REG - Intl Con Airline Grp - Final Results <Origin Href="QuoteRef">ICAG.L</Origin> - Part 6
24/02/2017 07:17
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subject to
the employee remaining employed by the Group. From 2015, the award was made as nil-cost options, and also had a two-year
additional holding period after the end of the performance period, before vesting takes place. The awards made between 2012
and 2014 will vest based 50 per cent on achievement of IAG's TSR performance targets relative to the MSCI European
Transportation Index, and 50 per cent based on achievement of earnings per share targets. The awards made in 2015 and 2016
will vest based one-third on achievement of IAG's TSR performance targets relative to the MSCI European Transportation
Index, one-third based on achievement of earnings per share targets, and one-third based on achievement of return on
invested capital targets.
b IAG Incentive Award Deferral Plan
The IAG Incentive Award Deferral Plan (IADP) is granted to qualifying employees based on performance and service tests. It
will be awarded when an incentive award is triggered subject to the employee remaining in employment with the Group for
three years after the grant date. The relevant population will receive 50 per cent of their incentive award up front in
cash, and the remaining 50 per cent in shares after three years through the IADP.
c Share-based payment schemes summary
Outstandingat January 1, 2016 Grantednumber Lapsednumber Vestednumber Outstandingat December31, 2016 Vested andexercisableDecember 31,2016
'000s '000s '000s '000s '000s '000s
Performance Share Plans 17,852 5,413 1,756 7,455 14,054 43
Incentive Award Deferral Plans 6,408 1,916 122 2,521 5,681 17
24,260 7,329 1,878 9,976 19,735 60
The fair value of equity-settled share-based payment plans determined using the Monte-Carlo valuation model, taking into
account the terms and conditions upon which the plans were granted, used the following weighted average assumptions:
December 31,2016 December 31,2015
Weighted average fair value (£) 2.27 3.19
Expected share price volatility (per cent) 30 30
Expected comparator group volatility (per cent) 20 20
Expected comparator correlation (per cent) 60 60
Expected life of options (years) 4.79 2.40
Weighted average share price at date of grant (£) 5.41 5.50
Volatility was calculated with reference to the Group's weekly pound sterling share price volatility. The expected
volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily
be the actual outcome. The fair value of the PSP also takes into account a market condition of TSR as compared to strategic
competitors. No other features of share-based payment plans granted were incorporated into the measurement of fair value.
The Group recognised a share-based payment charge of E36 million for the year to December 31, 2016 (2015: E35 million).
31 Other reserves and non-controlling interests
For the year to December 31, 2016
Other reserves
E million Retainedearnings Unrealisedgains and losses1 Currencytranslation2 Equity portion of convertiblebond3 Mergerreserve4 Total other reserves Non-controllinginterest5
January 1, 2016 1,160 (914) 500 173 (2,467) (1,548) 308
Profit for the year 1,931 - - - - 1,931 21
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net profit:
Passenger revenue - (57) - - - (57) -
Fuel and oil costs - 918 - - - 918 -
Currency differences - (68) - - - (68) -
Net change in fair value of cash flow hedges - (182) - - - (182) -
Net change in fair value of available-for-sale financial assets - 4 - - - 4 -
Currency translation differences - - (506) - - (506) -
Remeasurements of post-employment benefit obligations (1,807) - - - - (1,807) -
Cost of share-based payments 35 - - - - 35 -
Vesting of share-based payment schemes (73) - - - - (73) -
Dividend (339) - - - - (339) -
Issue of ordinary shares related to conversion of convertible bond 45 - - (72) - (27) -
Dividend of a subsidiary - - - - - - (1)
Distributions made to holders of perpetual securities - - - - - - (20)
December 31, 2016 952 (299) (6) 101 (2,467) (1,719) 308
For the year to December 31, 2015
Other reserves
E million Retained earnings Unrealised gains Currencytranslation2 Equity portion of convertiblebond3 Mergerreserve4 Total other reserves Non-controllinginterest5
and losses1
January 1, 2015 (234) (1,086) 319 72 (2,467) (3,396) 308
Profit for the year 1,495 - - - - 1,495 21
Other comprehensive income for the year
Cash flow hedges reclassified and reported in net profit:
Passenger revenue - 14 - - - 14 -
Fuel and oil costs - 1,474 - - - 1,474 -
Currency differences - (202) - - - (202) -
Investments - 4 - - - 4 -
Net change in fair value of cash flow hedges - (1,104) - - - (1,104) -
Available-for-sale assets reclassified and reported in net profit - (5) - - - (5) -
Net change in fair value of available-for-sale financial assets - (9) - - - (9) -
Currency translation differences - - 181 - - 181 -
Remeasurements of post-employment benefit obligations 156 - - - - 156 -
Cost of share-based payments 45 - - - - 45 -
Vesting of share-based payment schemes (99) - - - - (99) -
Equity portion of convertible bond issued - - - 101 - 101 -
Dividend (203) - - - - (203) -
Dividend of a subsidiary - - - - - - (1)
Distributions made to holders of perpetual securities - - - - - - (20)
December 31, 2015 1,160 (914) 500 173 (2,467) (1,548) 308
1 The unrealised gains and losses reserve records fair value changes on available-for-sale investments and the
portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be a an effective hedge.
2 The currency translation reserve records exchange differences arising from the translation of the financial
statements of non-euro functional currency subsidiaries and associates into the Group's reporting currency of euros. The
movement through this reserve in 2016 is affected by the fluctuations in the pound sterling to euro foreign exchange
translation rate.
3 The equity portion of convertible bond reserve represents the equity portion of convertible bonds issued. At
December 31, 2016, this related to the E500 million fixed rate 0.25 per cent convertible bond and the E500 million fixed
rate 0.625 per cent convertible bond (note 23). At December 31, 2015 this also related to the E390 million fixed rate 1.75
per cent convertible bond. The equity portion of this bond was transferred to retained earnings on conversion during the
year to December 31, 2016.
4 The merger reserve originated from the merger transaction between British Airways and Iberia. The balance
represents the difference between the fair value of the Group on the transaction date, and the fair value of Iberia and the
book value of British Airways (including its reserves).
5 Non-controlling interests largely comprise E300 million of 6.75 per cent fixed coupon euro perpetual preferred
securities issued by British Airways Finance (Jersey) LP. The holders of these securities have no rights against Group
undertakings other than the issuing entity and, to the extent prescribed by the subordinated guarantee, British Airways
Plc. In the event of a dividend paid by the Company, the coupon payment is guaranteed. The effect of the securities on the
Group as a whole, taking into account the subordinate guarantee and other surrounding arrangements, is that the obligations
to transfer economic benefits in connection with the securities do not go beyond those that would normally attach to
preference shares issued by a UK company.
32 Employee benefit obligations
The Group operates a variety of post-employment benefit arrangements, covering both defined contribution and defined
benefit schemes. The Group also has a scheme for flight crew who meet certain conditions and therefore have the option of
being placed on reserve and retaining their employment relationship until reaching the statutory retirement age, or taking
early retirement (note 25).
Defined contribution schemes
The Group operates a number of defined contribution schemes for its employees.
Costs recognised in respect of defined contribution pension plans in Spain, UK and Ireland for the year to December 31,
2016 were E132 million (2015: E108 million).
Defined benefit schemes
i. APS and NAPS
The principal funded defined benefit pension schemes within the Group are the Airways Pension Scheme (APS) and the New
Airways Pension Scheme (NAPS), both of which are in the UK and are closed to new members. APS has been closed to new
members since 1984 and NAPS closed to new members in 2003.
Benefits provided under APS are based on final average pensionable pay and, for the majority of members, are subject to
inflationary increases in payment in line with the Annual Review Orders (ARO) issued by the UK Government, which is based
on the Consumer Price Index (CPI). Benefits provided under NAPS are based on final average pensionable pay reduced by an
amount (the abatement) not exceeding one and a half times the Government's lower earnings limit. NAPS pension increases are
also linked to the ARO and increases are capped at a maximum of five per cent in any one year.
The Trustees of APS have proposed an additional discretionary increase above CPI inflation for pensions in payment for the
year to March 31, 2014. British Airways has challenged the decision as it considers the Trustees have no power to grant
such increases and it is concerned about the actuarial funding position of the scheme. British Airways is also concerned
about the residual unhedged risk in the scheme, which will be increased by the addition of new unfunded benefits, to which
British Airways may ultimately be exposed as the principal employer and sponsor of the scheme. British Airways is committed
to an existing recovery plan, which sees deficit payments of E65 million per annum until March 2023. Legal proceedings,
initiated by British Airways, are underway to determine the legitimacy of the additional discretionary increase. The
outcome of the proceedings is awaited. The discretionary increase has not been reflected in the accounting assumptions
used.
APS and NAPS are governed by separate Trustee Boards. Although separate, much of the business of the two schemes is common.
Most main Board and committee meetings are held in tandem although each Trustee Board reaches its decisions independently.
There are three committees which are separately responsible for the governance, operation and investments of each scheme.
British Airways Pension Trustees Limited holds the assets of both schemes on behalf of their respective Trustees.
Deficit payment plans are agreed with the Trustees of each scheme every three years based on the actuarial valuation
(triennial valuation) rather than the IAS 19 accounting valuation. The latest deficit recovery plan was agreed on the March
31, 2012 position with respect to APS and March 31, 2015 with respect to NAPS (note 32i). As a result of the litigation
referred to above, the triennial valuation as at March 31, 2015 for APS has been deferred until the conclusion of the legal
proceedings. The actuarial valuations performed at March 31, 2012 and March 31, 2015 are different to the valuation
performed under IAS 19 'Employee benefits' at December 31, 2016 due mainly to timing differences of the measurement dates
and to the scheme specific assumptions used in the actuarial valuation compared to IAS guidance used in the accounting
valuation assumptions.
ii. Other plans
British Airways provides certain additional post-retirement healthcare benefits to eligible employees in the US through the
US Post-Retirement Medical Benefit plan (US PRMB) which is considered to be a defined benefit scheme. In addition, Aer
Lingus operates certain defined benefit plans, both funded and unfunded.
The defined benefit plans expose the Group to risks, such as longevity risk, interest rate risk, market (investment) risk
and currency risk.
iii. Cash payments
Cash payments to pension schemes comprise normal employer contributions by the Group; deficit contributions based on the
agreed deficit payment plan with APS and NAPS; and cash sweep payments relating to additional payments made conditional on
the level of cash in British Airways. Total payments for the year to December 31, 2016 net of service costs were E740
million (2015: E434 million) being the employer contributions of E936 million (2015: E699 million) less the current service
cost of E196 million (2015: E265 million) (note 32b).
a Employee benefit schemes recognised on the Balance Sheet
2016
E million APS NAPS Other1 Total
Scheme assets at fair value 9,637 18,366 445 28,448
Present value of scheme liabilities (8,036) (20,376) (781) (29,193)
Net pension asset/(liability) 1,601 (2,010) (336) (745)
Effect of the asset ceiling2 (580) - - (580)
Other employee benefit obligations - - (10) (10)
December 31, 2016 1,021 (2,010) (346) (1,335)
Represented by:
Employee benefit assets 1,028
Employee benefit obligations (2,363)
(1,335)
2015
E million APS NAPS Other1 Total
Scheme assets at fair value 9,916 17,997 429 28,342
Present value of scheme liabilities (8,405) (18,460) (805) (27,670)
Net pension asset/(liability) 1,511 (463) (376) 672
Effect of the asset ceiling2 (561) - - (561)
Other employee benefit obligations - - (12) (12)
December 31, 2015 950 (463) (388) 99
Represented by:
Employee benefit assets 957
Employee benefit obligations (858)
99
1 The present value of scheme liabilities for the US PRMB was E18 million at December 31, 2016 (2015: E62
million).
2 APS has an accounting surplus under IAS 19, which would be available to the Group as a refund upon wind up of
the scheme. This refund is restricted due to withholding taxes that would be payable by the Trustees.
b Amounts recognised in the Income statement
Pension costs charged to operating result are:
E million 2016 2015
Defined benefit plans:
Current service cost 196 265
Past service cost1 (52) (1)
144 264
Defined contribution plans 132 108
Pension costs recorded as employee costs 276 372
1 In 2016 includes a past service gain of E51 million in respect of the US PRMB, which has been classified as an
exceptional item.
Pension costs (credited)/charged as finance costs are:
E million 2016 2015
Interest income on scheme assets (952) (1,031)
Interest expense on scheme liabilities 921 1,024
Interest expense on asset ceiling 19 19
Net financing (income)/expense relating to pensions (12) 12
c Remeasurements recognised in the Statement of other comprehensive income
E million 2016 2015
Return on plan assets excluding interest income (3,370) 462
Remeasurement of plan liabilities from changes in financial assumptions 5,624 (498)
Remeasurement of experience gains (137) (183)
Remeasurement of the APS asset ceiling 81 -
Exchange movements 56 12
Pension remeasurements charged/(credited) to Other comprehensive income 2,254 (207)
d Fair value of scheme assets
A reconciliation of the opening and closing balances of the fair value of scheme assets is set out below:
E million 2016 2015
January 1 28,342 26,167
Acquired through Business combination - 13
Interest income 952 1,031
Return on plan assets excluding interest income 3,370 (462)
Employer contributions1 906 684
Employee contributions 111 114
Benefits paid (1,315) (1,276)
Exchange movements (3,918) 2,071
December 31 28,448 28,342
1 Includes employer contributions to APS of E112 million (2015: E120 million) and to NAPS of E763 million (2015:
E535 million), of which deficit funding payments represented E106 million for APS (2015: E110 million) and E638 million for
NAPS (2015: E389 million).
Scheme assets held by all defined benefit schemes operated by the Group at December 31 comprise:
E million 2016 2015
Return seeking investments - equities
UK 3,049 2,724
Rest of world 7,495 7,112
10,544 9,836
Return seeking investments - other
Private equity 825 882
Property 1,783 2,142
Alternative investments 1,204 1,224
3,812 4,248
Liability matching investments
UK fixed bonds 3,850 3,949
Rest of world fixed bonds 116 118
UK index-linked bonds 6,690 6,650
Rest of world index-linked bonds 128 124
10,784 10,841
Other
Cash and cash equivalents 511 1,174
Derivatives 228 (114)
Insurance contract 1,872 1,928
Longevity swap (35) (40)
Other 732 469
28,448 28,342
All equities and bonds have quoted prices in active markets.
For APS and NAPS, the composition of the scheme assets is:
E million December 31, 2016 December 31, 2015
APS NAPS APS NAPS
Return seeking investments 1,582 12,565 1,721 12,169
Liability matching investments 5,936 4,728 6,103 4,616
7,518 17,293 7,824 16,785
Insurance contract and related longevity swap 1,811 - 1,862 -
Other 308 1,073 230 1,212
Fair value of scheme assets 9,637 18,366 9,916 17,997
For both APS and NAPS, the Trustees have ultimate responsibility for decision making on investments matters, including the
asset-liability matching strategy, which is a form of investing designed to match the movement in pension plan assets with
the movement in the projected benefit obligation over time. The Trustees' investment committee adopts an annual business
plan which sets out investment objectives and work required to support achievement of these objectives. The committee also
deals with the monitoring of performance and activities, including work on developing the strategic benchmark to improve
the risk return profile of the scheme where possible, as well as having a trigger based dynamic governance process to be
able to take advantage of opportunities as they arise. The investment committee reviews the existing investment
restrictions, performance benchmarks and targets, as well as continuing to develop the de-risking and liability hedging
portfolio.
The strategic benchmark for asset allocations differentiates between 'return seeking assets' and 'liability matching
assets'. Given the respective maturity of each scheme, the proportion for APS and NAPS vary. At December 31, 2016, the
benchmark for APS, expressed as a percentage of the assets excluding the insurance contract, was 19 per cent (2015: 19 per
cent) in return seeking assets and 81 per cent (2015: 81 per cent) in liability matching investments; and for NAPS the
benchmark was 68 per cent (2015: 68 per cent) in return seeking assets and 32 per cent (2015: 32 per cent) in liability
matching investments. Bandwidths are set around these strategic benchmarks that allow for tactical asset allocation
decisions, providing parameters for the investment committee and its investment managers to work within.
In addition to this, APS has an insurance contract with Rothesay Life which covers 20 per cent (2015: 24 per cent) of the
pensioner liabilities for an agreed list of members. The insurance contract is based on future increases to pensions in
line with inflation and will match future obligations on that basis for that part of the scheme. The insurance contract can
only be used to pay or fund employee benefits under the scheme. APS has also secured a longevity swap contract with
Rothesay Life, which covers an additional 24 per cent (2015: 20 per cent) of the pensioner liabilities for the same members
covered by the insurance contract above. The value of the contract is based on the difference between the value of the
payments expected to be received under this contract and the pensions payable by the scheme under the contract.
The fair value of insurance policies which exactly match the amount and timing of some or all benefits payable under the
scheme are deemed to be the present value of the related obligations. Longevity swaps are measured at their fair value.
Both schemes use derivative instruments for investment purposes and to manage exposures to financial risks, such as
interest rate, foreign exchange and liquidity risks arising in the normal course of business. Exposure to interest rate
risk is managed through the use of Inflation-Linked Swap contracts. Foreign exchange forward contracts are entered into to
mitigate the risk of currency fluctuations. For NAPS, a strategy exists to provide protection against the equity market
downside risk by reducing some of the upside participation.
e Present value of scheme liabilities
A reconciliation of the opening and closing balances of the present value of the defined benefit obligations is set out
below:
E million 2016 2015
January 1 27,670 26,120
Acquired through Business combination - 21
Current service cost 196 265
Past service cost (52) (1)
Interest expense 921 1,024
Remeasurements - financial assumptions 5,624 (498)
Remeasurements - demographic assumptions (137) (183)
Benefits paid (1,315) (1,276)
Employee contributions 111 114
Exchange movements (3,825) 2,084
December 31 29,193 27,670
The defined benefit obligation comprises E33 million (2015: E79 million) arising from unfunded plans and E29,160 million
(2015: E27,591 million) from plans that are wholly or partly funded.
f Effect of the asset ceiling
A reconciliation of the effect of the asset ceiling representing the IAS 19 irrecoverable surplus in APS is set out below:
E million 2016 2015
January 1 561 502
Interest expense 19 19
Remeasurements 81 -
Exchange movements (81) 40
December 31 580 561
g Actuarial assumptions
The principal assumptions used for the purposes of the actuarial valuations were as follows:
2016 2015
Per cent per annum APS NAPS Otherschemes APS NAPS Otherschemes
Discount rate1 2.60 2.70 1.5 - 4.1 3.60 3.85 2.1 - 4.4
Rate of increase in pensionable pay2 3.20 3.20 3.0 - 3.7 2.85 3.00 3.0 - 4.0
Rate of increase of pensions in payment3 2.10 2.10 0.4 - 3.5 1.85 2.00 1.5 - 3.5
RPI rate of inflation 3.20 3.20 3.0 - 3.2 2.85 3.00 3.0 - 3.2
CPI rate of inflation 2.10 2.10 1.75 - 3.0 1.85 2.00 1.7 - 3.0
1 Discount rate is determined by reference to the yield on high quality corporate bonds of currency and term
consistent with the scheme liabilities. The decline in these yields has resulted in lower discount rates
being applied in 2016.
2 Rate of increase in pensionable pay is assumed to be in line with long-term market inflation expectations. The
inflation rate assumptions for NAPS and APS are based on the difference between the yields on index-linked and
fixed-interest long-term government bonds.
3 It has been assumed that the rate of increase of pensions in payment will be in line with CPI for APS and NAPS.
However, the APS Trustees have proposed an additional discretionary increase of 20 basis points for the year to March 31,
2014, a decision that British Airways has challenged. British Airways initiated legal proceedings to determine the
legitimacy of the additional increase, the outcome of which is expected in 2017. The proposed discretionary increase is not
included in the assumptions above.
Rate of increase in healthcare costs is based on medical trend rates of 6.75 per cent grading down to 5.0 per cent over
seven years (2015: 7.0 per cent to 5.0 per cent over eight years).
In the UK, mortality rates are calculated using the standard SAPS mortality tables produced by the CMI for APS and NAPS.
The standard mortality tables were selected based on the actual recent mortality experience of members and were adjusted to
allow for future mortality changes. The current longevities underlying the values of the scheme liabilities were as
follows:
Mortality assumptions 2016 2015
Life expectancy at age 60 for a:
- male currently aged 60 28.3 28.3
- male currently aged 40 29.9 29.9
- female currently aged 60 29.9 29.9
- female currently aged 40 32.4 32.3
At December 31, 2016, the weighted-average duration of the defined benefit obligation was 12 years for APS (2015: 12 years)
and 20 years for NAPS (2015: 19 years).
For the US PRMB, mortality rates were based on the RP-14 mortality tables.
h Sensitivity analysis
Reasonable possible changes at the reporting date to significant actuarial assumptions, holding other assumptions constant,
would have affected the present value of scheme liabilities by the amounts shown:
E million Increase in schemeliabilities
Discount rate (decrease of 10 basis points) 519
Future salary growth (increase of 10 basis points) 97
Future pension growth (increase of 10 basis points) 393
Future mortality rate (one year increase in life expectancy) 940
Although the analysis does not take into account the full distribution of cash flows expected under the plan, it does
provide an approximation of the sensitivity of the assumptions shown.
i Funding
Pension contributions for APS and NAPS were determined by actuarial valuations made at March 31, 2012 and March 31, 2015
using assumptions and methodologies agreed between the Group and the Trustees of each scheme. At the date of the actuarial
valuation, the actuarial deficits of APS and NAPS amounted to E932 million and E3,818 million respectively. In order to
address the deficits in the schemes, the Group has also committed to the following undiscounted deficit payments:
E million APS NAPS
Within 12 months 65 356
2-5 years 261 1,423
5-10 years 82 1,779
More than 10 years - 267
Total expected deficit payments for APS and NAPS 408 3,825
The Group has determined that the minimum funding requirements set out above for APS and NAPS will not be restricted. The
present value of the contributions payable is expected to be available as a refund or a reduction in future contributions
after they are paid into the plan. This determination has been made independently for each plan, subject to withholding
taxes that would be payable by the Trustees.
Deficit payments in respect of local arrangements outside of the UK have been determined in accordance with local
practice.
In total, the Group expects to pay E683 million in employer contributions and deficit payments to its post-retirement
benefit plans in 2017. This includes expected deficit contributions of E65 million to APS and E356 million to NAPS. This
excludes any additional deficit contributions which may become due depending on the Group's cash balance at March 31,
2017.
Until September 2019, if British Airways pays a dividend to IAG higher than 35 per cent of its profits it will either
provide the scheme with a guarantee for 100 per cent of the amount above 35 per cent or 50 per cent of that amount as an
additional cash contribution.
British Airways has provided collateral on certain payments to APS which at December 31, 2016 amounted to E296 million
(2015: E343 million).
33 Contingent liabilities and guarantees
The Group has certain contingent liabilities and guarantees, in respect of guarantees and indemnities entered into as part
of the normal course of the Group's business which at December 31, 2016 amounted to E173 million (December 31, 2015: E172
million). No material losses are likely to arise from such contingent liabilities and guarantees. The Group also has the
following claims:
Cargo
The Group is party to a number of legal proceedings in the English courts relating to a decision by the European Commission
in 2010 which fined British Airways and ten other airline groups for participating in a cartel in respect of air cargo
prices. The decision was partially annulled against British Airways following an appeal to the general court of the
European Union and the fine was refunded in full. In May 2016 the Commission expressed its intention to adopt a new
decision amending the 2010 decision insofar as that decision was annulled by the General Court. It expects to adopt a new
decision in 2017.
The original decision has led to a large number of claimants seeking, in proceedings brought in the English courts, to
recover damages from British Airways which they claim arise from the alleged cartel activity. It is not possible at this
stage to predict the outcome of the proceedings, which British Airways will vigorously defend. British Airways has joined
the other airlines alleged to have participated in cartel activity to these proceedings to contribute to such damages, if
any awarded.
The Group is also party to similar litigation in a number of other jurisdictions including Germany, the Netherlands and
Canada together with a number of other airlines. At present, the outcome of the proceedings is unknown. In each case, the
precise effect, if any, of the alleged cartelising activity on the claimants will need to be assessed.
We are currently unable to determine whether the Group has an existing obligation as a result of the past event.
Pensions
The Trustees of the Airways Pension Scheme (APS) have proposed an additional discretionary increase above CPI for pensions
in payment for the year to March 31, 2014. British Airways has challenged the decision, as it considers the Trustees have
no power to grant such increases, and initiated legal proceedings to determine the legitimacy of the discretionary
increase. The outcome of the legal proceedings is uncertain and, once known, the delayed 2015 triennial valuation will
resume so that an appropriate funding plan can be agreed with the Trustees. The outcome is expected in 2017, and may result
in changes to the obligations under the scheme which are recognised in the financial statements. The Group is unable to
quantify the financial effects until the outcome of the legal proceedings is known.
34 Related party transactions
The following transactions took place with related parties for the financial years to December 31:
E million 2016 2015
Sales of goods and services
Sales to associates1 7 8
Sales to significant shareholders2 39 29
Purchases of goods and services
Purchases from associates3 49 57
Purchases from significant shareholders2 60 61
Receivables from related parties
Amounts owed by associates4 2 3
Amounts owed by significant shareholders5 1 1
Payables to related parties
Amounts owed to associates6 4 3
Amounts owed to significant shareholders5 - 4
1 Sales to associates: Consisted primarily of sales for airline related services to Dunwoody Airline Services
(Holding) Limited (Dunwoody) of E7 million (2015: E8 million) and an amount of less than E1 million
(2015: less than E1 million) to Sociedad Conjunta para la Emisión y Gestión de Medios de Pago EFC, S.A. (Medios de Pago)
and Handling Guinea Ecuatorial, S.A.
2 Sales to and purchases from significant shareholders: Related to interline services with Qatar Airways.
3 Purchases from associates: Mainly included E33 million of airport auxiliary services purchased from
Multiservicios Aeroportuarios, S.A. (2015: E29 million), E10 million of handling services provided by Dunwoody (2015: E10
million), E6 million of maintenance services received from Serpista, S.L. (2015: E7 million). During the year there were no
services received from International Supply Management, S.L. (2015: E8 million) and less than E1 million of services
provided by Iber-America Aerospace, LLC (2015: E3 million).
4 Amounts owed by associates: For airline related services rendered, that included balances with Dunwoody of E1
million (2015: E1 million) and E1 million of services provided to Handling Guinea Ecuatorial, S.A., Medios de Pago and
Iber-America Aerospace, LLC (2015: E2 million for Madrid Aerospace Services, S.L. and Medios de Pago).
5 Amounts owed by and to significant shareholders: Related to Qatar Airways.
6 Amounts owed to associates: Consisted primarily of E1 million due to Dunwoody (2015: E1 million), E2 million to
Multiservicios Aeroportuarios, S.A. (2015: less than E1 million) and E1 million to Serpista, S.A. (2015: E1 million).
During the year to December 31, 2016 British Airways met certain costs of administering its retirement benefit plans,
including the provision of support services to the Trustees. Costs borne on behalf of the retirement benefit plans amounted
to E7 million (2015: E7 million) in relation to the costs of the Pension Protection Fund levy.
The Group has transactions with related parties that are conducted in the normal course of the airline business, which
include the provision of airline and related services. All such transactions are carried out on an arm's length basis.
For the year to December 31, 2016, the Group has not made any provision for doubtful debts arising relating to amounts owed
by related parties (2015: nil).
Significant shareholders
In this instance, significant shareholders are those parties who have the power to participate in the financial and
operating policy decisions of the Group, as a result of their shareholdings in the Group, but who do not have control over
these policies.
On July 29, 2016, Qatar Airways (Q.C.S.C.) increased its shareholding in IAG to 20.01 per cent (2015: 9.99 per cent).
On February 13, 2017 Deutsche Bank AG notified the Spanish National Securities Market Commission (CNMV) of the acquisition
of a shareholding of 3.061 per cent.
At December 31, 2016 the Group had cash deposit balances with shareholders holding a participation of between 3 to 5 per
cent, of E189 million (2015: E48 million).
Board of Directors and Management Committee remuneration
Compensation received by the Group's Board of Directors and Management Committee, in 2016 and 2015 is as follows:
E million December31, 2016 December31, 2015
Base salary, fees and benefits
Board of Directors' remuneration 7 15
Management Committee remuneration 10 22
17 37
The Board of Directors includes remuneration for two Executive Directors (2015: two Executive Directors).
The Management Committee includes remuneration for nine members (2015: nine members).
The Company provides life insurance for all Executive Directors and the Management Committee. For the year to December 31,
2016 the Company's obligation was E44,000 (2015: E72,000).
At December 31, 2016 the transfer value of accrued pensions covered under defined benefit obligation schemes, relating to
the Management Committee totalled E4 million (2015: E9 million).
No loans or credit transactions were outstanding with Directors or officers of the Group atDecember 31, 2016 (2015: nil).
In relation to Article 229 of the Spanish Companies Act, all IAG Directors have confirmed that they have no conflict with
the Company's interests.
Group investments
Subsidiaries
Name and address Principal activity Country of Incorporation Percentage of equity owned
AERL Holding LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
Aer Lingus 2009 DCS Trustee LimitedDublin Airport, Dublin Republic of Ireland 100%
Aer Lingus Beachey LimitedPenthouse Suite, Analyst House, Peel Road, Isle of Man, IM1 4LZ Isle of Man 100%
Aer Lingus Group DAC*Dublin Airport, Dublin Holdingcompany Republic of Ireland 100%
Aer Lingus Limited*Dublin Airport, Dublin Airlineoperations Republic of Ireland 100%
Aer Lingus (NI) LimitedAer Lingus Base, Belfast City Airport, Sydenham Bypass, Belfast, BT3 9JH NorthernIreland 100%
Aer Lingus (Ireland) LimitedDublin Airport, Dublin Republic of Ireland 100%
ALG Trustee LimitedDublin Airport, Dublin Republic of Ireland 100%
Avios Group (AGL) Limited*Astral Towers, Betts Way, London Road, Crawley, West Sussex, RH10 9XY Airlinemarketing England 100%
Avios South Africa Proprietary Limited34 Whitley Road, Unit B, 3rd Floor, Melrose Arch, Melrose North, Johannesburg SouthAfrica 100%
BA and AA Holdings Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Holdingcompany England 100%
BA Call Centre India Private Limited (callBA)F-42, East of Kailash, New-Delhi, 110065 India 100%
BA Cityflyer Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Airlineoperations England 100%
BA European LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
BA Healthcare Trust LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
BA Number One LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
BA Number Two Limited13 Castle Street, St Helier, JE4 5UT Jersey 100%
Bealine PlcWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
bmibaby LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
Binter Finance B.V.Prins Bernhardplein 200, Amsterdam, 1097 JB Netherlands 100%
BritAir Holdings Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Holdingcompany England 100%
British Airways Plc*Waterside, PO Box 365, Harmondsworth, UB7 0GB Airlineoperations England 100%1
British Airways (BA) LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
British Airways 777 Leasing Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Aircraftfinancing England 100%
British Airways Associated Companies LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
British Airways Avionic Engineering Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Aircraftmaintenance England 100%
British Airways Capital LimitedQueensway House, Hilgrove Street, St Helier, JE1 1ES Jersey 100%
British Airways E-Jets Leasing Limited*Canon's Court, 22 Victoria Street, Hamilton, HM 12 Aircraftfinancing Bermuda 100%
British Airways Employee Benefit Trustees (Jersey) LimitedQueensway House, Hilgrove Street, St Helier, JE1 1ES Jersey 100%
British Airways Finance (Jersey) Limited Partnership13 Castle Street, St Helier, JE4 5UT Jersey 100%
British Airways Holdings B.V.Atrium, Strawinskylaan 3105, Amsterdam, 1077 ZX Netherlands 100%
British Airways Holdings Limited*13 Castle Street, St Helier, JE4 5UT Holdingcompany Jersey 100%
British Airways Holidays Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Packageholidays England 100%
British Airways Interior Engineering Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Aircraftmaintenance England 100%
British Airways Leasing Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Aircraftfinancing England 100%
British Airways Maintenance Cardiff Limited*Waterside, PO Box 365, Harmondsworth, UB7 0GB Aircraftmaintenance England 100%
British Airways Pension Trustees (No 2) LimitedWhitelocke House, 2-4 Lampton Road, Hounslow, Middlesex, TW3 1HU England 100%
British Midland Airways LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
British Midland LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
Compañía Explotación Aviones Cargueros Cargosur, S.A.Calle Martínez Villergas 49, Madrid, 28027 Spain 100%
Compañía Operadora de Corto Y Medio Radio Iberia Express, S.A.*Calle Alcañiz 23, Madrid, 28006 Airlineoperations Spain 100%
Diamond Insurance Company Limited1st Floor, Rose House, 51-59 Circular Road, Douglas, IM1 1RE Isle of Man 100%
Dirnan Insurance Company LimitedCanon's Court, 22 Victoria Street, Hamilton, Bermuda, HM 12 Bermuda 100%
Flyline Tele Sales & Services GmbHHermann Koehl-Strasse 3, Bremen, 28199 Germany 100%
Gatwick Ground Services LimitedWaterside, PO Box 365, Harmondsworth, UB7 0GB England 100%
IAG Cargo Limited*Carrus Cargo Centre, PO Box 99, Sealand Road, London Heathrow Airport, Hounslow, TW6 2JS Air freightoperations England 100%
IAG GBS
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