Finnair Board of Directors decided on new periods in the employee share plan and the long-term incentive scheme for key personnel
Finnair Plc Stock Exchange Release 10 February 2016 at 09.50 am. EET
Employee share plan
The Board of Directors of Finnair Plc has decided to launch a new 12-month savings period under the Employee Share Plan. The purpose of the plan introduced in 2013 is to encourage the employees to become shareholders in the company, to provide long-term rewards through potential share price appreciation and thereby strengthen the employees’ interest in the development of Finnair’s shareholder value.
Participation in the share savings plan is voluntary. The decided 12 month savings period will commence on 1 July 2016. Potential future savings periods are subject to separate Board decisions.
The eligible Finnair employees are offered the opportunity to invest part of their base salary in Finnair shares through the plan. Finnair awards each participant one Matching Share for each two purchased shares after a holding period of approximately two years. The awarded shares are taxable income for the recipient.
To increase the attractiveness of the plan, each employee participating in the plan for the first time in this savings period will additionally be awarded 20 bonus shares in October 2016, provided that employee participates at least in the first three months of the plan. The plan will be offered to approximately 4,500 Finnair employees in Finland. The maximum monthly savings are eight per cent and the minimum are two per cent of each participant's gross base salary during one month. The maximum annual savings amount is 8,000 euros per participant. The total amount of all savings in 2016–2017 may not exceed 7.5 euros million, which equals to approximately 1.6 million shares, using the 9 February 2016 closing share price of 4.70 euros.
Shares will be purchased with the accumulated savings at the market price quarterly, after the publication dates of the Finnair's interim results. Any dividends paid on purchased shares during the commencing savings period will be reinvested into additional shares on the following purchase date. These shares will have equal rights to Matching Shares.
Finnair has used Alexander Corporate Finance Oy as advisor in designing the plan. Evli Alexander Management Oy serves as Plan administrator.
Performance-based incentive plan for key personnel
Finnair Board of Directors has also approved, as a part of existing long-term incentive arrangement, a performance share plan covering years 2016–2018 for the key personnel of Finnair Group. The share plan is a part of Finnair’s long-term share-based incentive arrangement that Finnair Board of Directors approved in 2013, which consists of annually commencing individual plans. The purpose of the share plan is to encourage the management to work to increase long-term shareholder value and also to commit the management to the company.
The participants have the opportunity to earn Finnair shares as a long-term incentive reward if the performance targets set by the Board of Directors are achieved. The performance criteria applied to the 2016–2018 plan are ROCE (Return on Capital Employed) and TSR (total shareholder return). The number of employees eligible to participate in the plan is approximately 60 persons.
If the targets set for the plan for years 2016–2018 are met, the estimated total value of the shares to be paid on the basis of this plan would be 1.7 million euros, corresponding to approximately 360,000 Finnair shares based on current share price (gross before the payroll tax withholding). If the maximum targets are met, the estimated total value of shares to be paid would be approximately 3.3 million euros corresponding to approximately 710,000 Finnair shares (gross before the payroll tax withholding).
The potential reward shares will be delivered to the members of Finnair’s Executive Board in three share tranches and for other participants in two tranches during the three or two years following the performance period, i.e. in years 2019–2021. The maximum value of shares delivered to an individual participant based on the share plan in any given year may not exceed 60% of the employee’s annual base salary.
The three-year performance period of the 2016–2018 share plan will be followed by a restriction period, during which the participant may not sell or transfer the shares received as a reward. The restriction period is three years for the members of Finnair's Executive Board and one year for other participants. In addition, the members of Finnair’s Executive Board are required to accumulate and once achieved, to maintain a share ownership in Finnair corresponding to his/her annual base salary as long as he/she holds a position as a member of Finnair's Executive Board.
No new shares will be issued in connection with the share-based incentive plans and therefore the arrangement will have no diluting effect. The long-term incentive arrangement approved in 2013 as well as the new plan, covering years 2016–2018, are in line with guidelines issued by Cabinet Committee on Economic Policy. Finnair used PCA Corporate Finance as an advisor in designing the incentive plan
FINNAIR PLC
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Further information:
Finnair communications, tel. +358 9 818 4020, comms(a)finnair.com
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Nasdaq Helsinki
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Finnair is a network airline specialising in passenger and cargo traffic between Asia and Europe. Helsinki’s geographical location gives Finnair a competitive advantage, since the fastest connections between many European destinations and Asian megacities fly over Finland. Finnair’s vision is to offer its passengers a unique Nordic experience, and its mission is to offer the smoothest, fastest connections in the northern hemisphere via Helsinki and the best network to the world from its home markets. Finnair is the only Nordic carrier with a 4-star Skytrax ranking and a member of the oneworld alliance. In 2015, Finnair’s revenues amounted to EUR 2,324 million and it had a personnel of 4,800 at the year-end. Finnair Plc’s shares are quoted on Nasdaq Helsinki.