REG - Intl Con Airline Grp - Final Results <Origin Href="QuoteRef">ICAG.L</Origin> - Part 5
24/02/2017 07:12
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235 83 2,654
Provisions recorded during the year 319 172 26 23 101 641
Utilised during the year (141) (206) (24) (8) (94) (473)
Release of unused amounts (23) (18) (1) (60) (5) (107)
Unwinding of discount 3 3 13 1 1 21
Exchange differences 30 (3) - (2) (3) 22
Net book value December 31, 2016 1,201 692 593 189 83 2,758
Analysis:
Current 296 248 65 119 43 771
Non-current 905 444 528 70 40 1,987
1,201 692 593 189 83 2,758
Restoration and handback provisions
The provision for restoration and handback costs is maintained to meet the contractual return conditions on aircraft held
under operating leases. The provision also includes an amount relating to leased land and buildings where restoration costs
are contractually required at the end of the lease. Where such costs arise as a result of capital expenditure on the leased
asset, the restoration costs are capitalised. The provision is a long-term provision, typically covering the leased asset
term which is up to 14 years for aircraft.
Restructuring
The Group recognises a provision for targeted voluntary severance schemes. Part of this provision relates to a collective
redundancy programme, which provides for payments to affected employees until they reach the statutory retirement age. The
amount provided for has been determined by an actuarial valuation made by independent actuaries, and was based on the same
assumptions as those made to determine the provisions for obligations to flight crew below, with the exception of the
discount rate, which in this case was 0.20 per cent. The payments related to this provision will continue over ten years.
During the year the Group recognised a provision of E144 million in relation to the restructuring plans at British Airways
(note 5). The costs related to this provision are expected to be incurred in the next two years.
Employee leaving indemnities and other employee related provisions
This provision includes employees leaving indemnities relating to staff under various contractual arrangements.
The Group recognises a provision relating to flight crew who, having met certain conditions, have the option of being
placed on reserve and retaining their employment relationship until reaching the statutory retirement age, or taking early
retirement. The Group is required to remunerate these employees until they reach the statutory retirement age, and an
initial provision was recognised based on an actuarial valuation. The provision was reviewed at December 31, 2016 with the
use of independent actuaries using the projected unit credit method, based on a discount rate of 1.18 per cent and a 0.02
per cent depending on whether the employees are currently active or not and a 1.50 per cent annual increase in the Consumer
Price Index (CPI). This is mainly a long-term provision. The amount relating to this provision was E524 million at December
31, 2016 (2015: E505 million).
Legal claims provisions
Legal claims provisions includes:
• Amounts for multi-party claims from groups or employees on a number of matters related to its operations, including
claims for additional holiday pay and for age discrimination;
• Provisions related to tax assessment; and
• Amounts related to investigations by a number of competition authorities in connection with alleged
anti-competitive activity concerning the Group's passenger and cargo businesses. The final amount required to pay the
remaining claims and fines is subject to uncertainty (note 33).
Other provisions
Other provisions includes:
• Amounts for passengers whose flights were significantly delayed and are entitled to receive compensation. This
provision is largely a current provision and is expected to have amounts both utilised and provided for each year. This
provision has been reassessed based on the historic level of claims;
• A provision for the Emissions Trading Scheme that represents the excess of CO2 emitted on flights within the EU in
excess of the EU Emission Allowances granted; and
• A provision related to unfavourable fleet contracts.
26 Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk (including fuel price risk, foreign currency risk and
interest rate risk), counterparty risk, liquidity risk and capital risk. The Group's Financial Risk Management programme
focuses on the unpredictability of financial markets and defines the amount of risk that the Group is prepared to retain.
Financial risk is managed in two tiers under the overall oversight of the Group Treasury department. The first tier
comprises fuel price fluctuations, euro-US dollar volatility and sterling-US dollar volatility which represent the largest
financial risks facing the Group. The Board approves the key strategic principles and the risk appetite. The IAG Management
Committee approves the hedging levels and the degree of flexibility in applying the levels that are delegated to the Group
Treasury Committee. The Group Treasury Committee meets periodically and includes representatives from Group Treasury,
British Airways, Iberia, Vueling and Aer Lingus. The Committee approves a mandate for British Airways, Iberia, Vueling and
Aer Lingus treasury teams to place hedging cover in the market for their respective companies, including the instruments to
be used. Second tier risks such as interest rate movements, emissions and minor currency pairs are managed separately by
Group Treasury for British Airways and Iberia. Vueling and Aer Lingus manage second tier risks under authority delegated by
their boards to their treasury departments, aligned with Group treasury policy.
The Group Treasury Committee provides a quarterly report on the hedging position to the IAG Management Committee and the
Audit and Compliance Committee. The Board reviews the strategy once a year.
a Fuel price risk
The Group is exposed to fuel price risk. The Group's fuel price risk management strategy aims to provide protection against
sudden and significant increases in fuel prices while ensuring that the Group is not competitively disadvantaged in the
event of a substantial fall in the price. The current Group strategy, as approved by the IAG Management Committee, is to
hedge a proportion of fuel consumption for the next eight quarters, within certain defined limits. In addition, the Group
has additional flexibility to hedge a proportion of fuel consumption up to quarter 12.
Within the strategy, the Financial Risk Management programme allows for the use of a number of derivatives available on
over-the-counter (OTC) markets with approved counterparties.
The following table demonstrates the sensitivity of financial instruments to a reasonable possible change in fuel prices,
with all other variables held constant, on result before tax and equity:
2016 2015
Increase/(decrease)in fuel priceper cent Effect on resultbefore taxE million Effect onequityE million Increase/(decrease)in fuel priceper cent Effect on resultbefore taxE million Effect onequityE million
30 73 1,006 30 70 656
(30) (114) (855) (30) (49) (731)
b Foreign currency risk
The Group presents its consolidated financial statements in euros, has functional entities in euro and pound sterling, and
conducts business in a number of different countries. Consequently the Group is exposed to currency risk on revenue,
purchases and borrowings that are denominated in a currency other than the functional currency of the entity. The
currencies in which these transactions are denominated are primarily euro, US dollar and pound sterling. The Group
generates a surplus in most currencies in which it does business. The US dollar is an exception as fuel purchases,
maintenance expenses and debt repayments denominated in US dollars typically create a deficit.
The Group has a number of strategies to hedge foreign currency risks. The operational US dollar short position is subject
to the same governance structure as the fuel hedging strategy set out above. The current Group strategy, as approved by the
IAG Management Committee, is to hedge a proportion of up to three years of US dollar exposure, within certain defined
limits. Foreign exchange forwards and options are used to implement the strategy.
British Airways utilises its US dollar, euro and Japanese yen debt repayments as a hedge of future US dollar, euro and
Japanese yen revenues. Iberia's balance sheet assets and liabilities in US dollars are hedged through a rolling programme
of swaps and US dollar financial assets that eliminate the profit and loss volatility arising from revaluation of these
items into euros. Vueling and Aer Lingus manage their net position in US dollars using derivative financial instruments.
The following table demonstrates the sensitivity of financial instruments to a reasonable possible change in the exchange
rates, with all other variables held constant, on result before tax and equity:
Strengthening/(weakening) inUS dollar rateper cent Effect onresult beforetaxE million Effect onequityE million Strengthening/(weakening) inpound sterlingrateper cent Effect onresult beforetaxE million Effect onequityE million Strengthening/(weakening) inJapanese yenrateper cent Effect onresult before taxE million Effect onequityE million
2016 10 9 (29) 10 (39) 277 10 (3) (50)
(10) (9) 73 (10) 40 (277) (10) 3 50
2015 10 (2) (72) 10 (43) 170 10 - (32)
(10) 2 117 (10) 43 (179) (10) - 32
c Interest rate risk
The Group is exposed to changes in interest rates on floating rate debt and on cash deposits.
Interest rate risk on floating rate debt is managed through interest rate swaps, floating to fixed cross currency swaps and
interest rate collars. After taking into account the impact of these derivatives, 70 per cent of the Group's borrowings
were at fixed rates and 30 per cent were at floating rates.
All cash deposits are generally on tenors less than one year. The interest rate is predominantly fixed for the tenor of the
deposit.
The following table demonstrates the sensitivity of financial instruments to a reasonable possible change in the US dollar,
euro and sterling interest rates, on result before tax and equity:
Strengthening/(weakening) in US interest rateBasis points Effect on result before taxE million Effect onequityE million Strengthening/(weakening) in euro interest rateBasis points Effect on result before taxE million Effect on equityE million Strengthening/(weakening) in sterling interest rateBasis points Effect on resultbefore taxE million Effect onequityE million
2016 50 (1) 7 50 (11) - 50 10 -
(50) 1 (8) (50) 12 - (50) (10) -
2015 50 (3) 1 50 (6) - 50 8 -
(50) 3 (1) (50) 6 - (50) (8) -
d Counterparty risk
The Group is exposed to counterparty risk to the extent of non-performance by its counterparties in respect of financial
assets receivable. The Group has policies and procedures in place to minimise the risk by placing credit limits on each
counterparty. These policies and procedures are coordinated through the Group Treasury Committee. The Committee also
reviews the application of the policies and procedures by British Airways, Iberia, Vueling and Aer Lingus. The Group
monitors counterparty credit limits and defaults of counterparties, incorporating this information into credit risk
controls. Treasury activities include placing money market deposits, fuel hedging and foreign currency transactions, which
could lead to a concentration of different credit risks with the same counterparty. This risk is managed by allocation of
exposure limits for the counterparty to British Airways, Iberia, Vueling and Aer Lingus. Exposures at the activity level
are monitored on a daily basis and the overall exposure limit for the counterparty is reviewed at least monthly using
available market information such as credit ratings. Sovereign risk is also monitored, country concentration and sovereign
credit ratings are reviewed at every Group Treasury Committee meeting.
Each operating company invests surplus cash in interest-bearing accounts, time deposits, and money market funds, choosing
instruments with appropriate maturities or liquidity to provide sufficient headroom. At the reporting date the operating
companies held money market funds and other liquid assets that are expected to readily generate cash inflows for managing
liquidity risk.
The financial assets recognised in the financial statements, net of impairment losses, represent the Group's maximum
exposure to credit risk, without taking account of any guarantees in place or other credit enhancements.
At December 31, 2016 the Group's credit risk position, allocated by region, in respect of treasury managed cash and
derivatives was as follows:
Mark-to-market of treasury controlled financial instruments allocated by geography
Region 2016 2015
United Kingdom 36% 20%
Spain 1% 4%
Ireland 1% 7%
Rest of Eurozone 38% 38%
Rest of world 24% 31%
e Liquidity risk
Liquidity risk management includes maintaining sufficient cash and interest-bearing deposits, the availability of funding
from an adequate amount of credit facilities and the ability to close out market positions. Due to the volatile nature of
the underlying business, Group treasury maintains flexibility in funding by using committed credit lines.
At December 31, 2016 the Group had undrawn revolving credit of facilities of E17 million (2015: E14 million). The Group
held undrawn uncommitted money market lines of E30 million at December 31, 2016 (2015: E34 million). The Group held undrawn
general and committed aircraft financing facilities:
2016
Million Currency E equivalent
Euro facilities expiring between January and October 2017 E215 215
US dollar facility expiring December 2021 $1,164 1,117
US dollar facility expiring June 2022 $1,030 988
2015
Million Currency E equivalent
Euro facilities expiring between February and November 2016 E137 137
US dollar facilities expiring between September and December 2016 $1,247 1,146
US dollar facility expiring December 2021 $1,164 1,069
US dollar facility expiring June 2022 $1,750 1,608
The following table categorises the Group's (outflows) and inflows in respect of financial liabilities and derivative
financial instruments into relevant maturity groupings based on the remaining period at December 31 to the contractual
maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and include interest.
E million Within 6months 6-12months 1-2years 2-5years More than 5years Total2016
Interest-bearing loans and borrowings:
Finance lease obligations (376) (529) (982) (2,357) (3,070) (7,314)
Fixed rate borrowings (72) (31) (70) (737) (649) (1,559)
Floating rate borrowings (34) (67) (105) (198) (181) (585)
Trade and other payables (3,049) - (16) - - (3,065)
Derivative financial instruments (assets):
Aircraft lease hedges 18 - - - - 18
Forward currency contracts 93 85 93 5 - 276
Fuel derivatives 68 65 55 12 - 200
Currency options 2 2 2 - - 6
Derivative financial instruments (liabilities):
Aircraft lease hedges (14) - - - - (14)
Forward currency contracts (23) (2) (7) - - (32)
Fuel derivatives (38) (24) (12) - - (74)
December 31, 2016 (3,425) (501) (1,042) (3,275) (3,900) (12,143)
E million Within 6months 6-12months 1-2years 2-5years More than 5years Total2015
Interest-bearing loans and borrowings:
Finance lease obligations (315) (371) (803) (2,263) (2,765) (6,517)
Fixed rate borrowings (53) (449) (89) (1,109) (737) (2,437)
Floating rate borrowings (62) (73) (81) (251) (207) (674)
Trade and other payables (3,442) - (10) - - (3,452)
Derivative financial instruments (assets):
Aircraft lease hedges 1 1 10 - - 12
Forward currency contracts 97 86 38 11 - 232
Fuel derivatives 2 1 - - - 3
Currency options 11 3 4 2 - 20
Derivative financial instruments (liabilities):
Aircraft lease hedges (1) (1) (3) - - (5)
Forward currency contracts (6) - (2) (2) - (10)
Fuel derivatives (858) (465) (232) (42) - (1,597)
Currency options (2) (1) (1) (1) - (5)
Hedge of available-for-sale asset 1 - - - - 1
December 31, 2015 (4,627) (1,269) (1,169) (3,655) (3,709) (14,429)
f Offsetting financial assets and liabilities
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and
similar agreements.
The Group enters into derivative transactions under ISDA (International Swaps and Derivatives Association) documentation.
In general, under such agreements the amounts owed by each counterparty on a single day in respect of all transactions
outstanding are aggregated into a single net amount that is payable by one party to the other.
December 31, 2016
E million Gross valueof financialinstruments Financialinstruments thatare offset under nettingagreements Net amountsof financialinstruments in thebalance sheet Related amountsnot offset in thebalance sheet Net amount
Financial assets
Derivative financial assets 1,419 (921) 498 (14) 484
Financial liabilities
Derivative financial liabilities 1,029 (921) 108 (14) 94
December 31, 2015
E million Gross value of financial instruments Financialinstruments that are offset undernetting agreements Net amountsof financialinstruments in thebalance sheet Related amountsnot offset in thebalance sheet Net amount
Financial assets
Derivative financial assets 279 (19) 260 (5) 255
Financial liabilities
Derivative financial liabilities 1,629 (19) 1,610 (5) 1,605
g Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern to
maintain an optimal capital structure, to reduce the cost of capital and to provide returns to shareholders.
The Group monitors capital on the basis of the adjusted gearing ratio. For the year to December 31, 2016, the adjusted
gearing ratio was 51 per cent (2015: 54 per cent). The definition and calculation for this performance measure is included
in the Alternative performance measures section.
Further detail on liquidity and capital resources and capital risk management is disclosed in the financial review.
27 Financial instruments
a Financial assets and liabilities by category
The detail of the Group's financial instruments at December 31, 2016 and December 31, 2015 by nature and classification for
measurement purposes is as follows:
December 31, 2016
Financial assets
E million Loans andreceivables Derivativesused forhedging Available-for-sale Non-financialassets Totalcarryingamount bybalance sheetitem
Non-current assets
Available-for-sale financial assets - - 73 - 73
Derivative financial instruments - 169 - - 169
Other non-current assets 267 - - 232 499
Current assets
Trade receivables 1,405 - - - 1,405
Other current assets 304 - - 595 899
Non-current assets held for sale - - - 38 38
Derivative financial instruments - 329 - - 329
Other current interest-bearing deposits 3,091 - - - 3,091
Cash and cash equivalents 3,337 - - - 3,337
Financial liabilities
E million Loans andpayables Derivativesused forhedging Non-financialliabilities Totalcarryingamount bybalance sheetitem
Non-current liabilities
Interest-bearing long-term borrowings 7,589 - - 7,589
Derivative financial instruments - 20 - 20
Other long-term liabilities 16 - 222 238
Current liabilities
Current portion of long-term borrowings 926 - - 926
Trade and other payables 3,049 - 256 3,305
Derivative financial instruments - 88 - 88
December 31, 2015
Financial assets
E million Loans andreceivables Derivativesused forhedging Available-for-sale Non-financialassets Total carryingamount bybalance sheetitem
Non-current assets
Available-for-sale financial assets - - 74 - 74
Derivative financial instruments - 62 - - 62
Other non-current assets 345 - - 20 365
Current assets
Trade receivables 1,196 - - - 1,196
Other current assets 545 - - 690 1,235
Non-current assets held for sale - - - 5 5
Derivative financial instruments - 198 - - 198
Other current interest-bearing deposits 2,947 - - - 2,947
Cash and cash equivalents 2,909 - - - 2,909
Financial liabilities
E million Loans andpayables Derivativesused forhedging Non-financialliabilities Totalcarryingamount bybalance sheetitem
Non-current liabilities
Interest-bearing long-term borrowings 7,498 - - 7,498
Derivative financial instruments - 282 - 282
Other long-term liabilities 10 - 213 223
Current liabilities
Current portion of long-term borrowings 1,132 - - 1,132
Trade and other payables 3,442 - 361 3,803
Derivative financial instruments - 1,328 - 1,328
b Fair value of financial assets and financial liabilities
The fair values of the Group's financial instruments are disclosed in hierarchy levels depending on the nature of the
inputs used in determining the fair values as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. A market is regarded as active
if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or
regulatory agency, and those prices present actual and regularly occurring market transactions on an arm's length basis;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly. The fair value of financial instruments that are not traded in an active market is determined by
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; and
Level 3: Inputs for the asset or liability that are not based on observable market data.
The fair value of cash and cash equivalents, other current interest-bearing deposits, trade receivables, other current
assets and trade and other payables approximate their carrying value largely due to the short-term maturities of these
instruments.
The following methods and assumptions were used by the Group in estimating its fair value disclosures for financial
instruments:
Level 1: The fair value of listed asset investments classified as available-for-sale and listed interest-bearing borrowings
is based on market value at the balance sheet date.
Level 2: The fair value of derivatives and other interest-bearing borrowings is determined as follows:
• Forward currency transactions and over-the-counter fuel derivatives are measured at the market value of instruments
with similar terms and conditions at the balance sheet date using forward pricing models. Counterparty and own credit risk
is deemed to be not significant.
• The fair value of the Group's interest-bearing borrowings including leases is determined by discounting the
remaining contractual cash flows at the relevant market interest rates at the balance sheet date.
Level 3: Unlisted investments are predominantly measured at historic cost less accumulated impairment losses.
The carrying amounts and fair values of the Group's financial assets and liabilities at December 31, 2016 are set as
follows:
Fair value Carryingvalue
E million Level 1 Level 2 Level 3 Total Total
Financial assets
Available-for-sale financial assets 15 - 58 73 73
Aircraft lease hedges - 5 - 5 5
Forward currency contracts1 - 252 - 252 252
Fuel derivatives1 - 212 - 212 212
Currency option contracts1 - 29 - 29 29
Financial liabilities
Interest-bearing loans and borrowings:
Finance lease obligations - 6,823 - 6,823 6,602
Fixed rate borrowings 1,020 286 - 1,306 1,366
Floating rate borrowings - 547 - 547 547
Aircraft lease hedges2 - 1 - 1 1
Cross currency swaps2 - 1 - 1 1
Forward currency contracts2 - 32 - 32 32
Fuel derivatives2 - 74 - 74 74
1 Current portion of derivative financial assets is E329 million.
2 Current portion of derivative financial liabilities is E88 million.
The carrying amounts and fair values of the Group's financial assets and liabilities at December 31, 2015 are set out
below:
Fair value Carryingvalue
E million Level 1 Level 2 Level 3 Total Total
Financial assets
Available-for-sale financial assets 9 - 65 74 74
Aircraft lease hedges1 - 12 - 12 12
Forward currency contracts1 - 231 - 231 231
Fuel derivatives1 - 3 - 3 3
Currency option contracts1 - 14 - 14 14
Financial liabilities
Interest-bearing loans and borrowings:
Finance lease obligations - 6,117 - 6,117 5,878
Fixed rate borrowings 2,102 496 - 2,598 2,117
Floating rate borrowings - 635 - 635 635
Aircraft lease hedges2 - 5 - 5 5
Forward currency contracts2 - 10 - 10 10
Fuel derivatives2 - 1,595 - 1,595 1,595
1 Current portion of derivative financial assets is E198 million.
2 Current portion of derivative financial liabilities is E1,328 million.
There have been no transfers between levels of fair value hierarchy during the year.
The financial instruments listed in the previous table are measured at fair value for reporting purposes with the exception
of the interest-bearing borrowings.
c Level 3 financial assets reconciliation
The following table summarises key movements in Level 3 financial assets:
E million December 31, 2016 December 31, 2015
Opening balance for the year 65 65
Settlements - (5)
Exchange movements (7) 5
Closing balance for the year 58 65
The fair value of Level 3 financial assets cannot be measured reliably; as such these assets are stated at historic cost
less accumulated impairment losses with the exception of the Group's investment in The Airline Group Limited. This unlisted
investment had previously been valued at nil, since the fair value could not be reasonably calculated. During the year to
December 31, 2014 other shareholders disposed of a combined holding of 49.9 per cent providing a market reference from
which to determine a fair value. The investment remains classified as a Level 3 financial asset due to the valuation
criteria applied not being observable.
d Hedges
Cash flow hedges
At December 31, 2016 the Group's principal risk management activities that were hedging future forecast transactions were:
• Future loan repayment instalments in foreign currency, hedging foreign exchange risk on revenue cash inflows;
• Forward crude, gas oil and jet kerosene derivative contracts, hedging price risk on fuel cash outflows;
• Cross currency swaps, hedging foreign exchange and interest rate risk associated with lease cash outflows; and
• Foreign exchange contracts, hedging foreign exchange risk on revenue cash inflows and certain operational
payments.
To the extent that the hedges were assessed as highly effective, a summary of the amounts included in equity, the notional
principal amounts and the years to which the related cash flows are expected to occur are summarised below:
December 31, 2016
Cash flows hedged
Financial instruments designated as hedging instrumentsE million Within 6 months 6-12months 1-2 years 2-5 years More than 5 years TotalDecember 31, 2016
Debt repayments to hedge future revenue 34 77 108 239 361 819
Forward contracts to hedge future payments (65) (76) (73) (4) - (218)
Hedges of future fuel purchases (24) (44) (48) (11) - (127)
Hedges of future aircraft operating leases (3) - - - - (3)
Currency options to hedge future payments (2) (7) (5) - - (14)
(60) (50) (18) 224 361 457
Related deferred tax credit (73)
Total amount included within equity 384
December 31, 2016
E million Notional principal amounts(in local currency)
To hedge future currency revenues in euros E480
To hedge future currency revenues in Canadian dollars CAD 85
To hedge future currency revenues in pound sterling £88
To hedge future currency revenues in US dollars $174
To hedge future operating payments in US dollars $3,037
Hedges of future fuel purchases $4,304
Cross currency swaps:
- Floating to fixed (US dollars) $57
- Fixed to fixed (euro) E17
- Fixed to floating (US dollars) $340
Debt repayments to hedge future revenue:
- US dollars $2,798
- Euro E2,111
- Japanese yen ¥60,577
- Chinese yuan CNY 623
December 31, 2015
Cash flows hedged
Financial instruments designated as hedging instrumentsE million Within 6months 6-12 months 1-2 years 2-5 years More than 5years TotalDecember 31, 2015
Debt repayments to hedge future revenue 7 14 33 26 (10) 70
Forward contracts to hedge future payments (92) (86) (36) (9) (3) (226)
Hedges of future fuel purchases 780 530 206 32 - 1,548
Hedges of future aircraft operating leases 1 - (7) - - (6)
Currency options to hedge future payments (8) (1) (2) (1) - (12)
688 457 194 48 (13) 1,374
Related deferred tax credit (298)
Total amount included within equity 1,076
December 31, 2015
E million Notional principal amounts(in local currency)
To hedge future currency revenues in euros E160
To hedge future currency revenues in pound sterling £76
To hedge future currency revenues in US dollars $54
To hedge future operating payments in US dollars $3,770
Hedges of future fuel purchases $4,710
Cross currency swaps:
- Floating to fixed (euro) E260
- Fixed to fixed (euro) E126
Debt repayments to hedge future revenue:
- US dollars $3,061
- Euro E1,498
- Japanese yen ¥41,698
- Chinese yuan CNY 716
The ineffective portion recognised in the Income statement during the year on unrealised cash flow hedges was a gain of E36
million (2015: loss of E70 million).
The Group has no significant fair value hedges or net investments in foreign operations at December 31, 2016 and 2015.
28 Share capital and share premium
Alloted, called up and fully paid Number ofshares000s Ordinary share capitalE million SharepremiumE million
January 1, 2016: Ordinary shares of E0.50 each 2,040,079 1,020 5,867
Issue of ordinary shares of E0.50 each 92,910 46 344
Final 2015 dividend of E0.05 per share - - (106)
December 31, 2016 2,132,989 1,066 6,105
During the year all holders of the E390 million 1.75 per cent convertible bond exercised their options to exchange their
convertible bonds for ordinary shares in the Company, resulting in the issuance of 92,910,220 shares during the year.
29 Treasury shares
The Group has authority to acquire its own shares, subject to specific conditions.
In February 2017, the Group announced its intention to carry out a share buyback programme as part of its corporate finance
strategy to return cash to shareholders while reinvesting in the business and managing leverage. The programme will be E500
million, carried out during the course of 2017 and may be implemented through one or more share buyback programmes.
The treasury shares balance consists of shares held directly by the Group. During the year to December 31, 2016, the Group
purchased 3.3 million shares at a weighted average share price of E7.10 per share totalling E25 million, which are held as
Treasury shares. A total of 5.5 million shares were issued to employees during the year as a result of vesting of employee
share schemes. At December 31, 2016 the Group held 12.5 million shares, which represented 0.59 per cent of the Issued share
capital of the Company.
30 Share-based payments
The Group operates share-based payment schemes as part of the total remuneration package provided to employees. These
schemes comprise both share option schemes where employees acquire shares at an option price and share award plans whereby
shares are issued to employees at no cost, subject to the achievement by the Group of specified performance targets.
a IAG Performance Share Plan
The IAG Performance Share Plan (PSP) is granted to senior executives and managers of the Group who are most directly
involved in shaping and delivering business success over the medium to long term. For 2011 to 2014, a conditional award of
shares is subject to the achievement of a variety of performance conditions, which will vest after three years
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