During 2015, a further 3 applicants were accepted and left
employment with Aer Lingus. The related severance cost, including
provisions, for these programme participants of EUR0.2 million in
the six months ended June 2015 (June 2014: EUR0.5 million)
represent a termination cost under IAS19R and are recognised within
the termination charges above. Liabilities for unpaid termination
benefits at the period end are included within business
repositioning provisions (see Note 20).
In total, 142 employees participated in the 2013 VS
Programme.
2015 Voluntary severance scheme
On 2 February 2015, Aer Lingus launched a new voluntary
severance programme for applicants who satisfied certain selection
criteria. As at 30 June 2015, 33 applicants had been accepted and
had left employment with Aer Lingus. A further 26 applicants had
formally agreed to participate in the programme and leave
employment with Aer Lingus during 2015. The related severance cost,
including provisions, for these programme participants of EUR7.3
million in the six months ended June 2015 represent a termination
cost under IAS19R and are recognised within the termination charges
above. Liabilities for unpaid termination benefits at the period
end are included within business repositioning provisions (see Note
20).
Restructuring costs
The 2015 debit of EUR0.4 million reflects the cost of
eliminating specific functions. The 2014 restructuring net debit of
EUR0.1 million included a credit of approximately EUR0.4 million
arising from a remeasurement of the provision (which was created
for downsizing of Shannon line maintenance) following operational
decisions made in 2014 which impacted the original estimates and
assumptions in respect of maintenance of Boeing 757 aircraft as
well as the costs of eliminating specific functions and roles
(EUR0.5 million).
(b) Professional and legal fees
The amount in 2015 relates to advice received in relation to the
pension issues (see Note 19) and in relation to the IAG proposal to
acquire Aer Lingus. The comparative amount in 2014 relates to
advice received in respect of the pension issues (see Note 19).
(c) Post retirement income streaming
The Group previously recognised a liability in regards to an
income streaming arrangement in respect of certain current and
former employees who have an elective post-retirement entitlement.
As this liability is calculated by reference to those benefits that
would otherwise be payable on retirement under the IASS, the
liability reduces further and potentially to nil as correctly
executed waivers referred to in Note 19 are received. 63.4% of
waivers (78.9% for active members and 50.8% for deferred members)
were signed during the six month period to June 2015, which reduced
the liability by EUR11.3 million. See Note 19 'Defined contribution
pension schemes' and Note 27 'Events after the reporting period'
for a further update on the % of waivers received in the period
subsequent to year end and to 24 July 2015.
(d) Profit on disposal of Investment
This gain of EUR1.3 million in 2015 relates to the profit on
disposal of an investment.
10 Finance income and expense
Six months ended 30 June
2015 2014
Finance income EUR'000 EUR'000
Interest on cash, cash equivalents
and deposits 3,474 3,534
Interest income on loans and receivables 84 943
Amortisation of available-for-sale
reserve 7 84
Unwinding of discounting on non-current
prepayments 511 592
---------------------------------------------- -------------- --------------
4,076 5,153
---------------------------------------------- -------------- --------------
Finance expense
Interest expense on finance lease obligations (5,420) (6,453)
Net interest expense on post employment
benefit obligations (138) (564)
Interest on pensions escrow (131) -
Unwinding of discounting of provisions (52) (197)
---------------------------------------------- -------------- --------------
(5,741) (7,214)
---------------------------------------------- -------------- --------------
11 Property, plant and equipment and Intangible assets
During the six-month period ended 30 June 2015, the Group
capitalised intangible assets and acquired flight equipment,
property and ground equipment with a cost of EUR38.2 million
(six-month period ended 30 June 2014: EUR26.6 million).
12 Investment in joint venture
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 in 2013, and two additional
aircraft in 2014, one in April and one in July. These aircraft are
leased onward to Stobart Air. During 2013, the Joint Venture
purchased the entire share capital of Propius Leasing Limited
(formerly Arann Aircraft Leasing Limited). Propius Leasing Limited
subsequently acquired two ATR 72-500s from Comhfhorbairt
(Gaillimh), a company in the Aer Arann Group, which were then
leased back to Comhfhorbairt (Gaillimh).
The Group's share of the results of its Joint Venture in the six
months to 30 June 2015 was a profit (after tax) of EUR0.34 million
(2014: EUR0.25 million).
At 30 June 2015, there are no contingent liabilities relating to
the Group's interest in the Joint Venture.
13 Derivative financial instruments
Derivative financial instruments represent the fair value of
open foreign exchange forward contracts and fuel price swaps to
which the Group is a party at the reporting date. The fair value of
these open positions is calculated by reference to the forward
foreign exchange rates and forward fuel prices at the reporting
date.
The gains and losses arising from cash flow hedging position are
recognised in reserves until they are realised. The position in
reserves is recognised net of deferred tax.
The statement of comprehensive income shows fair value gains to
30 June 2015 of EUR20.4 million (2014: fair value losses of EUR2.4
million). These represent the mark to market losses on the Group's
portfolio of fuel hedges, offset by the gain inherent in the
Group's portfolio of foreign exchange hedges.
Fair value estimation
The Group's activities expose it to a variety of financial
risks: market risk (including currency risk, fair value interest
rate risk, cash flow interest rate risk and price risk), credit
risk and liquidity risk. The condensed consolidated interim
financial statements do not include all financial risk management
information and disclosures required in the annual financial
statements; they should be read in conjunction with the Group's
annual financial statements as at 31 December 2014. There have been
no significant changes in the Group's approach to risk management
or in any risk management policies since the year end.
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Quoted prices (unadjusted) in active markets for identical assets of liabilities (Level 1)
-- Inputs other than quoted prices included within level 1 that
are observable for the asset and liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2)
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level 3)
The fair value of financial instruments that are not traded in
an active market (for example, over-the-counter derivatives) is
determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is
available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in Level
2.
Specific valuation techniques used to value financial
instruments include:
-- The fair value of interest rate swaps is calculated as the
present value of the estimated future cash flows based on
observable yield curves.
-- The fair value of forward foreign exchange contracts is
determined using forward exchange rates at the statement of
financial position date, with the resulting value discounted back
to present value.
-- The fair value of fuel price swaps is determined using
forward fuel prices at the reporting date, with the resulting value
discounted back to present value.
The following table presents the Group's assets and liabilities
that are measured at fair value at 30 June 2015:
Level 1 Level 2 Level 3 Total
--------------------- ------- ------- ------- -------
EUR'000 EUR'000 EUR'000 EUR'000
--------------------- ------- ------- ------- -------
Assets
Derivative financial
instruments - 22,390 - 22,390
Liabilities
Derivative financial
instruments - 77,383 - 77,383
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