer Lingus has a flexible working policy. The objective of this policy is to help staff achieve a healthier balance between their working lives and personal responsibility without compromising business needs and to retain valued, experienced and trained employees. The policy includes...

  • Page 47
    ... donations by its employees through payroll deductions for Air Concern. This Dublin Airport based initiative provides financial assistance to families in need in the community working with the Ballymun Money Advice and Budgeting Service. Ethical The Aer Lingus Code of Business Conduct and Ethics...

  • Page 48
    ... financial statements for the year ended 31 December 2013 are set out in detail on pages 79 to 137. Information on the key performance indicators applicable to the Group are detailed in the Financial Highlights on page 1, the Chairman's Statement on pages 3 to 4, the Chief Executive Officer's Review...

  • Page 49
    ... recommend a dividend payment of four cent per share in respect of the year ended 31 December 2012, subject to shareholder approval at the AGM. The Company paid its second dividend, of four cent per share, on 10 May 2013. On 24 February 2014, the board announced that it would recommend a dividend...

  • Page 50
    ... and Sport of Ireland on 14 March 2014 and is considered as non-independent. On 25 March 2014 Mr. Andrew Macfarlane, Executive Director and the Group's Chief Financial Officer (CFO) informed the Board that he will step down from his position as CFO and Executive Director to take up a new role in the...

  • Page 51
    ... significant in relation to the Group's business. During the year ended 31 December 2013, the Company Secretary (Ms. Méabh Gallagher) was granted a conditional award of 35,000 shares under the Long Term Incentive Plan ("LTIP") in respect of the vesting period 1 January 2013 to 31 December 2015. Any...

  • Page 52
    ...to assess the Group's performance, business model and strategy. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Irish legislation governing the preparation and dissemination of financial statements may differ...

  • Page 53
    Books of account The measures taken by the Directors to secure compliance with the Company's obligation to keep proper books of account are the use of appropriate systems and procedures and employment of competent persons. The books of account are kept at Dublin Airport, Co. Dublin, Ireland. ...

  • Page 54
    ... Rules of the Irish Stock Exchange (ISE), the Directors are required in this statement to describe how the principles of the Codes have been applied by the Company in the year. A copy of the UK Corporate Governance Code (September 2012) can be obtained from the Fin ancial Reporting Council's website...

  • Page 55
    ... annual general meeting where this is required. Recommendation to shareholders for the election of Non-Executive Directors beyond six years will be made only after review by the Board. None of the Non-Executive Directors is a party to any service contract with the Company that provides for benefits...

  • Page 56
    ... as officers of the Company. Meetings The Board has a fixed schedule of meetings each year and may meet more frequently as required. There were nine scheduled Board meetings in 2013. Details of Directors' attendance at these meetings is outlined in the table on page 58. In line with best practice...

  • Page 57
    ...and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. to monitor and review the results of the Company's internal audit function and the annual internal audit plan; to make recommendations to the Board in relation to the appointment...

  • Page 58
    ... the issues by the Remuneration Committee. During 2013, the Remuneration Committee employed the services of Towers Watson to provide information and advice on remuneration strategy and structure including market benchmarking and best practice. Towers Watson was engaged by, and reported directly to...

  • Page 59
    ...monthly traffic statistics; issuance of the Annual Report and the half yearly report; issuance of preliminary annual results announcements and Q1 and Q3 interim management statements; investor relations section on the Group's website, including full text of financial results, press releases, results...

  • Page 60
    ... including use of appropriate authorisation levels; long term business plan; detailed annual budget process, with budget reviewed and approved by Board; monthly monitoring of historic and forecast performance against budget which is reported to the Board; comprehensive system of internal financial...

  • Page 61
    ... at Dublin Airport. From time to time, the Company has entered into codeshare agreements with other airlines as well as aircraft finance leases and exchange and interest rate hedging contracts with financial institutions. These agreements contain provisions which allow for their early termination in...

  • Page 62
    ...the EU, give a true and fair view of the assets, liabilities, financial position of the Company and the Group and of the profit of the Group and; ï,· the Directors' report contained in the annual report includes a fair review of the development and performance of the business and the position of the...

  • Page 63
    ... again in line with 2012, there was also no change to the Chairman's fee or non -executive directors' fees during 2013. These fees are well below the normal level payable to directors of Irish public companies. 2013 Performance Related Pay Scheme The performance of Aer Lingus in 2013, although solid...

  • Page 64
    ... shareholder return" over the performance period, the LTIP awards vested at 33.4% in 2013. Further details are set out in the body of this Remuneration Report. The Remuneration Committee has conducted a review of the terms of the Company's LTIP in 2013 and has engaged and consulted with a number...

  • Page 65
    ... Cost Reduction Program targets for 2012 for employee gain-sharing incentives; ï,· review and approval of the 2013 share award gran ts under the Company's LTIP to Executive Directors and other senior managers; ï,· consideration of the outcome of the performance conditions for the LTIP share awards...

  • Page 66
    ...the Company. Executive Directors Mr. Christoph Mueller (Chief Executive Officer) was an executive director throughout 2013. The remuneration package for Mr. Mueller as executive director consists of basic salary, annual performance related bonus, a pension contribution, premium-priced share options...

  • Page 67
    ... the Company's executive remuneration strategy, in 2010 the Remuneration Committee modified the performance objectives for LTIP awards. The 2010, 2011, 2012 and 2013 performance conditions consist of "total shareholder return" ("TSR" ) measured 50% against a comparator group of European airlines and...

  • Page 68
    ... AG, International Airlines Consolidated Group, S.A., Finnair Oyj, Air France - KLM, Air Berlin plc and SAS AB. On 24 February 2014, 200,400 shares vested to the Chief Executive Officer and 167,000 shares vested to the Chief Financial Officer in respect of the 2011 LTIP award. The 2013 award made to...

  • Page 69
    ... the req uirements of both the 2012 UK Corporate Governance Code and the Irish Stock Exchange. Directors' Pension Benefits Information regarding the pension benefits of the directors is outlined in Table 2.1 on page 68. The Company is required to make a contribution at a rate of 25% of basic salary...

  • Page 70
    ... to the income statement in relation to the estimated cost of shares which could vest under the share option award granted to Mr. Mueller prior to his appointment as a director and in relation to the estimated cost of shares which could vest under the 2011, 2012 and 2013 LTIP awards. In respect...

  • Page 71
    ... average closing share price on the five days prior to the date of grant). (3) In April 2011, Mr. Christoph Mueller was granted conditional awards of 600,000 shares under the LTIP in respect of the performance period 1 January 2011 to 31 December 2013. On 24 February 2014, 200,400 shares vested to...

  • Page 72
    .... Christoph Mueller 490,000 2012 1 January 2012 - 31 December 2014 1 January 2013 - 31 December 2015 465,000 2013 500,000 2011 1 January 2011 - 31 December 2013 Mr. Andrew Macfarlane Vested in the amount of 167,000 shares being 33.4% of award based on superior performance. Of these, 87,058...

  • Page 73
    ...course of 2013. EY was appointed for a three year period. Its current contract expires at the end of 2014, but is extendable at the option of Aer Lingus for one further year if EY consents. The annual internal audit plan is developed each year in response to risks in the business and in consultation...

  • Page 74
    ... to perform a certain amount of non-audit work where they are best placed to provide those services and they are not of a scale or nature that would pose a threat to independence. It is the policy of Aer Lingus to restrict aggregate fees for non-audit activities of the auditors in any given year to...

  • Page 75
    ... UK Corporate Governance Code requires that detail of the significant issues considered by the Audit Committee in relation to the financial statements and how those issues have been addressed be set out in this report. During 2013, the Audit Committee considered whether suitable accounting policies...

  • Page 76
    ... considers the response of the executive directors and senior management of the Company in respect of issues falling within the terms of reference of the Audit Committee as material to remuneration levels generally and to the award of performance related pay in particular. To that end the Audit...

  • Page 77
    ... a single operating unit that provides air transportation for passengers and cargo and th e Group's flight equipment is deployed through a single route scheduling system. The Group financial statements are a consolidation of the principal operating company, Aer Lingus Limited, and a number of wholly...

  • Page 78
    ...particular revenue and costs, fleet composition and discount rate assumptions. We compared the directors' future cash flow forecasts to the latest Board approved budgets and tested the calculations therein. We challenged the directors' key assumptions which include passenger numbers and yield, price...

  • Page 79
    ... to shareholders by the Board on directors' remuneration. We have nothing to report arising from these responsibilities. Corporate Governance Statement Under the Listing Rules of the Irish Stock Exchange we are required to review the part of the Corporate Governance Statement relating to the Company...

  • Page 80
    This report, including the opinions, has been prepared for and only for the Company's members as a body in accordance with Section 193 of the Companies Act, 1990 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other ...

  • Page 81
    ... income statement Year ended 31 December 2013 Note â,¬'000 1,425,115 2012 as restated â,¬'000 1,393,284 Revenue Operating expenses (before net exceptional items) Staff costs Depreciation and amortisation Aircraft operating lease costs Fuel and oil costs Maintenance expenses Airport charges En-route...

  • Page 82
    ... income Year ended 31 December 2013 Note â,¬'000 2012 as restated â,¬'000 Profit for the year 34,088 33,852 Other comprehensive income/(loss) Items which may be reclassified to the income statement Available-for-sale reserve - Amortisation of available-for-sale reserve - Deferred tax...

  • Page 83
    ... tax asset Deposits Non-current assets held for sale Current assets Inventories Loans and receivables Derivative financial instruments Trade and other receivables Current income tax receivables Deposits Cash and cash equivalents Total assets EQUITY Called-up share capital Share premium Capital...

  • Page 84
    ... and section 7 (1A) of the Companies (Amendment) Act, 1986, the Company is availing of the exemption from presenting its individual income statement to the Annual General Meeting and from filing it with the Registrar of Companies. The Company's result for the financial year is a profit of â,¬27,000...

  • Page 85
    ... comprehensive (loss)/income for the year ended 31 December 2013 Total comprehensive (loss)/income for the year Exercise of share awards Share based payment reserve Deferred tax impact Retranslation of investment in Joint Venture (see Note 16) Dividends Paid (4 cent per share) Capital reduction (see...

  • Page 86
    ... Balance at 31 December 2012 Balance at 1 January 2013 Profit for the year ended 31 December 2013, being total comprehensive income for the year Exercise of share awards Share based payment reserve Dividend Paid (4c per share) Capital reduction (see Note 31) Balance at 31 December 2013 26,702 26,702...

  • Page 87
    ...statement of cash flows Year ended 31 December Note Cash flows from operating activities Income tax paid Net cash generated from operations 33 2013 â,¬'000 101,088 (19) 101,069 2012 â,¬'000 118,508 (37) 118,471 Cash flows from investing activities Purchases of non...at 1 January Exchange losses on ...

  • Page 88
    Company statement of cash flows Year ended 31 December 2013 Note â,¬'000 33 â,¬'000 2012 Cash flows from operating activities Net cash used in operations (4) (4) (1) (1) Cash flows from investing activities Interest received (Increase in)/repayment of amounts owed from subsidiary undertaking ...

  • Page 89
    ...is Dublin Airport, Co. Dublin, Ireland. The Company has its primary listing on the Irish Stock Exchange and a standard listing on the London Stock Exchange. These financial statements were authorised for issue by the Board of Directors on 27 March 2014. The financial statements are for the Group for...

  • Page 90
    ...under the Greenfield cost reduction programme is in respect of employees who had accepted the offer of voluntary severance at the reporting date. See Note 9 for further information. (iii) Change in accounting policy - adoption of IFRS 13 Fair value measurement. The Group has included the disclosures...

  • Page 91
    ... payment reserve in Aer Lingus plc instead of Aer Lingus Limited During 2013, the Group identified that awards of options in and shares of Aer Lingus Group plc granted to employees of its subsidiary Aer Lingus Limited for services to that entity had not been recorded within Aer Lingus Group plc. The...

  • Page 92
    Annual 2011 improvements These annual improvements address six issues in the 2009-2011 reporting cycle. These includes changes to: . IFRS 1, 'First time adoption' . IAS 1, 'Financial statement presentation' . IAS 16, 'Property plant and equipment' . IAS 32, 'Financial instruments; Presentation' . ...

  • Page 93
    ...'s business model and the contractual cash flow characteristics of the financial asset. 1 January 2018 2.2 Consolidation (a) Subsidiaries Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally...

  • Page 94
    ...In 2011, as part of the surrender of the lease over its former head office building, the Group acquired a ten year license for the use of certain property owned by the Dublin Airport Authority. This license is held at cost and amortised over the ten year license term. 2.7 Impairment of non-financial...

  • Page 95
    ... and the Group has transferred substantially all risks and rewards of ownership. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Gains or losses arising from changes in the fair value of the financial assets through the income statement category...

  • Page 96
    ... are recorded in the income statement, together with any changes in the fair value of the hedged asset or liability. The Group only applies fair value hedge accounting for hedging fixed interest risk on assets and borrowings. The gain or loss relating to the effective portion of interest rate swaps...

  • Page 97
    ... to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds received. Where any group company purchases the Company's equity share capital, the consideration paid, including any directly attribut able incremental costs (net of income taxes) is deducted...

  • Page 98
    ... payment of termination benefits. 2.21 Share-based payment The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments of the Company (awarded under share awards and share options). The...

  • Page 99
    ...the offer of those benefits. 2.23 Frequent Flyer Programme The Group maintains a loyalty points programme, the Gold Circle Club, which allows customers to accumulate points when they purchase flights. The points can be redeemed for free flights, products and services with Aer Lingus and its partners...

  • Page 100
    ...work in relation to foreign exchange rate risk relates to the management of the Group's cashflow exposures. Significant currency exposures are managed for the current and future financial years on a systematic, amortising basis within pre-set bands. The dollar deficit arises because the dollar costs...

  • Page 101
    ...2013 and 2012. (iv) Carbon Allowances Price Risk The Group is exposed to market volatility of the price of EU-ETS allowances in respect of the need to purchase the non-free element of annual allowances. The Group treasury function manages this risk by making purchase decisions based on market prices...

  • Page 102
    ...of 2013. Given the delivery of an operating profit in each year since 2010; the attractive pros pects for the business and the increase in the Group's distributable reserves, the Board announced on 24 February 2014, that, in respect of 2014 and for the foreseeable future, it expects to pay an annual...

  • Page 103
    ... arrangements has a right of offset between financial assets and financial liabilities where there is an early termination event such as a default or change of ownership of the counterparty. Such events of default include failure to perform obligations or to make prompt payment when due. The right...

  • Page 104
    ...and the Irish Airlines (Pilots') Superannuation Scheme (collectively the "Irish pension schemes") As the provisions of the trust deeds governing the Irish Pension Schemes are such that no changes to the contribution rates are possible without the prior consent of Aer Lingus Limited, this company has...

  • Page 105
    ..., the Group is managed as a single business unit that provides air transportation for passengers and cargo, which allows the Group to benefit from an integrated revenue pricing and route network. The Group's flight equipment is deployed through a single route scheduling system. When making resource...

  • Page 106
    ...939 1,781,731 During the period additions totaling â,¬34 million (2012: â,¬44.4 million) were made to the reportable segments non -current assets. 6 Revenue 2013 â,¬'000 Passenger revenue Ancillary revenue Cargo revenue Other revenue Total revenue 2012 â,¬'000 1,170,614 181,444 43,639 29,418 1,425...

  • Page 107
    ... 2013 charge includes â,¬1.0 million arising from further downsizing in Shannon line maintenance following operational decisions regarding the maintenance of Boeing 757 aircraft. A further â,¬1.1 million represents additional costs relating to the conclusion of the Group's Greenfield cost reduction...

  • Page 108
    ...071 2 16,664 11 Employee benefits The average number of persons (Full Time Equivalents) employed by the Group in the financial year was 3,615 (2012: 3,566) split as follows: 2013 Operations and administration Sales and marketing 3,567 48 3,615 The associated payroll costs of these persons were as...

  • Page 109
    Termination benefits paid or payable to staff who left the Group during the year or who were committed to leave at year end are disclosed within Note 9. 12 Income tax 2013 â,¬'000 2012 â,¬'000 (i) Income tax charge recognised in the Income Statement Current taxation Withholding tax deducted at ...

  • Page 110
    ... 741,087 Leased assets included above (net book value) 31 December 2013 31 December 2012 465,650 502,170 465,650 502,170 1 During 2012, an aircraft previously classified as held for sale was brought back into the operational fleet and reinstated into fixed assets at its original cost and at a net...

  • Page 111
    ...82,927 76,079 3,041 333 79,453 Ground operations, catering and other operating costs 1 Amounts reflected in other revenue in 2012 related to depreciation incurred on the aircraft used in the extended codeshare agreement with United Airlines. The Group's share of the net profit or loss associated...

  • Page 112
    ...933 During 2012, the Group acquired a 33.33% equity interest in the share capital of Propius Holdings Limited (the "Joint Venture"), the parent company of an aircraft leasing group. The Joint Venture acquired six ATR 72-600 series aircraft over the course of 2013 for onward leasing to Aer Arann. It...

  • Page 113
    ...summarised financial information for Propius Holdings Limited. The Group accounts for this investment under the equity method, including recognition of the Group's share of post acquisition results. Propius Holdings Limited is an entity incorporated within the Cayman Islands, whose registered office...

  • Page 114
    ...,597 Aer Lingus Group plc is incorporated under the Irish Companies Acts, 1963 to 2013. Its head office is at Dublin Airport, Co. Dublin, Ireland. It is the ultimate parent company in the Aer Lingus Group. The principal group companies are Aer Lingus Limited, Aer Lingus (Ireland) Limited and Dirnan...

  • Page 115
    ... discounted using a rate based on the market interest rate and the risk premium appropriate to the unlisted securities. â,¬0.2 million (2012: â,¬0.1 million) was amortised from the available-for-sale reserve to the income statement in the year. The effective interest rates of the financial assets...

  • Page 116
    ... will affect the income statement at the point of settlement. 20 Inventories 2013 â,¬'000 Sundry inventory Sundry inventory primarily comprises catering and retail stock for sale on board. There were no write-downs of inventory during the current or prior year. 21 Group 2012 (as restated1) â,¬'000...

  • Page 117
    ... receivables have been included in "Ground operations, catering and other operating costs" within the Income Statement except for the reduction in impairment provision of â,¬4.8 million which was treated as exceptional in 2012. Amounts receivable are charged to the provision account when there is...

  • Page 118
    ... twelve months at year end. Given that the maturity of these investments falls outside the three month timeframe for classification as cash and cash equivalents under IAS 7 Statement of Cash Flows, the related balances have been treated as "deposits". The effective int erest rate on financial assets...

  • Page 119
    ...Accruals and deferred income Ticket sales in advance, excluding taxes and charges ¹ Employment related taxes Other amounts payable 63,313 55,832 133,131 7,154 32,838 292,268 53,716 52,031 129,469 7,348 41,075 283,639 ¹ The total value of tickets sales in advance at year end was â,¬158.5 million...

  • Page 120
    ... The Group's operating subsidiary, Aer Lingus Limited, participates in a number of pension schemes for its staff. The two main pension schemes are the Irish Airlines (Pilots) Superannuation Scheme (the "Pilots' Scheme"), for its pilots, and the Irish Airlines (General Employees) Superannuation...

  • Page 121
    ... Relations Commission (the "LRC"), Aer Lingus Limited and the Irish Airlines Pilots Association agreed certain changes to the scheme with the aim of addressing the deficit over time. The changes included an increase in retirement age from 55 to 60, a reduction in accrual rate for future service...

  • Page 122
    ... and related matters. Aer Lingus Limited has also engaged directly with the IASS Trustee in order to (i) confirm its agreement to move forward on the basis of the IASS Proposal (including changes and reductions to future benefits); (ii) seek confirmation that the IASS would be closed to new members...

  • Page 123
    ... Trustee, the Pensions Board, Aer Lingus Limited, Aer Lingus Group plc shareholders, DAA, trade unions, active and deferred members, all of which needs to be achieved in order for the IASS Proposal to be successfully implemented. Given the nature of the proposed reductions in benefits payable by the...

  • Page 124
    ...these plans. The Internal Revenue Code, as set forth by the Internal Revenue Service, also provides regulations and guidance for the administration of pension and medical schemes. The pension schemes set up under trust and operated by Aer Lingus in Ireland are exempt approved schemes under the Taxes...

  • Page 125
    ...retirement age of 65. Retirement benefits are reduced for service of less than 20 years. The scheme has 114 members (2012: 119). Both plan participation and accrual of benefits are frozen. The Group also operates a defined benefit scheme in respect of two retired Irish former executives of the Group...

  • Page 126
    ... provide an income equating to a pension until members reach age 65, at which point benefits cease. The risks of these schemes relate primarily to future medical cost inflation and to financial assumptions including changes to discount rates. The Group has not changed the process used to manage...

  • Page 127
    ... - effect of changes in financial assumptions Remeasurements - effect of experience adjustments Benefits paid Retranslation At 31 December The amounts recognised in the income statement are as follows: 2013 â,¬'000 Current service cost - recognised in staff costs Interest cost - recognised in...

  • Page 128
    .... It represents the directors' best estimate of the cost of these measures, having regard to the current status of negotiations. The provision relating to the 2013 Voluntary Severance Programme has been recorded in respect of individuals who at the reporting date had accepted the offer of voluntary...

  • Page 129
    ... interest. Aer Lingus is contesting these proceedings and has recently issued separate proceedings against the Irish Government on the basis that the air travel tax infringed EU rules on free movement of services. These proceedings seek repayment of â,¬8 per passenger for each passenger subject to...

  • Page 130
    ... to be recovered after more than 12 months Deferred tax (liability)/asset 54,216 (58,080) (3,864) 57,134 (55,804) 1,330 2013 â,¬'000 2012 â,¬'000 Deferred asset at 1 January Income statement charge Tax credit directly to equity Deferred tax (liability)/asset at 31 December 1,330 (5,433...

  • Page 131
    ...the 2010 cycle of the Group's Long Term Incentive Plan ("LTIP") scheme the vested awards of participants were settled, resulting in 1,917,052 treasury shares being issued by the Group to LTIP participants. No new treasury shares were subscribed for or purchased by ALG Trustee Limited during the year...

  • Page 132
    ... Aer Lingus Group plc with a view to improving flexibility for the future. At the time, Aer Lingus Group plc could not make a distribution to shareholders in excess of â,¬57. 4m, which was the total amount of that company's retained earnings at that time. As Aer Lingus Group plc is a holding company...

  • Page 133
    ... the cost of Aer Lingus Group plc ordinary shares held in order to fulfil awards under the Group's share based payment schemes. Share based payment reserve The reserve comprises amounts expensed in the Group Income Statement in connection with awards made or options issued under the Group's share...

  • Page 134
    ... used for pricing of financial instruments. The expense of â,¬3,158,717 (2012: â,¬3,262,404) reported in the income statement has been arrived at through applying a Monte Carlo simulation technique to model the combination of market and non-market based performance conditions of the plan...

  • Page 135
    ...423 2011 Long Term Incentive Plan Staff costs 982 960 2012 Long Term Incentive Plan Staff costs 1,158 879 2013 Long Term Incentive Plan Staff costs Total 1,018 3,158 3,262 The fair value of the shares awarded were determined using a Monte Carlo simulation technique, taking account of peer group...

  • Page 136
    ... At 1 January Exercise of LTIP awards Share based payment reserve At 31 December 32 Employee participation Employee Share Ownership Trust ("ESOT") The ESOT holds 102,907 shares of Aer Lingus Group plc (0.02% of the issued share capital) (2012: 114,188 shares). These shares are either unclaimed by...

  • Page 137
    ... years Later than five years 7,486 28,260 40,338 76,084 Aircraft â,¬'000 44,498 115,860 160,358 Plant and machinery â,¬'000 2 2 35 Related party transactions Key management compensation¹,² 2013 â,¬'000 2012 â,¬'000 Short-term employee benefits Post employment benefits Termination benefits Share...

  • Page 138
    ... cent per share in respect of the year ended 31 December 2013, subject to shareholder approval at the Annual General Meeting. Mr. John Hartnett, Mr. Nigel Northridge and Mr. Nicolás Villen were appointed to the Board as independent, non-executive directors with effect from 1 January 2014. Mr. Frank...

  • Page 139
    There have been no other significant events occurring after the reporting period, up to and including the date of approval of this financial information by the Board of Directors. 137

  • Page 140
    Shareholder Information (unaudited) 2014 financial calendar Annual General Meeting 2014 H1 period ends 2014 H1 results 2014 FY ends 2 May 2014 30 June 2014 July 2014 31 December 2014 Share price data â,¬ Share price movement during 2013 - High - Low Share price at 31 December 2013 Market ...

  • Page 141
    Crest Aer Lingus Group plc is a member of the CREST share settlement system. Shareholders may continue to hold paper share certificates or hold their shares in electronic form. Electronic proxy voting and CREST voting Shareholders may lodge a proxy form for the 2014 Annual General Meeting ...

  • Page 142
    ... the Annual and Interim Reports and copies of presentations to analysts and investors. News releases are also made available in this section of the website immediately after release to the Stock Exchanges. Company officers and advisors Directors Colm Barrington (Chairman) David Begg (Non-Executive...

  • Page 143
    ... (including airport charges/taxes) (in â,¬) Utilisation (average block hours per aircraft per day) RPKs (in millions) ASK (in millions) Passenger load factor (flown RPKs per ASKs) Average number of aircraft Scheduled cargo tonnes ¹ excludes extended codeshare agreement with United Airlines...

  • Page 144
    ... fare (including airport charges/taxes) (in â,¬) Utilisation (average block hours per aircraft per day) RPKs (in millions) ASK (in millions) Passenger load factor (flown RPKs per ASKs) Average number of aircraft Scheduled cargo tonnes ¹ excludes Aer Lingus Regional Services operated by Aer...

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  • Page 148
    ...in-ï¬,ight magazine. Our aim was to showcase some of the great destinations on our network through the eyes of our customers. The response was wonderful. The entries we received were of such high quality that we felt it would be nice to include some of these beautiful images here. www.aerlingus.com