Air Canada 2014 Annual Report Download - page 121

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121
2014 Consolidated Financial Statements and Notes
PERFORMANCE AND RESTRICTED SHARE UNITS
The Long-term Incentive Plan also includes performance share units (“PSUs”) and restricted share units
(“RSUs”), which are accounted for as equity settled instruments. The vesting of PSUs is based on the
Corporation achieving its cumulative annual earnings target over a three-year period, while RSUs will vest after
three years from their date of grant. The terms of the plan specify that upon the retirement of an employee,
the number of units that vest are prorated based on the total number of completed months of active service
during the vesting term. The PSUs and RSUs granted may only be redeemed for Air Canada shares purchased on
the secondary market and/or equivalent cash at the discretion of the Board of Directors.
The compensation expense related to PSUs and RSUs in 2014 was $8 (2013 – $12).
A summary of the Long-term Incentive Plan share unit activity is as follows:
2014 2013
Beginning of year 9,437,970 7,255,711
Granted 1,280,922 4,047,136
Settled (2,948,874) (1,661,624)
Forfeited (217,008) (203,253)
OUTSTANDING SHARE UNITS, END OF YEAR (1) 7,553,010 9,437,970
1 1,105,433 PSUs were eligible for vesting as at December 31, 2014, of which all were vested in accordance with the terms of the program. These PSUs which vested in 2014 are planned
to be settled in 2015.
Refer to Note 17 for a description of derivative instruments used by the Corporation to mitigate the cash flow
exposure to the PSUs and RSUs granted.
EMPLOYEE RECOGNITION AWARD
In 2011, Air Canada’s Board of Directors approved a special one-time Employee Recognition Award in the form
of Air Canada shares granted to all eligible unionized and certain non-unionized employees worldwide, where
permitted. Under the award, eligible employees were granted an aggregate of approximately 3.3 million shares
with a grant date fair value of $11. Half of these shares vested immediately upon issuance and the other half
vested at the end of three years. Pursuant to the award, the Corporation purchased approximately 3.3 million
shares for $11, of which half were distributed to the eligible employees and the other half were held in trust
over the vesting period. The shares held in trust were recorded at cost of $6 and were reported net against
Share capital. Compensation expense for these shares was recognized over the vesting period from 2011 to
2013. The compensation expense recorded in 2013 was $2.
During 2014, all remaining shares held in trust for the Employee Recognition award vested.
EMPLOYEE SHARE PURCHASE PLAN
Eligible employees can participate in the employee share purchase plan under which employees can invest
between 2% and 10% of their base salary for the purchase of shares on the secondary market. Air Canada will
match 33.3% of the investments made by the employee during the first year of participation in the program,
with a 50% match after 12 months of continuous participation in the program. During 2014, the Corporation
recorded compensation expense of $5 (2013 – $1) related to the Employee Share Purchase Plan.