CONTENTS
Strategic report
Financial highlights
Company overview
Chairman’s statement
Chief Executive’s review
Selected statistics
Financial review
Key statistics
Principal risks and uncertainties
Governance
Corporate governance report
Compliance with the UK Corporate Governance Code
Management of the Company
Report of the Chairman of the Audit Committee
Report of the Chairman of the Nomination Committee
Directors’ remuneration report
Corporate responsibility
Directors’ report
Company information
Statement of Directors’ responsibilities
Independent auditors’ report
Accounts and other information
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes forming part of the financial statements
4
5
9
10
15
17
24
25
30
31
35
43
46
47
58
59
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63
64
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76
77
References to “Wizz Air”, “the Company”, “the Group”, “we” or “our” in this report are references to Wizz Air Holdings Plc, or to
Wizz Air Holdings Plc and its subsidiaries, as applicable.
Wizz Air Holdings Plc Annual report and accounts 2016
2
STRATEGIC
REPORT
Wizz Air Holdings Plc Annual report and accounts 2016
3
STRATEGIC REPORT
FINANCIAL HIGHLIGHTS
Financial year
Total revenue
Profit for the year
Underlying profit after tax*
Financial year
Passengers**
Year-end fleet
Number of routes operated during the year
Number of employees (average)***
2016
€ million
1,429.1
192.9
223.9
2016
20.0m
67
444
2,396
2015
€ million
1,227.3
183.2
146.2
2015
16.5m
55
348
2,040
Change
+16%
+5%
+53%
Change
+21%
+22%
+28%
+17%
*
See Note 9 to the financial statements for reconciliation between underlying (non-GAAP) and IFRS profit for the year.
** Booked passengers.
*** Including subcontracted staff, being primarily rented pilots.
* F14 and F15 include exceptional item.
2016, F16, FY16 and FY 2016 in this document refer to the financial year ended 31 March 2016
2015, F15, FY15 and FY 2015 in this document refer to the financial year ended 31 March 2015
Equivalent terms are used for prior financial years
Wizz Air Holdings Plc Annual report and accounts 2016
4
STRATEGIC REPORT
COMPANY OVERVIEW
Our presence across Europe
Number of routes operated by country as at 22 April 2016:
Poland
Romania
Hungary
Bulgaria
Lithuania
Macedonia
Serbia
Latvia
Ukraine
Bosnia and Herzegovina
Czech Republic
Georgia
Slovakia
Other Central and Eastern European (CEE*) countries
* CEE is a region comprised of Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, the Czech Republic, Estonia,
Hungary, Kosovo, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia
and Ukraine.
125
112
55
29
30
23
14
10
9
8
9
7
5
8
Wizz Air Holdings Plc Annual report and accounts 2016
5
STRATEGIC REPORT
COMPANY OVERVIEW CONTINUED
History of the Group
Wizz Air was founded in 2003 by its current Chief Executive Officer (CEO) József Váradi and five other
individuals who recognised a demand for low-cost carriers in CEE driven in particular by the accession of ten
new EU member states on 1 May 2004, eight of which are in CEE (the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Slovakia and Slovenia), and the anticipated accession of Bulgaria and Romania to the EU in
January 2007. Wizz Air was established with bases in Budapest in Hungary and Katowice in Poland and its
first flight took off from Katowice on 19 May 2004.
Significant milestones in the development of Wizz Air since its first flight have included:
FY 2005
E By the end of its first year of operation, Wizz Air had established bases in Hungary and Poland, and started
flying to eight other European countries (Belgium, France, Germany, Greece, Italy, Spain, Sweden and the
United Kingdom), flying a total of 36 routes by March 2005.
E On-board catering, hotel bookings, car rental services and airport agents were offered as ancillary services.
E
Indigo Partners and certain EU investors provided financing to Wizz Air in the form of convertible loans
and Convertible Notes.
E 0.9 million passengers were carried and Wizz Air had six aircraft in its fleet at the year end.
FY 2006
E A third base was established in Gdansk, Poland.
E First aircraft order placed with Airbus to acquire twelve A320 aircraft.
E 2.1 million passengers were carried and Wizz Air had eight aircraft in its fleet at year end.
FY 2007
E A base was established in Sofia in Bulgaria, ahead of the country joining the EU in January 2007. Wizz Air
started flying to Croatia, Romania and the Netherlands, bringing the number of operated routes to 64 at
the year end.
E A second order was placed with Airbus to acquire a further 20 A320 aircraft.
E Priority boarding was launched as an additional ancillary service.
E
Indigo Partners and certain EU investors provided further financing to Wizz Air in the form of
convertible notes and equity.
E 3.1 million passengers were carried and Wizz Air had ten aircraft in its fleet at the year end.
FY 2008
E A base was opened in Romania and Wizz Air started flying to Norway. Wizz Air operated 86 routes at the
year end.
E A third order was placed with Airbus to acquire 50 A320 aircraft.
E Multi-currency pricing, extra legroom and travel insurance products were launched.
E 4.6 million passengers were carried and Wizz Air had 17 aircraft in its fleet at the year end.
FY 2009
E Wizz Air Ukraine was established in July 2008, the country’s first low-cost carrier, and a base was opened
in Kiev. Wizz Air started flying to Finland and operated 124 routes at the year end.
E 6.2 million passengers were carried and Wizz Air had 22 aircraft in its fleet at the year end.
FY 2010
E A base was opened in Prague in the Czech Republic and Wizz Air started flying to Latvia.
E A fourth order was placed with Airbus to acquire 50 (later reduced to 30) A320 aircraft.
E First co-branded credit card was launched in Hungary, followed by similar programmes in Poland
and Romania.
E 8.2 million passengers were carried and Wizz Air had 30 aircraft in its fleet at the year end.
Wizz Air Holdings Plc Annual report and accounts 2016
6
STRATEGIC REPORT
COMPANY OVERVIEW CONTINUED
History of the Group continued
FY 2011
E Wizz Air started flying to Serbia and Turkey, operating a total of 194 routes at the year end, and
subsequently opened a base in Belgrade in Serbia.
E Wizz Air established a new head office in Geneva, Switzerland.
E An online check-in option was launched and charges were implemented for airport check-in.
E 9.8 million passengers were carried and Wizz Air had 35 aircraft in its fleet at the year end.
FY 2012
E A base was established in Vilnius in Lithuania and Wizz Air started flying to Cyprus, operating a total of
217 routes at the year end.
E Wizz Exclusive Club (the predecessor to the Wizz Discount Club) loyalty programme was launched.
E Wizz Reserved Seat ancillary product selling the first two rows of seats was launched.
E
11.3 million passengers were carried and Wizz Air had 36 aircraft in its fleet at the year end.
FY 2013
E A base was established in Macedonia and Wizz Air started flying to Georgia, Israel, Slovenia and
Switzerland, operating a total of 233 routes at the year end.
E A new cabin baggage policy was introduced. Wizz Air was the first EU airline to charge for large
cabin baggage.
E Re-launched and re-branded the loyalty programme as “Wizz Discount Club”.
E A mobile sales channel was launched to enable bookings on iOS and Android mobile telephones.
E
12.3 million passengers were carried and Wizz Air had 40 aircraft in its fleet at year end.
FY 2014
E A base was established in Donetsk, Ukraine, and Wizz Air started flying to Azerbaijan,
Bosnia and Herzegovina, Malta, Moldova, Russia, Slovakia and the United Arab Emirates.
E The Wizz Air flight simulator and training centre in Budapest, Hungary, opened.
E Wizz Tours package holiday booking platform commenced sales in October 2013.
E Part 145 maintenance organisation established enabling Wizz Air to perform certain in-house
maintenance activities.
E
13.9 million passengers were carried and Wizz Air had 46 aircraft in its fleet at the year end.
FY 2015
E Bases were opened in Riga, Latvia, in June 2014 and in Craiova, Romania, in July 2014.
E The Donetsk, Ukraine, base was suspended in April 2014 due to a political crisis in the east of the country.
E Wizz Air announced bases in Tuzla, Bosnia and Herzegovina, and Kosice, Slovakia, with operations starting
in June 2015.
E Wizz Air commenced flights to Egypt, Portugal and Denmark.
E Baggage fee discounts were offered to Wizz Discount Club members.
E Two types of memberships of Wizz Discount Club were created, comprising a standard membership for
two passengers and a group membership for up to six passengers.
E Significant summer 2015 route expansion was announced for Wizz Air’s core markets in CEE. New
destinations included Aberdeen, Belfast and Bristol (United Kingdom), Billund (Denmark), Hurghada
(Egypt), Iasi (Romania), Kosice (Slovakia), Lisbon (Portugal), Maastricht and Groningen (the Netherlands),
Molde (Norway), Nis (Serbia), Nuremberg (Germany), Ohrid (Macedonia) and Pescara (Italy).
E Wizz Air announced the closure of Wizz Air Ukraine and the consolidation of Ukrainian routes into the
Wizz Air Hungary route network.
E
E
In March 2015 the Company completed an initial public offering (IPO) with a premium listing of its shares
on the London Stock Exchange.
16.5 million passengers were carried and Wizz Air had 55 aircraft in its fleet at the year end.
Wizz Air Holdings Plc Annual report and accounts 2016
7
STRATEGIC REPORT
COMPANY OVERVIEW CONTINUED
History of the Group continued
FY 2016
E
In April 2015 Wizz Air announced the introduction of full allocated seating on all services.
E
In May 2015 a comprehensive re-branding, including new livery, was announced.
E Network expansion continued with steady growth and the following new destinations were added:
Reykjavik (Iceland), Tenerife (Spain), Chisinau (Moldova), Birmingham (UK), Palanga (Lithuania),
Bratislava (Slovakia), Kaunas (Lithuania), Ibiza (Spain), Porto (Portugal).
E Stable growth requires a stable source of professional pilots and Wizz Air launched its Cadet Pilot program
in September to train and eventually hire new pilots for its growing fleet.
E New bases were opened in Tuzla (Bosnia and Herzegovina) and Kosice (Slovakia) in June, Lublin (Poland)
in September, and in Debrecen (Hungary) in December 2015.
E New bases were announced for Sibiu (Romania) operating from July 2016, Iasi (Romania) from
August 2016 and for Kutaisi (Georgia) from September 2016.
E The Company concluded a purchase agreement with Airbus for 110 A321neo aircraft, the first deliveries
taking place in 2019.
E Wizz Air reached the cumulative 100 million passenger milestone.
E Wizz Tours (online tour operator business unit) previously outsourced was brought in house in
October 2015.
E
In November 2015 the first A321ceo aircraft was delivered to the fleet followed by a further three aircraft
by the end of March 2016.
FY 2017 to date
E Network expansion has continued with a steady growth and the following new destinations were added:
Olsztyn-Mazury (Poland), Suceava (Romania) and Podgorica (Montenegro).
Wizz Air Holdings Plc Annual report and accounts 2016
8
STRATEGIC REPORT
CHAIRMAN’S STATEMENT
I am pleased to report that 2016 was another year of significant growth for Wizz Air. The business delivered
underlying net profit of €223.9 million, an increase of 53.2 per cent on year-on-year revenue growth of
16.4 per cent. We raised our profit guidance throughout this year as we continued to perform ahead of
expectations. As we move into our 12th year, I am proud to say that we continue to strengthen our position as
the leading low-cost carrier in Central and Eastern Europe (CEE).
We have remained focused on our vision to make safe, reliable, affordable air travel available to everyone in CEE.
Our ultra-low cost model allows us to stimulate demand through low ticket prices while continuing to drive
profitable growth as evidenced by our underlying operating margins which have improved 2.9 percentage points
to 16.5 per cent (F15: 13.6 per cent) over the past twelve months. Our industry leading cost base, strong balance
sheet, proven management team, best-in-class fleet, contracted aircraft delivery stream and recognised brand
will allow us to continue to deliver significant growth within the business and, in turn, value for our shareholders.
Wizz Air achieved a number of key milestones in FY 2016, including:
E We continued to grow and diversify our route network by announcing three new bases and launching 69 new
routes. We now offer more than 420 routes from 25 bases, connecting 124 destinations across 39 countries.
E Our traffic grew by 21.2 per cent to 20 million passengers, cementing Wizz Air’s position as CEE’s leading
low cost carrier.
E We successfully completed an order for 110 A321neo aircraft, with uncommitted purchase rights for an
additional 90 A321neo aircraft and certain conversion rights into A320neo aircraft providing committed
and flexible growth capacity until the end of 2024.
Opportunity
Our investment case is based on Wizz Air being the leading low cost carrier in Central and Eastern Europe
with exciting long-term growth opportunities. Our CEE home market remains very attractive; it is
under-penetrated by low cost carriers, when compared to Western Europe; the region enjoys GDP growth
which continues to be higher than Western European economies; and while the propensity to travel by air has
experienced significant growth in recent years it remains substantially below that of Western Europe. We
believe these are compelling market dynamics and Wizz Air is well placed to benefit from them through
increasing frequencies on existing successful routes and opening new bases and new routes. The introduction
of the A321ceo into our fleet means that we can maintain our industry-leading ultra-low cost base as we take
advantage of the growth opportunities and our Airbus A321neo aircraft order gives us the future capacity to
continue to capitalise on CEE’s ongoing development.
Customers
At Wizz Air, we work hard to deliver value and a great experience for our customers. Our threenew bases and 69 new
routes announced in FY 2016 have allowed us to bring affordable air travel to new destinations within CEE. We
continue to enhance the Wizz Air service, for example through the rollout of allocated seating, the introduction of the
Plus Fare bundled product and also offering additional benefits to our Wizz Discount Club members.
Employees
I would like to take this opportunity to thank all of our colleagues at Wizz Air for another year where they again
have exceeded expectations through their enthusiasm, professionalism and passion for the airline and our
customers. The results in terms of fleet expansion, new bases and destinations, schedule reliability and on-time
performance, speak for themselves. We have a team of approximately 2,600 aviation professionals delivering
superior service to our 20 million passengers flown during the year. Without them, these results would not be
achievable.
Board of Directors
In addition, I would like to thank the Board for their continued support and hard work over the last twelve months.
Their input has been instrumental in Wizz Air’s growth. I would like to extend a special welcome to Ms Susan
Hooper who joined the Board as a Non-Executive Director in March 2016. I look forward to working with the
Board, Senior Leadership Team and all colleagues in what we expect to be an exciting future for Wizz Air.
William A. Franke
Chairman
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
9
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW
Financial performance
I am delighted to present Wizz Air’s second annual report as a publicly listed company. The financial year ended
31 March 2016 was another remarkable year for us as we delivered a strong operating performance across all key
metrics. We continue to build on our market leadership in Central and Eastern Europe and have a strong balance
sheet and an attractive order book of existing and new technology aircraft to drive growth in 2017 and beyond.
Wizz Air delivered a profit for the year of €192.9 million, and an underlying profit after tax of €223.9 million, a 53.2
per cent improvement compared to FY 2015. Our underlying net profit margin increased from 11.9 per cent to 15.7
per cent over the course of the year and passenger number increased by 21.2 per cent to 20 million.
Our strong performance was driven by capacity expansion, passenger growth and continued improvements
to our industry leading ultra-low cost base. In numbers the Company delivered:
E
E
E
E
E
ticket revenue up 12.7 per cent to €894.9 million;
ancillary revenue up 23.2 per cent to €534.2 million;
total unit cost decline of 5.4 per cent to €3.43 cent per ASK;
a 19.1 per cent increase in the capacity offered to the market (as measured by available seat kilometres or ASKs),
as we extended and deepened our network of routes to and from Central and Eastern Europe; and
an increase in our average load factor by 1.5 percentage points to 88.2 per cent in the financial year, despite
the significant capacity expansion.
Order book to drive growth
In the year we made significant investment in our fleet and order book. We added twelve aircraft to the fleet in the
period, taking the fleet to 67 aircraft at the end of March 2016. The finalisation of the order for 110 Airbus A321neo
aircraft, overwhelmingly supported by our shareholders, and the introduction of the Airbus A321ceo to our fleet
provide significant capacity growth into the next decade, meaning we can grow at around 15 per cent each year until
2024. While we have flexibility within our order book to align deliveries with our actual growth, we are confident in our
ability to deploy this capacity given our business model and the characteristics of the markets we serve.
A321ceo
The Airbus A321ceo aircraft underpin our near term growth plans ensuring that we maintain our industry leading
ultra-low cost base. Our first A321ceo entered service in November 2015 and we have a total of 30 to be added
to our fleet between now and the end of 2018. As of today, we have five A321ceos in operation and will have
a total of eleven in service by the end 2016 calendar year.
The composition of our fleet at the last financial year end and as currently anticipated at the next end of the
next two is the following:
A320 without winglets (180 seats)
A320 with winglets (180 seats)
A321 with winglets (230 seats)
Fleet size
Share of fleet with winglets
Average number of seats per aircraft
March 2016
Actual
35
28
4
67
47.8%
183
March 2017
Planned
35
28
15
78
55.1%
190
March 2018
Planned
35
31
25
91
61.5%
194
Wizz Air took delivery of four new A321ceo aircraft during FY 2016, further contributing to one of the most
efficient fleets and to the Company’s drive for ever decreasing unit costs. The benefits we are seeing from the
operation of the A321ceo are in line with the Company’s expectations and the initial 27 A321ceo order was
increased to 30 units through the conversion of three additional A320ceo delivery slots, all of which will be
delivered by the end of the 2018 calendar year.
A321neo
In addition to the A321ceo deliveries, another crucial milestone in the Company’s history took place last year when
a new purchase agreement was entered into with Airbus for the purchase of 110 A321neo aircraft. The neo version
will bring further fuel burn efficiency and even lower unit cost making it the perfect replacement for those aircraft
being returned to lessors as well as the foundation for Wizz Air’s continued growth. Deliveries of our A321neos start
in 2019 and will continue until the end of 2024. The purchase agreement includes uncommitted purchase rights for
90 additional A321neo aircraft as well as certain flexibility for conversion to the A320neo, providing flexibility for to
ensure that deliveries match the Company’s capacity needs.
On the basis of our current order book, our fleet will reach close to 160 aircraft in 2024; more than double our
current size.
Wizz Air Holdings Plc Annual report and accounts 2016
10
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Building our strong market position
CEE comprises 21 countries with a total population of over 300 million people, a larger overall market than
that of Western Europe. However as this market is relatively underserved by airlines and in particular low-cost
airlines, it represents a huge opportunity for a low-cost airline.
At present Wizz Air has operations in 17 CEE countries. We serve the market by offering a network of 25 bases
and 124 destinations. We are convinced that the ultra-low cost business model is best placed to serve this
market and as such the Company offers safe, reliable operations, low fares and hassle-free services and a
distinctive brand designed to appeal to the whole market.
This approach has enabled the Company to become the number one or number two low-cost airline in all but
one of its base countries. The Company’s aggregate market share in CEE reached 42.6 per cent. in the 2016
financial year, up from 39.2 per cent. in 2015. The table below shows the Company’s ranking by low-cost market
share in each of its base countries.
Number 1
Number 2
Number 3
Carrier
Market
Wizz Air
CEE
Ryanair
Poland
Wizz Air
Romania
Ukraine
Wizz Air
Czech Republic EasyJet
Wizz Air
Hungary
Ryanair
Latvia
Wizz Air
Bulgaria
Wizz Air
Serbia
Ryanair
Lithuania
Ryanair
Slovakia
Wizz Air
Macedonia
Bosnia and
Herzegovina
Wizz Air
Source data: Innovata, March 2016.
Share Carrier
42.64% Ryanair
51.29% Wizz Air
60.38% Blue Air
40.78% Pegasus Airlines
31.47% Ryanair
50.66% Ryanair
57.72% Wizz Air
80.83% EasyJet
67.73% Pegasus Airlines
52.19% Wizz Air
77.66% Wizz Air
89.23% Pegasus Airlines
Share Carrier
32.56% EasyJet
39.82% Norwegian
23.66% Ryanair
26.20% Flydubai
19.70% Wizz Air
24.79% EasyJet
28.24% Norwegian
12.72% Transavia
10.25% Norwegian
42.61% Norwegian
18.84% Flydubai
7.42% Flydubai
54.56% Pegasus Airlines
22.15% Flydubai
The table below shows the fleet allocation by country at 31 March 2016 compared to a year earlier.
Fleet deployment by country
Year to end
Total
Poland
Romania
Hungary
Bulgaria
Lithuania
Ukraine
Macedonia
Czech Republic
Slovakia
Bosnia Herzegovina
Serbia
Latvia
Maintenance cover/ en route to base
March 2016
67
19
15
10
6
4
1
3
1
1
1
1
2
3
March 2015
55
17
15
7
4
3
2
2
1
-
-
1
1
2
Share
6.13%
4.25%
13.74%
19.42%
13.77%
8.43%
14.03%
3.68%
8.10%
5.20%
3.50%
3.35%
9.19%
Change
+12
+2
-
+3
+2
+1
-1
+1
-
+1
+1
-
+1
+1
The Company also offers services from 18 CEE cities where it does not base aircraft and crews. Three new CEE
points were added in the 2016 financial year as well as twelve new destinations in Western Europe (WE) during
the year.
Wizz Air Holdings Plc Annual report and accounts 2016
11
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Building our strong market position continued
New non-based CEE stations
New destination airports in WE
City
Ohrid
Nis
Palanga
Country
Macedonia
Serbia
Lithuania
City
Country
UK
Aberdeen
UK
Birmingham
UK
Bristol
Friedrichshafen
Germany
Karlsruhe/Baden-Baden Germany
Reykjavik
Nice
Pescara
Berlin
Tenerife
Billund
Copenhagen
Iceland
France
Italy
Germany
Spain
Denmark
Denmark
In total the Company operates to 124 airports in 39 countries, making it one of the most diversified low-cost
airlines in Europe.
Improving the customer experience
New routes and bases
We are very happy with our network development over the last twelve months, including the opening of four
new bases in Tuzla, Kosice, Lublin, and Debrecen and the announcement of new bases in Sibiu, Iasi, and Kutaisi.
In total we added 69 routes, increasing to 420 routes from 25 bases, connecting 124 destinations across 39
countries. In April of this year we also announced an exciting new destination at London Gatwick and will
operate a route from London to Bucharest, the only direct connection between the two airports. We now
operate from nine UK airports.
Offering our customers more
We operate in more countries and have the most diversified network of any airline in CEE. We also have the
youngest fleet of any European airline, which contributes to our efficiency and towards the comfort and travel
experience of our customers.
We understand that every passenger has different needs and we have adapted our business model and pricing
to reflect that. We have a range of services that our customers can avail themselves of after their ticket has
been purchased. These services include a range of seating alternatives, baggage options, flexible tickets and
on-board purchases and priority boarding. This “unbundling” philosophy enables Wizz Air to offer each
customer exactly and only what he or she needs while keeping the price of the basic service as low as possible.
In addition, we also provide customers with the opportunity to buy hotel, car hire and public transport services
as part of the same booking. Our Wizz Discount Club also enables customers and their friends and families to
benefit from lower air fares than those that are generally available.
Technology advancements
We recognise the importance of online engagement with our customers. 49 per cent of all our interactions
with customers now happen through mobile devices and tablets. 29 per cent of mobile or tablet visitors used
our WIZZ mobile app or the mobile website. Therefore, the new responsive website and the development of
the mobile app are increasingly important aspects of our business. We currently offer 24 languages on
wizzair.com and 11 languages on our mobile APP. We are due to launch a brand new customer website in
mid-2016 and recently launched a new Investor Relations section on our site.
We currently have over 815,000 Wizz Discount Club members, 3 million newsletter subscribers, 1.3 million mobile
app users and over 700,000 Facebook followers and we aim to continue to build this loyal customer base.
Management changes
There have been a number of management changes throughout the year in what has been a busy
twelve months. I am delighted to take this opportunity to welcome our new Chief Financial Officer (CFO),
Ms Sonia Jerez Burdeus to the Wizz Air team. Sonia brings to the Company significant experience as a chief
financial officer and board member of a European low-cost airline and we look forward to working with Sonia
as we continue to drive the growth of the business. Her appointment will take effect on 1 June 2016.
Wizz Air Holdings Plc Annual report and accounts 2016
12
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Management changes continued
As announced earlier in the FY 2016 financial year Mike Powell our previous CFO stepped down from that
position. We would like to thank Mike for his contribution to the Group over the past eight years, during which
he sat on the Company's Senior Leadership Team and contributed to the growth and success of the business
today. He was also central to the successful listing of the business on the London Stock Exchange in 2015 and
we wish him well for the future.
I would also like to take this opportunity to congratulate David Morgan, Chief Flight Operations Officer and
Johan Eidhagen, Chief Marketing Officer, who were appointed to their new roles and have now joined
Wizz Air’s Leadership Team.
Hedging positions
Wizz Air operates under a clear set of treasury policies supervised by the Board. The aim of the Company’s
hedging policy is to reduce short-term volatility in earnings and liquidity. Therefore Wizz Air hedges a
minimum of 50 per cent. of the projected US Dollar and jet fuel requirements for the next twelve months
(40 per cent. on the full 18-month hedge horizon).
Details of the current hedging positions (as at 24 May 2016) are set out below:
Foreign Exchange (FX) hedge coverage (Euro/US Dollar)
Period covered
Exposure (million)
Hedge coverage (million)
Hedge coverage for the period
Weighted average floor
Weighted average ceiling
Fuel hedge coverage
Period covered
Exposure in metric tons ('000)
Coverage in metric tons ('000)
Coverage with zero cost collars
Coverage with fuel caps
Hedge coverage for the period
Blended capped rate
Blended floor rate*
F17
11 months
$657
$359
55%
$1.09
$1.13
F17
11 months
693
414
5%
55%
60%
$675
$708
F18
12 months
$820
$115
14%
$1.10
$1.12
F18
12 months
877
71
8%
-
8%
$505
$456
* Fuel caps provide the Company with protection against the risk of higher fuel prices and also enable the Company to benefit
from lower fuel costs should fuel prices fall. The blended floor rate for fuel hedges shown in the table is only applicable to
zero cost collar hedges.
Sensitivities
E Pre-hedging a $10 (per metric ton) movement in the price of jet fuel impacts the 2017 financial year fuel
costs by $7.1 million.
E Pre-hedging a one cent movement in the Euro/US Dollar exchange rate impacts the 2017 financial year
operating expenses by €6.0 million.
In the Company’s view, the profit impact of such changes is likely to be less given the empirical evidence of major
industry-wide movements in input costs being passed through to air fares with a lag of three to twelve months.
Outlook
2017 financial year
Thanks to our ultra-low fares and our growing route network across CEE, we continue to experience strong
demand and forward booking momentum. We expect to continue to grow capacity by around 17 per cent. in
the 2017 financial year.
Assuming the jet fuel price and Euro/US Dollar exchange rate remain close to the prevailing spot levels ($450
per metric ton and $/€ 1.12 respectively), the Company expects total operating cost per available seat
kilometre (CASK) to be 5 per cent. lower than last year. This comprises an anticipated fuel CASK decline of 15
per cent. and a broadly flat non-fuel CASK. The expected fuel CASK decline reflects the combined impact of
lower fuel prices and fuel consumption savings, offset by a stronger US Dollar and a higher cost of complying
with the EU-ETS carbon scheme.
Wizz Air Holdings Plc Annual report and accounts 2016
13
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Outlook continued
2017 financial year continued
As previously indicated, lower fuel prices are feeding through to lower air fares and Management continues to
believe that the earnings benefit from declining fuel prices is limited over the short term. Based on current
booking trends management expects total revenue per available seat kilometer (RASK) to decline by a mid
single-digit percentage in H1 and remains cautious regarding the revenue performance for the second six
months of the financial year (H2), when capacity growth is planned to be 16 per cent.
Notwithstanding the fact that Easter fell one week earlier in 2016 than in 2015 pushing a higher proportion
of this high yield traffic into the previous financial year, we currently expect a further significant rise in
the Group’s net profit over F16 to a range of between €245 million and €255 million (excluding
exceptional items). This guidance is heavily caveated by the H2 revenue performance, a period for which
we currently have limited visibility.
Full year guidance
Capacity growth (ASKs)
Average stage length
Load Factor
Fuel CASK
Ex-fuel CASK
Total CASK
RASK
Tax rate
Net profit
2017
Financial Year
17%
Modest increase
Modest improvement
-15%
Broadly flat
-5%
Down mid- single digit
6%
€245 - 255 million
Comment
H1: 18%, H2 16%
-
-
Assumes spot price of $450/MT
Assumes $/€1.12
-
Pass through of lower fuel prices
-
Excluding exceptional items
First (June) quarter of the 2017 financial year
The Company expects to grow capacity in terms of seats flown by 17 per cent. in the June quarter and
anticipates a modest rise in load factor versus the same period of the previous year. Management expects the
timing of Easter to result in a net profit in Q1 (June quarter) only marginally ahead of Q1 of last year.
The last twelve months have been extremely exciting and as I outlined during the year, I remain fully committed
to this business. At just twelve years old, Wizz Air is one of the strongest airlines in Europe and the market
leader in CEE. I am very proud of what we have achieved as a management team – in particular during 2015
with our listing on the London Stock Exchange and our major A321neo aircraft order with Airbus. We have
made a considerable investment in the future growth of the business. I look forward to leading the Wizz Air
team in 2016 and well beyond as we build on our position as the leading low-cost airline in CEE and to bringing
a World of Opportunities to all of our customers.
József Váradi
Chief Executive Officer
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
14
STRATEGIC REPORT
SELECTED STATISTICS
* Reliability = (1 - number of operational cancellations/number of revenue flight legs) x 100 per cent.
** On-time performance = (1 - number of delays > 15min/number of revenue flight legs) x 100 per cent.
Wizz Air Holdings Plc Annual report and accounts 2016
15
STRATEGIC REPORT
SELECTED STATISTICS CONTINUED
*
*
* F14 and F15 include exceptional item.
**
Including subcontracted staff, primarily rented pilots.
Wizz Air Holdings Plc Annual report and accounts 2016
16
STRATEGIC REPORT
FINANCIAL REVIEW
During the 2016 financial year Wizz Air carried 20 million passengers, a 21.2 per cent. increase versus the
previous year, and contributed to the grand milestone of reaching 100 million passengers since the start of
Wizz Air’s operations. Revenues grew to €1,429.1 million, representing a 16.4 per cent. Increase compared to
the previous year. These growth rates compare to the balanced capacity growth measured in terms of
available seat kilometres (ASK) of 19.1 per cent. and seats of 19.2 per cent.
Given strong volume growth and declining industry wide input costs through the year, the unit revenue
performance of the business was creditable. Revenue per ASK decreased by 2.2 per cent. versus the
previous year.
the 2016 financial year was characterised by a strong drop in fuel prices complemented by a healthy fuel
hedging position resulting in a fuel unit cost (per ASK) decline of 15.0 per cent. partly offset by the stronger
US Dollar. Non-fuel unit costs, remained neutral and therefore the overall operating unit cost has decreased
by 5.4 per cent.
Underlying profit after tax increased by 53.2 per cent. from €146.2 million in 2015 to €223.9 million in 2016. This
equates to a 3.8 percentage point rise in the underlying after tax profit margin from 11.9 per cent to 15.7 per cent.
The profit for the year was €192.9 million and included a €31.0 million net loss from unrealised FX losses and
exceptional items. These comprised unrealised foreign exchange losses of €14.7 million and a loss from the
change in the time value of hedge positions of €25.0 million, offset by €8.7 million of exceptional realised FX
gain on the conversion of USD 75.6 million of deposits behind collaterals into EUR.
The income tax expense for the year was again €8.5 million (2015: €8.5 million) giving an effective tax rate for
the Group of 4.2 per cent. (2015: 4.4 per cent.). The main components of this charge are local business tax and
innovation tax paid in Hungary and corporate income tax paid in Switzerland.
Average jet fuel price ($/metric ton, including into plane
premium and hedge impact)
Average USD/EUR rate (including hedge impact)
Year-end USD/EUR rate
2016
740
1.20
1.14
2015
Change
986
1.32
1.07
-24.9%
-9.0%
+6.5%
Financial overview
Summary statement of comprehensive income
€ million
Total revenue
Fuel costs
Operating expenses excluding fuel
Total operating expenses
Operating profit
Operating profit margin
Net financing (expense)/income
Profit before income tax
Income tax expense
Profit for the year
2016
1,429.1
(401.5)
(792.1)
(1,193.6)
235.5
16.5%
(34.1)
201.4
(8.5)
192.9
2015
1,227.3
(396.6)
(663.4)
(1,060.0)
167.3
13.6%
24.4
191.7
(8.5)
183.2
Adjusted performance measures (Note 9)
€ million
Statutory (IFRS) profit
Exceptional items (Note 9):
Cost of extending and revaluing convertible debt
Translation gain relating to closure of Wizz Air
Ukraine Airlines LLC
IPO related costs
Realised FX gain on conversion of deposits
Loss from change in time value of hedges
Total exceptional adjustments
Unrealised foreign exchange losses/(gains) (Note 10)
Underlying profit
Underlying profit margin
Operating Profit
Profit for the year
2016
235.5
2015
167.3
2016
192.9
2015
183.2
-
-
-
2.5
-
-
-
-
-
-
235.5
16.5%
-
2.8
-
-
2.8
-
170.2
13.9%
-
-
(8.7)
25.0
16.3
14.7
223.9
15.7%
(14.5)
2.8
-
-
(9.2)
(27.8)
146.2
11.9%
Wizz Air Holdings Plc Annual report and accounts 2016
17
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Financial overview continued
Earnings per share
Earnings per share (Note 12)
Basic earnings per share, EUR
Diluted earnings per share (statutory), EUR
Proforma earnings per share (underlying), EUR
Proforma earnings per share (underlying), GBP*
2016
3.62
1.54
1.78
1.41
2015
14.43
6.91
1.19
0.87
* Translated from EUR to GBP at 1.263 for 2016 (rate applicable at 31 March 2016) and at 1.377 for 2015 (rate applicable at
31 March 2015).
The proforma underlying earnings per share (EPS) is a fully diluted measure defined by the Company.
Its calculation differs from the IFRS diluted EPS measure in the following ways:
E For earnings the underlying profit for the year is used, as opposed to the statutory (IFRS) profit
for the year.
E For the fully diluted number of shares, all convertible debt is taken into account for its dilution impact as
at the year end, resulting in 126.8 million (2015: 126.5 million) shares used as the denominator. By contrast,
the IFRS diluted EPS measure includes only those convertible debts that could be converted without
restriction and takes a weighted average position for the year.
Return on capital employed and capital structure
ROCE** for the 2016 financial year was 22.4 per cent., an improvement of 0.9 percentage points versus the
previous year driven by a proportionate growth of earnings before interest and tax (EBIT), shareholder’s
equity, net cash position, and capitalised leases.
The Company’s leverage, defined as net debt adjusted to include capitalised operating lease obligations*
divided by earnings before interest, tax, depreciation, amortisation and aircraft rentals (EBITDAR), fell to a
ratio of 1.4 from 1.6 at the end of the 2016 financial year.
Liquidity, defined as cash and equivalents as a percentage of the last twelve months’ revenue, rose from
37 per cent at the end of the 2015 financial year to 45 per cent a year later.
These improvements in the Company’s leverage and liquidity ratios reflect the combined effect of improved
profitability and the IPO proceeds.
ROCE**
Leverage
Liquidity
2016
22.4%
1.4
45%
2015
21.5%
1.6
37%
Change
0.9 ppts
(0.2) pts
8 ppts
* Annual aircraft lease expenses multiplied by seven as an estimate of the total outstanding obligation.
** ROCE: underlying operating profit after tax/average capital employed, where average capital employed is the sum of average
equity (excluding convertible debt) and capitalised operating lease obligations, less average free cash.
Financial performance
Revenue
The following table sets out an overview of Wizz Air’s revenue items for 2016 and 2015 and the percentage
change in those items:
Passenger ticket revenue
Ancillary revenue
Total revenue
2016
2015
Total
(€ million)
894.9
534.2
1,429.1
Percentage of
total revenue
62.6%
37.4%
100%
Total
(€ million)
793.8
433.5
1,227.3
Percentage of
total revenue
64.7%
35.3%
100%
Percentage
change
12.7%
23.2%
16.4%
In 2016 ASKs rose by 19.1 per cent. which combined with relatively stable RASK of –2.2 per cent. resulted in a
16.4 per cent increase in total revenue. Passenger ticket revenue increased by 12.7 per cent. to €894.9 million
and ancillary (or “non-ticket”) revenue increased by 23.2 per cent. to €534.2 million.
Wizz Air Holdings Plc Annual report and accounts 2016
18
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Financial performance continued
Revenue continued
Average revenue per passenger decreased slightly from €74.5 in 2015 to €71.5 in 2016, a decrease of
3.9 per cent. Average passenger ticket revenue per passenger declined from €48.2 in 2015 to €44.8
(-7.0 per cent.), while average ancillary revenue per passenger increased from €26.3 in 2015 to €26.7 in 2016,
an increase of 1.7 per cent. This slight decrease in average revenue per passenger was due to:
E
E
a significant increase in average passenger ticket revenue per passenger in 2016 compared to 2015, which
was the result of the increasing maturity of Wizz Air’s route network and higher passenger demand in
2016 than in 2015 as evidenced by a 1.5 percentage point increase in load factor to 88.2%; and
the combined impact of the modification of certain products (priority boarding now allows a second piece
of carry-on luggage, and there are now two weight categories within checked-in luggage), the
introduction of new services (allocated seating, and Plus Fare), and the adaptation of customers to some
of the longer standing products such as payable carry-on luggage.
Operating expenses
Total operating expenses increased by 12.6 per cent. to €1,193.6 million in 2016 from €1,060.0 million in 2015.
CASK declined by 5.4 per cent. to 3.43 Euro cents in 2016 from 3.62 Euro cents in 2015. This reduction in CASK
was principally driven by a reduction in the average fuel price and a favourable development of airport mix.
CASK excluding fuel expenses remained flat at 2.27 Euro cents in 2016 driven by the combined effect of further
improvement of major cost items (airport, handling, en-route charges) set off by increasing aircraft rentals and
a larger budget allocated to distribution and marketing.
The following table sets out Wizz Air’s operating expenses for 2016 and 2015 and the percentage
changes in those items:
Staff costs
Fuel costs
Distribution and marketing
Maintenance, materials and repairs
Aircraft rentals
Airport, handling and en-route charges
Depreciation and amortisation
Other expenses
Total operating expenses
2016
Percentage of
total
operating
expenses
8.5%
33.6%
2.0%
6.5%
14.8%
28.7%
2.4%
3.5%
100%
Total
(€ million)
101.4
401.5
23.5
77.5
176.2
343.1
28.8
41.7
1,193.6
2015
Percentage of
total
operating
expenses
7.9%
37.4%
1.8%
5.8%
12.9%
28.1%
3.2%
2.9%
100%
Total
(€ million)
83.4
396.6
18.8
62.0
137.1
297.7
33.9
30.5
1,060.0
Percentage
change
21.6%
1.2%
25.0%
25.0%
28.5%
15.3%
(14.9)%
36.7%
12.6%
Staff costs increased by 21.6 per cent. to €101.4 million in 2016, up from €83.4 million in 2015. The increase in
overall staff costs reflected an 18.4 per cent. rise in aircraft block hours and higher bonus payments than in the
previous year.
Fuel expenses rose by 1.2 per cent. to €401.5 million in 2016, up from €396.6 million in 2015. Although there
has been an increase of 19.1 per cent. growth in ASKs, and a 9.0 per cent. appreciation of the US Dollar against
the Euro after hedging (moving from average 1.32 rate in 2015 to 1.20 in 2016), it has been offset by a
0.5 per cent. reduction in fuel consumption per block hour and a 24.9 per cent. decline in the fuel price (after
hedging). The average fuel price (including hedging impact and into-plane premium) paid by Wizz Air in 2016
was US$740 per tonne, a decline of 24.9 per cent. from the previous year’s figure of US$986 per tonne.
Distribution and marketing costs rose 25.0 per cent. to €23.5 million in 2016 from €18.8 million in 2015. This
increase was largely due to distribution costs which grow in line with revenue growth. In addition, Company
increased discretionary marketing activity year which included a comprehensive re-branding exercise.
Maintenance, materials and repair costs increased by 25.0 per cent. to €77.5 million in 2016 from €62.0 million
in 2015. This cost increase was the result of the increase in the average fleet size and the implementation of
the amended engine maintenance contract that resulted in a one-off cost of €3.0 million.
Aircraft rental costs grew 28.5 per cent. to €176.2 million in 2016, from €137.1 million in 2015. This increase was
largely due to fleet growth (equivalent aircraft expanded by 19.1 per cent.), and increasing average lease rate
due to A321 aircraft joining the fleet, and the appreciation of the US Dollar to the Euro (average 9 per cent
year on year including hedge impact).
Wizz Air Holdings Plc Annual report and accounts 2016
19
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Financial performance continued
Operating expenses continued
Airport, handling and en-route charges increased by 15.3 per cent. to €343.1 million in 2016 from €297.7 million
in 2015. This category comprised €193.9 million of airport and handling fees and €149.3 million of en-route and
navigation charges in 2016 and €170.5 million of airport and handling fees and €127.2 million of en-route and
navigation charges in 2015. The cost increase was primarily due to an 18.8 per cent. increase in the number of
flights, and a 21.2 per cent. rise in passenger numbers.
Depreciation and amortisation charges fell by 14.9 per cent. to €28.8 million in 2016, down from €33.9 million
in 2015. This was driven by the implementation of a new engine maintenance contract which takes into account
the greater reliability and therefore the longer on-wing times of the airline’s engines. The fall in depreciation is
temporary and will catch up once the respective engines become out of condition again. See Note 13 to the
financial statements for more details.
Other expenses increased by 34.7 per cent. to €41.7 million in 2016 from €30.5 million in 2015. This increase
was primarily a result of an increase in non-salary related overhead and crew costs and flight cancellation
costs, which were partially offset by lower insurance premiums due to better terms achieved on the renewal
of the insurance policy. A further €1.7 million increase was caused by bringing the tour operator business unit
in-house, because third party input costs to the packages (for the time being these only apply to hotels) are
now recognised on a gross basis under other expenses.
Operating profit
As a result of the foregoing factors, Wizz Air made an operating profit of €235.5 million in 2016, a 40.8 per cent.
increase from the operating profit of €167.3 million made in 2015 (which included €2.8 million of
exceptional items).
Operating profit increased by 38.4 per cent when compared to the €170.1 million profit in 2015 excluding
exceptional items. This equates to a 2.6 percentage point improvement in the underlying operating profit
margin from 13.9 per cent to 16.5 per cent.
Net financing income and expense
Wizz Air’s net financing costs resulted in a cost of €34.1 million in 2016 after a net gain of €24.4 million in 2015.
This significant change was driven primarily by three special items, as shown in the table below:
€ million
Net FX-related impacts (including exceptional item in 2016)
Change in time value of hedges (exceptional)
Closure of Wizz Air Ukraine (one-off, exceptional)
All other financial income & expenses (recurring)
Net financing income and expense*
*
See also Notes 9 and 10 to the financial statements.
2016
(3.1)
(25.0)
-
(6.0)
(34.1)
2015
16.2
-
14.6
(6.3)
24.4
Change
(19.2)
(25.0)
(14.6)
0.3
(58.5)
Net FX-related impacts are expected to be limited in the future because by the end of 2016 the historically
high net US Dollar monetary asset position of the Group was substantially eliminated. Changes in hedge time
value will stop impacting earnings as soon as the EU endorses IFRS 9 and thus the Group can adopt it instead
of the currently applied IAS 39 – endorsement is now expected by the end of the 2016 calendar year.
Taxation
Wizz Air recorded an income tax expense of €8.5 million in 2016, in line with an almost identical figure in 2015.
The effective tax rate for the Group was 4.2 per cent. in 2016 and 4.4 per cent. in 2015. The reduction in the
effective tax rate reflects the impacts of Hungarian local taxes the tax base of which is different from the
corporate tax base.
Profit for the period
As a result of the foregoing factors, Wizz Air generated an IFRS profit for 2016 of €192.9 million, a 5.3 per cent.
increase from the profit of €183.2 million in 2015.
Other comprehensive income and expense
In 2016 the Group had other comprehensive income of €33.2 million compared to the €51.7 million expense in
2015. This change was driven primarily by the significant movements in the balance of the cash flow hedging
reserve (in equity) in the two years. In 2015 there was a €43.0 million increase in the reserve caused by the
sharp fall in fuel prices during the year combined with a substantial volume of zero cost collar hedge
instruments open at 31 March 2015. In 2016 there was a €33.2 million decrease in the reserve because, although
fuel prices continued to drop, at 31 March 2016 the Group’s open instruments were fuel caps, which do not
result in a liability for the Group even if the market rates for jet fuel are below the hedged rates.
Wizz Air Holdings Plc Annual report and accounts 2016
20
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Cash flows and financial position
Summary statement of cash flows
The following table sets out selected cash flow data and the Company’s cash and cash equivalents for 2016
and 2015:
€ million
Net cash generated by operating activities
Net cash used in investing activities
Net cash (used in)/from financing activities
Effect of exchange rate fluctuations on cash and
cash equivalents
Cash and cash equivalents at end of period
2016
288.9
(90.6)
(1.7)
0.5
645.6
2015
174.0
(49.8)
139.3
(0.5)
448.6
Change
114.9
(40.8)
(141.0)
1.0
197.0
Cash flow from operating activities
The vast majority of Wizz Air’s cash inflows from operating activities are derived from passenger ticket sales.
Net cash flows from operating activities are also materially affected by movements in working capital items.
While the difference in profit before tax was only €9.7 million between 2016 and 2015, the improvement in
operating cash flows (€114.9 million) was much more significant. This can be explained by two main adjusting
factors between book profit and cash flows:
E Financial income and expenses: In 2015 there were two significant non-cash items within financial income:
unrealised FX gain of €27.8 million and €14.5 million from the recycling of the balance of the cumulated
translation adjustment account from equity to the income statement. In contrast, in 2016 there were three
significant non-cash items within financial expense: unrealised FX loss of €14.7 million, €25.0 million loss
from the change in the time value of hedges, and recognition of €5.3 million fuel-cap related fees paid in
2015. These factors together explain the €87.3 million difference between the two years. Most of these
factors explain similarly the significant year on year improvement in underlying profits, when compared
to the relatively little improvement in IFRS profits. See also Notes 9 and 10 to the financial statements.
E Changes in working capital: €25.9 million was paid for fuel caps in 2015 while there was nil cash spending
in 2016. The other significant contributor was trade and other payables: while the balance grew in both
years, as it is normal in a fast growing business, in 2016 it contributed by €29.6 million more to the
operating cash flows than in 2015.
Cash flow from investing activities
Net cash used in investing activities increased by €40.8 million from a net cash outflow of €49.8 million in
2015 to n e t c a s h o u t f l o w o f €90.6 million in 2016. The main contributor was advances paid for aircraft,
net of refunds of advances, for which €29.4 million more was invested in 2016 than in 2015.
Cash flow from financing activities
Net cash from financing activities decreased by €141.0 million to a €1.7 million outflow in 2015 from a
€139.3 million inflow in 2015. This was mainly due to the net proceeds of €149.1 million received during 2015
from the issue of new shares, most of them being the primary proceeds from the Company’s IPO.
Wizz Air Holdings Plc Annual report and accounts 2016
21
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Summary statement of balance sheet
The following table sets out summary statements of financial position of the Group for 2016 and 2015:
€ million
ASSETS
Property, plant and equipment
Restricted cash*
Derivative financial instruments*
Trade and other receivables*
Cash and cash equivalents
Other assets*
Total assets
EQUITY AND LIABILITIES
Equity
Equity
Liabilities
Trade and other payables
Convertible debt and other borrowings*
Deferred income*
Derivative financial instruments*
Provisions*
Other liabilities*
Total liabilities
Total equity and liabilities
2016
2015
Change
353.6
101.6
1.7
197.7
645.6
31.7
1,331.8
247.1
73.6
60.7
167.9
448.6
22.6
1,020.5
688.8
459.9
177.3
33.6
321.6
17.6
84.9
8.1
643.1
1,331.8
123.9
31.5
262.9
81.7
52.4
8.2
560.6
1,020.5
106.5
28.0
(59.0)
29.8
197.0
9.1
311.3
228.9
53.4
2.1
58.7
(64.1)
32.5
(0.1)
82.5
311.3
*
Including both current and non-current asset and liability balances, respectively.
Property, plant and equipment increased by €106.5 million as at 31 March 2016 compared to 31 March 2015
(see Note 13 to the financial statements). This was driven by investments in all the important fixed asset
categories, as follows: (i) aircraft maintenance assets (including advances for these assets) increased by
€43.5 million, mainly due to more engines being out of condition as they approach end of useful life as at the
end of 2016 than a year before; (ii) advances paid for aircraft (PDPs) increased by €35.8 million due to a
combination of the deposit in relation to the purchase agreement for110 A321neo aircraft deal, the fact that
A321 PDPs are higher than those for A320s, and also the fact that the deposits open at 31 March 2016 were
placed during a stronger US Dollar environment than those open at 31 March 2015 (iii) investment into aircraft
parts in the amount of €13.3 million, most of this related to the delivery of a spare engine.
Restricted cash (current and non-current) increased by €28.0 million as at 31 March 2016 compared to
31 March 2015. This was driven by the growth in the amount of lease-related letters of credit, particularly as
security in relation to future maintenance obligations.
Derivative financial assets (current and non-current) decreased by €59.0 million as at 31 March 2016 compared
to 31 March 2015 (see Notes 3 and 20 to the financial statements). The decrease was driven by two factors: (i)
USD/EUR FX collars: there was a significant receivable on these instruments at 31 March 2015 due to the heavy
appreciation of the USD during the 2015 financial year, however the FX rate stabilised in the twelve months to
31 March 2016 and the older instruments that were contracted at a weaker USD had been settled by then; and
(ii) fuel caps: the 31 March 2015 balance included €22.6 million in relation to the fair value of fuel caps while by
31 March 2016 the fair value reduced to close to nil, due mainly to the reduction in time value.
Trade and other receivables (current and non-current) increased by €29.8 million as at 31 March 2016
compared to 31 March 2015 (see Note 18 to the financial statements). This increase of 18 per cent was broadly
in line with the growth of the business and its revenue.
Cash and cash equivalents increased by €197.0 million as at 31 March 2016 compared to 31 March 2015. This
change is explained in detail in the cash flow analysis above.
Trade and other payables increased by €53.4 million as at 31 March 2016 compared to 31 March 2015. This
increase was at a higher rate than the overall growth of the business, driven primarily by a temporary peak in
vendor payables in March 2016. This in turn was caused by the stabilisation that was required after changes
made in a key system used for the control of the Group’s vendor invoices.
Deferred income (current and non-current) increased by €58.7 million as at 31 March 2016 compared to
31 March 2015 (see Note 26 to the financial statements). This was driven by the increase in unflown revenues
(€36.2 million), itself primarily due to the increase of offered seat capacity at the end of the year, and by the
concessions received by aircraft and component manufacturers in relation to the twelve new aircraft delivered
during the year.
Wizz Air Holdings Plc Annual report and accounts 2016
22
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Summary statement of balance sheet continued
Derivative financial liabilities (current and non-current) decreased by €64.1 million as at 31 March 2016
compared to 31 March 2015 (see Notes 3 and 20 to the financial statements). This is because at 31 March 2016
the majority of the open fuel hedge instruments were caps (for which the Group does not have a liability when
market rates are below the capped rate), while at 31 March 2015 the majority of open fuel hedge instruments
were collars (for which the Group had significant liability due to the market rates for jet fuel at the time being
significantly below the floor rates of the collars).
Provisions (current and non-current) increased by €32.5 million as at 31 March 2016 compared to 31 March 2015
(see Note 29 to the financial statements). The increase relates primarily to new provisions made for future
heavy maintenance events, particularly engine LLP replacements.
József Váradi
Acting Chief Financial Officer
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
23
STRATEGIC REPORT
KEY STATISTICS
CAPACITY
Number of aircraft at end of period
Equivalent aircraft
Utilisation (block hours per aircraft per day)
Total block hours
Total flight hours
Revenue departures
Average departures per day per aircraft
Seat capacity
Average aircraft stage length (km)
Total ASKs (’000 km)
OPERATING DATA
RPKs (revenue passenger kilometer) (’000 km)
Load factor (%)
Number of passenger segments
Fuel price (US$ per ton, including hedging impact and
into-plane premium)
Foreign exchange rate (US$/€ including hedging impact)
FINANCIAL MEASURES
Yield (revenue per RPK, € cents)
Average revenue per seat (€)
Average revenue per passenger (€)
RASK (€ cents)
CASK (including exceptional items) (€ cents)
CASK (excluding exceptional items) (€ cents)
Ex-fuel CASK (including exceptional items) (€ cents)
Ex-fuel CASK (excluding exceptional items) (€ cents)
Operating profit margin (including exceptional items) (%)
Operating profit margin (excluding exceptional items) (%)
Net profit margin for the period (profit after tax divided by
revenue) (%)
Underlying net profit margin for the period (%)
2016
2015
Change*
67
62.57
12.44
284,894
246,930
125,501
5.48
22,654,100
1,538
34,844,016
55
52.53
12.55
240,711
208,736
105,627
5.51
19,012,860
1,539
29,266,510
30,786,117
88.2
19,981,377
25,350,823
86.7
16,482,468
21.8%
19.1%
(0.9)%
18.4%
18.3%
18.8%
(0.5)%
19.2%
(0.1)%
19.1%
21.4%
1.7%
21.2%
740
1.20
4.64
63.09
71.52
4.10
3.43
3.43
2.27
2.27
16.5
16.5
13.5
15.7
986
1.32
(24.9)%
(9.0)%
4.84
64.55
74.46
4.19
3.62
3.61
2.27
2.26
13.6
13.9
14.9
11.9
(4.1)%
(2.3)%
(3.9)%
(2.2)%
(5.4)%
(5.2)%
0.3%
0.7%
20.9%
18.9%
(9.6)%
31.5%
* Percentage changes in this table are calculated by division of the two years’ KPIs also when the KPIs are expressed in percentage.
Wizz Air Holdings Plc Annual report and accounts 2016
24
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
Wizz Air operates in a dynamic, fast-paced and competitive industry. It is an industry where reputations and
businesses can be lost quickly if a risk is not anticipated and dealt with effectively.
This section of the report sets out our risk management process, as well as a short description of some of the
key risks that could, if not properly dealt with, affect Wizz Air’s future success, although it does not by any
means list all risks that might possibly affect our business. Risk management is itself a dynamic and developing
area and the Company understands that what was appropriate and adequate in the past may not continue to
be so as the Company continues to grow. The Directors will therefore continue to review risk management on
an ongoing basis to ensure that the processes used in the Company remain appropriate and adequate.
Our risk management process
The Board oversees the Company’s risk process and has delegated authority for this to the Audit Committee.
The Company’s Head of Internal Audit reports directly to the Chairman of the Audit Committee. Each year, a
risk universe exercise is undertaken with the Company’s senior and operational management. The results of
this exercise are used to produce an internal audit plan for the coming year. The internal audit plan generally
always covers internal control risks as well as some other enterprise risks.
Senior management reports to the Board at each of the scheduled Board meetings and the Board also
received a report from the Chairman of the Audit Committee at each of the scheduled Board meetings. These
reports include detailed assessment of, for example, commercial and operational risks which may have arisen
or been dealt with during the reporting period. In addition, the Board is kept updated by senior management
as and when specific risk issues arise between Board meetings.
As noted in the FY15 annual report, the Audit Committee and senior management are developing a
comprehensive risk analysis and reporting framework. The first stage of this development saw the creation of
a formal internal Risk Committee, which brings together the Company’s Leadership Team and a number of
other senior employees on a regular basis to consider and update the risks identified in the risk universe. Using
the risk universe as a basis, the Risk Committee identified the key risks to realising the Company’s strategic
goals and agreed with the Board that these would form the basis of regular, specific risk reports to the Board.
These key risks, many of which were already the subject of regular reporting and discussion between senior
management and the Board, are detailed below. In addition, and as part of the Company’s regular mid-term
planning process, management have, where appropriately measurable, provided financial models of the
possible effects of some of these key risks to the Board. The Board is therefore satisfied that it has carried out
a robust assessment of the principal risks facing the Company, including those that would threaten its business
model, future performance, solvency or liquidity.
To date, the Company’s small administrative headcount has ensured that consideration of risk has enjoyed
close oversight in relation to day-to-day matters by the Company’s senior management. The Board, however,
recognises that as the Company continues to grow, a more structured process of risk management is required.
Some areas of the Company’s business already have sophisticated risk analysis and mitigation processes in
place. For example, the Company’s flight operations are subject to a world-class risk assessment and
mitigation programme and the Company’s exposure to foreign exchange and fuel price changes is mitigated
through a Board-approved hedging programme administered by the Audit Committee. Risks and internal
controls relating to financial reporting were subject to a detailed and comprehensive analysis as part of the
Company’s preparations for its initial public offering in March 2015. For other areas, a comprehensive
enterprise risk management (”ERM”) programme appropriate for the Company’s business is being developed
and will be implemented in the coming months.
During the year, a review of the Company’s risk management and internal control systems was carried out.
Ernst & Young has been engaged to provide expert advice and to work with senior management and the Risk
Committee to ensure that the ERM project enhances and develops the Company’s risk management activities
and internal control processes and puts them in a framework appropriate not only for the coming year, but
the coming decade.
Wizz Air Holdings Plc Annual report and accounts 2016
25
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risks relating to the Group
Introduction
The key risks identified by the Risk Committee fall into six broad groupings:
E
information technology and cyber risk, including website availability, protection of our own and our
customers’ data and ensuring the availability of operations-critical systems;
E external factors, such as fuel cost, foreign exchange rates, competition and geopolitical risk;
E product development, making sure that we are making the best use of our capacity and ensuring that we
have access to the right airport infrastructure at the right price so that we can keep on delivering the
superior Wizz Air service at low fares across an ever wider network;
E
fleet development, to ensure the Company has the right number of aircraft available at the right time to
take advantage of commercial opportunities and grow in a disciplined way;
E operations, including safety events; and
E human resources, whether being able to recruit the right number of colleagues of the right quality to
continue to grow or, once recruited, ensuring that they remain sufficiently engaged and motivated.
Information technology and cyber risk
Wizz Air is, primarily, an e-business. During FY16, 97% per cent. of bookings were made through our website
and mobile applications. We are therefore dependent on our information technology systems to receive,
process and manage ticket reservations, process credit and debit card payments, check in passengers, manage
our traffic network, perform flight operations and engage in other critical business tasks. Our website is our
shop window and therefore it is critical that it is secure and reliable. We outsource the hosting and operation
of these systems to a number of IT suppliers. However, we retain an experienced internal team to oversee the
operation of these systems and include suitable contractual recovery and other key performance standards
with each of our key IT suppliers. We have also increased the number of card acquirers and payment service
providers that we use, with each provider being an effective back-up for the others. We will continue to review
our business-critical systems to ensure that the appropriate level of back-up is in place. Business continuity
processes are also tested and we have procedures in place to ensure that key staff can be relocated to an
alternative location should our normal offices become unusable.
Cyber risk is a hugely important consideration for a business such as ours and is one of the areas on which
specific work has been done with the Board over the last year. Our systems could be attacked in a number of
ways and with varying outcomes – for example, unavailability of our website or operations-critical systems or
theft of our or our customers’ data. Quite apart from immediate commercial loss, any loss of customer data is
likely to result in considerable loss of confidence of our customers. While we have implemented additional
security measures both internally and with our suppliers, cyber security is a constantly evolving challenge. Our
in-house IT Security function will constantly review emerging threats and provide regular updates to the Board
on actions being taken by the Company to safeguard its systems.
External risks
We are a truly international business and, while we report in Euros, we transact in 19 currencies. We also
have to make a large number of payments in US Dollars. Appreciation of the US Dollar against the Euro may
impact results and margins. Therefore, to reduce our exposure to currency fluctuations in respect of costs
incurred in US Dollars, we engage in Euro/US Dollar hedging in accordance with a Board-approved hedging
policy. Transactions are subject to the approval of the Audit Committee.
Fuel accounted for 34 per cent. of our total operating cost in FY16. A rise in fuel prices could significantly
affect our operating costs. We therefore hedge our aviation fuel cost in accordance with a Board-approved
hedging policy. The Audit Committee is involved in and approves each hedging decision.
Competition is one of the key risks to our business. The airline industry in Europe is fiercely competitive. We
have yet to see consolidation on the scale experienced in, for example, the United States and so there are a
large number of airlines, including ultra-low-cost and low-cost carriers, traditional airlines and charter airlines,
competing throughout our network. Our competitors may seek to protect or gain market share in markets in
which we operate, perhaps by offering discounted fares or more attractive schedules. We believe that
competition is good for the industry – both for consumers, who benefit from lower prices, as well as airlines
themselves, as they must embrace cost discipline – but we must react to a competitive threat. We constantly
seek to enhance our customer offering and the comprehensive re-branding unveiled in May 2015 has put the
WIZZ brand in a strong position to continue its success in the future. Ultimately, our key competitive strength
is our commitment to driving our cost ever lower while delivering a superior customer service. We firmly
believe that, in a tough market, lowest cost ultimately wins and the necessary cost discipline is something to
which we are committed, day in, day out. Competition can, however, adversely
Wizz Air Holdings Plc Annual report and accounts 2016
26
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risks relating to the Group continued
External risks continued
affect revenues and so we constantly monitor our competitors’ actions and the performance of our route
network to ensure that we take both reactive and proactive actions in a timely manner, as required.
We are exposed to political and economic events and trends in CEE and elsewhere. Our business extends
beyond the borders of the EU and into countries such as Russia, Turkey and Ukraine and regions including
the Caucasus, North Africa and the Middle East. These and other countries in the region have experienced,
and may still be subject to, potential political and economic instability caused by changes in governments,
political deadlock in the legislative process, contested election results, tension and conflict between federal
and regional authorities, corruption among governmental officials, social and ethnic unrest and currency
instability. We maintain close relationships with local authorities and, as an organisation, we are able to react
quickly to adverse events. As reported last year, unrest in Ukraine led to the decision to close the operations
of Wizz Air Ukraine Airlines LLC. This year, following the terrorist event in Sharm el-Sheikh, we took the
decision to stop operations not only from Sharm el-Sheikh but also Hurghada and, for the few flights we
operated after that decision was taken to ensure our customers were able to travel home, we implemented
significantly enhanced security measures provided by our own contracted security company. We also work
closely with a security advisory company to assess the security threat in each of own destination airports.
Like all European airlines, we have prospered in a liberalised regulatory environment which makes the free
movement of people throughout the European Union a reality. Any event which adversely affects either the
liberalised operating environment or the free movement of people has the potential to affect our business.
We are therefore awaiting the outcome of the United Kingdom’s European Union membership referendum
with interest. Even if there were to be a vote in favour of the United Kingdom leaving the European Union, it
is not clear what this would mean in practice or how it would affect airlines. While we have a strong United
Kingdom business, we have always believed that diversification of our network and our customers is a key
part of a sustainable business. That remains the case and we are confident that there remains a large
addressable market in CEE which will continue to provide opportunities for profitable growth.
Product development
We do not just compete for customers, we compete for access to infrastructure too. Wizz Air has big plans
– but as we grow, we need more terminal space, slots and aircraft parking to be able to operate our flights.
Certain airports to which we operate may already be or become congested, meaning we may not be able to
secure access to those airports at our preferred times and, therefore, when we have slots we need to make
sure that we retain them. We mitigate this risk by operating primarily from secondary airports which have
significant spare capacity and, where we do fly to congested airports, our flights often constitute in-bound
traffic for such airports and take up off-peak capacity. However, we ensure that we maintain close working
relationships with relevant airport authorities and slot co-ordinators and we are continually improving our
system to ensure that slot requests and submissions are made in a timely way – and used in a way that delivers
the maximum benefit for the Company.
Fleet development
Our planned growth means we need planned aircraft deliveries. Wizz Air has big plans – we will continue to
grow and we will continue to be ready to respond to competitive challenges. However, in order to do so, we
need capacity and that means that we need an appropriate supply contract for new aircraft. And the emphasis
here is on new aircraft – we currently operate one of the youngest fleets in Europe, with an average age of
4.2 years and that means we have a more efficient fleet which is more reliable and therefore able to be utilised
for over twelve hours a day. For the business, that means lower unit operating costs and for our customers,
lower prices. Our existing order book with Airbus as at 31 March 2016 comprises a further 34 Airbus A320ceo
family aircraft, split into 8 A320ceo and 26 A321ceo deliveries and all of which will be delivered before the end
of 2018. From 2019 onwards, we will start to take delivery of the A321neo aircraft ordered at the Paris Air Show
in June 2015. That gives a confirmed delivery stream until the end of 2024, at which point Wizz Air will be an
airline operating 155 aircraft. As has been the case in the past, we will continue to ensure that we operate a
young, fuel-efficient and reliable fleet of aircraft and that deliveries of new aircraft support our growth.
A large aircraft order is a significant financial commitment and so requires financing. To date, we have
financed all of our new aircraft deliveries through sale and leaseback arrangements. This will continue to be
the case for the remaining A320ceo family deliveries through to the end of 2018, for which we already have in
place sale and leaseback financing arrangements either in fully committed form (13 aircraft) or in the form of
letter of intent (21 aircraft). We are now starting to consider the best options for financing the first A321neo
deliveries from 2019 – we are confident that, given the aircraft’s desirability as a result of its superior operating
economics and Wizz Air’s established strong financial track record, finance will be readily available on
competitive terms.
Wizz Air Holdings Plc Annual report and accounts 2016
27
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risks relating to the Group continued
Operational risks
Safety events. An accident or incident, or terrorist attack, can adversely affect an airline’s image and
customers’ willingness to travel with that airline.
At Wizz Air, our number one priority is the safety of our aircraft, passengers and crew. Our aircraft fleet is
young and reliable, we use the services of world-class maintenance organisations and we have a strong safety
culture. A cross-functional safety council meets twice a year, involving both senior management as well as
operational staff, and reviews any issues which have arisen in the past six months and the actions taken as a
consequence. In addition to this, we collect detailed data from all aspects of our operation in order to identify
trends and relevant personnel from our Operations department meet twice a year to discuss any trends
identified in their sphere of operation and how they are being dealt with. We also operate an anonymous safety
reporting system, to allow our flight and cabin crew to report safety issues which are a concern to them. Our
entry standards for operating crew are high and our own Approved Training Organisation (ATO) ensures that
all of our pilots are trained to the same exacting standards.
Our experienced Security team has an ongoing programme to check that the security of our operations and
the airports which we serve meet high standards. We know that the proper management of risk means that
we must anticipate and deal with issues in advance. Our Security team also maintains close contact with
relevant authorities in order to assess any potential security or other threats to our operations. Any serious
threat will be escalated to senior management. We have in the past suspended operations to destinations
where the safety of our aircraft, passengers and crew cannot be guaranteed. In December 2015, Wizz Air
Hungary Ltd. was named as a company of strategic importance by the Hungarian Parliament and, as such, the
Company now enjoys enhanced security information and protection under the auspices of the Hungarian
Constitution Protection Office.
Human resources
Wizz Air is a people business. We know that our people are the backbone of our business and it is their
dedication, day in, day out, that allows us to deliver our low-cost, quality service. But we know that we cannot
take our people for granted and that competition for the high quality people who we seek is keen and may
become even more so.
E From time to time, pilots and others can be in short supply. We invest a huge amount of time in recruiting
pilots and also training them to maintain our high standards. In order to ensure the future availability of
pilots of the right calibre, we have recently announced a five-year training partnership with CTC Aviation
Training and Central European Flight Academy, to provide cadet pilots to Wizz Air. We have also
introduced an innovative scheme which allows pilots who are currently turboprop captains to transition
quickly to a position with Wizz Air.
E We are proud that, to date, we have maintained a good relationship with our employees and we have not
experienced industrial unrest. We strive to make sure that this will remain the case, but we realise that
there can be no guarantee. We know that we need to ensure that we continue to motivate our colleagues.
Feedback is an essential part of this process – both giving and receiving – and we consider direct
communication between senior management and other employees as the best way of listening to our
employees’ concerns. Visits by senior management to each of our operating bases are organised annually
and, this year, we launched an online and in-person employee feedback programme which allowed every
employee to provide direct feedback anonymously. The results will be communicated to the whole Wizz
team, together with actions to address any issues raised.
E Our success to date has also depended on a number of key personnel, including our Chief Executive
Officer, other senior managers and post holders required by regulation. Our continuing success will
depend on having the right people in those key positions. While, in the past, we have successfully recruited
for those positions, we recognise that we have a pool of talent within the Company and have recently
started a talent assessment and leadership development programme for our staff. During the 2016
financial year and as we announced on 4th November 2015, the Company entered into a new service
contract with our Chief Executive Officer for a term of five years, subject to six months’ notice on either
side. We are also pleased to confirm that, after a period of medical leave, John Stephenson has returned
to work as the Company’s Executive Vice President.
József Váradi
Chief Executive Officer
Wizz Air Holdings Plc Annual report and accounts 2016
28
GOVERNANCE
Wizz Air Holdings Plc Annual report and accounts 2016
29
GOVERNANCE
CORPORATE GOVERNANCE REPORT
A COMPANY COMMITTED TO HIGH STANDARDS OF CORPORATE GOVERNANCE
Chairman’s statement on corporate governance
It is now just over a year since Wizz Air’s ordinary shares of £0.0001 each (Ordinary Shares) were admitted to
the premium listing segment of the UK Listing Authority’s Official List and to trading on the London Stock
Exchange’s Main Market for listed securities. In the first year of Wizz Air’s life as a listed company, the Company
reported record profits and the Company’s valuation saw Wizz Air admitted to the FTSE 250. As Wizz Air as
a company has continued to grow in size, value and reputation, so Wizz Air’s Directors have sought to ensure
high standards of corporate governance.
As Chairman, my primary aim is to ensure that the Board provides effective leadership of the Company. The
Board recognises that it must continually re-appraise its involvement in the Company’s business and also its
own constitution and processes, so that its capabilities grow alongside the Company. Reflecting this
continuous re-appraisal, I am delighted to report that Susan Hooper joined the Board on 1 March 2016. Susan
brings to Wizz Air a wealth of experience from both her executive career, where she developed outstanding
credentials in the leisure sector, and also her non-executive career, where she has a great deal of experience
as a non-executive director of UK listed companies.
While Wizz Air’s Board is made up of individuals with significant listed company experience, the Directors
recognise the value of reviewing current procedures and processes in order to ensure that they remain
appropriate for the Company as it grows. During the financial year ended 31 March 2016, Lintstock Ltd.
conducted a performance evaluation of the Board, its committees and individual Directors. The process
enabled all Directors to give feedback on the Board and its committees’ constitution and processes, as well as
the individual performance of me, as Chairman, and the committee chairmen and their own performance and
development needs. The results of the performance evaluation were shared with and discussed by all Directors
and a number of actions are being implemented both to build on current strengths and to ensure that
processes continue to develop in an appropriate way.
As I mentioned in my statement on corporate governance in the Company’s annual report for the 2015 financial
year, the Board had requested that the Audit Committee further develop the comprehensive risk assessment
and mitigation reviews already carried out by the Company’s Internal Audit function. Indeed, while the Board’s
risk oversight has been appropriate for the Company to date, feedback given as part of the Board’s
performance appraisal suggested that the Company should develop a more structured enterprise risk
management system. That process is already underway, with the Company’s management working with Ernst
& Young to implement the enterprise risk management system during the course of the current financial year
(FY 2017).
I also noted in my statement on corporate governance in the Company’s annual report for the 2015 financial
year that there was one area where an exception to full compliance with the UK Corporate Governance Code
(September 2012) had been approved by the Directors. This exception related to three Directors, namely
Stephen L. Johnson, John R. Wilson and me, who have been nominated to hold office as Non-Executive
Directors by Indigo Hungary LP and Indigo Maple Hill L.P. (together, “Indigo”), as contemplated by the
relationship agreement entered into by Indigo and Wizz Air and which is described in the section headed “Our
key Shareholders” below. The Directors had agreed that, in order to retain appropriate expertise on the
Company’s Board and its committees, Stephen L. Johnson and John R. Wilson should remain members of the
Company’s Audit Committee and Remuneration Committee respectively until 2 March 2016 at the latest. As
contemplated, Stephen L. Johnson and John R. Wilson stepped down from their respective committee
positions with effect from 1 March 2016. At the same time, Susan Hooper was appointed to the Company’s
Audit Committee and Remuneration Committee, bringing the constitution of those committees in line with the
requirements of the UK Corporate Governance Code (September 2014) (the “Corporate Governance Code”).
I would like to thank both Mr Johnson and Mr Wilson for their expert and valuable contributions to the
committees over the years.
The Company’s first year in public life has seen a number of changes in our Shareholders. While we have
welcomed new investors to the Company, we have also seen some Shareholders who supported the initial
public offering not only retain their holdings but increase them. The Board thanks each and every one of our
investors for the faith they have shown in the Company’s business and, also, recognises the trust that the
Shareholders have placed in the Board and senior management. Over the course of the last year, a large
number of meetings with investors were organised by senior management and, in addition, I have also spoken
to a number of Shareholders myself. Any concerns or comments raised were fed back to the Board.
Once again, I would stress that the trust that both investors and other stakeholders have placed in the Board
is not taken for granted. We will continue to develop our processes to ensure that our policy of ensuring high
standards of governance appropriate for the Company is maintained in the future.
Wizz Air Holdings Plc Annual report and accounts 2016
30
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
The Directors support high standards of corporate governance and it is the policy of the Company to comply
with current best practice in UK corporate governance to the extent appropriate for a company of its size. The
Board intends that the Company will comply fully with the requirements of the Corporate Governance Code
(September 2014) during the 2017 financial year, save as set out below:
a) William A. Franke, the Chairman, does not meet the independence criteria set out in the Corporate
Governance Code, given that he is the managing partner of Indigo. However, given the benefits to the
Company of his recognised experience in the airline industry, the Board believes that Mr Franke should
continue as Chairman.
b) The underlying principles of the Company’s remuneration policy, described in more detail in the
Remuneration Report on pages 49 to 53, are that: (i) remuneration must be competitive whilst not being
more than is necessary to attract, retain and motivate executive management of the quality required to
continue to run the Company successfully; and (ii) a significant proportion of remuneration remains
performance based. Following a period of consultation with a large number of significant Shareholders,
the policy was approved by the Company’s Shareholders at the Company’s 2015 annual general meeting
and will remain in place for a period of three years. The policy does not include provisions allowing the
Company to recover sums paid or withhold the payment of any sum as mentioned in paragraph D.1.1. of
the Corporate Governance Code. The Company believes that the policy as approved by Shareholders
reflects the Company’s preference to keep all aspects of its business as simple as possible. Nonetheless,
the Company has been transparent with its Shareholders in this respect and the Remuneration Committee
will continue to review all aspects of the remuneration policy on an ongoing basis to ensure that it
continues to align with the Company’s and Shareholders’ interests.
The Board considers that it and the Company have, during FY16, complied with the Corporate Governance
Code, save as set out above and as follows:
c) Stephen L. Johnson, who is not considered to be an independent Non-Executive Director given his past
position with Indigo, was a member of the Audit Committee until 1 March 2016. As noted in the Company’s
annual report for the 2015 financial year, the Board considered that given Mr Johnson’s experience and
familiarity with the Group, and the fact that the Audit Committee Chairman, Mr Duffy, had at the time been
recently appointed to the Board, Mr Johnson should remain on the Audit Committee until 2 March 2016,
at the latest. On 1 March 2016, Mr Johnson stepped down from his membership of the Audit Committee
and Ms Susan Hooper, an independent Non-Executive Director, was appointed to the Audit Committee.
Therefore, until 1 March 2016 and as contemplated in the annual report for the 2015 financial year, the
Company did not comply with the provisions of paragraph C.3.1. of the Corporate Governance Code, which
requires all members of the Audit Committee to be independent Non-Executive Directors. However, from
1 March 2016, the Company did comply with the provisions of paragraph C.3.1. of the Corporate
Governance Code.
d) John R. Wilson, who is not considered to be an independent Non-Executive Director as he is a principal of
Indigo, was a member of the Remuneration Committee until 1 March 2016. As noted in the Company’s
annual report for the 2015 financial year, the Board considered that given Mr Wilson’s experience and
familiarity with the Group, and the fact that the Remuneration Committee Chairman, Mr Demuynck, had
at the time been recently appointed to the Board, Mr Wilson should remain on the Remuneration
Committee until 2 March 2016, at the latest. On 1 March 2016, Mr Wilson stepped down from his
membership of the Remuneration Committee and Ms Susan Hooper, an independent Non-Executive
Director, was appointed to the Remuneration Committee. Therefore, until 1 March 2016, the Company did
not comply with the provisions of paragraph D.2.1. of the Corporate Governance Code, which requires all
members of the Remuneration Committee to be independent Non-Executive Directors. However, from
1 March 2016, the Company did comply with the provisions of paragraph D.2.1. of the Corporate
Governance Code.
e) The general meeting to approve the proposed purchase of 110 Airbus A321neo aircraft from Airbus was
convened 13 working days prior to the date of the meeting and therefore the requirement in paragraph
E.2.2 of the Corporate Governance Code for the notice of general meetings and related papers to be sent
to shareholders at least 14 working days in advance was not met. Given the commercial imperative to
conclude the transaction as soon as possible, the Board decided on this occasion to provide for one day
less than the 14 working day period.
The Corporate Governance Code is issued by the Financial Reporting Council and is available for review on
the Financial Reporting Council's website: www.frc.org.uk.
Wizz Air Holdings Plc Annual report and accounts 2016
31
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
CONTINUED
Our key Shareholders
As at 31 March 2016, the Company had been notified pursuant to DTR 5 of the Financial Conduct Authority’s
Disclosure Rules and Transparency Rules (the DTRs) that the following Shareholders held more than
3 per cent. of the Company’s issued Ordinary Shares:
Shareholder
Indigo Hungary LP
FMR LLC
Old Mutual Plc
Indigo Maple Hill LP
PAR Capital Management Inc.
Váradi, J.J.
AGTA Invest Co. Ltd
Shareholding
14.49 per cent.
9.97 per cent.
8.50 per cent.
4.38 per cent.
4.34 per cent.
4.08 per cent.
3.45 per cent.
Reported number of shares
8,245,590
5,673,069
4,837,683
2,495,043
2,470,555
2,320,500
1,962,208
As at 23 May 2016, being the latest practicable date before the approval of the annual report and accounts,
the positions were the same as listed above for 31 March 2016.
Changes in interests that have been notified to the Company pursuant to DTR 5 of the DTRs since 23 May 2016
can be found in the Regulatory News section of the Investor Relations page of the Company’s corporate
website: http://corporate.wizzair.com/en-GB/investor_relations/news/press_releases.
Our relationship with Indigo
On 31 March 2016, Indigo (Indigo Hungary LP and Indigo Maple Hill L.P. together) held 18.87 per cent. of the
Company’s issued Ordinary Shares, as well as 44,830,503 convertible shares of £0.0001 each in the capital of
the Company (“Convertible Shares”). The Convertible Shares do not have any right to participate in the
Company’s profits and are, save in very limited circumstances, non-voting. These limited circumstances include
the consideration of a resolution for the winding-up of the Company or the variation of the rights attaching to
the Convertible Shares or any variation of the rights attaching to the Ordinary Shares into which the
Convertible Shares may be converted.
Each Convertible Share may be converted into one Ordinary Share, as long as the ownership of the Company
remains compliant with applicable EU ownership and control rules. Indigo also holds a number of convertible
notes which may be converted into Ordinary Shares, again provided that the Company’s ownership remains
compliant with EU ownership and control rules. The terms of these convertible notes are governed by a note
purchase agreement dated 24 February 2015 and entered into between the Company, Wizz Air Hungary Ltd.
and Indigo. Our Chairman, William A. Franke, is the managing partner of Indigo.
According to the Financial Conduct Authority’s Listing Rules (the “Listing Rules”), any person who exercises
or controls the exercise, on their own or together with any person with whom they are acting in concert,
30 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of a
company are known as “controlling shareholders”. The UK Listing Authority takes the view that, in the
circumstances, Indigo is a controlling shareholder of the Company for these purposes. The Listing Rules require
companies with controlling shareholders to enter into a written and legally binding agreement which is
intended to ensure that the controlling shareholder complies with certain independence provisions. The
agreement must contain undertakings that:
a) transactions and arrangements with the controlling shareholder (and/or any of its associates) will be
conducted at arm’s length and on normal commercial terms;
b) neither the controlling shareholder nor any of its associates will take any action that would have the effect
of preventing the listed company from complying with its obligations under the Listing Rules; and
c) neither the controlling shareholder nor any of its associates will propose or procure the proposal of a
Shareholder resolution which is intended or appears to be intended to circumvent the proper application
of the Listing Rules.
Wizz Air entered into a relationship agreement with Indigo dated 24 February 2015. The key terms of this
relationship agreement are set out below.
Wizz Air Holdings Plc Annual report and accounts 2016
32
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
CONTINUED
Our key Shareholders continued
Our relationship with Indigo continued
Independence
Indigo has undertaken to exercise its voting powers in relation to the Company to ensure that the Company is
capable of operating and making decisions for the benefit of the Shareholders of the Company as a whole and
independently of Indigo at all times. In addition, Indigo has undertaken that it will not, and will procure that
none of its associates will: (a) take any action that would have the effect of preventing the Company from
complying with its obligations under the Listing Rules; and (b) propose or procure the proposal of a
Shareholder resolution which is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
Board
Indigo may nominate: (a) three Directors to the Board if Indigo and its associates hold in excess of 30 per cent.
of the fully converted share capital of the Company (i.e. assuming the conversion in full of all Convertible
Shares and Convertible Notes); (b) two Directors to the Board if Indigo and its associates hold in excess of
20 per cent. of the fully converted share capital; or (c) one Director to the Board if Indigo and its associates
hold in excess of 10 per cent. of the fully converted share capital (each an “Indigo Director”). If Indigo and/or
its associates no longer hold at least 30, 20 or 10 per cent., respectively, of the fully converted share capital of
the Company, then Indigo has agreed to procure, insofar as it is legally able to do so, that the appropriate
number of Indigo Directors resigns from the Board unless a majority of the independent Directors resolve that
any Indigo Director should remain on the Board.
Indigo may not nominate any person to be an Indigo Director whose re-election has been proposed to, but
not approved by, the holders of Ordinary Shares in general meeting, or who has been removed from office by
a resolution of the holders of Ordinary Shares.
Indigo may also nominate one Indigo Director to each of the Audit Committee and the Remuneration
Committee until the earlier of: (a) twelve months from Admission; or (b) Indigo and its associates ceasing to
hold at least 10 per cent. of the fully converted share capital of the Company.
The Board shall manage the Company independently of Indigo in accordance with the articles of association,
the Listing Rules and applicable law. The parties have also agreed that at least half of the Board (excluding the
Chairman) shall comprise independent Non-Executive Directors, the Nomination Committee shall consist of a
majority of independent Directors and, save as set out in the paragraph above, the Remuneration and Audit
Committees shall consist only of independent Directors.
Arm’s length transactions
All transactions and relationships between the Company and Indigo or any of their associates shall be
conducted at arm’s length, on a normal commercial basis and in accordance with the related party transaction
rules set out in Chapter 11 of the Listing Rules.
Provision of information and confidentiality
Indigo shall, subject to the Company’s obligations under all applicable laws (including, without limitation, the
Listing Rules and the DTRs), be provided with financial, management and/or other information relating to
any member of the Group as Indigo (or any of its associates) may reasonably require for the purposes
of any internal or external reporting requirements which the relevant party is required by internal compliance,
law or regulation to make. Indigo may disclose any such financial, management and/or other information
to its associates provided that: (a) Indigo will (and will procure that any associate to whom any information
is passed will) keep confidential any such information; (b) such information does not include information
relating to any transaction between the Company and Indigo or any of their associates obtained as a result
of an Indigo Director’s position as a Director; (c) disclosure would not result in the breach by the
Company of the Disclosure and Transparency Rules or require the Company to make a public
announcement; and (d) the name of such persons to whom information is disclosed is added to the
Company’s insider list.
Wizz Air Holdings Plc Annual report and accounts 2016
33
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
CONTINUED
Our key Shareholders continued
Our relationship with Indigo continued
Confirmation regarding compliance
The Board confirms that, since the entry into the relationship agreement, on 24 February 2015, until
24 May 2016, being the latest practicable date prior to the publication of this report:
a) the Company has complied with the independence provisions included in the relationship agreement; and
b) so far as the Company is aware, the independence provisions included in the relationship agreement have
been complied with by Indigo.
Engaging with our Shareholders
Wizz Air recognises the need to engage with its Shareholders.
Over the course of the past year, the Company’s Investor Relations department has arranged a number of
meetings and roadshows, timed around the release of financial results, with investors and the Chairman has
had personal meetings with a number of Shareholders. At the 2015 Annual General Meeting, attended by all of
the Directors, both the Chairman and the Senior Independent Non-Executive Director, along with the chairmen
of the Audit Committee and the Remuneration Committee, were available to answer questions from investors.
The Chairman, the Senior Independent Non-Executive Director and the chairmen of the Audit Committee and
the Remuneration Committee will be present at the 2016 Annual General Meeting and, again, will be available
to answer questions from investors.
A report on investor relations is presented by the Chief Financial Officer and, in the absence of the Chief
Financial Officer, the Head of Investor Relations at each Board meeting, during which feedback from meetings
held by senior management with investors is provided. The Board is supplied with copies of analysts’ and
brokers’ briefings as they are received.
Reflecting the importance that the Company places on being transparent with its Shareholders, key
Shareholders were consulted on certain aspects of the proposed remuneration policy before it was put to a
Shareholder vote at the 2015 Annual General Meeting.
Wizz Air Holdings Plc Annual report and accounts 2016
34
GOVERNANCE
MANAGEMENT OF THE COMPANY
The Board of Directors
Effective oversight of Wizz Air’s business is the key function of the Board. Key to this oversight is the approval
of the Company’s long-term strategy and commercial objectives and these matters are reserved to the Board,
along with the approval of annual operating and capital expenditure budgets and any changes thereto. Other
key areas also reserved to the Board include financial reporting and controls, internal controls, the review and
approval of key contracts, Board membership, the remuneration of Directors and senior executive employees,
corporate governance and the review of safety issues.
Board membership
Wizz Air’s Board currently comprises one Executive and eight Non-Executive Directors, which the Directors
consider to be an appropriate Board structure. The current Directors bring a wealth of experience from both
the worldwide aviation industry as well as other international industries and so together bring to the Company
an appropriate breadth, depth and balance of skills, knowledge, experience and expertise. The Directors who
have served since the beginning of the 2016 financial year are:
Name
Executive Director
József Váradi
Non-Executive Directors
William A. Franke
Thierry de Preux
Guido Demuynck
Simon Duffy
Stephen L. Johnson
John McMahon
John R. Wilson
Susan Hooper
Position
Committee membership (as at 31 March 2016)
Chief Executive Officer
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director,
Senior Independent Director
Non-Executive Director
Non-Executive Director
Nomination Committee
Remuneration Committee
Remuneration Committee
Audit Committee, Nomination Committee
Audit Committee, Nomination Committee
Audit Committee, Remuneration
Committee
William A. Franke, Chairman
Mr Franke has been Chairman of Wizz Air since 2004. The Chairman’s role is to lead the Board and ensure that
it operates effectively. Mr Franke is the founder and managing partner of Indigo, a private equity fund focused
on air transportation, and chairman of Frontier Airlines, Inc. From 1998 to 2001, Mr Franke was a managing
partner of Newbridge Latin America, a private equity fund focused on Latin America. Mr Franke was the
chairman and chief executive officer of America West Airlines from 1993 to 2001 and currently serves on the
board of directors of Concesionaria Vuela Compañía de Aviación, S.A. de C.V., a Mexican airline that does
business as Volaris. He served as chairman of Spirit Airlines Inc., a United States airline, from 2006 to 2013 and
Tiger Aviation Pte. Ltd, a Singapore-based airline, from 2004 to 2009, and held directorships in Alpargatas
S.A.I.C., an Argentina-based footwear and textiles manufacturer, from 1996 to 2007, and Phelps Dodge
Corporation, a mining company, where he served as the lead outside director for several years, from 1980 to
2007. He has in the past served on a number of publicly listed company boards of directors including ON
Semiconductor, Valley National Corporation, Southwest Forest Industries and the Circle K Corporation.
Mr Franke has both undergraduate and law degrees from Stanford University and an honorary PhD from
Northern Arizona University.
József Váradi, Chief Executive Officer
Mr Váradi was one of the founders of Wizz Air in 2003. Mr Váradi worked at Procter & Gamble for ten years
between 1991 and 2001, and became sales director for global customers where he was responsible for major
clients throughout eleven EU countries. He then joined Malév Hungarian Airlines, the Hungarian state airline,
as chief commercial officer in 2001, before serving as its chief executive officer from 2001 to 2003. He has also
held board memberships with companies such as Lufthansa Technik Budapest (supervisory board,
2001-2003) and Mandala Airlines (board of commissioners, 2007–2011). In 2007, Mr Váradi won the Ernst &
Young Hungary “Brave Innovator” award. Mr Váradi holds a master’s degree in economics from the Budapest
University of Economic Sciences and a master’s degree in law from the University of London.
Thierry de Preux, Non-Executive Director
Mr de Preux was a founding Shareholder of Wizz Air in 2003 and joined the Board in 2012. A qualified chemical
engineer, Mr de Preux completed his master of business administration at Harvard Business School and went
on to become a general manager at the Nestlé Group. He subsequently spent 17 years as the head of the Swiss
division of Korn/Ferry International, where he specialised in board consulting and recruitment. In 2008,
Mr de Preux founded the Swiss Board Members Forum, an association including board members of the
20 largest companies on the Swiss Market Index.
Wizz Air Holdings Plc Annual report and accounts 2016
35
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
The Board of Directors continued
Board membership continued
Guido Demuynck, Non-Executive Director
Mr Demuynck joined the Board in February 2014. Mr Demuynck spent more than 25 years with Koninklijke
Philips N.V., holding various roles including general manager, portable audio business line, general manager,
audio business group and Marantz, and chief executive, consumer electronics (as a member of the group
management committee of Royal Philips Electronics and senior vice president). He then held the positions of
board member, responsible for the mobile division, at KPN (Koninklijke) N.V. and chief executive of Kroymans
Corporation B.V. and Liquavista B.V. Mr Demuynck is currently a member of the supervisory board and
chairman of the remuneration committee of TomTom N.V., a member of the board of directors and of the
audit committee of Belgacom N.V., a member of the supervisory board of each of Teleplan International N.V.,
Divitel Holding B.V. and Aito B.V. and chairman of the audit committee of Belgacom SA. Mr Demuynck has a
master’s degree in applied economics (magna cum laude) from the University of Antwerp and a master’s
degree in marketing and distribution (magna cum laude) from the University of Ghent.
Simon Duffy, Non-Executive Director
Mr Duffy joined the Board in January 2014. Mr Duffy started his career at NM Rothschild & Sons Ltd and has
held positions at Shell International Petroleum Co, Bain & Co, Consolidated Gold Fields Plc, Guinness Plc, Thorn
EMI Plc (where he held the position of deputy chairman and group finance director), World Online International
B.V. (where he held the position of deputy chairman and chief executive), End2End AS (where he held the
position of chief executive), Orange SA (where he held the position of chief financial officer), NTL:Telewest
Inc. (where he held the position of executive vice chairman) and Tradus Plc (where he held the position of
executive chairman). Mr Duffy has extensive London Stock Exchange non-executive director experience. He
has sat on the board of, amongst others, Gartmore Plc, HMV Group Plc, GWR Group Plc and Imperial Tobacco
Plc. He is currently chairman of You View Ltd., which is a joint venture between British Telecom, TalkTalk and
all the leading broadcasters in the United Kingdom and chairman of M Blox Inc. He is a non-executive director
of Oger Telecom, a Middle East telecommunications company, and of Modern Times Group AB, one of
Europe’s largest broadcasting companies listed on the Stockholm Exchange, where he is chairman of the audit
committee. Mr Duffy has a BA in philosophy, politics and economics from Oxford University and an MBA from
Harvard Business School.
Susan Hooper, Non-Executive Director
Ms Hooper was appointed to the Board of Directors as a Non-Executive Director in March 2016 and serves on
Wizz Air's Audit and Remuneration committees. A UK national, Ms Hooper was managing director of British
Gas Services, leading the service and repair, central heating installations, electrical services and Dyno-Rod
business units until November 2014. She joined British Gas from the Acromas Group, where she was chief
executive of the travel division, responsible for Saga holidays and hotels, Saga cruises, Spirit of Adventure
cruises, Titan Travel and the travel division of the AA. Previously, Ms Hooper held senior roles at Royal
Caribbean International, Avis Europe, PepsiCo International, McKinsey & Company and Saatchi & Saatchi.
During her time with PepsiCo International, Ms Hooper spent over five years based in Central and Eastern
European countries. She is currently a non-executive director of Affinity Water Ltd. and The Rank Group plc,
as well as being an advisory board member of LUISS Business School in Rome. From 2011 to 2014 she was a
non-executive director of Whitbread PLC and has held several other non-executive directorships, including at
First Choice plc, Transcom SA, Royal and Sun Alliance Group plc and Courtaulds Textiles Plc.
Stephen L. Johnson, Non-Executive Director
Mr Johnson joined the Board in 2004, left the Board in 2009 and was re-appointed as a Non-Executive Director
in 2011. Mr Johnson is executive vice president, corporate affairs for American Airlines Group Inc. and its
principal subsidiary, American Airlines, Inc. Previously, Mr Johnson served as executive vice president,
corporate and government affairs for US Airways. Prior to joining US Airways in 2009, Mr Johnson was a
partner at Indigo from 2003 to 2009. Between 1995 and 2003, Mr Johnson held a variety of positions with
America West Holdings Corporation prior to its merger with US Airways Group, including executive vice
president, corporate. Prior to joining America West, Mr Johnson served as senior vice president and general
counsel at GPA Group plc, an aircraft leasing company, and as an attorney at Seattle-based law firm Bogle &
Gates, where he specialised in corporate and aircraft finance and taxation. Mr Johnson earned his MBA and
Juris Doctor from the University of California, Berkeley, and a bachelor of arts in economics from California
State University, Sacramento.
Wizz Air Holdings Plc Annual report and accounts 2016
36
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
The Board of Directors continued
Board membership continued
John McMahon, Non-Executive Director
Mr McMahon has been a member of the Board since 2012. He has almost 30 years of experience in commercial
aviation, initially with Aer Lingus, GPA Group and GE Capital Aviation Services before later holding senior
management positions at debis AirFinance (now AerCap) and Lloyds TSB Bank. In 2006, he led the initial
public offering and New York Stock Exchange listing of Genesis Lease Limited, an aircraft leasing company,
where he served as chairman and chief executive officer until its merger with AerCap in 2010. Since then, he
has served as a consultant, director and lecturer. His non-executive directorships include Airspeed Limited,
BNP Paribas Ireland, Investec Aircraft Syndicate Limited, Turbine Engines Securitization Limited and Waypoint
Leasing Limited. Mr McMahon holds a bachelor of engineering degree from the National University of Ireland,
Galway, and post-graduate diplomas in accounting and finance (Association of Chartered Certified
Accountants) and computer modelling and simulation (Trinity College Dublin). He completed the Advanced
Management Program at Harvard Business School and is a Chartered Director of the Institute of Directors.
John R. Wilson, Non-Executive Director
Mr Wilson has been a member of the Board since 2005 and a principal of Indigo since 2004. Mr Wilson is a
member of the board of directors of Frontier Airlines, Inc., together with its holding companies, Frontier Airlines
Holdings, Inc. and Falcon Acquisition Group, Inc. Prior to that he served at America West Airlines from 1997 to
2004 as the vice president of financial planning and analysis, vice president of operations finance and other
senior finance positions. From 1991 to 1997 he was employed by Northwest Airlines where he last served as
director of finance for Asian operations based in Tokyo, Japan. Mr Wilson served on the board of Spirit Airlines
Inc. from 2009 to 2013 and served on the board of Vuela Compañía de Aviación, S.A.P.I. de C.V. from 2010 to
2012. Mr Wilson has an MBA from the Darden School of Business at the University of Virginia and an
undergraduate degree in finance from Texas Tech University.
Independence
The UK Corporate Governance Code recommends that at least half the members (excluding the chairman) of
the board of directors of a company with a premium listing should be non-executive directors, determined by
the board to be independent in character and judgment and free from relationships or circumstances which
are likely to affect, or could appear to affect, their judgment.
The Board has considered the independence of the Company’s Non-Executive Directors and has
concluded that:
a) William A. Franke, the Chairman, does not meet the independence criteria set out in the Corporate
Governance Code, given that he is the managing partner of Indigo (a significant Shareholder). However,
given the benefits to the Company of his recognised experience in the airline industry, the Board believes
that it is in the Company’s best interest that Mr Franke should continue as Chairman of Wizz Air.
b) Stephen L. Johnson is not considered to be an independent Non-Executive Director given his past position
with Indigo.
c) John R. Wilson is not considered to be an independent Non-Executive Director as he is a principal
of Indigo.
Other than William A. Franke, John R. Wilson and Stephen L. Johnson, the Company regards all of its
Non-Executive Directors, namely, Guido Demuynck, Simon Duffy, Thierry de Preux, Susan Hooper and John
McMahon, as independent Non-Executive Directors within the meaning of “independent” as defined in the
Corporate Governance Code and free from any business or other relationship which could materially interfere
with the exercise of their independent judgment. Accordingly, as an absolute majority of the Directors are
independent Non-Executive Directors, the Company complies with the requirement of the Corporate
Governance Code that at least half of the board (excluding the chairman) of a company with a premium listing
should comprise independent non-executive directors.
Senior Independent Non-Executive Director
The Corporate Governance Code recommends that the Board should appoint one of its independent
Non-Executive Directors as the Senior Independent Non-Executive Director. The Senior Independent
Non-Executive Director should be available to Shareholders if they have concerns that contact through
the normal channels of the Chairman or Chief Executive Officer has failed to resolve or where such contact
is inappropriate. John McMahon has been appointed as
Independent
Non-Executive Director.
the Company’s Senior
Wizz Air Holdings Plc Annual report and accounts 2016
37
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Senior management team
The Chief Executive Officer and senior management team are responsible for the management of the Group’s
business and implementation of the Group’s strategy on a day-to-day basis.
As at 24 May 2016, the Group’s senior management team, in addition to the Chief Executive Officer, is:
Name
John Stephenson
See note below
György Abrán
Diederik Pen
Owain Jones
Johan Eidhagen
David Morgan
Position
Executive Vice President
Chief Financial Officer*
Chief Commercial Officer
Chief Operations Officer
Chief Corporate Officer
Chief Marketing Officer
Chief Flight Operations Officer
* As announced by the Company on 2 March 2016, Sonia Jerez Burdeus has been appointed as the Group’s Chief Financial
Officer. She will take up her post on 1 June 2016.
John Stephenson, Executive Vice President
Mr Stephenson joined Wizz Air as Chief Commercial Officer in 2006, becoming Executive Vice President in
2009. He joined Wizz Air from EasyJet, where he worked from 1997 to 2006 as head of yield management,
head of revenue and scheduling, head of network development and, from 2005 to 2006, as acting commercial
director. Prior to joining EasyJet, Mr Stephenson worked for MVA Consultancy from 1991 to 1997 as a
consultant in the transport and financial fields. Mr Stephenson holds a bachelor of science degree in
mathematics for decision making from the University of Brighton.
György Abrán, Chief Commercial Officer
Mr Abrán joined Wizz Air in 2004 as Head of Pricing and Revenue Management and became Chief Commercial
Officer in 2009. Mr Abrán joined Wizz Air from McKinsey & Company, where he spent seven years, initially as
a business analyst and then as an engagement manager. His experience from McKinsey covers a wide range
of geographies and industries and includes around two years of aviation-related engagements. Mr Abrán holds
an engineering degree in computer science from the Technical University of Cluj and a master of arts degree
in economics from a joint programme of the University of Essex and Central European University.
Diederik Pen, Chief Operations Officer
Mr Pen joined Wizz Air in January 2013 as Chief Operations Officer, becoming Accountable Manager in
September 2013. He was formerly the chief executive officer and chief operating officer of Martinair Holland.
Prior to joining Martinair Holland in 2006, Mr Pen worked for Virgin Blue Airlines in Australia from 2002 to
2006 as head of ground operations, for Brisbane Airport Corporation in Australia as general manager of
commercial services and for Amsterdam Airport Schiphol as manager of commercial services. Mr Pen has a
master of business administration in business economics from the University of Amsterdam.
Owain Jones, Chief Corporate Officer
Mr Jones joined Wizz Air as General Counsel in 2010 and was promoted to Chief Corporate Officer in
June 2014. Mr Jones is a solicitor of the Supreme Court of England and Wales. Having trained at Nicholson
Graham & Jones (1994 to 1996), Mr Jones joined Wilde Sapte (now Dentons LLP) in 1996 as a solicitor in its
aviation group, specialising in finance and regulatory matters. He spent time in the firm’s Paris and Hong Kong
offices before being appointed a partner in 2006, following which he spent three years in the firm’s Abu Dhabi
office, becoming acting managing partner of the office. He left the firm in 2009 to spend 18 months training
for a frozen air transport pilot’s licence with CTC Aviation Training. Mr Jones holds a bachelor of law degree
from University College London.
Johan Eidhagen, Chief Marketing Officer
Mr Eidhagen joined Wizz Air in January 2015 as Head of Brand and Marketing and was appointed Chief
Marketing Officer effective 1 February 2016. Before joining Wizz Air Mr Eidhagen built an extensive sales and
marketing career at Nokia, holding several senior global and regional marketing positions. He joined Nokia in
1998 from a background in retail and was head of marketing for the Nordic region until 2004, when he moved
to Nokia HQ in Finland to run global marketing services for the entertainment category. Between 2005 and
2007 he was based in New York as the director of marketing for Nokia Multimedia in North America before
returning to Finland where he was director and head of marketing for the Nokia Nseries Category. In 2009 he
became country manager for Nokia in Sweden and was appointed as managing director for the Scandinavian
region in 2011. Mr. Eidhagen is a native of Stockholm and is a DIHM marketing graduate from the IHM Business
School in Stockholm.
Wizz Air Holdings Plc Annual report and accounts 2016
38
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Senior management team continued
David Morgan, Chief Flight Operations Officer
Captain Morgan was appointed Chief Flight Operations Officer effective 1 February 2016. He joined Wizz Air
in 2008 based in Katowice, Poland, and became Fleet Captain in 2010. A year later he was promoted to Wizz
Air Chief Pilot. Captain Morgan began his aviation career in the armed forces of the United Kingdom and
Australia. His career has taken him around the world including five years as a management pilot at the iconic
Royal Flying Doctor Service of Australia and five years for BAE Systems in Saudi Arabia. He is a graduate of
the Royal Military Academy Sandhurst.
Board committees
The Directors have established an Audit Committee, a Remuneration Committee and a Nomination Committee. The
terms of reference of the committees have been drawn up in accordance with the provisions of the Corporate
Governance Code. A summary of the terms of reference of the committees is set out below.
Each committee and each Director has the authority to seek independent professional advice where necessary
to discharge their respective duties, in each case at the Company’s expense.
Audit Committee
The Audit Committee’s duties, as set out in its terms of reference, include:
a) monitoring the integrity of the Company’s financial statements of the Company, including its annual and
semi-annual reports, interim management statements, preliminary results announcements and any other
formal announcement relating to its financial performance;
b) reviewing significant financial reporting issues and judgments which they contain having regard to matters
communicated to it by the auditors;
c) where requested by the Board, reviewing the content of the annual report and accounts and advising the
Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company’s performance, business model and strategy;
d) keeping under review the adequacy and effectiveness of the Company’s internal financial controls and
internal control and risk management systems;
e) reviewing the adequacy and security of the Company’s arrangements for its employees and contractors
to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The
Audit Committee shall ensure that these arrangements allow proportionate and independent investigation
of such matters and appropriate follow-up action;
f) monitoring and reviewing the effectiveness of the Company’s Internal Audit function in the context of the
Company’s overall risk management system;
g) considering and approving the remit of the Internal Audit function and ensuring it has adequate resources
and appropriate access to information to enable it to perform its function effectively and in accordance
with the relevant professional standards. The Audit Committee shall also ensure the Internal Audit function
has adequate standing and is free from management or other restrictions;
h) meeting the Company’s head of the Internal Audit function at least once a year, without management
being present, to discuss its remit and any issues arising from the internal audits carried out. In addition,
the Audit Committee shall ensure that the Company’s head of the Internal Audit function has the right of
direct access to the Chairman, the Audit Committee Chairman and the rest of the Audit Committee, and
is accountable to the Audit Committee;
i) considering and making recommendations to the Board, to be put to Shareholders for approval at the Annual
General Meeting, in relation to the appointment, re-appointment and removal of the Company’s external
auditors. The Audit Committee shall oversee the selection process for new auditors and if auditors resign,
the Audit Committee shall investigate the issues leading to this and decide whether any action is required;
j) overseeing the relationship with the external auditors including (but not limited to):
I.
II.
assessing annually their independence and objectivity taking into account relevant UK
professional and regulatory requirements and the relationship with the external auditors as a
whole, including the provisions of any non-audit services; and
satisfying itself that there are no relationships (such as family, employment, investment, financial
or business) between the external auditors and the Company (other than in the ordinary course
of business) which could adversely affect the auditors’ independence and objectivity;
Wizz Air Holdings Plc Annual report and accounts 2016
39
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board committees continued
Audit Committee continued
k) meeting regularly with the external auditors, including once at the planning stage before the audit and once
after the audit at the reporting stage. The Audit Committee shall meet the external auditors at least once a year,
without management being present, to discuss their remit and any issues arising from the audit;
l)
reviewing and approving the annual audit plan and ensuring that it is consistent with the scope of the
audit engagement having regard to the seniority, expertise and experience of the audit team; and
m) reviewing the findings of the audit with the external auditors. This shall include but not be limited to
the following:
I.
II.
III.
IV.
a discussion of any major issues which arose during the audit;
any accounting and audit judgments;
levels of errors identified during the audit; and
the effectiveness of the audit process.
The Corporate Governance Code recommends that the Audit Committee should comprise at least three
members, who should all be independent Non-Executive Directors, and that at least one member should have
recent and relevant financial experience. The membership of the Company’s Audit Committee comprises three
members. Until 1 March 2016, the Audit Committee members were Simon Duffy, Stephen L. Johnson and
John McMahon, all of whom apart from Stephen L. Johnson are independent Non-Executive Directors. On
1 March 2016, Mr Johnson stepped down from his membership of the Audit Committee and Susan Hooper, an
independent Non-executive Director, was appointed to the Audit Committee. All current members of the Audit
Committee are, therefore, independent Non-Executive Directors. No members of the Audit Committee have
links with the Company’s external auditors. Mr Duffy is considered by the Board to have recent and relevant
financial experience and is Chairman of the Audit Committee.
The Company therefore considers that it complies with the Corporate Governance Code recommendation
regarding the composition of the Audit Committee.
The Audit Committee formally meets at least three times per year and otherwise as required. The Chief
Executive Officer, other Directors and representatives from the Finance function of the Company may attend
and speak at meetings of the Audit Committee. The Company’s external auditors and the Chief Financial
Officer are invited to attend meetings of the Audit Committee on a regular basis. Following each meeting, the
Chairman of the Audit Committee reports to the Board on the significant items discussed during the Audit
Committee’s meeting. The Audit Committee met on seven occasions during the 2016 financial year. In addition
to the formal meetings, the Audit Committee is in regular contact with relevant management in connection
with, for example, the implementation of the Group’s hedging strategy.
Remuneration Committee
The Remuneration Committee is responsible for setting the remuneration policy for all Executive Directors and the
Chairman, including pension rights and any compensation payments, and recommending and monitoring the
remuneration of the senior managers. Non-Executive Directors’ fees are determined by the full Board.
The objective of the Company’s remuneration policy is to attract, retain and motivate executive management
of the quality required to run the Company successfully without paying more than is necessary, having regard
to the views of Shareholders and other stakeholders.
The Remuneration Committee is also responsible for making recommendations for the grants of awards under the
Company’s share option schemes. In accordance with the Remuneration Committee’s terms of reference, no Director
may participate in discussions relating to his own terms and conditions of remuneration.
The Corporate Governance Code provides that the Remuneration Committee should comprise at least three
members, all of whom should be independent Non-Executive Directors. Until 1 March 2016, the membership of
the Company’s Remuneration Committee comprised three members, namely Guido Demuynck, John R. Wilson
and Thierry de Preux, all of whom apart from John R. Wilson are independent Non-Executive Directors. On
1 March 2016, John R. Wilson stepped down from his membership of the Remuneration Committee and
Susan Hooper, an independent Non-Executive Director, became a member of the Remuneration Committee.
All current members of the Remuneration Committee are, therefore, independent Non-Executive Directors.
The Chairman of the Remuneration Committee is Mr Demuynck.
The Company therefore considers that it complies with the Corporate Governance Code recommendations
regarding the composition of the Remuneration Committee.
The Remuneration Committee meets formally at least twice each year and otherwise as required. There were
six meetings of the Remuneration Committee during the 2016 financial year.
Wizz Air Holdings Plc Annual report and accounts 2016
40
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board committees continued
Nomination Committee
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of
the Board. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and
experience on the Board, the size, structure and composition of the Board, and retirements and appointments
of additional and replacement Directors, and will make appropriate recommendations to the Board on such
matters. While a number of Directors were initially appointed to the Board under investor appointment rights,
the most recent appointments of Simon Duffy, Guido Demuynck and Susan Hooper were conducted through
Korn/Ferry, which has no other connections with the Company.
The Corporate Governance Code provides that a majority of the members of the Nomination Committee
should be independent Non-Executive Directors. The Company’s Nomination Committee is comprised of three
members, namely William A. Franke, John McMahon and Simon Duffy. The Chairman of the Nomination
Committee is Mr Franke. The Company therefore considers that it complies with the Corporate Governance
Code’s recommendations regarding the composition of the Nomination Committee.
The Company recognises the importance to the Company of diversity, including gender equality. The
Company’s Code of Ethics is unequivocal that discriminatory practices will not be tolerated and that people
will be judged on the basis of their performance and ability to do their jobs and not on any other basis. The
Nomination Committee will work further to ensure that, when the opportunity presents itself, diversity is
properly reflected in the Board and in the Company’s senior management. The Company believes that this
commitment is demonstrated by recent appointments at both Director and senior management level.
The Nomination Committee is scheduled to meet formally at least twice a year and otherwise as required.
There were four meetings of the Nomination Committee during the 2016 financial year and, in between these
meetings, members of the Nomination Committee advised senior management on the searches for an
additional independent Non-Executive Director as well as the Group’s Chief Financial Officer. Interviews of
candidates for each of these positions were also conducted by the members of the Nomination Committee.
Attendance at Board meetings
The following table sets out the attendance by Director at the Board and committee meetings held during the
2016 financial year.
Board
attended/total
Audit
attended/total
Remuneration
attended/total
Nomination
attended/total
Executive Director
József Váradi
Non-Executive Directors
William A. Franke
Guido Demuynck
Simon Duffy
Thierry de Preux
Susan Hooper**
Stephen L. Johnson***
John McMahon
John R. Wilson
11/11
11/11
11/11
9/11
11/11
-
7/11
11/11
11/11
7/7*
6/6*
4/4*
-
-
6/7
-
-
6/7
7/7
6/7
-
6/6
-
6/6
-
-
-
5/6
4/4
3/4
-
-
-
4/4
-
*
The Executive Director was invited to attend these various committee meetings in order to discuss certain matters but did
not have a vote.
** Susan Hooper was appointed to the Board with effect from 1 March 2016 and had already notified the Company that she
would be unable to join the Board meeting scheduled for 22 March 2016.
*** Stephen L. Johnson attended six out of the seven scheduled Board meetings. He was unable to join three ad hoc telephone
meetings owing to prior commitments but provided his views and input in advance.
Wizz Air Holdings Plc Annual report and accounts 2016
41
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board procedures
At least six Board meetings are scheduled during each financial year. At these meetings, the Directors meet
with senior executives to receive detailed updates on Wizz Air’s business and operations. Prior to these
meetings, each Director receives an information pack containing a comprehensive review of the Company’s
business as well as detailed proposals for approval of transactions and development falling within the Board’s
remit. The Company believes that this enables each Director properly to discharge his or her responsibilities.
At each Board meeting, Directors who have a conflict of interest in any agenda item declare that interest and
are not entitled to vote on that agenda item.
A number of key strategic and commercial decisions require Board approval and, as and when any such
decision is needed outside the scheduled meeting cycle, an ad hoc telephone Board meeting may be arranged.
In general, therefore, it is anticipated that there will be around ten Board meetings in total during each
financial year.
Newly appointed Non-Executive Directors meet with the Company’s senior management and visit Wizz Air’s
operational headquarters to ensure that they have a thorough understanding of the Company’s business.
Wizz Air maintains directors’ and officers’ liability insurance. This insurance covers any claim that may be
brought against the Directors in the exercise of their duties.
The Company has adopted a Share Dealing Policy that reflects and incorporates the provisions of the UK
Listing Authority’s Model Code. As a consequence, the Directors as well as certain designated employees must
obtain clearance from the Company’s Chairman before dealing in the Company’s shares and are prohibited
from dealing at all during certain periods as set out in the Model Code. The Share Dealing Policy is being
updated to reflect the requirements of the EU Market Abuse Regulation which comes into effect on 3 July 2016.
Finally, it is proposed that, in accordance with the recommendations of the UK Corporate Governance Code,
all Directors will offer themselves for re-election at the 2016 Annual General Meeting.
Wizz Air Holdings Plc Annual report and accounts 2016
42
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE AUDIT COMMITTEE
Following Wizz Air’s initial public offering (IPO) during the last financial year, the Audit Committee’s work
during the 2016 financial year has been focused on day-to-day financial and risk issues, including further
discussion on hedging strategy and approval of hedging transactions.
During the year, the Audit Committee worked with senior management and the Company’s Internal Audit
function on a project to look at the Company’s risk management processes and to ensure that a robust
assessment of principal risks was carried out. Over the coming year, the Audit Committee will continue to work
on this Board-approved project to develop and implement an enhanced enterprise risk management system
for the Company.
Main activities of the Audit Committee during the 2016 financial year
Risk management
The Audit Committee is tasked with ensuring that the Board has adequate oversight of risk management and
that it deems the controls sufficient and effective.
The Company’s Internal Audit function conducts an annual risk assessment exercise involving senior
management from the level of heads of function upwards. Based on this risk assessment exercise, a risk register
is compiled showing risk description, inherent risk, mitigating measures and residual risk. Consideration is then
given to which areas can be efficiently improved in line with the Company’s risk appetite.
This risk register is then used to develop an internal audit plan for the year, which is approved by the Audit
Committee. Internal audits are performed by Ernst & Young and the Head of Internal Audit, who has direct
responsibility to the Chairman of the Audit Committee as well as a reporting line to the Company’s Chief
Executive Officer.
Following completion of an internal audit, a report is compiled which sets out the findings, makes
recommendations for control improvement and presents the improvement actions undertaken by
management. Internal audit reports are submitted and presented to the Audit Committee for approval. The
Chairman gives a report of the internal audit reports completed in a particular period to the full Board.
Internal Audit then follows up the completion of the actions and reports back to the Audit Committee on the
status. A process for verifying the effective application of the controls that are put in place has also been
started. The Audit Committee will work to ensure that the Company continues to develop effective risk
assessment and management processes.
As I have noted above, the Audit Committee worked with and advised senior management and the Internal
Audit function on a review of the Company’s risk management processes. One outcome of this review was the
creation of an internal Risk Committee, comprising the Company’s Leadership Team and certain other
members of senior management. The Risk Committee developed a list of principal risks and mitigating actions
which was presented to the Board. The Risk Committee will monitor this list on an ongoing basis and regular
updates will be given to the Board both on the identified risks as well as any newly emerging risk. The Company
has embarked on the development and implementation of a comprehensive enterprise risk management
programme, to position the Company’s risk management processes for the next stage of the Company’s
growth. More information on risk management within the Company is set out on pages 25 to 28 of this
annual report.
Financial information
The Audit Committee reviews and approves all interim and final financial statements, as well as the content of
the Company’s annual report. The Company’s external auditors provide the Audit Committee with a briefing
on any issues arising. The Audit Committee also reviews and approves any regulatory announcements that
are made in connection with such financial information. It is only after the Audit Committee’s approval that the
statements are put to the Board for approval.
Relationship with external auditors
The Audit Committee was satisfied with the performance of the external auditors and with the effectiveness
of the external audit process. The audit of the 2016 financial statements and of this Annual Report, and the
review of the half-year financial report were all completed in time and in good quality, addressing the key
issues. This was particularly important because 2016 was the first full financial year of the Company with regular
reporting to the London Stock Exchange.
The Audit Committee has approved the fees to be paid and the external audit plan for the 2016 financial year
and reviewed the report of the auditors on the annual audit performed.
The Audit Committee will consider the appointment of external auditors for the financial year ending
31 March 2017 and the Directors will propose a resolution in this respect for the forthcoming Annual General
Meeting of the Company.
Wizz Air Holdings Plc Annual report and accounts 2016
43
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE AUDIT COMMITTEE
CONTINUED
Main activities of the Audit Committee during the 2016 financial year continued
Relationship with external auditors continued
The Audit Committee ensures the independence of the Company’s external auditors. The Audit Committee
reviewed the independence letter of the auditors and considered in particular the non-audit fees paid to the
external auditors during the year (see Note 6 to the financial statements). While fees paid on tax advisory
services were higher in 2016 than audit fees, the Audit Committee was satisfied that this did not compromise
the objectivity and independence of the auditors, mainly because (i) the engagement leaders from the relevant
tax departments are not part of the audit team, and (ii) no such services were ordered by the Company that
carried self-review threat for the auditor.
Significant matters relating to the annual report
In the course of the preparation of the Company’s financial statements, the following issues were considered
by the Audit Committee:
E Maintenance accounting: The Audit Committee satisfied itself that the policy and the procedures
applicable to this complex area were followed in the year consistently, including the regular updates to
estimates and judgments and the maintenance of the system supporting the calculations. The Audit
Committee considered in particular the accounting implications of the amendment of the existing Fleet
Hour agreements of the Group for the engines of the A320 sub-fleet (effective May 2015). The Audit
Committee agreed to the treatment proposed by management. See further details in Note 13 to the
financial statements.
E Concessions from component manufacturers: The Audit Committee considered the accounting treatment
of concessions from component manufacturers, receivable in exchange for the Group selecting the given
component for its future new aircraft deliveries. While these type of arrangements have been in place for
many years, the 2016 financial year required particular consideration of the issue as a result of the Group
taking its first free spare engine to balance sheet. The Audit Committee reviewed particularly the timing
of the recognition of such credits, and agreed to the treatment proposed by management, as specified in
the current accounting policy of the Group.
E Hedging: Hedge transactions and hedge accounting continued to be a complex and material area and,
accordingly, are a recurring topic on the agenda of the Audit Committee. The 2016 financial year was
special in three respects: (i) the continued volatility of the commodity markets, particularly jet fuel; (ii) the
significant movements in the time value of hedges, causing volatility to reported earnings; and (iii) the
application of hedge accounting to a significant part of the USD denominated monetary assets, as natural
hedges, in the interest of reducing the exposure of the Group’s earnings to movements in the Euro/USD
foreign exchange rates. The adoption of IFRS 9 will enable the Group to eliminate the impact of changes
in hedge time value on earnings. In this respect the Audit Committee and management were disappointed
to see the continued postponement of the endorsement of IFRS 9 by the EU, due to which the Group was
not able to apply IFRS 9 in the preparation of its 2016 financial statements.
E Corporate governance: The Audit Committee considered the implications of the 2014 changes in the
Corporate Governance Code on the directors’ statements around risk governance and risk assessment,
going concern and longer-term viability. The Audit Committee satisfied itself that the required changes in
the Company’s procedures and in the disclosures in the Annual Report were either implemented during
the year or were in the process of being implemented, that were necessary for the Directors to be able to
make the statements required by the Corporate Governance Code.
At the request of the Board, the Audit Committee also considered whether the Annual Report taken as a whole
was fair, balanced and understandable and whether it provided the necessary information for shareholders to
assess the Group’s position and performance, business model and strategy. The Committee is satisfied that
the Annual Report meets these criteria.
Other matters considered during the year
E Tender for outsourced accounting and tax compliance services of the Group: The Group has a significant
part of its accounting and tax compliance services outsourced to a third party provider. The services were
tendered during the 2016 financial year. Due to the importance of these services for the integrity of the
financial reporting of the Group the Audit Committee had oversight of the tender process and was
involved in the final decision. The Audit Committee was satisfied that the existing provider, that supported
the Company also in its IPO process, was re-appointed on competitive terms.
Wizz Air Holdings Plc Annual report and accounts 2016
44
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE AUDIT COMMITTEE
CONTINUED
Main activities of the Audit Committee during the 2016 financial year continued
Other matters considered during the year continued
E Tendering statutory audit services for the Group: It is the policy of the Group to put services to tender
regularly so that the cost-competitiveness of the business is maintained, and statutory audit services are
no exception. PricewaterhouseCoopers have been the auditors since 2007 and audit services were last
tendered in 2011. The Audit Committee is considering whether it will be to the benefit of the Company to
tender these services in 2016. The external regulatory framework is complicated and under significant
change – both in terms of mandatory tendering and rotation of auditors and in terms of compatibility of
audit and non-audit services in the future. The Audit Committee noted that there are EU regulations in
place for the mandatory tendering of auditors (Order of the Competition and Markets Authority) -
although technically these do not apply to the Company as it is registered in Jersey (Channels Islands)
that is not part of the EU. At the time of writing no definitive conclusion has been reached but a decision
will be made during the course of the 2017 financial year.
E Preliminary assessment of the implications of the new lease standard (IFRS 16 Leases) for the Group: The
new lease accounting standard (IFRS 16 Leases) was issued with an application date of January 2019 (that
is April 2019 for the Group). In order to be adopted in the EU, endorsement from the European Financial
Advisory Group will be required. It is expected that this will happen by approximately mid 2017. Subject
to such endorsement, early adoption is permitted. The new standard will have a material impact on the
financial statements of the Group. Management has performed certain analyses with the support of the
auditors and the result of this work was reviewed by the Audit Committee. Nevertheless, this subject will
require further work, including choices to be made in the future in respect of the year of adoption and the
method of transition. The Audit Committee will continue to be involved in these considerations.
Simon Duffy
Chairman of the Audit Committee
Wizz Air Holdings Plc Annual report and accounts 2016
45
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE NOMINATION COMMITTEE
Wizz Air’s Nomination Committee is comprised of three members, namely John McMahon, our Senior
Independent Non-Executive Director, Simon Duffy and me.
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of
the Board. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and
experience on the Board, the size, structure and composition of the Board, and retirements and appointments
of additional and replacement Directors, and will make appropriate recommendations to the Board on
such matters.
The Company’s success to date has been driven by ensuring that it appoints people of the highest calibre,
whether as Directors, management or employees. While the key selection criteria is to ensure that people are
appointed on their ability to do their jobs, the Company and the Nomination Committee recognise the
importance to the Company of diversity, including gender equality, and the appointments on which the
Nomination Committee has advised during the 2016 financial year prove that the Company is committed to
this principle in practice as well as theory.
Main activities of the Nomination Committee during the 2016 financial year
During the 2016 financial year, the Nomination Committee worked on two key appointments for the Company.
Following the Company’s initial public offering in March 2015, the Board decided that it was an appropriate
time to add an additional independent non-executive director. The Nomination Committee worked with
Korn/Ferry and senior management on the search process and members of the Nomination Committee
conducted a number of interviews with candidates. The final candidate, Ms. Susan Hooper, was recommended
to the Board for appointment by the Nomination Committee.
The Company also appointed a new Chief Financial Officer during the 2016 financial year. Again, the
Nomination Committee, along with other Directors, assisted senior management and the Board with the
selection process which was conducted through Heidrick & Struggles and I am delighted that the Company
has appointed Sonia Jerez Burdeus, who takes up her position from 01 June 2016. Ms. Jerez brings to the
Company significant experience as a chief financial officer and board member of a European low-cost airline
and will further strengthen the Company’s senior management team as the Company continues to pursue its
growth strategy.
The Nomination Committee’s ongoing work
The Nomination Committee will continue to work with the Board to ensure that it has the appropriate balance
of skills, knowledge and experience and that, where the opportunity presents itself, appointments are made
which reflect not only the Company’s requirement to retain the best people for a particular role but also the
Company’s values, including ensuring diversity within the Board and the Company’s senior management.
The Nomination Committee and the Board also recognise the importance of ensuring that succession of
Directors and senior management is properly managed, to ensure that the Company has the right people
available as needed. The Nomination Committee will continue to work with the Board and the Company’s
senior management to develop and refine succession plans, encouraging and facilitating internal talent
development where necessary.
William A. Franke
Chairman of the Nomination Committee
Wizz Air Holdings Plc Annual report and accounts 2016
46
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Report of the Chairman of the Remuneration Committee
Wizz Air has enjoyed a very successful first full financial year as a listed company. During the 2016 financial
year the Company delivered record underlying net profits of €223.9 million, seeing unit operating cost fall by
5.4 per cent. at the same time as revenue growth of 16.4 per cent. The strength of Wizz Air’s performance was
reflected in a share price which, as at 31 March 2016, was 60 per cent. higher than the offering price in the
Company’s initial public offering. Over the year, therefore, the Directors and senior management have ensured
that the Company’s business has delivered results that have significantly increased Shareholder value.
The Remuneration Committee is committed to ensuring that the Company’s Remuneration Policy remains an
effective way to align the interests of the Directors and senior management with those of the Company’s
Shareholders and that it provides appropriate incentivisation to continue to deliver shareholder value.
However, the Remuneration Committee is also focused on the Company’s ultra-low-cost business model, and
the governing principle that will continue to be applied is that remuneration must be competitive whilst not
being more than is necessary to attract, retain and motivate executive management of the quality required to
continue to run the Company successfully, and that a significant proportion of remuneration remains
performance based. Indeed, this is a principle which is applied consistently throughout the Company for
all employees.
As a company, we value our Shareholders’ feedback, including on remuneration matters. I was pleased that,
following consultation with a large number of our key Shareholders, the Company’s Directors’ Remuneration
Policy received overwhelming support and approval from our investors.
As contemplated in the approved Directors’ Remuneration Policy, successful Company performance is
reflected in the remuneration of the Executive Director and senior management. Under our Short-term
Incentive Plan, performance against the four measures of underlying profit after tax, ex-fuel cost per available
seat kilometre, on-time performance and individual performance assessment resulted in an average payout
equivalent to 179 per cent. of the base payout. Further details of the targets for the Short-term Incentive Plan
applicable for the 2016 financial year are provided on page 54.
As reported in the Company’s annual report for the 2015 financial year, the Remuneration Committee planned
to make the first award under the approved Long-term Incentive Plan during the 2016 financial year. This first
award was made in July 2015 to officers and to heads of function. The award is due to vest in July 2018 with
level of vesting for the major part of the award based on a combination of relative total shareholder return
(TSR) performance compared to selected European airlines and fully diluted earnings per share growth.
Whilst the Company is incorporated in Jersey, we have chosen voluntarily to comply in all material respects
with the provisions of the UK Companies Act 2006 and related regulations in respect of the Directors’
Remuneration Report and Remuneration Policy, underlining the Company’s commitment to adopt best UK
corporate governance practice. The Directors’ Remuneration Policy was approved by Shareholders at the
Company’s Annual General Meeting in September 2015 with the intention that it should apply for three years.
Following a review of the policy during the year, the Remuneration Committee agreed that it remains
appropriate and is aligned with the overall strategy of the Company and, therefore, we will not be asking
Shareholders to vote on the policy at this year’s Annual General Meeting, although there will be an advisory
vote on the Annual Report on Remuneration.
Nonetheless, we shall continue to review the Directors’ Remuneration Policy to ensure that it remains
appropriate and aligned with overall strategy even before it is next due to be put before Shareholders for
approval. In order to ensure that this is the case, it is important that the Remuneration Committee has access
to expert advice and I am pleased to report that, following a competitive tender process, Willis Towers Watson
was appointed to provide this expert advice to the Remuneration Committee.
Wizz Air Holdings Plc Annual report and accounts 2016
47
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Report of the Chairman of the Remuneration Committee continued
The 2016 financial year has also seen changes in the constitution of the Remuneration Committee. At the time
of the Company’s initial public offering in March 2015, the Directors approved an exception to the requirement
that all members of the Remuneration Committee should be independent Non-Executive Directors.
Specifically, the Directors agreed that Mr John R. Wilson, a Non-Executive Director appointed by Indigo, should
remain a member of the Remuneration Committee until 2 March 2016 at the latest, given his valuable
contribution to the Remuneration Committee (and its predecessor the Compensation Committee) and wide
and expert knowledge of remuneration matters. As contemplated by the Directors, Mr Wilson stepped down
from the Remuneration Committee as of 1 March 2016 and I would like to take this opportunity to thank him
for his outstanding contribution and wise counsel as a member of the Remuneration Committee. I am delighted
to welcome Susan Hooper as the third member of the Remuneration Committee as of 1 March 2016. I am very
much looking forward to working with Ms Hooper and her experience both as a senior executive and as a
non-executive director of a number of listed companies, and her knowledge of remuneration issues, will be
invaluable to the Remuneration Committee in the coming years.
The Remuneration Committee’s performance was evaluated by Lintstock Limited as part of the broader Board
performance evaluation. The Remuneration Committee’s performance was evaluated positively, but with a
recognition that the members of the Remuneration Committee would benefit from more regular briefings on
shareholder views and the wider remuneration climate. I will therefore be arranging for the Remuneration
Committee’s advisers, Willis Towers Watson, to requested to make a presentation every six months to the
Remuneration Committee, to detail any developing trends and foster discussion of any issues.
In conclusion, I would reiterate that Wizz Air is proud of the outstanding results delivered in the 2016 financial
year. We remain committed to ensuring that our Remuneration Policy continues to incentivise delivery of
outstanding results in the future, but in a way that appropriately aligns the interests of the Directors and senior
management with those of the Company’s Shareholders. We believe that the approved Directors’
Remuneration Policy does this in a way which is consistent with the Company’s current growth phase and its
desire to bring simplicity to all areas of its operation. Simplicity of process and practice reflects the Company’s
strategy to focus on achieving the lowest possible unit operating cost while improving customers’ experience.
We look forward to the continued support of our Shareholders and welcome any questions or suggestions
that you may have to further align our Remuneration Policy with the interests of our investors.
Guido Demuynck
Chairman of the Remuneration Committee
Wizz Air Holdings Plc Annual report and accounts 2016
48
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Introduction
The Directors’ Remuneration Policy was approved by Shareholders at the Annual General Meeting held on 29
September 2015. The intention is that the policy, as approved, will apply until the Annual General Meeting to
be held in 2018. This Directors’ Remuneration Report sets out the remuneration earned for the 2016 financial
year in accordance with the approved Directors’ Remuneration Policy (pages 49 to 53) and the planned
application of our Remuneration Policy for the 2017 financial year (page 57).
The report has been prepared in accordance with the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended (the Regulations), which the Company has chosen to
comply with in all material respects as a matter of best practice.
For transparency, we have included the approved Directors’ Remuneration Policy in full in this report although
there will not be a vote on the Directors’ Remuneration Policy at this year’s Annual General Meeting. The
definitive Remuneration Policy approved by Shareholders is outlined in the Company’s annual report for the
2015 financial year and is available to view at corporate.wizzair.com.
Remuneration Policy
Introduction
Our principal consideration when determining the Remuneration Policy is to ensure that it supports our
company strategy and business objectives, as well as to attract, retain and motivate executive management
of the quality required to run the Company successfully without paying more than is necessary.
In the selection of performance measures for both the annual performance bonus and the Long-term Incentive
Plan the Remuneration Committee takes into account the Group’s strategic objectives and short and long-term
business priorities. The performance targets are set in accordance with the Group’s annual operating plan and
are reviewed annually to ensure that they are sufficiently stretching. In selecting the targets the Remuneration
Committee also takes into account analysts’ forecasts, economic conditions and the Remuneration
Committee’s expectation of performance over the relevant period.
The aim of the Remuneration Policy is to:
E
E
E
attract, retain and motivate executive management without paying more than is necessary;
incentivise the successful execution of the Company’s business strategy; and
align the Executive Directors’ long-term interests with those of Shareholders.
Executive Director remuneration
The Chief Executive Officer is currently the Company’s sole Executive Director. The Remuneration Committee
believes that the Company’s Remuneration Policy supports the Company’s ultra-low-cost business model by
incentivising senior management, including the Chief Executive Officer, to continue to strive to increase the
Company’s cost advantage while improving the customers’ experience. The Chief Executive Officer currently
receives a base salary and is eligible for an annual performance bonus of up to 200 per cent. of base salary
and a long-term incentive award of up to 250 per cent. of base salary, with payments being dependent on the
Company achieving certain financial and operational targets.
In deciding appropriate remuneration levels, the Remuneration Committee takes into account, among other
things, the levels paid at competitor low-cost carriers.
Wizz Air Holdings Plc Annual report and accounts 2016
49
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Executive Director remuneration continued
Future policy table: Executive Directors
Element
Base salary
Purpose and link to strategy Operation and opportunity
To provide the core
reward for the role.
To attract, retain and
motivate executive
management without
paying more than
necessary.
Salaries will be reviewed
annually, with any increase
being awarded at the discretion
of the Remuneration Committee.
The Executive Director’s salary
for the 2016 financial year is
detailed in the Annual Report
on Remuneration.
The Remuneration Committee
may take into account a
number of factors in deciding
whether an increase should be
made, including benchmarking
against selected airlines.
Executive Directors are
covered by the Company’s
group personal accident and
life assurance cover, which is in
place for all employees
(2x salary).
The Company does not provide
a pension scheme for the
Executive Directors unless
contributions are required
by law.
Payments under the Short-term
Incentive Plan are made in
cash, subject to certain
specified performance
requirements as determined by
the Remuneration Committee
being met and up to a
maximum bonus set as a
percentage of base salary by
the Remuneration Committee.
The maximum bonus for an
Executive Director is 200
per cent.
Currently, these performance
requirements relate to
Company profitability, on-time
performance, operating cost
and personal performance. The
Chief Executive Officer’s
maximum bonus is currently
200 per cent. of base salary.
Each year, performance shares
may be granted, subject to the
achievement of performance
targets. Awards normally vest
over a three-year period. The
maximum face value of annual
awards will be 250 per cent. of
salary for the Chief Executive
Officer and the Executive
Director must remain in office
when the performance
shares vest.
Framework used to assess performance
and provisions for the recovery of
sums paid
The Remuneration Committee
will consider the individual
salary of Executive Directors at
a meeting each year.
There are no provisions for the
recovery of sums paid or the
withholding of any payment
relating to base salary.
There are no provisions for the
recovery of sums paid or the
withholding of any payments
relating to benefits.
Not applicable.
Performance requirements
are determined by the
Remuneration Committee
annually. They are intended to
align the performance of the
Executive Directors with the
Group’s near-term objectives of
delivering against its strategy.
In particular, the performance
requirements incentivise the
Executive Directors to focus
on cost control to achieve
profitability targets, while
delivering a reliable service
to customers.
There are no provisions for the
recovery of sums paid pursuant
to the Short-term Incentive Plan.
Performance targets
are determined by the
Remuneration Committee and
vesting of the performance
shares is subject to performance
targets being met over the
performance period.
If a participant’s employment
ends before the end of the
performance period, any vested
and unvested options will
normally lapse, save in certain
“good leaver” scenarios.
Benefits
Pension
Short-term
Incentive
Plan
To attract, retain and
motivate executive
management without
paying more than
necessary.
To attract, retain and
motivate executive
management without
paying more than
necessary.
To incentivise the
successful execution
of the Company’s
business strategy.
To reward the
achievement of
annual financial and
operational goals.
Long-term
Incentive
Plan (LTIP)
(operating
for the first
time in the
2016
financial
year)
To align the Executive
Directors’ long-term
interests with those of
Shareholders.
To reward strong
financial performance
and sustained
increase in
Shareholder value.
Wizz Air Holdings Plc Annual report and accounts 2016
50
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Difference in remuneration policy for Executive Directors and employees
Remuneration of the Company’s senior management team follows a similar pattern to that of the Executive
Directors, although amounts for each component may vary. Other employees receive remuneration judged by
senior management to be appropriate for their position and experience.
Non-Executive Director remuneration
The Non-Executive Directors are only paid fees.
Framework used to assess performance
and provisions for the recovery of
sums paid
Not applicable; there are no
provisions for the recovery
of sums paid or the withholding
of any payment relating to fees.
Element
Fees
Purpose and link to strategy Operation and opportunity
To remunerate Non-
Executive Directors
to reflect their level
of responsibility.
Non-Executive Directors are
paid a basic fee, plus an
additional amount for each
Board meeting attended.
Additional fees are paid for the
role of Chairman of the Audit
Committee, Chairman of the
Remuneration Committee and
Chairman of the Board. Fees for
Non-Executive Directors, other
than the Chairman, are
determined by the Board. Fees
for the Chairman are determined
by the Remuneration
Committee. The Remuneration
Committee, in relation to the
Chairman, and the Board, in
relation to the other Non-
Executive Directors, retain the
flexibility to increase fee levels
to ensure that they continue to
appropriately
reflect the experience of the
individual, time commitment
of the role and fee levels in
comparable companies.
The fees paid to the Chairman
and other Non-Executive
Directors for the 2016 financial
year are set out in the Annual
Report on Remuneration.
Illustration of the application of the Remuneration Policy
The bar chart below sets out the annual remuneration package of the Chief Executive Officer, at a minimum,
as a reasonable expectation and as a possible maximum (in Euro):
All amounts are determined in Swiss Francs (CHF) that for the purposes of this chart were converted into Euro at the rate of
1.093 CHF for 1 Euro (rate at 31 March 2016).
The remuneration receivable under the LTIP as shown in the table (i) does not assume any share price appreciation between
grant and vesting; and (ii) for the sake of illustration it assumes that no shares would vest in the minimum scenario, 50 per cent.
of shares would vest in the expected scenario, and all shares would vest in the maximum scenario.
Fixed remuneration is base salary (May 2016 level annualised, being €623,971). The annual bonus amount is
zero at minimum, €623,971 at the expected level (50% of maximum opportunity of 200%) and €1,247,942 at
maximum (200% of base salary). The long-term incentive amount is zero at minimum, €779,964 at the
expected level (50% of maximum opportunity of 250%) and €1,559,927 at maximum (250% of base salary).
Wizz Air Holdings Plc Annual report and accounts 2016
51
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Recruitment remuneration
The remuneration package for an incoming Executive Director would reflect the principles set out above,
although relocation expenses or allowances (such as school fees) for an Executive Director recruited from
abroad may be paid as appropriate.
For the appointment of a new Chairman or Non-Executive Director, fee arrangements will be made in line with
the policy as set out above.
Policy on payment for loss of office
In the event of termination of a service contract or letter of appointment of a Director, contractual obligations
will be honoured in accordance with the service contract or letter of appointment. The Remuneration
Committee will take into consideration the circumstances and reasons for departure, health, length of service
and performance. Under this policy, the Remuneration Committee may make any statutory payments it is
required to make. In addition, the Remuneration Committee may agree to payment of outpatient counselling
costs and disbursements (such as legal costs) if considered to be appropriate and dependent on the
circumstances of departure.
There are no pre-determined contractual provisions for Directors regarding compensation in the event of loss
of office save for those listed in the table below.
Details of provision
Notice period
Executive Director
Six months’ notice by either party.
Termination payment
Post-termination
covenants
The employing company may terminate the
Executive Director’s employment with immediate
effect by payment in lieu of notice.
The Executive Director will be paid a sum equal to six
months’ base salary if the employing company
chooses to enforce the restrictive covenants
referenced below.
Upon termination of employment other than for cause,
the Executive Director is entitled to a severance
payment equal to six months’ salary in addition to any
notice pay or payment in lieu of notice.
Post-termination restrictive covenants apply for
a period of one year following termination
of employment.
Non-Executive Directors
One month’s notice
by either party.
Fees and expenses
accrued up to
termination only.
Not applicable.
Discretion, flexibility and judgement of the Remuneration Committee
The Remuneration Committee operates the Short-term Incentive Plan and the Long-term Incentive Plan, which
include flexibility in a number of areas. These include:
E
E
E
E
E
E
E
E
E
the timing of awards and payments;
the size of an award, within the maximum limits;
the participants of the plan;
the performance requirements and maximum percentages of salary to be used for the Short-term
Incentive Plan and the Long-term Incentive Plan from year to year;
the performance conditions, performance periods and vesting periods for awards under the Long-term
Incentive Plan from year to year;
the assessment of whether performance requirements and/or conditions have been met;
the treatment to be applied for a change of control or significant restructuring of the Group;
the determination of a good/bad leaver for incentive plan purposes and the treatment of awards
thereof; and
the adjustments, if any, required in certain circumstances (e.g. rights issues, corporate restructuring,
corporate events and special dividends).
Wizz Air Holdings Plc Annual report and accounts 2016
52
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Legacy arrangements
In approving this policy, authority is to be given to the Company to honour commitments paid, promised to
be paid or awarded to (i) current or former Directors prior to the date of this policy being approved or (ii) to
an individual (who subsequently is appointed as a Director of the Company) at a time when the relevant
individual was not a Director of the Company and, in the opinion of the Remuneration Committee, was not in
consideration of that individual becoming a Director of the Company, even where such commitments are
inconsistent with the provisions of this policy.
Outstanding awards under the Company’s previous 2009 international employee share option plan remain
eligible for vesting and exercise in accordance with their terms.
Consideration of Shareholder views
The Remuneration Committee and the Board will consider Shareholder feedback received in relation to the
Annual General Meeting each year at a meeting immediately following the Annual General Meeting and any
action required will be incorporated into the Remuneration Committee's business plan for the ensuing period.
This, and any additional feedback received from Shareholders from time to time, will then be considered by
the Remuneration Committee and as part of the Company's annual review of remuneration arrangements.
Specific engagement with major Shareholders may be undertaken when a significant change in remuneration
policy is proposed.
Annual Report on Remuneration
The members of the Remuneration Committee were Guido Demuynck (Chairman), Thierry de Preux, John R.
Wilson (until 1 March 2016) and Susan Hooper (from 1 March 2016).
The Remuneration Committee is responsible for setting the remuneration policy for all Executive Directors and
the Chairman, including pension rights and any compensation payments, and recommending and monitoring
the remuneration of the senior managers. Non-Executive Directors’ fees are determined by the full Board. A
summary of the Remuneration Committee’s terms of reference can be found on our corporate website,
corporate.wizzair.com. Further details about the Remuneration Committee are set out on pages 47 to 48 of
the Corporate Governance Report.
József Váradi, the Chief Executive Officer, and Owain Jones, the Chief Corporate Officer, attend meetings by
invitation and assist the Remuneration Committee in its deliberations as appropriate, though they are not
present when their own compensation is discussed.
The Remuneration Committee is advised by Willis Towers Watson, which was selected following a competitive
process led by the Chairman of the Remuneration Committee in 2015. Willis Towers Watson attends
Committee meetings as and when required. During FY16, Willis Towers Watson received fees totalling GBP
89,297 for advice related to remuneration policy, governance, developments in executive pay, benchmarking
and performance analysis.
Willis Towers Watson is a member of the Remuneration Consultants Group and, as such, voluntarily operates
under the Remuneration Consultants Group Code of Conduct in relation to executive remuneration consulting
in the UK. The Remuneration Committee is satisfied that Willis Towers Watson offers impartial and objective
advice and brings a high degree of expertise to the Remuneration Committee’s discussions. The Company has
no other connection with Willis Towers Watson.
Shareholders’ vote on remuneration
At the 2015 Annual General Meeting the Remuneration Policy was put forward for a binding vote and the
Annual Report on Remuneration was put forward for an advisory vote. Details of the voting outcomes are
provided in the table below:
Votes for
Votes against
Total
Votes withheld
Remuneration Policy
38,578,768
141,517
38,720,285
773,017
99.63%
0.37%
Annual Report on Remuneration
38,777,578
101,517
38,879,095
614,207
99.74%
0.26%
Wizz Air Holdings Plc Annual report and accounts 2016
53
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Executive Director’s remuneration
Full details of the Chief Executive Officer’s remuneration are set out below (in Euros):
Single total figure of remuneration table – audited
József Váradi
Fees and
salary
627,447
Benefits
-
Bonus
1,185,436
2016
2015
LTIP
-
Pension
-
Total
1,812,883
József Váradi
Total
1,607,587
Salary and bonus were paid/are payable in Swiss Francs and were converted into Euros at the average rate
applicable for the year (salary) or the rate applicable at the end of the financial year (bonus).
Bonus
1,075,080
Benefits
-
Pension
-
LTIP
-
Fees and
salary
532,507
Bonus is linked to three important financial and operational KPIs of the Company and to individual
performance. The measures, target performance and actual performance for 2016 were the following:
Measures
Profit (underlying, €m)
CASK ex-fuel (€c/ASK)
On-time performance
(delay <15 mins)
Individual performance rating
Aggregate payout ratio
Target performance
Weight
67%
11%
11%
11%
Threshold*
148.0
2.36
76.0%
2
Target**
175.0
2.30
80.0%
2+
Maximum***
201.0
2.24
Actual
performance
223.9
2.27
84.0%
1
82.3%
1
Payout
ratio
200%
150%
158%
200%
190%
*
There is no payment if the performance is worse than the threshold.
** At “Target” there is 100 per cent. payment (being equal to twelve months’ salary in the case of the CEO).
*** If the “Maximum” is reached or exceeded then there is 200 per cent. payment.
As outlined earlier, the first award under the LTIP (of 250 per cent. of base salary) was made to the Chief
Executive Officer during the 2016 financial year (July 2015). The award included 73,805 performance options,
valued at GBP 15.72 per option share, that was the market price of the Company’s shares at the date of grant.
The exercise price of the options is nil.
Vesting is due in July 2018 subject to meeting the following performance criteria:
a) relative total shareholder return (TSR) growth versus selected European airlines (50 per cent. weighting); and
b) absolute fully diluted earnings per share (EPS) growth of the Company (50 per cent. weighting).
The TSR group consists of the following entities: Ryanair and EasyJet (50 per cent. weighting); AirFrance-KLM,
Air Berlin, Deutsche Lufthansa, Finnair, Flybe, IAG and SAS (50 per cent. weighting). Aer Lingus has been
removed from the group following acquisition by IAG and subsequent delisting in September 2015.
25 per cent. of the award will vest for median performance and 100 per cent. of the award will vest for
performance equal to or exceeding the upper quartile. There will be no vesting for performance below median
and linear interpolation will apply for performance between the median and upper quartile.
With respect to the EPS growth measure, 25 per cent. of the award will vest for threshold average annual
growth of 14 per cent., 50 per cent. will vest for target average annual growth of 17 per cent. and 100 per cent.
will vest for maximum average annual growth of 20 per cent. Linear interpolation will apply for performance
between threshold and target and target and maximum.
No remuneration is shown for LTIP options in the table above for ‘single total figure of remuneration’, because
– as explained above - final vesting of these options is not determined as a result of achievement of
performance targets relating to the 2016 financial year.
As outlined in the 2015 annual report, 1,920,075 share options were issued to the Chief Executive Officer during
the 2005–2011 calendar years from the previous long-term incentive plan (ESOP) of the Company. Of these,
1,755,075 were exercised during the 2015 financial year. The remaining 165,000 (vested) options had not been
exercised as at 31 March 2016 and are exercisable until April 2021.
A performance graph that would show the Company’s total shareholder return compared to a selected equity
market index is not presented in this report due to the short trading history of the Company’s shares. However,
a graph is planned for 2017.
In the tables below we provide a five-year overview of the Chief Executive Officer’s remuneration and the
change in the Chief Executive Officer’s remuneration compared to that of all employees.
Wizz Air Holdings Plc Annual report and accounts 2016
54
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Executive Director’s remuneration continued
Five-year overview of Chief Executive Officer remuneration
Financial year
2012
2013
2014
2015
2016
Single figure
of total
remuneration
Euro
764,460
533,398
1,462,212
1,607,587
1,812,883
Performance
bonus
achieved
against
maximum
possible
100%
0%
97%
91%
95%
LTIP shares
vesting
against
maximum
possible*
100%
N/A
N/A
N/A
N/A
*
Share options were last time issued to the CEO in the 2012 financial year. The vesting period was three years but there were
no performance conditions other than being in employment during the vesting period.
Change in the remuneration of the Chief Executive Officer compared to that of all employees
Salary and fees
Benefits
Bonus
Total remuneration
Chief Executive Officer
2016
627,447
-
1,185,436
1,812,883
2015
532,507
-
1,075,080
1,607,587
Change
+17.8%
N/A
+10.3%
+12.8%
Total employees
Change**
+8.9%
+3.5%
-41.0%
3.6%
* Benefits represented an insignificant part, approximately only 2 per cent., of the employee pay in these two years.
** Per employee, excluding the Chief Executive Officer.
The 41 per cent. decrease year on year in the bonus paid to employees was due to the €1.6 million one-off
IPO-related bonus paid in 2015 (see Note 9 to the financial statements). Excluding this impact the change in
the per employee total remuneration was +6.8 per cent. instead of the 3.6 per cent. shown in the table. On the
other hand, the remuneration of the Chief Executive Officer, when expressed in Euro, was inflated by the
appreciation of the Swiss Franc to the Euro year on year – this had an approximately 9 per cent. impact on the
salary number in Euro.
Total employee remuneration changed from €55.6 million in the 2015 financial year to €68.6 million in the 2016
financial year (see Note 7 to the financial statements), being a 23.4 per cent. increase year on year. This was
driven also by the 19.3 per cent. increase in employee number.
There were no dividends or share buybacks either in the 2016 financial year or the 2015 financial year.
Non-Executive Director remuneration
The Chairman and Non-Executive Directors are paid only Directors’ fees, full details of which are set out below:
Single total figure of remuneration table – audited
2016
William A. Franke
Stephen L. Johnson
John R. Wilson
Thierry De Preux
John McMahon
Simon Duffy
Guido Demuynck
Susan Hooper*
Total
*
Joined on 1 March 2016.
Fees and
salary
€
77,500
45,000
52,500
52,500
52,500
72,895
65,000
2,083
419,978
Benefits
-
-
-
-
-
-
-
-
-
Bonus
-
-
-
-
-
-
-
-
-
LTIP
-
-
-
-
-
-
-
-
-
Pension
-
-
-
-
-
-
-
‐
-
Total
€
77,500
45,000
52,500
52,500
52,500
72,895
65,000
2,083
419,978
Wizz Air Holdings Plc Annual report and accounts 2016
55
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Non-Executive Director remuneration continued
Fees and
salary
€
82,500
55,000
27,500
57,500
57,500
55,000
25,168
61,102
58,441
479,711
Benefits
-
-
-
-
-
-
-
-
-
-
2015
Bonus
-
-
-
-
-
-
-
-
-
-
LTIP
-
-
-
-
-
-
-
-
-
-
Pension
-
-
-
-
-
-
-
-
-
-
Total
€
82,500
55,000
27,500
57,500
57,500
55,000
25,168
61,102
58,441
479,711
William A. Franke
Stephen L. Johnson
Heather Lawrence*
John R. Wilson
Thierry De Preux
John McMahon
John Tierney**
Simon Duffy
Guido Demuynck
Total
* Retired on 3 October 2014.
** Retired on 6 August 2014.
Total Directors’ remuneration (Executive and Non-Executive) (audited)
Total remuneration of Directors for the period was €2,232,861 (2015: €2,087,298). This is the sum of the two
single figure tables set out above. The Chief Executive Officer is not a member of any other board.
Directors’ shareholdings
The Chief Executive Officer holds a significant shareholding in the Company through a family trust and is also
eligible to participate in the Company’s Long-term Incentive Plan.
Each of the Non-Executive Directors, other than Susan Hooper, is also a Shareholder in the Company, following
awards made under a historic non-executive share scheme and/or the purchase of shares with the relevant
Director’s own cash. No new share plan awards have been made since July 2013 or will be made in the future
under this historic share scheme.
The Company therefore believes that the interests of the Directors are well aligned with those of the
Shareholders. Full details of the Directors’ and their connected persons’ interests in the Company’s shares as
at 31 March 2016 are set out below:
Directors and connected persons’ interests in shares – audited
Director
William A. Franke(1)
József Váradi(2)
Thierry de Preux
Guido Demuynck
Simon Duffy
Stephen L. Johnson
John Mc Mahon
John R. Wilson
Direct
ownership
Interests
Number of
Ordinary
Shares
82,917
10,500
66,384
5,250
5,250
52,750
14,750
59,083
Number of
Ordinary
Shares
10,815,383
2,310,000
-
-
-
-
-
-
Number of
Convertible
Shares
44,830,503
-
-
-
-
-
-
-
Total
Ordinary
Share
interests
10,898,300
2,320,500
66,384
5,250
5,250
52,750
14,750
59,083
(1) Mr Franke is deemed to be interested in all of the Ordinary Shares and Convertible Shares held by Indigo Hungary LP, Indigo
Maple Hill L.P., Indigo Hungary Management LLC and Bigfork Partners LLC for the purposes of section 96B of the Financial
Services and Markets Act 2000. Indigo Hungary LP and Indigo Maple Hill L.P. also hold Convertible Notes that, subject to
certain conditions, are convertible to Ordinary Shares of the Company.
(2) Mr Váradi is deemed to be interested in the Ordinary Shares held by his family trust companies. Mr Váradi’s family trust
company also holds 165,000 vested share options with an exercise price of GBP1.90 per share.
There has been no change to the interests of each of the Directors set out above since 31 March 2016 to the
date of the notice of the 2016 Annual General Meeting.
Wizz Air Holdings Plc Annual report and accounts 2016
56
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Application of the Remuneration Policy in the 2017 financial year
a) Chief Executive Officer’s base salary
A change of salary, if any, would be confirmed only after the release of this Annual Report.
b) Short-term Incentive Plan
The Chief Executive Officer is eligible to receive a cash bonus of up to 200 per cent. of base salary in respect
of the 2017 financial year. The actual cash bonus received will depend on the achievement of certain
performance criteria including underlying profit after tax (67 per cent.), on-time performance (11 per cent.),
cost per available seat kilometre (11 per cent.) and personal evaluation (11 per cent.).
The Remuneration Committee believes that the specified performance criteria are sufficiently challenging
compared to the Company’s business plan. The annual bonus targets are commercially sensitive and therefore
will be disclosed in the 2017 remuneration report following the completion of the financial year provided that
they are no longer commercially sensitive.
c) Long-term Incentive Plan
An award of performance shares of up to 250 per cent. of base salary will be made to the Chief Executive
Officer in May 2017. Awards will vest following a three-year performance period and be subject to the same
type of same performance criteria as the 2016 award, but details would be confirmed only after the release of
this Annual Report.
d) Chairman and Non-Executive Directors’ fees
There will be no increases to fees for our Chairman and Non-Executive Directors during the financial year
ending 31 March 2017.
As outlined in the FY15 annual report, the Non-Executive Directors receive a fee of €25,000 per annum, plus
€2,500 for each full Board meeting attended. Simon Duffy, as Chairman of the Audit Committee, receives an
additional fee of €18,750 per annum for taking on that role. Guido Demuynck, as Chairman of the Remuneration
Committee, receives an additional fee of €12,500 per annum for taking on that role. William A. Franke, as
Chairman, receives an additional fee of €25,000 per annum for taking on that role. The Non-Executive
Directors will also be reimbursed for all proper and reasonable expenses incurred in performing their duties.
Other disclosures
Directors’ service agreement and letters of appointment
Executive Director
The Chief Executive Officer entered into a new service agreement with the Geneva branch of Wizz Air Hungary
Ltd. (“WAHL”) on 15 December 2015, for a period of five years, subject to earlier termination upon six months’
notice by either party. WAHL also has the right to terminate Mr Váradi’s employment with immediate effect
by payment in lieu of notice. The service agreement contains post-termination restrictive covenants
preventing Mr Váradi from competing with WAHL or any of its business partners in the EU as well as those
non-EU countries where WAHL operates, for a period of one year following the termination of his employment.
Mr Váradi will be paid a sum equal to six months’ base salary if WAHL chooses to enforce these restrictive
covenants. Upon termination of employment other than for cause, Mr Váradi is entitled to a severance payment
equal to six months’ salary, in addition to any notice pay or payment in lieu of notice.
Non-Executive Directors
The Company entered into letters of appointment with each of its Non-Executive Directors on 4 June 2014, which
became effective on completion of the IPO for a term of three years. Each Non-Executive Director’s appointment
may be terminated by the Company or the Non-Executive Director with one month’s written notice. Continuation
of the appointment is contingent on continued satisfactory performance and re-election at the Company’s annual
general meetings and the appointment will terminate automatically on the termination of the appointment by
the Shareholders or, where Shareholder approval is required for the appointment to continue, the withholding of
approval by the Shareholders. Re-appointment will be reviewed annually.
In accordance with the terms of the letters of appointment, each of the Non-Executive Directors is required to
allocate sufficient time to discharge their responsibilities effectively. Each letter of appointment contains
obligations of confidentiality which have effect during the appointment and after termination thereof.
On behalf of the Board
Guido Demuynck
Chairman of the Remuneration Committee
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
57
GOVERNANCE
CORPORATE RESPONSIBILITY
Wizz Air is a successful company and we consider ourselves to be a regional aviation industry champion in
our home markets. However, we recognise that financial performance is not all that it takes to be successful.
Wizz Air must also be a responsible company, where business is done ethically and with integrity.
We already have in place our Code of Ethics – The Wizz Way – which sets out how our business is run. But
being a responsible company goes further than just business and we are developing a strategy that will set
out a framework for our sustainability endeavours and objectives to reach.
The sustainability strategy is being built upon three pillars: our people and how we interact with our colleagues,
our passengers and the communities in which we operate; the planet and how we manage our environmental
impact; and our focus, already mentioned, of making sure that we conduct our business ethically.
We want our sustainability strategy not only to be achievable but also to contribute genuine value. Although
the strategy itself is being finalised, we have already implemented a number of initiatives that we believe
embody some of what we want to achieve, for example:
E promoting a healthy lifestyle by sponsoring major running events such as the Skopje Marathon, the Kosice
Runway Run, and the Budapest Half-Marathon, engaging with our communities, and encouraging
participation of our colleagues by providing travel, accommodation and entry to many of the events;
E encouraging team building amongst colleagues and working to ensure a genuine and unique WIZZ culture
through departmental away-days and through the organisation of Company events such as the annual ski
event attended by over 150 colleagues and the Christmas party, hosted in Budapest, for over 1,000
colleagues from across the network;
E ensuring that Wizz Air is not only a great airline, but that it also remains a great airline to work for. This
year, we carried out our first network-wide feedback survey, to which over 1,500 colleagues responded.
Conducted on an anonymous basis, the results will be shared with colleagues and we will work together
on any key issues highlighted;
E
supporting and promoting community volunteer projects in base cities carried out by local crew;
E personal development of our employees through the introduction of talent assessment and leadership
development programmes;
E developing and implementing a large number of fuel-saving initiatives – 55 so far – through which we not
only save money but also drive down our emissions and carbon footprint. As an example, our fleet fuel
consumption, measured in tonnes per block hour, was 0.5 per cent. lower in the 2016 financial year than
in the previous year;
E ensuring that fuel consumption and, so emissions, are kept as low as possible. Our fleet is already one of
the youngest, most fuel-efficient in Europe and includes the 230-seat Airbus A321ceo – the most efficient
single aisle aircraft in operation. In 2015, we concluded an agreement with Airbus to purchase 110 Airbus
A321neo aircraft, with uncommitted purchase rights for a further 90 aircraft. Our commitment to operating
the latest technology aircraft means that, as we continue to grow, our environmental footprint will be as
small as possible; and
E making sure that we remain efficient in all other aspects of our operation. During the 2016 financial year,
we moved our Budapest operational headquarters to the Laurus office complex, an A-grade office
building employing environmentally-efficient technology to provide a superior working environment and
able to offer the Company the space needed for its continued growth over the coming decade. The office’s
location at a major public transport interchange midway between the airport and downtown means that
more of our colleagues can use public transport, resulting in fewer and shorter car journeys as well as
making the company even more attractive for prospective employees.
These initiatives are very much the start of what we aim to achieve. We want Wizz Air to be recognised not
only as a great airline to fly with, but also as a company that adds real value to its employees’ careers and the
communities in which it operates, and with a real concern for the environment.
Wizz Air Holdings Plc Annual report and accounts 2016
58
GOVERNANCE
DIRECTORS’ REPORT
The Directors present their report and the audited consolidated financial statements for Wizz Air Holdings plc
(“the Company”) and its subsidiaries (“the Group”) for the year ended 31 March 2016.
Results and dividend
The results for the year are shown on page 72.
The Directors do not recommend the payment of a dividend (2015: nil).
Directors
The Directors of the Company who were in office during the year and up to the date of signing the financial
statements are listed below:
E
József Váradi
E William A. Franke
E
John R. Wilson
E Stephen L. Johnson
E
John McMahon
E Thierry de Preux
E Simon Duffy
E Guido Demuynck
E Susan Hooper (appointed with effect from 1 March 2016)
Going concern
Wizz Air’s business activities, financial performance and financial position, together with factors likely to affect
its future development and performance, are described in the Strategic Report on pages 4 to 24. Principal
risks and uncertainties facing the Group are described on pages 25 to 28. Note 3 to the accounts sets out the
Group’s objectives, policies and procedures for managing its capital and provides details of the risks related
to financial instruments held by the Group.
At 31 March 2016, the Group held cash and cash equivalents of €645.6 million while net current assets were
€328.7 million. Other than convertible debt with a balance of €27.2 million the Group has no significant
external borrowings.
The Directors have reviewed financial forecasts including plans to finance future aircraft deliveries. After
making enquiries, the Directors have satisfied themselves that the Group will be able to operate within the
level of its liquid resources for the foreseeable future. Accordingly, they continue to adopt the going concern
basis in preparing these financial statements.
Viability
In accordance with provision C.2.2 of the UK Corporate Governance Code (2014), the Directors have assessed
the prospects and the viability of the Group over a three-year period to March 2019. The Directors have
determined that the three-year period was the appropriate period because (i) Wizz Air has a fast expanding
business which gives less certainty of certain key forecasting assumptions over a longer period; and (ii) the
Group’s strategic planning process traditionally covers three years.
Assessment of prospects
The Group’s prospects are assessed by management and the Board primarily through the strategic planning
process. This three-year plan takes into account the current position of the Group, includes the fully detailed
annual operating plan for the financial year starting (in this case for the year ending March 2017) and then,
building on it, a sufficiently detailed bottom-up forecast for further two financial years. The Board participates
fully in the process by aligning the key assumptions and the topline financial targets, reviewing and approving
the annual operating plan, and reviewing and acknowledging the three-year plan.
The plan takes into account the existing aircraft order book of the Group that defines a programmed growth
for several years ahead. Financing of future aircraft deliveries is already substantially secured until the end of
2018 (with lease contracts for some deliveries and with letters of intent for some others). The Directors believe
that the growth assumptions are justified also from the demand side, as the Group continues to execute its
core strategy: have lower cost than any of its competitors, and with low prices stimulate further demand for
its services both in existing and new markets.
Wizz Air Holdings Plc Annual report and accounts 2016
59
GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Viability continued
Assessment of viability
Although the strategic plan reflects management and the Directors’ best estimate of the future prospects of
the business, they have also tested the resilience of the business to unfavorable deviations of certain key
variables from the base case scenario. In defining these scenarios the Directors took into account the principal
risks that could prevent the Group from delivering on its strategy and financial targets, as summarised on
pages 26 to 28 in the Strategic Report.
As part of this assessment, the Directors made the following key assumptions / caveats:
E
E
there will not be a prolonged grounding of a substantial portion of the aircraft fleet; and
if the UK in June 2016 votes to leave the European Union, the terms of exit will be such that will allow the
Group to continue to operate broadly the same network to/from the UK as at present.
The Directors assessed the potential financial impacts of severe but plausible scenarios that the Group could
experience. The scenarios included significant increase in jet fuel prices, significant strengthening of the
US Dollar to the Euro, decreasing unit revenues, increasing crew costs, and a combination of these factors.
While several risks can impact revenues, increased competition in key markets was considered the most
important risk both in terms of likelihood and potential impact.
The results of the testing showed that, due to the strong competitive position, operating cash flows and
existing reserves of the Group, it would be able to withstand the impact of these scenarios over the period of
the financial forecasts.
Viability statement
Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period to March 2019.
Disclosure of information to auditors
The Directors at the date of approval of the financial statements confirmed that, so far as they are aware, there
is no relevant audit information of which the Company's auditors are unaware, and 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 auditors are aware of that information.
Independent auditors
A resolution for the appointment of the auditors of the Company for the financial year ending 31 March 2017
is to be proposed by the Directors at the forthcoming Annual General Meeting.
Indemnities
Wizz Air maintains directors’ and officers’ liability insurance. This insurance covers any claim that may be
brought against the Directors in the exercise of their duties. Wizz Air has also provided customary third-party
indemnities to its Directors, to the extent permitted under Jersey law.
Political donation and expenditure
Wizz Air works constructively with all levels of government across its network, regardless of political affiliation.
Wizz Air believes in the right of individuals to engage in the democratic process; however, Wizz Air itself does
not make any political donations and does not incur any political expenditure.
Capital structure
As at 31 March 2016, the Company had 56,922,171 Ordinary Shares of £0.0001 each in issue, each with one vote,
and 44,830,503 Convertible Shares, which do not entitle the holder to voting rights save in very limited
circumstances. There were no shares held in treasury at that date. The rights and obligations attaching to the
Company’s shares are set out in the articles of association. Holders of Ordinary Shares have the following rights:
a) subject to any rights or restrictions as to voting attached to any Ordinary Shares, on a show of hands, each
Shareholder present in person shall have one vote, and on a poll each Shareholder present in person or by
proxy shall have one vote for every Ordinary Share of which he is the holder;
b) a certificated share may be transferred by means of an instrument in writing, either by the usual transfer form or
in any other form that the Board approves, signed by or on behalf of the person transferring the Ordinary Shares
and, unless the Ordinary Shares are fully paid, by or on behalf of the person acquiring the Ordinary Shares. Ordinary
Shares in uncertificated form may be transferred by means of the relevant system;
Wizz Air Holdings Plc Annual report and accounts 2016
60
GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Capital structure continued
c) the right to receive dividends on a pari passu basis; and
d) on a winding-up, the liquidator may divide amongst the members in specie the whole or any part of the
assets of the Company.
During the 2016 financial year 642,056 new Ordinary Shares were allotted for cash, all on a non-pre-emptive
basis. These were allotted pursuant to the exercise of share options by the employees of the Group.
The aggregate nominal value of the Ordinary Shares allotted for cash in the 2016 financial year was £64.
The aggregate cash consideration received by the Company for the allotment of the Ordinary Shares was
£1.2 million.
In addition, an aggregate of 4,000,000 Convertible Shares held by Indigo were converted into Ordinary Shares.
Information required by Listing Rule LR 9.8.4C
In compliance with Listing Rule 9.8.4C, the Company discloses the following information:
Listing Rule
9.8.4(1)
9.8.4(2)
Information required
Interest capitalised by the Group
Unaudited financial information as required
(LR 9.2.18)
Relevant disclosure
N//A
Unaudited financial information was
published by the Group in its interim
management statements (for Q1 and Q3)
and in its half-year results. There have
been no changes to the unaudited
information previously published.
The Company issued a profit forecast for
the 2016 financial year in the Class 1
Circular dated 15 November 2015,
prepared in connection with the Airbus
purchase order. The Company expected
to report ‘a net profit for the full year
(excluding unusual and exceptional
items) in the range of €190 million to
€200 million’. The actual underlying net
profit for the year was €223.9 million.
The main driver of the higher than
forecasted profit is that the actual
unhedged fuel price was only $407/ton
in the last seven months of the financial
year, while the forecast assumed
$550/ton. Actual demand turned out to
be broadly in line with the plan.
See Directors’ Remuneration Report.
N/A
N/A
See paragraph headed “Capital
structure” in this report.
N/A
N/A
N/A
See Corporate Governance Report.
9.8.4(4)
9.8.4(5)
9.8.4(6)
9.8.4(7)
9.8.4(8)
9.8.4(10)
9.8.4(11)
9.8.4(12)
9.8.4(13)
9.8.4(14)
Long-term incentive plans (LR 9.4.3)
Directors’ waivers of emoluments
Directors’ waivers of future emoluments
Non-pro-rata allotments of equity for cash
(the Company)
Non-pro-rata allotments of equity for cash
(major subsidiaries)
Contracts of significance involving a Director N/A
N/A
Contracts of significance involving a
controlling shareholder
Waivers of dividends
Waivers of future dividends
Agreement with a controlling shareholder
(LR 9.2.2.AR(2)(a))
For and on behalf of the Board
József Váradi
Chief Executive Officer
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
61
GOVERNANCE
COMPANY INFORMATION
Registered number
103356
Registered office
44 The Esplanade
St Helier
Jersey
JE4 9WG
Secretary
Elian Corporate Services (Jersey) Limited
44 The Esplanade
St Helier
Jersey
JE4 9WG
Independent auditors
PricewaterhouseCoopers LLP, Chartered
Accountants and Statutory Auditors
1 Embankment Place
London WC2N 6RH
United Kingdom
Principal bankers
Citibank
Citigroup Centre
25 Canada Square
Canary Wharf
London E14 5LB
United Kingdom
Share registrar
Computershare Investor Services (Jersey)
Limited
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
Financial public relations
FTI Consulting
200 Aldersgate Street
London EC1A 4HD
United Kingdom
Principal legal advisers
Latham and Watkins (London) LLP
99 Bishopsgate
London EC2M 3XF
United Kingdom
Joint corporate brokers
Barclays Bank PLC
1 Churchill Place
London E14 5HP
United Kingdom
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
Wizz Air Holdings Plc Annual report and accounts 2016
62
GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.
The Companies (Jersey) Law 1991 requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have prepared the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
E
select suitable accounting policies and then apply them consistently;
E make judgments and accounting estimates that are reasonable and prudent;
E
state whether applicable IFRSs as adopted by the European Union have been followed, subject to any
material departures disclosed and explained in the financial statements; and
E 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 show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements comply with the Companies
(Jersey) Law 1991 and the Directors’ Remuneration Report complies with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and the Group 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 Company’s website. Legislation in
Jersey and the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for Shareholders to assess the Company’s position
and performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 35 to 37 confirm that, to the best of
their knowledge:
E
E
the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the
EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
the Strategic Report contained in the annual report includes a fair review of the development and
performance of the business and the position of the Group, together with a description of the principal
risks and uncertainties that it faces.
On behalf of the Board
József Váradi
Director
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
63
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC
Report on the group financial statements
Our opinion
In our opinion, Wizz Air Holdings plc’s group financial statements (the “financial statements”):
E give a true and fair view of the state of the group’s affairs as at 31 March 2016 and of its profit and cash
flows for the year then ended;
E have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as
adopted by the European Union; and
E have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:
E
E
E
E
E
the Consolidated statement of financial position as at 31 March 2016;
the Consolidated statement of comprehensive income for the year then ended;
the Consolidated statement of cash flows for the year then ended;
the Consolidated statement of changes in equity for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the
financial statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs
as adopted by the European Union, and applicable law.
Our audit approach
Overview
Materiality
E Overall group materiality: €10.1 million which represents 5% of profit before tax.
Audit scope
E The group financial statements are a consolidation of Wizz Air Holdings plc, the
trading subsidiary Wizz Air Hungary Kft and a number of insignificant
intermediate holding, small trading, dormant and ceased operation companies.
E The accounting for these entities and the group consolidation is largely
centralised in Hungary where the majority of our audit work was performed.
E Our audit scope comprised an audit of Wizz Air Holdings plc and the complete
financial information of Wizz Air Hungary Kft, being the significant components.
Areas of focus
E Aircraft maintenance provisioning.
E Hedge and derivative accounting.
E Net presentation of government taxes and other similar levies.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs
(UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our
resources and effort, are identified as “areas of focus” in the table below. We have also set out how we tailored
our audit to address these specific areas in order to provide an opinion on the financial statements as a whole,
and any comments we make on the results of our procedures should be read in this context. This is not a
complete list of all risks identified by our audit.
Wizz Air Holdings Plc Annual report and accounts 2016
64
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT CONTINUED
Report on the group financial statements continued
Our audit approach continued
The scope of our audit and our areas of focus continued
How our audit addressed the area of focus
tested
system
(MPS) and
We evaluated the integrity of the maintenance
provision
the
calculations therein. This included assessing the
process by which the variable factors within the
provision were estimated, evaluating
the
reasonableness of the assumptions, testing the
input data and re-performing calculations. We
found no significant issues in the MPS input data
or the calculated maintenance assets and
provisions. The basis for these calculations was
found to be consistent with prior periods and in
line with the detailed accounting policy set out in
note 2.
We compared the cost assumptions in the MPS to
recent invoices, inspected future flight schedules
and approved maintenance plans as well as
validated current flight hours and flight cycles to
non-financial data sources. We found no material
exceptions from these procedures and estimates.
testing on
We read new or amended aircraft lease contracts
and validated the updated MPS input data. We
focused our
the current year
amendments to the Fleet Hour Agreement (FHA).
Specifically this year, we focused our testing on
the accounting for additional spare engine credits.
We agreed the fair value of the engine credits to
market value and ensured the appropriate
accounting as spare engines were received.
from
We found
these procedures.
no material
exceptions
We tested modifications to the original purchase
agreement with Airbus and IAE. Our testing of the
changes from MPS to the amended purchase
agreement found no material exceptions from
these modifications and changes in estimates.
Area of focus
Aircraft maintenance provisioning
The group operates aircraft, which are held under
operating lease arrangements, and incurs liabilities for
maintenance during the term of the lease. Provisions
arise from legal and contractual obligations relating to
the condition of the aircraft when it is returned to
the lessor.
Maintenance provisions of €83.7 million for aircraft
maintenance costs in respect of operating leased aircraft
are recorded in the financial statements at 31 March 2016
(refer to note 29 to the financial statements).
For aircraft held under operating lease agreements,
the group is contractually committed to either return
the aircraft in a certain condition or to compensate the
lessor based on the actual condition of the aircraft and
its major components upon return.
Provision is made for the minimum unavoidable costs
of specific future obligations created by the lease at
the time when such obligation becomes certain. This is
when the respective aircraft component no longer
meets the lease re-delivery conditions. Commonly
there is a warranty period for components at the start,
during which no obligation arises; provisioning only
commences after this warranty period.
At each balance sheet date, the calculation of the
maintenance provision, derived from the maintenance
provision system (MPS), includes a number of variable
factors and assumptions including: likely utilisation of
the aircraft; the expected cost of the heavy maintenance
check and the time it is expected to occur; the condition
of the aircraft; and the lifespan of life-limited parts.
Modifications to these contracts represents changes in
accounting estimates and are adjusted prospectively.
A focus for the audit was to confirm that all
amendments to the Fleet Hour Agreement (FHA)
which modifies the number of hours before heavy
maintenance are required and impacts future costs,
are updated in the MPS as a change in estimate.
The company leases a large volume of aircraft and has
received a certain number of spare engines free of
charge, the value of which was allocated to all engines
proportionately and released over their lease period
(netted against the aircraft rental expense). As the
aircraft and spare engines are received by the
company over a period of time, the deferred income
for the discount and spare engine asset value is
recognised at the time the aircraft is received.
We focused on maintenance provisioning because of the
inherent level of management judgement required in
calculating the amount of provision that is considered
appropriate as a result of the complex and subjective
elements around these variable factors and assumptions.
Wizz Air Holdings Plc Annual report and accounts 2016
65
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT CONTINUED
Report on the group financial statements continued
Our audit approach continued
The scope of our audit and our areas of focus continued
Area of focus
Hedge and derivative accounting
The group uses derivative financial instruments
(options) to hedge transaction currency (comprising
fuel, leasing and maintenance US dollar payments)
and jet fuel price risks.
At 31 March 2016, derivative financial assets
amounted to €1.7 million and derivative financial
liabilities were €17.6 million. Further details are set
out in notes 2, 3 and 20 to the financial statements.
We focused on these balances because of their
materiality to the financial position of the group, the
level of manual involvement in monitoring open,
closed and settled derivatives and the complexity of
the
to apply hedge
in order
accounting (e.g. timely tailored documentation,
including details of how hedge effectiveness is
monitored both prospectively and retrospectively).
requirements
How our audit addressed the area of focus
management’s
We evaluated the processes, procedures and controls
in respect of the group’s treasury and other
management functions which directly impact the
relevant account balances and transactions. We
tested
account
reconciliation process, including cut-off procedures.
The results of this work allowed us to focus on
substantiating the year-end positions recorded in the
financial statements. We independently obtained
direct confirmations from each of the counterparties
to test the cut-off at the year end. We found no
material exceptions from these confirmations.
year-end
adequate
We assessed
the appropriateness of hedge
accounting for the derivative financial instruments
and
and
effectiveness testing was found to be in place. We
tested, using independent data-feeds, the fair values
being ascribed to those instruments at the year end
and noted no significant exceptions.
documentation
hedge
We also assessed the appropriateness of the
disclosures in the financial statements in respect of
derivative financial instruments. We did not identify
the measurement
issues with
any significant
derivative
of
or presentation
financial instruments.
group’s
the
Net presentation of government taxes and other
similar levies
The group assesses all charges levied by airports and
government authorities to ensure that any amounts
recovered from passengers in respect of these
charges are appropriately classified within the
income statement.
We read significant new or amended airport
contracts to validate the correct accounting
treatment of tax or tax-like items. We found that the
treatment adopted was consistent with the criteria
set out in the group’s accounting policies.
The group’s accounting policy stipulates that where
charges levied by airports or government authorities
on a per passenger basis represent a tax in fact or
substance, such amounts are presented on a net basis
in the consolidated income statement (revenue and
airport handling and en-route charges lines).
tested charges
We
levied by airports and
government authorities to ensure appropriate
recognition within the income statement. Our work
did not identify any inappropriate netted amounts
within revenue or airport handling and en-route
charges financial statement line items.
Given the variability of these charges and the
number of airports and jurisdictions within which the
group operates, the assessment of whether these
items constitute taxes in nature is an inherently more
complex area, requiring a level of judgement.
In addition, we analysed the costs per passenger,
investigating significant variances from prior years
to
identify potential non-compliance with the
group’s accounting policy. We found no material
exceptions from these procedures.
As such, we focused on whether these charges had
been accurately assessed and classified within the
financial statements.
Wizz Air Holdings Plc Annual report and accounts 2016
66
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT CONTINUED
Report on the group financial statements continued
Our audit approach continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the geographic structure of the group, the accounting
processes and controls, and the industry in which the group operates.
The group operates through Wizz Air Holdings plc and its trading subsidiary Wizz Air Hungary Kft, which
includes branch operations in base countries. The group financial statements are a consolidation of these
entities and a number of insignificant intermediate holding, small trading, dormant and ceased operation
companies. The accounting for these entities and the group consolidation is centralised in Hungary.
Our audit scope comprised an audit of Wizz Air Holdings plc and the complete financial information of
Wizz Air Hungary Kft, being the significant components.
The audit is performed by a single engagement team comprising individuals based in the UK and in Hungary.
The operations are audited by applying their collective knowledge and understanding of the group and its
financial reporting processes and controls.
In addition to the standard audit work performed by the engagement team based in Hungary, the UK team
members visited the Budapest’s management team three times during the audit cycle. These visits involved
discussing the audit approach, areas of focus and issues arising from our work. The UK team members also
attended the local clearance meeting in Hungary and all Audit Committee meetings in Switzerland, either in
person or via telephone call. This gave us the evidence we required for our opinion on the group financial
statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as
a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
Overall group materiality
How we determined it
Rationale for benchmark applied Consistent with the prior year, we applied this benchmark, a generally
€10.1 million (2016: €9.6 million).
5% of profit before tax.
accepted auditing practice, in the absence of indicators that an
alternative benchmark would be appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above €0.4 million (2016: €0.4 million) as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Going concern
The directors have complied with provision C.1.3 of the UK Corporate Governance Code (‘the Code’) and
provided a statement in relation to going concern, set out in the Directors’ report. The directors have requested
that we review the statement on going concern as if the Company were a UK registered company. We have
nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to the directors’ statement about whether they considered it appropriate to adopt the
going concern basis in preparing the financial statements. We have nothing material to add or to draw
attention to.
As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going
concern basis in preparing the financial statements. The going concern basis presumes that the group has
adequate resources to remain in operation, and that the directors intend it to do so, for at least one year from
the date the financial statements were signed. As part of our audit we have concluded that the directors’ use
of the going concern basis is appropriate. However, because not all future events or conditions can be
predicted, these statements are not a guarantee as to the group’s ability to continue as a going concern.
Wizz Air Holdings Plc Annual report and accounts 2016
67
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT CONTINUED
Other required and voluntary reporting
Consistency of other information
Opinion on Strategic Report and Directors’ report
The directors voluntarily prepare a Strategic Report and Directors’ Report in accordance with the provisions
of the United Kingdom Companies Act 2006. The directors have requested that we express an opinion on the
consistency of that information with the financial statements in accordance with the United Kingdom
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit the information given in the Strategic
Report and the Directors’ Report for the financial year for which the financial statements are prepared is
consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
E
information in the Annual Report is:
materially inconsistent with the information in the audited financial
statements; or
apparently materially incorrect based on, or materially inconsistent with,
our knowledge of the group acquired in the course of performing our
audit; or
We have no exceptions
to report.
E
E
otherwise misleading.
the statement given by the directors on page 63, in accordance with
provision C.1.1 of the Code, that they consider the Annual Report taken as a
whole to be fair, balanced and understandable and provides the information
necessary for members to assess the group’s position and performance,
business model and strategy is materially inconsistent with our knowledge of
the group acquired in the course of performing our audit.
We have no exceptions
to report.
the section of the Annual Report on pages 43 to 45, as required by provision
C.3.8 of the Code, describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee.
We have no exceptions
to report.
The directors’ assessment of the prospects of the group and of the principal risks that would threaten
the solvency or liquidity of the group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to:
E
E
E
the directors’ confirmation on page 25 of the Annual Report, in accordance
with provision C.2.1 of the Code, that they have carried out a robust
assessment of the principal risks facing the group, including those that would
threaten its business model, future performance, solvency or liquidity.
We have nothing
material to add or to
draw attention to.
the disclosures in the Annual Report that describe those risks and explain
how they are being managed or mitigated.
the directors’ explanation on pages 59 to 60 of the Annual Report, in
accordance with provision C.2.2 of the Code, as to how they have assessed
the prospects of the group, over what period they have done so and why
they consider that period to be appropriate, and their statement as to
whether they have a reasonable expectation that the group will be able to
continue in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing attention to
any necessary qualifications or assumptions.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
Under the Listing Rules we are required to review the directors’ statement that they have carried out a robust
assessment of the principal risks facing the group and we have also reviewed the statement the directors have
made in relation to the longer-term viability of the group. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their
statements; checking that the statements are in alignment with the relevant provisions of the Code; and
considering whether the statements are consistent with the knowledge acquired by us in the course of
performing our audit. We have nothing to report having performed our review.
Wizz Air Holdings Plc Annual report and accounts 2016
68
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT CONTINUED
Other required and voluntary reporting continued
Adequacy of information and explanations received
Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion, we have not
received all the information and explanations we require for our audit. We have no exceptions to report arising
from this responsibility.
Corporate Governance Statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to
ten further provisions of the Code. We have nothing to report having performed our review.
The Corporate Governance Statement includes the information with respect to internal control and risk
management systems and about share capital structures required by the Disclosure Rules and Transparency
Rules of the Financial Conduct Authority. The directors have requested that we report on the consistency of
that information with the financial statements.
In our opinion, the information given in the Corporate Governance Statement set out on page 43 with respect
to internal control and risk management systems and on pages 60 to 61 about share capital structures is
consistent with the financial statements.
Directors’ remuneration
The directors voluntarily prepare a Directors’ remuneration report in accordance with the provisions of the
United Kingdom Companies Act 2006. The directors have requested that we audit the part of the Directors’
remuneration report specified by the United Kingdom Companies Act 2006.
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in
accordance with the United Kingdom Companies Act 2006.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 63, the directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only for the company’s members as a body in
accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of:
E whether the accounting policies are appropriate to the group’s circumstances and have been consistently
applied and adequately disclosed;
E
E
the reasonableness of significant accounting estimates made by the directors; and
the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence,
forming our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or a combination of both.
Wizz Air Holdings Plc Annual report and accounts 2016
69
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT CONTINUED
Responsibilities for the financial statements and the audit continued
What an audit of financial statements involves continued
In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
David Snell (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
24 May 2016
Wizz Air Holdings Plc Annual report and accounts 2016
70
ACCOUNTS
AND OTHER
INFORMATION
Wizz Air Holdings Plc Annual report and accounts 2016
71
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2016
Continuing operations
Passenger ticket revenue
Ancillary revenue
Total revenue
Staff costs
Fuel costs
Distribution and marketing
Maintenance materials and repairs
Aircraft rentals
Airport, handling and en-route charges
Depreciation and amortisation
Other expenses
Total operating expenses
Operating profit
Comprising
– operating profit excluding exceptional items
– exceptional expense
Financial income
Financial expenses
Net foreign exchange (loss)/gain
Net exceptional financial (expense)/income
Net financing (expense)/income
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income /(expense) – items that may be
subsequently reclassified to profit or loss:
Net movements in cash flow hedging reserve, net of tax
Currency translation differences
Other comprehensive income /(expense) for the year, net of tax
Total comprehensive income for the year
Earnings per share (Euro/share)
Diluted earnings per share (Euro/share)
Note
5
5
5
6
9
10
10
10
9
11
12
12
2016
€ million
894.9
534.2
1,429.1
(101.4)
(401.5)
(23.5)
(77.5)
(176.2)
(343.1)
(28.8)
(41.7)
(1,193.6)
235.5
235.5
-
2.0
(8.0)
(11.8)
(16.3)
(34.1)
201.4
(8.5)
192.9
33.2
-
33.2
226.1
3.62
1.54
2015
€ million
793.8
433.5
1,227.3
(83.4)
(396.6)
(18.8)
(62.0)
(137.1)
(297.7)
(33.9)
(30.5)
(1,060.0)
167.3
170.1
(2.8)
1.8
(5.6)
16.2
12.0
24.4
191.7
(8.5)
183.2
(43.0)
(8.7)
(51.7)
131.5
14.43
6.91
Wizz Air Holdings Plc Annual report and accounts 2016
72
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March 2016
Note
2016
€ million
2015
€ million
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Restricted cash
Deferred tax assets
Deferred interest
Derivative financial instruments
Trade and other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Financial assets available for sale
Derivative financial instruments
Deferred interest
Restricted cash
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Share premium
Reorganisation reserve
Equity part of convertible debt
Cash flow hedging reserve
Retained earnings
Total equity
Non-current liabilities
Borrowings
Convertible debt
Deferred income
Deferred tax liabilities
Derivative financial instruments
Provisions for other liabilities and charges
Total non-current liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Convertible debt
Derivative financial instruments
Deferred income
Provisions for other liabilities and charges
Total current liabilities
Total liabilities
Total equity and liabilities
13
14
22
15
21
20
18
17
18
19
20
21
22
28
28
28
28
28
23
24
26
15
20
29
25
23
24
20
26
29
353.6
5.7
100.0
0.2
6.0
-
71.2
536.8
17.6
126.5
1.0
1.7
1.2
1.6
645.6
795.1
1,331.8
-
377.0
(193.0)
8.3
(13.0)
509.4
688.8
5.9
26.9
96.6
4.9
1.2
41.2
176.7
177.3
3.2
0.5
0.3
16.4
225.0
43.7
466.4
643.1
1,331.8
247.1
3.2
70.4
0.7
7.7
22.1
80.3
431.5
8.8
87.6
1.0
38.6
1.2
3.2
448.6
589.0
1,020.5
-
375.4
(193.0)
8.3
(46.1)
315.3
459.9
3.8
27.0
74.2
4.1
1.8
44.9
155.8
123.9
4.1
0.4
0.3
79.9
188.7
7.5
404.8
560.6
1,020.5
The financial statements on pages 72 to 114 were approved by the Board of Directors and authorised for issue
on 24 May 2016 and were signed on behalf of the Board.
József Váradi
Chief Executive Officer
Wizz Air Holdings Plc Annual report and accounts 2016
73
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2016
Share
capital
€ million
28
-
Share
premium
€ million
28
375.4
Reorganisation
reserve
€ million
28
(193.0)
Equity part
of
convertible
debt
€ million
Cash flow
hedging
reserve
€ million
Cumulated
translation
adjustments
€ million
Retained
earnings
€ million
Total
equity
€ million
Note
Balance at 1 April 2015
Comprehensive income
Profit for the year
Other comprehensive
income
Hedging reserve
Currency translation
differences
Recycling of currency
translation difference on
closure of the subsidiary
operation
Total other
comprehensive income
Total comprehensive
income for the year
Transactions with owners
Proceeds from shares
issued (Note 28)
Convertible debt
conversion
Share based payment
charge (Note 27)
Total transactions
with owners
Balance at 31 March 2016
-
-
-
-
-
-
1.6
-
-
-
-
-
-
-
-
-
-
-
8.3
(46.1)
-
-
-
-
-
-
-
-
-
-
33.2
-
-
33.2
33.2
-
-
-
1.6
377.0
-
(193.0)
-
8.3
-
(13.0)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
315.3
459.9
192.9
192.9
-
-
-
-
33.2
-
-
33.2
192.9
226.1
-
-
1.2
1.6
-
1.2
1.2
509.4
2.8
688.8
Wizz Air Holdings Plc Annual report and accounts 2016
74
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONTINUED
For the year ended 31 March 2015
Share
capital
€ million
28
-
Share
premium
€ million
28
207.1
Reorganisation
reserve
€ million
28
(193.0)
Equity part
of
convertible
debt
€ million
Cash flow
hedging
reserve
€ million
Cumulated
translation
adjustments
€ million
Retained
earnings
€ million
Total
equity
€ million
11.1
(3.1)
8.7
129.1
159.9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
149.1
19.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2.8)
-
-
(43.0)
-
-
-
5.8
-
(14.5)
(43.0)
(8.7)
183.2
183.2
-
-
-
-
(43.0)
5.8
(14.5)
(51.7)
(43.0)
(8.7)
183.2
131.5
-
-
-
-
-
-
-
-
-
149.1
2.8
19.2
0.2
0.2
3.0
315.3
168.5
459.9
168.3
375.4
-
(193.0)
(2.8)
8.3
-
(46.1)
Note
Balance at 1 April 2014
Comprehensive income
Profit for the year
Other comprehensive
income
Hedging reserve
Currency translation
differences
Recycling of currency
translation difference on
closure of the subsidiary
operation (Note 9)
Total other
comprehensive income
Total comprehensive
income for the year
Transactions with
owners
Proceeds from shares
issued on IPO (Note 28)
Convertible debt
conversion
Share based payment
charge (Note 27)
Total transactions
with owners
Balance at 31 March 2015
Wizz Air Holdings Plc Annual report and accounts 2016
75
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2016
Note
2016
€ million
2015
€ million
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation
Amortisation
Financial income
Financial expense
Share based payment charges
Changes in working capital (excluding the effects of
exchange differences on consolidation)
Increase in trade and other receivables
Increase in restricted cash
Increase in derivative assets
Decrease/(increase)/ in deferred interest
Increase in inventory
(Decrease)/increase in provisions
Increase in trade and other payables
Increase in deferred income
Cash generated by operating activities before tax
Comprising
– cash flow excluding exceptional item
– exceptional item
Income tax paid
Net cash generated by operating activities
Cash flows from investing activities
Purchase of aircraft maintenance assets
Purchases of tangible and intangible assets
Advances paid for aircraft
Refund of advances paid for aircraft
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Interest paid
Commercial loan repaid
Net cash (used in)/generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash and
cash equivalents
Cash and cash equivalents at the end of the year
13
14
7
9
201.4
26.8
2.0
(2.0)
47.3
1.2
276.8
(32.0)
(31.7)
-
1.5
(8.8)
(0.4)
47.1
45.0
297.5
297.5
-
(8.6)
288.9
(42.7)
(12.4)
(116.7)
80.9
0.2
(90.6)
1.6
(2.8)
(0.4)
(1.7)
196.5
448.6
0.5
645.6
191.7
32.5
1.4
(44.2)
8.1
0.2
189.7
(35.9)
(24.4)
(25.9)
(0.3)
(2.6)
1.0
17.5
59.1
178.2
177.2
1.0
(4.2)
174.0
(36.3)
(7.3)
(74.6)
68.2
0.2
(49.8)
149.1
(3.7)
(6.1)
139.3
263.5
185.6
(0.5)
448.6
Wizz Air Holdings Plc Annual report and accounts 2016
76
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1. General information
Wizz Air Holdings plc (“the Company”) is a public company incorporated in Jersey under the address
44 The Esplanade, St Helier, Jersey JE4 9WG. The Company is managed from Switzerland. The Company and
its subsidiaries (together referred to as “the Group” or “Wizz Air”) provide low-cost, low-fare passenger air
transportation services on scheduled short-haul and medium-haul point-to-point routes across Europe and
the Middle East.
2. Accounting policies
The principal accounting policies applied in the presentation of these consolidated financial statements are set
out below.
Basis of preparation
These consolidated financial statements consolidate those of the Company and its subsidiaries. The consolidated
financial statements have been prepared and approved by the directors in accordance with International
Financial Reporting Standards as adopted by the EU (“Adopted IFRSs” and IFRS IC interpretations).
Based on the exemption provided in Article 105 (11) of the Companies (Jersey) Law 1991 the Company does
not present its individual financial statements and related notes.
The financial statements are presented in Euros which is the functional currency of all companies in the Group
with the exception of Dnieper Aviation LLC and Wizz Air Ukraine Airlines LLC for which the functional currency
is the Ukrainian Hryvnia (national currency of Ukraine).
The consolidated financial statements have been prepared under the historical cost convention, as modified
by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including
derivative instruments) at fair value through profit or loss.
The preparation of the consolidated financial statements in conformity with IFRS legislates the use of certain
critical accounting estimates and requires management to exercise judgements in the process of applying the
Group's accounting policies. The areas involving a high degree of judgement or complexity, on areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
New standards and interpretations
a) Standards, amendments and interpretations effective and adopted by the Group
The following new IFRSs and amendments are mandatory for financial periods beginning on or after
1 January 2015 and have therefore been adopted by the Group as of 1 April 2015.
E Amendment to IFRS 2, Share-based payment – clarifies the definition of ‘vesting condition’ and now
distinguishes between ‘performance condition’ and ‘service condition’.
E Amendment to IFRS 3, Business combinations – clarifies that an obligation to pay contingent
consideration is classified as financial liability or equity under the principles in IAS 32 and that all non-equity
contingent consideration (financial and non-financial) is measured at fair value at each reporting date. It
is also clarified that IFRS 3 does not apply to the accounting for the formation of any joint arrangement.
E Amendment to IFRS 8, Operating segments – requires disclosure of the judgements made by
management in aggregating operating segments and clarifies that a reconciliation of segment assets must
only be disclosed if segment assets are reported.
E Amendment to IFRS 13, Fair value measurement – confirms that short-term receivables and payables
can continue to be measured at invoice amounts if the impact of discounting is immaterial. It also clarifies
that the portfolio exception in IFRS 13 (measuring the fair value of a group of financial assets and financial
liabilities on a net basis) applies to all contracts within the scope of IAS 39 or IFRS 9.
E Amendment to IAS 16, Property, plant and equipment and IAS 38, Intangible assets – clarifies how the
gross carrying amount and accumulated depreciation are treated where an entity measures its assets at
revalued amounts.
E Amendment to IAS 24, Related party disclosures – where an entity receives management personnel
services from a third party (a management entity), the fees paid for those services must be disclosed
by the reporting entity, but not the compensation paid by the management entity to its employees
or directors.
Wizz Air Holdings Plc Annual report and accounts 2016
77
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
New standards and interpretations continued
a) Standards, amendments and interpretations effective and adopted by the Group continued
E Amendment to IAS 40, Investment property – clarifies that IAS 40 and IFRS 3 are not mutually exclusive
when distinguishing between investment property and owner-occupied property and determining
whether the acquisition of an investment property is a business combination.
E Amendment to IAS 19, Employee benefits - clarifies the accounting for defined benefit plans that require
employees or third parties to contribute towards the cost of the benefits. Under the previous version of
IAS 19, most entities deducted the contributions from the cost of the benefits earned in the year the
contributions were paid. However, the treatment under the 2011 revised standard was not so clear. It could
be quite complex to apply, as it requires an estimation of the future contributions receivable and an
allocation over future service periods. To provide relief, changes were made to IAS 19. These allow
contributions that are linked to service, but that do not vary with the length of employee service (e.g. a
fixed per cent of salary), to be deducted from the cost of benefits earned in the period that the service is
provided. Therefore many entities will be able to (but not be required) continue accounting for employee
contributions using their existing accounting policy. The Group anticipates that the adoption of the above
standards will not have a material effect on its results or financial position.
b) Standards early adopted by the Group
There are no standards early adopted by the Group.
c) Interpretations and standards that are not yet effective and have not been early adopted by the Group
E
IFRS 9, ‘Financial instruments’- addresses the classification, measurement and recognition of financial
assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through other comprehensive income or expense
and fair value through profit or loss. IFRS 9 allows changes in the time value of options to be recognised
in other comprehensive income, as opposed to the statement of comprehensive income under IAS 39. For
financial liabilities there were no changes to classification and measurement except for the recognition of
changes in own credit risk in other comprehensive income, for liabilities designated at fair value through
profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument
and for the “hedged ratio” to be the same as the one management actually uses for risk management
purposes. Contemporaneous documentation is still required but is different to that currently prepared
under IAS 39. The standard has not been adopted by the European Union, but is expected to be effective
for accounting periods beginning on or after 1 January 2018 with early adoption permitted.
E
E
E
IFRS 14, ‘Regulatory deferral accounts’ (effective for annual periods beginning on or after 1 January 2016) –
specifies the financial reporting requirements for regulatory deferral account balances that arise when an entity
provides goods or services to customers at a price or rate that is subject to rate regulation.
IFRS 15, ‘Revenue from contracts with customers’ – deals with revenue recognition and establishes principles
for reporting useful information to users of financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised
when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the
benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11 ‘Construction contracts’
and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017
and earlier application is permitted subject to EU endorsement.
IFRS 16, ‘Leases’ (effective for the accounting periods beginning on or after 1 January 2019) – addresses
the classification, measurement and recognition of leases with the objective of ensuring that lessees and
lessors provide relevant information that faithfully represents those transactions. The standard supersedes
IAS 17 ‘Leases’ and is subject to EU endorsement.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the
financial statements of the Group in future periods except that (i) IFRS 9 will impact both the measurement
and disclosures of financial instruments; (ii) IFRS 15 may have an impact on revenue recognition and related
disclosures; and (iii) IFRS 16 will require all lease contracts of the Group to be recognised on the balance sheet,
as well as significant new, enhanced disclosures. At this stage the Directors are not able to estimate the impact
of the new rules on the Group’s financial statements. The Group will make more detailed assessment of the
impact of these standards over the next twelve months.
Wizz Air Holdings Plc Annual report and accounts 2016
78
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Basis of consolidation
Subsidiaries are all entities controlled by the Company. Control exists when the Group has the power, directly
or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken
into account. The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
The results of all the subsidiaries are consolidated up to 31 March which is the financial year end of
the Company.
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group
transactions are eliminated in preparing the consolidated financial statements.
Going concern
The financial statements have been prepared on a going concern basis which assumes that the Group will
continue in business for the foreseeable future. This assumption is based on the Directors’ assessment of the
Group’s financial performance and position to date, together with a review of its forecasts, in light of the risks
to which the Group is exposed.
Foreign currency
The Group’s presentational currency is the Euro. The functional currency of all the Group entities with the
exception of Dnieper Aviation LLC and Wizz Air Ukraine Airlines LLC is the Euro. Transactions in foreign
currencies are translated into functional currency at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date
are translated into Euros at the exchange rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the statement of comprehensive income as financial income or expense.
Non-monetary assets and liabilities denominated in foreign currencies and which are recognised at their
historical cost are translated into Euros at the exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies and which are stated at fair value are translated into
Euros at exchange rates ruling at the dates the fair value was determined.
The functional currency of Dnieper Aviation LLC and Wizz Air Ukraine Airlines LLC is the Ukrainian Hryvnia
(UAH). The results and financial position of all the Group entities that have a functional currency different from
the presentational currency are translated into the presentational currency as follows:
E
E
assets and liabilities for each statement of financial position presented are translated at the closing rate at
the date of that statement of financial position;
income and expenses for each statement of comprehensive income are translated at monthly average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the rate on the
dates of the transactions); and
E all resulting exchange differences are recognised as a separate component of equity (cumulative
translation adjustments).
The below exchange rates were used for the translation in the respective financial years:
Closing rate
Average rate for the year
Year ended
31 March
2016
UAH/EUR
29.69
29.26
Year ended
31 March
2015
UAH/EUR
25.45
25.12
Wizz Air Holdings Plc Annual report and accounts 2016
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CONTINUED
2. Accounting policies continued
Financial assets and liabilities
The Group classifies its financial assets and liabilities – in line with IAS 39 ‘Financial instruments: recognition
and measurement’ – into the following categories:
Description in the statement of financial position
Non-current assets
Restricted cash
Trade and other receivables
Current assets
Trade and other receivables
Financial assets available for sale
Derivative financial instruments
Restricted cash
Cash and cash equivalents
Non-current liabilities
Borrowings
Convertible debts
Current liabilities
Trade and other payables
Borrowings
Convertible debt
Derivative financial instruments
Category
Loans and receivables
Loans and receivables
Loans and receivables
Available-for-sale assets
Fair value through profit or loss
Loans and receivables
Loans and receivables
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Fair value through profit or loss
The classification of financial assets depends on the purpose for which the assets were acquired. Management
determines the classification of its financial assets at initial recognition.
a) Financial assets and liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short-term. Assets in this
category are classified as current assets. Derivatives (assets or liabilities) are also categorised as held for
trading unless they are designated as hedges.
b) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. They are included in current assets, except for maturities greater than twelve
months after the statement of financial position date, that are classified as non-current assets. The Group’s
loans and receivables comprise trade and other receivables, cash and cash equivalents and restricted cash in
the statement of financial position.
c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless management intends to
dispose of the investment within twelve months of the statement of financial position date. Available-for-sale
financial assets are subsequently carried at fair value.
d) Other financial liabilities measured at amortised costs
Other financial liabilities are non-derivative financial liabilities with fixed or determinable payments that are not
quoted in an active market.
They are included in current liabilities, except for maturities greater than twelve months after the statement of
financial position date that are classified as non-current liabilities. The Group’s other financial liabilities
comprise trade and other payables and interest-bearing loans and borrowings (including convertible debt) in
the statement of financial position.
The Group invests excess cash in a conservative way, primarily in short-term time deposits and money market
funds. Management does not, in the short term, plan to have held-to-maturity investments. The recognition
and measurement criteria are described in the relevant accounting policy section.
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CONTINUED
2. Accounting policies continued
Financial assets and liabilities continued
Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised initially at fair value. The gain or loss on remeasurement to fair
value is recognised immediately in the statement of comprehensive income, within financial income or
expenses. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss
depends on the nature of the item being hedged (see below). The Group enters into foreign exchange and jet
fuel price hedging transactions to minimise the impact of fluctuations in foreign exchange rates and fuel price
on the Group. Both types of hedging transactions are cash flow hedges under IAS 39.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised
asset or liability, or a highly probable forecast transaction, the effective part of any unrealised gain or loss on
the derivative financial instrument is recognised directly in the hedging reserve within other comprehensive
income. Any ineffective portion of the hedge is recognised immediately in the statement of comprehensive
income as financial income or expenses.
The associated cumulative gain or loss on the effective part is removed from other comprehensive income
and recognised in the statement of comprehensive income in the respective operating expense line(s) in the
same period or periods as the hedged forecast transaction. When a hedging instrument expires or is sold,
terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast
transaction is still expected to occur, the cumulative gain or loss at that point remains in other comprehensive
income and is recognised in accordance with the above policy when the hedged transaction is recognised in
the statement of comprehensive income. If the hedged transaction is no longer expected to take place, the
cumulative unrealised gain or loss recognised in other comprehensive income is recognised in the statement
of comprehensive income immediately, net of tax, within the cash flow hedging reserve.
Before expiry, the fair value of an option comprises i) its intrinsic value, being a function of the difference
between contracted and market (or spot) prices; and ii) its time value, being the difference of the fair value
and the intrinsic value at any point in time. Subject to hedge effectiveness, any increase or decrease in the
intrinsic value of the hedging instrument is taken to equity within other comprehensive income or expense.
However, any increase or decrease in the time value of the hedging instrument is recognised immediately in
the statement of comprehensive income as financial income or expense. This reflects the fact that variations
in the time value of an option are required to be excluded from the hedge relationship in accordance with IAS
39 ‘Financial instruments: recognition and measurement’.
Accordingly:
E
E
E
initial recognition: the open position on the derivative hedging instrument is recorded as an asset or
liability in the statement of financial position at fair value;
subsequent remeasurement of unexpired options: (i) the effective portion of changes in the intrinsic
element of the fair value is recorded in other comprehensive income, (ii) changes in the time value element
of the fair value, or the ineffective portion, if any, are recorded as financial income or expense in the
statement of comprehensive income; and
the realised gains or losses on the hedging instrument are recorded against the respective operating
expense line(s) in the statement of comprehensive income.
The ineffective portion is determined in line with IAS 39, applying the 80–125 per cent. rule. The ineffective
part of changes in fair value, if any, is recorded as financial income or expense in the statement of
comprehensive income.
Wizz Air Holdings Plc Annual report and accounts 2016
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CONTINUED
2. Accounting policies continued
Financial assets and liabilities continued
Derivative financial instruments and hedging continued
Hedging with non-derivatives
The Group uses its selected financial assets denominated US Dollar to hedge highly probable future expenses
in US Dollar. Starting from January 2016 the Group applies hedge accounting to part of its non-derivate
financial assets, in the interest of reducing the amount of unrealised foreign exchange gains or losses resulting
from the periodic revaluation of these assets.
The accounting treatment of non-derivatives designated as hedging instruments is identical to cash flow
hedges with derivatives, that is:
E
E
the unrealised gains or losses on hedging instruments are recorded as an asset or liability in the statement
of financial position at fair value, and the effective portion of changes in the fair value is recorded in other
comprehensive income; and
the realised gains or losses on the hedging instruments are recorded against the respective expense line(s)
in the statement of comprehensive income.
Trade and other receivables
Trade and other receivables are stated at their amortised cost using the effective interest rate method less
impairment losses.
The carrying amount of the asset is reduced through the trade and other receivables account, and the amount
of the loss is recognised in the statement of comprehensive income within other expenses. Subsequent
recoveries of amounts previously written off are credited against other expenses in the statement of
comprehensive income.
Other receivables also comprise insurance claims related to events that are covered by insurance contracts.
The Group recognises the income in the financial statements only from those insurance claims which, based
on management’s judgment, are virtually certain to be received by the Group.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits repayable on demand or which mature
within three months of inception, less any overdrafts repayable on demand. Cash held in money market funds
is also included in cash and cash equivalents. Cash and cash equivalents do not include restricted cash. Cash
and cash equivalents are netted only when right of offset has been obtained.
Restricted cash
Restricted cash represents cash deposits held by the banks that cover letters of credit, issued by the same
bank, to certain suppliers. Restricted cash is split between non-current and current assets depending on the
maturity period of the underlying letters of credit.
Trade and other payables
Trade and other payables are stated at amortised cost using the effective interest rate method. Trade and
other payables comprise balances payable to suppliers, authorities and employees.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the statement of comprehensive income as a financial
expense over the period of the borrowings on an effective interest rate basis. Financial expenses include also
withholding tax paid on the interest if according to the loan agreement the payment of withholding tax is the
liability of the Group.
Convertible debt
Convertible debt instruments that can be converted to share capital at the option of the holder, where the
number of shares issued does not vary with changes in their fair value, are accounted for as compound
instruments. Transaction costs that relate to the issue of a compound instrument are allocated to the liability
and equity components in proportion to the allocation of proceeds. The liability component is recognised
initially at the fair value of a similar liability that does not have an equity conversion option. The equity
component of the compound instrument is calculated as the excess of the issue proceeds over the value of
the liability component.
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CONTINUED
2. Accounting policies continued
Financial assets and liabilities continued
Classification of compound instruments issued by the Group
Compound instruments issued by the Group are treated as equity (i.e. forming part of Shareholders’ funds)
only to the extent that they meet the following two conditions:
a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash
or other financial assets or to exchange financial assets or financial liabilities with another party under
conditions that are potentially unfavourable to the Company (or Group); and
b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the Company’s own equity
instruments or it is a derivative that will be settled by the Company exchanging a fixed amount of cash or
other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met the proceeds of issue are classified as a financial liability. Where
the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these
financial statements for called up share capital and share premium account exclude amounts in relation to
those shares.
Where a compound instrument that contains both equity and financial liability components exists these
components are separated by recognising the liability at fair value and accounted for individually under the
above policy. The finance cost on the financial liability component is correspondingly higher over the life of
the instrument.
Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance
payments associated with compound instruments that are classified in equity are dividends and are recorded
directly in equity.
Impairment of financial assets
Impairment losses are recognised on financial assets carried at amortised cost where there is objective
evidence that a loss has been incurred. The amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of future cash flows, discounted at the original effective
interest rate.
If, subsequently, the amount of the impairment loss decreases, and the decrease can be related objectively to
an event that occurred after the impairment was recognised, the appropriate portion of the loss is reversed.
Both impairment losses and reversals are recognised in the statement of comprehensive income as
components of financial income or expenses, except in the case of impairment of available-for-sale financial
assets where the impairment and its reversal may be charged to other comprehensive income under
certain circumstances.
Current trade and other receivables are discounted where the effect is material.
Non-financial assets and liabilities
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
Depreciation is charged to the statement of comprehensive income on a straight-line basis to write off cost to
residual value over the estimated useful economic lives of each part of an item of property, plant and
equipment. In the case of certain aircraft maintenance assets, the useful economic life of the asset can be
defined in terms of flight hours or flight cycles, and in this case the depreciation charge is determined based
on the actual number of flight hours or flight cycles. The estimated useful lives are as follows:
Land and buildings
Aircraft maintenance assets
Aircraft parts
Fixtures and fittings
three to five years, being the shorter of useful economic life
and the lease term
two to seven years, being the shorter of useful economic life
and the lease term
seven years
three years
The residual values and useful lives are re-assessed annually.
Wizz Air Holdings Plc Annual report and accounts 2016
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CONTINUED
2. Accounting policies continued
Non-financial assets and liabilities continued
Assets received free of charge
In certain cases the Group receives assets free of charge. These are treated as non-cash items in the statement
of cash flows.
Advances paid for aircraft – pre-delivery payments (PDP)
Pre-delivery payments (PDP) are paid by the Group to aircraft and engine manufacturers for financing the
production of the ordered aircraft or spare engine as determined by the contractual terms. Such advance
payments for aircraft or spare engines are recognised at cost and classified as property, plant and equipment
in the statement of financial position. The amount is not depreciated.
The Group may enter into sale and leaseback arrangements with lessors to finance future aircraft or spare
engine deliveries. These arrangements are structured such that the right and the commitment to purchase the
aircraft or spare engine are assigned to the lessor only on the date of delivery (a “delivery date assignment”);
as such, the recognition and classification of the PDP balance does not change when the sale and leaseback
contracts are signed. On the delivery of the aircraft or spare engine the lessor pays the full purchase price of
the asset to the manufacturer and the Group receives from the manufacturer a refund of the PDPs paid. At
this moment the fixed asset is de-recognised from the statement of financial position and any gain or loss
arising is transferred to the statement of comprehensive income as an operating income or expense.
In some instances PDPs are paid – in the name of the Group – by the lessors directly to the aircraft
manufacturer. These PDPs are also recognised by the Group in the statement of financial position as advances
paid for aircraft and as received loans until the delivery of the aircraft. In the statement of cash flows these
PDPs and loans are treated as non-cash items and are eliminated both from advances paid for aircrafts/refund
of advances paid for aircraft and commercial loan lines.
Advances paid for aircraft maintenance assets (FHA)
Advances paid for aircraft maintenance assets represent advance payments made in relation to heavy
maintenance scheduled to be performed in the future (for the definition of heavy maintenance see the
accounting policy section on maintenance). Such advance payments are made by the Group particularly to the
engine maintenance service provider under fleet hour agreements (FHA). The balance of such assets is
re-categorised into aircraft maintenance assets at the time when the aircraft maintenance asset is recognised
in respect of the same component and the same heavy maintenance event. This is when the component no
longer meets the conditions set out in the lease agreement. Advances paid for aircraft maintenance are
not depreciated.
In the statement of cash flows the FHA payments are shown under the purchase of maintenance assets line
together with other aircraft maintenance asset purchases.
Intangible assets
Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and
impairment losses.
Web development costs are capitalised to the extent they are expected to generate future economic benefits
and meet the other criteria described in IAS 38 ‘Intangible assets’.
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed
as incurred.
Amortisation is charged to the statement of comprehensive income on a straight-line basis over the estimated
useful economic lives of intangible assets. Intangible assets are amortised from the date they are available for
use. The estimated useful lives are as follows:
Software licences
three to eight years
Web and other software development costs
three to five years
Inventories
Inventories (mainly spares) are purchased for internal use and are stated at cost unless impaired or at net
realisable value if any items are to be sold or scrapped. Net realisable value is the estimated selling price in the
ordinary course of the business less the estimated selling expense. Cost is based on the first-in first-out
principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing
location and condition.
Wizz Air Holdings Plc Annual report and accounts 2016
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NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Non-financial assets and liabilities continued
Emissions Trading Scheme
As of January 1, 2012 the scope of the EU Emissions Trading Scheme 2008/101/EC (EU ETS) covers airlines.
The Group is required to formally report its annual emissions to the relevant authorities and surrender emission
allowances (EUAs) equivalent to the emission made during the year. Surrendered allowances are a
combination of the free allowances granted by the authorities and allowances purchased by the Group from
other parties. The Group follows the “cost method” of booking the allowances: the free allowances have nil-
cost value so therefore are not recognised as an asset; allowances purchased in the market are recorded at
the purchase price in inventory. The Group is given free allowances by the competent authorities, and the net
economic impact to the Group is therefore represented by the shortfall between the actual carbon emitted and
the free allowances given to the Group for that period. The shortfall is recorded at forward prices as a cost.
Application of this accounting treatment means that the statement of comprehensive income and the
statement of financial position reflect the net economic impact and are not grossed up to reflect the
full obligation.
Deferred interest
The Group enters into sale and leaseback agreements to finance future aircraft or spare engine deliveries. In
some cases it enters also into arrangements to finance the PDPs of such deliveries. Interest accrued on loans
to finance the PDPs on aircraft or spare engines is initially recognised under property plant and equipment
(advances paid for aircraft). When the leased aircraft or spare engine is delivered, the PDP interest balance is
reclassified within the statement of financial position from property, plant and equipment into deferred
interest. From this point forward the interest is amortised to the statement of comprehensive income during
the term of the respective lease contract.
The Group recognises in the deferred interest line also the effect of the discounting adjustment of
non-current receivables.
Impairment of non-financial assets
The carrying amounts of the Group’s assets are reviewed at each statement of financial position date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable
amount is estimated. The recoverable amount is the higher of an asset’s fair value less costs to sell and value
in use. An impairment loss is recognised whenever the carrying amount of an asset or cash-generating unit
exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive income.
Employee benefits
Share based payment transactions
The Group operates an equity-settled share option programme that allows Group employees to acquire shares
in the Company. The options are granted by the Company. The fair value of options granted is recognised as
an employee expense with a corresponding increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become unconditionally entitled to the options. The fair
value of the options granted is measured using an option valuation model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an expense is adjusted at any
measurement date so that the cumulative expense to date reflects the actual number of share options that are
expected to vest.
The share award programme allows the Directors of the Company to acquire shares in the Company at nominal
value. The fair value of the awards granted is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during which there are
restrictions in place in respect of the transfer of the award shares by the Directors.
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or
constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will
be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability (please see further details of aircraft maintenance provisions in the accounting policy
section on maintenance).
Wizz Air Holdings Plc Annual report and accounts 2016
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NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Revenue
Revenue comprises the invoiced value of flight seats and ancillary revenues.
Passenger ticket revenue arises from the sale of flight seats and is recognised net of government taxes in the
period in which the service is provided, that being when the airplane has departed. Where charges levied by
airports or government authorities on a per passenger basis represent a government tax in fact or in substance,
then such amounts are presented on a net basis in the statement of comprehensive income (netted between
revenue and airport, handling and en-route charges lines). Unearned revenue represents flight seats sold but not
yet flown and is included in deferred income. Refunds made to passengers are recorded as reductions in revenue.
Ancillary revenue arises from the sale of other services made by the Group and from commissions earned in
relation to services sold on behalf of other parties. Revenues from other services comprise mainly baggage
charges, booking/payment handling fees, airport check-in fees, fees for various convenience services (priority
boarding, extended legroom, reserved seat), loyalty programme membership fees, and hotel and other
services sold by the tour operator unit of the Group. Commission revenue arises in relation to the sale of on-
board catering, accommodation, car rental, travel insurance, bus transfers, premium calls and co-branded
credit cards. Ancillary revenues are recognised as revenue on the date that the right to receive consideration
occurs which is the date when the underlying service was provided. This, depending on the type of service,
might be either the date of sale, the date of flight or (in the case of membership fees) over the period
of membership.
Leases
Finance leases
If the risks and rewards incidental to ownership of an asset are substantially transferred to Wizz Air then it is
accounted for as a finance lease. The Group analyses five criteria as follows:
E
transfer of ownership of the asset at the end of lease term;
E option to purchase the asset at sufficiently below fair value; therefore, it is reasonably certain that the
option will be exercised;
E major part of assets' economic life is at the lessee;
E
the asset is so special that it can be used only by the lessee; and
E present value of minimum lease payments is substantially all of the fair value of the asset.
Management uses the above criteria as guidelines for its analyses; however, the substance of a transaction is
always considered during the assessment.
Management assesses each leasing contract individually at initial recognition based on the above discussed criteria.
Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased asset
and the present value of the minimum lease payments.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases are recognised in the statement of
comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are
recognised in the statement of comprehensive income as an integral part of the total lease expense.
Sale and leaseback transactions
The Group enters into transactions whereby it assigns to a third party the right to acquire new aircraft or spare
engines. On delivery of the aircraft or spare engine, the Group will lease the aircraft or spare engine back
through an operating lease from the same party. Any gain arising on disposal, where the price that the aircraft
is sold for is above fair value, is recognised initially in deferred income and then amortised on a straight-line
basis over the lease term of the asset.
Maintenance
Aircraft maintenance provisions
For aircraft held under operating lease agreements, the Group is contractually committed to either return the
aircraft in a certain condition or to compensate the lessor based on the actual condition of the aircraft and its major
components upon return. Provision is made for the minimum unavoidable costs of specific future obligations
created by the lease at the time when such obligation becomes certain. This is when the respective aircraft
component no longer meets the lease re-delivery conditions. The provision is used through the completion of a
maintenance event such that the component again meets the re-delivery conditions.
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CONTINUED
2. Accounting policies continued
Maintenance continued
Aircraft maintenance assets
Heavy maintenance relates to the overhaul of engines and associated components, the replacement of life
limited parts, the replacement of landing gears and the non-routine airframe inspection and rectification works.
Under normal operating conditions heavy maintenance relates to work expected to be performed no more
frequently than every two to four years.
The cost of heavy maintenance is capitalised and recognised as a tangible fixed asset (and classified as “aircraft
maintenance assets”) at the earlier of (a) the time the lease re-delivery condition is no longer met (see above
under aircraft maintenance provisions) or (b) when maintenance including enhancement is carried out. Other
maintenance costs are expensed as incurred.
Such maintenance assets are depreciated over the period the Group benefits from the asset which is the
shorter of (a) the estimated period until the next date when the lease re-delivery condition is no longer met or
(b) the end of the asset’s operational life or (c) the end of the lease.
For engines and associated components, depreciation is charged on the basis of flight hours or cycles, while
for other aircraft maintenance assets depreciation is charged evenly over the period the Group expects to
derive benefit from the asset.
Components of newly leased aircraft such as life limited parts and engines are not accounted for as separate
assets, and the inherent benefit of these assets which are utilised in the period from inception of the lease until
the time the assets no longer meet the lease re-delivery condition is reflected in the payments made to the
lessor over the life of the lease.
Aircraft maintenance assets are non-monetary items. Non-Euro amounts are translated on inception to Euro
and are not retranslated.
The recognition of aircraft maintenance assets against provisions for other liabilities and charges in the
statement of financial position is a transaction not involving cash flows. In the statement of cash flows the
spending on these assets is presented as “purchase of aircraft maintenance assets” in the period when cash
actually flows out of the Group. This can happen either before or after the recognition of the asset, depending
on the exact facts and circumstances associated with the relevant asset or assets.
Please refer also to the property, plant and equipment section of accounting policies.
Other receivables from lessors – maintenance reserve
Payments for aircraft and engine maintenance, as stipulated in the respective operating lease agreements, are
made to the lessors as a security for the performance of future heavy maintenance works. The payments are
recorded as receivables from the lessors until the respective maintenance event occurs and the reimbursement
with the lessor is finalised. Any payment that is not expected to be reimbursed by the lessor is recognised
within operating expenses (aircraft rentals) in the statement of comprehensive income.
Other
The Group enters into agreements with maintenance service providers that guarantee the maintenance of
major components at a rate defined in the contract, the prime example being fleet hour agreements (FHAs)
for aircraft engines. Such FHAs cover the cost of both scheduled and unscheduled engine overhauls. FHA
payments are accounted for as follows:
E Payments for scheduled maintenance work are recognised as advances paid for aircraft maintenance
assets until the maintenance asset for the respective engine overhaul is created. After this point any further
FHA payments are either used to settle previously established aircraft maintenance provisions (to the
extent a provision for the respective FHA contract exists) or, in the absence of a provision, are added to
the amount previously capitalised within property, plant and equipment as advances paid for aircraft
maintenance assets.
E Payments that are made to provide guaranteed coverage for the performance of unscheduled
maintenance events are considered as insurance payments and are expensed as incurred.
Please refer to the property, plant and equipment section of accounting policies.
Wizz Air Holdings Plc Annual report and accounts 2016
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NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Supplier credits
The Group receives certain assets (cash contributions or aircraft spares) for nil consideration in connection
with its acquisition of aircraft and of major aircraft parts.
Cash contributions or aircraft spares received are recognised as an asset in the statement of financial position.
The corresponding credits are recognised as income, spread equally across the shorter of useful economic life
and the lease term of the respective aircraft.
In certain cases the concessions receivable from a component manufacturer are linked to the Group’s
commitment to purchase a number of new aircraft with the manufacturer’s components installed on those. In
such case, in substance, the right to the concessions is earned by the Group through the delivery of the
respective aircraft. In certain cases the concessions might be delivered by the component manufacturer later
than the date when the respective aircraft is taken by the Group. If so, then the right earned for the concession
is recognised at the date of the aircraft delivery as part of trade and other receivables, with a corresponding
credit to deferred income. Following this, the credits are amortised on a straight-line basis over the lease term
of the respective asset, decreasing aircraft rental expenses.
Net financing costs
Net financing costs comprise interest payable, finance charges on finance leases, interest receivable on funds
invested and foreign exchange gains and losses that are recognised in the statement of comprehensive income.
Interest income and interest payable are recognised in the statement of comprehensive income using the
effective interest method.
Non-cash elements of financial income and expenses are eliminated from the statement of cash flows as an
adjusting item whereas cash elements, e.g. realised foreign exchange gains and losses, are included in the
statement of cash flows.
Share capital
Ordinary shares are classified as equity. Qualifying transaction costs directly attributable to the issuing of new
shares are debited to equity, reducing the share premium arising on the issue of shares.
Taxation
Taxation on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the
statement of comprehensive income except to the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the
statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a business combination; and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted
at the statement of financial position date.
A deferred tax asset is recognised to the extent that it is probable that sufficient future taxable profits will be
available against which the asset can be utilised.
Wizz Air Holdings Plc Annual report and accounts 2016
88
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group. They are non-recurring material items of
income or expense that are shown separately due to the significance of their nature or amount. Underlying
profit after tax excludes the effect of unrealised foreign exchange gains and losses.
Segment reporting
Operating and reportable segments
The Group is managed as a single business unit that provides low-cost, low-fare passenger air transportation
services using a fleet of single aircraft type. The Group has only one reportable segment being its entire route
network. Management information is provided to the Executive Management Team which is the Group’s Chief
Operating Decision Maker (‘CODM’). Resource allocation decisions are made by the CODM for the benefit of
the route network as a whole, rather than for individual routes within the network. The performance of the
network is assessed primarily based on the operating profit or loss for the period.
3. Financial risk management
Financial risk factors
The Group is exposed to market risks relating to fluctuations in commodity prices, interest rates and currency
exchange rates. The objective of financial risk management at Wizz Air is to minimise the impact of commodity
price, interest rate and foreign exchange rate fluctuations on the Group's earnings, cash flows and equity. To
manage commodity and foreign exchange risks, Wizz Air uses various derivative financial instruments,
including foreign currency and commodity zero cost collar contracts.
Risk management is carried out by the treasury department under policies approved by the Board of Directors.
The Board provides written principles for overall risk management, as well as written policies covering specific
areas, such as foreign exchange risk, fuel price risk, credit risk, use of derivative financial instruments,
adherence to hedge accounting, and hedge coverage levels. The Board has mandated the Audit Committee
of the Board to supervise the hedging activity of the Group and the compliance with the policies approved by
the Board.
Risk analysis
Market risks
Foreign currency risk
The Group is exposed to foreign currency risk on sales, purchases and commitments that are denominated in
a currency other than the Euro. The main currency that gives rise to foreign currency risk related to purchases
is primarily the US Dollar (USD), while the currencies giving rise to foreign currency risk related to sales
revenues are primarily the British Pound (GBP) and the Polish Zloty (PLN).
The foreign currency exposure is significant as only a small portion of the Group’s revenues are denominated
or linked to the USD while a significant portion of the Group’s expenses are USD denominated, including fuel,
aircraft leases, maintenance reserves and aviation insurance.
The Group chooses the Euro/USD foreign currency rate as the underlying foreign currency pair in its foreign
currency rate hedging strategies. The main objective is to cover the Group’s ongoing USD cash flow
requirements. The Group’s maximum hedge coverage level is 75 per cent. of the total anticipated USD purchases
hedged by the time the respective quarter on monthly rolling forward basis is reached. This maximum target
hedge coverage level was 70 per cent. until 31 March 2014 and increased to 75 per cent. during the year ended
31 March 2016. These levels were not always maintained during the current or prior years.
Wizz Air Holdings Plc Annual report and accounts 2016
89
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Risk analysis continued
Market risks continued
Foreign currency risk continued
The table below analyses the financial instruments by the currencies of future receipts and payments as follows:
At 31 March 2016
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Total financial liabilities
At 31 March 2015
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Total financial liabilities
EUR
€ million
USD
€ million
Other
€ million
Total
€ million
65.9
-
-
615.0
100.6
781.5
6.4
27.2
138.2
-
171.8
121.0
-
1.7
6.2
0.9
129.8
-
-
18.8
17.6
36.4
10.8
1.0
-
24.4
0.1
36.3
-
-
20.3
-
20.3
197.7
1.0
1.7
645.6
101.6
947.6
6.4
27.2
177.3
17.6
228.5
EUR
€ million
USD
€ million
Other
€ million
Total
€ million
38.3
-
-
426.3
2.0
466.6
4.2
27.3
80.2
-
111.7
112.0
-
60.7
0.3
71.5
244.5
-
-
26.6
81.7
108.3
17.6
1.0
-
22.0
0.1
40.7
-
-
17.1
-
17.1
167.9
1.0
60.7
448.6
73.6
751.8
4.2
27.3
123.9
81.7
237.1
As explained in the paragraph on foreign currency in the accounting policy, monetary assets and liabilities
denominated in foreign currencies (that is currencies other than the Euro) are translated into Euro at the
statement of financial position date at the exchange rates ruling at that date, and foreign exchange differences
arising on the translation are recognised in the statement of comprehensive income as financial income of
expense. If the net balance of monetary assets and liabilities denominated in foreign currencies is high then
this translation process can result in material volatility to financial income and expense, and thus to earnings.
Historically the Group had a high balance of net monetary assets denominated in US Dollar and this resulted
in significant unrealised foreign exchange gains (as in 2015) and losses (as in 2016). By the end of the 2016
financial year the US Dollar monetary asset-liability position of the Group became materially balanced,
therefore starting from financial year 2017 there are no material movements expected in this area. This is not
visible from the table above that shows a net asset balance of US Dollar denominated financial instruments of
€93.4 million in 2016. The two positions can be reconciled as follows:
E
E
the balance of trade and other receivables at 31 March 2016 includes USD 34.5 million that has been
designated for hedge accounting and therefore is not subject to foreign currency revaluation – see under
‘foreign exchange hedge with non-derivatives later in this Note 3; and
at 31 March 2016 the Group had provisions of €60.2 million denominated in US Dollars (as part of the total
€83.7 million balance reported in Note 29). Provisions are not financial instruments and therefore their
balance is not included in the table above.
Wizz Air Holdings Plc Annual report and accounts 2016
90
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Risk analysis continued
Market risks continued
Interest rate risk
The Group has future commitments under certain operating lease contracts that are based on floating interest
rates. The floating nature of the interest charges on the operating leases exposes the Group to interest rate risk.
Interest rates charged on convertible debt liabilities and on short and long-term loans to finance the deposits of
aircraft are not sensitive to interest rate movements as they are fixed until maturity. See Notes 23 and 24.
The Group is also exposed to interest rate risk in relation to the valuation of financial instruments as they are
carried at fair value.
The Group has not used financial derivatives to hedge its interest rate risk during the year. The Directors may
in the future consider hedging interest rate risk to reduce the potential Group earnings volatility arising from
fluctuations in interest rates.
Commodity risks
One of the most significant costs for the Group is jet fuel. The price of jet fuel can be volatile and can directly impact
the Group’s financial performance. The Group’s maximum hedge coverage level under its hedge programme is
75 per cent. of the total anticipated fuel purchases hedged by the time the respective quarter on a monthly rolling
forward basis is reached. The hedge coverage level during the year ended 31 March 2015 averaged 70 per cent.
Hedge transactions during the periods
The Group uses non-derivatives and zero cost collar instruments to hedge its foreign exchange exposures and uses
zero cost collar and outright cap instruments to hedge its jet fuel exposures. The time horizon of the hedging
programme with derivatives is a usually up to a maximum of 18 months; however, this horizon can be exceeded at the
Board’s discretion. The volume of hedge transactions expired during the periods was as follows:
a) Foreign exchange hedge (USD versus EUR):
USD 339.0 million (2015: USD 390.0 million).
b) Fuel hedge:
439,500 metric tons (2015: 306,000 metric tons).
Hedge year-end open positions
At the end of the year and the prior year the Group had the following open hedge positions:
a) Foreign exchange hedge with derivatives:
The fair value of the open positions was €4.8 million gain (2015: €37.5 million gain) recognised within other
comprehensive income, current assets or current liabilities, respectively.
The notional amount of the open positions was USD 313.5 million (2015: USD 297.0 million).
b) Foreign exchange hedge with non-derivatives:
The notional amount of the open positions was USD 190.5 million (2015: USD 132.0 million).
Non-derivatives are existing financial assets that hedge highly probable foreign currency cash flows in the
future, therefore act as a natural hedge. During the year out of its non-derivative financial assets the Group
designated USD 34.5 million for hedge accounting (2015: nil). The rest of the open positions relate to
expected PDP refunds (USD 156.0 million in 2016 and USD 132.0 million in 2015), for which no hedge
accounting is applied.
c) Fuel hedge:
The fair value of the open positions was €11.4 million loss (2015: €84.4 million loss) recognised within other
comprehensive income and current assets or liabilities, respectively.
The notional amount of the open positions was 449,000 metric tons (2015: 888,500 metric tons).
In relation to these open hedge positions the cash flows will occur and the hedge relationships will impact the
statement of comprehensive income during the years ending 31 March 2017.
Hedge effectiveness
During the year covered by these financial statements, based on the evaluation of the Group, the hedging
transactions did not give rise to material ineffectiveness under IAS 39. As explained below in the credit risk
section, in the opinion of the management none of the hedge counterparties had a material change in their
credit status that would have influenced the effectiveness of the hedging transactions.
Wizz Air Holdings Plc Annual report and accounts 2016
91
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Risk analysis continued
Market risks continued
Sensitivity analysis
The table below shows the sensitivity of the Group’s profits to various markets risks for the current and the
prior year.
Fuel price sensitivity
Fuel price $100 higher per metric tonne
Fuel price $100 lower per metric tonne
FX rate sensitivity (USD/EUR)
FX rate 0.05 higher (meaning EUR stronger)
FX rate 0.05 lower
FX rate sensitivity (GBP/EUR)
FX rate 0.03 higher (meaning EUR stronger)
FX rate 0.03 lower
FX rate sensitivity (PLN/EUR)
FX rate 0.15 higher (meaning EUR stronger)
FX rate 0.15 lower
Interest rate sensitivity (EUR)
Interest rate is higher by 100 bps
Interest rate is lower by 100 bps
2016
Difference in
profit after tax
(in € million)
2015
Difference in
profit after tax
(in € million)
-56.6
+56.6
+28.0
-28.0
-8.6
+8.6
-4.1
+4.1
+2.3
-2.3
-41.9
+41.9
+21.0
-21.0
-5.4
+5.4
-3.5
+3.5
+0.9
+0.5
The interest rate sensitivity calculation considers the effects of varying interest rates on the interest income
on bank deposits and on the expense from floating lease rentals.
The impact of these macro-economic variables on equity is the same as the impact on profit after tax, except
for the fuel price and for the USD/EUR FX rate variables where the equity impact would also include the
change in the fair value of the derivative financial instruments that are open at the year end. The fair value of
these instruments was provided by the hedge counterparties and management has not calculated the
theoretical value of these instruments for other scenarios.
Liquidity risks
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding. The Group
has an adequate liquidity position. The Group invests excess cash in a conservative way, primarily in AAA-rated
money market funds and also in short-term time deposits with high quality bank counterparties.
The table below analyses the Group’s financial assets and liabilities (receivable or payable either on cash base
or net-settled derivative financial assets and liabilities) into relevant maturity groupings based on the
remaining period at the statement of financial position date to the contractual maturity date.
The amounts disclosed in the table below are the contractual undiscounted cash flows except for derivatives
where fair values are presented. Therefore, for certain asset and liability categories the amounts presented in
this table can be different from the respective amounts presented in the statement of financial position.
At 31 March 2016
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Financial guarantees
Total financial liabilities
Within three
months
€ million
Between three
months
and one year
€ million
Between one and
five years
€ million
More than five
years
€ million
104.3
-
0.8
645.6
0.9
751.6
0.3
-
177.3
12.6
711.2
901.4
22.2
1.0
0.9
-
0.7
24.8
0.8
2.1
-
3.8
-
6.7
72.3
-
-
-
18.6
90.9
4.0
31.7
-
1.2
-
36.9
0.7
-
-
-
81.4
82.1
4.3
-
-
-
-
4.3
Total
€ million
199.5
1.0
1.7
645.6
101.6
949.4
9.4
33.8
177.3
17.6
711.2
949.3
Wizz Air Holdings Plc Annual report and accounts 2016
92
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Liquidity risks continued
At 31 March 2015
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Financial guarantees
Total financial liabilities
Within three
months
€ million
Between three
months
and one year
€ million
Between one and
five years
€ million
More than five
years
€ million
80.9
-
8.6
448.6
2.9
541.0
0.2
-
123.9
33.9
624.7
782.7
5.9
1.0
30.0
-
0.3
37.2
0.5
2.1
-
46.0
-
48.6
81.8
-
22.1
-
16.4
120.3
2.9
33.8
-
1.8
-
38.5
2.5
-
-
-
54.0
56.5
2.2
-
-
-
-
2.2
Total
€ million
171.1
1.0
60.7
448.6
73.6
755.0
5.8
35.9
123.9
81.7
624.7
872.0
The Group has obligations under financial guarantee contracts as detailed in Note 31.
The Company provides guarantees in relation to aircraft lease contracts to guarantee the performance of its
airline subsidiaries. These possible obligations are disclosed in the table above, with the shortest maturity
under the financial guarantees line. Management does not expect that any payment under these guarantee
contracts will be required in the future because the respective subsidiaries have so far paid all their liabilities
under the lease contracts and are expected to do so also in the future.
Other financial guarantee contracts relate to hedging, aircraft pre-delivery payments, and convertible loans
and notes. The respective liabilities are reflected under the appropriate line of the financial liabilities part of the
table above. Since the liability itself is already reflected in the table, it would not be appropriate to include also
the financial guarantee provided by another Group entity for the same obligation.
Credit risk
The Group’s exposure to credit risk from individual customers is limited as the large majority of the payments
for flight tickets are collected before the service is provided.
However, the Group has significant banking, hedging, aircraft manufacturer and card acquiring relationships
that represent counterparty credit risk. The Group analysed the creditworthiness of the relevant business
partners in order to assess the likelihood of non-performance of liabilities due to the Group. The credit quality
of the Group’s financial assets is assessed by reference to external credit ratings (published by Standard &
Poor’s) of the counterparties as follows:
At 31 March 2016
Financial assets
Trade and other receivables
Derivative financial assets
Financial assets available for sale
Cash
Restricted cash
Total financial assets
At 31 March 2015
Financial assets
Trade and other receivables
Derivative financial assets
Financial assets available for sale
Cash
Restricted cash
Total financial assets
AAA
€ million
AA
€ million
A
€ million
A-
€ million
Other
€ million
Unrated
€ million
Total
€ million
-
-
-
547.5
-
547.5
-
-
1.0
-
-
1.0
-
1.6
-
96.8
101.0
199.4
-
0.1
-
-
-
0.1
18.6
-
-
-
-
18.6
179.1
-
-
1.3
0.6
181.0
197.7
1.7
1.0
645.6
101.6
947.6
AAA
€ million
AA
€ million
A
€ million
A-
€ million
Other
€ million
Unrated
€ million
Total
€ million
-
22.3
-
357.7
-
380.0
-
-
-
-
-
-
-
35.9
1.0
89.9
71.8
198.6
0.5
2.5
-
-
1.7
4.7
14.7
-
-
-
-
14.7
152.7
-
-
1.0
0.1
153.8
167.9
60.7
1.0
448.6
73.6
751.8
Wizz Air Holdings Plc Annual report and accounts 2016
93
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Credit risk continued
The “Other” column shows the receivables from the Group’s main credit card acquirer. This partner has a credit
rating of two on a scale of four (one being the best), provided by Dun & Bradstreet.
From the unrated category within trade and other receivables the Group has €97.3 million (2015: €86.8 million)
receivables from different aircraft lessors in respect of maintenance reserves and lease security deposits paid
(see also Note 19). However, given that the Group physically possesses the aircraft owned by the lessors and
that the Group has significant future lease payment obligations towards the same lessors (see Note 32),
management does not consider the credit risk on maintenance reserve receivables to be material.
Based on the information above management does not consider the counterparty risk of either party being
material and therefore no fair value adjustment was applied to the respective cash or receivable balances.
Fair value estimation
The Group classifies its financial instruments based on the technique used for determining fair value into the
following categories:
Level 1: Fair value is determined based on quoted prices (unadjusted) in active markets for identical assets
or liabilities.
Level 2: Fair value is determined based on inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly.
Level 3: Fair value is determined based on inputs that are not based on observable market data (that is, on
unobservable inputs).
The following table presents the Group’s financial assets and liabilities that are measured at fair value at
31 March 2016.
Assets
Financial assets available for sale
Derivative financial instruments
Liabilities
Derivative financial instruments
Level 1
€ million
Level 2
€ million
Level 3
€ million
Total
€ million
1.0
-
1.0
-
-
-
1.7
1.7
17.6
17.6
-
-
-
-
-
1.0
1.7
2.7
17.6
17.6
Financial assets available for sale represents a unit linked insurance invested in government bonds by the
insurer. These government bonds are traded in an active market therefore it falls into the Level 1 category.
The Group measures its derivative financial instruments at fair value, calculated with a technique by the banks
involved in the hedging transactions that falls into the Level 2 category.
All the other financial assets and financial liabilities are measured at amortised cost.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for Shareholders, to provide benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of financial liabilities, cash and cash equivalents and equity. Financial
liabilities primarily consist of commercial loans relating to aircraft financing and convertible debt as disclosed
in Notes 23 and 24 respectively. Equity comprises issued capital, reserves and retained earnings as disclosed
in the statement of changes in equity. Since the financial year beginning on 1 April 2007, the Group’s growth
has been financed entirely out of cash from operations and commercial debt with financial institutions. The
overall capital risk management strategy remains unchanged from prior years.
Management reviews the Group’s cost of capital on an ongoing basis as well as the risks associated with each
capital instrument and makes recommendations to the Board for approval.
Wizz Air Holdings Plc Annual report and accounts 2016
94
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
4. Critical accounting estimates and judgments made in applying the Group’s accounting policies
a) Maintenance policy
For aircraft held under operating lease agreements, provision is made for the minimum unavoidable costs of
specific future obligations created by the lease at the time when such obligation becomes certain. The amount
of the provision involves making estimates of the cost of the heavy maintenance work that is required to
discharge the obligation, including any end of lease costs.
The cost of heavy maintenance is capitalised and recognised as a tangible fixed asset (and classified as “aircraft
maintenance asset”) at the earlier of (a) the time the lease re-delivery condition is no longer met or (b) when
maintenance including enhancement is carried out. The calculation of the depreciation charge on such assets
involves making estimates for the future utilisation of the aircraft and in case of engines also of the future
operating conditions of the engine.
b) Hedge and derivative accounting
Fair value of derivatives (namely open position of cash flow hedges) is determined by the contracting financial
institutions as per their industry practice. As required, the fair values ascribed to those instruments are verified
also by management using high-level models. Further, the effectiveness of hedges is tested both prospectively
and retrospectively to determine the appropriate accounting treatment of hedge gains and losses.
c) Net presentation of government taxes and other similar levies
The Group’s accounting policy stipulates that where charges levied by airports or government authorities on
a per passenger basis represent a government tax in fact or in substance, then such amounts are presented
on a net basis in the statement of comprehensive income (netted between revenue and airport, handling and
en-route charges lines).
Management reviews all passenger-based charges levied by airports and government authorities to ensure
that any amounts recovered from passengers in respect of these charges are appropriately classified within
the statement of comprehensive income. Given the variability of these charges and the number of airports and
jurisdictions within which the Group operates, the assessment of whether these items constitute taxes in nature
is an inherently complex area, requiring a level of judgement.
5. Segment information
Reportable segment information
The ‘chief operating decision maker’ of the Group, as defined in IFRS 8 Segment reporting, is the executive
management team of the Group.
The Group has only one reportable segment being its entire route network. All segment revenue is derived
wholly from external customers and, as the Group has a single reportable segment, inter-segment revenue
is zero.
Segment revenue
Segment operating profit
2016
€ million
1,429.1
235.5
2015
€ million
1,227.3
167.3
Wizz Air Holdings Plc Annual report and accounts 2016
95
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
5. Segment information continued
Reportable segment information continued
Reconciliation of reportable segment operating profit to consolidated profit or loss after income tax:
Segment operating profit
Financial income and expenses (net)
Income tax expense
Consolidated profit after income tax
2016
€ million
235.5
(34.1)
(8.5)
192.9
2015
€ million
167.3
24.4
(8.5)
183.2
Entity-wide disclosures
Products and services
Revenue from external customers can be analysed by groups of similar services as follows:
Passenger ticket revenue
Ancillary revenues
Total revenue from external customers
2016
€ million
894.9
534.2
1,429.1
2015
€ million
793.8
433.5
1,227.3
Ancillary revenues arise mainly from baggage charges, booking/payment handling fees, airport check-in fees,
fees for various convenience services (priority boarding, extended legroom, reserved seat), loyalty programme
membership fees, and from commission on the sale of on-board catering, accommodation, car rental, travel
insurance, bus transfers, premium calls and co-branded cards, all directly attributable to the low-fare business.
Geographic areas
Revenue from external customers can be analysed by geographic areas as follows:
Jersey (country of domicile)
EU
Other (non-EU)
Total revenue from external customers
2016
€ million
-
1,322.9
106.2
1,429.1
2015
€ million
-
1,116.2
111.1
1,227.3
Revenue was allocated to geographic areas based on the location of the first departure airport on each ticket
booking.
Major customers
The Group derives the vast majority of its revenues from its passengers and sells most of its tickets directly to
the passengers as final customers rather than through corporate intermediaries (tour operators, travel agents
or similar). Therefore the Group does not have any major corporate customers.
6. Operating profit
Auditors’ remuneration
Fees payable to Company’s auditors for the audit of the parent company and
consolidated financial statements
Fees payable to the Company’s auditors and their associates for other services
Audit of financial statements of subsidiaries pursuant to legislation
Other services relating to taxation
Audit-related assurance and transaction services
All other services
Total remuneration of auditors
2016
€’000
225
39
436
-
18
718
2015
€’000
204
39
443
610
13
1,309
Audit-related assurance and transaction services in the prior year were related primarily to the preparation of
the Company for its IPO which was completed during March 2015.
Inventories
Inventories totalling €3.8 million were recognised as an expense in the year (2015: €4.1 million).
Wizz Air Holdings Plc Annual report and accounts 2016
96
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
7. Staff numbers and costs
The average monthly number of persons employed during the year, including Non-Executive Directors but
excluding subcontracted staff such as rented pilots, analysed by category, was as follows:
Number of persons
Non-Executive Directors
Crew and pilots
Administration and other staff
Total staff number
The aggregate compensation of these persons was as follows:
Wages and salaries
Pension costs
Social security costs other than pension
Share based payments
Subtotal
Subcontracted staff costs (rented pilots)
Total staff costs
8. Directors’ emoluments
Salaries and other short-term benefits
Social security costs
Share based payments
Directors’ services and related expenses
Total Directors’ emoluments
Directors receiving emoluments
The number of Directors who in respect of their services received LTIP share
options under long-term incentive schemes during the year
2016
7
2,028
215
2,250
2016
€ million
68.6
4.2
8.4
1.2
82.4
19.0
101.4
2016
€ million
2.1
0.2
0.3
0.2
2.8
2016
9
1
2015
7
1,676
203
1,886
2015
€ million
55.6
5.1
7.6
0.3
68.6
14.9
83.5
2015
€ million
1.9
1.5
0.2
0.2
3.8
2015
10
-
Social security costs were high in 2015 primarily because of the vesting of the share options held by the Chief
Executive Officer, and the exercise of most of these options. These costs were not accrued earlier during the
vesting period of the options because until 2014 it was not assumed that Swiss social security would apply to
the exercise of most of these options.
9. Exceptional items and underlying profit
Exceptional items
In the 2016 financial year the Group had a net exceptional expense of €16.3 million from the following:
E €16.3 million of net financial expense, consisting of: (i) exceptional expense of €25.0 million relating to the
change in time value of open hedge positions, particularly fuel caps; (ii) exceptional income of €8.7 million
relating to realised foreign exchange gain arising on a one-off replacement of USD 75.6 million bank
deposits behind collaterals with Euro deposits.
In the 2015 financial year the Group had an exceptional income of €9.2 million from the following:
E €2.8 million of operating expenses in relation to the IPO of the Company. These consisted of (i) €1.6 million
within staff costs for a one-off IPO bonus for employees other than senior management; and (ii) €1.2 million
within other expenses for advisory fees incurred in relation to the IPO.
E €12.0 million of net financial income, consisting of: (i) an exceptional income of €14.5 million relating to the
recycling of the balance of the cumulated translation adjustment account from equity to the statement of
comprehensive income. This balance had been accumulated in relation to Wizz Air Ukraine, and the
Company announced in March 2015 that the operations of this subsidiary would be discontinued which
then happened in April 2015; and (ii) an exceptional expense of €2.5 million arising on the extension of the
Company’s convertible debt in August 2015 (see Note 25).
Wizz Air Holdings Plc Annual report and accounts 2016
97
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
9. Exceptional items and underlying profit continued
Exceptional items continued
The financial income and expense items are non-cash therefore are not impacting the statement of cash flows.
The cash flow impact of the €2.8 million of IPO-related operating expenses is not significant in either year and
is therefore not presented as an exceptional item in the statement of cash flows. The €1.0 million exceptional
cash inflow in the statement of cash flows for 2014 relates to a settlement received from the main credit card
acquirer of the Group, related to prior years (€6.3 million total settlement, of which €5.3 million was received
in the 2014 financial year and the remaining €1.0 million in 2015).
These items were used by management in the determination of the non-GAAP underlying profit measure for
the Group – see below.
Underlying profit
Profit for the period
Adjustments (exclusions):
Unrealised foreign exchange loss/(gain)
Exceptional items net loss/(gain)
Sum of adjustments
Underlying profit after tax
2016
€ million
192.9
14.7
16.3
31.0
223.9
2015
€ million
183.2
(27.8)
(9.2)
(37.0)
146.2
On top of the exceptional items listed in Note 9, unrealised foreign exchange gains and losses are also excluded
from the calculation of underlying profit. These are non-cash translation differences that arise primarily on the
revaluation of the significant net US Dollar monetary asset position of the Group.
This had material impact particularly in the 2015 financial year due to the significant strengthening of the US
Dollar against the Euro in the period. The unrealised loss in 2016 relates primarily to the conversion of USD
75.6 million collaterals into Euro – this transaction alone resulted in €8.7 million realised foreign exchange gain on
one hand and €12.4 million unrealised foreign exchange loss on the other hand (the latter being the reversal of
the unrealised gains recognised on these assets since their initial recognition). That is, the net foreign exchange
impact of this conversion in 2016 was €3.7 million loss – all included in the adjustments in the table above.
By the end of the 2016 financial year the US Dollar monetary asset-liability position of the Group became
materially balanced, therefore starting from financial year 2017 there are no material movements expected in
this area.
The tax effects of the adjustments made above are insignificant.
10. Net financing income and expense
Interest income
Ineffective hedge gain
Financial income
Interest expense
Convertible debt
Finance lease
Other
Premium of expired fuel cap deals
Financial expenses
Foreign exchange (loss)/gain
Realised
Unrealised
Net foreign exchange (loss)/gain
Net exceptional financial (expense)/income (Note 9)
Net financing (expense)/income
2016
€ million
1.0
1.0
2.0
(1.6)
(0.4)
(0.7)
(5.3)
(8.0)
2.9
(14.7)
(11.8)
(16.3)
(34.1)
2015
€ million
1.0
0.8
1.8
(4.5)
(0.4)
(0.7)
-
(5.6)
(11.6)
27.8
16.2
12.0
24.4
Wizz Air Holdings Plc Annual report and accounts 2016
98
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
10. Net financing income and expense continued
Interest income and expense contain interest on financial instruments and the effect of the initial discounting
of long-term deposits and the later unwinding of such discounting. Interest expense includes also withholding
tax paid in Switzerland on the interest accrued on convertible loans. This withholding tax for these instruments
is the liability of the Group according to the terms of the respective loan agreements.
Interest expense on convertible debt is lower in 2016 because (i) a significant part of the convertible debt was
converted into shares in 2015, linked to the IPO of the Company; (ii) interest rates were also reduced during
2015; and (iii) Swiss withholding tax of €0.4 million previously incurred on convertible debt was now recovered
and credited to interest expenses.
The fuel caps premium of €5.3 million in 2016 relates to the option fees for fuel caps expired in the period –
these were paid in the 2015 financial year.
Out of the unrealised foreign exchange loss of €14.7 million in 2016 €12.4 million was caused by the
replacement of US Dollar bank deposits behind collaterals with Euro deposits. This is because the unrealised
foreign exchange gain recognised on these assets until March 2015 now had to be reversed due to their de-
recognition – see also in Note 9.
For the year ended 31 March 2015 the net realised foreign exchange loss of €11.6 million was primarily driven by
the devaluation of the Ukrainian Hryvnia and by the strengthening of the US Dollar against the Euro. The net
unrealised foreign exchange gain of €27.8 million was primarily driven by the strengthening of the US Dollar
against the Euro, impacting through the revaluation of the net US Dollar monetary asset position of the Group.
11. Income tax expense
Recognised in the statement of comprehensive income
Current year corporate tax
Other income based taxes
Deferred tax
Total tax charge
2016
€ million
2.3
5.4
0.8
8.5
2015
€ million
1.9
5.3
1.3
8.5
The Company has a tax rate of 7.8 per cent. (2015: 7.8 per cent.). The tax rate relates to Switzerland, where
the Company is tax resident.
The current tax charge for the year is different to the standard rate of corporation tax of 7.8 per cent.
(2015: 7.8 per cent.). The difference is explained below.
Reconciliation of effective tax rate
Profit before tax
Tax at the corporation tax rate of 7.8 per cent. (2015: 7.8 per cent.)
Effect of different tax rate of subsidiaries versus the parent company
Other income based foreign tax
Total tax charge
Effective tax rate
2016
€ million
201.4
15.7
(12.6)
5.4
8.5
4.2%
2015
€ million
191.7
14.9
(11.7)
5.3
8.5
4.4%
The Company had no taxable income. Substantially all the profits of the Group in 2016 and 2015 were made
by Wizz Air Hungary Kft, the airline subsidiary of the Group, and substantially all the tax charges presented in
this Note were incurred by this entity.
Other income based foreign tax represents the “innovation contribution” and the local business tax payable in
Hungary in 2016 and 2015 by the Hungarian subsidiaries of the Group, primarily Wizz Air Hungary Kft.
Hungarian local business tax and innovation contribution are levied on an adjusted profit basis.
Wizz Air Holdings Plc Annual report and accounts 2016
99
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
12. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by
the weighted average number of Ordinary Shares in issue during each period.
Profit from the year, € million
Weighted average number of Ordinary Shares in issue
Basic earnings per share, EUR
2016
192.9
53,344,145
3.62
2015
183.2
12,693,373
14.43
There were also 44,830,503 Convertible Shares in issue at 31 March 2016 (see Note 28). These shares are
non-participating, i.e. the profit attributable to them is €nil. Therefore these shares are not included in the basic
earnings per share calculation above.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares in issue
with the weighted average number of Ordinary Shares that could have been issued in the respective year
as a result of the conversion of various convertible instruments. In this respect the period prior to IPO
(in March 2015) and post IPO have different characteristics, as explained below, which causes the significant
difference between the fully diluted share numbers between the two years.
Period prior to IPO:
E Convertible notes and loans: Not all of the shares which would have been issued on full conversion of the
convertible debt instruments have been included in the diluted earnings per share calculation as there
were contractual restrictions limiting the number which could be converted. These restrictions were in
place to ensure that the Group remains owned and controlled by a majority of EU nationals.
E Employee share options: Conversion of employee share options was not assumed because the completion
of an IPO by the Company was one of the vesting conditions that was not met before March 2015 – see
Note 28 for further details.
Period post IPO:
E Convertible Shares: The Convertible Shares that were issued on the IPO as a result of the conversion of
some of the convertible loans and notes were included in the diluted earnings per share calculation.
E Convertible notes remaining after IPO: These can be converted at the option of the holder into Ordinary
Shares, although these might be subject to restrictions on voting and dividend rights.
E Employee share options: Vested share options are included in the calculation. Since the IPO there are no
further criteria in place that would limit the exercisability of vested share options.
The profit for the year has been adjusted for the purposes of calculating diluted earnings per share in respect
of the interest charge relating to the debt which could have been converted into shares.
Profit for the year, € million
Interest expense on convertible debt (net of tax), € million
Profit used to determine diluted earnings per share, € million
Weighted average number of Ordinary Shares in issue
Adjustment for assumed conversion of convertible instruments
Weighted average number of Ordinary Shares for diluted earnings per share
Diluted earnings per share, EUR
2016
192.9
1.6
194.5
53,344,145
73,208,656
126,552,801
1.54
2015
183.2
1.0
184.2
12,693,373
13,940,632
26,634,005
6.91
Wizz Air Holdings Plc Annual report and accounts 2016
100
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
12. Earnings per share continued
Proforma earnings per share
The proforma earnings per share is a fully diluted non-IFRS measure defined by the Company, calculated
as follows:
Underlying profit for the year, € million
Interest expense on convertible debt, € million(1)
Profit used to determine proforma earnings per share, € million
Number of shares in issue at year end(2)
Adjustment for assumed conversion of convertible debt instruments(3)
Adjustment for assumed conversion of employee share options
Fully diluted number of shares for proforma earnings per share
Proforma earnings per share, EUR
2016
223.9
1.6
225.4
101,752,674
24,246,715
765,390
126,764,779
1.78
2015
146.2
4.5
150.7
101,110,618
24,246,716
1,117,446
126,474,780
1.19
(1) Interest expense on convertible debt is lower in 2016 because interest rates were reduced during 2015 and
a significant part of the debt was converted into shares on IPO in 2015.
(2) The issued share number includes also the 44.8 million Convertible Shares in issue at 31 March 2016 (2015:
48.8 million). See Note 28 for share capital.
(3) Interest outstanding on convertible notes in issue at year end is not taken into account for conversion
because it is more likely to be paid in cash than converted into shares (as it was the case also in the past).
The calculation of the proforma underlying EPS is different from the calculation of the IFRS diluted EPS
measure in the following:
E For earnings the underlying profit for the year was used (see Note 10), as opposed to the statutory (IFRS)
profit for the year.
E For the fully diluted number of shares, (i) year-end position was taken rather than the weighted average
for the year and (ii) all convertible debts were taken into account for their dilution impact as at the year
end. By contrast, the IFRS diluted EPS measure takes a weighted average position for the year and
includes only those convertible debt instruments that could be converted by the holder without
any restriction.
The proforma EPS measure was introduced by the Company to better reflect the underlying earnings and the
underlying equity structure, particularly to remove the distortion that was caused by the special conversion
restrictions existing for convertible debt until the IPO in March 2015. The latter issue was relevant last for the
2015 financial year. In the 2016 financial year the same instruments were place both during the year and at the
end of the year; therefore, the fully diluted share number was almost the same in the diluted EPS calculation
as in the proforma EPS calculation.
Wizz Air Holdings Plc Annual report and accounts 2016
101
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
13. Property, plant and equipment
Land and
buildings
€ million
Aircraft
maintenance
assets Aircraft parts
€ million
€ million
Fixtures and
fittings
€ million
Advances paid
for aircraft
€ million
Advances paid
for aircraft
maintenance
assets
€ million
Total
€ million
-
5
-
7.7
(0.1)
32.2
-
149.1
5.0
-
-
-
11.6
4.6
-
-
3.3
1.8
(0.1)
-
-
5.0
2.7
-
-
25.4
25.9
-
(5.4)
-
5.0
1.0
(1.0)
-
(0.1)
16.1
16.2
-
-
110.3
79.9
(83.7)
-
118.5
29.4
(30.8)
5.4
-
45.9
37.5
-
10.5
274.1
141.6
(114.6)
-
(0.2)
300.9
215.2
(85.8)
-
(0.1)
122.4
41.1
(3.9)
(10.5)
-
106.5
116.7
(80.9)
-
Cost
At 1 April 2014
Additions
Disposals
Transfers
Foreign exchange
differences
At 31 March 2015
Additions
Disposals
Transfers
Foreign exchange
differences
At 31 March 2016
Accumulated
depreciation
At 1 April 2014
Depreciation
charge for the year
Disposals
Foreign exchange
differences
At 31 March 2015
Depreciation
charge for the year
Disposals
Foreign exchange
differences
At 31 March 2016
Net book amount
353.6
24.1
At 31 March 2016
At 31 March 2015
247.1
10.8
Additions to aircraft parts were €16.2 million. Approximately half of this increase was related to the delivery of
a spare engine from IAE. This is the first owned spare engine of the Group – the others are all leased under
operating lease contracts.
32.5
(30.9)
29.7
(30.8)
(0.1)
430.2
142.3
106.5
-
142.3
22.9
(3.9)
26.8
(4.0)
0.6
(0.1)
85.4
77.7
93.9
45.9
-
93.9
-
76.6
-
63.7
-
44.7
(0.1)
3.0
(0.1)
53.8
0.5
(0.1)
0.5
-
2.8
-
6.4
4.2
1.5
2.0
-
0.8
0.4
-
-
3.5
-
5.3
-
8.1
-
1.3
1.9
-
45.8
52.3
-
-
-
-
-
-
-
-
0.4
3.4
2.7
-
-
-
-
-
-
-
-
-
-
In May 2015 the Group entered into an amendment of its existing IAE Fleet Hour Agreement (FHA) that covers
the scheduled and unscheduled maintenance of its aircraft engines. The reason for the change was that the
type of IAE engines used by the Group (V2500 family) have had better operational performance than originally
expected by the parties – sufficient empirical evidence now exists that demonstrate that engines can stay on-
wing longer before they need to be taken into the shop for a scheduled shop visit. This change was reflected
in a revised engine maintenance plan of the Group, supported by the amendment of the FHA with IAE.
Many of the engines of the Group that were in May 2015 ‘out of condition’ under the lease return conditions of
the respective aircraft lease agreement became ‘in condition’ as a consequence of these changes. The aircraft
maintenance assets that existed for these engines were de-recognised and their net book value was transferred
to advances paid for aircraft maintenance assets – as reflected in the net €10.5 million ‘reverse direction’ transfer
between the two asset categories in 2015. Depreciation for these de-recognised assets ceased in May 2015 – that
resulted in the lower depreciation charge for aircraft maintenance assets in 2016 when compared to 2015. A new
asset is recognised and depreciation is re-commenced when the engine becomes ‘out of condition’ for its lease
contract under the new amended FHA and the revised maintenance plan.
Land and buildings includes the following amounts where the Group is a lessee under a finance lease:
Cost from capitalised finance lease
Accumulated depreciation
Net book amount
2016
€ million
7.5
(1.2)
6.3
2015
€ million
4.8
(0.7)
4.1
Wizz Air Holdings Plc Annual report and accounts 2016
102
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
14. Intangible assets
Cost
At 1 April 2014
Additions
At 31 March 2015
Additions
Disposals
At 31 March 2016
Accumulated amortisation
At 1 April 2014
Amortisation charge for the year
At 31 March 2015
Amortisation charge for the year
Disposals
At 31 March 2016
Net book amount
At 31 March 2016
At 31 March 2015
15. Tax assets and liabilities
Deferred tax liabilities recognised
At 1 April 2014
Charged to:
Profit or loss
Other comprehensive income
At 31 March 2015
Charged/(credited) to:
Profit or loss
Other comprehensive income
At 31 March 2016
Less than one year
Greater than one year
Deferred tax assets recognised
At 1 April 2014
Credited to:
Profit or loss
Other comprehensive income
At 31 March 2015
Charged to:
Profit or loss
Other comprehensive income
At 31 March 2016
Less than one year
Greater than one year
Software licences and
web development
€ million
6.9
1.6
8.5
4.6
(0.6)
12.5
3.9
1.4
5.3
2.0
(0.5)
6.8
5.7
3.2
Provisions for
other liabilities
and charges
€ million
1.2
Property, plant
and equipment
€ million
1.1
Advances paid for
aircraft
maintenance
assets
€ million
0.4
Other
€ million
0.1
Total
€ million
2.8
0.5
-
1.7
0.4
-
2.1
-
2.1
0.2
-
1.3
0.1
-
1.4
-
1.4
0.3
-
0.7
0.7
-
1.4
-
1.4
0.3
-
0.4
(0.4)
-
-
-
-
Hedging reserve
recognised in OCI
€ million
-
-
0.7
0.7
-
(0.5)
0.2
0.2
-
1.3
-
4.1
0.8
-
4.9
-
4.9
Total
€ million
-
-
0.7
0.7
-
(0.5)
0.2
0.2
-
Unrecognised deferred tax assets
Until 31 March 2010 Wizz Air Hungary was Hungarian tax resident and up to this date had accumulated
€30.0 million tax loss in Hungary. This balance remained unchanged at 31 March 2016. This loss can be utilised
only to offset profits generated under Hungarian tax residency. The Group does not expect to have profit
generated under Hungarian tax residency in the foreseeable future and therefore no deferred tax asset is
recognised in this respect.
Wizz Air Holdings Plc Annual report and accounts 2016
103
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
16. Subsidiaries
The Group has the following subsidiaries:
Subsidiary undertakings
Wizz Air Hungary Kft
Cabin Crew Professionals Sp. z.o.o.
Wizz Air Bosnia
Wizz Air Polska Sp. z.o.o.
Wizz Air Netherland Holding B.V.
Dnieper Aviation LLC
Wizz Air Ukraine Airlines LLC
Wizz Tours Kft.
Country of
incorporation
Principal activity
Class of
shares held
Percentage
held
Financial
year end
Airline operator Ordinary
Crew company Ordinary
Crew company Ordinary
Hungary
Poland
Bosnia and
Herzegovina
Dormant Ordinary
Poland
Dormant Ordinary
Netherland
Dormant Ordinary
Ukraine
Dormant Ordinary
Ukraine
Hungary Online tour operator Ordinary
100%
31 March
100% 31 December
100% 31 December
31 March
100%
100%
31 March
100% 31 December
100% 31 December
31 March
100%
Wizz Air Polska Sp. z.o.o is under solvent liquidation since 2012.
Wizz Air Ukraine Airlines LLC discontinued airline operations in April 2015.
Wizz Tours Kft. was founded in April 2015 and started its operation in October 2015.
Certain subsidiaries have a financial year end different from the Group’s financial year due to the requirements
of local legislation.
17. Inventories
Aircraft consumables
Emission trading scheme purchased allowances
Total inventories
18. Trade and other receivables
Non-current
Receivables from lessors
Other receivables
Non-current trade and other receivables
Current
Trade receivables
Other receivables from lessors
Other receivables
Total current other receivables
Less: provision for impairment of other receivables
Other current receivables net
Prepayments, deferred expenses and accrued income
Current trade and other receivables
Total trade and other receivables
2016
€ million
10.6
7.0
17.6
2015
€ million
7.5
1.3
8.8
2016
€ million
2015
€ million
68.6
2.6
71.2
57.5
28.7
4.6
33.3
-
33.3
35.7
126.5
197.7
80.3
-
80.3
42.0
7.4
2.7
10.1
-
10.1
35.5
87.6
167.9
Receivables from lessors (both current and non-current) represent the deposits provided by Wizz Air to
lessors as security in relation to the lease contracts and in relation to the funding of future maintenance events.
Impairment of trade and other receivables
Impaired receivables
– other receivables
Allowances on impaired receivables
– other receivables
2016
€ million
2015
€ million
-
-
-
-
After considering all of the available objective evidence, the Group made full impairment for all receivables
that are overdue by more than 60 days. All receivables are due within 60 days.
Wizz Air Holdings Plc Annual report and accounts 2016
104
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
19. Financial assets available for sale
Unit linked insurance serving as security deposit
Total financial assets available for sale
2016
€ million
1.0
1.0
2015
€ million
1.0
1.0
Financial assets available for sale represent a unit linked insurance product which is invested in government
bonds by the insurer. This insurance serves as a security for the acquirer bank which collects card payments
for the Group. The Group was required to place a security deposit of 300 million Hungarian Forints
(approximately one million EUR) behind this insurance. This amount is restricted until September 2016.
20. Derivative financial instruments
Assets
Non-current derivatives
Cash flow hedges
Current derivatives
Cash flow hedges
Total derivative financial assets
Liabilities
Non-current derivatives
Cash flow hedges
Current derivatives
Cash flow hedges
Total derivative financial liabilities
2016
€ million
2015
€ million
-
1.7
1.7
22.1
38.6
60.7
(1.2)
(1.8)
(16.4)
(17.6)
(79.9)
(81.7)
The derivative financial instruments represent cash flow hedges (see also Note 3). The full value of a hedging
derivative is classified as a current asset or current liability if the remaining maturity of the hedged item is less
than twelve months.
The cash flow hedges expiring in 2016 had an ineffective portion of €1.0 million (2015: €0.8 million).
The balance of derivative assets decreased versus 2015 for the following reasons: (i) At the end of the 2015
financial year the Group had significant receivables from open Fx collars that were entered into before the
heavy appreciation of the US Dollar to the Euro during 2014. These instruments were all settled during the
2016 financial year, and by 31 March 2016 the contracted rates of the open Fx collars were very close to the
market spot rate. (ii) The 31 March 2015 balance included €22.6 million in relation to the fair value of fuel caps
while by 31 March 2016 the fair value reduced to €0.8 million. The reduction is mainly due to change in time
value - as discussed in Note 9, the Group recognised €25.0 million financial expense (classified as exceptional
item) relating to the change in time value of open hedge positions, particularly fuel caps.
The balance of derivative liabilities decreased versus 2015 because at 31 March 2016 the majority of the open
fuel hedge instruments were caps (for which the Group does not have a liability when market rates are below
the capped rate), while at 31 March 2015 the majority of open fuel hedge instruments were collars (for which
the Group had significant liability due to the market rates for jet fuel at the time being significantly below the
floor rates of the collars).
The net position of assets and liabilities does match the cash flow hedging reserve in the statement of financial
position because (i) the hedging reserve does not include the time value of open options, only the intrinsic
value; (ii) hedging with non-derivatives has an impact on the hedging reserve (2016 only); and (iii) the balance
of derivative assets is influenced also by the cash deposits paid in relation to fuel caps (purchase options) open
at the end of the year.
Wizz Air Holdings Plc Annual report and accounts 2016
105
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
21. Deferred interest
Non-current
Deferred PDP interest
Deferred interest expense
Current
Deferred PDP interest
Total deferred interest
2016
€ million
2015
€ million
3.7
2.3
6.0
1.2
7.2
4.9
2.8
7.7
1.2
8.9
Deferred
non-current receivables.
interest expense represents the deferred
initial discount adjustments calculated
for
Deferred PDP interest is the deferred part of PDP interest expenses incurred on leased aircraft or spare
engines. Such interest relates to aircraft or spare engine PDP payments financed by third parties, and is initially
recognised under property, plant and equipment (advances paid for aircraft). When the leased aircraft or spare
engine is delivered, PDP interest is reclassified to deferred interest expense. It is then amortised on a
straight-line basis over the lease term of the respective asset and the amortisation charge is recognised in the
statement of comprehensive income as aircraft rental expense.
22. Restricted cash
Non-current financial assets
Current financial assets
Total restricted cash
2016
€ million
100.0
1.6
101.6
2015
€ million
70.4
3.2
73.6
Restricted cash for the Group comprises cash in bank, against which there are letters of credit issued or other
restrictions in place governing the use of that cash, resulting from agreements with aircraft lessors or other
business partners. Restricted cash is excluded from cash and cash equivalents in the cash flow statement.
Restricted cash during the 2016 financial year was held mainly on current account in Euro, earning no interest.
23. Borrowings
Non-current liabilities
Finance lease liabilities
Total non-current borrowings
Current liabilities
Finance lease liabilities
Total current borrowings
Total borrowings
2016
€ million
2015
€ million
5.9
5.9
0.5
0.5
6.4
3.8
3.8
0.4
0.4
4.2
Finance lease liabilities relate to an aircraft flight simulator asset and a maintenance hangar building leased by the
Group. The latter lease started from September 2015, causing the increase of liability versus the prior year.
Gross finance liabilities – minimum lease payments
No later than one year
Later than one year and no later than five years
Later than five years
Future finance charges on finance lease liabilities
Present value of finance lease liabilities
Present value of finance liabilities
No later than one year
Later than one year and no later than five years
Later than five years
Present value of finance lease liabilities
2016
€ million
2015
€ million
1.0
4.0
4.3
9.3
(2.9)
6.4
0.7
2.9
2.2
5.8
(1.6)
4.2
2016
€ million
2015
€ million
0.5
2.5
3.4
6.4
0.4
1.9
1.9
4.2
Wizz Air Holdings Plc Annual report and accounts 2016
106
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
24. Convertible debt
Non-current financial liabilities
Current financial liabilities
Total convertible debt
2016
€ million
26.9
0.3
27.2
2015
€ million
27.0
0.3
27.3
Convertible debt are convertible notes held by Indigo Hungary LP and Indigo Maple Hill LP (‘Indigo’).
Principal and any accrued interest on the convertible notes are convertible into Ordinary Shares in Wizz Air
Holdings Plc at conversion factors in the range of €1.0–1.5 for one share. Until the notes are converted, interest
on the notes is payable in cash with a coupon rate of interest of 8 per cent per annum, twice a year in February
and in August.
Convertible notes are guaranteed by Wizz Air Hungary Kft – see Note 31.
For more information about the Group’s exposure to interest rate risk, see Note 3.
25. Trade and other payables
Current liabilities
Trade payables
Other trade payables
Accrued expenses
Total trade and other payables
26. Deferred income
Non-current financial liabilities
Deferred income
Current financial liabilities
Unflown revenue
Other
Total deferred income
2016
€ million
2015
€ million
46.2
6.4
124.7
177.3
38.6
6.2
79.1
123.9
2016
€ million
2015
€ million
96.6
74.2
207.7
17.3
225.0
321.6
175.9
12.8
188.7
262.9
Non-current deferred income represents the value of benefit for the Group coming from assets (cash credits
and free aircraft components) received from aircraft and certain component suppliers for nil consideration,
that will be recognised as a credit (an aircraft rentals expenses decreasing item) on a straight-line basis over
the lease term of the respective asset.
Current deferred income represents the value of tickets paid by passengers for which the flight service is yet
to be performed and the current part of the value of assets received for nil consideration.
27. Employee benefits
Share based payments
The share based payment charge in the financial statements for the year relates to three types of instruments
that are in issue at 31 March 2016: share awards issued to Directors of the Board during 2006-2013 and employee
share options issued (i) during until January 2015 under the 2005 International Employee Share Option Plan
(‘ESOP’) and (ii) in July 2015 under the 2014 Employee Long Term Incentive Plan (‘LTIP’) of the Group.
The awards and options are classified as equity-settled share based payments. The Company issues new
shares for any options exercised, irrespective of the method of exercise. The fair value of the awards and
options is recognised as staff cost over the estimated vesting period with a corresponding charge to equity.
Wizz Air Holdings Plc Annual report and accounts 2016
107
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
27. Employee benefits continued
Share based payments continued
The expenses (other than social security) recognised in relation to these instruments were the following:
Director share awards
ESOP options
LTIP options
Total share based payments charge
Long Term Incentive Plan (LTIP)
Options issued during the financial year
Terms and conditions:
Number of options
Exercise price
Vesting period
Termination
2016
€ million
0.1
0.4
0.7
1.2
2015
€ million
0.1
0.1
0.0
0.2
Restricted
options
33,250
nil
3 years
10 years
Performance
options
228,389
nil
3 years
10 years
There are no individual performance conditions set for the employees to exercise their options after the three-
year vesting period other than that the employee must be in employment with one of the Group entities until
and on the date of exercise of the options.
For the Performance Options the performance conditions are set as follows, with 50% weighting for each:
E
E
total shareholder return (‘TSR’) of the Group relative to the TSR of certain selected European airlines over
the three-year period following the award; and
absolute growth in underlying, fully diluted earnings per share of the Group, measured over the period
from 1 April 2015 to 31 March 2018.
The percentage of Performance Options that will vest will be determined on a pro-rata basis (‘payout rate’),
to the extent that the target levels for these performance conditions will be met by the Group.
The fair value of options granted was determined by using the Black-Scholes model, resulting in €22.20 per
share. The total cost of the grant was determined based on (i) the fair value of options; (ii) the number of
options expected to vest; and (iii) the estimated payout rate for Performance Options.
Share options in issue
The number of LTIP share options in issue at year end is as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
Employee Share Option Plan (ESOP)
Share options issued during the financial year
Terms and conditions:
Number of options
Exercise price
Vesting period
Termination
Restricted
options
-
33,250
-
(2,500)
30,750
-
Performance
options
-
228,389
-
(26,741)
201,648
-
2016
nil
2015/A
20,000
€8.39
3 years
10 years
2015/B
220,000
€13.68
3 years
10 years
There are no individual performance conditions set for the employees to exercise their options after the three-
year vesting period other than that the employees must be in employment with one of the Group entities until
and on the date of exercise of the options.
Wizz Air Holdings Plc Annual report and accounts 2016
108
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
27. Employee benefits continued
Share based payments continued
Employee Share Option Plan (ESOP) continued
Share options in issue
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2016
Weighted
average
exercise price
€
4.11
-
2.51
-
5.15
2.74
2016
Number
of options
1,667,446
-
(642,056)
-
1,025,390
765,390
2015
Weighted
average
exercise price
€
2.33
13.24
2.18
2.36
4.11
2.44
2015
Number
of options
5,241,733
240,000
(3,779,287)
(35,000)
1,667,446
1,117,446
The range of exercise prices on options outstanding at the year end was €2.00-€13.68 (2015: €1.50-€13.68).
At the end of the financial year, the outstanding options had a weighted average outstanding contractual life
of four years and seven months (2015: five years and seven months).
Non-Executive Director share award programme
371,832 shares were awarded to Directors during 2006-2013. Of these shares 174,082 were granted to persons
who were not any longer a Director of the Company at 31 March 2016.
The shares were awarded subject to restrictions such as the Directors may not sell, assign, transfer, pledge,
exchange, encumber or dispose of any of the award shares for a period of three years or until an IPO, whichever
is later. These restrictions expired for all award shares by 31 March 2016 except 37,000 shares awarded in
July 2013, for which the restrictions will expire in July 2016.
Taxation
Under the terms of each of the three programmes all taxes payable on share options and awards are the
liability of the recipients of these benefits. However, in certain cases the Company or one of its subsidiaries has
legal obligation to pay the employer social security on the income realised by the recipients. To the extent the
additional social security obligations can be estimated, the Group makes a provision for these already during
the vesting period of the instruments.
28. Capital and reserves
Share capital
Number of shares
In issue at beginning of the year
Issued during the year for cash
Converted during the year from bonds
In issue at end of the year – fully paid
Ordinary Shares
Convertible Shares
2016
101,110,618
642,056
-
101,752,674
56,922,171
44,830,503
2015
8,740,468
13,358,107
79,012,043
101,110,618
52,280,115
48,830,503
Authorised
Equity: 170,000,000 Ordinary Shares of £0.0001
each and 80,000,000 non-voting, non-participating
Convertible Shares of £0.0001 each (2015: same)
Allotted, called up and fully paid
Equity: 101,752,674 (2015: 101,110,618) shares of
£0.0001 each
Ordinary Shares
Convertible Shares
2016
£
2016
€
2015
£
2015
€
25,000
34,415
25,000
34,415
10,175
5,692
4,483
13,661
7,642
6,019
10,111
5,228
4,883
13,574
7,019
6,555
During 2016 the increase in the total number of issued shares was due to the exercise of certain employee
share options. Separately, Indigo converted 4,000,000 of Convertible Shares into Ordinary Shares. During
2016 the increase in the number of issued shares was caused by: (i) shares issued as part of the IPO of the
Company in March 2015; (ii) conversion of convertible debt instruments in March 2015 into Ordinary and
Convertible Shares; and (iii) the exercise of certain employee share options.
Wizz Air Holdings Plc Annual report and accounts 2016
109
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
28. Capital and reserves continued
Ordinary Shares
The holders of Ordinary Shares are entitled to receive dividends as declared and are entitled to one vote per
share at meetings of the Company.
Convertible Shares
In March 2015, linked to the listing of the Company’s shares on the London Stock Exchange, certain convertible
loans and notes (including accrued interest) were converted into non-voting non-participating Convertible
Shares of the Company. There were 44,830,503 Convertible Shares in issue at 31 March 2016, all fully paid
(2015: 48,830,503). The Convertible Shares are held by Indigo and can be converted into Ordinary Shares of
the Company by Indigo on the condition of meeting certain criteria post conversion regarding the overall
shareholding structure of the Company.
Capital reserves
Share premium
Share premium has two main components. €207.0 million was recognised as a result of the Group
reorganisation in October 2009. It represents the estimated fair value of the Group at the date of the
transaction. The remaining €170.0 million (as at 31 March 2016) was recognised as a result of new share issues
made since October 2009. These new share issues comprised the primary offering on the initial public offering
of the Company’s shares on the London Stock Exchange in March 2015, the conversion of some of the
convertible debt instruments into shares and the conversion of certain employee share options into shares.
Within this, during the 2016 financial year €1.6 million increase was recorded in the share premium, all related
to conversion of employee share options.
Reorganisation reserve
Reorganisation reserve of €193.0 million was recognised as a result of the Group reorganisation in October
2009. It is equal to the difference between the fair value of the Group at the date of reorganisation
(€209.0 million) and the share capital of the Group at the same date (€16.0 million).
Equity part of convertible debt
The equity part of convertible debt in equity comprises the equity component of compound instruments
issued by the Company. The amount of the convertible debts classified as equity of €8.3 million
(2015: €8.3 million) is net of attributable transaction costs of €0.5 million.
Share based payment charge
The share based payment balance of €2.9 million credit (2015: €1.7 million credit) corresponds to the
recognised cumulative charge of share options and share awards provided to the employees and Directors
under long-term incentive schemes. This balance is recognised directly in retained earnings.
Cash flow hedging reserve
The hedging reserve comprises the effective portion of the cumulative unrealised net change in the intrinsic
part of the fair value of cash flow hedging instruments related to hedged transactions that have not
yet occurred.
29. Provisions for other liabilities and charges
At 1 April 2014
Capitalised within property, plant and equipment
Charged to comprehensive income
Used during the year
At 31 March 2015
Non-current provisions
Current provisions
Capitalised within property, plant and equipment
Charged to comprehensive income
Used during the year
At 31 March 2016
Non-current provisions
Current provisions
Aircraft
maintenance
€ million
26.9
26.5
-
(2.8)
50.6
44.9
5.7
41.0
-
(7.9)
83.7
41.2
42.5
Other
€ million
0.7
-
1.5
(0.4)
1.8
-
1.8
-
0.8
(1.4)
1.2
-
1.2
Total
€ million
27.6
26.5
1.5
(3.2)
52.4
44.9
7.5
41.0
0.8
(9.3)
84.9
41.2
43.7
Wizz Air Holdings Plc Annual report and accounts 2016
110
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
29. Provisions for other liabilities and charges continued
Non-current provisions relate to future aircraft maintenance obligations of the Group on leased aircraft and
spare engines, falling due beyond one year from the balance sheet date. Current aircraft maintenance
provisions relate to heavy maintenance obligations expected to be fulfilled in the coming financial year. The
amount of provision reflects management’s estimates of the cost of heavy maintenance work that will be
required in the future to discharge obligations under the Group’s operating lease agreements (see Note 4).
Maintenance provisions in relation to engines covered by FHA agreements are netted off with the FHA
prepayments made to the engine maintenance service provider in respect of the same group of engines.
The increase in current maintenance provisions from 2015 to 2016 relates primarily to new provisions made for
engine Life Limited Part (LLP) replacements most of which fall due in the 2017 financial year.
Other provisions relate to future liabilities under the Group’s customer loyalty programme, all within one year.
30. Financial instruments
Fair values
The fair values of the financial instruments of the Group together with their carrying amounts shown in the
statement of financial position are as follows:
Trade and other receivables due after more
than one year
Restricted cash
Financial assets available for sale
Derivative financial assets
Trade and other receivables due within one year
Cash and cash equivalents
Trade and other payables due within one year
Derivative financial liabilities
Convertible debt
Borrowings
Net balance of financial instruments (asset)
Carrying amount
2016
€ million
Fair value Carrying amount
2015
€ million
2016
€ million
Fair value
2015
€ million
71.2
101.6
1.0
1.7
126.5
645.6
(177.3)
(17.6)
(27.2)
(6.4)
719.1
71.2
101.6
1.0
1.7
126.5
645.6
(177.3)
(17.6)
(27.2)
(6.4)
719.1
83.4
73.6
1.0
60.7
87.6
448.6
(123.9)
(81.7)
(27.3)
(4.2)
517.8
80.3
73.6
1.0
60.7
87.6
448.6
(123.9)
(81.7)
(27.3)
(4.2)
514.7
The fair value of financial instruments that are not traded in an active market (such as long-term deposits
among the non-current other receivables) is determined by estimated discounted cash flows.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values due to the short-term nature of trade receivables and payables. Long-term financial assets and
liabilities which are classified as fair value through profit and loss are recognised on fair value.
Trade and other receivables due after more than one year are almost exclusively maintenance reserves, with
an average term of approximately four years. The fair value of these assets is determined by discounting at a
rate of interest of four years’ USD swap rate prevailing on the last day of the financial year.
The fair value of derivative financial instruments is based on their actual mark-to-market evaluation of the
financial institutions.
During the year a €71.0 million loss (2015: €7.2 million loss) was realised on derivative financial assets and
liabilities in the income statement.
During the year a €48,000 loss (2015: €26,000 gain) was realised on financial assets available for sale.
Wizz Air Holdings Plc Annual report and accounts 2016
111
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
30. Financial instruments continued
Effective interest rates analysis
Interest-bearing financial liabilities
The following table indicates the effective interest rate of the interest-bearing liabilities of the Group on the
statement of financial position date and the periods in which they mature. Convertible loans and notes are
denominated in EUR, while the other short-term loans are denominated in USD.
Effective
interest
Above
five
years
rate € million € million € million € million € million
Two to
five
years
Within
one year
Total
2016
One to
two
years
2015
One to
two
years
Total
Effective
interest
Within
one year
Above
five
years
rate € million € million € million € million€ million
-
1.9
-
- 7.4% 27.3
4.2
-
Two to
five
years
27.0
1.5
-
0.3
0.4
-
-
0.4
-
1.4 8.4%
-
2.0
Convertible notes
Finance lease liability 1
Finance lease liability 2
7.4%
8.4%
7.4%
27.2
3.8
2.6
0.3
0.4
0.1
-
0.4
0.1
26.9
1.6
0.4
Interest earning financial assets
The Group invests excess cash in a conservative way, primarily in AAA-rated money market funds and also in
short-term time deposits on market rate.
31. Financial guarantees
The Company has provided parent guarantees to certain lessors of its aircraft fleet, to guarantee the
performance of its airline subsidiaries under the respective lease contracts.
The Company has provided parent guarantees to certain hedging counterparties, to guarantee the
performance of Wizz Air Hungary Kft, under the respective hedge contracts.
The note purchase agreement (for convertible notes) contains a guarantee and indemnity, pursuant to which
Wizz Air Hungary Kft, inter alia, guarantees to Indigo Hungary LP and Indigo Maple Hill LP the punctual
performance by the Company of its obligations under the note purchase agreement.
32. Lease commitments
The total future minimum lease payments under non-cancellable operating lease rentals are as follows:
Payments due:
Within one year
Between one and five years
More than five years
Total operating lease commitments
2016
€ million
244.8
950.1
563.5
1,758.3
2015
€ million
218.7
817.7
455.8
1,492.2
The majority (97%) of the commitments relate to aircraft operating lease contracts. The above table includes
also the lease costs of those aircraft that are not yet delivered but for which the lease contract was already
signed before the statement of financial position date.
The lease payments are not subject to future escalation, but five of the aircraft lease contracts are on floating
rate and thus the lease payments for these vary with the USD market rates of interest.
33. Capital commitments
At 31 March 2016 the Group had the following capital commitments:
E
commitment to purchase 144 Airbus aircraft of the A320 family in the period 2016–2024. Of the 144 aircraft
34 relate to the ‘ceo’ version of the A320 family (from purchase orders placed prior to 2015) while the
remaining 110 to the ‘neo’ version (from the purchase order placed in June 2015). The total commitment is
valued at USD 17.5 billion (€15.5 billion) at list prices in 2016 USD terms (as at 31 March 2015: USD 5.9 billion
(€5.5 billion), valued at 2015 list prices). As at the date of approval of this document 13 of the 144 aircraft
are covered by sale and leaseback agreement; and
E commitment to purchase six IAE aircraft spare engines in the period 2016–2018. The commitment is valued
at USD 63.8 million (€56.2 million) at list prices in 2016 USD terms (as at March 2015: USD 74.6 million
(€69.6 million), valued at 2015 list prices). As at the date of approval of this document the six engines are
not yet financed.
Wizz Air Holdings Plc Annual report and accounts 2016
112
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
34. Contingent liabilities
Legal disputes
European Commission state aid investigations
Six of the European Commission’s on-going state aid investigations which are in their formal phase concern
arrangements between Wizz Air and certain airports to which it flies, namely, Timişoara, Cluj-Napoca,
Targu Mures, Beauvais, Girona and Lübeck. Wizz Air has submitted its legal observations and supporting
economic analyses of these arrangements to the European Commission. Ultimately, an adverse decision by
the European Commission could result in a repayment order for the recovery from Wizz Air of any amount
determined by the European Commission to be illegal state aid. None of these on-going investigations are
expected to lead to exposure that is material to the Group.
The European Commission has given notice that the state aid investigations involving Wizz Air will be assessed
on the basis of new “EU Guidelines on State aid to airports and airlines” which were adopted by the European
Commission on 20 February 2014. Where relevant, Wizz Air has made further submissions to the European
Commission in connection with this notification.
Claims by Carpatair
Carpatair, a regional airline based in Romania, started a number of cases in the Romanian courts during 2012 and
2013 which relate to Carpatair’s allegations that Timişoara airport granted unlawful state aid to Wizz Air pursuant
to an agreement between the parties or by virtue of the publicly available scheme of charges published by
Timişoara airport. Wizz Air is intervening in the defence of these claims, either in its own right or in support of
Timişoara airport. One of these cases determined that state aid existed in the 2010 scheme of charges, but failed
to substantiate that decision or to quantify the amount involved. Following this decision, Carpatair began a case
in which both Timişoara airport and Wizz Air are named as defendants and, pursuant to which, Carpatair aims to
have the alleged state aid under the 2010 scheme of charges quantified and a repayment order issued. Wizz Air
understands that the Romanian Chamber of Accounts has issued a decision requiring Timişoara airport to recover
from Wizz Air an amount of approximately €3 million in respect of the state aid attributable to the 2010 and 2011
scheme of charges despite there having been no expert quantification of the amount and the airport has now
started proceedings which Wizz Air is defending.
In January 2016 Carpatair filed a new legal action – registered with the Bucharest Tribunal – against Timisoara
Airport, the Romanian Ministry of Transports and Wizz Air. The legal action was sent by the court to Wizz Air
on 22 April 2016. By the said legal action Carpatair asks the court to order the three defendants to pay, jointly,
to Carpatair damages preliminarily estimated to amount to €92 million and interest related to the said amount,
resulting from an alleged state aid granted by Timisoara Airport to Wizz Air, from the existence of a marketing
agreement between Timisoara Airport and Wizz Air and from an abuse of dominant position on the part of
Timisoara Airport.
Wizz Air is currently reviewing the substance of the new legal action and will submit its defense in due course.
Management estimates that the maximum potential exposure for these cases could be in the region of
€113 million (including the €3 million and the 92 million specifically mentioned above). No provision has been
made by the Group in relation to these issues because there is currently no reason to believe that the Group
will incur charges from these cases.
35. Subsequent events
There were no matters arising, between the statement of financial position date and the date on which these
financial statements were approved by the Board of Directors, requiring adjustment or disclosure in
accordance with IAS 10, ‘Events after the reporting period’, other than the following:
E The Group entered into Letter of Intent with various lessors for sale and leaseback financing of 21 of its
future aircraft to be delivered in the period between July 2017 and July 2018.
36. Related parties
Identity of related parties
Related parties are:
E
E
Indigo Hungary LP and Indigo Maple Hill LP (collectively referred to as “Indigo” here), because it appointed
three Directors to the Board of Directors (all in service at 31 March 2016); and
key management personnel (Directors and Officers).
These related parties held 24.7 per cent. of the voting shares of the Company at 31 March 2016 (2015: 20.5 per cent.).
Wizz Air Holdings Plc Annual report and accounts 2016
113
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
36. Related parties continued
Transactions with related parties
There were no transactions with related parties during the fiscal year except as indicated below.
Transactions with Indigo
At 31 March 2016 Indigo held 10,740,633 of Ordinary Shares (equal to 18.9 per cent. of the Company’s issued
share capital) and 44,830,503 of Convertible Shares of the Company (2015: 6,740,633 Ordinary Shares and
48,830,503 Convertible Shares).
Indigo has interest in convertible debt instruments issued by the Company (see Note 24). The Company’s liability
to Indigo, including principal and accrued interest, was €27.2 million at 31 March 2016 (2015: €27.3 million).
During the year ended 31 March 2016 the Company entered into transactions with Indigo as follows:
E
E
E
Indigo converted 4,000,000 Convertible Shares into the Company’s Ordinary Shares;
the Company recognised interest expense on convertible debt instruments held by Indigo in the amount
of €2.0 million (2015: €3.9 million); and
fees of €0.1 million (2015: €0.1 million) were paid to Indigo in respect of the remuneration of two of the
Directors who were delegated by Indigo to the Board of Directors of the Company.
Transactions with key management personnel
Officers (members of executive management) and Directors of the Board are considered to be key
management personnel. The compensation of key management personnel, including Non-Executive Directors,
is as follows:
Salaries and other short-term employee benefits
Social security costs
Share based payments
Amounts paid to third parties in respect of Directors’ service
Total key management compensation expense
2016
€ million
6.6
1.3
0.9
0.2
9.1
2015
€ million
6.0
3.2
0.2
0.2
9.6
Social security costs were exceptionally high in financial year 2015 because of the vesting of most of the share
options held by the Officers, and the exercise of most of these vested options. These social security costs were
not accrued earlier during the vesting period of the options because until 2014 it was not assumed that Swiss
social security would apply to the exercise of most of these options.
37. Ultimate controlling party
In the opinion of the Directors there is no individual controlling party in relation to the Company's issued
Ordinary Shares.
As at 8 April 2016 approximately 53.3% of the Ordinary Shares in the Company were owned by Qualifying
Nationals. Shareholders and potential investors are reminded that the Group’s Hungarian operating licence
depends, inter alia, on Qualifying Nationals owning more than 50 per cent. of the Ordinary Shares. The
Company’s articles of association enable the Directors to take action to ensure that the amount of Ordinary
Shares held by Non-Qualifying Nationals does not reach a level that could jeopardise the Group’s entitlement
to continue to hold or enjoy the benefit of any operating licence that benefits the Group.
Qualifying Nationals include: (i) EEA Nationals, (ii) nationals of Switzerland and (iii) in respect of any
undertaking, an undertaking that satisfies the conditions as to nationality of ownership and control of
undertakings granted an operating licence contained in Article 4(f) of the Air Services Regulation, as such
conditions may be amended, varied, supplemented or replaced from time to time, or as provided for in any
agreement between the EU and any third country (whether or not such undertaking is itself granted an
operating licence).
A Non-Qualifying National is any person who is not a Qualifying National in accordance with the
definition above.
Wizz Air Holdings Plc Annual report and accounts 2016
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