annual report 2009 - Aer Lingus

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28 Directors’ Report Aer Lingus Group Plc – Annual Report 2009Directors’ Report [continued]Directors’ statement pursuant to the TransparencyRegulationEach of the Directors, whose names and functions are listed onpages 10 to 11 confirms that, to the best of each person’s knowledgeand belief:• the financial statements, prepared in accordance with IFRSsas adopted by the EU, give a true and fair view of the assets,liabilities, financial position of the Company and the Groupand of the loss of the Group; and• the Directors’ Report contained in the annual report includesa fair review of the development and performance of thebusiness and the position of the Company and Group, togetherwith a description of the principal risks and uncertainties thatthey face.Internal controlThe Board has overall responsibility for the Group’s system ofinternal control. Those systems, which are maintained by the Group,can only provide reasonable and not absolute assurance againstmaterial misstatement or loss. An outline of the Group’s internalcontrol processes is included in the Corporate Governance Statementon pages 29 to 36.Issue and purchase of own sharesThe Company received authority from shareholders at its lastAnnual General Meeting on 5 June 2009 to allot relevant securitiesup to a nominal value of €8,810,249 and purchase up to 10%of its own shares. Both these authorities are due to expire at theCompany’s forthcoming Annual General Meeting on 18 June 2010.On 2 September 2009 the Company acquired 5,605,347 ordinaryshares (representing 1% of the called up share capital of theCompany) of €0.05 each in the issued share capital of the Companyfor nil consideration from ALG Trustee Limited, pursuant to section41(2) of the Companies (Amendment) Act, 1983 and these 5,605,347shares were then cancelled in accordance with section 43 of theCompanies (Amendment) Act, 1983. ALG Trustee Limited is thetrustee of the Aer Lingus Group plc Employee Benefit Trust andin that capacity, it holds Aer Lingus shares for the purposes of theCompany’s 2007 Long-Term Incentive Plan. The Shares were acquiredand cancelled by the Company as the Company does not expectthat the shares, which were acquired and cancelled, will be requiredto satisfy vestings pursuant to the LTIP.Share ownership restrictionsSince Aer Lingus’ entitlement to obtain or to continue to hold orenjoy the benefit of the licences, permits, consents and privilegesthat enable Aer Lingus to carry on business as an air carrier in Irelandand/or internationally can be adversely affected if too many of theordinary shares are held by non-EU nationals, the Directors are givencertain powers under the Articles of Association to take action toensure that shareholdings of non-EU nationals in the Company’sshare capital are not of such a size or type which could jeopardiseAer Lingus’ air carrier rights. The Directors have the power todesignate a maximum percentage of the Company’s share capitalwhich may be held by Non-EU nationals and have determined thatin excess of 50% of the Company’s issued share capital will be heldby EU shareholders.Political contributionsThe Group made no political donations during the year.Subsidiary companiesDetails of the group companies are set out in Note 16 to theconsolidated financial statements.Books of accountThe measures taken by the Directors to secure compliance with theCompany’s obligation to keep proper books of account are the use ofappropriate systems and procedures and employment of competentpersons. The books of account are kept at Dublin Airport, Co Dublin,Ireland.Independent auditorsThe independent auditors, PricewaterhouseCoopers, are preparedto continue in office in accordance with the provisions of S.160 (2)of the Companies Act, 1963.Transparency (Directive 2004/109/EC) Regulations 2007As required by Statutory Instrument 277/2007 Transparency (Directive2004/109/EC) Regulations 2007 the following sections of the Company’sannual report shall be treated as forming part of this report:• The Chairman’s Statement and Chief Executive’s Reviewon pages 2 to 5• Operating and Financial Review on pages 6 to 9, which includes areview of the price risk and cash flow risk, external environment,key strategic aims and performance measures.• Details of earnings per ordinary share on page 72• Details of derivative financial instruments on pages 76 to 77• Details of key performance indicators relating to employeematters, e.g. change in number of employees, on page 71.
Directors’ Report Aer Lingus Group Plc – Annual Report 200929Events after the reporting dateIn October 2009, the Group launched its Cost ReductionProgramme (“Greenfield”), which targeted annualised cost savingsof approximately €97m over the period to 2012. On 5 March 2010,the Group was notified that the Greenfield proposals were rejectedin a staff ballot of cabin crew represented by IMPACT. The Groupwas separately notified that the four other staff ballots conductedby Pilots (IALPA), Middle Management (IAESA), SIPTU (GroundOperations/Support areas/certain cabin crew) and MaintenanceStaff (Craft Union) had supported the Greenfield proposals. On9 March 2010, the Group announced that it would immediatelycommence the implementation of those elements of the Greenfieldprogramme that were agreed with the four union groups thatsupported the proposals. On 26 March 2010 the Group was notifiedthat the Greenfield proposals were supported in a re-ballot of cabincrew staff represented by IMPACT. The Group then commenced theimplementation of the Greenfield programme with cabin crew staff.In April 2010, a volcanic eruption in Iceland caused severe disruptionto European air traffic and caused the cancellation of more than 1,500Aer Lingus flights. The current estimate of the impact on the Group’sprofits is approximately €20 million but the long-term impact oncustomer confidence is unclear.In April 2010, the Group entered into a finance lease arrangementfor the purchase of an Airbus A330 aircraft, resulting in an increasein finance lease obligations of €58.5m.Financial risk managementDetails regarding financial risk management are set out at Note 3to the consolidated financial statements.Corporate governance statement – year ended31 December 2009The Report of the Remuneration Committee on Directors’Remuneration is set out on pages 38 to 42. The Directors’ CorporateSocial Responsibility Statement is set out on pages 13 to 25.The Company is committed to maintaining the highest standards ofcorporate governance and the Directors recognise their accountabilityto the Company’s shareholders in this regard. This statement describeshow the principles of section 1 of the Combined Code on CorporateGovernance (June 2008) published by the Financial ReportingCouncil in the UK have been applied by the Company in the year.A copy of the Combined Code can be obtained from the FinancialReporting Council’s website, www.frc.org.uk.Statement of complianceExcept as disclosed below, the Directors consider that the Companyhas complied with all relevant provisions of the 2008 FRC CombinedCode throughout the year and the Company intends to continuedoing so in the future.• Rotation of directors: The Minister for Transport of Ireland(acting through the Minister for Finance of Ireland in his capacityas shareholder) and the ESOT each have specific rights under theCompany’s Articles of Association in relation to the nominationand rotation of Directors. These rights may not comply with therequirement under the Combined Code that the AppointmentsCommittee lead the process for Board appointments and makerecommendations to the Board regarding Board appointmentsand the requirement under the Combined Code that all Directorsbe submitted for re-election at regular intervals.• Composition of the Board and independence: As part of thearrangements entered into by the Minister for Finance of Irelandin 2003 in respect of the Company and as part of the arrangementsput in place immediately prior to the flotation of the Company in2006, it was provided in the Company’s Articles of Association thatthe Minister for Transport of Ireland would be entitled to nominatefor appointment up to three Directors on the basis set out in theInitial Public Offering Prospectus and that the ESOT would beentitled to nominate for appointment up to two Directors onthe basis set out in the Initial Public Offering Prospectus. At timesduring 2009, at least half the Board, excluding the Chairman didnot comprise non-executive Directors determined by the Boardto be independent. Under the Company’s Articles of Association,the maximum number of Directors is set at fifteen. Throughoutmost of 2009 a total of five Directors were nominated by eitherthe Minister for Transport of Ireland or by the ESOT (these fiveDirectors represent the full nomination entitlement of three andtwo Directors, respectively of these two shareholders). Thesefive non-executive Directors were not considered independent.Similarly, throughout much of 2009, there were two executiveDirectors on the Board (the Chief Executive and the ChiefFinancial Officer) neither of whom is considered independent.Therefore seven Directors out of a possible maximum of fifteenwere not considered independent. Accordingly, as the independentnon-executive Chairman is excluded from the calculation, asingle appointment to or resignation from the Board can causenon-compliance with this particular requirement under theCombined Code. The Company was in full compliance with thisCombined Code requirement in the period from 6 March 2009to 13 September 2009. Due to changes in Board composition on31 December 2009 and since the year end, as at 28 April 2010the Company is in full compliance with this Combined Coderequirement. It is the Company’s intention to continue to reviewthe composition of the Board to endeavour to continue tocomply with this requirement.
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Page 13 and 14: Board of Directors Aer Lingus Group
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