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Aer Lingus Limited

Directors’ report and financial statements

Financial year ended 31 December 2018

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Contents

Page

Directors and other information 3

Directors’ report 4 to 10

Independent auditor’s report 11 to 13

Income Statement 14

Statement of Other Comprehensive Income 15

Statement of Financial Position 16

Statement of Changes in Equity 17

Statement of Cash Flows 18

Notes to the financial statements 19 to 60

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Directors and other information

Board of Directors at 1 March 2019

Sean Doyle (Chief Executive Officer) Rachel Izzard (Chief Financial Officer)

Mike Rutter (Chief Operating Officer)

Stephen Kavanagh (Non-Executive Director) Willie Walsh (Parent Company Executive)

Robert Boyle (Parent Company Executive)

Secretary and registered office

Méabh Gallagher

Dublin Airport

Co. Dublin Ireland

Registered number: 9215

Independent auditors

Ernst & Young Chartered Accountants

Harcourt Centre

Harcourt Street Dublin 2

Ireland

Bankers

Ulster Bank

Dublin Airport Branch Swords Road

Cloghran

Co. Dublin Ireland

Legal advisors

Arthur Cox Earlsfort Centre

Earlsfort Terrace

Dublin 2 Ireland

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Directors’ report

The Directors submit their report together with the audited financial statements for the year ended 31 December 2018.

Directors' responsibility statement

The Directors are responsible for preparing the Directors’ report and the financial statements in accordance with Irish law. Irish law requires

the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS).

Under Irish law the Directors shall not approve the financial statements unless they are satisfied that they give a true and fair view of the Company’s assets, liabilities and financial position as at the end of the financial year and of the profit or loss of the Company for the

financial year.

In preparing these financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and prudent;

state whether the financial statements have been prepared in accordance with IFRS and ensure that they contain the additional information required by the Companies Act 2014; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to:

correctly record and explain the transactions of the Company;

enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy; and

enable the Directors to ensure that the financial statements comply with the Companies Act 2014 and enable those financial statements to be audited.

The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s and the parent Company’s website. Legislation in Ireland governing the preparation and dissemination of financial statements may differ from

legislation in other jurisdictions.

Audit Committee

The Company does not have an Audit Committee of its Board in accordance with section 167 of the Companies Act 2014, but instead relies on the independent Audit Committee of its ultimate parent, International Consolidated Airlines Group, S.A. (‘IAG’, together with its

subsidiaries ‘Group’), which is maintained in compliance with its listing obligations.

Directors’ Compliance Statement

It is the policy of Aer Lingus Limited to comply with its relevant obligations as defined in section 225 of the Companies Act 2014. The Directors have drawn up a compliance policy statement as defined in section 225(3)(a) of the Companies Act 2014. Arrangements and

structures have been put in place that are, in the Directors’ opinion, designed to secure a material compliance with the Company’s relevant

obligations. These arrangements and structures were reviewed during the financial year. As required by section 225(2) of the Companies Act 2014, the Directors acknowledge that they are responsible for the Company’s compliance with the relevant obligations. In discharging

their responsibilities under section 225, the Directors relied on the advice of third parties who the Directors believe have the requisite

knowledge and experience to advise the Company on compliance with its relevant obligations.

Accounting records

The measures taken by the Directors to secure compliance with the Company’s obligation to keep adequate accounting records are the use of

appropriate systems and procedures and employment of competent persons. The books of account are kept at Dublin Airport, Co. Dublin, Ireland.

Accounting policies

The accounts are prepared under International Financial Reporting Standards as adopted by the EU. The principal accounting policies,

together with the basis of preparation of the accounts are set out in Notes 2 and 3 to the financial statements.

Disclosure of information to the auditor

The Directors confirm that:

in so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware;

they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of such information.

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Results for the year and state of affairs at 31 December 2018

The Income Statement for the year ended 31 December 2018 and the Statement of Financial Position as at that date are set out on pages 14

and 16 respectively. The profit after taxation for the year amounted to €258.2 million (2017: €234.5 million). The movement in retained

earnings for the year was as follows:

€ m

Balance, 1 January 2018 110.8

Profit for the year 258.2

Other comprehensive income for the year 0.4

Dividend paid (225.0)

Balance, 31 December 2018 144.4

Total retained earnings increased by €33.6 million since 1 January 2018. The Directors propose no other transfers to or from reserves.

Dividends

A dividend was paid in two tranches during 2018 to Aer Lingus Group DAC for a total of €225.0 million (2017: €200.0 million).

Principal activities

The principal activities of the Company during the year continued to be the provision of air travel services.

Business overview and commercial developments

Aer Lingus achieved a record operating profit in 2018 of €303.5 million (2017: operating profit of €266.8 million) and maintained high

levels of guest satisfaction, whilst ASK capacity increased by 10%. Net promoter score and on-time performance metrics continued to be strong, with external validation reconfirmed via a Skytrax 4-star ranking and APEX 5-star ranking.

In a year where Aer Lingus celebrated 60 years flying to North America, we continued on our mission to be the leading value carrier across

the North Atlantic, enabled by a sustainable short haul network. We grew our long haul network by 18%, introducing Ireland’s first direct

service to Seattle, and a new daily service to Philadelphia. We believe that Aer Lingus is delivering on this ambition, with a compelling position in the markets we serve, and an operational and financial performance which we believe is sustainable, creating opportunities for

further profitable growth. The opportunity remains for Aer Lingus to grow Dublin as a major hub connecting Europe and North America.

This will be enabled by investments in airport infrastructure at Dublin and will also provide significant social and economic benefits for a range of stakeholders in Ireland.

Demand conditions improved through 2018, with strong demand across both the premium transatlantic and short haul markets. With

significant long haul capacity growth and rigorous cost control, we continued to improve our non-fuel unit cost. This facilitated further

investment in price for our guests, through the application of the value carrier model, while maintaining strong load factors. This in turn

drove strong profit improvement, achieved in spite of significant fuel commodity price increases. Long haul growth was supported by the

addition of two A330 aircraft, which entered service during the year.

For the second year in a row, Aer Lingus placed in the top 10 most punctual airlines globally and won two Irish Travel Industry Awards for

‘Best Business Class’ and ‘Ireland’s Favourite Airline’. We are a guest-focused business and our value model is simple by design, demand-led and centred on cost, product and service.

Aer Lingus has a competitive product and well positioned brand. During 2018 we continued to invest in our product. The Aer Lingus loyalty

programme, AerClub, announced a member milestone as one million guests have joined the scheme to make it Ireland's largest travel

rewards programme. During December, we announced a brand refresh and unveiled a new brand livery in January 2019. The new livery reflects the value proposition offered, and remains faithful to the brand heritage and the proud legacy of 82 years of successful operations in

Ireland, whilst recognising the modern brand that Aer Lingus has become.

Investment will continue in 2019, a year in which Aer Lingus will introduce new technology long-range Airbus A321neo LR aircraft into

our fleet, to add frequency and capacity across existing North American gateways, and to unlock new gateway opportunities across North America. There will be investment in brand spend and product changes. Two new direct services will launch from Dublin, to Montreal and

Minneapolis-St. Paul.

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Trading highlights

In 2018, the Company generated revenue of €2,020 million representing a 9% increase compared with prior year (2017: €1,858 million).

This revenue performance was mainly driven by growth in long haul passenger services and additional frequencies as detailed within the Business overview above.

The key revenue statistics are as follows:

Revenue statistics 2018 2017 % increase/

(decrease)

Passenger revenue (€ million) 1,952.6 1,798.8 9%

Passenger numbers ('000s) 11,371 10,884 4%

Number of seats (‘000s) 14,511 13,905 4%

Available Seat Kilometres (ASKs) (million) 29,029 26,386 10%

Load factor RPK1/ASK (%) 80.9% 81.2% 0%

Passenger revenue per ASK (€cent) 6.73 6.82 (1%)

Total cargo revenue (€ million) 53.6 47.6 13%

Other revenue (€ million) 13.7 11.3 21% 1Revenue Passenger Kilometres

Revenues increased on 2017 by 9% in total, driven by growth on the North Atlantic network. Passenger revenue per ASK decreased by 1%

driven by significant capacity growth on new routes through the delivery of the value carrier strategy.

The key operating costs and unit cost measures are as follows:

Operating costs

(€ million unless otherwise stated) 2018 2017

% increase/

(decrease)

Fuel, oil costs and emissions charges 381.7 316.0 21%

Landing fees and en-route charges 328.9 331.1 (1%)

Employee costs 379.3 350.3 8%

Other operating costs1 626.6 593.6 6%

Total operating costs 1,716.5 1,591.0 8%

Operating cost per ASK (€ cent) 5.91 6.03 (2%)

Non-fuel operating cost per ASK (€ cent) 4.60 4.85 (5%)

1 Other operating costs includes aircraft and property lease costs, handling fees, catering and selling costs, depreciation and amortisation,

expenditure with other Group entities, see related party transactions note 33.

The decrease in non-fuel unit cost was driven by productivity improvements, scale benefits of additional flying, efficient growth and

rigorous cost control. Unit costs (excluding fuel) are 5% lower than 2017, with absolute costs, including fuel, growing 8% in the context of a capacity increase of 10%.

2018 balance sheet movements:

The Company’s balance sheet remains healthy with net assets of €441.5 million at 31 December 2018 (December 2017: net assets of €520.2

million). Gross cash was €1,088.7 million (December 2017: €1,088.4 million). Gross debt fell by 72.2 million as a result of finance lease

repayments.

There were a number of significant balance sheet movements between 31 December 2017 and 31 December 2018:

Property, Plant and Equipment and Intangible assets combined, decreased by a net amount of €1.4 million, being the net effect of capital additions, less depreciation and amortisation, less disposals. Capital expenditure of €83.2 million was incurred during the

year (2017: €148.5 million). This was across a range of asset classes, with no new aircraft coming on balance sheet during the

year (2017: two A330-300 aircraft acquired on balance sheet). The depreciation and amortisation charges for the year were €70.7 million and €12.0 million.

Other non-current assets comprise long term loans, prepayments made for a period greater than one year, and USD denominated deposits with a maturity profile of greater than one year. Other non-current assets increased by €122.3 million during 2018, due

primarily to an increase in intergroup deposits. This was offset by a transfer of USD deposits to current assets to match our

current lease obligations in relation to leases maturing in 2019.

Other reserves principally include cash flow hedging reserves deficit, a capital contribution reserve, a capital conversion reserve

fund and retained earnings. Movements within reserves are detailed within Note 29. The overall movement in reserves is mainly

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due to profit after tax of €258.2 million, a decrease of €112.3 million in the cash flow hedging reserves, due to items having been

reclassified to net profit, fair value movements in equity and dividend paid to Aer Lingus Group DAC of €225.0 million. Overall,

other reserves, and net assets, have decreased by €78.7 million, with no change to issued share capital during the year.

Interest-bearing long-term borrowings, amounting to €337.8 million at the balance sheet date (2017: €410 million), relate to finance lease obligations, a number of which are denominated in US dollars, and the remaining denominated in Euro. The

movement during 2018 relates to scheduled lease repayments.

Deferred tax liability balance sheet position decreased by €13.0 million. This net decrease mainly relates to an increase in the deferred tax asset arising from derivative financial instruments of €16.0 million.

Provisions increased by €29.8 million, with the main movement being increases in maintenance provisions.

The net derivative hedging position amounted to a €63.5 million liability position at the end of 2018 (2017: a net asset position of

€53.2 million). At the end of 2018, the hedging position comprises a significant mark to market loss on the Company’s portfolio of both fuel and foreign exchange hedges. This was driven by a decrease in market fuel prices during the latter part of 2018

combined with fluctuations in both the US dollar and GBP sterling rates. The Financial Risk Management disclosures within

Note 17 to these financial statements provide further background on the Company’s positions.

Fleet summary

A summary of our operating fleet as at 31 December 2018 was:

By aircraft type and financing structure:

Aircraft type Owned Finance lease Operating lease Wet lease Total

A320 12 4 18 34

A321 3 3

A330-200 2 1 2 5

A330-300 1 5 2 8

B757 4 4

Avro RJ-85 2 2

Total 18 10 22 6 56

Our short haul fleet consists of 39 aircraft (2017: 37) with 17 aircraft in our long haul fleet (2017: 16).

An A330-300 acquired in November 2017 was placed into a storage programme upon delivery and entered into service in March 2018. An A330-200 entered into service in May 2018 under an operating lease. Two Avro RJ-85s entered service in October 2018, operated by

CityJet, on a wet lease basis.

A summary of our operating fleet as at 31 December 2017 was:

By aircraft type and financing structure:

Aircraft type Owned Finance lease Operating lease Wet lease Total

A320 10 6 18

34

A321 3

3

A330-200 2 1 1

4

A330-300 1 5 2

8

B757

4 4

Total 16 12 21 4 53

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Principal Risks and Uncertainties

The Directors are responsible for oversight of the Company’s risk management systems, which are designed to identify, manage and

mitigate potential material risks to the Company’s strategic and business objectives. The Company carries out detailed risk management reviews under the IAG risk management framework. A separate but parallel management system monitors flight safety risks.

The principal corporate, non-flight risks that may threaten the Company’s business model, future performance and solvency are described

below. This list is not intended to be exhaustive.

Airport Infrastructure – Strategic Enablers

Aer Lingus has proposed defined growth ambitions in its Business Plan, notably to develop and expand its value carrier model on the North

Atlantic. This growth is significantly dependent on the timely delivery of appropriate infrastructure by the daa.

Alliance Risk

The cost/benefit analysis required to facilitate Aer Lingus’ entry into the Atlantic Joint Business with British Airways, American Airlines and other airlines on the North Atlantic, has been completed. This analysis indicates that there continues to be both opportunities and

significant cost implications to the Atlantic Joint Business.

Business Continuity & Disaster Recovery

Long term disruption or the inability to promptly recover from short term disruptions, can have an adverse material impact on the

Company’s business in terms of lost bookings and revenue, additional cost and damaged customer confidence. We have scenario based business continuity plans in place for all foreseeable contingencies, and a robust and independently validated Emergency Response Plan for

aircraft related crisis events.

Commodity Risk

Aer Lingus operates in a sector where certain market parameters can strongly impact on our performance. Jet fuel prices and foreign

exchange rates are volatile and airport charges are largely outside the Company’s control. Aer Lingus is particularly vulnerable to increases in charges at Dublin, which is our hub airport. Fuel hedging is actively managed in accordance with treasury policy and Board approvals.

Competition Risk

Aer Lingus operates in an intensely competitive market across all our main route groups. Several new entrants have entered our key markets.

Any failure to maintain our ability to compete so as to maintain and grow our market share in those key markets may result in erosion of our

revenue and margins. We pro-actively manage our capacity, services, revenues and costs to optimise our ability to retain and grow market share.

Cyber Security

Aer Lingus could face financial loss, disruption or damage to brand reputation arising from an attack on its systems by criminals, terrorists

or foreign governments. If the Company does not adequately protect our customer and employee data, it could breach regulation and face

penalties and loss of customer trust. Aer Lingus follows the IAG initiatives to enhance defences and response plans, ensures that it is up to

date with industry standards and addresses identified weaknesses.

There is oversight of critical systems and suppliers to ensure that data is secure, and the Company adheres to regulations and understands the

data that is held. A General Data Protection Regulation (GDPR) programme was implemented across the IAG Group in 2018 as part of its

ongoing privacy programmes.

The fast-moving nature of this risk means that we will always retain a level of vulnerability.

Fleet - Sourcing

In accordance with the business plan, maintaining the correct fleet specification, aircraft number and mix is critical for our business. Over

the last couple of years a number of mitigation actions have been implemented to reduce single supplier (OEM and lessor) and aircraft

availability risk. We have expanded our aircraft lessor portfolio from four lessors to over ten and established commercial relations with main aircraft and engine OEMs. This has permitted increased buying and negotiating power and preferential access to aircraft production slots.

IT systems and IT infrastructure

The Company is dependent on IT systems for most of its primary business processes. The performance and reliability of these systems is

critical to our ability to operate and compete effectively. The Company works with world class partners and is increasing resilience by

implementing agreed plans which include investing in new technology, updates and a robust operating platform.

People - Industrial relations

The Company has a largely unionised workforce and collective bargaining takes place on a regular basis across a range of issues. A successful relationship with our staff stakeholders is vital to our performance.

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Political and Economic Conditions

Any uncertainty in the political and economic environment in the markets in which Aer Lingus operates may increase volatility in foreign

exchange or pose a threat to continued economic recovery and growth.

Following the UK referendum decision in 2016, the UK is expected to leave the European Union (EU) on March 29, 2019. Our parent

undertaking, IAG, has continued to engage extensively with the relevant authorities to ensure IAG’s and Aer Lingus’ views on post-Brexit aviation arrangements are understood and taken into account. This has included frequent dialogue with the UK, Spanish and Irish

governments, as well as the European Commission and Members of the European Parliament. The completion of a Withdrawal Agreement

between the negotiators confirmed that there would be no change to aviation arrangements until the end of the transition period on December 31, 2020 and that the future relationship between the parties would include a comprehensive air transport agreement.

As the Withdrawal Agreement is subject to ratification by the UK and EU parliaments, both the European Commission and the UK

Government published separate plans to allow air services to continue in the event that the Withdrawal Agreement (or an amended version

of it) cannot be ratified. These include mechanisms to permit flights between the UK and the EU and recognition of each other’s safety certification, approvals and security regimes for a limited period of time following the UK’s departure from the EU pending agreement on

more comprehensive arrangements. As part of this, the EU is in the process of adopting a Regulation on basic connectivity between the EU

and UK that may result in some restrictions on code share flexibility. In addition, in November, the UK signed new air services agreements with the USA and Canada to replace existing EU-wide agreements once the UK leaves the EU, securing market access and regulatory

arrangements for the future. IAG has had detailed and constructive engagement with its national regulators and governments about

ownership and control. Those discussions will continue, including with the European Commission, and IAG remains confident that its operating companies, including Aer Lingus, will comply with relevant ownership rules post Brexit. IAG’s and Aer Lingus’ assessment

remains that, even in the event of no-deal, Brexit will have no significant long-term impact on its business.

Regulatory Compliance Risk

Any breach of laws and regulations would pose a risk to the company. Aer Lingus actively manages compliance with competition and data

protection regulations to ensure compliance.

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Directors and Secretary

The names of the current Directors appear on page 3. The Directors who served during the year ended 31 December 2018 are listed in the

table below.

Director Status Executive/Non-Executive

Robert Boyle Current Parent Company Executive

Rachel Izzard Current Executive

Stephen Kavanagh Current Executive

Mike Rutter Current Executive

Willie Walsh Current Parent Company Executive

Stephen Kavanagh resigned as Chief Executive Officer and was appointed non-executive director with effect from 1 January 2019. Sean

Doyle was appointed Chief Executive Officer, and was appointed to the board, with effect from 1 January 2019.

Directors’ and Secretary’s interests in shares and debentures

The Directors and the Secretary were not interested in, at either the beginning of the financial year (or, if he or she was not then a Director,

when he or she became a Director) or at the end of the financial year, any shares in or debentures of the Company or any group undertaking

of the Company required to be recorded in the Company’s register of interests under section 267 of the Companies Act 2014.

Payment practices

The Directors acknowledge their responsibility for ensuring compliance, in all material respects, with the provisions of the European

Communities (Late Payments in Commercial Transactions) Regulations 2002 (the “Regulations”). Procedures have been implemented to identify the dates upon which invoices fall due for payment and to ensure that payments are made by such dates. Such procedures provide

reasonable assurance against material non-compliance with the Regulations. The payment policy throughout 2018 was to comply with the

requirements of the Regulations.

Research and Development

The Company did not engage in any research and development activities during the year.

Political contributions

No political donations were made by the Company during the year.

Subsidiary companies

Details of the principal subsidiary companies are set out in Note 14 to the financial statements.

Financial Risk Management

Details regarding financial risk management are set out in Note 17 to the financial statements.

Independent auditors

The independent auditors, Ernst & Young, are prepared to continue in office in accordance with the provisions of section 383(2) of the

Companies Act 2014.

Events after the reporting date

Events after the reporting date are disclosed in Note 34 to the financial statements.

On behalf of the Board

RACHEL IZZARD SEAN DOYLE

Director Director

1 March 2019 1 March 2019

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DRAFT INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AER LINGUS LIMITED

Opinion

We have audited the financial statements of Aer Lingus Limited (‘the Company’) for the year ended 31

December 2018, which comprise the Income Statement, the Statement of Other Comprehensive Income, the

Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and notes to

the financial statements, including the summary of significant accounting policies set out in note 3. The financial

reporting framework that has been applied in their preparation is Irish Law and International Financial

Reporting Standards (IFRS) as adopted by the European Union as applied in accordance with the provisions of

the Companies Act 2014.

In our opinion the financial statements:

give a true and fair view of the assets, liabilities and financial position of the company as at 31

December 2018 and of its profit for the year then ended;

have been properly prepared in accordance with IFRS as adopted by the European Union; and

have been properly prepared in accordance with the requirements of the Companies Act 2014.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and

applicable law. Our responsibilities under those standards are further described in the Auditor's Responsibilities

for the Audit of the Financial Statements section of our report. We are independent of the Company in

accordance with ethical requirements that are relevant to our audit of financial statements in Ireland, including

the Ethical Standard as applied to public interest entities issued by the Irish Auditing and Accounting

Supervisory Authority (IAASA), and we have fulfilled our other ethical responsibilities in accordance with these

requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our

opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters, in relation to which ISAs (Ireland) require us to

report to you where:

the directors’ use of the going concern basis of accounting in the preparation of the financial statements

is not appropriate: or

the directors have not disclosed in the financial statements any identified material uncertainties that

may cast significant doubt about the Company’s ability to continue to adopt the going concern basis of

accounting for a period of at least twelve months from the date when the financial statements are

authorised for issue.

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Other information

The directors are responsible for the other information. The other information comprises the directors report.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise

explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and,

in doing so, consider whether the other information is materially inconsistent with the financial statements or

our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material

inconsistencies or apparent material misstatements, we are required to determine whether there is a material

misstatement in the financial statements or a material misstatement of the other information. If, based on the

work we have performed, we conclude that there is a material misstatement of this other information, we are

required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2014

Based solely on the work undertaken in the course of the audit, we report that:

in our opinion, the information given in the directors’ report is consistent with the financial statements;

and

in our opinion, the directors’ report has been prepared in accordance with the Companies Act 2014

We have obtained all the information and explanations which we consider necessary for the purposes of our

audit.

In our opinion the accounting records of the Company were sufficient to permit the financial statements to be

readily and properly audited and the Company statement of financial position is in agreement with the

accounting records.

Matters on which we are required to report by exception

Based on the knowledge and understanding of the company and its environment obtained in the course of the

audit, we have not identified material misstatements in the directors' report.

The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors’

remuneration and transactions required by sections 305 to 312 of the Act are not made. We have nothing to

report in this regard.

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Respective responsibilities

Responsibilities of directors for the financial statements

As explained more fully in the directors’ responsibilities statement set out on page 4, the directors are

responsible for the preparation of the financial statements and for being satisfied that they give a true and fair

view, and for such internal control as they determine is necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless management either intends to liquidate the Company or to cease operations,

or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free

from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our

opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can

arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the IAASA's

website at: http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-

a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf .

This description forms part of our auditor's report.

The purpose of our audit work and to whom we owe our responsibilities

Our report is made solely to the Company’s members, as a body, in accordance with section 391 of the

Companies Act 2014. Our audit work has been undertaken so that we might state to the Company’s members

those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the

Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

for and on behalf of

Ernst & Young Chartered Accountants and Statutory Audit Firm

Dublin

Date: 1 March 2019

http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf

http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/Description_of_auditors_responsibilities_for_audit.pdf

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All reported results arise from continuing operations.

The notes on pages 19 to 60 form an integral part of these financial statements.

Approved by the Board of Directors on 1 March 2019.

Income Statement Year ended 31 December

2018 2017

As restated

Note €'000 €'000

Passenger revenue 1,952,611 1,798,803

Cargo revenue 53,639 47,622

Other revenue 13,716 11,328

Total revenue 2,019,966 1,857,753

Employee costs 379,288 350,258

Fuel, oil costs and emission charges 381,723 316,025

Handling, catering and other operating costs 200,191 180,139

Landing fees and en-route charges 328,882 331,073

Engineering and other aircraft costs 97,551 97,464

Property, IT and other costs 57,528 58,456

Selling costs 86,859 79,207

Depreciation and amortisation 6 82,753 76,968

Aircraft operating lease costs 6 103,352 96,946

Currency differences (1,622) 4,457

Total expenditure on operations 1,716,505 1,590,993

Operating profit 303,461 266,760

Finance costs 7 (9,199) (10,032)

Finance income 7 5,760 4,015

Net currency retranslation (charges)/credits (3,653) 6,589

(Loss)/Gain on derivatives not qualifying for hedge accounting (136) 403

Net gain related to sale of property, plant, equipment and investments 50 848

Net financing charge relating to pensions 7 (73) (88)

Profit before taxation 296,210 268,495

Tax 10 (37,984) (34,018)

Profit after taxation 258,226 234,477

Attributable to:

Equity holders of the parent 258,226 234,477

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Statement of other comprehensive income Year ended 31 December

2018 2017

As restated

Note €'000 €'000

Items that may be reclassified subsequently to net profit/(loss)

Cash flow hedges:

Fair value movements in equity 29 (87,026) 43,777

Deferred tax impact 27 10,878 (5,472)

Reclassified and reported in net profit 29 (41,362) (57,379)

Deferred tax impact 27 5,170 7,172

Items that will not be reclassified to net profit/(loss)

Re-measurements of post-employment benefit obligations 24 434 134

Deferred tax impact 27 (54) (17)

Total other comprehensive income/(loss) for the year, net of tax (111,960) (11,785)

Profit after tax for the year 258,226 234,477

Total comprehensive income for the year 146,266 222,692

Total comprehensive income is attributable to:

Equity holders of the parent 146,266 222,692

All reported results arise from continuing operations.

The Notes on pages 19 to 60 form an integral part of these financial statements.

Approved by the Board of Directors on 1 March 2019.

16

Statement of financial position

At At At

31 December

2018

31 December

2017

31 December

2016

As restated As restated

Note €'000 €'000 €'000

Non-current assets

Property, plant and equipment 11 618,440 639,457 571,067

Intangible assets 12 54,514 34,853 33,138

Investment in subsidiaries 13 113,708 113,708 113,710

Employee benefit assets 24 406 385 349

Loans and receivables 16 200,195 195 195

Derivative financial instruments 17 5,195 13,503 11,214

Other non-current assets 19 19,879 89,314 135,360

1,012,337 891,415 865,033

Current assets

Inventories 18 8,420 6,675 6,727

Trade receivables 19 29,239 23,432 36,182

Other current assets 19 79,695 102,608 67,567


Other current interest bearing-deposits 20 671,388 805,880 666,782

Cash and cash equivalents 20 217,110 216,706 185,187

1,015,278 1,199,396 1,001,351

Assets classified as held for sale 15 327 - 14,598

Total current assets 1,105,605 1,199,396 1,015,949

Total assets 2,027,942 2,090,811 1,880,982

Shareholders' equity

Issued share capital 28 337,991 337,991 337,991

Other reserves 29 103,523 182,257 159,565

Total shareholders' equity 441,514 520,248 497,556

Total equity 441,514 520,248 497,556

Non-current liabilities

Interest-bearing long-term borrowings 21 202,076 327,709 264,523

Employee benefit obligations 24 1,860 2,299 3,355

Deferred tax liability 27 32,161 45,128 35,669

Provisions for liabilities 25 134,246 103,563 87,400

Derivative financial instruments 17 28,896 662 3,447

Other long-term liabilities 22 135,565 136,104 136,065

534,804 615,465 530,459

Current liabilities

Current portion of long-term borrowings 21 135,725 82,249 31,809

Deferred revenue on ticket sales 22 221,096 212,791 206,065

Trade and other payables 22 579,746 589,565 528,891


Provisions for liabilities 25 65,880 66,777 75,804

1,051,624 955,098 852,967

Total liabilities 1,586,428 1,570,563

1,383,426

Total equity and liabilities 2,027,942 2,090,811

1,880,982


On behalf of the Board

RACHEL IZZARD SEAN DOYLE

Director Director

1 March 2019 1 March 2019

17

Statement of changes in equity Year ended 31 December 2018

Called-up share

capital

Capital

conversion

reserve fund

Cash flow

hedging reserve

Capital

contribution

reserve

Share based

payment reserve

Retained

earnings

As Restated

Total equity

As Restated

€'000 €'000 €'000 €'000 €'000 €'000 €'000

Balance at 1 January 2017 (as restated) 337,991 1,705 68,498 13,207 - 76,155 497,556

Profit for the year - - - - - 234,477 234,477

Other comprehensive income for the year:

Cash flow hedges reclassified and reported in net profit: - - (50,207) - - - (50,207)

Net change in fair value of cash flow hedges - - 38,305 - - - 38,305

Re-measurement of post-employment benefit obligations - - - - - 117 117

Total comprehensive income/(loss) for the year - - (11,902) - - 234,594 222,692

Share based payment vesting charge - - - - 1,780 - 1,780

Share based payment intercompany settlement

- - - - (1,780) - (1,780)

Dividends paid - - - - - (200,000) (200,000)

Balance at 31 December 2017 337,991 1,705 56,596 13,207 - 110,749 520,248

Balance at 1 January 2018 337,991 1,705 56,596 13,207 - 110,749 520,248

Profit for the year - - - - 258,226 258,226

Other comprehensive income for the year:

Cash flow hedges reclassified and reported in net profit: - - (36,192) - - - (36,192)

Net change in fair value of cash flow hedges - - (76,148) - - - (76,148)

Re-measurement of post-employment benefit obligations - - - - - 380 380

Total comprehensive income/(loss) for the year - - (112,340) - - 258,606 146,266

Share based payment vesting charge - - - - 2,431 - 2,431

Share based payment intercompany settlement

- - - - (2,431) - (2,431)

Dividends paid - - - - - (225,000) (225,000)

Balance at 31 December 2018 337,991 1,705 (55,744) 13,207 - 144,355 441,514


18

Statement of cash flows Year ended 31 December

2018

2017

As restated

Note €'000 €'000

Cash flows from operating activities

Cash generated from operations 32 456,660 367,213

Interest paid (5,195) (5,709)

Taxation (paid)/refunded (61,229) 37

Net cash flows from operating activities 390,236 361,541

Cash flows from investing activities

Acquisition of property, plant and equipment and intangible assets (89,357) (168,174)

Proceeds from sales of property, plant and equipment and intangible assets 50 1,469

Proceeds from sale of investment in joint venture - 15,415

Increase in interest-bearing and other deposits 801 (114,572)

Interest received 6,180 5,516

Net cash flows from investing activities (82,326) (260,346)

Cash flows from financing activities

Drawdown of long-term interest-bearing borrowings - 168,413

Repayments of loans (to)/from fellow group companies 1,215 (15)

Repayments of long-term interest-bearing borrowings (84,587) (37,062)

Dividends paid (225,000) (200,000)

Net cash flows from financing activities (308,372) (68,664)

Net increase in cash and cash equivalents (462) 32,531

Net foreign exchange differences on cash and cash equivalents 866 (1,012)

Cash and cash equivalents at 1 January 20 216,706 185,187

Cash and cash equivalents at year end 20 217,110 216,706


19

Notes to the financial statements

1 General information

Aer Lingus Limited (“the Company”) operates as an Irish airline primarily providing passenger and cargo transportation services from Ireland to the UK and Europe (“short haul”) and also to North America (“long haul”). The Company, registered number 9215, is a limited

liability company incorporated and domiciled in Ireland. The address of its registered office is Dublin Airport, Co. Dublin, Ireland. The

Company is a wholly owned subsidiary of Aer Lingus Group DAC, a company incorporated and domiciled in Ireland. The address of its registered office is Dublin Airport, Co. Dublin, Ireland. The ultimate parent of Aer Lingus Limited is International Consolidated Airlines

Group, S.A. hereinafter “IAG”. IAG is a Spanish company registered in Madrid and was incorporated on April 8, 2010. IAG shares are

traded on the London Stock Exchange’s main market for listed securities and also on the stock exchanges of Madrid, Barcelona, Bilbao and Valencia (the ‘Spanish Stock Exchanges’), through the Spanish Stock Exchanges Interconnection System (Mercado Continuo Español).

2 Basis of preparation

The financial statements of the Company have been prepared on a going concern basis in accordance with International Financial Reporting

Standards (IFRS) as adopted by the European Union (EU), IFRS Interpretations Committee (IFRIC) interpretations and the Companies Act 2014 applicable to companies reporting under IFRS.

The financial statements presented are separate financial statements. Details of the principal subsidiary undertakings are included in Note 14. The Company has availed of an exemption from preparing consolidated financial statements, as set out under section 299 of the

Companies Act 2014 and IFRS 10, Consolidated Financial Statements, as it is a wholly owned subsidiary of Aer Lingus Group DAC, a

company incorporated and domiciled in Ireland. The ultimate parent of the Company is International Consolidated Airlines Group, S.A.

(‘IAG’) which presents consolidated financial statements, including the results of the Company, prepared in accordance with the

International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU). The registered office of IAG

is S.A El Caserío, Iberia Zona Industrial no 2 (La Munoza) Camino de La Munoza, s/n, 28042 Madrid, Spain and the consolidated financial statements are publicly available on the IAG’s website at http://www.iairgroup.com/.

The financial statements are presented in euro, rounded to the nearest thousand unless otherwise stated. These financial statements have been

prepared on a historical cost basis except for certain financial assets and liabilities, including derivative financial instruments and available-

for-sale financial assets that are measured at fair value.

IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. References to IFRS hereafter should be construed as

references to IFRS adopted by the EU.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and assumptions

that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions,

actual results ultimately may differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where

assumptions and estimates are significant to the financial statements are disclosed in Note 4.

The Company’s financial statements for the year to 31 December 2018 were authorised for issue, and approved by the Board of Directors on

1 March 2019.

3 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been

consistently applied to all the years presented, unless otherwise stated.

3.1 Foreign currency translation

(a) Functional and presentation currency

The financial statements are presented in euro, which is the functional and presentation currency of the Company.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions, or at the reporting date where items are remeasured. Foreign exchange gains and losses resulting from the settlement of

such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign

currencies are recognised in the Income statement in either “Currency differences” or “Net currency retranslation charges” except when deferred in equity as qualifying cashflow hedges. Foreign exchange differences on long-term balances reported are included within Net

currency retranslation charges whilst foreign exchange differences on short-term and working capital balances are included within

Currency differences.

3.2 Property, plant and equipment

Property, plant and equipment is held at cost. Depreciation is calculated to write off the cost less the estimated residual value on a straight

line basis over the economic life of the asset. Residual values, where applicable, are reviewed annually against prevailing market values for

equivalently aged assets and depreciation rates adjusted accordingly on a prospective basis.

http://www.iairgroup.com/

20

(a) Capitalisation of interest on progress payments

Interest attributed to progress payments, and related exchange movements on foreign currency amounts, made on account of aircraft and

other qualifying assets under construction are capitalised and added to the cost of the asset concerned. All other borrowing costs are recognised in the Income statement in the year in which they are incurred.

(b) Fleet

All aircraft are stated at the fair value of the consideration given after taking account of manufacturers’ credits. Fleet assets owned or

held on finance leases are depreciated at rates calculated to write down the cost to the estimated residual value at the end of their planned operational lives on a straight-line basis.

Cabin interior modifications, including those required for brand changes and relaunches, are depreciated over the lower of five years and the remaining life of the aircraft.

Aircraft and engine spares acquired on the introduction or expansion of a fleet, as well as rotable spares purchased separately, are carried as property, plant and equipment and generally depreciate in line with the fleet to which they relate.

Major engine overhaul expenditure is capitalised and depreciated over the average expected life between major overhauls. The costs of replacement engine LLPs (life limited parts) are capitalised and depreciated over the remaining life of the fleet to which they relate. All

other replacement spares and other costs relating to maintenance of fleet assets (including maintenance provided under ‘pay-as-you-go’

contracts) are charged to the Income statement on consumption or as incurred respectively.

(c) Other property, plant and equipment

Provision is made for the depreciation of all property, plant and equipment. Property, with the exception of freehold land, is depreciated

over its expected useful life over periods not exceeding 50 years, or in the case of leasehold properties, over the duration of the lease if shorter, on a straight-line basis. Equipment is depreciated over periods ranging from 2 to 20 years.

(d) Leased assets

Where assets are financed through finance leases, under which substantially all the risks and rewards of ownership are transferred to the

Company, the assets are treated as if they had been purchased outright. The amount included in the cost of property, plant and equipment represents the aggregate of the capital elements payable during the lease term. The corresponding obligation, reduced by the

appropriate proportion of lease payments made, is included in borrowings.

The amount included in the cost of property, plant and equipment is depreciated on the basis described in the preceding paragraphs on

fleet and the interest element of lease payments made is included as an interest expense in the Income statement. Total minimum

payments, measured at inception, under all other lease arrangements, known as operating leases, are charged to the Income statement in equal annual amounts over the period of the lease. In respect of aircraft, certain operating lease arrangements allow the Company to

terminate the leases after a limited initial period, without further material financial obligations. In certain cases the Company is entitled

to extend the initial lease period on predetermined terms; such leases are described as extendable operating leases.

(e) Depreciation

Depreciation is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives as

follows:

Useful lives Residual values¹

Flight equipment

Aircraft fleet and major spares

- short haul aircraft 21 years 7% of cost

- long haul aircraft 20 years 10% of cost

Rotable spares

- short haul aircraft 21 years 7% of cost

- long haul aircraft 20 years 10% of cost

Modifications to leased aircraft No greater than 5 years Nil

Property

Freehold Principally 50 years Nil

Leasehold Period of lease Nil

Equipment

Ground equipment 3 – 20 years Nil

Other equipment 2 – 10 years Nil

21

1The residual values and useful lives of assets are reviewed and adjusted if appropriate, at the end of each reporting period. An asset’s

carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated

recoverable amount. Gains and losses on disposals are determined by comparing the proceeds received with the carrying amount written off.

3.3 Intangible assets

The cost to purchase or develop computer software that is separable from an item of related hardware is capitalised separately and amortised

on a straight-line basis over a period not exceeding five years.

In 2011, as part of the surrender of the lease over its former head office building, the Company acquired a ten year license for the use of

certain property owned by the Dublin Airport Authority. This license is held at cost and amortised over the ten year license term on a straight line basis.

Landing rights are capitalised at fair value at the date of purchase. Subsequently they are accounted for at cost less any accumulated impairment losses. Landing rights are considered to have an indefinite life as they will remain available for use for the foreseeable future

provided minimum utilisation requirements are met, and therefore they are not amortised. The carrying value of these rights is subject to

impairment testing annually or when events or changes in circumstances indicate that carrying values may not be recoverable.

Purchased emissions allowances are recognised at cost. Emissions allowances are considered to be indefinite lived assets and are not

revalued or amortised but are tested for impairment whenever indicators exist that the carrying value may not be recoverable.

3.4 Impairment of non-financial assets

Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate

that the carrying amount may not be recoverable. Indefinite lived assets are tested for impairment at least annually. An impairment loss is

recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which

there are separately identifiable cash flows. Non-financial assets that have been impaired are reviewed for possible reversal of the impairment at each reporting date. Refer to Note 11 and Note 12 for further detail.

3.5 Investment in subsidiaries

The investments in subsidiaries are stated in the Company’s financial statements at cost less impairment. On disposal of such an investment,

the difference between the net disposal proceeds and its carrying amount is included in the Income statement.

3.6 Financial Instruments

The Company classifies its financial assets and liabilities in those categories set out below. The classification depends on the purpose for

which the financial assets or liabilities were acquired. Management determines the classification of its financial assets and liabilities at initial

recognition.

(a) Loans and receivables

After initial recognition, interest-bearing loans and receivables are subsequently measured at amortised cost using the EIR method. Gains

and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance income in the statement of comprehensive income.

(b) Trade and other receivables

For trade receivables, the Company applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit

risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic

environment. Loans to third parties are initially measured at the fair value of the consideration given plus any directly attributable

transaction costs, and measured thereafter at amortised cost using the effective interest method.

(c) Other current and non-current interest-bearing deposits

Other current interest-bearing deposits, principally comprising funds held with banks and other financial institutions, are carried at amortised

cost using the effective interest method.

(d) Derivative financial instruments and hedging activities

Derivative financial instruments, comprising interest rate swap agreements, foreign exchange derivatives and fuel hedging derivatives are

initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The

method of recognising the resulting gain or loss arising from revaluation depends on whether the derivative is designated as a hedging

instrument, and if so, the nature of the item being hedged (as detailed below under cash flow hedges). The gains or losses related to derivatives not used as effective hedging instruments are recognised in the Income statement.

The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy, for undertaking various hedging transactions. The Company also documents its assessment, both

at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting

changes in fair values or cash flows of hedged items.

22

Exchange gains and losses on monetary assets and liabilities are taken to the Income statement unless the item has been designated and is

assessed as an effective hedging instrument. Exchange gains and losses on non-monetary assets and investments are reflected in equity until

the investment is sold when the cumulative amount recognised in equity is recognised in the Income statement.

i. Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the Income statement, together

with any changes in the fair value of the hedged asset or liability. The Company only applies fair value hedge accounting for hedging fixed interest risk on assets and borrowings. The gain or loss relating to the effective portion of interest rate swaps hedging fixed rate assets and

borrowings is recognised in the Income statement within “finance costs”. The gain or loss relating to the ineffective portion of the interest

rate swaps is recognised in the Income statement within “Gains/(losses) on derivatives not qualifying for hedge accounting”.

If a hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective

interest method is used is amortised to profit or loss over the period to maturity.

ii. Cash flow hedges

Cash flow hedges are principally used to hedge the commodity price risk associated with the Company’s forecasted fuel purchases as well as

certain foreign exchange and interest rate exposures. Gains and losses on derivative financial instruments designated as cash flow hedges

and assessed as effective for the year, are recorded in equity. The gain or loss relating to the ineffective portion of the interest rate swaps is recognised in the Income statement within “Gains/(losses) on derivatives not qualifying for hedge accounting”. Gains and losses recorded

in equity are reclassified to the income statement when either the hedged cash flow impacts income or the hedged item is no longer expected

to occur.

3.7 Derecognition of financial assets and liabilities

A financial asset or liability is generally derecognised when the contract that gives rise to it has been settled, sold, cancelled or has expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing

liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition

of a new liability, such that the difference in the respective carrying amounts are recognised in the Income statement.

3.8 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of financial position when there is a legally

enforceable right to offset the recognised amounts which is not contingent on a future event and there is an intention to settle on a net basis,

or realise the asset and settle the liability simultaneously, which is enforceable, as well as in the normal course of business, in the event of default or of insolvency or bankruptcy of any of the counterparties.

3.9 Impairment of financial assets

The Company recognises an allowance for expected credit losses (ECLs) for trade receivables. The Company applies a simplified approach

in calculating ECLs. An allowance for expected credit losses is calculated by considering on a discounted basis the cash shortfalls the

Company would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each

shortfall occurring.

3.10 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using weighted average cost. Net realisable value is the estimated selling price in the ordinary course of business, less applicable disposal costs.

3.11 Cash and cash equivalents and deposits

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with

original maturities of three months or less. Bank overdrafts are shown within current liabilities on the Statement of financial position.

Deposits with original maturities of less than three months are classified as cash and cash equivalents. Deposits with an original maturity of

more than 3 months are classified as current assets if maturing within 12 months and otherwise as non-current assets.

3.12 Share capital

Ordinary shares issued are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in the

statement of comprehensive income as a deduction, net of tax, from the proceeds received.

3.13 Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within 12 months or less (or in the normal operating cycle of the

business if longer). If not, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

23

3.14 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost;

any difference between the net proceeds and the redemption value is recognised in the Income statement over the period of the borrowings

using the effective interest method.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least

12 months after the end of the reporting period.

3.15 Current and deferred tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it

relates to items recognised in other comprehensive income or directly in equity. In this case the tax is recognised in other comprehensive income or directly in equity, respectively.

The current tax charge is calculated on the basis of the tax rates and laws enacted or substantively enacted at the reporting date in the countries where the Company operates and generates taxable income. Management periodically evaluates positions taken in tax returns with

respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of

amounts expected to be paid to the tax authorities.

Deferred tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and

their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset

or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit

or loss. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date and which

are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.

Deferred tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the Company controls the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable

future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities

and when the deferred tax assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different

taxable entities where there is an intention to settle the balances on a net basis.

The tax effects of tax losses available for carry forward are recognised as an asset when it is probable that future taxable profits will be

available against which these losses can be utilised.

3.16 Employee benefits

Post-employment benefit obligations

The Company operates various pension schemes. The schemes are generally funded through payments to trustee-administered funds. The

Company contributes to defined contribution and defined benefit plans.

For defined contribution schemes, the Company pays contributions into the pension schemes in accordance with the trust deed. The

Company has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expenses when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future

payments is available.

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations

being carried out at each reporting date. Actuarial gains and losses (re-measurements) are recognised in full in the period in which they

occur. They are recognised outside the Income statement and are presented in other comprehensive income.

The discount rate applied by the Company in determining the present value of the schemes’ liabilities is determined by reference to market

yields at the reporting date, on high quality corporate bonds of a currency and term consistent with the currency and term of the associated post-employment benefit obligation. Where a deep market for high quality corporate bonds of a term consistent with the post retirement

obligations of a particular scheme does not exist, a rate which is extrapolated (with assistance from actuarial experts) from available high

quality corporate bonds of shorter maturities is used.

Past service cost is recognised immediately as an expense at the earlier of the following dates (a) when a plan amendment or curtailment

occurs; and (b) upon recognition of related restructuring costs or termination benefits.

The post-employment benefit obligation recognised in the Statement of financial position represents the present value of the defined benefit

obligation as adjusted for unrecognised past service cost and as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the scheme.

Termination benefits Termination benefits are payable when employment is terminated by the Company before the normal retirement date, or whenever an

employee accepts voluntary redundancy in exchange for these benefits. The Company recognises termination benefits at the earlier of the

following dates; (a) when the Company can no longer withdraw the offer of these benefits following communication to employees; and (b) when the Company recognises costs for a restructuring which is within the scope of IAS 37 and involves the payment of termination

benefits. They represent the Directors’ best estimate of the cost of these measures.

24

3.17 Share-based payment

As at 31 December 2018 Aer Lingus did not operate any equity-settled, share-based compensation plans.

IAG has a number of equity-settled share-based employee incentive plans in which the Group’s employees participate. Awards are made

under the Performance Share Plan (PSP) operated by IAG and represent rights over its ordinary shares. The cost of these awards is

recharged from IAG to the Company and recognised as an intercompany payable to IAG.

3.18 Provisions

Provisions are made when:

the Company has a present legal or constructive obligation as a result of a past event;

it is probable that an outflow of resources will be required to settle the obligation, and;

the amount is capable of reliable estimation.

If the effect is material, expected future cash flows are discounted using a rate that reflects, where appropriate, the risks specific to the provision. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance cost.

Provisions are made for aircraft maintenance costs which the Company incurs in connection with engine overhauls and end-of-lease airframe checks on operating leased aircraft, where the terms of the lease impose obligations on the lessee to have this maintenance work

carried out. Provisions reflect the cost rates expected to apply at the time the work is carried out and to meet the contractual end of lease

return conditions. The actual cash outflow of the overhauls is charged against the provision when incurred. Any residual balance is transferred to the Income statement. Routine maintenance is expensed as incurred.

A provision for restructuring costs is recognised when a constructive obligation exists. The amount of the provision is based on the terms of business repositioning measures, including employee severance measures which have been communicated to employees. They represent the

Directors’ best estimate of the cost of these measures.

3.19 Frequent Flyer Programme (“FFP”) AerClub, with Avios, is the loyalty platform for Aer Lingus. The programme awards guests with Avios points which can be redeemed for

various rewards, primarily for redemption travel, including flights, hotels and car hire. The programme is administered by Avios Group

Limited, who recharge the Company for the Avios issued to AerClub members. The revenue recognised when the transportation service is provided is reduced by the price of the loyalty points issued.

3.20 Revenue recognition

The Company recognises revenue when the amount of revenue can be reliably measured, it is probable that the future economic benefits will

flow to the entity and when specific criteria have been met for each of the Company’s activities as described below.

Revenue comprises the fair value of consideration received or receivable for the sale of the Company’s services in the ordinary course of the

Company’s activities, and can be divided into scheduled passenger, cargo, ancillary and other revenue. Scheduled passenger revenue is shown inclusive of passenger charges and other fees to the extent that these are recovered directly from customers at the point of sale, but

exclusive of applicable government taxes including taxes levied by governments for travel to and from their respective countries and sales

taxes such as VAT. The point of recognition differs according to the various revenue streams as set out below:

(a) Revenues

Amounts in respect of transportation of passengers and cargo are deferred and are not recognised as revenue until the point at which

the passenger or cargo has flown; the point at which the performance obligations associated with these services has been satisfied.

The value of bookings made for which transportation has not been provided at the reporting date is included in “Deferred revenue on ticket sales”. Unused tickets are recognised as revenue using estimates based on historical trends.

Fees charged for bags, seat selection, charges for any changes to flight tickets and other administration fees are recognised when the passenger has flown.

Other revenues, including maintenance, handling and commissions, are recognised in the Income statement in the period in which the associated services are provided. Revenues arising from the Company’s franchise agreement with Stobart Air are recognised on a net

(as agent) basis with the agreed franchise fee reported within “Other revenue”.

(b) Lessor accounting

The Company acts as an operating lessor of aircraft, including crew and other services. Amounts in respect of these leases are billed in advance and recorded as deferred revenue. Revenue and costs are recognised as the services are provided, with the costs associated

with this revenue recognised within the relevant Income statement categories (staff costs, maintenance, depreciation, aircraft hire and

overheads). Revenue is recorded within other revenues.

(c) Interest income

Interest income is accrued by reference to the principal outstanding using the effective interest rate applicable.

25

(d) Dividend income

Dividend income is recognised when the right to receive payment is established.

3.21 New and amended standards adopted by the Company

IFRS 15 ‘Revenue from contracts with customers’ is effective for periods beginning on or after January 1, 2018. The standard establishes a

five-step model that will apply to revenue arising from contracts with customers. Revenue is recognised at an amount that reflects the

consideration to which an entity expects to be entitled in exchange for goods and services and at a point when the performance obligations

associated with these goods and services have been satisfied.

The Company identified the following change to revenue recognition on adoption of the standard:

Passenger revenue – revenue associated with ancillary services that were previously recognised when paid, such as administration fees and change fees, will be deferred to align with the recognition of revenue associated with the related

travel.

The Company has applied the standard on a fully retrospective basis. On adoption of the standard, the adjustment to retained earnings as at

January 1, 2017 was a charge of €7.9 million. For the year to December 31, 2017, adjustments to reflect the new standard were: reduction to

revenue €1.5 million resulting in a reduction in operating profit of €1.5 million.

IFRS 9 ‘Financial Instruments’ is effective from January 1, 2018. The standard amends the classification and measurement models for financial assets and adds new requirements to address the impairment of financial assets. It also introduces a new hedge accounting model to

more closely align hedge accounting with risk management strategy and objectives. The standard allows the Company to hedge account for

specific risk components of its fuel purchases, such as price risk. It also requires movements in the time value of options (currently recognised in the Income statement) to be recognised in other comprehensive income as they are considered to be a cost of hedging. On

adoption of the standard, there has been limited impact to the financial statements.

The Company identified the following change to impairment of financial assets on adoption of the standard:

The Company has adopted a new impairment model for trade receivables and other financial assets, with no material adjustment to existing provisions. The Company will continue to recognise most financial assets at amortised cost.

3.22 New standard, amendment and interpretation not yet effective

The IASB and IFRIC issued the following standard, amendment and interpretation with an effective date after the year end of these financial

statements which management believe could impact the Company in future periods. Unless otherwise stated, the Company plans to adopt the following standard, interpretation and amendment on its effective date:

IFRS 16 ‘Leases’ is effective from January 1, 2019. The new standard eliminates the classification of leases as either operating leases or finance leases and instead introduces a single lessee accounting model. The Company is currently assessing the impact of the new standard.

Interest-bearing borrowings and non-current assets will increase on implementation of this standard as obligations to make future payments under leases currently classified as operating leases will be recognised on the Statement of financial position, along with the related ‘right-

of-use’ (ROU) asset. There will be a reduction in expenditure on operations and an increase in finance costs as operating lease costs are

replaced with depreciation and lease interest expense. Foreign exchange movements on lease obligations, which are predominantly denominated in US Dollars, will be remeasured at each Statement of financial position date. Details of the Company’s operating lease

commitments are disclosed in Note 31.

The Company intends to apply the standard on a modified retrospective basis. As at 1 January 2019, adjustments to reflect the new standard

are expected to be: introduction of ROU Asset €276.0 million and an increase in Lease Liability of €275.5 million with an overall impact to

reserves of €0.5 million.

The Company has not early adopted any standard, amendment or interpretation that has been issued but is not yet effective.

3.23 Changes in accounting policies and disclosures

IFRS 15 supersedes IAS 18 Revenue and related interpretations and it applies, with limited exceptions, to all revenue arising from contracts with its customers. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires that

revenue be recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring

goods or services to a customer.

IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each

step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.

The Company adopted IFRS 15 using the full retrospective method of adoption. The effect of the transition on the current period has not been disclosed as the standard provides an optional practical expedient.

The effect of adopting IFRS 15 is, as follows:

26

Impact on financial statements

The following tables summarise the impact of adopting IFRS 15 on the income statement for the 12 months to December 31, 2017 and the

Statement of financial position as at December 31, 2017 and December 31, 2016.

Income statement (extract for the 12 months ended December 31, 2017)

€ 000 As previously

reported IFRS 15

adjustments Restated

Passenger revenue

1,798,803 - 1.798,803

Cargo revenue

47,622 - 47,622

Other revenue

12,871 (1,543) 11,328

Total revenue

1,859,296 (1,543) 1,857,753

Expenditure on operations

1,590,993 - 1,590,993

Total expenditure on operations

1,590,993 - 1,590,993

Operating profit 268,303 (1,543) 266,760

Other non-operating items

1,735 - 1,735

Profit before tax

270,038 (1,543) 268,495

Tax

(34,211) 193 (34,018)

Profit after tax for the year

235,827 (1,350) 234,477

Statement of financial position (extract at December 31, 2017)

€ 000

As previously reported IFRS 15 adjustments Restated

Non-current assets

Other non-current assets

891,415 - 891,415

891,415 891,415

Current assets

Other current assets

1,199,396 - 1,199,396

Total assets

2,090,811 - 2,090,811

Total equity

528,517 (8,269) 520,248


Deferred tax liability

46,309 (1,181) 45,128

Other non-current liabilities

570,337 - 570,337

616,646 (1,181) 615,465

Current liabilities

Deferred revenue on ticket sales 203,341 9,450 212,791

Other current liabilities

742,307 - 742,307

Total liabilities

1,562,294 8,269 1,570,563

Total equity and liabilities

2,090,811 - 2,090,811

27

Statement of financial position (extract at December 31, 2016)

€ 000

As previously

reported

IFRS 15

adjustments Restated

Non-current assets

Other non-current assets

865,033 - 865,033

865,033 - 865,033

Current assets

Other current assets

1,015,949 - 1,015,949

Total assets

1,880,982 - 1,880,982

Total equity

504,475 (6,919) 497,556


Deferred tax liability

36,657 (988) 35,669

Other non-current liabilities

494,790 - 494,790

531,447 (988) 530,459

Current liabilities

Deferred revenue on ticket sales

198,158 7,907 206,065

Other current liabilities

646,902 - 646,902

845,060 7,907 852,967

Total liabilities

1,376,507 6,919 1,383,426

Total equity and liabilities

1,880,982 - 1,880,982

The Company has not adopted any other standards, amendments or interpretations in the 12 months to December 31, 2018 that have had a

significant change to its financial performance or position.

4 Critical accounting estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of

policies and reported amounts of assets and liabilities, income and expenses. These estimates and associated assumptions are based on

historical experience and various other factors believed to be reasonable under the circumstances. Actual results in the future may differ from estimates upon which financial information has been prepared. These underlying assumptions are reviewed on an ongoing basis.

Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in

the period of the revision and future periods if these are also affected. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as follows.

(a) Provisions The Company makes provisions for legal and constructive obligations which are outstanding at the reporting date. These provisions are

made based on historical or other relevant information, adjusted for recent trends where appropriate. However, provisions represent

estimates of the financial costs of events that may not occur for some years. The basis for these estimates are reviewed and updated at least annually and where information becomes available that may give rise to a material change. Measurement uncertainty associated with end of

lease aircraft maintenance provisions also arises from the timing and nature of overhaul activity required, lease return dates and conditions,

and likely utilisation of the aircraft. As a result of this and the level of uncertainty attaching to the final outcomes, the actual results may differ significantly from those estimates. Refer to Note 25 for further details.

(b) Impairment of non-financial assets Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate

that the carrying amount may not be recoverable. In addition, indefinite lived assets are also reviewed for impairment annually at each reporting date. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The

recoverable amount is the higher of an asset’s fair value less cost to sell and value in use. For the purpose of assessing impairment, assets

are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As this assessment involves long term projections which may not be realised, this is an area of judgement for management.

(c) Fair value of derivatives and other financial instruments The fair value of financial instruments that are not traded in active markets (for example, “over the counter” derivatives) is determined using

valuation techniques. The Company exercises judgement in selecting valuation methods and makes assumptions that are mainly based on

observable market data and conditions existing at each reporting date. The specific valuation techniques used to value financial instruments are set out in Note 17. Further judgement is exercised by management in considering the probability of occurrence of underlying hedge

transactions, in particular the likelihood and timing of future fuel, US dollar and aircraft purchases.

(d) Estimation of residual values of aircraft

The Company has determined the residual values of its aircraft as being 7% of original cost for short haul aircraft and 10% of original cost

for long haul aircraft. The Company periodically examines its estimate of residual values in light of results of actual aircraft disposals and changing market conditions.

28

(e) Post-employment benefits – Irish Airlines (General Employees) Superannuation Scheme and Irish Airlines (Pilots’) Superannuation Scheme (collectively the “Irish pension schemes”)

As the provisions of the trust deeds governing these schemes are such that no changes to the contribution rates are possible without the prior

consent of the Company, the Directors have concluded that it has no obligation, legal or constructive, to increase its contributions beyond those levels. As such, these schemes have been accounted for as defined contribution schemes under the provisions of IAS 19 Employee

Benefits (Revised) (“IAS 19R”), and, as a result, any surplus or deficit in the schemes is not recognised in the Statement of financial position

of Aer Lingus Limited.

If any legal or constructive obligation to vary the Company’s contributions based on the funding status of the schemes were to arise, IAS

19R would require the Company to include any pension fund surplus or deficit on its Statement of financial position and reflect any period on period movements in their Income statement or the Statement of other comprehensive income. Refer to Note 23 for further detail.

5 Going Concern

After making enquiries, considering the net cash available at the reporting date and considering the projections in the Company’s 2019 budget, the Directors consider that the Company has adequate resources to continue operating for the foreseeable future. For this reason they

have continued to adopt the going concern basis in preparing the financial statements.

6 Operating profit

Operating profit is stated after charging:

2018 2017

€'000 €'000

Depreciation on property, plant and equipment (Note 11)

- owned 40,948 40,537

- held under finance leases 29,764 26,788

Amortisation of intangible assets (Note 12) 12,041 9,643

Operating lease rentals payable

- aircraft 103,352 96,946

- property 8,191 8,287

Auditor's remuneration

- audit fee of the entity financial statements 340 340

- auditor’s fee for other assurance services 108 109

- auditor’s fee for non-assurance services 153 -

29

7 Finance income and expense

2018 2017

€'000 €'000

(a) Finance costs

Bank borrowings and interest cost on pensions escrow (272) (268)

Finance leases (8,832) (9,577)

Provisions unwinding of discount (32) (37)

Other interest costs (63) (150)

(9,199) (10,032)

(b) Finance income

Interest receivable 5,259 3,354

Other finance income 501 661

Interest on interest-bearing deposits 5,760 4,015

(c) Net financing charge relating to pensions

Net financing charge relating to pensions (73) (88)

8 Staff costs and numbers

The average number of persons (Full Time Equivalents) employed by the Company in the year was 2,658 (2017: 2,662) analysed as follows:

2018 2017

Operations and administration 2,638 2,643

Sales and marketing 20 19

2,658 2,662

The associated payroll costs of these persons were as follows:

2018 2017

€'000 €'000

Wages and salaries 226,910 221,915

Social insurance costs 19,313 17,321

Pension costs 24,668 22,981

Share based payments 2,431 1,780

273,322 263,997

The Company has an agreement with a fellow subsidiary company for human resource support. The charge for these payroll services

amounted to €90.0 million for the year ended 31 December 2018 (2017: €71.0 million). The staff cost total for the year including this charge

was €363.3 million (2017: €335.0 million).

Of the total staff costs €4.0 million (2017: €2.3 million) has been capitalised as part of the cost of intangible assets, with all remaining costs treated as an expense in the Income Statement.

30

9 Directors’ remuneration

Amounts paid to all Directors of the Company, who held office during the year, were as follows:

2018 2017

€'000 €'000

Emoluments 2,795 3,049

Benefits under long-term incentive schemes 1,448 1,191

Contributions to defined contribution retirement benefit schemes 50 77

4,293 4,317

Amounts disclosed under this category include payments made to the current directors by IAG which were subsequently recharged to the

Company.

10 Taxation

The tax charge recognised in the Income statement comprises:

2018

2017

As restated

€'000 €'000

Current taxation

Current tax charge 34,928 22,942

Foreign taxes paid 29 37

34,957 22,979

Deferred tax

Origination and reversal of temporary differences 3,027 11,039

Tax charge 37,984 34,018

2018 2017

€'000 €'000

Profit on ordinary activities before tax multiplied by

standard Irish corporation tax rate of 12.5% (2017:12.5%) 37,026 33,562

Effects of:

Expenses not deductible for tax purposes / (Income not taxable) 927 (15)

Differences in tax rates 13 6

Other adjusting items 18 465

Tax charge 37,984 34,018

31

11 Property, plant and equipment

Fleet Property Equipment Total

€'000 €'000 €'000 €'000

Cost

1 January 2017 1,234,016 48,878 86,125 1,369,019

Additions 132,835 1,019 1,916 135,770

Disposals (4,296) (1,938) (752) (6,986)

31 December 2017 1,362,555 47,959 87,289 1,497,803

Accumulated depreciation

1 January 2017 682,872 38,338 76,742 797,952

Depreciation charge for the period 59,929 3,997 3,399 67,325

Disposals (4,296) (1,938) (697) (6,931)

31 December 2017 738,505 40,397 79,444 858,346

Fleet Property Equipment Total

€'000 €'000 €'000 €'000

Cost

1 January 2018 1,362,555 47,959 87,289 1,497,803

Additions 42,345 2,244 5,258 49,847

Transfers to assets held for sale - - (162) (162)

Disposals (670) (8,200) (13,077) (21,947)

31 December 2018 1,404,230 42,003 79,308 1,525,541

Accumulated depreciation

1 January 2018 738,505 40,397 79,444 858,346

Depreciation charge for the period 65,884 2,752 2,076 70,712

Transfers to assets held for sale - - (122) (122)

Disposals (625) (8,182) (13,028) (21,835)

31 December 2018 803,764 34,967 68,370 907,101

Net book value

31 December 2018 600,466 7,036 10,938 618,440

31 December 2017 624,050 7,562 7,845 639,457

Leased assets included above (net book

value)

31 December 2018 346,007 - - 346,007

31 December 2017 375,446 - - 375,446

Finance lease obligations are secured on flight equipment with a net book value of €346.0 million (2017: €375.4 million). Depreciation of

€29.8 million (2017: €26.8 million) was charged on these assets during the year.

At 1 January 2017 fleet assets included €56.8 million of progress payments on future aircraft deliveries. At 31 December 2017, fleet assets

included €23.5 million of progress payments on future aircraft deliveries, following a net movement of €33.3m during the year. During 2018, a further €24.3 million of progress payments were made. At 31 December 2018, fleet assets include € 47.8 million of progress

payments on future aircraft deliveries.

Impairment tests for items of property, plant and equipment are performed on a cash generating unit basis when impairment triggers arise.

No impairment charges of long-lived assets arose during 2018 or 2017.

32

12 Intangible assets

Computer

software Licence1 Landing Rights

Emissions

allowances Total

€'000 €'000 €'000 €'000 €'000

Cost

At 1 January 2017 99,544 3,000 4,423 2,606 109,573

Additions 12,741 - - - 12,741

Disposal (4,749) - - (1,383) (6,132)

At 31 December 2017 107,536 3,000 4,423 1,223 116,182

Aggregate amortisation

At 1 January 2017 73,295 1,665 1,475 - 76,435

Charge for the year 9,308 333 - - 9,643

Impairment - - - - -

Disposal (4,749) - - - (4,749)

At 31 December 2017 77,854 1,998 1,475 - 81,329

Cost

At 1 January 2018 107,536 3,000 4,423 1,223 116,182

Additions 25,124 - - 8,344 33,468

Transfers to assets held for sale (515) - - - (515)

Disposal (3,772) - - (1,450) (5,222)

At 31 December 2018 128,373 3,000 4,423 8,117 143,913

Aggregate amortisation

At 1 January 2018 77,856 1,998 1,475 - 81,329

Charge for the year 11,708 333 - - 12,041

Transfers to assets held for sale (228) - - - (228)

Disposal (3,743) - - - (3,743)

At 31 December 2018 85,593 2,331 1,475 - 89,399

Net book value

31 December 2018 42,780 669 2,948 8,117 54,514

31 December 2017 29,682 1,000 2,948 1,223 34,853 1Licence to occupy certain DAA owned property

33

13 Investments in subsidary undertakings

2018 2017

€’000 €'000

Investment in Subsidiaries 113,708 113,708

Details of the principal subsidiary undertakings are included in Note 14. The fair value of the investments in subsidiary undertakings is

considered not to be less than their carrying value.

14 Principal subsidiary undertakings

Details of the Company’s subsidiary undertakings are as follows:

Name of entity

Country of

incorporation and

place of business Registered office Nature of business

Proportion of

ordinary share

capital held %

Dirnan Insurance Company Limited Bermuda Canon’s Court

22 Victoria Street

Hamilton, Bermuda, HM 12

Dormant 100

Aer Lingus Beachey Limited Isle of Man Penthouse Suite,

Analyst House,

Peel Road, Douglas,

Isle of Man, IM1 4LZ

Dormant 100

Aer Lingus Northern Ireland Limited UK Aer Lingus Base Offices,

Belfast City Airport,

Sydenham Bypass, Belfast,

Co. Antrim, BT3 9JH

Dormant 100

Shinagh Limited Republic of Ireland Dublin Airport,

Ireland

Dormant 100

Santain Developments Limited Republic of Ireland Dublin Airport, Ireland

Dormant 100

15 Assets classified as held for sale

2018 2017

€'000 €'000

At 31 December 327 -

At 31 December 2018, the Company classified IT hardware assets as held for sale having met the conditions of IFRS 5 Non-current

Assets Held-for-sale and discontinued operations.

34

16 Loans and receivables

2018 2017

€’000 €'000

At 31 December 200,195 195

During the year, the Company provided a €200m unsecured, fixed interest-bearing loan at prevailing market rates at the date of transaction

to IAG that is repayable within five years. There were no other loans to fellow group companies at 31 December 2018 and 2017.

There were no impairment provisions recognised against loans and receivables in the current or prior year.

17 Derivative financial instruments

Financial risk management objectives and policies

17.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, commodity price and interest rate risk), credit risk and liquidity risk. The Company’s risk management programme focuses on the unpredictability of financial markets and

seeks to minimise potential adverse effects on the Company’s financial performance. The Company uses derivative financial instruments to

hedge certain risk exposures.

Financial risk management is carried out by a central treasury department (Company treasury) under policies approved by the Board of

Directors. Company treasury identifies, evaluates and hedges financial risks in close co-operation with the Company’s business areas. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange

risk, interest rate risk, credit risk, commodity price risk, use of derivative financial instruments and non-derivative financial instruments, and

investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk

The main currency exposures result from a structural trading surplus in US Dollars and in Sterling. A large proportion of the Company

treasury function’s work in relation to foreign exchange rate risk relates to the management of the Company’s cashflow exposures.

Significant currency exposures are managed for the current and future financial years on a systematic, amortising basis within pre-set bands. The US Dollar surplus arises because the US Dollar sales exceed US Dollar costs. The Sterling surplus also arises because Sterling sales

exceed Sterling costs. Profits are reduced by a weaker US Dollar and/or a weaker Sterling.

Additionally, significant currency exposure results from the capital commitments relating to the purchase of aircraft which are priced in US

Dollars. Acquisition costs are increased by a stronger US Dollar.

The Company treasury function manages both cashflow exposures and financial position exposures arising from currency risk. The

products used by the Company treasury function in managing currency risk are predominantly forward foreign exchange contracts.

Based on the trading surplus in US Dollar for the year ended 31 December 2018, a 5% weakening of the EUR to US Dollar exchange rate

over the year-end rate would result in an increase in profit of €5.3 million for the year (2017: a 5% weakening of the EUR to US Dollar

exchange rate would have resulted in a reduction in profit of €4.1 million for the year). Based on the trading surplus in Sterling for the year ended 31 December 2018, a 5% strengthening of the EUR to Sterling exchange rate over the year end rate would result in an reduction in

profit of €4.8 million for the year (2017: reduction in profit of 5.7million). The impact of such currency movements after taking account of

hedging would have been negligible for both 2018 and 2017.

(ii) Interest rate risk

The Company is exposed to interest rate risk associated with its long term funding requirements and its programme of surplus funds

investment. Higher interest rates increase the costs of gross debt and lower interest rates reduce the returns from cash investments.

Overall the Company is in a net cash position. Interest rate exposure on foreign currency debt is managed by placing matching investments,

which serve as natural hedges in relation to both interest rate and currency exposures on the debt. In addition to these investments, the Company holds further cash, predominantly in euro, and therefore the major interest rate exposure the Company has is to movements in the

euro interest rate. This exposure is actively reviewed and managed. A 1% fall in interest rates based on net surplus cash throughout 2018

would reduce profits by €6.9 million (2017: €7.9 million). Interest rate risk on borrowings is also managed through determining the right balance of fixed and floating debt within the financing

structure. To manage this, the Company enters into interest rate swaps, to exchange floating rate debt on finance lease obligations for fixed

rate debt.

35

(iii) Commodity price risk

Aviation jet fuel requirements expose the Company to the market volatility of jet fuel prices. The volatility of jet fuel prices has been

significant in recent years and can have a significant effect on profitability. The primary policy objective for the management of fuel price exposure in the Company is to reduce the volatility and increase the predictability of future fuel costs in a risk managed and cost effective

manner.

The Company treasury function manages fuel price risk within a tightly controlled framework. The Company operates a systematic fuel

hedging policy covering a rolling three year period. This hedging policy targets specific cover levels for each period on a rolling basis

ranging from 70% to 100% cover for the following month to between zero and 20% cover 36 months out. This generates average cover levels of between approximately 75% for the next 12 month period (rolling year 1) and 35% for the following 12 months (rolling year 2) and

15% for rolling year 3. Under the policy, Company treasury can request Board approval to derogate from this systematic hedging

requirement, in the event of unusual market conditions.

The products used by the Company treasury function in managing commodity price risk are predominantly jet fuel swaps. A US $10

increase in the price per tonne of jet fuel in 2018 would have increased fuel costs by approximately $6.9 million, based on usage of 694,000 metric tonnes, absent hedging (2017: increase of $6.3 million based on usage of 630,000 metric tonnes). In light of the Company’s hedging

strategy, the impact of a US$10 increase in jet fuel per tonne would have been negligible in both 2018 and 2017.

(iv) Carbon Allowances Price Risk

The Company is exposed to market volatility of the price of EU-ETS allowances in respect of the need to purchase the non-free element of annual allowances. The Company treasury function manages this risk by making purchase decisions based on market prices. The entire

non-free allowance requirement for 2018 was purchased in advance of the year end. The Company operates a systematic carbon credit

hedging policy covering a rolling three year period. This hedging policy targets specific cover levels for each period on a rolling basis.

(b) Credit risk

Credit risk arises from trade receivables due from customers, and from loans and receivables, derivative financial instruments, deposits and

cash and cash equivalents with banks and financial institutions (“financial counterparties”). The maximum exposure to credit risk is represented by the carrying amount of each financial asset.

Company policy requires financial counterparties to hold minimum credit ratings from independent rating agencies. The appropriateness of

Board approved credit limits are regularly monitored and reviewed in light of the commercial requirements of the Company.

At 31 December 2018 the Company had a total credit exposure of €737 million (2017: €1.1 billion) relating to bonds, deposits, cash and

derivatives which was spread over 32 (2017: 31) counterparties. Of this €737 million (2017: €1.1 billion) was due to mature within 12

months. The Company does not have any material credit risk arising from the ageing of trade and other receivables (see Note 19).

42.5% (2017: 38%) of the total credit exposure was held with financial institutions holding long-term credit ratings equivalent to AA2 to

AA3 (Moody’s). 54.5% (2017: 41%) of the total credit exposure was held with financial institutions holding long term-ratings equivalent to

A1 to A2. The remaining 3% (2017: 21%) was held with financial institutions with long-term credit ratings below A2.

(c) Liquidity risk

The principal policy objectives in relation to liquidity are to ensure that the Company has access at minimum cost, to sufficient liquidity to

enable it to meet its obligations as they fall due and to provide adequately for contingencies. In implementing this policy, the Company is

required to maintain, at all times, access to Board approved minimum liquidity requirements. In addition, this liquidity requirement, once drawn, must continue to be accessible for an agreed further period. Cash balances in excess of these levels are normally maintained in order

to enable the Company to take advantage of commercial opportunities and withstand business shocks.

The Company has long-term debt associated with aircraft acquisitions. All borrowing is undertaken by the Company treasury function. Company policy is to maintain, at all times, cash and/or committed facilities for substantially all of the net forecasted debt repayments for

the following 12 months.

At 31 December 2018 the Company had capital commitments of €1,297.8 million (2017: €1,102.8 million) of which €1,294.3 million (2017: €1,099.4 million) relates to aircraft and equipment. The Company currently expects to finance these commitments with a combination of

finance and operating leases.

The table below analyses the Company’s financial liabilities into relevant maturity groupings based on the remaining period at the date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows, including interest. Trade and

other payables exclude ticket sales in advance (excluding taxes and charges).

36

Less than 1 year 1-2 years 2-5 years Over 5 years Total

€'000 €'000 €'000 €'000 €'000

At 31 December 2018

Finance lease obligations 143,236 37,715 98,583 82,840 362,374

Loans from fellow group companies 416,295 - - 133,963 550,258

Trade and other payables 163,450 1,603 - - 165,053

Less than 1 year 1-2 years 2-5 years Over 5 years Total

€'000 €'000 €'000 €'000 €'000

At 31 December 2017

Finance lease obligations 93,350 136,443 120,017 95,736 445,546

Loans from fellow group companies 414,966 - - 133,971 548,937

Trade and other payables 174,601 2,132 - - 176,732

The table below analyses the Company’s derivative financial instruments, which will be settled on a gross basis with regard to forward

foreign currency contracts and on a net basis with regard to forward fuel contracts, into relevant maturity groupings based on the remaining

period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than 1 year 1-2 years 2-5 years Total

€'000 €'000 €'000 €'000

At 31 December 2018

Forward foreign currency contracts

Outflow 241,751 149,256 75,134

466,141

Inflow 241,199 144,821 70,153

456,173

Forward fuel price contracts

Net outflow 41,802 17,865 7,365 67,032

Less than 1 year 1-2 years 2-5 years Total

€'000 €'000 €'000 €'000

At 31 December 2017

Forward foreign currency contracts

Outflow 195,443 81,759 29,474 306,676

Inflow 190,820 80,742 29,322 300,885

Forward fuel price contracts

Net outflow 34,978 9,485 909 45,373

17.2 Capital Risk Management

The Company’s objectives when managing capital (comprising total equity and debt) are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain a capital structure which

reduces the cost of capital as far as practical.

The Board regularly reviews the Company statement of financial position with a view to improving flexibility for the future.

In order to maintain or adjust the capital structure, the Company may issue new shares or sell assets to reduce debt.

17.3 Fair value estimation

The following table 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 or liabilities (Level 1);

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or

indirectly (that is, derived from prices) (Level 2); and

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

37

The following table presents the Company’s net assets and liabilities that are measured at fair value at 31 December 2018.

Level 1 Level 2 Level 3 Total

Assets €'000 €'000 €'000 €'000

Derivative financial instruments - 14,621 - 14,621

Liabilities


The following table presents the Company's net assets and liabilities that are measured at fair value at 31 December 2017.

Level 1 Level 2 Level 3 Total

Assets €'000 €'000 €'000 €'000


Liabilities


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.

17.4 Master netting arrangements

There are no financial assets and financial liabilities netted and offset against each other on the Statement of financial position at the reporting dates. However, certain financial assets and financial liabilities are subject to enforceable master netting arrangements which

could create a potential right of offset within the scope of the amendment to IFRS 7 "Offsetting Financial Assets and Financial Liabilities".

These arrangements are contained within ISDA (International Swaps and Derivatives Association) Master Agreements ("ISDA's") and relate to derivative financial instruments only.

Each party to the master netting arrangements has a right of offset between financial assets and financial liabilities where there is an early termination event such as a default or change of ownership of the counterparty. Such events of default include failure to perform obligations

or to make prompt payment when due. The right of offset is only enforceable in those situations and as such does not meet the criteria for

offset in the Statement of financial position, nor is there any intention by the Company or its counterparties to settle on a net basis or to realise the assets and settle the liabilities simultaneously.

The carrying value of derivative financial instruments in the Statement of financial position would potentially be reduced by approximately €5.1 million (2017: €4.1 million) if all master netting arrangements were enforced (as reflected in the following tables):

38

Derivative Financial Assets

As at 31 December 2018 Related Amounts Not Offset

Gross amounts

of recognised

Financial

Assets

Gross amounts

of recognised

financial

liabilities set

off in the

balance sheet

Net amounts of

financial assets

presented in

balance sheet

Financial

Instruments

Cash

Collateral

Received

Net Amount

€'000's €'000's €'000's €'000's €'000's €'000's

Derivative Financial Assets 14,621 - 14,621 (5,067) - 9,554


Gross amounts

of recognised

Financial

Assets

Gross amounts

of recognised

financial

liabilities set

off in the

balance sheet

Net amounts of

financial assets

presented in

balance sheet

Financial

Instruments

Cash

Collateral

Received

Net Amount

€'000's €'000's €'000's €'000's €'000's €'000's

Derivative Financial Assets 57,598 - 57,598 (4,050) - 53,548

Derivative Financial Liabilities


Gross amounts

of recognised

financial

liabilities

Gross amounts

of recognised

financial assets

set off in the

balance sheet

Net amounts of

financial

liabilities

presented in

the balance

sheet

Financial

instruments

Cash

Collateral

Pledged

Net Amount

€'000's €'000's €'000's €'000's €'000's €'000's

Derivative Financial Liabilities 78,073 - 78,073 (5,067) - 73,006


Gross amounts

of recognised

financial

liabilities

Gross amounts

of recognised

financial assets

set off in the

balance sheet

Net amounts of

financial

liabilities

presented in

the balance

sheet

Financial

instruments

Cash

Collateral

Pledged

Net Amount

€'000's €'000's €'000's €'000's €'000's €'000's

Derivative Financial Liabilities 4,378 - 4,378 (4,050) - 328

17.5 Summary of derivatives by instrument

2018 2018 2017 2017

€'000 €'000 €'000 €'000

Assets Liabilities Assets Liabilities

Forward foreign exchange contracts 11,587 (8,442) 12,816 (4,378)

Forward fuel price contracts 3,034 (69,631) 44,782 -

Total 14,621 (78,073) 57,598 (4,378)

Non-current portion:

Forward foreign exchange contracts 4,775 (4,422) 4,505 (662)

Forward fuel price contracts 420 (24,474) 8,998 -

Total non-current portion 5,195 (28,896) 13,503 (662)

Current portion:

Forward foreign exchange contracts 6,812 (4,020) 8,311 (3,716)

Forward fuel price contracts 2,614 (45,157) 35,784 -

Total current portion: 9,426 (49,177) 44,095 (3,716)

39

Derivative financial instruments represent the fair value of open foreign exchange forward contracts and fuel price swaps to which the

Company is a party at the reporting date and are within level 2 of the fair value hierarchy. 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 positions are recognised in reserves until they are realised. The position in reserves is

recognised net of deferred tax.

The Statement of other comprehensive income shows fair value losses to 31 December 2018 of €87.0 million (2017: fair value gains of

€43.8 million). These represent the mark to market losses on the Company’s portfolio of both fuel and foreign exchange hedges at year end.

Foreign exchange contracts

The notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2018 were €453.0 million (2017:

€308.7 million).

Aircraft fuel price contracts

The Company enters into derivative contracts to fix the price of a proportion of its forecast aircraft fuel purchases. The notional principal amounts of the outstanding contracts at 31 December 2018 were €559.4 million (2017: €269.2 million).

The maximum exposure to credit risk at the reporting date is the value of the derivative assets in the Statement of financial position.

A credit relating to ineffectiveness of fuel hedges of €0.6 million is reflected in the Income statement in 2018 (2017: credit of €0.7 million).

Cash flows in respect of derivative financial instruments are expected to occur as they mature at various points over the next 34 months for

foreign exchange positions, and over the next 36 months for fuel positions. The fair value of the instruments at settlement will impact the

Income statement as the hedged transaction occurs.

18 Inventory

Inventory primarily comprises maintenance consumables and aircraft spare parts.

2018 2017

€'000 €'000

Inventory 8,420 6,675

There were no material write-downs of inventory during the current or prior year. €11.1 million (2017: €11.0 million) of inventories were expensed to the P&L in the period.

40

19 Trade receivables and other assets

2018 2017

€'000 €'000

Amounts falling due within one year

Trade receivables 29,955 24,769

Provision for doubtful receivables (716) (1,337)

Net trade receivables 29,239 23,432

Prepayments and accrued income 51,590 74,870

Current tax asset 3,171 -

Other current assets 24,934 27,738

108,934 126,040

Amounts falling due after one year

Prepayments and accrued income 19,879 23,650

Non-current deposits - 65,664

19,879 89,314

Movements in the provision for doubtful receivables were as follows:

2018 2017

€'000 €'000

At beginning of year 1,337 1,146

Increase during the year 913 1,555

Write-off during the year (1,534) (1,364)

716 1,337

The creation and release of provisions for impairment of trade receivables have been included in "Handling, catering and other operating

costs" within the Income statement. Amounts receivable are charged to the provision account when there is no expectation of recovering the amounts outstanding.

2018 2017

€'000 €'000

Up to 1 month past due 13,591 13,172

Over 1 month past due 769 668

14,360 13,840

41

20 Gross Cash

Gross cash comprises the following:

2018 2017

€'000 €'000

Non-current

Loans and receivables 200,195 195

Non-current interest-bearing deposits - 65,664

200,195 65,859

Current

Current interest-bearing deposits 671,388 805,880

Cash and cash equivalents 217,110 216,706

888,498 1,022,586

Total gross cash 1,088,693 1,088,445

Included within current interest-bearing deposits is a restricted deposit of €42.2 million (2017: €43.4 million) held in escrow and relating to

the once-off IASS contribution.

The carrying amount of the Company’s cash, cash equivalents and other deposits are denominated in the following currencies:

2018 2017

€'000 €'000

Euro 758,382 909,390

Sterling 3,504 2,064

US dollar 117,615 169,727

Other 9,192 7,264

1,088,693 1,088,445

The Company holds deposits in order to meet certain finance lease obligations, which are denominated in the same currency. The deposits,

together with the interest receivable thereon, will be sufficient to meet in full the lease obligations and related lease interest over the period

of the leases.

Current deposits have maturity terms of between three and twelve months at year end. Given that the maturity of these investments falls

outside the three month time frame for classification as cash and cash equivalents under IAS 7, Statement of Cash Flows, the related balances have been treated as “deposits”. The effective interest rate on financial assets classified as current deposits as at 31 December 2018

was negative 0.17% (2017: negative 0.2%). These deposits have a weighted average maturity of 132 days (2017: 156 days) as at 31

December 2018. The carrying value of the Company’s deposits approximates to their fair value at 31 December 2018.

Non-current deposits have a maturity date between over 53 months to 54 months and an interest rate between 2.32% -2.41 %

42

21 Interest-bearing long-term borrowings

2018 2017

€'000 €'000

Repayable - within one year 135,725 82,249

- from one to two years 32,378 129,175

- from two to five years 88,550 106,630

- after five years 81,148 91,904

337,801 409,958

Less current portion (135,725) (82,249)

Non-current portion 202,076 327,709

Fair value of interest-bearing long term borrowings are as follows:

Carrying amounts Carrying amounts Fair value Fair value

2018 2017 2018 2017

€'000 €'000 €'000 €'000

Finance Lease Obligations 337,801 409,958 337,801 410,232

The fair values are based on cash flows discounted using a rate on prevailing forward market rates. In 2018, these rates ranged from negative

0.404% to positive 2.81% and are within level 2 of the fair value hierarchy.

The carrying amounts of the current portion of long-term interest-bearing borrowings approximate their fair values.

The carrying amounts of the Company’s interest-bearing borrowings are denominated in the following currencies:

2018 2017

€'000 €'000

US dollar 105,562 152,139

Euro 232,239 257,819

Total 337,801 409,958

The effective interest rates at the reporting date were as follows:

2018 2017

€ $ € $

Finance lease obligations 1.63% 3.33% 1.69% 2.89%

Finance lease obligation - minimum lease payments

2018 2017

€'000 €'000

No later than one year 143,236 93,350

Later than one year but no later than five years 136,298 256,460 Later than five years 82,840 95,736

362,374 445,546

Future finance charges on finance leases (24,573) (35,588)

Capital value of finance lease liabilities 337,801 409,958

43

22 Trade and other payables

2018

2017

As restated

€'000 €'000

Trade creditors 68,889 50,646

Other creditors 22,376 17,647

Other taxation and social insurance 9,072 31,366

Accruals 58,737 73,722

Deferred income 2,347 3,351

Deferred revenue on ticket sales 221,096 212,791

Loans from fellow group companies 553,890 548,937

936,407 938,460

Shown as: 2018 2017

€'000 €'000

Non-current liability 135,565 136,104

Current liability 800,842 802,356

936,407 938,460

Loans from fellow group companies is split between non-current and current as follows:

2018 2017

€'000 €'000

Loans from fellow Group companies (non-current) 133,963 133,971

Loans from fellow Group companies (current) 419,927 414,966 553,890 548,937

The carrying amounts and fair value of borrowings are as follows:

Carrying amounts Carrying amounts Fair value Fair value

2018 2017 2018 2017

€'000 €'000 €'000 €'000

Loans from fellow Group companies 553,890 548,937 553,890 548,937

Amounts owed to fellow group and subsidiary undertakings are unsecured and interest free, and amounts shown as current are repayable on

demand. The carrying amount of loans from fellow group companies, which are denominated in euro, approximates their fair value.

The Company had no undrawn borrowing facilities at 31 December 2018 or 31 December 2017.

44

23 Defined contribution pension schemes

In 2018, Aer Lingus participated in a number of pension schemes including the Aer Lingus Defined Contribution Pension Scheme, for

general employees, and the Irish Airlines (Pilots) Superannuation Scheme (the “Pilots Scheme”), for its pilots. The Company has also

historically been involved in the Irish Airlines (General Employees) Superannuation Scheme (the “IASS”), a multi-employer scheme.

Aer Lingus Limited is the sponsoring company for Aer Lingus Group’s participation in these pension schemes. The Company’s

contributions, including those in respect of Aer Lingus Ireland Limited, to defined contribution schemes are set out in the table below. 2018 2017

€'000 €'000

Irish Airlines (Pilots) Superannuation Scheme 12,160 13,843

Other defined contribution schemes 15,077 11,227

Total 27,237 25,070

Aer Lingus Defined Contribution Pension Scheme and IASS

Aer Lingus Limited began contributing in 2015 to the Aer Lingus Defined Contribution Pension Scheme on behalf of current employees who were previously members of the IASS. This arrangement was part of a funding solution for the IASS. This solution comprised a

number of elements including a once-off payment by Aer Lingus, the cessation of benefit accrual and contributions with regard to the IASS,

the revision of the existing defined contribution scheme to accommodate employees who were previously IASS members and the establishment of a deferred defined contribution pension scheme in respect of deferred Aer Lingus IASS members.

It further provided that the once-off payment would be transferred to an escrow account and would only be released into individual accounts

in the Aer Lingus Defined Contribution Pension Scheme and the deferred defined contribution pension scheme on receipt of correctly

executed waivers. These waive any and all rights to legal action against Aer Lingus Limited and the IASS Trustee in relation to the IASS.

At the end of December 2018, 69.6% of these waivers had been executed (active members 82.9%, deferred members 58.8%) and €148.5 million had been paid from the pension escrow account. Therefore, at that date, €42.2 million of the €190.7 million remained in escrow to be

administered; €26.9 million of which relates to active members with the remaining €15.3 million relating to deferred members.

Proceedings have been issued by a deferred IASS member against a number of parties involved in the IASS funding solution, including Aer

Lingus Limited. These proceedings will be strenuously defended. If, contrary to the firm legal advice that Aer Lingus Limited has received (that such proceedings were unlikely to succeed), a Court were to find against Aer Lingus Limited in such litigation, loss could arise. It is

not practicable to estimate the financial exposure, if any, of Aer Lingus Limited, should any such proceedings succeed.

Irish Airlines (Pilots) Superannuation Scheme

At 31 December 2018 (the most recent date for which Pilots Scheme membership data is available), the Pilots Scheme had 1,130 members,

comprising 662 active members, 96 deferred members and 372 pensioners.

Following discussions between Aer Lingus Limited, the Trustee of the Pilots Scheme and IALPA, a funding proposal was submitted to the Pensions Authority, and approved by it on 3 December 2014. This proposal, which is subject to review annually in March, does not involve

any capital contribution by Aer Lingus Limited either within the Pilots Scheme or outside of the Pilots Scheme. Based on market conditions

at 31 March 2018, the Scheme Actuary is satisfied that this funding proposal is on track and can reasonably be expected to satisfy the funding standard, and funding standard reserve, by 31 December 2023.

Aer Lingus’ consistent position is that its liability to contribute to the Pilots Scheme is fixed at its current contribution rate and, accordingly

that it has neither a constructive nor a legal obligation to increase its rate of contribution to the Pilots Scheme, even if the scheme is found to

have insufficient funds to pay all employees expected benefits relating to their current and past employment service.

45

24 Employment benefit obligations

The Company operated two defined benefit schemes, one of which is funded and one of which is unfunded, during 2018. The North

America Pension scheme was closed in February 2017. The following is a summary of the Company's net defined benefit obligations/(assets) for each of the schemes, split between funded and unfunded. Background to each scheme is given below.

Summary of net defined benefit obligations/(assets): 2018 2017

€'000 €'000

Funded

Other (406) (385)

Net defined benefit asset for funded schemes (406) (385)

Unfunded

North America Post Retirement Medical Benefits 1,860 2,299

Net defined benefit obligation for unfunded schemes 1,860 2,299

Net defined benefit obligation in total 1,454 1,914

2018 2017

Shown as: €'000 €'000

Employee benefit assets 406 385

Employee benefit (obligations) (1,860) (2,299)

Net defined benefit asset/(obligation) in total (1,454) (1,914)

The following is a summary of the Company's total net employee benefit obligation, and the related funding status, analysed on a total basis:

2018 2017

€'000 €'000

Present value of funded obligations (1,623) (1,827)

Fair value of plan assets 2,029 2,212

Asset (deficit) in funded plans 406 385

Present value of wholly unfunded obligations (1,860) (2,299)

Net defined benefit obligation in total (1,454) (1,914)

The net (credits)/charges to the Income statement in respect of these obligations are as follows: The net (credits)/charges to the Income statement in respect of these obligations are as follows:

2018 2017

€'000 €'000

Funded (a) (7) (60)

Unfunded (b) 31 (107)

24 (167)

Actuarial (gains)/losses (gross of deferred tax) recognised in the Statement of other comprehensive income during the year: Actuarial (gains)/losses (gross of deferred tax) recognised in the Statement of other comprehensive income during the year:

2018 2017

€'000 €'000

Funded (a) 74 32

Unfunded (b) 360 102

434 134

46

The dates of the most recent actuarial valuation in respect of the various schemes are as follows:

Valuation date

Funded

Other 31 December 2018

Unfunded

North American Post Retirement Medical Benefits 31 December 2018

Valuations are not available for public inspection; however they are available to the members of the above schemes.

The North American Post Retirement Medical Benefits scheme applies the regulations of The Employee Retirement Income Security Act of

1974 and The Internal Revenue Code. The Employee Retirement Income Security Act of 1974 is a federal law that sets minimum standards

for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. The Internal Revenue Code, as set forth by the Internal Revenue Service, also provides regulations and guidance for the administration of pension and

medical schemes. The pension schemes set up under trust and operated by Aer Lingus in Ireland are exempt approved schemes under the

Taxes Consolidation Act 1997 and are regulated by the Pensions Authority under the Pensions Act 1990 (Amended).

(a) Funded

The Company operated a defined benefit scheme for qualifying employees and former employees of its operation in North America.

A decision had been made previously by the Company to close the scheme and settle all of the liabilities arising under the scheme by

purchasing annuities. Following an annuity placement exercise with effect from February 2017, the scheme has been terminated and the liabilities for all members have been placed with an insurance company in the form of individual annuities in each member’s name.

The Company operates a defined benefit scheme in respect of two retired Irish former executives of the Company and their spouses.

The risks of the scheme relate primarily to demographic assumptions around mortality and to future asset performance. Future financial

statement liabilities and expense will also be affected by future changes in the rate used to discount the liabilities. The Company seeks to match the assets it holds in respect of funded schemes to the liabilities of the plans, in terms of currency and maturity, and also seeks to

balance risk and return in making asset investment decisions which match investment yield to expected cash outflows. The Company has

not changed the process used to manage its risks from previous periods.

As at 31 December 2018 there was an employee benefit asset of €406,000 (2017: employee benefit liability: €385,000). Employer

contributions of €nil (2017: €nil) were paid into the remaining funded scheme which meant there was a net asset surplus for the years ending 31 December 2017 and 31 December 2018.

The rules of the scheme allow for any surplus to be returned to the employer on the death of the last pensioner. Therefore, the asset is not expected to be returned to the Company until the last of the current pensioners has died.

The movement in the defined benefit obligation in respect of funded arrangements during the year is as follows:

2018 2017

€'000 €'000

At 1 January 1,827 10,170

Interest cost 28 28

Remeasurement - effects of changes in demographic assumptions (96) (18)

Remeasurement - effects of changes in financial assumptions (19) -

Remeasurement - effects of experience adjustments (21) (26)

Settlement of North America Pension Scheme - (7,650)

Benefits paid (96) (98)

Retranslation - (579)

At 31 December 1,623 1,827

The movement in the fair value of related plan assets during the year is as follows: 2018 2017

€'000 €'000

At 1 January 2,212 9,743

Interest income 35 30

Remeasurements - effect of experience adjustments (122) (12)

Settlement of North America Pension Scheme - (6,928)



At 31 December 2,029 2,212

47

The movement in the net defined pension obligation is as follows:

2018 2017

€'000 €'000

At 1 January (385) 427

Interest cost (7) (2)

Remeasurements (14) (32)

Loss on settlement of North America Pension Scheme - (722)


At 31 December (406) (385)

The amounts recognised in the Income statement are as follows:

2018 2017

€'000 €'000

Interest cost - recognised in finance expense 28 28

Interest income (35) (30)

Retranslation - recognised in other gains/losses - (471)

Total recognised in the Income statement (7) (473)

The actual return on plan assets was €125,000 (2017: €45,000)

Key Assumptions

2018 2017

Discount rate - Other 1.60% 1.60%

Inflation rate 1.75% 1.75%

Future pension increases - Other 1.75% 1.75%

Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience.

These assumptions translate into the following average life expectancy in years for a pensioner retiring at age 65:

2018 2017

Retiring at the end of the reporting period:

-Male (Other) 23.5 24.8

-Female (Other) 24.9 26.2

48

Sensitivities

The sensitivity of the post employment benefit liabilities to changes in the weighted principal assumptions is:

Change in assumption Impact on overall liability

Discount rate Other Increase/decrease by 0.25% Decrease by 2.46%/increase by 1.08%

Inflation rate Other Increase/decrease by 0.25% Increase by 3.64%/decrease by 3.52%

The above sensitivity analyses are based on a change in the assumption noted while holding all other assumptions constant. In practice, this is

unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the post employment liabilities

the same method has been applied as when calculating the liability recognised within the Statement of financial position. Changes in assumptions could lead to an increase in actuarial deficits which would affect future cash flows of the business due to increased contributions.

Plan assets are comprised as follows:

2018 2018 2017 2017

€'000 % of plan assets €'000 % of plan assets

Quoted

Debt instruments 1,315 65% 1,427 65%

Other 714 35% 785 35%

Total 2,029 100% 2,212 100%

Investments are well diversified, such that the failure of any single investment would not have a material impact on the overall level of

scheme assets. The largest proportion of assets is invested in bonds, although the schemes also invest in cash.

(b) Unfunded

The Company operates a post employment medical benefit scheme for certain former employees of the operation in North America. The scheme has 56 members (2017: 51). Both participation in the plan and accrual of benefits are frozen.

The Company 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. These arrangements were to provide an income equating to a pension until

members reach the age of 65 at which point benefits cease.

The risks of these schemes relate primarily to future medical cost inflation and to financial assumptions including changes to discount rates.

The Company has not changed the process used to manage its risks from previous periods.

The amounts recognised in the Statement of financial position are as follows:

2018 2017

€'000 €'000

Present value of unfunded obligations, being scheme deficits and liability in the statement

of financial position 1,860 2,299

49

The movement in the defined benefit obligation in respect of unfunded arrangements during the year is as follows:

2018 2017

€'000 €'000

At 1 January 2,229 2,579

Current service cost 38 38

Interest cost 68 77

Remeasurements - effect of changes in demographic assumptions (3) (2)

Remeasurements - effect of changes in financial assumptions (114) 69

Remeasurements - effect of experience adjustments (243) (165)


Retranslation (75) (223)

At 31 December 1,860 2,299

The amounts recognised in the Income statement are as follows:

2018 2017

€'000 €'000

Current service costs - recognised in staff costs 38 38

Interest cost - recognised in finance expense 68 77

Retranslation recognised in Net currency retranslation charges (75) (223)

Total recognised in the Income statement 31 (108)

Key Assumptions

The principal actuarial assumptions relating to unfunded schemes are as follows:

2018 2017

Discount rate - North America Post Retirement Medical Benefits 3.87% 3.20%

Immediate medical cost rate 5.81% 5.96%

Sensitivities

The sensitivity of the post employment benefit liabilities to changes in the weighted principal assumptions is:

Change in assumption Impact on overall liability

Medical cost trend rate

North American Medical

Scheme Increase/decrease by 0.50%

Increase by 5.10%/decrease by

4.79%

Discount rate

North American Medical

Scheme Increase/decrease by 0.25%

Decrease by 2.36%/increase by

2.44%

The above sensitivity analyses are based on a change in the assumption noted while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the post

employment liabilities the same method has been applied as when calculating the liability recognised within the Statement of financial

position. Changes in assumptions could lead to an increase in actuarial deficits which would affect future cash flows of the business due to increased contributions.

Due to the unfunded nature of these arrangements, no employer contributions were paid during the year ended 31 December 2018.

50

Maturity analysis

The expected maturities of the undiscounted funded and unfunded schemes over the next 10 years are as follows:

Less than a year

Between 1-2

years

Between 2-5

years

Between 5-10

years Total

At 31 December 2018 €'000 €'000 €'000 €'000 €'000

Funded 99 207 326 440 1,072

Unfunded 99 125 403 864 1,491

Total 198 332 729 1,304 2,563

Weighted average duration of the obligation (years)

The weighted average duration of the funded and unfunded schemes is as follows:

At 31 December 2018 Years

Funded

Other 9.00

Unfunded

North America Post Retirement Medical Benefits 9.66

51

25 Provisions for other liabilities

IASS solution - once

off pension

contribution¹

Business

Repositioning²

Aircraft

Maintenance³ Other4 Total

€'000 €'000 €'000 €'000 €'000

At 1 January 2017 46,553 11,926 82,892 21,833 163,204

Provided during the year - 4,000 33,437 10,567 48,004

Written back during the year - (2,388) (1,337) (2,684) (6,409)

Utilised during the year (3,153) (4,740) (15,882) (1,424) (25,199)

Unwind of discounting - 9 (25) 60 44

Retranslation - 13 (9,317) - (9,304)

At 31 December 2017 43,400 8,820 89,768 28,352 170,340

At 1 January 2018 43,400 8,820 89,768 28,352 170,340

Provided during the year - 2,371 37,879 5,422 45,672

Written back during the year - (941) (2,497) (348) (3,786)

Utilised during the year (1,167) (3,071) (2,902) (9,191) (16,331)

Unwind of discounting - 7 (24) 49 32

Retranslation - - 4,199 - 4,199

At 31 December 2018 42,233 7,186 126,423 24,284 200,126

Analysed as current liabilities

31 December 2018 42,233 4,754 2,627 16,266 65,880

31 December 2017 43,400 5,655 1,046 16,676 66,777

Analysed as non-current liabilities

31 December 2018 - 2,432 123,796 8,018 134,246

31 December 2017 - 3,165 88,722 11,676 103,563

Total Provision

31 December 2018 42,233 7,186 126,423 24,284 200,126

31 December 2017 43,400 8,820 89,768 28,352 170,340

1 Provision for IASS solution - once off pension contribution

In December 2014, Aer Lingus Group plc shareholders voted in favour of the IASS solution which sought to address issues arising from the funding deficit in the IASS. The approval of the IASS solution involved a once-off exceptional contribution of €190.7 million.

This once off contribution was placed in an escrow structure at this time, and held as a restricted deposit balance in the Statement of financial position as at 31 December 2014. The liability reduced by €1.2 million in 2018 (2017: €3.1 million) and reduces further and

potentially to nil as the correctly executed waivers referred to in Note 23 are received. At 31 December 2018 the restricted deposit cash

balance remaining was €42.2 million (2017: €43.4 million) which is included within gross cash as set out in Note 20. 2 Business repositioning

Business repositioning costs include provisions for restructuring costs recognised in accordance with IAS 37 when a constructive obligation

exists and a provision for termination benefits that are not part of a restructuring plan, and are therefore recognised in accordance with IAS

19R when the entity can no longer withdraw the offer of benefits.

The amount of the restructuring provision is based on the terms of the restructuring measures, including certain employee benefits and

employee severance, which have been communicated to employees. It represents the Directors’ best estimate of the cost of these measures.

The provision relating to the voluntary severance programme has been recorded in respect of individuals who at the reporting date had

accepted the offer of voluntary severance but had not yet received payment.

Measurement uncertainty associated with restructuring provisions arises from the achievement of certain operating and financial targets and

changes in human resources requirements. Uncertainty associated with the provision in respect of the voluntary severance programme

52

relates to the timing of employee exit dates. The voluntary severance provision is expected to be materially utilised in the next financial

year, with the remaining provision balance expected to be largely utilised in the next 5 years. 3 Aircraft maintenance Provisions are made for aircraft maintenance costs which the Company incurs in connection with engine overhauls and end of lease airframe checks on operating leased aircraft, where the terms of the lease impose obligations on the lessee to have this maintenance work carried out.

Provisions reflect the cost rates expected to apply at the time the work is carried out and to meet the contractual end of lease return

conditions. Other airframe check costs on operating leased aircraft are expensed as incurred to the Income statement. Measurement uncertainty associated with aircraft maintenance provisions arises from the timing and nature of overhaul activity required, lease return dates

and conditions, and likely utilisation of the aircraft. As a result of this, and the level of uncertainty attaching to the final outcomes, the

actual results may differ significantly from those estimated. 4 Other

Other provisions relate mainly to an employer’s liability provision, free flight entitlements in respect of former employees, a dilapidation provision and provisions in relation to other potential legal cases, including those relating to historic pension calculation issues which arose

in our former capacity as pension scheme administrators of a number of pension schemes.

26 Contingent liabilities and assets

Arrangement relating to Stobart Air

Aer Lingus Regional flights are operated by Stobart Air. However, passengers book their flights using the Aer Lingus website and booking

channels. Should Stobart Air fail to meet its obligations to passengers and if such passengers were to then seek refunds and/or re-routing, Aer Lingus may have an obligation to reimburse those passengers for losses incurred. In such circumstances, Aer Lingus would have a

corresponding claim against Stobart Air.

No amounts have been provided in respect of this matter.

Litigation and claims

The Company is party to various uninsured legal proceedings. The Company makes provision for any amounts for which it expects to

become liable. At 31 December 2018, these provisions were less than the total amounts claimed by plaintiffs because the Company does not

believe that it has any liability for the balance and the proceedings are being defended.

53

27 Deferred Tax

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities

and when deferred taxes relate to the same fiscal authority. The offset amounts are as follows:

2018

2017

As Restated

€'000 €'000

Deferred tax asset 15,648 13,661

Deferred tax liability (47,809) (58,789)

Deferred tax liability (32,161) (45,128)

2018 2017

€'000 €'000

Deferred tax (liability) at 1 January (45,128) (35,669)

Tax charged to the Income statement (3,027) (11,039)

Tax credited/(charged) directly to equity 15,994 1, 580

Deferred tax liability at 31 December (32,161) (45,128)

The movement in deferred tax assets and liabilities during the period, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred tax assets Provisions Tax losses

Share

based

payments

IASS

pension

adjustment

Derivative

financial

instruments Other

IFRS 15

As Restated

Total

As Restated

€'000 €'000 €'000 €’000 €’000 €’000 €’000 €'000

At 1 January 2017 713 10,454 202 14,302 - 550 988 27,209

(Charged)/credited to the Income

statement (43) (8,934) 21 (4,768) - - - (13,724)

(Charged)/credited directly to equity - - - - - (17) 193 176

At 31 December 2017 670 1,520 223 9,534 - 533 1,181 13,661

(Charged)/credited to the Income statement (514) (493) 81 (4,768) - - (236) (5,930)

Charged)/credited directly to equity - - - - 7,971 (54) - 7,917

At 31 December 2018 156 1,027 304 4,766 7,971 479 945 15,648

Deferred tax liabilities

Accelerated tax

depreciation

Derivative

financial

instruments Other Total

€'000 €'000 €'000 €'000

At 1 January 2017 49,885 9,777 3,216 62,878

Credited to the Income statement (2,484) - (8) (2,492)

Adjustment in respect of prior year - - 103 103

Credited directly to equity - (1,700) - (1,700)

At 31 December 2017 47,401 8,077 3,311 58,789

Charged/(credited) to the Income statement (2,893) - (10) (2,903)

Credited directly to equity - (8,077) - (8,077)

Adjustment in respect of prior year - - - -

At 31 December 2018 44,508 - 3,301 47,809

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Deferred Tax charged directly to equity is as follows:

2018 2017

€’000 €’000

Fair value reserves in shareholders' equity - -

Cash flow hedging reserve 16,048 1,700

Revaluation reserve on available-for-sale financial assets - -

Other (54) (17)

15,994 1,683

The Directors are satisfied, based on expected future performance, as indicated by the Company’s five year projections, that the recognition

of the deferred tax assets is appropriate on the basis that their recoverability is probable.

The Company holds unutilised capital losses forward of €24.7 million in respect of which no deferred tax asset is recognised.

55

28 Called-up share capital

2018 2017

€'000 €'000

Authorised

260,000,000 ordinary shares of €1.25 each (2017: 260,000,000) 325,000 325,000

15,000,000 preferred ordinary shares of €1.25 each 18,750 18,750

At 31 December 343,750 343,750

Allotted, called up and fully paid - presented as equity

255,393,003 ordinary shares of €1.25 each (2017: 255,393,003) 319,241 319,241

15,000,000 preferred ordinary shares of €1.25 each 18,750 18,750

At 31 December 337,991 337,991

The capital conversion reserve fund was attributable to the re-denomination of the nominal value of the Company’s shares from Irish Pound

to Euro in 2000.

29 Other reserves

2018 2017

As Restated

€'000 €'000

Capital conversion reserve fund

At 1 January and 31 December 1,705 1,705

Cashflow hedging reserve

At 1 January 56,596 68,498

Fair value movements in equity in the period (87,026) 43,777

Deferred tax on fair value movements in equity in the period 10,878 (5,472)

Reclassified and reported in net profit (41,362) (57,379)

Deferred tax on amounts reclassified and reported in net profit in the period 5,170 7,172

At 31 December (55,744) 56,596

Capital Contribution reserve

At 1 January and 31 December 13,207 13,207

Retained earnings

At 1 January 110,749 76,155

Profit for the year 258,226 234,477

Re-measurements of post-employment benefit obligations 380 117

Dividends Paid (225,000) (200,000)

At 31 December 144,355 110,749

Total other reserves 103,523 181,257

56

30 Share Based Payments

IAG operates share-based payment schemes as part of the total remuneration package provided to employees.

The IAG Performance Share Plan (PSP) is granted to key senior executives and managers of the Group who are directly involved in shaping and delivering business success over the medium to long term. The awards were made as nil-cost options, and are subject to the achievement

of pre-defined performance conditions measured over a performance period of at least three financial years and are subject to the employee

remaining employed by the Group. There is a two-year additional holding period after the end of the performance period, before vesting

takes place. The awards 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.

The cost of these awards is recharged from IAG based on their determination of award fair values. The cost recharged in the year was €2.4m

(2017: €1.8m). 31 Financial commitments

(a) Capital commitments

The Company had capital commitments as follows:

2018 2017

€'000 €'000

Contracted for but not provided

- Aircraft and equipment 1,294,298 1,099,386

- Other 3,541 3,440

1,297,839 1,102,826

Included within capital commitments in respect of aircraft and equipment are unhedged amounts denominated in US dollars of US$1,477

million (2017: US$1,323 million). These have been translated at the appropriate rate of $1.141 (December 2017: $1.176).

(b) Lease commitments

At 31 December 2018, the Company had commitments, which were the total of future minimum lease payments under non-cancellable

operating leases, which fall due as follows:

Property Aircraft

€'000 €'000


Later than one year but no later than five years 15,183 306,117

Later than five years 13,174 374,888

35,509 774,078

At 31 December 2017, the Company had commitments, which were the total of future minimum lease payments under non-cancellable

operating leases, which fall due as follows:

Property Aircraft

€'000 €'000


Later than one year but no later than five years 19,055 292,670

Later than five years 16,163 421,052

43,711 787,864

Capital conversion reserve fund

The capital conversion reserve fund was attributable to the re-denomination of the nominal value of the Company’s shares from Irish Pound

to Euro in 2000.

Cash flow hedging reserve

The cash flow hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments (net of tax), principally relating to fuel and forward currency contracts.

Capital contribution reserve

The reserve comprises the cumulative expense recognised in the Income statement in respect of awards made by the Company’s parent (Aer

Lingus Group DAC) to employees of Aer Lingus Limited under the terms of the Aer Lingus Long Term Incentive Plan and share option

arrangements.

57

The Company has entered into commercial leases on certain properties, equipment and aircraft. These leases have durations ranging from

less than one year for aircraft to 15 years for property leases.

The Company does not have contingent rents. Some aircraft lease agreements contain a fixed and variable element, with the variable element

dependent on the number of block hours flown in the period.

Some of the existing aircraft operating leases have options to extend. None of the existing operating leases have options to purchase the

aircraft.

58

32 Cash flows from operating activities

2018 2017

As Restated

€'000 €'000

Profit before tax 296,210 268,495

Adjustments for:

- Depreciation, amortisation and impairment 82,753 76,968

- Net movement in provisions for other liabilities 30,054 16,535

- Other unrealised non-cash (losses) (4,896) (8,240)

- Post employment benefit obligations (240) (739)

- Finance Costs 9,199 10,032

- Finance Income (5,760) (4,015)

- Net Currency retranslation charges/(credits) 3,653 (6,589)

- Loss/(Gain) 136 (403)

- Net gain related to sale of property, plant, equipment and investments (50) (848)

- Net financing charge relating to pensions 73 88

Changes in working capital

- Inventories (4,061) 53

- Trade and other receivables 15,285 (29,001)

- Trade and other payables (including deferred revenue on ticket sales) 34,304 44,877

Cash flows from operating activities 456,660 367,213

Changes in liabilities arising from financing activities

1 January 2018

€’000

Net Cash Flows

€’000

Foreign Exchange

Movements

€’000

31 December 2018

€’000

Obligations under finance leases (409,959) 84,587 (6,210) (331,582)

Total liabilities from financing activities (409,959) 84,587 (6,210) (331,582)

1 January 2017

€’000

Net Cash Flows

€’000

Foreign Exchange

Movements

€’000

31 December 2017

€’000

Obligations under finance leases (296,332) (131,351) 17,724 (409,959)

Total liabilities from financing activities (296,332) (131,351) 17,724 (409,959)

33 Related party transactions

Key management compensation1

2018 2017

€'000 €'000

Short-term employee benefits 5,772 5,346

Post employment benefits 250 211

Share based payments 62 72

Termination benefits - 82

6,085 5,710

¹Key management compensation comprises all amounts in respect of Directors, Non-Executive Directors and members of the Executive

Management Team.

Of the total amount of key management compensation €2.1 million, (2017: €2.0 million) was outstanding at 31 December 2018.

Related party transactions as part of IAG group

59

During the ordinary course of business, the Company has transactions with IAG and fellow subsidiary companies, which are considered to

be related parties. A summary of these transactions is given below:

2018 2017

€’000 €’000

Interline settlement of ticket sales2

Outward billings to subsidiaries & significant shareholders of IAG 101,307 103,342

Inward billings from subsidiaries & significant shareholders of IAG 11,381 11,263

Sales/purchases transactions with subsidiary undertakings of IAG

Recharges to IAG3 - -

Purchases and recharges from IAG3 3,641 5,399

Sales to subsidiaries of IAG4 4641 1,964

Purchases from subsidiaries of IAG4 23,964 27,330

Amounts owed to IAG3 7,233 6,298

Amounts owed to subsidiaries of IAG4 20,154 3,312

Amounted owed from IAG5 200,000 -

2When a passenger purchases a ticket for a flight from Aer Lingus but is flown by another airline, the other airline will subsequently invoice

Aer Lingus and the transaction will be recorded as an Inward billing. If a passenger purchases a ticket for a flight from another Airline but flies with Aer Lingus, the Company will subsequently raise an invoice to the other Airline and the transaction will be recorded as an

Outward billing. This practice is common across the airline industry with settlement of these interline transactions processed through IATA

Systematic Interline Settlement (“SIS”).

3The transactions between the Company and IAG comprise management fees in respect of services provided by IAG and recharges between

the entities in respect of invoices settled on behalf of the other party. Transactions with IAG and fellow subsidiaries are carried out on an arm’s length basis.

4The transactions between the Company and subsidiaries of IAG include services provided to the Company in respect of Engineering and Handling, as well as transactions with Avios Group Limited in respect of the AerClub loyalty program. AerClub members can earn and

redeem Avios when flying with Aer Lingus and partner airlines. The Company purchases points accrued by members from Avios Group

Limited and transactions are included above, within ‘Purchases from subsidiaries of IAG’.

5During the year, the Company provided a €200.0 million unsecured, fixed interest-bearing loan at prevailing market rates at the date of

transaction to IAG that is repayable within five years.

Transactions with fellow subsidiaries of IAG are carried out on an arm’s length basis.

The Company has not benefitted from any guarantees for any related party receivables or payables. In addition the Company has not made

any provision for doubtful debts relating to amounts owed by related parties.

Other related party transactions

The Company’s investment in its subsidiary companies is set out in Note 13. Amounts due to the Company from subsidiary undertakings

and fellow group companies are disclosed in Note 19. Amounts due by the Company to fellow group companies are disclosed in Note 22.

The Company’s contributions to its post-employment benefit obligations are disclosed in Notes 23 and 24.

In addition, the Company has an agreement with a fellow subsidiary company, Aer Lingus Ireland Limited, for the provision of human

support services and jet fuel and related services.

Aer Lingus Ireland Limited earns a mark-up on the provision of human support services and on some operating costs equivalent to industry

standards. During the year, the Company incurred expenditure of €90.0 million (2017: €71.0 million) on services provided by Aer Lingus

Ireland Limited. During the year, the Company incurred expenditure of €56.9 million (2017: €nil) on jet fuel and related services provided

by Aer Lingus Ireland Limited.

At the reporting date, there was a balance of €17.8 million outstanding to Aer Lingus Ireland Limited from the Company (2017: €13.7

million).

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34 Events after the reporting period

There have been no other significant events occurring after the reporting period, up to and including the date of approval of the financial information within these financial statements by the Board of Directors.

35 Approval of financial statements

The Directors approved the financial statements and authorised them for issue on 1 March 2019.

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