Zurich Airport News Flash No. 24 / Impacts of Affiliation Contract with Employee Pension Fund of the Canton of Zurich (BVK) on Financial Results 2012

Flughafen Zürich AG signs the affiliation contract with the Employee Pension Fund of the Canton of Zurich (BVK). The resulting classification as defined benefit plan according to IAS 19 leads to a net income-affecting initial recognition of a defined benefit obligation in the consolidated financial statement 2012. Accordingly, profit guidance 2012 is adjusted by this effect.

With a News Flash on September 14, 2012, Flughafen Zürich AG informed about its decision to remain with the Employee Pension Fund of the Canton of Zurich (BVK) and announced the presumable reclassification of the pension obligation after IAS 19 (as revised in 2011). The affiliation contract was now signed on November 29, 2012, and will become effective on January 1, 2013.

Under the new affiliation contract, Flughafen Zürich AG must contribute to the restructuring plan of BVK. Furthermore, since BVK is becoming an independent legal entity by January 1, 2014, after being legally dependent under public cantonal law, its perennial continuation is no longer secured. Both aspects lead to a reclassification of the pension plan of Flughafen Zürich AG. Previously classified as a defined contribution plan, the pension plan will now be presented as a defined benefit plan in line with IAS 19 in the financial statements. The initial recognition of the affiliation contract leads to a one time impact in the profit and loss charge 2012 equal to the net defined benefit liability newly recognised on the balance sheet of Flughafen Zürich AG.

Based on the previous contract including a supplementary agreement from the year 2003, contributions to the restructuring plans or funding the deficit of BVK could have been avoided by leaving BVK. However, after comprehensive assessment, Flughafen Zürich AG has come to the conclusion that remaining with BVK is the more appropriate solution for the company altogether.

Based on provisional calculations, the expected net defined benefit liability amounts to approximately 120 – 135 million Swiss francs as per end of the year 2012. Taking into consideration deferred taxation, the net expected profit and loss impact in 2012 amounts to approximately 95 – 110 million Swiss francs. The financial results 2012 will be impacted by this amount and the net income will be reduced accordingly.

The initial recognition of the net defined liability has no impact on liquidity. The annual restructuring contributions to be paid by Flughafen Zürich AG starting as of the year 2013 amount to a low to medium single digit million amount of Swiss francs and depend on the development of the BVK and its funding ratio. Restructuring contributions will be omitted once the funding ratio reaches 100 percent.