FlyMe Annual Report

FlyMe Annual report

2012-2013

Contents Chairman’s Statement 3 Fleet Review 4 Product and Services 5 Strategy and Operations 6 Corporate Social Responsibility 8 Our People 9 Financial Statements 10

“fantastic experience…” customers’ general perception of FlyMe

48% share of luxury market

82% growth in routes offered 2012-2013

$1.96m* average quarterly revenue growth

36% average revenue quarterly growth

$23m* total revenue 2012-2013

*All figures rounded.

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FlyMe Annual Report and accounts 2013

Overview Chairman’s statement

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quarter, offsetting a carefully managed cost structure. Through tough decisions, and a clear change management strategy FlyMe has developed for the better as an airline that the industry can be proud of. Central to our strategy are our people; the people that fly with us, that work with us, and those we work with. At FlyMe we believe quality can only really be defined by our customers, and as such we respond and will try to accommodate ourselves to our customers and market signals. Quality is a long-term process, and one that cannot be quickly or easily gained. Supplier selection is a carefully managed process, with a strong focus on relationship building with suppliers to give our customers what they want, when and where they want it. At FlyMe we invest in our suppliers to collectively pull improvement and quality through our supply chain, creating a company focused on, and achieving, lean operational excellence. Our operational side is again focused on providing the highest quality and comfort to our people. With a high quality fleet, which is well maintained by a stringent and secure maintenance policy, FlyMe

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The Federal government’s deregulation of the US airline industry, coupled with strong demand has presented the regional airline industry with a boom period, giving great growth prospects for small to mid-sized airlines. This considerable confidence in the market has not only given the basis for expansion, but also opened up much finance for the airline industry to fund a rapid and powerful expansion; it is upon this atmosphere that FlyMe is building itself. It has been a year of unparalleled growth for FlyMe. With a strong expansion in the first two quarters of this year, FlyMe has grown from a small regional airline to one that has successfully cornered the market for luxury in both non-business and business flights. This long-term strategy plan has begun rewarding a sustained revenue increase each

Chairman & Chief Operating Officer Mr Andrew Partridge

With a clear focus on achieving the most efficient and effective performance possible, with the resources we

have whilst remaining an environmentally sustainable company, I have focused on bringing in a level of clear and directed changes, most notably the lean operational excellence programme.

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provides the best comfort and safety possible. An optimised fleet-route management structure is a key change made; now being a core part of our operational strategy. This ensures the right aircraft are matched to their routes based on fulfilling both demand and mileage considerations in the most effective way. Optimisation is also a key consideration for a much improved maintenance strategy that becomes part of effective aircraft logistics, ensuring our fleet is in top shape for our people. For FlyMe, operational excellence includes environmental and social impact, as well as a high performing supply chain and process development. With a strong CSR policy covering numerous areas including an investment in a local college aviation’s programme, FlyMe has shown it truly invests in the local economy; creating the leaders of tomorrow. FlyMe’s commitment to the environment is a step ahead of many in the regional airline industry, with commitments to reducing paper use in our offices, as well as making the most environmentally sustainable use of resources we have; this is why we are moving towards reducing and recycling 100% of

*All figures rounded.

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FlyMe

Annual Report and accounts 2013

Fleet Review

22 Routes

8 Aircraft

1 Base

Following the deregulation of the US Airline industry, FlyMe has expanded its fleet of aircraft considerably, spending over £25 million on new aircraft. We have introduced 8 new modern fuel-efficient jets to its fleet including 4 brand new Embraer Brasilia and 4 new Embraer ERJ135 aircraft.

Missouri Number of daily flights Kansas City 2 St. Louise 2 Springfield 2 Columbia 2

Kentucky Number of daily flights Louisville 2 Lexington 2 Bowling Green 2 Owensboro 2 Covington 2 Richmond 2 Florence 2

Canada Number of daily flights Toronto 2 Montreal 2 Quebec 2 ThunderBay 2 Winnipeg 2 Regina 2 Ottawa 2 Niagra Falls 2

Chicago

Chief Marketing Officer Mr Jameil Robertson Attracting customers is one of the hardest aspects of business; my role is crucial in ensuring FlyMe maintain their image of sophistication and quality.

Ohio Number of daily flights Columbus 2 Cleveland 2 Cincinatti 2

Current fleet at March 2013

Embraer ERJ-135

Embraer Brasilia

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FlyMe ltd Annual Report and accounts 2013

Products and Services

As a luxurious airline, pleasing our people is essential

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In Flight In flight, we offer a selection of magazines and newspapers for our passengers. Excellence in service not only covers our range of amenities, but also extends to our selection of high quality regional food. A highly maintained and impeccably kept fleet is core to our continuous passenger offer. Following FlyMe’s diversification into cargo, we have rapidly expanded our airfreight network; increasing our market presence within the industry. FlyMe offers airfreight on all routes including the main business hubs of Chicago, Cedar Rapids, and selected foreign destinations in financial year 2012.

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On Ground On ground, our people are trained to answer all inquiries, and to give our passenger the best air travel experience. Our people are the face of the company; an investment in our people is an investment in FlyMe. This is why we are currently the market leader in both quality and training. Our car rental service, now available at selected airports, will be expanded to all airports we work with in the next year. This allows our passengers a hassle-free journey to and from airports. We provide access to free wi-fi, both on the ground and in the air because we understand the importance of remaining connected in a constantly changing world.

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At FlyMe, we offer the best experience possible to our people; those who fly with us and those who work with us. We want our people to be able to count on us, to see us as a big family that always provides; therefore, we cater to their needs, as we would do with our own family. We offer excellence in service from home to destination.

Chief ̀Executive Officer Mrs Chloé Deloron When I joined the company I had no idea how fulfilling this experience would be both intellectually and personally. As a team we are constantly adapting to new market pressures, making operations an on-going but enjoyable function of the FlyMe family.

“ ”

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Strategy and Operations

Our Objectives FlyMe has successfully implemented many of its medium and long term objectives, moving forward not just as an airline, but also as a beacon for luxury air travel in the industry.

FlyMe is committed to providing excellence in service, a safe and fair place to work, and to being an

economically and environmentally sustainable airline.

FlyMe is committed to providing excellence in service, a safe and fair place to work, and to being an

economically and environmentally sustainable airline.

Our Strategy From humble beginnings to a rapidly expanding airline business, we always keep our people at the heart of everything we do. This includes not only our people who fly with us, but also our people who work with us, and our local communities. The same is true of our strategy; by putting our people at the heart of everything we do, we are consistently providing a service that is highly commended in the markets we operate in.

FlyMe: Providing Excellence in Service • Excellence in service through continuous innovation

• Lean operational excellence is considered a central theme to our operational strategy; extending excellence to all considerations within our day to day performance.

FlyMe: A Safe and Fair Place to Work • From a family business to rapidly expanding airline, we have never forgotten our people, and continuously strive towards better working conditions, fair pay and inclusion, and a welcoming work culture.

FlyMe: Economically and Environmentally Sustainable • Both economic and environmental costs are considered in everything we do, be it in our choice of planes, our strong stance on waste and recycling, or work with suppliers.

The First Choice for Luxury

Medium Term Objectives

Effectively match supply and demand on each flight

Maintain a quality image whilst striving for better

quality performance

Long Term Objectives Responsible and Sustainable growth

Continuously aggregate customer demands and respond to market conditions

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Strategy and Operations cont.

At FlyMe we believe that our operations should be built around our people; and with 22 well-established routes, and 8 luxurious aircraft, we

have proved ourselves operationally. FlyMe: Lean Operational Excellence

Reduce Waste; Create Value; Optimise Our suppliers and employees are a key part of engaging with FlyMe’s lean excellence programme. FlyMe’s operations are always focused on making the most efficient use of our capital, giving the best service to our people. This is implemented through a well-funded maintenance programme reducing aircraft downtime; to our optimisation policy for matching capacity, demand, and flight times to our heavy focus on reducing waste and recycling. Working Closely with our Suppliers FlyMe believes that long-term relationships are crucial to good business practice and as such we work closely with our suppliers on improvement projects to really help them gain an edge in their markets, which gives us an edge in our markets. FlyMe considers long-term partners as part of the FlyMe family and encourages close integration throughout the supply chain in order to maximise the quality and service provided. We use only those who have proven themselves to be dependable, flexible, and responsive to change, which in an industry as fast moving as airlines, is of upmost benefit.

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FlyMe: Operational Review 2012-2013 Quarter 1: Management change at FlyMe: new directors brought in with visionary new ideas for a small regional airline. Focus is made on looking into new markets and integrating lean operational excellence in the day-to-day running of FlyMe. The company vastly increased its service offering and put forward the groundwork for a luxury business experience on all new aircraft. FlyMe began to work closely with a local education programme to educate the leaders of tomorrow. Quarter 2: Operational changes were successfully implemented and FlyMe set the standard for lean

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operational excellence in the market. Revenue quickly expanded and FlyMe benefit in terms of finance and growth. Recycling and waste reduction programmes commenced, significantly increasing the efficient use of scarce resources at FlyMe. Quarter 3: FlyMe expanded its service offering to include cargo and a luxury rental service for passengers to and from their destinations. Quarter 4: FlyMe made a commitment to its suppliers and worked closely on strong integration throughout the supply chain. In the future we will increase our investment in the leaders of tomorrow by expanding our graduate

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programs. We want to expand our routes and invest in aircraft to increase destinations offered and flight regularity. In particular we are developing new partnerships with airports so that we will soon be offering a link between North and South America. FlyMe plans to create new services both on ground and in the air to delight you, including:

• A fast track system to reduce your queuing time.

• An executive lounge service to enhance your luxurious experience.

• Exclusive partnerships with luxury hotels.

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Market Growth 2012 - 2013

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Corporate Social Responsibility

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Fleet modernisation Improved environmental performance was a major consideration behind our modernisation of the fleet of 4 Embraer ERJ135 aircraft and 4 Embraer Brasilia aircraft to replace the Beechcraft 1900 aircraft. All aircraft options were evaluated using environmental criteria for fuel efficiency, external noise and internal cabin noise. The aircrafts we have selected have higher levels of environmental efficiency, than our previous fleet and many of the aircrafts in the industry. Supporting communities We are committed to developing strong community partnerships. Our priority is to invest in education, helping to create the leaders of tomorrow. One partnership supports the aviation mechanics programme at a local college, initially to provide aviation-related training to students. With the partnership, the college has been able to expand and diversify and now offers an extensive range of educational opportunities designed to give students a firm foundation for success in their career pathways. In addition to this partnership, FlyMe are introducing a Graduate Programme allowing students to undergo a real life experience and apply their knowledge in a dynamic and enthusiastic environment.

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Environment Our environmental policy covers three areas:

• Reduce air, noise and visual pollution • Reduce waste sent to land fill • Recycle up to 100%

Climate change We have made clear progress in implementing a programme to reduce our impact on climate change. This includes careful management of fuel and energy usage and engagement with carbon offsetting initiatives. In April 2013, we will be launching our ‘click to offset your carbon emission’ option on the FlyMe.com booking website. This allows customers to donate to environmental projects worldwide to offset the environmental impact of their flights. Waste We have successfully reduced waste produced at all the airports we operate from, in particular Chicago, which has seen the largest decrease of 4.7% during the year. We continue to develop new waste management programmes as part of our strategy to move towards achieving 100% recycling.

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Governance In 2012, we created a new corporate responsibility department, which is overseen by our Corporate Responsibility Board, chaired by Chloe Deloron, our CEO. CSR Strategy We focus our corporate responsibility around two main areas:

• Environment – making sure we minimise our impact on the environment

• Community investment activities – We support projects such as the aviation college investment to make local communities a better place to be and to invest in the leaders of tomorrow.

Human Resource Executive Mrs Becky Wilson Employees are at the core of our business and we could not grow without the commitment from our hard working teams. Throughout my role, it is crucial that FlyMe remains to have the same family feel as when we started, whilst providing new opportunities in a fair and safe environment. Ultimately, the most rewarding aspect "is helping to create a welcoming work culture where our people can thrive.

FlyMe’s corporate responsibility vision is to become the region’s most responsible airline and we have developed guiding principles that explain how

we are going to achieve this goal

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Our People

From a family business to rapidly expanding airline, we have never forgotten our people, and continuously strive towards better working conditions, fair pay and inclusion, and a welcoming work culture. We could not develop our business without the skills, passion, enthusiasm and commitment of our hard working team. The people we work and engage with are central to our strategy which is why we place a strong focus on our:

• Employees – ensuring that we provide a sustainable and fair environment for current employees and become the employer of choice for future employees

• Suppliers and customers – Building a relationship with our customers and suppliers toward a more sustainable supply chain

People and organizational effectiveness We have recently embarked on a culture change programme that will transform FlyMe into an organisation where innovation, sustainable growth and clear customer focus are the defining qualities:

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Training To enhance the knowledge of employees we tailor individual programmes to their skills and we have won accolades for the success of our training and development programmes. We place great emphasis and are continuously increasing the quality and amount of training year to year. We have invested significantly in the development of our customer service-training portfolio, which aims to ensure cabin crew deliver the highest standards of service to our customers. Our success will come from our people so we focus on inspirational leadership to drive strategy.

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Diversity and inclusion Our Diversity team launched a new Diversity and Inclusion Strategy in October 2012 with the aim of ensuring fair employment for all. We are committed to building an inclusive working culture in which all our employees feel valued, respected, and motivated.

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Supplier market We are committed to being fully responsible in our purchasing decisions. We engage in long-term relationships to support our loyal suppliers, never compromising on quality we can provide.

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Customers Our customers are the core of our business, therefore their well being is extremely important to us. Every year, we research and listen to the views of thousands of customers to continuously innovate and improve. All of our processes are related to making the experience a better and a more pleasurable one.

“We have been working here for two years now and we still feel as enthusiastic as we did when we joined the FlyMe family. It’s a great

environment to work in. “

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Financial statement

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Chief Finance Director Mrs Rocio Venzal Vallejo As the Financial Executive of FlyMe my responsibilities about cost and production are not only important but also hugely enriching. When I was first appointed, I had no idea of the task I had undertaken, however I have developed as both as a financer and as a person.

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Asset Investment We have a view of a bigger, stronger company. We believe in it, so we made huge investments in our assets, especially our aircrafts in order to achieve it. Our fleet is expanding constantly to increase our flight variety and frequency for our clients.

2011 Quarter 1

2012 Quarter 2

2012 Quarter 3

2012 Quarter 4

2013 Total value of assets $2,482,089 15,566,261 19,703,885 23,192,227 27,889,733 Total Current Assets $1,800,000 930,261 5,331,885 2,992,727 3,837,983 Net Aircraft $1,700,000 14,541,000 14,282,000 20,114,500 21,000,000 Total Fixed Assets $682,089 14,636,000 14,372,000 20,199,500 24,051,750

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2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012

Value of Assets

Total value of Assets Net Aircraft

Stronger Company

Investment in our assets • Before 3 Beechcrafts • now 4 Embraer ERJ135 & 4 Embraer Brasilia

Investment in new routes • Before 5 destinations • Now 22 destinations

Investment in additional services • Now car rental in some locations • Now offer cargo

Investment in our people • Better training • Building stronger relationships

FlyMe ROA currently: 0.007 Industry ROA currently: -0.007 Our ROA shows the efficient management at using our assets.

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Financial statement cont.

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Gross revenue $2,325,652 $4,320,110 $6,864,500 $9,320,870 Net revenue $1,987,486 $3,704,075 $5,985,071 $8,271,491 Expenditure ($4,090,685) ($4,343,075) ($5,802,879) ($8,094,526) Other 0 0 ($7,494) $8,338 Profit/loss before tax

($2,103,199) ($639,304) $182,192 $185,303

Tax paid 0 0 0 0 Net profit/loss ($2,103,199) ($639,304) $182,192 $185,303 Dividend paid 0 0 0 0 Profit retained ($2,103,199) ($639,304) $182,192 $185,303

Income Statement We strive to offer excellence, balancing financial cost and strategic investments in our products and services. In order to achieve our objectives of high quality passenger experience we undertook a significant financial investment in quarter one. We have continually worked towards increasing revenue and creating a sustainable profit margin from our costly financial investment in quarter one; our quick rate of growth since then clearly indicates of long-term viability.

Stock & Shareholders Whilst we don’t concentrate on short-term profitability, we focus on a long-term view of profitability that is reflected through our investments. FlyMe is a secure investment to undertake, consistently meeting stringent targets and attaining mid to long-term objectives with ease. We offer more routes, a better service, higher quality and a modern fleet. We have rapidly expanded our destination offering from 5 to 22, expanding our equity from $1,688,019 to $13,113,010. Our share price has remained stable, which is a great achievement considering how many new shares we have put into the market. Year 2011 Year 2012 Growth Stock Price $20 $20.06 0,30% Common stock $1,500,000 $15,300,000 920% Equity $1,688,019 $13,113,010 676.83

Quarter 1 to 2 Quarter 2 to 3 Quarter 3 to 4 Growth net profit 69.60% 128.50% 1.70% Growth gross revenue

85.80% 58.90% 35.80%

Fly Me ROE currently: 0.014 Industry ROE currently: -0.103 Our ROE is higher than the industry, the profit FlyMe generates with the money that our shareholders have invested. -2,500,000 -2,000,000 -1,500,000 -1,000,000 -500,000 0 500,000

Q1 2010

Q3 2010

Q1 2011

Q3 2011

Q1 2012

Q3 2012

Net Profit Last 3 Years (in $’s)

A

This report has been printed by Folio on Revive 100 coated which contains 100% recycled and de-inked pulp from postconsumer waste which has been FSC (Forest Stewardship Council) certified at a mill that has been awarded the ISO 14001 certificate for environmental management. 100% of the electricity used is generated from renewable sources, 95% of press chemicals are recycled for further use and on average 98% of any waste associated with this production will be recycled. © FlyMe 2013

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