I N I T I A L P U B L I C O F F E R I N G - Aer Lingus

I N I T I A L P U B L I C O F F E R I N GP R O S P E C T U S

NORTHSEABALTICSEAATLANTICOCEANMEDITERRANEANSEAEUROPEAN ROUTE NETWORK TO/FROM DUBLINNORTHSEABALTICSEAATLANTICOCEANKEYMEDITERRANEANSEAExistingRouteCommencingOctober 29thEUROPEAN ROUTE NETWORK TO/FROM CORK & SHANNON

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. When considering what action you should take you are recommended toobtain advice from your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser, who, if youare taking such advice in Ireland, should be authorised or exempted under the Investment Intermediaries Act 1995 or the Stock Exchange Act 1995.The Company and the Directors, whose names are set out on page 20 of this Prospectus, accept responsibility for the information contained in this Prospectus. The SellingShareholder accepts responsibility for the information identified in paragraph 1.2 of Part XV (Additional Information) of this Prospectus. To the best of the knowledge andbelief of the Company, the Directors and the Selling Shareholder (who have taken all reasonable care to ensure that such is the case) the information contained in thisProspectus, for which they are respectively responsible, is in accordance with the facts and does not omit anything likely to affect the import of such information.Application has been made to the Financial Regulator, as competent authority under Directive 2003/71/EC, for this Prospectus to be approved. Such approval relates only tothe Existing Ordinary Shares and the New Ordinary Shares which are to be admitted to trading on the regulated market of the Irish Stock Exchange or other regulatedmarkets for the purposes of Directive 93/22/EEC or which are to be offered to the public in any member state of the EEA. The Financial Regulator only approves thisdocument as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive 2003/71/EC.Application has been made to the Irish Stock Exchange for the Existing Ordinary Shares and the New Ordinary Shares to be admitted to the Official List of the Irish StockExchange and to trading on its regulated market. Application has been made to the UK Financial Services Authority for the Existing Ordinary Shares and the New OrdinaryShares to be admitted to the Official List of the UK Financial Services Authority, and to the London Stock Exchange for the Existing Ordinary Shares and the New OrdinaryShares to be admitted to trading on the London Stock Exchange’s main market for listed securities. It is expected that Admission to the Official Lists will become effectiveand that unconditional dealings in the Ordinary Shares will commence on the Irish Stock Exchange and the London Stock Exchange at 8:00 am on 2 October 2006. Noapplication has been or is currently intended to be made for the Ordinary Shares to be admitted to listing or trading on any other exchange.This document has been made available to the public in Ireland and the United Kingdom in accordance with Part 8 of the Prospectus Regulations 2005 by the same beingmade available, free of charge and in printed form, from the Company’s registered office at Dublin Airport, County Dublin, Ireland, at the Irish offices of the followingstockbrokers: Goodbody Stockbrokers, Merrion Stockbrokers, Bloxham Stockbrokers, Campbell O’Connor & Co, Davy, Dolmen Stockbrokers, Fexco Stockbroking Ltd andNCB Stockbrokers and at the offices in the United Kingdom of Goldman Sachs International and UBS Investment Bank. The Prospectus is also being made available topersons in Ireland or the United Kingdom at www.aerlingus.com/ipo.Conditional dealings in the Ordinary Shares on the Irish Stock Exchange and the London Stock Exchange are expected to commence at 8:00 am on 27 September 2006. Alldealings in the Ordinary Shares prior to the commencement of unconditional dealings will be of no effect if Admission does not take place and will be at the sole risk of theparties concerned.The Offer Shares have not been registered under the US Securities Act. In the United States, the Offer is being made only to qualified institutional buyers in accordance with Rule 144Aunder the US Securities Act. Outside the United States, the Offer is being made in accordance with Regulation S under the US Securities Act. Prospective purchasers that are qualifiedinstitutional buyers are hereby notified that the sellers or issuers of the Ordinary Shares may be relying on the exemption from the registration requirements of the US Securities Actprovided by Rule 144A or another exemption from registration.For a description of the selling restrictions and of certain restrictions on transfers of the Ordinary Shares, see paragraph 18 (Selling Restrictions) of Part XIV (The Offer) andparagraph 4.4 (Share Ownership Restrictions) of Part XV (Additional Information) of this Prospectus.This Prospectus should be read in its entirety and, in particular, Part III (Risk Factors) should be considered by prospective investors in the Ordinary Shares.Aer Lingus Group plc(incorporated in Ireland with limited liability under the Companies Acts 1963 to 2005, registered number 211168)Offer by Aer Lingus Group plc and by the Selling Shareholder,acting on behalf of the Irish Government,of up to 300,807,153 Ordinary Shares of 10.05 each at a priceexpected to be between 12.10 and 12.70 per Ordinary ShareAdmission to the Official Lists of the Irish Stock Exchange and the UK Financial Services AuthorityJoint SponsorsAIB Corporate FinanceJoint Global Co-ordinators and Joint BookrunnersUBS Investment BankAIB Capital MarketsUBS Investment Bank(incorporating AIB Corporate Financeand Goodbody Stockbrokers)Joint Lead ManagersMerrion Stockbrokers Limited Goldman Sachs InternationalEXPECTED ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION(BASED ON THE OFFER ASSUMPTIONS)AuthorisedIssued and fully paidNumber Amount Number Amount900,000,000 045,000,000 Ordinary Shares of 00.05 each 494,707,854 024,735,393The Offer Price Range is indicative only and may be changed during the course of the Offer. The Offer Price may be set within, above or below the Offer Price Range. If theOffer Price Range does change during the course of the Offer, the Company may be required to publish a supplementary prospectus pursuant to Regulation 51(1) of theProspectus Regulations 2005. It is expected that the Offer Price Announcement will be published and filed with the Financial Regulator on or around 27 September 2006.The Offer Price Announcement will be made available, free of charge and in printed form, to persons in Ireland or the United Kingdom from the Company’s registered officeat Dublin Airport, County Dublin, Ireland, at the Irish offices of the following stockbrokers: Goodbody Stockbrokers, Merrion Stockbrokers, Bloxham Stockbrokers, CampbellO’Connor & Co, Davy, Dolmen Stockbrokers, Fexco Stockbroking Ltd and NCB Stockbrokers, and at the offices in the United Kingdom of Goldman Sachs International andUBS Investment Bank. The Offer Price Announcement will also be made available to persons in Ireland or the United Kingdom at www.aerlingus.com/ipo.AIB Capital Markets plc, which is regulated in Ireland by the Financial Regulator, is advising the Irish Government and no one else in relation to the Offer. AIB CapitalMarkets plc will not be responsible to anyone other than the Irish Government for providing the protections afforded to customers of AIB Capital Markets plc or forproviding advice in relation to the Offer, the contents of this Prospectus or any transaction, arrangement or other matter referred to herein.AIB Corporate Finance Limited, which is regulated in Ireland by the Financial Regulator, is advising the Company and no one else in its capacity as Sponsor for the purposesof the Listing Rules of the Irish Stock Exchange and the UK Financial Services Authority. AIB Corporate Finance Limited will not be responsible to anyone other than theCompany for providing the protections afforded to customers of AIB Corporate Finance Limited or for providing advice in relation to the Offer, the contents of thisProspectus or any transaction, arrangement or other matter referred to herein.Goodbody Stockbrokers, which is regulated in Ireland by the Financial Regulator is advising the Irish Government and no one else in relation to the Offer. GoodbodyStockbrokers will not be responsible to anyone other than the Irish Government for providing the protections afforded to customers of Goodbody Stockbrokers or forproviding advice in relation to the Offer, the contents of this Prospectus or any transaction, arrangement or other matter referred to herein.UBS Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is advising the Irish Government and the Company (in its capacityas Sponsor for the purposes of the Listing Rules of the Irish Stock Exchange and the UK Financial Services Authority) and no one else in relation to the Offer. UBS Limited willnot be responsible to anyone other than the Irish Government and the Company for providing the protections afforded to customers of UBS Limited or for providing advicein relation to the Offer, the contents of this Prospectus or any transaction, arrangement or other matter referred to herein.Goldman Sachs International, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is exclusively acting for the Company and no oneelse in relation to the Offer. Goldman Sachs International will not be responsible to anyone other than the Company for providing the protections afforded to customers ofGoldman Sachs International or for providing advice in relation to the Offer, the contents of this Prospectus or any transaction, arrangement or other matter referred toherein.Merrion Stockbrokers Limited, which is regulated in Ireland by the Financial Regulator, is exclusively advising the Company and no one else in relation to the Offer. MerrionStockbrokers Limited will not be responsible to anyone other than the Company for providing the protections afforded to customers of Merrion Stockbrokers Limited or forproviding advice in relation to the Offer, the contents of this Prospectus or any transaction, arrangement or other matter referred to herein.AIB Capital Markets plc, AIB Corporate Finance Limited, Goodbody Stockbrokers, UBS Limited, Goldman Sachs International and Merrion Stockbrokers Limited make norepresentation, express or implied with respect to the accuracy or completeness of any information contained in this Prospectus and accept no responsibility for, nor do theyauthorise, the contents of this Prospectus, or for any other statement made or purported to be made by them (or any of them), or on their behalf, in connection with theCompany, the Selling Shareholder, the Offer Shares or the Offer, or its issue, including without limitation under section 41 of the Investment Funds, Companies andMiscellaneous Provisions Act 2005, or Regulation 31 of the Prospectus Regulations 2005.PR Ann I,1.1, 1.2PR Ann III,1.1, 1.2PR Ann I,5.1.1, 5.1.2PR Ann III,4.4LR3.2.1(1)

No person has been authorised to give any information or make any representations other than thosecontained in this Prospectus and, if given or made, such information or representations must not be reliedupon as having been authorised by UBS Limited, AIB Capital Markets plc, AIB Corporate Finance Limited,Goodbody Stockbrokers, Goldman Sachs International, Merrion Stockbrokers Limited, the Company, theSelling Shareholder or the Irish Government. Neither the delivery of this Prospectus nor any sale, purchaseor subscription made on the basis hereof shall, under any circumstances, create any implication that therehas been no change in the affairs of Aer Lingus since the date hereof or that the information herein iscorrect as of any time subsequent to its date.In connection with the Offer, UBS Limited, AIB Capital Markets plc, AIB Corporate Finance Limited,Goldman Sachs International, Goodbody Stockbrokers, Merrion Stockbrokers Limited and any of theirrespective affiliates acting for its or their own account, may retain, purchase, sell, subscribe for, offer to sellor subscribe for or otherwise deal for its or their own account(s) in Ordinary Shares, any other securities ofthe Company or other related investments in connection with the Offer or otherwise. Accordingly,references in this Prospectus to the Ordinary Shares being offered or otherwise dealt in should be read asincluding any offer to, or dealing by UBS Limited, AIB Capital Markets plc, AIB Corporate Finance Limited,Goodbody Stockbrokers, Goldman Sachs International, Merrion Stockbrokers Limited and any of theirrespective affiliates acting for its or their own account(s). UBS Limited, AIB Capital Markets plc, AIBCorporate Finance Limited, Goodbody Stockbrokers, Goldman Sachs International and MerrionStockbrokers Limited do not intend to disclose the extent of any such investment or transaction otherwisethan in accordance with any legal or regulatory obligation to do so. Goldman Sachs International will useGoldman, Sachs & Co. as its broker dealer for offers and sales into the United States.In connection with the Offer, the Stabilising Manager (or any of its agents), may (but will be under no PR Ann III,6.5.1, 6.5.2,obligation to), to the extent permitted by law and for stabilisation purposes, effect transactions (on any 6.5.3, 6.5.4securities market, over-the-counter market, stock exchange or otherwise) with a view to supporting themarket price of the Ordinary Shares at a level higher than that which might otherwise prevail in the openmarket, including over-allotting Ordinary Shares up to a maximum of 15% of the total number of OfferShares (assuming no exercise of the Over-allotment Arrangements) and the Stabilising Manager has beengranted the Over-allotment Arrangements pursuant to which the Stabilising Manager may purchase, orprocure purchasers for, Ordinary Shares (the ‘‘Over-allotment Shares’’) representing 15% of the number ofOrdinary Shares comprised in the Offer (assuming there is no exercise of the Over-allotment Arrangements),for the purpose of allowing them to cover short positions arising from such over-allotments and stabilisingtransactions. The transactions referred to above may be effected, and the Over-allotment Arrangementsmay be exercised in whole or in part, at any time during the period commencing after the Offer Price isannounced and ending 30 days thereafter. The Over-allotment Shares made available pursuant to the OverallotmentArrangements will be sold at the Offer Price on the same terms and conditions as, and will rankpari passu with, the other Ordinary Shares, including for any dividends and other distributions declared,made or paid on the Ordinary Shares and will form a single class for all purposes with the other OrdinaryShares. There is no assurance that such transactions, including the over-allotting of Ordinary Sharespursuant to the Over-allotment Arrangements, will be undertaken and, if commenced, they may bediscontinued at any time and must be brought to an end after a limited period. Save as required by law orregulation, neither the Stabilising Manager nor any of its agents intends to disclose the extent of any overallotmentsand/or stabilisation transactions pursuant to the Offer.The distribution of this Prospectus and the offer, sale and/or issue of Ordinary Shares in certain jurisdictionsmay be restricted by law. No action has been taken by the Company, the Selling Shareholder or the JointGlobal Co-ordinators to permit a public offer of Ordinary Shares or possession or distribution of thisProspectus (or any other offer or publicity material or application form relating to the Ordinary Shares) inany jurisdiction, other than in the Permitted Countries. Persons into whose possession this Prospectuscomes are required by the Company, the Selling Shareholder and the Joint Global Co-ordinators to informthemselves about and to observe any such restrictions. Any failure to comply with these restrictions mayconstitute a violation of the securities laws of any such jurisdiction. This Prospectus does not constitute orform part of an offer to sell, or the solicitation of an offer to buy or subscribe for, Ordinary Shares to anyperson in any jurisdiction to whom or in which such offer or solicitation is unlawful. Further information onthe restrictions to which the distribution of this Prospectus is subject is set out in paragraph 18 (SellingRestrictions) of Part XIV (The Offer) of this Prospectus.2

Certain terms used in this Prospectus, including certain technical and other items, are defined and explainedin Part I (Glossary of Technical Terms) or Part XVI (Definitions) of this Prospectus, as the case may be.NOTICE TO PROSPECTIVE INVESTORS IN THE UNITED STATESThe Offer Shares have not been and will not be registered under the US Securities Act of 1933, as amended(the ‘‘US Securities Act’’) and may not be offered or sold in the United States except pursuant to anexemption from, or in a transaction not subject to, the registration requirements of the US Securities Actand in compliance with any applicable state securities laws. The Offer Shares have not been recommendedby any US federal or state securities commission or regulatory authority, nor have any of the foregoingauthorities passed upon or endorsed the merits of the Offer or the accuracy or adequacy of this Prospectus.Any representation to the contrary is a criminal offence in the United States. Prospective investors arehereby notified that sales of Ordinary Shares may be made in reliance on an exemption from the provisionsof Section 5 of the US Securities Act. The Joint Global Co-ordinators may arrange for the offer and resale ofthe Ordinary Shares in the United States only to persons reasonably believed to be Qualified InstitutionalBuyers (‘‘QIBs’’) within the meaning of, and in reliance on, Rule 144A under the US Securities Act oranother exemption from, or in a transaction not subject to, the registration requirements of the USSecurities Act. Any offer or sale of shares in reliance on Rule 144A under the US Securities Act will be madeby broker-dealers who are registered as such under the US Exchange Act of 1934, as amended (the‘‘US Exchange Act’’). For a description of these and certain further restrictions on the offer, sale and transferof the Ordinary Shares and distribution of this Prospectus, see paragraph 18 (Selling Restrictions) of Part XIV(The Offer) of this Prospectus. Please note that by receiving this Prospectus, investors shall be deemed tohave made certain representations, acknowledgements and agreements set out herein including, withoutlimitation, those set out in paragraph 18 (Selling Restrictions) of Part XIV (The Offer) of this Prospectus.NOTICE TO NEW HAMPSHIRE RESIDENTS ONLYNEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEENFILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (‘‘RSA 421-B’’) WITH THESTATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON ISLICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OFTHE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE ANDNOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT ANY EXEMPTION OR EXCEPTION ISAVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE OF THE STATEOF NEW HAMPSHIRE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, ORRECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFULTO MAKE OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT, ANYREPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.NOTICE TO PROSPECTIVE INVESTORS IN CANADAThe Offer Shares have not been nor will be qualified by prospectus for sale to the public in Canada underapplicable Canadian securities laws and, accordingly, any offer or sale of the Offer Shares in Canada will bemade pursuant to an exemption from the applicable prospectus filing requirements, and otherwise incompliance with applicable Canadian laws. Investors in Canada should refer to the section entitled‘‘Canada’’ in paragraph 18 (Selling Restrictions) of Part XIV (The Offer) of this Prospectus and Ontarioinvestors in particular should refer to paragraph 18.3(e) (Rights of Action for Damages or Rescission(Ontario)) of Part XIV (The Offer) of this Prospectus. The Offer Price Range, financial statements andcertain financial information disclosed in this Prospectus are presented in euro. On 8 September2006, being the latest practicable date prior to the publication of this Prospectus, 10.7052 wasequal to CAD1.00, based on the Bank of Canada noon exchange rate.3

NOTICE TO PROSPECTIVE INVESTORS IN JAPANThe Underwriters have confirmed that the Offer Shares have not been and will not be registered under theSecurities and Exchange Law of Japan (the ‘‘Securities and Exchange Law’’). Accordingly, each of theUnderwriters has represented, warranted and agreed that it has not, directly or indirectly, offered or soldand will not, directly or indirectly, offer or sell any Offer Shares in Japan or to, or for the benefit of, anyresident of Japan (which term as used herein means any person resident in Japan, including any corporationor other entity organised under the laws of Japan) or to others for re-offering or re-sale, directly orindirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption fromthe registration requirements of, and otherwise in compliance with, the Securities and Exchange Law andother relevant laws and regulations of Japan.AVAILABLE INFORMATION FOR INVESTORS IN THE UNITED STATESNeither the Company nor any of its subsidiaries is required to file periodic reports under Section 13 orSection 15(d) of the US Exchange Act or is exempt from reporting pursuant to Rule 12g3-2(b) under the USExchange Act. For as long as this remains the case, the Company will provide, upon written request, toholders of Ordinary Shares, any owner of any beneficial interest in Ordinary Shares or to any prospectivepurchaser designated by such holder or owner, the information required to be delivered pursuant toRule 144A(d)(4) under the US Securities Act if, at the time of such request, any of the Company’s OrdinaryShares remain outstanding as ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under theUS Securities Act. The Company does not currently intend to make an application for an exemption underRule 12g3-2(b) under the US Exchange Act.This Prospectus is being provided by the Company in connection with an offer exempt from the registrationrequirements of the US Securities Act, solely for the purpose of enabling a prospective investor to considerthe subscription for or acquisition of Ordinary Shares described in this Prospectus. The informationcontained in this Prospectus has been provided by the Company and other identified sources. ThisProspectus is being provided on a confidential basis only to persons reasonably believed to be QIBs in theUnited States. Any reproduction or distribution of this Prospectus, in whole or in part, in the United Statesand any disclosure of its contents or use of any information herein or therein in the United States for anypurpose, other than in considering an investment by the recipient in the Ordinary Shares offered hereby orthereby, is prohibited. Each potential investor in the Ordinary Shares, by accepting delivery of thisProspectus agrees to the foregoing.ENFORCEMENT OF JUDGMENTSThe Company is a public company incorporated under the laws of Ireland. The majority of the assets of AerLingus are located in Europe. A majority of the Directors and Senior Management Team of the Company arenot citizens or residents of the United States. As a result, it may not be possible for investors to effectservice of process within the United States upon the Company or such persons or to enforce outside theUnited States judgments obtained against the Company or such persons in US courts, including, withoutlimitation, judgments based upon the civil liability provisions of the US federal securities laws or the laws ofany state or territory within the United States. In addition, awards of punitive damages in actions brought inthe United States or elsewhere may be unenforceable in Ireland. Investors may also have difficultiesenforcing, in original actions brought in courts in jurisdictions outside the United States, liabilities under USsecurities laws.FORWARD-LOOKING STATEMENTSCertain statements contained in this Prospectus, including those in Part III (Risk Factors), Part VIII(Information on Aer Lingus) and Part IX (Operating and Financial Review) constitute ‘‘forward-lookingstatements’’. In some cases, these forward-looking statements can be identified by the use of forwardlookingterminology, including the terms ‘‘believes’’, ‘‘estimates’’, ‘‘forecasts’’, ‘‘plans’’, ‘‘prepares’’,4

‘‘anticipates’’, ‘‘expects’’, ‘‘intends’’, ‘‘may’’, ‘‘will’’ or ‘‘should’’ or, in each case, their negative or othervariations or comparable terminology. Such forward-looking statements involve known and unknown risks,uncertainties and other factors, which may cause the actual results, performance or achievements of AerLingus or the industry in which it operates, to be materially different from any future results, performance orachievements expressed or implied by such forward-looking statements. In particular, certain statements inthis Prospectus relating to future financial results, plans and expectations regarding Aer Lingus’ business,growth and profitability, as well as the general economic conditions to which Aer Lingus is exposed, areforward-looking in nature and may be affected by factors including, but not limited to, those set out inparagraph 2.25 (Actual results may differ materially from forward-looking/forecast statements) of Part III(Risk Factors) of this Prospectus. It is strongly recommended that investors read Part III (Risk Factors), Part VIII(Information on Aer Lingus) and Part IX (Operating and Financial Review) of this Prospectus for a morecomplete discussion of the factors which could affect the Group’s future performance and the industry inwhich it operates. In light of these risks, uncertainties and assumptions, the forward-looking eventsdescribed in this Prospectus may not occur. Due to such uncertainties and risks, you should not place unduereliance on such forward-looking statements, which speak only as at the date of this Prospectus. TheCompany will not undertake any obligation to release publicly any revisions or updates to these forwardlookingstatements to reflect events, circumstances, unanticipated events, new information or otherwiseoccurring after the date of this Prospectus except as required by law or by any appropriate regulatoryauthority.PRESENTATION OF FINANCIAL AND OPERATING INFORMATIONOverviewThe Group is required to report its results under the International Financial Reporting Standards (‘‘IFRS’’),including International Accounting Standards (‘‘IAS’’), adopted by the International Accounting StandardsBoard (‘‘IASB’’) beginning with the financial year ended 31 December 2005 for the purposes of thisProspectus.The financial information included in this Prospectus consists of the following:➤ Historical financial information as at and for the six months ended 30 June 2006 and 2005 prepared onthe basis of IFRS;➤ Historical financial information as at and for the years ended 31 December 2005 and 2004 prepared onthe basis of IFRS;➤ Historical financial information as at and for the years ended 31 December 2004 and 2003 prepared inaccordance with Irish GAAP; and➤ Unaudited Pro Forma Balance Sheet (consisting of a balance sheet as at 30 June 2006) restating the IFRSfinancial information as at that date on the basis that the Offer had occurred as at 30 June 2006.IFRS and Underlying Historical Financial InformationFor the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004, Aer Lingus presents financial information under IFRS. With respect to certain financialinformation included in this Prospectus, Aer Lingus also presents adjusted financial informationunder the caption ‘‘Underlying’’ which reflects its commercial hedging arrangements andexceptional items.To qualify for hedge accounting under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement), an entity must formally designate its hedging arrangements as hedges prior toentering into such arrangements and document its risk management strategy in respect of eachhedged item. In addition, it must be established that each hedging arrangement was highlyeffective to hedge the applicable risk as at each applicable balance sheet date and that there is anexpectation that the hedging arrangement will continue to be highly effective in the future.5

Aer Lingus has satisfied the prescribed hedge accounting requirements under IFRS-IAS 39 withrespect to all its foreign currency, fuel and interest rate hedging arrangements since 1 January2006. Aer Lingus did not meet the prescribed hedge accounting requirements with respect to allits hedging arrangements prior to 1 January 2006, primarily because the prescribeddocumentation was not in place and the related hedge effectiveness testing requirements werenot satisfied at the time the commercial hedging arrangements were entered into. As a result,changes in the fair value of the arrangements which do not satisfy the prescribed requirementsare recognised immediately in the income statement, rather than being originally recorded inshareholders’ equity in the balance sheet each time they are fair valued and subsequentlyrecorded in the income statement in the period in which the hedged item affects the incomestatement. The impact of Aer Lingus not satisfying these IFRS requirements is that certain gainson fuel and other commercial hedging arrangements in respect of Aer Lingus’ debt obligationsare recognised in the income statement in earlier accounting periods than they would otherwisebe under Irish GAAP.The notes to the audited consolidated financial statements for the six months ended 30 June2006 and 2005 and the years ended 31 December 2005 and 2004 prepared on the basis of IFRSseparately disclose Aer Lingus’ underlying financial performance under the caption ‘‘Underlying’’as if these commercial hedging arrangements had qualified in full for hedge accountingtreatment under IFRS-IAS 39 prior to 1 January 2006 by excluding the amounts set out under theheading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains andlosses, measured under IFRS, on such commercial hedging arrangements, not qualifying forhedge accounting, and by excluding exceptional items and the taxation impact of excludeditems. Underlying data is provided for the Operating expense items of Fuel and oil costs andOther (gains)/losses, net. Underlying data also excludes Exceptional items and the taxationimpact of amounts excluded from Underlying data. Aer Lingus believes that the Underlying dataprovides investors with additional useful information on underlying trends in its business andoperations.Underlying data may not be comparable with similarly-titled profit measurements reported byother companies. Underlying data is not intended to be a substitute for IFRS measurements ofprofits. Further information regarding the presentation of IFRS and Underlying historical financialinformation is set out in Note 2 (Underlying Performance Measures) of the notes to the historicalfinancial information for the six months ended 30 June 2006 and 2005 and Note 2 (UnderlyingPerformance Measures) of the notes to the historical financial information for the years ended31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.Reconciliation between Irish GAAP and IFRSAs IFRS differs in certain material respects from Irish GAAP, a description of the principal differencesbetween IFRS and Irish GAAP is set out in paragraph 12 (Reconciliation between Irish GAAP and IFRS) ofPart IX (Operating and Financial Review) of this Prospectus which includes a quantitative and qualitativereconciliation of differences to show the transition from Irish GAAP to IFRS as at and for the years ended31 December 2005 and 2004. See also Note 31 (Transition to IFRS) of the notes to the 2005 and 2004historical financial information in Part XII (Historical Financial Information) of this Prospectus.AUDITED FINANCIAL INFORMATIONAudited financial information in relation to Aer Lingus means the information in this Prospectus that has PR Ann I,been extracted without material adjustment from Part XII (Historical Financial Information) of this 20.4.1Prospectus or has been extracted from those accounting records of Aer Lingus that have been used toprepare that financial information. Audited financial information is to be found in Part II (Summary), Part VII(Selected Summary Financial Information), Part VIII (Information on Aer Lingus), Part IX (Operating andFinancial Review) and Part XV (Additional Information) of this Prospectus. Investors should ensure that theyread the whole of this Prospectus and should not just rely on key information or information summarisedwithin it.6

UNAUDITED OPERATING AND FINANCIAL INFORMATIONUnaudited operating and financial information in relation to the business of Aer Lingus is extracted from PR Ann I,the following sources: (1) management accounts for the relevant accounting periods presented; (2) internal 20.4.3financial and operating reporting systems supporting the preparation of financial statements; and (3)internal non-financial operating reporting systems. Operating information extracted from managementaccounts or internal reporting systems in relation to the business of Aer Lingus is to be found principally inPart II (Summary), Part VIII (Information on Aer Lingus) and Part IX (Operating and Financial Review) of thisProspectus. These management accounts are prepared using information extracted from accountingrecords used in the preparation of the Group’s historical financial information, although they may alsoinclude certain other management assumptions and analyses.In this Prospectus, statements of the number of routes flown by Aer Lingus, and calculations based thereon,exclude the Dublin-Shannon route.INDUSTRY AND MARKET DATAThis Prospectus includes market share and industry data, which were obtained by Aer Lingus from industrypublications and surveys and internal Company surveys. Third party industry data, market and statistical andother information was, in addition, obtained from the following sources: (1) Economic and Social ResearchInstitute: Irish Economy Overview; (2) Economic and Social Research Institute; (3) Dublin Airport Authorityplc, Annual Report and Accounts 2005; (4) CSO Regional Population Projections, 2006-2021; (5) InnovataSchedules data provided by www.rati.com, July 2006; (6) IATA Industry Times, Edition 9 November 2005;(7) IATA Passenger and Freight Forecast Publications, October 2005; (8) McKinsey Report — Billigflieger inEurope — Die Boombranche vor dem Wendepunkt 23 June 2005; (9) EUROCONTROL Low-Cost CarrierMarket Update May 2006; (10) Dublin Airport Authority Presentation to Aer Lingus, 25 April 2006;(11) OECD Economic Surveys: Ireland 2006; (12) Eurostat News Release, 3 July 2006; (13) SRS Analyser, July2006; (14) Airline Fleet and Network Management, March/April 2006; (15) CSO Household Travel SurveyQ4 2005, published 24 May 2006; (16) EUROCONTROL: Short-Term Forecast, 31 May 2006 and Medium-Term Forecast, Volume I; (17) American Community Survey Profile 2002, table 2; (18) Epsilon Interactive,Email Trends Update and Benchmark Data, Q1, 2006; and (19) US State Department Daily Press Briefing,17 August 2006.The Company confirms that the information in this Prospectus obtained from third-party sources has been PR Ann III,accurately reproduced. So far as the Company is aware and has been able to ascertain from information 10.4published by such third parties, no facts have been omitted which would render the reproduced PR Ann I,information inaccurate or misleading.23.2Certain market share information and other statements in this Prospectus regarding the Irish, European,transatlantic and global airline industries and Aer Lingus’ position relative to its competitors, are not basedon published statistical data or information obtained from independent third parties. Rather, suchinformation and statements reflect the Directors’ best estimates based upon information obtained fromtrade and business organisations and associations and other contacts within the industries in which itcompetes, as well as information published by its competitors.The Company does not have access to the facts and assumptions underlying the numerical data, marketdata and other information extracted from publicly available sources. As a result, the Company is unable toverify such numerical data, market data and other information.7

ASSUMPTIONSUnless otherwise stated herein, the Offer Assumptions used in this Prospectus are that:➤ The Offer Price is 02.40, the mid-point of the Offer Price Range;➤ 208,444,574 New Ordinary Shares are issued by the Company pursuant to the Offer;➤ 72,663,949 Sale Shares are sold by the Selling Shareholder pursuant to the Offer;➤ The Over-allotment Arrangements are not exercised;➤ Admission occurs on 2 October 2006;➤ The ESOT acquires Offer Shares with an aggregate value of 033 million in the Offer;➤ APSS members take up in full the APSS Allocation; and➤ The level of demand from Qualifying Nationals is sufficient to ensure that the percentage of theCompany’s share capital held by Non-Qualifying Nationals immediately after the Offer is less than 45%.The Bonus Share Assumption is that 2,340,781 Bonus Shares will be issued pursuant to the Bonus ShareIncentive.The Offer Assumptions and the Bonus Share Assumption are together referred to in this Prospectus as theAssumptions.NO INCORPORATION OF WEBSITE INFORMATIONThe contents of Aer Lingus’ website or any other website referred to in this Prospectus do not form part ofthis Prospectus.ROUNDINGPercentages in certain tables in this Prospectus have been rounded and accordingly may not add up to100%. Certain financial data has also been rounded. As a result of this rounding, the totals of datapresented in this Prospectus may vary slightly from the actual arithmetic totals of such data.8

ContentsPagePart I Glossary of Technical Terms ******************************** 10Part II Summary ************************************************ 13Part III Risk Factors********************************************** 31Part IV Directors, Company Secretary, Registered Office and Advisers *** 45Part V Expected Timetable of Principal Events *********************** 48Part VI Offer Statistics ******************************************* 49Part VII Selected Summary Financial Information ********************* 50Part VIII Information on Aer Lingus ********************************* 55Part IX Operating and Financial Review***************************** 98Part X Regulation *********************************************** 168Part XI Directors, Senior Management and Corporate Governance ***** 179Part XII Historical Financial Information ***************************** 196Section A: IFRS Financial Information for Financial Years 2005and 2004 *********************************************** 196Section B: Irish GAAP Financial Information for Financial Years2004 and 2003 ****************************************** 245Section C: IFRS Financial Information for the Six Months Ended30 June 2006 and 2005 *********************************** 267Part XIII Unaudited Pro Forma Balance Sheet************************* 297Part XIV The Offer************************************************ 301Part XV Additional Information ************************************ 324Part XVI Definitions*********************************************** 3739

Part IGlossary of Technical TermsThe following explanations are not intended as technical definitions, but rather are intended to assist thereader in understanding certain terms used in this Prospectus.‘‘Available Seat Kilometres’’or ‘‘ASKs’’‘‘Available Tonne Kilometres’’or ‘‘ATKs’’‘‘block hours’’‘‘block hours per aircraft’’‘‘Cash Operating Costs’’‘‘codesharing’’‘‘EBITDAR’’‘‘EBITDAR/ReplacementValue’’‘‘frequent flyer programme’’‘‘full-time equivalentemployees’’ or ‘‘FTEs’’‘‘gateway’’‘‘interline agreement’’‘‘open skies’’means the total number of flights multiplied by the total number ofactual seats per flight multiplied by the distance per flight measured inkilometresmeans the number of tonnes of capacity available for the carriage ofpassenger and cargo load multiplied by the distance flownmeans each hour from the moment the chocks are removed from thewheels of an aircraft until the chocks are next again returned to thewheelsmeans the total number of block hours divided by the total number ofaircraftmeans operating expenses other than net interest expense (financeexpense), taxation, depreciation, amortisation and impairment, rentals(aircraft operating lease costs) and employee profit sharemeans an arrangement by which different airlines can place their IATAdesignated code on a single flight operated by one of themmeans profit for the period plus exceptional items, net interest expense(finance expense), taxation, depreciation, amortisation andimpairment, rentals (aircraft operating lease costs) and employee profitsharemeans EBITDAR divided by Replacement Value and is a measure of cashoperating performance relative to the current value of the capital usedto earn itmeans a loyalty reward scheme for travelling frequently with an airlineor with associated partner airline(s) whereby passengers can gainbonuses redeemable against a range of benefitsmeans the total number of hours worked per week by all employees ineach respective department divided by the standard number of hoursworked per week by all employees in each respective department,aggregated across all departmentsmeans a major airport designated under bilateral air serviceagreements as an international entry/exit pointmeans an agreement as to the sale, endorsement and acceptance oftickets between air carriers, including the refund, prorating andaccounting schemes established for such purposesmeans agreements between states enabling airlines which aresubstantially owned and effectively controlled by those contractingstates and/or the nationals of those contracting states to operate airtransport services between those states with very limited or norestrictions on routes, frequency or fares10

Part IGlossary of Technical Terms‘‘passenger load factor’’‘‘point-to-point’’‘‘Replacement Value’’‘‘RevenuePassenger-Kilometres’’ or‘‘RPKs’’‘‘Revenue Tonne Kilometres’’or ’’RTKs‘‘‘‘Seat Equivalent’’‘‘sector’’‘‘slot’’‘‘summer season’’‘‘Third Package’’‘‘traffic rights’’‘‘Underlying’’‘‘Unit Cost’’means flown RPKs expressed as a percentage of ASKsmeans direct point of origin to destination air services, in contrast to‘‘hub and spoke’’ airline services, where flights from point of origin todestination are routed through a central ‘‘hub’’means an estimate of the current value of the fleet with reference tobase values from the secondary aircraft marketmeans the number of passengers multiplied by the distance flownmeans the number of tonnes of revenue load carried on each sector ofa flight multiplied by the distance flownmeans the equivalent of a seat on an aircraft based on themanufacturer’s all-economy class configuration. As used in thisProspectus, there are 180, 220, 375 and 375 Seat Equivalents on theAirbus A320, Airbus A321, Airbus A330-200 and Airbus A330-300aircraft, respectivelymeans a single direct flight between two destinationsmeans the right for an aircraft to land or take off at a given airport on aspecific date and timemeans the period from the last Sunday in March to the last Saturday inOctobermeans the third of a series of three measures adopted by the EuropeanCommission in 1987 and implemented in 1992 which includedmeasures aimed at putting an end to certain aspects of the monopoliesof various national airline companies. It applies to scheduled, nonscheduledand cargo servicesmeans the transport rights that the signatories to the ChicagoConvention grant to each other and that are available under the thirdpackagemeans Aer Lingus’ underlying financial performance as disclosed inNote 2 (Underlying Performance Measures) of the notes to the auditedconsolidated financial statements for the six months ended 30 June2006 and 2005 and Note 2 (Underlying Performance Measures) of thenotes to the audited consolidated financial statements for the yearsended 31 December 2005 and 2004 prepared on the basis of IFRS.Underlying data is separately disclosed as if Aer Lingus’ commercialhedging arrangements had qualified in full for hedge accounting underIFRS—IAS 39 (Financial Instruments: Recognition and Measurement),by excluding the impact of fair value gains and losses on suchcommercial hedging arrangements. Underlying data also excludesExceptional items and the taxation impact of amounts excluded fromUnderlying datameans Cash Operating Costs per ASK11

Part IGlossary of Technical Terms‘‘Unit Cost Excluding Fuel’’‘‘Unit Revenue’’‘‘Utilisation’’‘‘wet lease’’‘‘winter season’’‘‘Yield’’means Cash Operating Costs excluding fuel and oil costs per ASKmeans total revenues per ASKmeans ASKs per Seat Equivalentmeans the leasing of an aircraft where cabin and cockpit crew areprovided by the lessormeans the period from the first Sunday after the last Saturday inOctober to the last Saturday in Marchmeans the total revenues per RPK12

Part IISummaryThis summary should be read as an introduction to this Prospectus. Any decision to invest in theOrdinary Shares should be based on the consideration of this Prospectus as a whole by theinvestor. Following the implementation of the relevant provisions of the Prospectus Directive ineach member state of the EEA, civil liability attaches to those persons who are responsible for thesummary, including any translation of the summary, but only if the summary is misleading,inaccurate or inconsistent when read together with other parts of this Prospectus. Where a claimrelating to the information contained in this Prospectus is brought before a court, the plaintiffinvestor might, under the national legislation of the relevant EEA member state, have to bear thecosts of translating this Prospectus before the legal proceedings are initiated.1. BUSINESS OVERVIEW1.1 BusinessAer Lingus is a low-cost, low-fares Irish airline primarily providing passenger transportation services. For thesix months ended 30 June 2006, Aer Lingus operated a single economy class service on its short-haulnetwork, including a maximum of ten routes to the United Kingdom and 56 routes to Continental Europe,and a two-class service on its long-haul network, including a maximum of nine routes to the United Statesand one route to the United Arab Emirates. Aer Lingus also provides cargo transportation services on itspassenger aircraft, primarily on its long-haul routes, as well as a range of ancillary services to its passengers.Beginning in October 2001, Aer Lingus implemented a restructuring plan and significantly changed itsbusiness model in order to meet the challenges presented by the terrorist attacks on the United States in2001, the general global economic downturn and the increasing number of low-cost airlines. The measuresimplemented as part of this plan in 2001 and the significant operational changes introduced since 2001returned Aer Lingus to profitability and transformed its operations, repositioning Aer Lingus as a low-cost,low-fares airline. Aer Lingus’ low-cost, low-fares model is centred around maintaining low Unit Cost,offering one-way fares, maintaining effective fleet Utilisation and developing the Aer Lingus brand. AerLingus’ principal distribution channel is its website, aerlingus.com. In 2005, approximately 71% of AerLingus’ total passenger ticket sales was generated from direct bookings by customers throughaerlingus.com.Aer Lingus operates a fleet of 35 aircraft (33 out of Ireland and two out of London Heathrow), with flightsto and from Dublin, Cork and Shannon airports. Aer Lingus’ short-haul operations use a single fleet of sixAirbus A321s and 22 Airbus A320s, with an average age of approximately three years, and its long-hauloperations use a single fleet of seven Airbus A330s, with an average age of approximately nine years.In addition to passenger transportation services, Aer Lingus provides cargo transportation services on someof its scheduled passenger routes, including to the United States, the Middle East, Germany and, to a lesserextent, the Netherlands. Aer Lingus also provides limited mail transportation services to the UnitedKingdom. Aer Lingus transports cargo in the bellyhold of its passenger aircraft and does not operate anydedicated cargo aircraft. In addition to providing its own cargo handling services at Dublin and Shannonairports, Aer Lingus provides third-party cargo handling services to Singapore Airlines, SAS and Lufthansa.Aer Lingus also generates revenues from the sale of products and services that are ancillary to its corepassenger operations, including in-flight sales of merchandise (including duty-free sales on flights outsidethe European Union), as well as in-flight sales of beverages and hot and cold meals on short-haul routes aswell as alcoholic beverages on long-haul routes, commissions from sales of car rentals, hotelaccommodation and travel insurance through aerlingus.com, excess baggage charges and fees forpassenger upgrades, access to airport lounges, commissions from online currency conversion andadvertising in Aer Lingus’ in-flight magazine.PR Ann I,6.1.113

Part IISummary1.2 Scheduled Passenger and Cargo Operating DataThe following table sets out certain unaudited scheduled passenger and cargo operating data for AerLingus for the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005, 2004 PR Ann I,and 2003:20.4.3Six Monthsended 30 June Year ended 31 December2006 2005 2005 2004 2003(unaudited)Long-haulNumber of routes flown (1) ********************************** 10 9 9 11 9Number of sectors flown (flights)**************************** 2,234 2,124 4,457 4,529 4,246Average sector length (in kilometres) (2) *********************** 5,527 5,582 5,589 5,532 5,517Number of passengers (in thousands) ************************ 533 557 1,169 1,183 1,104Average fare (in 0) (3) *************************************** 259.93 238.67 262.07 270.60 249.57Average block hours per aircraft per day (4) ******************** 13.3 12.8 13.3 13.2 12.8ASKs (in millions) (5) **************************************** 3,697 3,557 7,467 7,514 7,016RPKs (in millions) (6) **************************************** 2,915 3,060 6,426 6,437 5,997Passenger load factor (flown RPKs per ASK) ****************** 79% 86% 86% 86% 85%Average number of Seat Equivalents (7) *********************** 2,625 2,625 2,625 2,625 2,531Utilisation (ASKs per Seat Equivalent in millions) (8) ************** 1.41 1.36 2.84 2.86 2.77Average number of aircraft ********************************* 7.0 7.0 7.0 7.0 6.8Short-haulNumber of routes flown (1) ********************************** 66 57 64 51 38Number of sectors flown (flights)**************************** 26,785 25,728 52,870 48,130 50,261Average sector length (in kilometres)************************* 935 848 869 813 727Number of passengers (in thousands) ************************ 3,619 3,230 6,875 5,776 5,491Average fare (in 0) (3) *************************************** 86.49 84.86 87.55 100.77 83.08Average block hours per aircraft per day (4) ******************** 9.6 9.3 9.4 8.8 8.3ASKs (in millions) (5) **************************************** 4,560 3,707 7,973 6,075 5,256RPKs (in millions) (6) **************************************** 3,445 2,810 6,135 4,700 3,966Passenger load factor (flown RPKs per ASK) ****************** 76% 76% 77% 77% 75%Average number of Seat Equivalents (7) *********************** 5,102 4,658 4,792 4,379 4,271Utilisation (ASKs per Seat Equivalent in millions) (8) ************** 0.89 0.80 1.66 1.39 1.23Average number of aircraft ********************************* 27.0 25.4 25.9 24.7 26.2Other operating dataATKs (in millions) (9) **************************************** 915 813 1,727 1,514 1,355RTKs (in millions) (10) *************************************** 642 589 1,254 1,104 1,000Scheduled cargo tonnes************************************ 12,139 10,285 21,073 27,453 28,386Source: Management accounts and internal financial and operating reporting systems.(1) Includes the maximum number of routes served during the periods presented; excludes all Dublin/Shannon routes flown onlong-haul flights between Ireland and the United States.(2) Flights between Ireland and the United States which have a stopover in Ireland are treated as one sector length.(3) Includes airport charges/taxes for the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004. Excludes airport charges/taxes for the year ended 31 December 2003 because airport charges were netted againstrevenues for 2003.(4) Block hours per aircraft represents the total number of block hours divided by the total number of aircraft.(5) Available Seat Kilometres, or ASKs, are the total number of flights multiplied by route by the number of actual seats per flightmultiplied by the distance per flight measured in kilometres.(6) Revenue Passenger Kilometres, or RPKs, are the number of passengers multiplied by the distance flown. It is a measure of theamount of total capacity sold during a period.(7) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy class configuration.(8) Utilisation is a measure of Aer Lingus’ efficiency in using its fleet to produce capacity. Aer Lingus defines Utilisation as ASKs perSeat Equivalent, which represents the amount of available capacity, measured in ASKs, produced by each Seat Equivalent in thefleet.(9) Available Tonne Kilometres, or ATKs, are the number of tonnes of capacity available for the carriage of passenger and cargo loadmultiplied by the distance flown.14

Part IISummary(10) Revenue Tonne Kilometres, or RTKs, are the number of tonnes of revenue load carried on each sector of a flight multiplied by thedistance flown.1.3 Key Financial Data for the Six Months Ended 30 June 2006 and 2005 under IFRSThe following table sets out key financial data for Aer Lingus for the six months ended 30 June 2006 and2005 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses oncommercial hedging arrangements and exceptional items), together with the amounts excluded fromUnderlying data:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited) (2) (unaudited) (2)Revenues (0 in millions)********** 508.3 — 508.3 451.6 — 451.6EBITDAR (0 in millions) (3) ********* 63.0 (18.8) 44.2 62.9 35.4 98.3Yield (Revenues per RPK, in0 cent) ********************** 7.99 — 7.99 7.69 — 7.69Unit Revenues (Revenues per ASK,in 0 cent)******************** 6.16 — 6.16 6.22 — 6.22Unit Cost (Cash Operating Costsper ASK, in 0 cent) (4) ********** 5.39 0.23 5.62 5.35 (0.49) 4.86Total Utilisation (ASKs per SeatEquivalent in millions) ********* 1.07 — 1.07 1.00 — 1.00EBITDAR per Seat Equivalent (0 inthousands) (5) ***************** 8.2 (2.4) 5.8 8.6 4.9 13.5Unit Cost Excluding Fuel (CashOperating Costs excluding fueland oil costs per ASK, in 0 cent) 4.30 0.04 4.34 4.57 (0.04) 4.53PR Ann I,20.4.3Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financial andoperating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six months ended30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.For the six months ended 30 June 2006, the approximately 3(18.8) million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the period of approximately 3(12.7) million, (2) Taxation of approximately 3(1.8) million; and(3) Exceptional items of approximately 3(4.3) million. The 0.23 cent excluded from Unit Cost comprised approximately 0.18 centof Fuel and oil costs and approximately 0.05 cent of Other (gains)/losses, net, and the 0.04 cent excluded from Unit CostExcluding Fuel comprised approximately 0.04 cent of Other (gains)/losses, net.For the six months ended 30 June 2005, the approximately 335.4 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the period of approximately 331.0 million; and (2) Taxation of approximately 34.4 million. The (0.49)cent excluded from Unit Cost comprised approximately (0.45) cent of Fuel and oil costs and approximately (0.04) cent of Other(gains)/losses, net, and the (0.04) cent excluded from Unit Cost Excluding Fuel comprised approximately (0.04) cent of Other(gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for thesix months ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.15

Part IISummary(2) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excluding Revenues, areconsidered non-GAAP financial measures which Aer Lingus believes are important to an understanding of its performance.These measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute foranalysis of Aer Lingus’ results as reported under GAAP.(3) EBITDAR is defined as profit for the period plus exceptional items, net interest expense, (finance expense), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share. EBITDAR is considered a non-GAAP financial measure. Aer Lingus believes that EBITDAR is an important measure of its performance and is a usefulsupplement to profit for the period and other income statement data. Aer Lingus believes EBITDAR is useful to management andinvestors in comparing its performance to that of other companies in its industry, as it removes the impact of (a) differences incapital structure, including the effects of finance income and expense, (b) differences among the tax regimes to which AerLingus and comparable companies are subject and (c) differences in the age, method of acquisition and approach todepreciation and amortisation of productive assets. However, because other companies may calculate EBITDAR differently thanAer Lingus does, it may be of limited usefulness as a comparative measure. EBITDAR has limitations as an analytical tool andinvestors should not consider it in isolation or as a substitute for analysis of its results as reported under GAAP. A reconciliationof EBITDAR to profit for the period under IFRS and on an Underlying basis is set out in the table below.(4) Cash Operating Costs are operating expenses other than net interest expense (finance expenses), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share.(5) EBITDAR per Seat Equivalent is based on the annual average number of aircraft operated during the period.The following table sets out a reconciliation of EBITDAR to profit for the period under IFRS and also on an Underlying basis for the sixmonths ended 30 June 2006 and 2005:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying Underlying Total Underlying Underlying Total(2 in millions) (2 in millions)(unaudited) (1) (unaudited) (1)Profit for the period ************************ 3 16.3 3 (12.7) 2 3.6 3 14.5 3 31.0 2 45.5Exceptional items***************************** — (4.3) (4.3) — — —Finance (income)/expense, net****************** (9.2) — (9.2) (5.0) — (5.0)Taxation ************************************ 3.5 (1.8) 1.7 1.0 4.4 5.4Depreciation, amortisation and impairment ****** 27.9 — 27.9 31.5 — 31.5Aircraft operating lease costs ****************** 24.5 — 24.5 20.9 — 20.9Employee profit share************************* — — — — — —EBITDAR *********************************** 3 63.0 3 (18.8) 2 44.2 3 62.9 3 35.4 2 98.3PR Ann I,20.4.3Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of this Prospectus.EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.16

Part IISummary1.4 Key Financial Data for the Years Ended 31 December 2005 and 2004 under IFRSThe following table sets out certain key financial data for Aer Lingus for the years ended 31 December 2005and 2004 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses oncommercial hedging arrangements and exceptional items), together with the amounts excluded fromUnderlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited) (2) (unaudited) (2)Revenues (0 in millions) ****** 1,002.6 — 1,002.6 1,009.6 — 1,009.6EBITDAR (0 in millions) (3) ****** 187.1 8.4 195.5 215.6 22.5 238.1Yield (Revenues per RPK, in0 cent)******************* 7.98 — 7.98 9.07 — 9.07Unit Revenues (Revenuesper ASK, in 0 cent) ******** 6.49 — 6.49 7.43 — 7.43Unit Cost (Cash OperatingCosts per ASK, in 0 cent) (4) 5.28 (0.05) 5.23 5.84 (0.16) 5.68Total Utilisation (ASKs per SeatEquivalent in millions) ****** 2.08 — 2.08 1.94 — 1.94EBITDAR per Seat Equivalent(0 in thousands) (5) ********* 25.2 1.1 26.3 30.8 3.2 34.0Unit Cost Excluding Fuel (CashOperating Costs excludingfuel and oil costs per ASK,in 0 cent) **************** 4.38 (0.02) 4.36 5.06 (0.01) 5.05PR Ann I,20.4.3Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financial andoperating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.For the year ended 31 December 2005, the approximately 38.4 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the year of 37.4 million; and (2) Taxation of approximately 31.0 million. The (0.05) cent excluded fromUnit Cost comprised approximately (0.03) cent of Fuel and oil costs and approximately (0.02) cent of Other (gains)/losses, net,and the (0.02) cent excluded from Unit Cost Excluding Fuel comprised approximately (0.02) cent of Other (gains)/losses, net.For the year ended 31 December 2004, the approximately 322.5 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the year of 3(70.0) million; (2) Taxation of approximately 3(10.0) million; and (3) Exceptional items ofapproximately 3102.5 million. The (0.16) cent excluded from Unit Cost comprised approximately (0.15) cent of Fuel and oil costsand approximately (0.01) cent of Other (gains)/losses, net and the (0.01) cent excluded from Unit Cost Excluding Fuel comprisedapproximately (0.01) cent of Other (gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(2) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excluding Revenues, areconsidered non-GAAP financial measures which Aer Lingus believes are important to an understanding of its performance.These measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute foranalysis of Aer Lingus’ results as reported under GAAP.17

Part IISummaryThe following table sets out a reconciliation of EBITDAR to profit for the year under IFRS and also on an Underlying basis for the yearsended 31 December 2005 and 2004:PR Ann I,20.4.3Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying Underlying Total Underlying Underlying Total(2 in millions) (2 in millions)(unaudited) (1) (unaudited) (1)Profit for the year ****************** 3 81.5 3 7.4 2 88.9 3 92.9 3 (70.0) 2 22.9Exceptional items********************* — — — — 102.5 102.5Finance (income)/expense, net********** (10.2) — (10.2) (7.3) — (7.3)Taxation***************************** 10.1 1.0 11.1 14.4 (10.0) 4.4Depreciation, amortisation andimpairment ************************ 60.8 — 60.8 63.8 — 63.8Aircraft operating lease costs*********** 44.9 — 44.9 41.2 — 41.2Employee profit share ***************** — — — 10.6 — 10.6EBITDAR**************************** 3187.1 3 8.4 2195.5 3215.6 3 22.5 2238.1Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of this Prospectus.EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.1.5 Key Financial Data for the Years Ended 31 December 2004 and 2003 under Irish GAAPThe following table sets out key financial data for Aer Lingus for the years ended 31 December 2004 and2003 under Irish GAAP:PR Ann I,20.4.3Year ended31 December2004 2003(unaudited) (1)Revenues (0 in millions)****************************************************************** 906.8 888.3EBITDAR (0 in millions) ****************************************************************** 216.7 186.8Yield (Revenues per RPK, in 0 cent) ******************************************************* 8.14 8.92Unit Revenues (Revenues per ASK, in 0 cent) *********************************************** 6.67 7.24Unit Cost (Cash Operating Costs per ASK, in 0 cent) **************************************** 5.08 5.72Total Utilisation (ASKs per Seat Equivalent in millions) **************************************** 1.94 1.80EBITDAR per Seat Equivalent (0 in thousands)*********************************************** 30.9 27.5Unit Cost Excluding Fuel (Cash Operating Costs excluding fuel and oil costs per ASK, in 0 cent) *** 4.30 4.99Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financial andoperating reporting systems. Revenues are extracted from Part XII (Historical Financial Information) of this Prospectus.All measures in the table above, excluding Revenues, are considered non-GAAP financial measures which Aer Lingus believes areimportant to an understanding of its performance. These measures have limitations as analytical tools and investors should notconsider them in isolation or as a substitute for analysis of Aer Lingus’ results as reported under GAAP.(1) All data in this table is unaudited financial information, except for Revenues which is audited.18

Part IISummaryThe following table sets out a reconciliation of EBITDAR to profit for the year under Irish GAAP for the years ended 31 December 2004and 2003:PR Ann I,Year ended31 December2004 2003(2 in millions)Profit for the year ******************************************************************************* 3 1.2 3 69.2(unaudited) (1)Exceptional items ********************************************************************************* 102.5 — 20.4.3Finance (income)/expense, net ********************************************************************** (7.3) (5.3)Taxation ***************************************************************************************** (0.1) 10.2Depreciation, amortisation and impairment *********************************************************** 68.6 69.7Aircraft operating lease costs *********************************************************************** 41.2 34.2Employee profit share ***************************************************************************** 10.6 8.8EBITDAR **************************************************************************************** 3216.7 3186.8Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of this Prospectus.EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.1.6 StrengthsAer Lingus believes that its principal strengths are:➤ Returns-focused business model designed for a competitive market➤ Proven track record of financial performance➤ Strong presence in growing Irish market➤ Enhanced service offering➤ Positive brand recognition➤ Leading position between Ireland and the United States➤ Key competitive position at Dublin and London Heathrow airports➤ Strong capital structure➤ Experienced management team1.7 StrategyThe key elements of Aer Lingus’ strategy are:➤ Low Fares. Way Better➤ Growing capacity through fleet investment➤ Maximising passenger revenues➤ Maintaining disciplined cost control➤ Promoting aerlingus.com as its principal distribution channel➤ Growing ancillary revenues19

Part IISummaryMore detailed information about the business of the Group is set out in Part VIII (Information on Aer Lingus)of this Prospectus.2. DIRECTORS, SENIOR MANAGEMENT TEAM AND AUDITORSThe Directors of the Company are John Sharman (Chairman), Dermot Mannion (Chief Executive), GregO’Sullivan (Finance Director), Ivor Fitzpatrick (Non-executive Director), Sean FitzPatrick (Non-executiveDirector), Danuta Gray (Non-executive Director), Francis Hackett (Non-executive Director), Michael Johns(Non-executive Director), Anne Mills (Non-executive Director), Thomas Moran (Non-executive Director) andChris Wall (Non-executive Director).The Senior Management Team of Aer Lingus is Dermot Mannion (Chief Executive), GregO’Sullivan (Finance Director), Niall Walsh (Deputy Chief Executive), Dick Butler (Ground OperationsDirector), Enda Corneille (Commercial Director), Stephen Kavanagh (Planning Director) and Liz White(Human Resources Director).As at the date of this Prospectus, of the current Directors, Francis Hackett is a nominee of the SellingShareholder, and Michael Johns is a nominee of the ESOT. Sean FitzPatrick is the senior independentDirector.The auditors of the Company are PricewaterhouseCoopers.3. SELECTED SUMMARY FINANCIAL INFORMATIONThe following is a summary of the Group’s historical financial information for the periods indicated. Thehistorical financial information discussed below has been extracted without material adjustment fromPart XII (Historical Financial Information) of this Prospectus and is based on the historical financialinformation of the Group as at and for the six months ended 30 June 2006 and 2005 and as at and for theyears ended 31 December 2005, 2004 and 2003. As the information set out below is only a summary,potential investors are advised to read the whole of this Prospectus and not to rely on only the key orsummarised information set out below.PR Ann I,3.1, 3.2The historical financial information as at and for the six months ended 30 June 2006 and 2005 and as atand for the years ended 31 December 2005 and 2004 has been prepared on the basis of IFRS. The historicalfinancial information as at and for the years ended 31 December 2004 and 2003 has been prepared inaccordance with Irish GAAP.Further information regarding the presentation of financial information is set out in ‘‘Presentation ofFinancial and Operating Information’’ on page 5 of this Prospectus. This financial information should beread in conjunction with Part IX (Operating and Financial Review) and Part XII (Historical FinancialInformation) of this Prospectus. Further information regarding the differences between Irish GAAP and IFRSis set out in paragraph 12 (Reconciliation between Irish GAAP and IFRS) of Part IX (Operating and FinancialReview) of this Prospectus.20

Part IISummary3.1 Six Months Ended 30 June 2006 compared with Six Months Ended 30 June 2005 underIFRSPR Ann I,20.4.2Six Months ended30 June2006 2005(1 in millions)(audited)Selected Income Statement Data:Revenues************************************************************** 0508.3 0451.6Operating expenses:— Cost of sales and other operating expenses **************************** (516.5) (405.6)— Employee profit share *********************************************** — —Operating profit/(loss) before exceptional items ************************* (8.2) 46.0Exceptional items******************************************************** 4.3 —Operating profit/(loss) after exceptional items*************************** (3.9) 46.0Finance income/(expense), net********************************************* 9.2 5.0Profit before taxation ************************************************** 5.3 51.0Taxation**************************************************************** (1.7) (5.4)Profit for the period *************************************************** 03.6 045.6As at 30 June2006 2005(1 in millions)(audited)PR Ann I,20.4.2Selected Balance Sheet Data:Non-current assets******************************************************* 0839.2 0863.5Current assets ********************************************************** 742.9 671.2Total assets************************************************************ 1,582.1 1,534.7Total equity************************************************************* 404.7 365.4Non-current liabilities **************************************************** 561.2 552.3Current liabilities ******************************************************** 616.2 617.0Total equity and liabilities ********************************************** 01,582.1 01,534.7Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.The following table sets out Aer Lingus’ income statement items for the six months ended 30 June 2006 and 2005 under IFRS and alsoon an Underlying basis (excluding the impact of fair value gains and losses on commercial hedging arrangements and exceptionalitems), together with the amounts excluded from Underlying data:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(2 in millions) (2 in millions)(audited)(audited)Revenues ******************************************* 3508.3 3— 2508.3 3451.6 3— 2451.6Operating expenses: *********************************** (497.8) (18.7) (516.5) (441.1) 35.5 (405.6)— Cost of sales and other operating expenses ********** (497.8) (18.7) (516.5) (441.1) 35.5 (405.6)— Employee profit share ***************************** — — — — — —Operating profit/(loss) before exceptional items ******* 10.5 (18.7) (8.2) 10.5 35.5 46.0Exceptional items ************************************* — 4.3 4.3 — — —Operating profit/(loss) after exceptional items********* 10.5 (14.4) (3.9) 10.5 35.5 46.0Finance income/(expense), net ************************** 9.2 — 9.2 5.0 — 5.0Profit before taxation******************************** 19.7 (14.4) 5.3 15.5 35.5 51.0Taxation ********************************************* (3.5) 1.8 (1.7) (1.0) (4.4) (5.4)Profit for the period ********************************* 316.2 3(12.6) 23.6 314.5 331.1 245.6Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.21AI, 20.4.2

Part IISummary(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six months ended30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.For the six months ended 30 June 2006, the approximately 3(18.7) million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 3(15.0) million of Fuel and oil costs andapproximately 3(3.7) million of Other (gains)/losses, net. Approximately 34.3 million is excluded from Exceptional items and31.8 million is excluded from Taxation.For the six months ended 30 June 2005, the 335.5 million excluded from Operating expenses (Cost of sales and other operatingexpenses) on an Underlying basis comprised approximately 332.5 million of Fuel and oil costs and approximately 33.0 million ofOther (gains)/losses, net. Approximately 3(4.4) million is excluded from Taxation.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for thesix months ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.3.2 Year Ended 31 December 2005 compared with Year Ended 31 December 2004 under IFRSPR Ann I,20.4.2Year ended 31 December2005 2004(1 in millions)(audited)PR Ann I,20.4.2Selected Income Statement Data:Revenues************************************************************** 01,002.6 01,009.6Operating expenses:— Cost of sales and other operating expenses **************************** (912.8) (876.5)— Employee profit share *********************************************** — (10.6)Operating profit before exceptional items ******************************* 89.8 122.5Exceptional items******************************************************** — (102.5)Operating profit after exceptional items ******************************** 89.8 20.0Finance income/(expense), net********************************************* 10.2 7.3Profit before taxation ************************************************** 100.0 27.3Taxation**************************************************************** (11.1) (4.4)Profit for the year ***************************************************** 0 88.9 0 22.9As at 31 December2005 2004(1 in millions)(audited)PR Ann I,20.4.2Selected Balance Sheet Data:Non-current assets******************************************************* 0 866.2 0 857.2Current assets ********************************************************** 627.8 532.5Total assets************************************************************ 1,494.0 1,389.7Total equity************************************************************* 403.4 318.1Non-current liabilities **************************************************** 603.0 489.4Current liabilities ******************************************************** 487.6 582.2Total equity and liabilities ********************************************** 01,494.0 01,389.7Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.22

Part IISummaryThe following table sets out Aer Lingus’ income statement items for the years ended 31 December 2005 and 2004 under IFRS and alsoon an Underlying basis (excluding the impact of fair value gains and losses on commercial hedging arrangements and exceptionalitems), together with the amounts excluded from Underlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(2 in millions) (2 in millions)(audited)(audited)Revenues ******************************************** 31,002.6 3 — 21,002.6 31,009.6 3 — 21,009.6Operating expenses:— Cost of sales and other operating expenses *********** (921.2) 8.4 (912.8) (899.0) 22.5 (876.5)— Employee profit share ***************************** — — — (10.6) — (10.6)Operating profit before exceptional items ************* 81.4 8.4 89.8 100.0 22.5 122.5Exceptional items ************************************** — — — — (102.5) (102.5)Operating profit/(loss) after exceptional items ********* 81.4 8.4 89.8 100.0 (80.0) 20.0Finance income/(expense), net *************************** 10.2 — 10.2 7.3 — 7.3Profit before taxation ******************************** 91.6 8.4 100.0 107.3 (80.0) 27.3Taxation ********************************************** (10.1) (1.0) (11.1) (14.4) 10.0 (4.4)Profit for the year************************************ 3 81.5 3 7.4 2 88.9 3 92.9 3 (70.0) 2 22.9AI, 20.4.2Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.For the year ended 31 December 2005, the approximately 38.4 million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 34.7 million of Fuel and oil costs and approximately33.7 million of Other (gains)/losses, net. Approximately 3(1.0) million is excluded from Taxation.For the year ended 31 December 2004, the approximately 322.5 million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 320.8 million of Fuel and oil costs and approximately31.7 million of Other (gains)/losses, net. Approximately 3(102.5) million is excluded from Exceptional items and approximately310.0 million is excluded from Taxation.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.23

Part IISummary3.3 Year Ended 31 December 2004 compared with Year Ended 31 December 2003 underIrish GAAPPR Ann I,20.4.2Year ended 31 December2004 2003(1 in millions)(audited)Selected Income Statement Data:Revenues******************************************************************** 0906.8 0888.3Operating expenses:— Cost of sales and other operating expenses ********************************** (799.9) (805.3)— Employee profit share ***************************************************** (10.6) (8.8)Operating profit before exceptional items ************************************* 96.3 74.2Exceptional items************************************************************** (102.5) —Operating profit/(loss) after exceptional items********************************* (6.2) 74.2Finance income/(expense), net*************************************************** 7.3 5.2Profit before taxation ******************************************************** 1.1 79.4Taxation********************************************************************** 0.1 (10.2)Profit for the year *********************************************************** 0 1.2 0 69.2As at 31 December2004 2003(1 in millions)(audited)Selected Balance Sheet Data:Fixed assets******************************************************************* 0568.1 0591.3Current assets **************************************************************** 859.5 724.9Total assets less current liabilities************************************************* 985.4 907.3Net assets ******************************************************************* 366.2 321.9Shareholders’ funds — equity interests **************************************** 366.2 321.9Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.4. CURRENT TRADING AND PROSPECTSPR Ann I,12.1, 12.2Aer Lingus’ historical financial information for the six months ended 30 June 2006 is included in Part XII(Historical Financial Information) of this Prospectus. Aer Lingus’ business is seasonal and historicallyAer Lingus’ revenues for July, August and September have been higher than in other months. Aer Lingus’performance for the six months to 30 June 2006 was in line with the same period in 2005. AlthoughAer Lingus’ revenues for July 2006 were higher than for July 2005, operating profit for July 2006 was lowerthan for the same period in 2005. This shortfall resulted primarily from an increase in fuel and oil costs.On 10 August 2006, there was a terrorism alert in the United Kingdom which led to additional securityrestrictions at UK airports. During the period between 10 August and 17 August 2006, Aer Lingus had tocancel a number of its flights between Dublin and London Heathrow due to the disruption at LondonHeathrow. In addition, since 10 August 2006, there has been some negative impact on Aer Lingus’ advancepassenger bookings for August, September and October 2006, although passenger bookings for Novemberand December 2006 are in line with the comparable period as at the same point in 2005.In light of the impact of the terrorism alert on Aer Lingus’ passenger bookings, since the middle of August2006, Aer Lingus has been actively managing its business to generate demand to mitigate this shortfall,using tactical pricing initiatives to stimulate passenger demand. Aer Lingus believes that it is well-positionedto continue to develop its business in line with its strategy.24

Part IISummaryThese forward-looking statements may be affected by the factors set out in Part III (Risk Factors) of thisProspectus.5. SIGNIFICANT CHANGEExcept as disclosed in paragraph 4 (Current Trading and Prospects) of this Part II, there has been nosignificant change in the Group’s financial or trading position since 30 June 2006, which was the end of thelast period for which audited financial information of the Group was published by Aer Lingus.6. WORKING CAPITALThe Company is of the opinion that, taking into consideration the net proceeds from the Offer to bereceived by the Company and the available bank and other facilities, the working capital available to theGroup is sufficient for the Group’s present requirements and, in particular, is sufficient for at least the next12 months from the date of this Prospectus.PR Ann III,3.17. CAPITALISATION AND INDEBTEDNESSAs at 30 June 2006, the Group’s capitalisation was 0368.9 million which was comprised of equity share PR Ann III,capital, share premium and the capital conversion reserve fund. As at 30 June 2006, the Group had a net 3.2financial surplus of 0420.8 million, represented by an excess of cash, cash equivalents and other depositsand available for sale financial assets over total debt.Further information about the capitalisation and indebtedness of the Group is set out in paragraph 10(Capitalisation and Indebtedness) of Part XV (Additional Information) of this Prospectus.8. DIVIDEND POLICYIt is the current intention of the Board not to pay any cash or share dividends on the Ordinary Shares.PR Ann I,20.79. RISK FACTORSAn investment in the Ordinary Shares is subject to a number of risks and prospective investors shouldconsider carefully all of the risks described in Part III (Risk Factors) of this Prospectus prior to making aninvestment decision. Aer Lingus’ business, financial condition or results of operations could be materiallyand adversely affected should any of these risks, certain of which are highlighted below, materialise:➤ Aer Lingus’ costs could increase as a result of increases in the price of aviation fuel or airport, transit andlanding fees, changes to legal or regulatory requirements (for example, any future application ofrestrictions in regard to greenhouse gas emissions and/or noise pollution), airline insurance becomingmore difficult or expensive to obtain, or the need to implement additional security procedures.➤ The airline industry is competitive and the competition Aer Lingus faces could increase as a result of overcapacityin the industry, restricted capacity at airports (particularly at Dublin airport, which is currentlyAer Lingus’ principal base airport) and in airspace, amendments to the existing Ireland/United Statesbilateral treaty or the adoption of an open skies regime by the European Union and the United States.➤ Aer Lingus’ profitability and future plans may be affected by political and economic uncertainty,epidemics/pandemics, seasonal fluctuations, terrorist incidents or the threat of such incidents, accidents,currency exchange rate and interest rate movements, the failure to finalise the proposed EU/US openskies agreement or to otherwise liberalise the restrictions in the existing Ireland/United States bilateral25

Part IISummarytreaty, or the lack of availability of the additional aircraft required for route expansion on commerciallyacceptable terms.➤ Aer Lingus relies on good employee relations and relationships with third parties (including service andfacility providers, aircraft manufacturers, and other airlines with which Aer Lingus has interline orcodeshare arrangements) to operate its business. Aer Lingus may be adversely affected if theserelationships deteriorate or are terminated or are not available on commercially acceptable terms.➤ There has been no prior public market for the Ordinary Shares and there can be no guarantee that anactive trading market will develop in the Ordinary Shares. The market price of the Offer Shares may bevolatile and cause the value of investors’ investment to decline. Existing shareholders may exercisesignificant influence over the Company following the Offer and/or their interests may differ from themajority of other shareholders.More detailed information about these and other risk factors that could affect Aer Lingus is set out in Part III(Risk Factors) of this Prospectus.10. THE OFFER10.1 Based on the Offer Assumptions, 208,444,574 of the Offer Shares will be New Ordinary Shares,which will be issued by the Company, and 72,663,949 will be Sale Shares, which are currently heldby, and will be sold by, the Selling Shareholder.PR Ann III,5.1.2, 7.2The Offer Price Range is 02.10 to 02.70.10.2 The Offer is being made by way of: (a) an offer to certain institutional investors outside of the UnitedStates; (b) a Rule 144A Private Placement to qualified institutional buyers in the United States; (c) theESOT Subscription; (d) the Intermediaries Offer; and (e) the Employee and APSS Participant Offer.No action has been or will be taken in any jurisdiction (other than Ireland and the United Kingdom)that would permit a public offer of Ordinary Shares, or the possession or distribution of thisProspectus or any other offering material in any country or jurisdiction where action for that purposeis required. Accordingly, the Ordinary Shares may not be offered or sold, directly or indirectly, andthis Prospectus may not be distributed or published, in or into or from any country or jurisdiction,except in compliance with all applicable rules and regulations of such country or jurisdiction.10.3 Members of the public in Ireland and the United Kingdom may apply for New Ordinary Shares PR Ann III,pursuant to the Intermediaries Offer. In addition to the conditions to the Offer described in 5.1.6paragraph 12 (Underwriting Agreement) of Part XIV (The Offer) of this Prospectus, the IntermediariesOffer is subject to a minimum application amount of 010,000 per application from investors inIreland and the United Kingdom. The Intermediaries Offer is being made to the public in Ireland andthe United Kingdom only. Applications received from persons in EEA Member States, other thanIreland or the United Kingdom, which are not capable of being accepted in a manner which wouldcomply with one of the public offer prospectus exemptions recognised in Article 3.2(a), 3.2(b) or3.2(c) of the Prospectus Directive, will be rejected. No New Ordinary Shares allocated under theIntermediaries Offer will be registered in the name of any person whose registered addressis outside Ireland, the United Kingdom or any other member state of the EU. More detailedinformation about the Intermediaries Offer is set out in paragraph 6 (The Intermediaries Offer) ofPart XIV (The Offer) of this Prospectus.10.4 Holders of New Ordinary Shares acquired in the Intermediaries Offer (excluding Intermediariesacquiring New Ordinary Shares for their own benefit) and/or the Employee and APSS ParticipantOffer will conditionally be allotted one Bonus Share for every 20 New Ordinary Shares subscribed forby them and, provided they hold those 20 New Ordinary Shares for a continuous period of one yearfrom the date of Admission, this one Bonus Share will be issued to them at the end of that one-year26

Part IISummaryperiod with no further payment required. Fractions of Bonus Shares will be rounded down to thenearest whole share when calculating individual entitlements. Further details of the Bonus ShareIncentive are set out in paragraph 6.2 (The Bonus Share Incentive) of Part XIV (The Offer) of thisProspectus.10.5 The terms and conditions of the Employee and APSS Participant Offer are the same as thoseapplicable to the Intermediaries Offer, except that: (1) the 010,000 minimum application amountdoes not apply; (2) no brokers’ commissions are chargeable; (3) in the event of oversubscription ofthe Offer, APSS Participants and Eligible Employees (in that order of priority) will not be scaled backbelow the higher of 020,000 per applicant or to the extent that the Company is required to issueNew Ordinary Shares pursuant to the APSS Allocation; and (4) applications by Eligible Employees andAPSS Participants must be made directly to the Company. Further details of the Employee and APSSParticipant Offer are set out in paragraph 7 (The Employee and APSS Participant Offer) of Part XIV(The Offer) of this Prospectus.10.6 The statutory pre-emption rights of the existing shareholders in the Company, including the ESOTand the APSS Participants, to subscribe for the New Ordinary Shares were disapplied at anextraordinary general meeting of the Company on 11 September 2006. At the same meeting, thePre-Admission Articles were amended so as to remove the ESOT Anti-Dilution Right and the APSSAnti-Dilution Right. Except with respect to the ESOT Subscription and the Employee and APSSParticipant Offer, there will be no pre-emption rights to subscribe for Offer Shares vested in theexisting shareholders of the Company.10.7 The ESOT has agreed to subscribe for Offer Shares (the ‘‘ESOT Subscription’’) with an aggregatevalue of up to 033 million at the Offer Price. Based on the Offer Assumptions, this would result inthe ESOT acquiring 13,750,000 Offer Shares (representing 2.78% of the Company’s issued sharecapital immediately following Admission) pursuant to the Offer. In addition, the Selling Shareholderhas agreed to grant to the ESOT an option (the ‘‘ESOT Option’’) to acquire that number of OrdinaryShares currently held by the Selling Shareholder in the Company (the ‘‘Option Shares’’) equal to thenumber of New Ordinary Shares as would be required to be issued to the ESOT so as to restore thepercentage shareholding of the ESOT in the issued share capital of the Company to the level it wasimmediately prior to Admission (having taken into account the effect of any dilution caused by thesubsequent issue of the Bonus Shares). The ESOT Option will be exercisable by the ESOT for a periodof five years commencing on the date of Admission. The number of Ordinary Shares under optionwill be reduced by the number of Ordinary Shares acquired by the ESOT as a result of any marketpurchases made by the ESOT. The Selling Shareholder has agreed to vote the Option Shares asdirected by the ESOT for the duration of the ESOT Option. Further details of the ESOT Subscriptionand the ESOT Option are set out in paragraph 22 (ESOT and ESPS) of Part VIII (Information on AerLingus), and in paragraph 10 (The ESOT Subscription) and paragraph 11 (The ESOT Option and theNew Profit Share Arrangement) of Part XIV (The Offer) of this Prospectus.10.8 In connection with the Offer, Aer Lingus has made a contractual commitment in the ESOT Deed ofFurther Covenant to establish a new employee profit share arrangement, which (provided the 0.5%Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation are implemented byAdmission) will be effective from 1 January 2006 (the ‘‘New Profit Share Arrangement’’). The NewProfit Share Arrangement is to be used primarily for the purchase of Ordinary Shares on or beforethe fifth anniversary of Admission, and to discharge expenses. The New Profit Share Arrangementwill terminate on the earlier of the fifth anniversary of Admission and the date the ESOT acquires thesame number of Ordinary Shares as is equal to the number of Ordinary Shares which can be acquiredunder the ESOT Option, either through exercise of the ESOT Option or market purchases or acombination of both. However, the New Profit Share Arrangement will continue to fund therepayment of all borrowings (capital and interest) used to fund such purchases on the exercise of theESOT Option where such purchases or exercises occur on or before the fifth anniversary ofAdmission. Further details of the ESOT Option and the New Profit Share Arrangement are set out inparagraph 11 (The ESOT Option and the New Profit Share Arrangement) of Part XIV (The Offer) ofthis Prospectus.27

Part IISummary10.9 The Company will receive proceeds only from the issue of the New Ordinary Shares. The Offer will befully underwritten by the Underwriters in accordance with the terms of the UnderwritingAgreement. Pursuant to the Underwriting Agreement, subject to certain limited exceptions, (1) theSelling Shareholder has agreed with the Joint Global Co-ordinators that for a period of 12 monthsfollowing the date of Admission the Selling Shareholder will not offer, sell or market, directly orindirectly, any Ordinary Shares or enter into any transaction (including a derivatives transaction)having a similar economic effect, and (2) the Company has agreed with the Joint GlobalCo-ordinators that for a period of nine months following the date of Admission the Company willnot, directly or indirectly, issue, sell, offer, contract to sell or otherwise dispose of or announce theoffering of any Ordinary Shares, or enter into any transaction (including a derivatives transaction)having a similar economic effect, in each case, without the prior written consent of the Joint GlobalCo-ordinators. Further information about the Underwriting Agreement and these agreements is setout in paragraph 12 (Underwriting Agreement) and paragraph 15 (Orderly Market Arrangements) ofPart XIV (The Offer) of this Prospectus.10.10 As at 8 September 2006, the latest practicable date prior to publication of this Prospectus, the ESOTheld 36,028,679 Ordinary Shares for the benefit of the Beneficiaries, which constituted 12.6% ofthe Company’s issued share capital as of that date. On 11 September 2006, the Aer Lingus ESOPTrustee Limited resolved that it would not appropriate to Beneficiaries or otherwise dispose of33,295,903 of these Ordinary Shares until 20 August 2007, and 623,172 of these Ordinary Sharesuntil 9 June 2007.All of the 6,624,549 Ordinary Shares which are held by Aer Lingus ESOP Trustee Limited for thebenefit of the APSS Participants will be available for distribution to the APSS Participants on or assoon as possible following Admission, and following such distribution these Ordinary Shares will becapable of being sold immediately by their owners.10.11 Based on the Offer Assumptions, the Company will, through the issue of the New Ordinary Shares,raise gross proceeds of 0500.3 million, and the Selling Shareholder will, through the sale of the SaleShares, raise gross proceeds of 0174.4 million. These figures may vary if the Offer Shares are sold ata price different to the mid-point of the Offer Price Range or if a greater or lesser portion of the NewOrdinary Shares or Sale Shares are issued or sold in the Offer than is assumed in the OfferAssumptions. The commissions, fees and expenses of the Offer payable by the Company out of thegross proceeds of the Offer to be received by the Company are expected to amount toapproximately 030 million.10.12 The Company intends to use the net proceeds of the Offer received by the Company, together withexisting and future available cash resources and future financings, to finance the expansion andreplacement of Aer Lingus’ short-haul and long-haul aircraft fleet, to meet the costs associated withestablishing new routes in a flexible and cost-effective manner and to make a one-off contribution in2006 of up to approximately 0104 million to the Supplemental Funds. Aer Lingus currentlyanticipates that these future financings will include bank financings and aircraft finance leasearrangements. If the proceeds of the Offer received by the Company are significantly less than0500.3 million, the amount to be invested in the expansion and replacement of Aer Lingus’ aircraftfleet may be reduced, which may affect Aer Lingus’ aircraft expansion and replacement plans.Further details on the use of the proceeds of the Offer are set out in paragraph 8 (Amount and Useof Proceeds) of Part XIV (The Offer) of this Prospectus.PR Ann III,3.410.13 The ISIN for the Ordinary Shares will be IE00B1CMPN86, the trading symbol for the Ordinary Shareson the Irish Stock Exchange will be EIL1, and on the London Stock Exchange will be AERL.PR Ann III,4.110.14 Admission is expected to take place and unconditional dealings in the Ordinary Shares are expectedto commence on the Irish Stock Exchange and on the London Stock Exchange at 8:00 am on2 October 2006. Dealings in the Ordinary Shares are expected to commence on a conditional basison the Irish Stock Exchange and the London Stock Exchange on 27 September 2006 and the earliestdate for settlement of such dealings will be 2 October 2006. All dealings in the Ordinary Sharesbefore the commencement of unconditional dealings will be of no effect if Admission doesnot take place and such dealings will be at the sole risk of the parties concerned. Thesetimes and dates may be changed.28

Part IISummary10.15 Since ALL’s entitlement to obtain or to continue to hold or enjoy the benefit of the licences, permits,consents and privileges that enable ALL to carry on business as an air carrier in Ireland and/orinternationally (‘‘ALL’s air carrier rights’’), can be adversely affected if too many of the OrdinaryShares are held by Non-Qualifying Nationals, the Directors are given certain powers under theArticles of Association to take action to ensure that shareholdings of Non-Qualifying Nationals in theCompany’s share capital are not of such a size or type which could jeopardise ALL’s air carrier rights.The Directors have the power to designate a maximum percentage of the Company’s share capitalwhich may be held by Non-Qualifying Nationals and have determined that this will initially be inexcess of 45% but less than 50%.Further information about the nationality-based restrictions on ownership of shares in the Companyset out in the Articles of Association is set out in paragraph 4.4 (Share Ownership Restrictions) ofPart XV (Additional Information) of this Prospectus.Further information about the Offer is set out in Part XIV (The Offer) of this Prospectus.11. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS11.1 Interests of Major Shareholders(a) Insofar as is known to the Company, as at 8 September 2006 (being the latest practicable date prior PR Ann I,to publication of this Prospectus), the Selling Shareholder held 243,610,052 Ordinary Shares in the 18.1Company (representing 85.10% of the Company’s issued share capital) and Aer Lingus ESOP TrusteeLimited held (in aggregate) 42,653,228 Ordinary Shares in the Company (representing 14.90% ofthe Company’s issued share capital).(b)(c)(d)(e)Immediately following Admission, on the basis of the Offer Assumptions and, and insofar as is PR Ann III,known to the Company, the Selling Shareholder will hold 170,946,103 Ordinary Shares in the 9.1Company (representing 34.55% of the Company’s issued share capital) and Aer Lingus ESOP TrusteeLimited will hold 49,778,679 Ordinary Shares in the Company (representing 10.06% of theCompany’s issued share capital) (assuming the Aer Lingus ESOP Trustee Limited does not hold anyOrdinary Shares on behalf of the APSS Participants immediately following Admission).Immediately following Admission on the basis of the Offer Assumptions, 12,779,137 OrdinaryShares held by the Selling Shareholder (representing 2.58% of the Company’s issued share capital)will be subject to an option in favour of Aer Lingus ESOP Trustee Limited and the voting rights overthose Ordinary Shares will be exercisable by Aer Lingus ESOP Trustee Limited. Further details of theESOT Option are set out in paragraph 10.7 of this Part II and in paragraph 11 (The ESOT Option andthe New Profit Share Arrangement) of Part XIV (The Offer) of this Prospectus.While the Selling Shareholder has the voting rights over shares representing in excess of 30% of theOrdinary Shares in the Company, he has confirmed that (i) he will exercise those rights so as toensure that the Group is capable at all times of carrying on its business independently of him and(ii) all transactions between him and/or the Minister for Transport and the Group are conducted atarm’s length and on a basis no less favourable to the Group than on a normal commercial basis.Nothing in this confirmation is, however, to prejudice the Ministers’ rights in relation to the disposalof London Heathrow slots, particulars of which are fully detailed in paragraph 5.2(p) (Disposal ofLondon Heathrow Slots) of Part XV (Additional Information) of this Prospectus.Board procedures will be put in place to monitor the above provisions, including regular monitoringat Board level in relation to transactions between the Selling Shareholder and/or the Minister forTransport and the Group, to include the question of whether it is appropriate for the Boardrepresentatives of the Minister for Transport to vote in relation to such transactions.29

Part IISummary11.2 Related Party TransactionsInformation about the related party transactions to which Aer Lingus is a party is set out in paragraph 13(Related Party Transactions) of Part XV (Additional Information) of this Prospectus.12. DOCUMENTS ON DISPLAYCopies of the following documents will be available for inspection during normal business hours on anyweekday (Saturdays and public holidays excepted) at the offices of Arthur Cox, Earlsfort Centre, EarlsfortTerrace, Dublin 2, Ireland and Arthur Cox, 29 Ludgate Hill, London EC4M 7JE, England, until Admission:➤ the Memorandum and Articles of Association of the Company;➤ the accountants’ reports on the Group’s historical financial information set out in Part XII (HistoricalFinancial Information) of this Prospectus;➤ the accountants’ report on the unaudited pro forma balance sheet on the Group set out in Part XIII(Unaudited Pro Forma Balance Sheet) of this Prospectus;➤ Irish Airlines (General Employees) Superannuation Scheme Actuarial Valuation as at 31 March 2005;➤ Irish Airline (Pilots) Superannuation Scheme Actuarial Valuation as at 31 March 2006;➤ the written consents referred to in paragraph 16 (Consents) of Part XV (Additional Information) of thisProspectus; and➤ this Prospectus.30

Part IIIRisk FactorsPotential investors should carefully consider the risks described below and other information inthis Prospectus before purchasing any Ordinary Shares. The value of Ordinary Shares may beadversely affected by general market conditions. Furthermore, there can be no assurance thatthe Ordinary Shares will trade on the Irish Stock Exchange or the London Stock Exchangesubsequent to the Offer at or above the price at which the Ordinary Shares are sold in the Offer.If any of the risks below actually occurs, Aer Lingus’ business, financial condition or results ofoperations could be materially adversely affected and the trading price of the Ordinary Sharescould decline. The headings for each risk factor set out in this Part III are not definitive andpotential investors should read the entirety of each risk factor.PR Ann I,4,PR Ann III,21. RISKS RELATING TO THE AIRLINE INDUSTRY1.1 The airline industry is exposed to aviation fuel price fluctuations. Increased costs and/orrestricted availability of aviation fuel may affect Aer Lingus’ business, financial conditionand results of operations.Aviation fuel has been, and is expected in the future to be, subject to significant price volatility andfluctuations in supply and demand. Aer Lingus’ fuel and oil costs are also subject to certain exchange raterisks as international prices for aviation fuel are denominated in US dollars. Although Aer Lingus has a policyof hedging a portion of its projected aviation fuel requirements, hedging contracts do not fully protect AerLingus from significant increases in the price of aviation fuel in the short-term or long-term, and may limitthe benefit that could be derived from significant decreases in the price of aviation fuel. While fuelsurcharges have been introduced on long-haul routes it may not be feasible to do this on the short-haulroutes, and it may not be feasible to continue to do this on long-haul routes. For the six months ended30 June 2006, fuel and oil costs represented Aer Lingus’ second largest operating expense. Substantial priceincreases, adverse changes in exchange rates or the unavailability of adequate supplies, including as a resultof prolonged hostilities in oil-producing regions, or the suspension of production by any significant oilproducer, could have a material adverse effect on Aer Lingus’ business, financial condition and results ofoperations as they would result in even greater costs which may not be recoverable from passengers. Theseevents could ultimately result in a curtailment of Aer Lingus’ scheduled services.1.2 The airline industry is competitive. If Aer Lingus does not compete effectively, itsbusiness, financial condition and results of operations may be adversely affected.The level of competition amongst airlines is high and fares have experienced substantial declines over time,both in nominal and real terms. The airline industry has been historically susceptible to fare discounting,partly due to the typical airline cost structure, where there are very low marginal costs in respect ofpassengers occupying otherwise vacant seats. Aer Lingus’ competitors may seek to protect or gain marketshare through fare-matching or price-discounting, by offering more attractive flight schedules or services,by introducing new routes, or by placing large orders for new aircraft and transferring excess capacity tomarkets and routes already served by Aer Lingus or which Aer Lingus is contemplating serving. Somecompetitors may also be able to offer lower fares than Aer Lingus as a consequence of, for example,providing passengers with fewer on-board services, having lower fixed and/or variable costs, or drawingupon sources of financing unavailable to Aer Lingus, such as government subsidies or intra-group financialsupport. Aer Lingus may be vulnerable to price-discounting by competitors because it is generally requiredto respond to competitors’ fares in order to maintain passenger traffic levels. If Aer Lingus’ competitorsengage in price-cutting or make other changes in their services in an attempt to increase their marketshares and Aer Lingus is not able to respond effectively to maintain its market share, Aer Lingus’ passengerrevenues could decline and, accordingly, its business, financial condition and results of operations could bematerially adversely affected.1.3 Over-capacity in the air travel industry can result in increased competition.A number of European low-cost carriers have placed large orders for new aircraft for delivery over the nextfew years. As a result, capacity among European low-cost carriers is expected to increase, even if some of31

Part IIIRisk Factorsthe new aircraft are expected to replace older aircraft. Competitors may respond to increased competitionresulting from over-capacity or from slower-than-expected market growth by, for example, lowering theirfares or transferring their excess capacity to markets and routes already served or contemplated to beserved by Aer Lingus. If Aer Lingus is not able to respond quickly enough to increased competition by eitherincreasing the size of its fleet or lowering its fares, Aer Lingus could lose market share which may have amaterial adverse effect on Aer Lingus’ business, financial condition and results of operations.1.4 Airlines have high fixed costs and low profit margins, which make them more vulnerableto relatively small changes in the numbers of passengers or in the pricing or traffic mix.The airline industry is characterised by high fixed costs and low profit margins. The revenues generated by aflight are variable and are directly related to the number of passengers carried and the fare structure of theflight. As a result, a relatively small change in the number of passengers carried by Aer Lingus or in thepricing or traffic mix obtainable by Aer Lingus could have a disproportionate effect on Aer Lingus’passenger revenues.1.5 Profitability in the airline industry can be cyclical and may be adversely affected byPR Ann I,political and economic uncertainty.9.2.3As an international airline, Aer Lingus is exposed to various risks beyond its control, such as instability offoreign economies and governments, hostilities, military conflicts or the threat thereof, and any perceivedreduction in the security of international air travel. The airline industry tends to experience severe adversefinancial results during general economic downturns or periods of international and political instability. As asubstantial portion of airline travel is a discretionary consumer expense, changes in economic conditions canreduce passenger traffic and have a substantial adverse effect on the airline industry generally. In suchdownturns, Aer Lingus may be required to take delivery of new aircraft it has agreed to purchase or leasewhether or not Aer Lingus requires the additional capacity provided by such aircraft, or may be unable todispose of unnecessary aircraft (whether leased or owned) on financially acceptable terms. Economicuncertainty in certain markets may also lead certain of Aer Lingus’ competitors to shift their capacity tomarkets and routes served by Aer Lingus, increasing competition in these markets. Any of the foregoingevents could cause a reduction in the demand for Aer Lingus’ services and pressure to lower its fares, whichcould result in material adverse effects on Aer Lingus’ business, financial condition and results ofoperations.1.6 Profitability in the airline industry is subject to seasonal fluctuations.Demand for Aer Lingus’ services fluctuates over the course of the year, and has historically been higher inthe summer season and lower in the winter season (except for the days around Christmas, the New Yearand Easter). As the majority of Aer Lingus’ profits are generated in the summer season and the days aroundChristmas, the New Year and Easter, lower demand for air travel, flight cancellations and other factors thatadversely affect aircraft Utilisation during these periods may have a disproportionately strong adverse effecton Aer Lingus’ business, financial condition and results of operations.1.7 Epidemics/pandemics can adversely affect the demand for air travel.An outbreak of a contagious disease, such as avian flu, Severe Acute Respiratory Syndrome or foot andmouth disease, which affects travel behaviour by reducing passenger traffic, either generally or to offereddestinations, could have a material adverse effect on Aer Lingus’ business, financial condition and results ofoperations.1.8 Terrorist incidents, or the threat of such incidents, could result in a reduction in airlinepassenger traffic.Hijacking or other terrorist incidents, or any major terrorist attack anywhere in the world, can significantlyharm public confidence in the airline industry, reduce passenger traffic or affect general political, economicor business conditions in ways that could result in increased costs and reduced passenger revenues. Thethreat of terrorist incidents may similarly adversely affect the airline industry. Most recently, on 10 August2006, there was a terrorism alert in the United Kingdom which led to additional security restrictions at UKairports and the cancellation of certain flights. If an actual or perceived threat of terrorism were to continuefor a prolonged period, it could have a material adverse effect on the business, financial condition andresults of operations of Aer Lingus.32

Part IIIRisk Factors1.9 The airline industry is highly regulated and airlines cannot always pass on to theirPR Ann I,customers the costs associated with regulation. Regulatory changes can have an adverse 9.2.3impact on airlines’ costs, flexibility, marketing strategy, business model and ability toexpand.The airline industry is highly regulated (as is discussed in greater detail in Part X (Regulation) of thisProspectus). Regulatory changes could have an adverse impact on Aer Lingus’ costs, flexibility, marketingstrategy, business model and ability to expand. It may not be feasible to pass regulatory and compliancecosts on to customers and regulatory charges may affect how Aer Lingus markets its services. Regulatoryauthorities may, for example, impose operating restrictions at airports served by Aer Lingus, such asrestrictions on the availability of slots, landing and take-off curfews, mandatory flight paths, runwayrestrictions, limits on the average number of daily departures and restrictions on maximum total duty timefor crew members. Changes to the regulatory environment in which Aer Lingus operates, or action byregulatory authorities may adversely affect Aer Lingus’ business, financial condition and results ofoperations. For example, Aer Lingus may be affected by changes to the European Commission slotallocation regulations, if, for example, such changes were to include a mechanism for random cancellationof slots, in which case some of the slots currently controlled by Aer Lingus might be lost.1.10 Airlines may be adversely affected by any future application of restrictions in regard tonoise pollution, greenhouse gas emissions and other environmental Laws andPR Ann I,Regulations.8.2Airlines can have their activities restricted on account of noise control regulations. Such regulations couldbecome more restrictive in the future, which may adversely affect Aer Lingus’ business, financial conditionand results of operations.Under the United Nations Framework Convention on Climate Change and the Kyoto Protocol, contractingstates entered into obligations to control and reduce the emission of greenhouse gases. In 2003, to complywith its obligations, the European Union established a scheme for greenhouse gas emission allowancetrading. Under this scheme as currently implemented, regulated companies may be allocated a certainnumber of allowances by the relevant regulatory authority and must surrender an amount equal to theiractual emissions each calendar year. There are fines for non-compliance. If a company does not expect tohave enough allowances to surrender, additional allowances may be purchased through trading markets oractual emissions may be reduced (e.g., by investment in new technology or limiting activities).While the airline industry is not currently subject to this scheme, the European Commission anticipatesproviding a legislative proposal by the end of 2006, which is likely to deal with emission limitations, atrading scheme and other complementary measures for the airline industry, the implementation of whichcould have an adverse effect on the business, financial condition and results of operations of most airlines,including Aer Lingus. As at the date of this Prospectus, it is not possible to predict what costs might arise forAer Lingus if it has to purchase greenhouse credits in an emissions trading market or what level of impactemission restrictions could have on Aer Lingus’ ability to expand in the future, or on its business, financialcondition and results of operations.The airline industry is also subject to environmental laws and regulations and is likely to be subject to morestringent environmental laws and regulations in the future. These environmental laws and regulations relateto, among other issues, the use and handling of hazardous materials, air emissions and environmentalcontamination clean-up. These requirements potentially could impose substantial ongoing compliance costsand operational restrictions on Aer Lingus. Aer Lingus expects to incur expenditure on an ongoing basis tocomply with such regulations. Compliance with these laws and regulations could increase Aer Lingus’expenses.1.11 Airlines may be adversely affected by restrictions at airports and in airspace.Congestion and air traffic control restrictions have been a problem in European airspace, where Aer Lingusprincipally operates. These restrictions may limit the ability of Aer Lingus to provide or increase services atcertain airports, including its most important base at Dublin airport, and may cause Aer Lingus to incuradditional costs. These restrictions may also limit Aer Lingus’ ability to add additional routes and/or flights to33

Part IIIRisk Factorsits existing schedule. Some of these restrictions could cause Aer Lingus to give up existing slots in keyairports if the slots are not used, whether for technical or commercial reasons. In addition, there is limitedavailable airspace for flights, especially in densely populated western Europe. An increase in air traffic couldresult in further restrictions on Aer Lingus’ current route network and could limit future growth in itsnetwork.1.12 An airline can suffer a catastrophic loss in the event that one of its aircraft is subject toan accident.Aer Lingus, like all airlines, is exposed to potential catastrophic losses in the event that one of its aircraft issubject to an accident or other catastrophe. This may involve not only the repair or replacement ofdamaged or lost aircraft and its consequent temporary or permanent loss from service, but also claims frominjured passengers and survivors of deceased passengers. There can be no assurance that the amount ofAer Lingus’ insurance coverage available in the event of such losses would be adequate to cover suchlosses, or that Aer Lingus would not be forced to bear substantial losses from such events, regardless of itsinsurance cover. Moreover, any aircraft accident or incident, even if fully insured, could create a publicperception that Aer Lingus is less safe or reliable than other airlines, which could cause passengers to loseconfidence in Aer Lingus and switch to other airlines or other means of transportation.1.13 Airline insurance may become too difficult or expensive to obtain which could exposeAer Lingus to substantial loss and may force it to cease operations.Aer Lingus carries insurance for public liability, passenger liability, property damage and all-risk coverage fordamage to Aer Lingus’ aircraft. In the aftermath of the terrorist attacks in New York and Washington DC on11 September 2001, airline insurers withdrew war-risk insurance. At the same time, insurers and re-insurersraised premiums for airline insurance in general. While there have been occasions where certaingovernments have been prepared to offer war-risk insurance when insurers have withdrawn cover inresponse to acts of terrorism or war, there can be no assurance that this will be repeated. More recently,airline insurers and re-insurers have published clauses which are intended to exclude or significantly curtailcoverage for certain risks involving so-called weapons of mass destruction. If insurers or re-insurers excludecoverage for these risks or such coverage is not available on commercially reasonable terms then, ifinsurance cover is not available from another source (for example, a government entity), Aer Lingus may notbe able to insure those risks and Aer Lingus would not be able to carry on its air transportation business andwould ultimately be forced to cease its operations.1.14 Increased requirements for security measures can disrupt business and adversely affectairlines.Aer Lingus believes that its operations are safe and secure but security measures have in the past, and havethe potential in the future, to disrupt its business on temporary or long-term grounds. There can be noassurance that any future security-related costs or complications would not disrupt Aer Lingus’ business oraffect passengers’ propensity to travel and, by reducing demand for Aer Lingus’ services, result in adverseeffects on Aer Lingus’ business.Most recently, on 10 August 2006, there was a terrorism alert in the United Kingdom which led toadditional security restrictions at UK airports and the cancellation of certain flights, including flightsoperated by Aer Lingus. If the resulting security measures were to continue for a prolonged period, it couldhave a material adverse effect on the business, financial condition and results of operations of Aer Lingus.1.15 Airport, airspace and landing fees and other costs outside Aer Lingus’ control mayincrease.Certain types of operating costs outside the control of airlines, including Aer Lingus, (for example, airport,airspace and landing fees) have increased significantly in recent years and there can be no assurance thatsuch costs will not continue to rise. Future events or developments could also result in heightened securityregulations for air traffic, which will increase costs further. If airfares become subject to VAT in the future,and it was not feasible for Aer Lingus to pass on this cost to all of its customers, this would increase AerLingus’ operating costs. If Aer Lingus is unable to pass on increases in fees, charges or other costs to itscustomers, or if passing on these fees, charges and other costs to customers in the fares it charges results in34

Part IIIRisk Factorsreduced passenger demand, the resulting increase in its operating costs could have a material adverse effecton its business, financial condition and results of operations.1.16 The elimination of current tax exemptions for aviation fuel would lead to a substantial PR Ann I,increase in Aer Lingus’ aviation fuel costs.9.2.3Over the past few years, there have been discussions at EU level and within EU Member States regardingthe existing tax exemptions for aviation fuel. While such exemptions are the subject of an internationaltreaty and are therefore not within the European Union’s control, there can be no assurance that thecurrent tax exemptions for aviation fuel will be maintained and any change to these exemptions could leadto a substantial increase in Aer Lingus’ aviation fuel costs which could have a material adverse effect on itsbusiness, financial condition and results of operations.2. RISKS RELATING TO AER LINGUS2.1 Initiatives by Aer Lingus to generate additional revenues, control costs, improvePR Ann I,productivity and reduce costs may not be adequate or successful.4In seeking to improve its financial performance, Aer Lingus must continue to take steps to generateadditional revenues and to control costs and improve productivity. Although there are a number ofinitiatives underway to address cost and revenue challenges, a number of these initiatives involve significantchanges to the business, which Aer Lingus may be unable to implement because of regulatory measures orpressure from its competitors, such as fare discounting or other measures to shift market share away fromAer Lingus, or for other reasons. The adequacy and ultimate success of these initiatives to generateadditional revenues, control costs and improve productivity are not known at this time and cannot beassured. Moreover, whether these initiatives will be adequate or successful depends in large part on factorsbeyond Aer Lingus’ control, notably the overall industry environment, including passenger demand, Yieldand industry capacity growth, and aviation fuel prices as well as regulatory measures. Failure to successfullyimplement these initiatives may adversely affect Aer Lingus’ revenues, costs and efficiency and, as aconsequence, may adversely affect Aer Lingus’ business. There can be no assurance that they will besuccessfully implemented or achieve the planned results.2.2 Dublin airport is currently Aer Lingus’ principal base airport, on which it is dependent.Aer Lingus’ expansion plans are heavily dependent on the development of Dublin airportand the availability of sufficient additional capacity there.As Aer Lingus’ current principal base is at Dublin airport, any matters adversely affecting Dublin airport, orany increase in competition on Aer Lingus’ routes from Dublin airport (for example, if Aer Lingus’competitors expand aggressively there), may adversely affect Aer Lingus’ business, financial condition andresults of operations.Aer Lingus’ future expansion plans are heavily dependent on the availability of sufficient additional capacityat Dublin airport. The Dublin Airport Authority’s capital investment plan includes the development of asecond terminal, a new runway and additional pier facilities. Although Aer Lingus expects to benefit fromthe opening of any new terminal and the increased capacity offered, this project, which the Dublin AirportAuthority expects to be completed in 2009, poses significant risks, costs and challenges, includingcompletion risk and risks associated with starting operations in a new facility. If the capital investment planfor Dublin airport were not implemented as is currently anticipated or is delayed Aer Lingus could incurgreater unexpected costs and its expansion plans and overall growth strategy could be significantlycurtailed.35

Part IIIRisk Factors2.3 Maintenance of existing air traffic rights is important to Aer Lingus’ business. Failure tofinalise the proposed EU/US open skies agreement or otherwise to liberalise therestrictions in the existing Ireland/United States bilateral treaty may adversely affect AerLingus’ expansion plans.Route rights and landing rights are often determined by the country of destination. If permissions arewithdrawn, Aer Lingus’ operations would be impaired and its business and results could be adverselyaffected.Aer Lingus intends to grow its long-haul business, in particular to the United States. This is dependent onfinalisation of the proposed EU/US open skies agreement or the liberalisation of the restrictions in theexisting Ireland/United States bilateral treaty. If Irish/US liberalisation or EU/US open skies do not occur orare delayed significantly, Aer Lingus’ expansion plans, business, financial condition and results of operationsmay be adversely affected.Further details about the status of negotiations on the EU/US open skies agreement are set out inparagraph 1.3 (EU/US Open Skies and Transitional Arrangements) of Part X (Regulation) of this Prospectus.2.4 Amendments to the existing Ireland/United States bilateral treaty or the adoption of anopen skies regime by the European Union and the United States may lead to increasedcompetition on Aer Lingus’ route network, particularly between Ireland and theUnited States.Implementation of an open skies regime between the European Union and the United States would permitEU and US airlines to fly between every destination in the European Union and every destination in theUnited States without restrictions. The implementation of an EU/US open skies regime or amendments tothe existing Ireland/United States bilateral treaty (including removing the requirement for every operatorthat, for every direct flight from Dublin airport to or from the United States, there must be a flight fromShannon airport to or from the United States), will increase the opportunity for and the attractiveness toother EU or US airlines to offer services between Ireland and the United States, and EU airlines to enter theIrish-US market, which may result in increased competition for Aer Lingus. Significant competitive factorsamong airlines include fare levels and frequency of services and schedules. Any one or more competitivefactors such as these could adversely affect Aer Lingus’ business, financial condition and results ofoperations.Further details about the status of negotiations on the EU/US open skies agreement are set out inparagraph 1.3 (EU/US Open Skies and Transitional Arrangements) of Part X (Regulation) of this Prospectus.2.5 Aer Lingus has not entered into firm commitments to purchase or lease additionalaircraft sufficient to meet its medium-term plans for fleet expansion. It may not bepossible to acquire additional aircraft required either at suitable times or oncommercially acceptable terms.Aer Lingus’ strategy for continued growth is dependent on its ability to acquire additional aircraft and toreplace older aircraft. This is consistent with its strategy to maintain a young fleet and will require AerLingus to place additional orders for new aircraft in the future and/or enter into additional agreements tolease further aircraft. Aer Lingus has not ordered or entered into agreements to lease a majority of theaircraft required to implement its expansion plans. If Aer Lingus’ existing aircraft cannot be replaced or if itsexisting fleet cannot be expanded in accordance with its plans because suitable aircraft are unavailable foracquisition or its suppliers are unable to meet their contractual obligations or to meet agreed deliveryschedules, Aer Lingus may not be able to accommodate demand from additional passengers and it willhave to meet increased maintenance costs as the age of its fleet increases. In addition, Aer Lingus willrequire significant additional funds for new aircraft and there can be no assurance that when this strategy isbeing implemented, suitable financing arrangements will be available on commercially acceptable terms. Iffuture growth in passenger numbers and revenues does not keep up with the planned expansion of AerLingus’ fleet, Aer Lingus could face difficulties in meeting its aircraft payment obligations. The impact ofone or more of these events could have a material adverse effect on Aer Lingus’ business, financialcondition and operating results.36

Part IIIRisk Factors2.6 When disposing of aircraft, Aer Lingus is and will continue to be exposed to the secondhandaircraft market.Aer Lingus intends to replace older aircraft as part of its strategy to maintain a young fleet. Aer Lingus willtherefore be exposed to fluctuations in the second-hand aircraft market. This exposure may lead to adverseeffects on Aer Lingus’ business, financial condition and results of operations, including if second-handprices drop or if Aer Lingus faces delays in making sales of second-hand aircraft, and especially to the extentthat Aer Lingus wishes or needs to rely on the sales proceeds of replaced aircraft to discharge debts relatingto the financing of such aircraft.2.7 Aer Lingus is dependent on a limited number of key markets, including Ireland.For the six months ended 30 June 2006, approximately 54% of Aer Lingus’ total passenger revenues weregenerated in Ireland. The Irish economy has been one of the faster growing economies in the EuropeanUnion over the past 10 years (Source: Economic and Social Research Institute: Irish Economy Overview).However, if economic growth in Ireland slows or general economic conditions deteriorate, it could have amaterial adverse effect on Aer Lingus’ business, financial condition and results of operations. Aer Linguscould also suffer if growth slowed in the United States or elsewhere in Europe, as Aer Lingus’ businessstrategy for continued growth is dependent on its expanding into more markets in the United States andEurope.2.8 Costs will be incurred in developing new routes, and new routes proposed by Aer Lingusmay not be profitable.Aer Lingus’ growth strategy involves increasing the frequency of flights to destinations it currently servesand expanding the number of destinations served. When an airline begins service on a new route, itspassenger load factors initially tend to be lower than those on its established routes, and its advertising andother promotional costs tend to be higher. As a result, the establishment of new routes may require asubstantial amount of cash and usually generates initial losses. Customers may make less use of new routesor additional capacity on existing routes than Aer Lingus may have expected. New routes may alsoexperience more competition than current ones, or competition may otherwise exceed Aer Lingus’expectations. If Aer Lingus is unable to manage or implement its planned growth adequately by correctlyassessing demand, capacity and fares, or if Aer Lingus is forced to terminate any unprofitable routes, thiscould significantly increase costs, which could have a material adverse effect on Aer Lingus’ business,financial condition and results of operations.2.9 Aer Lingus is dependent on positive recognition of its brand by customers andpotential customers.As part of its overall business model, Aer Lingus relies on positive brand recognition, among other factors,to attract customers. Any deterioration in brand image or consumer confidence in its brand might adverselyaffect Aer Lingus’ ability to market its services and attract and retain customers.2.10 A default in the payment of basic pension benefits under the Company’s Irish PensionSchemes could possibly result in a future claim against the Company.The position of the Company is (and has been since the inception of the Company’s Irish Pension Schemes)that the liability of the Company to contribute to the Irish Pension Schemes is fixed at their currentcontribution rates. This is reflected in the documentation governing the Company’s Irish Pension Schemes.Accordingly, as the Company has determined that it has neither a legal nor a constructive obligation toincrease its rate of contributions to the Irish Pension Schemes, and as there are no provisions under Irish lawthat could result in an obligation to change the contribution rates without the consent of the Company, theIrish Pension Schemes are accounted for on the basis that they are, for the purposes of InternationalFinancial Reporting Standards IAS 19 (Employee Benefits), defined contribution schemes.On the basis that the latest actuarial valuation report, made as at 31 March 2005 by Mercer HumanResources Consulting, demonstrated an aggregate surplus as at 31 March 2005 in the Main Scheme as awhole, on an ongoing basis, before taking into account the costs of future discretionary indexation, ofapproximately 0140 million and a surplus in the Pilots’ Scheme, on the same basis, as at 31 March 2006, ofapproximately 0252 million, the Board believes that the risk of the Irish Pension Schemes defaulting in thepayment of basic benefits is low.37

Part IIIRisk FactorsIf, notwithstanding the above, there were to be a default on the payment of basic benefits under either IrishPension Scheme at some future date and if a claim were made by current and/or former employees againstthe Company in respect of any shortfall in the payment of basic benefits resulting from such default, theposition of the Company, supported by firm legal advice, is that any such claim, if made, would be unlikelyto succeed. The Board is aware of alternative legal advice provided to the Ministers to the effect that, in theevent of a default in the payment of basic benefits under the Main Scheme, a reasonable case for a claimcould be made by a significant number of current and/or former employees against the Company,independently of the Main Scheme, in respect of the shortfall arising from such default. The Company andits legal advisors, having reviewed such legal advice, remain of the view that any claim, if made, would, asstated above, be unlikely to succeed.If, contrary to the legal advice which the Company has received, a court were to make a determination, incircumstances where either Irish Pension Scheme was in default in the payment of basic benefits, that theCompany had a liability to make payment of the shortfall in basic benefits, or if there were a change in lawrelating to the funding of the Irish Pension Schemes or if the Irish Pension Schemes were required to betreated as defined benefit schemes rather than as defined contribution schemes for the purpose of IAS 19,then the Company might be required to make payments additional to its existing obligations to contributeto the Irish Pension Schemes and/or to make increased accounting provisions. This could adversely affectthe value of the Ordinary Shares and/or have a material adverse effect on its financial condition or results ofoperations. Further information regarding Aer Lingus’ pension schemes is set out in paragraph 7 (Pensions)of Part XV (Additional Information) of this Prospectus.2.11 Aer Lingus is dependent on third-party service and facility providers.Aer Lingus’ business is dependent on the provision of services by third parties, such as airport authorities, airtraffic controllers, security personnel, towing and push-back vehicles, passenger transporters, caterers,check-in staff, baggage-handling, aviation fuel service providers and contractors that perform aircraft andengine maintenance. If any of these third-party services or facilities is restricted, temporarily halted (forexample, as a result of technical problems or strikes), ceases permanently or is not available on commerciallyacceptable terms, the disruption to Aer Lingus’ operations could have a material adverse effect on AerLingus’ business, financial condition and results of operations. Similarly, the efficiency, timeliness andquality of contract performance by third-party providers are largely beyond Aer Lingus’ direct control and, ifthese are inadequate, Aer Lingus’ reputation and performance could be adversely affected.Aer Lingus will need to enter into airport service agreements in any new markets it enters, and there can beno assurance that it will be able to obtain the necessary facilities and services at competitive rates andrequired quality levels. If Aer Lingus is not able to do so, it may not be able to operate profitably in thosemarkets.2.12 Aer Lingus’ use of an aircraft fleet supplied by a single manufacturer and aircraft enginessupplied by a single manufacturer for each of its long and short-haul routes makes itvulnerable to any problems associated with the aircraft or its manufacturers.An important element of Aer Lingus’ strategy is to operate a single type fleet on each of its short-haul andlong-haul networks. Aer Lingus’ current dependence on Airbus aircraft and on engines supplied by GE forits long-haul fleet and on Airbus aircraft and on engines supplied by CFM for its short-haul fleet makes itparticularly vulnerable to any problems that might be associated with the aircraft, their engines or theirrespective manufacturers.Aer Lingus’ business, financial condition and results of operations would be adversely affected if a designdefect or mechanical problem with the Airbus A320 and/or A330 aircraft families or any other type ofaircraft which Aer Lingus subsequently acquires were discovered, causing its aircraft to be grounded whileany such defect or problem was corrected, or attempts were made to correct it. Similarly, if a manufacturerexperiences financial difficulties, goes out of business or defaults on its obligations to Aer Lingus, this couldhave adverse consequences for Aer Lingus.38

Part IIIRisk FactorsAer Lingus’ business, financial condition and results of operations could also be adversely affected if itscustomers were to avoid flying with Aer Lingus due to an adverse public perception of the Airbus aircraftcaused by safety concerns or other problems, whether real or perceived.2.13 Aer Lingus relies on maintaining high aircraft Utilisation rates to maximise its revenues,which makes Aer Lingus vulnerable to delays.One of the key elements of Aer Lingus’ business strategy is to maintain a high daily aircraft Utilisation rate,which is achieved in part by operating with quick turnaround times at airports so that Aer Lingus can flymore hours on average in a day. Aer Lingus’ rate of aircraft Utilisation is dependent on a number ofassumptions, including assumptions relating to air traffic and airport congestion, weather conditions anddelays by third-party service providers relating to matters such as security procedures, fuelling, groundhandling, availability of spare parts and the absence of technical problems. If any of these assumptionsturns out to be incorrect, it could materially affect Aer Lingus’ business, financial conditions and results ofoperations.2.14 Failure to maintain codesharing and interline arrangements with American Airlines andBritish Airways following Aer Lingus’ exit from the oneworld alliance may adverselyaffect Aer Lingus’ business.On 30 May 2006, Aer Lingus announced its intention to exit the oneworld alliance. As a result, AmericanAirlines and British Airways have the right to terminate their existing bilateral co-operation arrangementswith Aer Lingus. If Aer Lingus’ codesharing and interline arrangements with British Airways and AmericanAirlines, which provide connectivity outside Aer Lingus’ own network and which accounted for 5.4% of AerLingus’ passenger services revenues in the year ended 31 December 2005, are not maintained following itsexit from the oneworld alliance with effect from April 2007, this could lead to a significant reduction in AerLingus’ passenger revenues and/or may alter the competitive environment in which Aer Lingus operates onits transatlantic and other routes and this may adversely affect Aer Lingus’ business and results ofoperations.2.15 Currency exchange rate and interest rate movements may adversely affect AerPR Ann I,Lingus’ profitability.9.2.3Aer Lingus’ business, financial condition and results of operations may be adversely affected by fluctuationsin exchange rates, particularly between the euro, the US dollar and Sterling. The majority (approximately65% in 2005) of Aer Lingus’ revenues are generated in euro, while many of Aer Lingus’ significant fixedand variable costs (approximately 58% in 2005) are in other currencies, particularly US dollars. Thesepayments are related mainly to aircraft purchase and lease payments, maintenance reserves, enginemaintenance and aviation fuel purchases. An adverse change in the US dollar and/or Sterling exchange rateagainst the euro could have a material adverse effect on Aer Lingus’ business, financial condition andresults of operations. Although Aer Lingus engages in currency hedging transactions to reduce its exposureto currency fluctuations, there can be no assurance that these currency hedging transactions will besufficient to protect against adverse exchange rate movements.In addition, Aer Lingus is subject to the effects of interest rate fluctuations on its floating rate financingarrangements. Currently Aer Lingus has a net cash position and the floating rate debt is matched againstdeposits so there is no exposure to interest rate fluctuations. In the future, as funding is put in place for AerLingus’ expansion, Aer Lingus may move to a net debt position and increases in the interest rates of AerLingus’ floating rate obligations may have a material adverse effect on Aer Lingus’ business, financialcondition and results of operations. There can be no assurance that Aer Lingus’ interest rate hedgingprogramme will be sufficient to protect against adverse interest rate movements.2.16 Rapid growth may be difficult to manage.As Aer Lingus’ business grows, it may face shortages in specialist staff, and its financial, control andplanning systems may have to grow in complexity. Any shortfall in resources might require Aer Lingus tomake significant additional expenditures, including on systems and personnel. Failure to secure andintroduce and integrate successfully the new systems, facilities and personnel could result in a materialadverse effect on Aer Lingus’ business, financial condition and results of operations.39

Part IIIRisk Factors2.17 Good employee relations are vital to Aer Lingus and the success of its business.As at 30 June 2006, approximately 92% of Aer Lingus’ employees were members of trade unions. AerLingus currently consults with its employees and the relevant trade unions regarding pay, work practicesand conditions of employment. It also adheres to the principles of the social partnership established inIreland. While industrial relations issues in Aer Lingus have previously been resolved through negotiation orthe existing industrial relations fora of the Labour Relations Commission and the Labour Court, there can beno assurance that in the future this will always be the case and that Aer Lingus’ employees might not resortto industrial action or that Aer Lingus will be able to continue to negotiate wages and salaries and termsand conditions of employment on terms that support its ability to offer its services at competitive prices.In the event that Aer Lingus becomes subject to industrial action or other labour conflicts, this may result inincreased costs and could have a material adverse effect on its business, financial condition or operatingresults.2.18 Aer Lingus is dependent on key personnel.Aer Lingus’ success depends significantly on the continued service of its key senior executives. The loss ofthe services of any of these key personnel without adequate replacement could have a material adverseeffect on Aer Lingus’ business, financial condition and results of operations. Aer Lingus has not taken outkey-man insurance for any of its employees because the Board believes that the cost of obtaining key maninsurance is disproportionate to its usefulness.2.19 Aer Lingus’ ability to attract and retain sufficient qualified employees is important forAer Lingus’ business.If Aer Lingus is unable to attract and retain sufficient qualified employees at reasonable costs, its businesscould be harmed. There can be no assurance that Aer Lingus will be able to retain employees in keypositions or recruit a sufficient number of new employees with appropriate technical qualifications tocompensate for the loss of employees or to accommodate its future growth.2.20 Good health and safety practices are essential for the maintenance of AerLingus’ business.Aer Lingus’ employees carry out difficult and specialist tasks 24 hours a day, 365 days a year. There are strictcontrols on the permissible flying hours of Aer Lingus’ pilots and cabin crews. A major incident affecting thehealth and safety of staff would disrupt the operations of Aer Lingus. There is a risk of fines or litigation if ahealth and safety incident occurs. Furthermore a major incident would disrupt operations and could have anegative effect on customer confidence and Aer Lingus’ business, financial condition and results ofoperations.2.21 Aer Lingus is dependent on the internet as its primary distribution channel.Aer Lingus pursues a low-cost distribution strategy. In 2005, approximately 71% of Aer Lingus’ totalpassenger ticket sales was generated from direct bookings by customers through aerlingus.com. Anycompromise of internet security could deter people from using the internet or from using it to conducttransactions that involve transmitting confidential information. Aer Lingus may incur significant costs toprotect against the threat of security breaches, particularly if the perceived risks of terrorist activity and/orthird party misappropriation of information lead to government-imposed increases in internet security andgreater restrictions on ticket purchases made remotely. Costs may also be incurred in alleviating problemscaused by security breaches. In addition, alleviating these problems may cause interruptions, delays orcessations in service to Aer Lingus’ customers, which could cause them to stop using Aer Lingus’ service orto make claims against Aer Lingus.Aer Lingus retains personal information received from customers and has put in place security measures toprotect against unauthorised access to such information. Personal information held both offline and onlineis highly sensitive and, if third parties were to access such information without the customer’s prior consentor if third parties were to misappropriate that information, customers could possibly bring legal claimsagainst Aer Lingus.40

Part IIIRisk Factors2.22 Aer Lingus is dependent on uninterrupted operation of technology.Aer Lingus’ ability to manage ticket sales, receive and process reservations, check-in passengers, manage itstraffic network, perform flight operations and engage in other critical business tasks is dependent on theefficient and uninterrupted operation of its computer and communication systems, on the key personnelwho maintain these systems and on the systems used by third parties in the course of their co-operationwith Aer Lingus. Any disruption to computer and communication systems or indeed a failure of the back-upsystems used by Aer Lingus or third parties, particularly if the disruptions persist, could significantly impairAer Lingus’ ability to conduct its business efficiently and could have a material adverse effect on Aer Lingus’business, financial condition and results of operations.2.23 Authorities in Europe and the United States have initiated an investigation into possibleillegal price fixing in the air cargo transportation industry, which may adversely affectAer Lingus’ results of operations and financial condition.Authorities in Europe and the United States have initiated an investigation into possible illegal price fixing inthe air cargo transportation industry. In connection with this investigation, Aer Lingus, in addition to over12 other airlines, received a grand jury subpoena from the US Department of Justice. Although Aer Lingushas been advised by the US Department of Justice that it is not a target of the investigation into possibleillegal price fixing in the air cargo transportation industry, there can be no assurance that it will not becomea target of such investigation or any future US or European government investigation or action related toillegal price fixing in its air cargo business. When an entity becomes a target of a government investigation,the entity may face criminal enforcement action. The resulting fines that would be imposed if the entitywere found to be guilty of any violation may be substantial. Entities that are found guilty of violating USantitrust laws may also face civil claims arising in the United States for substantial monetary damages. If thiswere to happen to Aer Lingus, it could divert the efforts and attention of management, result in increasedlegal costs, have a negative impact on Aer Lingus’ share price and have a material adverse effect on AerLingus’ business, financial condition and results of operations. Further information on the US Department ofJustice investigation is set out in paragraph 9.4 (US Department of Justice Investigation into the CargoIndustry) of Part XV (Additional Information) of this Prospectus.2.24 Obligations under environmental indemnities may adversely affect Aer Lingus’profitability.In making divestments, Aer Lingus has given certain indemnities in relation to potential environmentalliabilities. Aer Lingus is not aware of any outstanding material claims arising under these indemnities, otherthan as set out in paragraph 9.2B (Ongoing Issues relating to Disposal of TEAM Aer Lingus) of Part XV(Additional Information) of this Prospectus. However, there can be no assurance that claims will not bemade under these indemnities in the future, and in such event, the potential liabilities could be significant.Further information on Aer Lingus divestments is set out in paragraph 3 (History and Development) ofPart VIII (Information on Aer Lingus) and paragraph 8.8 (Disposal Agreements) of Part XV (AdditionalInformation) of this Prospectus.2.25 Actual results may differ materially from forward-looking/forecast statements.Statements in this Prospectus with respect to Aer Lingus’ plans, strategies, projected financial figures andbeliefs, as well as other statements that are not historical facts are forward-looking statements involvingrisks and uncertainties. The important factors that could cause actual results to differ materially from suchstatements include, but are not limited to:➤ aviation fuel prices;➤ seasonal fluctuations in passenger travel;➤ developments in government regulations and labour relations;➤ the future development of Dublin airport;PR Ann I,9.2.3➤ overall passenger traffic;➤ the high level of fixed costs in its operations;41

Part IIIRisk Factors➤ foreign currency fluctuations, in particular between the euro and the US dollar;➤ changes in aircraft acquisition, leasing and other operating expenses;PR Ann I,9.2.3➤ the airline ticket pricing environment in a period of increased competition;➤ delay in finalising or failure to finalise the proposed EU/US open skies agreement or the proposedliberalisation of the existing Ireland/United States bilateral treaty;➤ the ability to finance its planned acquisition of aircraft and to discharge any resulting debt serviceobligations;➤ higher landing fees;➤ the availability of additional slots or landing rights at existing airports and the availability of new airportsfor expansion;➤ increases in restrictions at airports and in airspace;➤ interest rate fluctuations;➤ extraordinary events, such as accidents, terrorist threats or attacks, natural disasters and outbreaks ofcontagious diseases;➤ changes in regulations affecting the airline industry;➤ the rates of taxes payable; and➤ general economic conditions in Ireland, the European Union and the United States.PR Ann I,9.2.3PR Ann I,9.2.3PR Ann I,9.2.33. RISKS RELATING TO THE OFFERPR Ann III,23.1 Prior to the commencement of conditional dealings, there has been no market in theOrdinary Shares and an active trading market may not develop following the Offer. AerLingus’ share price could be volatile and could decline following the Offer.PR Ann I,The Ordinary Shares have not been publicly traded prior to the Offer. The Offer Price will be determined commencement 9.2.3following a ‘‘bookbuilding’’ process. There can no assurance that the Offer Price will match the price atwhich the Ordinary Shares will trade on the market subsequent to the Offer, or that a liquid trading marketin Ordinary Shares will develop.Any of the following factors could affect the market price of Ordinary Shares:➤ general market, political and economic conditions;➤ changes in earnings estimates and recommendations by financial analysts relating to Aer Lingus;➤ changes in market valuations of listed stocks in general and other airline stocks in particular;➤ changes in government policy, legislation or regulation;➤ inclusion or removal of the Ordinary Shares from major market indices;➤ general operational and business risks;42

Part IIIRisk Factors➤ the expiration of share sale restrictions that have been put in place with the Company and the SellingShareholder in connection with the Offer; and➤ the sale of Ordinary Shares by certain shareholders following the issue of the Bonus Shares pursuant tothe Bonus Share Incentive.In addition, many of the risks described elsewhere in this Part III could materially and adversely affect themarket price of the Offer Shares.The equity markets have experienced price and volume volatility that has affected the share prices of manycompanies. Share prices for many companies have experienced wide fluctuations that have often beenunrelated to the operating performance of these companies. Fluctuations such as these may adverselyaffect the market price of the Offer Shares.3.2 The Company’s current policy is not to pay dividends.It is the current intention of the Board not to pay any cash or share dividends on the Ordinary Shares.3.3 If the 0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendationcannot be implemented by Admission, the arrangements with the ESOT and Aer Lingus’employees described in this Prospectus will be subject to variation.Aer Lingus has proposed to the trade unions representing its employees that it will capitalise a 0.5%element of the pay increase recommended by the Labour Court to fund the acquisition of Ordinary Sharesby the ESOT (the ‘‘0.5% Capitalisation Recommendation’’). This proposal is subject to the approval of AerLingus’ unionised employees (other than its pilots) in the Employee Ballot. The Employee Ballot is expectedto be completed on 15 September 2006.In addition, a recommendation is contained in the recent report of the Aer Lingus Pilots Pay Tribunal, whichprovides that ‘‘in the event that the rest of the workforce, other than pilots, accept the proposal to forego0.5% of the Labour Court Recommendation to facilitate the purchase of shares, the pilot body shouldlikewise forego 0.5% of this pay award for such purpose from the same date’’ (the ‘‘Pilots Pay TribunalRecommendation’’). This recommendation is subject to the approval of the pilots and is the subject ofongoing discussions with the pilots.If both the 0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation cannot beimplemented by Admission, the ESOT will only be able to subscribe for Offer Shares having a value at theOffer Price of approximately 021 million in the ESOT Subscription, there will be no New Profit ShareArrangement for the ESOT and the ESOT Option will not come into effect. Further details of the EmployeeBallot are set out in paragraph 20 (Employees) of Part VIII (Information on Aer Lingus) of this Prospectus.Further details of the ESOT Subscription are set out in paragraph 10 (The ESOT Subscription) of Part XIV(The Offer) of this Prospectus. Further details of the New Profit Share Arrangement are set out inparagraph 20.3 (The New Profit Share Arrangement) of Part VIII (Information on Aer Lingus) of thisProspectus. Further details of the ESOT Option are set out in paragraph 22 (ESOT and ESPS) of Part VIII(Information on Aer Lingus), paragraph 11 (The ESOT Option and the New Profit Share Arrangement) ofPart XIV (The Offer) and paragraphs 8.9 (The ESOT Option) and 8.10 (The ESOT Deed of Further Covenant)of Part XV (Additional Information) of this Prospectus.3.4 Existing shareholders may exercise significant influence over the Company following theOffer and/or their interests may differ from the majority of other shareholders.Immediately following Admission and based on the Offer Assumptions, the Selling Shareholder and theESOT will control 31.97% and 12.65%, respectively, of the voting rights in the Company. Based on theOffer Assumptions, the ESOT will control 2.58% of those voting rights pursuant to the ESOT Option. Inaddition, the Selling Shareholder and the ES0T will have the right to appoint directors to the Board asdescribed in paragraph 5.2(a) of Part XV (Additional Information) of this Prospectus. Further details aboutthe ESOT Option are set out in paragraph 11 (The ESOT Option and the New Profit Share Arrangement) ofPart XIV (The Offer) of this Prospectus. As a result, these shareholders, through the exercise of theirindividual voting rights and positions, could be able to influence the outcome of matters submitted for aPR Ann I,20.743

Part IIIRisk Factorsvote by shareholders (including the election of directors and the approval of significant transactions). Inexercising their voting rights, these shareholders may be motivated by interests that are different from themajority of other shareholders. Examples of such matters include the facts that the Irish Government is thesole shareholder of Dublin Airport Authority, the airport management company for Dublin airport, which isAer Lingus’ principal base, and that the Irish Government regards Aer Lingus’ continued access to its slots atLondon Heathrow airport as being of strategic interest to Ireland.3.5 Restrictions on non-Irish/non-EU ownership of shares may affect the marketability of theCompany’s shares and/or the Company’s ability to attract foreign investors.In order to maintain its traffic rights in the European Union, Aer Lingus must be substantially owned andeffectively controlled by EU nationals. In addition, in order to maintain its traffic rights under bilateraltreaties with non-EU countries, Aer Lingus must be substantially owned and effectively controlled by Irishnationals. The Company has adopted terms in its Articles of Association that permit it to maintain therequired shareholder composition necessary to secure the continuation of its air traffic rights. This mayaffect the marketability of the Ordinary Shares.PR Ann I,9.2.3The nationality restrictions on holding Ordinary Shares are discussed in greater detail in paragraph 4.4(Share Ownership Restrictions) of Part XV (Additional Information) of this Prospectus.3.6 Future sales of shares by the Selling Shareholder and/or the ESOT may depress the share PR Ann I,price.9.2.3In connection with the Offer, the Company and the Selling Shareholder have agreed not to issue, sell orundertake similar transactions relating to the Ordinary Shares for periods of nine and 12 months,respectively, after Admission without the prior written consent of the Joint Global Co-ordinators. On11 September 2006, Aer Lingus ESOP Trustee Limited resolved that it would not appropriate to Beneficiariesor otherwise dispose of 33,295,903 of these Ordinary Shares until 20 August 2007, and 623,172 of theseOrdinary Shares until 9 June 2007, in either case, without the consent of the Joint Global Co-ordinators.There can be no assurance that these parties will not effect transactions after the expiry of these restrictionswhich could have an adverse impact on the market price of the Ordinary Shares.3.7 Irish law governs the rights of holders of Ordinary Shares and these rights may differfrom the rights of shareholders in other jurisdictions.The Company is incorporated under the laws of Ireland. The rights of holders of Ordinary Shares aregoverned by Irish law, including the Companies Acts and by the Articles of Association and certain laws ofthe European Union. These rights differ in certain respects from the rights of shareholders in typical UScorporations. In particular, Irish law significantly limits the circumstances under which shareholders in Irishcompanies may bring derivative actions. In addition, Irish law does not afford appraisal rights to dissentingshareholders in the form typically available to shareholders of a US corporation.3.8 The Company may be treated as a passive foreign investment company (‘‘PFIC’’) forUS federal income tax purposes, which could result in adverse US federal income taxconsequences for US investors.In general, a non-US corporation will be considered a PFIC for any taxable year in which (1) 75% or more ofits gross income consists of passive income or (2) 50% or more of the average quarterly value of its assetsconsists of assets that produce, or are held for the production of, passive income. The Company has asignificant amount of cash and other assets on its consolidated balance sheet that are or may be consideredpassive assets for PFIC purposes, which is expected to continue to be the case in future years. In addition,the market value of the Company’s assets may be determined in large part by the market price of theOrdinary Shares, which is likely to fluctuate (possibly considerably) over time. As a result, the Company maybe a PFIC for the current taxable year or any future taxable year. If the Company were treated as a PFIC forany taxable year during which a US investor held Ordinary Shares, certain adverse US federal income taxconsequences could apply to the US investor. Further information about the PFIC rules is set out inparagraph 15.3(c) (Passive Foreign Investment Company Rules) of Part XV (Additional Information) of thisProspectus.44

Part IVDirectors, Company Secretary, Registered Office and AdvisersDIRECTORSJohn SharmanDermot MannionGreg O’SullivanIvor FitzpatrickSean FitzPatrickDanuta GrayFrancis HackettMichael JohnsAnne MillsThomas MoranChris WallCOMPANY SECRETARYLaurence GourleyREGISTERED OFFICEDublin AirportCo DublinIrelandSELLING SHAREHOLDERThe Minister for FinanceDepartment of FinanceUpper Merrion StreetDublin 2IrelandJOINT GLOBAL CO-ORDINATORSAIB Capital Markets plc(incorporating AIB Corporate Finance Limited andGoodbody Stockbrokers)BankcentreBallsbridgeDublin 4IrelandSPONSORS(Chairman)(Chief Executive)(Finance Director)(Non-executive Director)(Non-executive Director)(Non-executive Director)(Non-executive Director)(Non-executive Director)(Non-executive Director)(Non-executive Director)(Non-executive Director)UBS Limited1/2 Finsbury AvenueLondon EC2M 2PPUnited KingdomAIB Corporate Finance LimitedUBS Limited85 Pembroke Road 1/2 Finsbury AvenueBallsbridgeLondon EC2M 2PPDublin 4United KingdomIrelandBROKERS TO THE OFFERGoodbody StockbrokersBallsbridge ParkBallsbridgeDublin 4IrelandUBS Limited1/2 Finsbury AvenueLondon EC2M 2PPUnited KingdomPR Ann III,10.1PR Ann I,1.1PR Ann III,1.1PR Ann I,5.1.4PR Ann III,7.1PR Ann III,5.4.145

Part IVDirectors, Company Secretary, Registered Office and AdvisersUNDERWRITERSAllied Irish Banks p.l.c.BankcentreBallsbridgeDublin 4IrelandUBS Limited1/2 Finsbury AvenueLondon EC2M 2PPUnited KingdomGoldman Sachs InternationalMerrion Stockbrokers LimitedPeterborough CourtThe Sweepstakes133 Fleet Street BallsbridgeLondon EC4A 2BB Dublin 4United KingdomIrelandPR Ann III,5.4.3FINANCIAL ADVISERS TO THE MINISTER FOR FINANCEAIB Capital Markets plc(incorporating AIB Corporate Finance Limited andGoodbody Stockbrokers)BankcentreBallsbridgeDublin 4IrelandUBS Limited1/2 Finsbury AvenueLondon EC2M 2PPUnited KingdomFINANCIAL ADVISERS TO AER LINGUS GROUP PLCGoldman Sachs InternationalMerrion Stockbrokers LimitedPeterborough CourtThe Sweepstakes133 Fleet Street BallsbridgeLondon EC4A 2BB Dublin 4United KingdomIrelandLEGAL ADVISERSTo the Company as to Irish law To the Company as to English law To the Company as to US lawArthur Cox Norton Rose Davis Polk & WardwellEarlsfort Centre Kempson House 99 Gresham StreetEarlsfort Terrace Camomile Street London EC2V 7NGDublin 2 London EC3A 7AN United KingdomIrelandUnited KingdomTo the Selling Shareholder as to Irish lawTo the Selling Shareholder as to English and US lawWilliam FryFreshfields Bruckhaus DeringerFitzwilton House65 Fleet StreetWilton PlaceLondon EC4Y 1HSDublin 2United KingdomIrelandTo the Joint Global Co-ordinators, Sponsors and To the Joint Global Co-ordinators, Sponsors andUnderwriters as to Irish lawUnderwriters as to English and US lawMcCann FitzGeraldShearman & Sterling (London) LLP2 Harbourmaster Place Broadgate WestIFSC9 Appold StreetDublin 1London EC2A 2APIrelandUnited Kingdom46

Part IVDirectors, Company Secretary, Registered Office and AdvisersAUDITORS AND REPORTING ACCOUNTANTSPricewaterhouseCoopersChartered AccountantsGeorge’s QuayDublin 2IrelandPR Ann I,2.1, 23.1REGISTRARS AND RECEIVING AGENTCapita Corporate Registrars PlcUnit 5Manor Street Business ParkManor StreetDublin 7IrelandCapita Corporate Registrars Plcc/o Capita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent BR3 4TUUnited KingdomPR Ann III,5.4.247

Part VExpected Timetable of Principal Events (1)EventTime and/or dateLatest time for completed Client Confirmation Forms in respect of thePR Ann III,Intermediaries Offer to be received by the Intermediaries ****************** 10:00 am 21 September 2006 5.1.3Latest time for completed Employee and APSS Participant Application Forms inrespect of the Employee and APSS Participant Offer to be received by theCompany *********************************************************** 10:00 am 21 September 2006Latest time for completed Intermediaries Application Forms in respect of theIntermediaries Offer to be received by the Receiving Agent **************** 5:00 pm 25 September 2006Latest time for bids to be received by the Joint Global Co-ordinators in respectof the Institutional Offer ********************************************** 5:00 pm 26 September 2006Publication of Offer Price Announcement containing the Offer Price and thePR Ann III,number of Offer Shares (2) ********************************************* 27 September 2006 5.2.4Conditional dealings commence (3) **************************************** 27 September 2006Advertisement of the Offer Price ***************************************** 28 September 2006Admission to listing and expected date of commencement of unconditionalPR Ann III,dealings on the Irish Stock Exchange and the London Stock Exchange******* 2 October 2006 4.7CREST accounts credited (4) ********************************************** 2 October 2006 PR Ann III,Qualifying Date for Bonus Share Incentive (5) ******************************** 6:00 pm 1 October 20075.1.8(1) All references are to Dublin time. Each of the times and dates in the above are indicative only and may be subject to change.(2) The Offer Price Announcement will not be sent to persons who receive this Prospectus but will be announced to a RegulatoryInformation Service, in the Irish Times, the Irish Independent and the Financial Times and will be available on Aer Lingus’ website.(3) If Admission does not occur, all conditional dealings will be of no effect and any such dealings will be at the sole risk of theparties concerned.(4) Temporary documents of title will not be issued.(5) The Bonus Share Incentive is only available to persons who acquire New Ordinary Shares in the Intermediaries Offer and theEmployee and APSS Participant Offer.48

Part VIOffer StatisticsOffer Price Range per Ordinary Share (1) ****************************************** 02.10 to 02.70Total number of New Ordinary Shares in Offer (2)(3) *********************************208.4 millionTotal number of Sale Shares in Offer (2)(3) ***************************************** 72.7 million PR Ann III,Ordinary Shares in issue following Admission (2)(3) **********************************494.7 million 7.2Number of Over-allotment Shares (4) *********************************************42.2 millionMarket capitalisation of the Company following the Offer (5)(3) ***********************01,187.3 million LR3.2.7(1)Estimated net proceeds receivable by the Company (6) ******************************0470.3 million PR Ann III,8.1The information in this table is based on the Offer Assumptions.(1) The Offer Price may be set within, above or below the Offer Price Range. It is expected that the Offer Price Announcementcontaining the Offer Price and the number of Offer Shares will be published on or about 27 September 2006. Further detailsabout the Offer are set out in Part XIV (The Offer) of this Prospectus.(2) Assumes that the Offer Price is set at the mid-point of the Offer Price Range being 32.40.(3) Assumes no exercise of the Over-allotment Arrangements.(4) The number of Over-allotment Shares to be subject to the Over-allotment Arrangements is expected to be, in aggregate, equalto 15% of the total number of Offer Shares.(5) Assumes that the Offer Price is set at the mid-point of the Offer Price Range being 32.40. The market capitalisation of theCompany at any given time will depend on the market price of the Ordinary Shares at that time. There can be no assurance thatthe market price of an Ordinary Share will be equal to or exceed the Offer Price.(6) The estimated net proceeds receivable by the Company is based on the Offer Assumptions and is stated after the deduction ofunderwriting commissions and other estimated fees and expenses payable by the Company and incurred in connection with theOffer of approximately 330 million.49

Part VIISelected Summary Financial InformationThe following is a summary of the Group’s historical financial information for the periods indicated. Thehistorical financial information discussed below has been extracted without material adjustment fromPart XII (Historical Financial Information) of this Prospectus and is based on the historical financialinformation of the Group as at and for the six months ended 30 June 2006 and 2005 and as at and for theyears ended 31 December 2005, 2004 and 2003. As the information set out below is only a summary,potential investors are advised to read the whole of this Prospectus and not to rely on only the key orsummarised information set out below.The historical financial information as at and for the six months ended 30 June 2006 and 2005 and as atand for the years ended 31 December 2005 and 2004 has been prepared on the basis of IFRS. The historicalfinancial information as at and for the years ended 31 December 2004 and 2003 has been prepared inaccordance with Irish GAAP.PR Ann I,3.2PR Ann I,3.1Further information regarding the presentation of financial information is set out in ‘‘Presentation ofFinancial and Operating Information’’ on page 5 of this Prospectus. This financial information should beread in conjunction with Part IX (Operating and Financial Review) and Part XII (Historical FinancialInformation) of this Prospectus. Further information regarding the differences between Irish GAAP and IFRSis set out in paragraph 12 (Reconciliation between Irish GAAP and IFRS) of Part IX (Operating and FinancialReview) of this Prospectus.PR Ann I,1. Six Months Ended 30 June 2006 compared with Six Months Ended 30 June 200520.4.2Six Months ended30 June2006 2005(1 in millions)(audited)Selected Income Statement Data:Revenues******************************************************************************************** 0 508.3 0 451.6Operating expenses:— Cost of sales and other operating expenses ********************************************************** (516.5) (405.6)— Employee profit share ***************************************************************************** — —Operating profit before exceptional items ************************************************************* (8.2) 46.0Exceptional items************************************************************************************** 4.3 —Operating profit/(loss) after exceptional items ********************************************************* (3.9) 46.0Finance income/(expense), net*************************************************************************** 9.2 5.0Profit before taxation ******************************************************************************** 5.3 51.0Taxation********************************************************************************************** (1.7) (5.4)Profit for the period ********************************************************************************* 0 3.6 0 45.6As at 30 June2006 2005(1 in millions)(audited)Selected Balance Sheet Data:AssetsNon-current assetsProperty, plant and equipment ************************************************************************** 0521.9 0502.3Available for sale financial assets ************************************************************************ 146.8 142.7Other deposits **************************************************************************************** 160.7 195.2Current assetsDerivative financial instruments ************************************************************************** 26.5 47.4Trade and other receivables ***************************************************************************** 81.2 86.2Cash, cash equivalents and other deposits **************************************************************** 634.7 536.5Total assets****************************************************************************************** 1,582.1 1,534.7PR Ann I,20.4.250

Part VIISelected Summary Financial InformationAs at 30 June2006 2005(1 in millions)(audited)EquityShare capital****************************************************************************************** 357.8 357.8Retained earnings ************************************************************************************* 35.1 (11.9)Total equity ***************************************************************************************** 404.7 365.4LiabilitiesNon-current liabilitiesBorrowings ******************************************************************************************* 461.5 441.8Deferred tax liabilities ********************************************************************************** 16.1 14.4Provisions for other liabilities and charges ***************************************************************** 75.9 91.0Current liabilitiesTrade and other payables ******************************************************************************* 495.1 470.8Borrowings ******************************************************************************************* 59.9 53.9Provisions for other liabilities and charges ***************************************************************** 52.3 92.1Total liabilities *************************************************************************************** 1,177.4 1,169.3Total equity and liabilities **************************************************************************** 01,582.1 01,534.7Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.The following table sets out Aer Lingus’ income statement items for the six months ended 30 June 2006 and 2005 under IFRSand also on an Underlying basis (excluding the impact of fair value gains and losses on commercial hedging arrangementsand exceptional items), together with the amounts excluded from Underlying data:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(2 in millions) (2 in millions)(audited)(audited)Revenues***************************************** 3 508.3 3 — 2 508.3 3 451.6 3 — 2 451.6Operating expenses: ******************************** (497.8) (18.7) (516.5) (441.1) 35.5 (405.6)— Cost of sales and other operating expenses ******** (497.8) (18.7) (516.5) (441.1) 35.5 (405.6)— Employee profit share ************************** — — — — — —Operating profit/(loss) before exceptional items **** 10.5 (18.7) (8.2) 10.5 35.5 46.0Exceptional items *********************************** — 4.3 4.3 — — —Operating profit/(loss) after exceptional items ****** 10.5 (14.4) (3.9) 10.5 35.5 46.0Finance income/(expense), net ************************ 9.2 — 9.2 5.0 — 5.0Profit before taxation ***************************** 19.7 (14.4) 5.3 15.5 35.5 51.0Taxation******************************************* (3.5) 1.8 (1.7) (1.0) (4.4) (5.4)Profit for the period ****************************** 3 16.2 3(12.6) 2 3.6 3 14.5 3 31.1 2 45.6PR Ann I,20.4.2Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six months ended 30June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedging arrangementshad qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition and Measurement)and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set out under the heading‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured under IFRS on commercialhedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreign currency and interestrate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlying data is provided for theOperating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludes Exceptional items andthe taxation impact of amounts excluded from Underlying data.For the six months ended 30 June 2006, the approximately 3(18.7) million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 3(15.0) million of Fuel and oil costs andapproximately 3(3.7) million of Other (gains)/losses, net. Approximately 34.3 million is excluded from Exceptional items and31.8 million is excluded from Taxation.For the six months ended 30 June 2005, the approximately 335.5 million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 332.5 million of Fuel and oil costs and approximately33.0 million of Other (gains)/losses, net. Approximately 3(4.4) million is excluded from Taxation.51

Part VIISelected Summary Financial InformationUnderlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlyingdata is not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation ofIFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical FinancialInformation) of Part IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financialinformation for the six months ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.2. Year Ended 31 December 2005 compared with Year Ended 31 December 2004 under IFRSYear ended 31December2005 2004(1 in millions)(audited)PR Ann I,20.4.2Selected Income Statement Data:Revenues ************************************************************************* 01,002.6 01,009.6Operating expenses:— Cost of sales and other operating expenses **************************************** (912.8) (876.5)— Employee profit share *********************************************************** — (10.6)Operating profit before exceptional items******************************************* 89.8 122.5Exceptional items******************************************************************** — (102.5)Operating profit/(loss) after exceptional items*************************************** 89.8 20.0Finance income/(expense), net ******************************************************** 10.2 7.3Profit before taxation ************************************************************** 100.0 27.3Taxation *************************************************************************** (11.1) (4.4)Profit for the year ***************************************************************** 0 88.9 0 22.9As at 31 December2005 2004(1 in millions)(audited)PR Ann I,20.4.2Selected Balance Sheet Data:AssetsNon-current assetsProperty, plant and equipment ******************************************************** 0 508.0 0 492.1Available for sale financial assets ****************************************************** 160.0 117.4Other deposits ********************************************************************** 191.9 235.6Current assetsDerivative financial instruments******************************************************** 37.6 17.6Trade and other receivables *********************************************************** 60.2 52.9Cash, cash equivalents and other deposits ********************************************** 529.0 461.1Total assets************************************************************************ 1,494.0 1,389.7EquityShare capital *********************************************************************** 357.8 357.8Retained earnings ******************************************************************* 31.5 (57.4)Total equity *********************************************************************** 403.4 318.1LiabilitiesNon-current liabilitiesBorrowings ************************************************************************* 501.7 387.8Deferred tax liabilities **************************************************************** 16.3 8.3Provisions for other liabilities and charges*********************************************** 80.1 86.2Current liabilitiesTrade and other payables************************************************************* 364.5 349.7Borrowings ************************************************************************* 54.1 94.1Provisions for other liabilities and charges*********************************************** 65.2 118.7Total liabilities********************************************************************* 1,090.6 1,071.6Total equity and liabilities ********************************************************** 1,494.0 1,389.7Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.52

Part VIISelected Summary Financial InformationThe following table sets out changes in Aer Lingus’ income statement items for the years ended 31 December 2005 and 2004under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses on commercial hedgingarrangements and exceptional items), together with the amounts excluded from Underlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(2 in millions) (2 in millions)(audited)(audited)Revenues *********************************** 31,002.6 3 — 21,002.6 31,009.6 3 — 21,009.6Operating expenses:— Cost of sales and other operating expenses ** (921.2) 8.4 (912.8) (899.0) 22.5 (876.5)— Employee profit share ******************** — — — (10.6) — (10.6)Operating profit before exceptional items **** 81.4 8.4 89.8 100.0 22.5 122.5Exceptional items ***************************** — — — — (102.5) (102.5)Operating profit/(loss) after exceptional items 81.4 8.4 89.8 100.0 (80.0) 20.0Finance income/(expense), net ****************** 10.2 — 10.2 7.3 — 7.3Profit before taxation *********************** 91.6 8.4 100.0 107.3 (80.0) 27.3Taxation************************************* (10.1) (1.0) (11.1) (14.4) 10.0 (4.4)Profit for the year ************************** 3 81.5 3 7.4 2 88.9 3 92.9 3 (70.0) 2 22.9PR Ann I,20.4.2Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39.Underlying data is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlyingdata also excludes Exceptional items and the taxation impact of amounts excluded from Underlying data.For the year ended 31 December 2005, the approximately 38.4 million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 34.7 million of Fuel and oil costs andapproximately 33.7 million of Other (gains)/losses, net. Approximately 3(1.0) million is excluded from Taxation.For the year ended 31 December 2004, the approximately 322.5 million excluded from Operating expenses (Cost of sales andother operating expenses) on an Underlying basis comprised approximately 320.8 million of Fuel and oil costs andapproximately 31.7 million of Other (gains)/losses, net. Approximately 3(102.5) million is excluded from Exceptional items andapproximately 310.0 million is excluded from Taxation.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlyingdata is not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation ofIFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical FinancialInformation) of Part IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financialinformation for the years ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.53

Part VIISelected Summary Financial Information3. Year Ended 31 December 2004 compared with Year Ended 31 December 2003 underIrish GAAPYear endedPR Ann I,31 December20.4.22004 2003(1 in millions)(audited)Selected Income Statement Data:Revenues ********************************************************************** 0 906.8 0 888.3Operating expenses:— Cost of sales and other operating expenses ************************************* (799.9) (805.3)— Employee profit share ******************************************************** (10.6) (8.8)Operating profit before exceptional items**************************************** 96.3 74.2Exceptional items***************************************************************** (102.5) —Operating profit/(loss) after exceptional items************************************ (6.2) 74.2Finance income/(expense), net****************************************************** 7.3 5.2Profit before taxation *********************************************************** 1.1 79.4Taxation ************************************************************************ 0.1 (10.2)Profit for the year ************************************************************** 0 1.2 0 69.2As at 31 December2004 2003(1 in millions)(audited)Selected Balance Sheet Data:AssetsFixed assetsTangible assets ******************************************************************* 0 568.1 0 591.3Current assetsDebtors ************************************************************************* 52.0 67.4Cash, short-term deposits and liquid resources— Free cash ********************************************************************* 559.5 384.8— Restricted cash **************************************************************** 247.2 271.4Creditors (amounts due within one year) ******************************************** (442.1) (408.9)Total assets less current liabilities ************************************************ 985.4 907.3Creditors (amounts due after more than one year) ************************************ (400.2) (383.5)Provisions for liabilities and charges ************************************************* (219.0) (201.9)Net assets ********************************************************************** 366.2 321.9Capital and reservesCalled-up share capital ************************************************************ 357.8 319.7Shareholders’ funds — equity interests ******************************************* 0 366.2 0 321.9Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.54

Part VIIIInformation on Aer LingusExcept as otherwise disclosed in this Prospectus, the financial information in this Part VIII has been extractedwithout material adjustment from Part XII (Historical Financial Information) of this Prospectus and is basedon the audited consolidated financial statements of the Group as at and for the six months ended30 June 2006 and 2005 and as at and for the years ended 31 December 2005, 2004 and 2003.1. BUSINESS OVERVIEWAer Lingus is a low-cost, low-fares Irish airline primarily providing passenger transportation services. For thesix months ended 30 June 2006, Aer Lingus operated a single economy class service on its short-haulnetwork, including a maximum of ten routes to the United Kingdom and 56 routes to Continental Europe,and a two-class service on its long-haul network, including a maximum of nine routes to the United Statesand one route to the United Arab Emirates. Aer Lingus also provides cargo transportation services on itspassenger aircraft, primarily on its long-haul routes, as well as a range of ancillary services to its passengers.Beginning in October 2001, Aer Lingus implemented a restructuring plan and significantly changed itsbusiness model in order to meet the challenges presented by the terrorist attacks on the United States in2001, the general global economic downturn and the increasing number of low cost airlines. The measuresimplemented as part of this plan in 2001 and the significant operational changes introduced since 2001returned Aer Lingus to profitability and transformed its operations, repositioning Aer Lingus as a low-cost,low-fares airline. Aer Lingus’ low-cost, low-fares model is centred around maintaining low Unit Cost,offering one-way fares, maintaining effective fleet Utilisation and developing the Aer Lingus brand. AerLingus’ principal distribution channel is its website, aerlingus.com. In 2005, approximately 71% of AerLingus’ total passenger ticket sales was generated from direct bookings by customers throughaerlingus.com.Aer Lingus operates a fleet of 35 aircraft (33 out of Ireland and two out of London Heathrow), with flightsto and from Dublin, Cork and Shannon airports. Aer Lingus’ short-haul operations use a single fleet of sixAirbus A321s and 22 Airbus A320s with an average age of approximately three years and its long-hauloperations use a single fleet of seven Airbus A330s with an average age of approximately nine years.In addition to passenger transportation services, Aer Lingus provides cargo transportation services on someof its scheduled passenger routes, including to the United States, the Middle East, Germany and, to a lesserextent, the Netherlands. Aer Lingus also provides limited mail transportation services to the UnitedKingdom. Aer Lingus transports cargo in the bellyhold of its passenger aircraft and does not operate anydedicated cargo aircraft. In addition to providing its own cargo handling services at Dublin and Shannonairports, Aer Lingus provides third-party cargo handling services to Singapore Airlines, SAS and Lufthansa.Aer Lingus also generates revenues from the sale of products and services that are ancillary to its corepassenger operations, including in-flight sales of merchandise (including duty-free sales on flights outsidethe European Union), as well as in-flight sales of beverages and hot and cold meals on short-haul routes aswell as alcoholic beverages on long-haul routes, commissions from sales of car rentals, hotelaccommodation and travel insurance through aerlingus.com, excess baggage charges and fees forpassenger upgrades, access to airport lounges, commissions from online currency conversion andadvertising in Aer Lingus’ in-flight magazine.PR Ann I,6.1.155

Part VIIIInformation on Aer LingusThe following table sets out an overview of Aer Lingus’ revenue items for the six months ended 30June 2006 and 2005 under IFRS on an absolute basis and as a percentage of total revenues,together with the percentage change in those items:Six Months ended 30 JunePR Ann I,2006 20056.2,PercentPercent 20.4.2of Total Percent of TotalRevenues Change Revenues(1 in millions, except %)(audited, except %) (1)Passenger revenues *************************** 0451.6 88.9% 10.9% 0407.1 90.2%— Long-haul ******************************** 138.6 27.3 4.2 133.0 29.5— Short-haul ******************************** 313.0 61.6 14.2 274.1 60.7Cargo revenues ****************************** 24.2 4.7 18.0 20.5 4.5Ancillary revenues **************************** 29.9 5.9 41.0 21.2 4.7Other revenues ****************************** 2.6 0.5 (7.1) 2.8 0.6Total revenues ****************************** 0508.3 100% 12.6% 0451.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus, except for components of Passengerrevenues which are extracted from management accounts.(1) All data in this table is audited, except for percentage calculations and the components of Passenger revenues which areunaudited.The following table sets out an overview of Aer Lingus’ revenue items for years ended 31 December2005 and 2004 under IFRS on an absolute basis and as a percentage of total revenues, together withthe percentage change in those items:Year ended 31 DecemberPR Ann I,2005 20046.2,Percent ofPercent of 20.4.2Total Percent TotalRevenues Change Revenues(1 in millions, except %)(audited, except %) (1)Passenger revenues ************************ 0 908.6 90.6% (0.2)% 0 910.8 90.2%— Long-haul****************************** 306.5 30.6 (4.2) 320.1 31.7— Short-haul ***************************** 601.9 60.0 3.4 582.1 57.7— Other (charter)************************** 0.2 — (97.7) 8.6 0.8Cargo revenues**************************** 41.5 4.1 (17.3) 50.2 5.0Ancillary revenues************************** 48.2 4.8 41.8 34.0 3.4Other revenues **************************** 4.3 0.4 (70.6) 14.6 1.4Total revenues *************************** 01,002.6 100% (0.7)% 01,009.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus, except for components of Passengerrevenues which are extracted from management accounts.(1) All data in this table is audited, except for percentage calculations and the components of Passenger revenues which areunaudited.56

Part VIIIInformation on Aer LingusThe following table sets out an overview of Aer Lingus’ revenue items for years ended 31 December2004 and 2003 under Irish GAAP on an absolute basis and as a percentage of total revenues,together with the percentage change in those items:Year ended 31 DecemberPR Ann I,2004 20036.2,Percent ofPercent of 20.4.2Total Percent TotalRevenues Change Revenues(1 in millions, except %)(unaudited) (1)Passenger revenues *************************** 0799.0 88.1% 2.5% 0779.8 87.8%— Long-haul ******************************** 295.3 32.5 7.2 275.5 31.0— Short-haul******************************** 460.6 50.8 0.9 456.3 51.4— Other************************************ 43.1 4.8 (10.2) 48.0 5.4Cargo revenues ****************************** 50.2 5.6 (4.2) 52.4 5.9Ancillary revenues **************************** 23.9 2.6 359.6 5.2 0.6Other revenues ****************************** 33.7 3.7 (33.8) 50.9 5.7Total revenues ****************************** 0906.8 100% 2.1% 0888.3 100%Source: Management accounts.(1) All data in this table is unaudited, except for total revenues which are audited.The following table sets out an overview of Aer Lingus’ revenue items for the six months ended30 June 2006 and 2005 under IFRS on a geographic basis (by journey destination point) and as apercentage of total revenues, together with the percentage change in those items:Six months ended 30 JunePR Ann I,2006 20056.2Percent ofPercent ofTotal Percent TotalRevenues Change Revenues(1 in millions, except %)(audited, except %)Europe *********************************** 0313.6 61.7% 14.0% 0275.0 60.9%Rest of world ***************************** 149.0 29.3 3.5 143.9 31.9Ancillary and other unallocated revenue******* 45.7 9.0 39.8 32.7 7.2Total revenues *************************** 0508.3 100% 12.6% 0451.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.57

Part VIIIInformation on Aer LingusThe following table sets out an overview of Aer Lingus’ revenue items for 2005 and 2004 under IFRSon a geographic basis (by journey destination point) and as a percentage of total revenues, togetherwith the percentage change in those items:PR Ann I,6.2Year ended 31 December2005 2004Percent ofPercent ofTotal Percent TotalRevenues Change Revenues(1 in millions, except %)(audited, except %)PR Ann I,20.4.2Europe *********************************** 0 603.5 60.2% 2.7% 0 587.7 58.2%Rest of world ***************************** 328.2 32.7 (5.8) 348.3 34.5Ancillary and other unallocated revenue******* 70.9 7.1 (3.7) 73.6 7.3Total revenues *************************** 01,002.6 100% (0.7)% 01,009.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.Further information regarding Aer Lingus’ financial condition and results of operations is set out in Part IX(Operating and Financial Review) and Part XII (Historical Financial Information) of this Prospectus.58

Part VIIIInformation on Aer LingusThe following table sets out certain unaudited scheduled passenger operating data for Aer Lingus for thesix months ended 30 June 2006 and 2005 and the years ended 31 December 2005, 2004 and 2003:PR Ann I,20.4.320.4.2Six Monthsended 30 June Year ended 31 December2006 2005 2005 2004 2003(unaudited)Long-haulNumber of routes flown (1) ********************************** 10 9 9 11 9Number of sectors flown (flights)**************************** 2,234 2,124 4,457 4,529 4,246Average sector length (in kilometres) (2) *********************** 5,527 5,582 5,589 5,532 5,517Number of passengers (in thousands) ************************ 533 557 1,169 1,183 1,104Average fare (in 0) (3) *************************************** 259.93 238.67 262.07 270.60 249.57Average block hours per aircraft per day (4) ******************** 13.3 12.8 13.3 13.2 12.8ASKs (in millions) (5) **************************************** 3,697 3,557 7,467 7,514 7,016RPKs (in millions) (6) **************************************** 2,915 3,060 6,426 6,437 5,997Passenger load factor (flown RPKs per ASK) ****************** 79% 86% 86% 86% 85%Average number of Seat Equivalents (7) *********************** 2,625 2,625 2,625 2,625 2,531Utilisation (ASKs per Seat Equivalent in millions) (8) ************** 1.41 1.36 2.84 2.86 2.77Average number of aircraft ********************************* 7.0 7.0 7.0 7.0 6.8Short-haulNumber of routes flown (1) ********************************** 66 57 64 51 38Number of sectors flown (flights)**************************** 26,785 25,728 52,870 48,130 50,261Average sector length (in kilometres)************************* 935 848 869 813 727Number of passengers (in thousands) ************************ 3,619 3,230 6,875 5,776 5,491Average fare (in 0) (3) *************************************** 86.49 84.86 87.55 100.77 83.08Average block hours per aircraft per day (4) ******************** 9.6 9.3 9.4 8.8 8.3ASKs (in millions) (5) **************************************** 4,560 3,707 7,973 6,075 5,256RPKs (in millions) (6) **************************************** 3,445 2,810 6,135 4,700 3,966Passenger load factor (flown RPKs per ASK) ****************** 76% 76% 77% 77% 75%Average number of Seat Equivalents (7) *********************** 5,102 4,792 4,658 4,379 4,271Utilisation (ASKs per Seat Equivalent in millions) (8) ************** 0.89 0.80 1.66 1.39 1.23Average number of aircraft ********************************* 27.0 25.4 25.9 24.7 26.2Source: Management accounts and internal financial and operating reporting systems.(1) Includes the maximum number of routes served during the periods presented; excludes all Dublin/Shannon routes flown onlong-haul flights between Ireland and the United States.(2) Flights between Ireland and the United States which have a stopover in Ireland are treated as one sector length.(3) Includes airport charges/taxes for the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004. Excludes airport charges/taxes for the year ended 31 December 2003 because airport charges were netted againstrevenues for 2003.(4) Block hours per aircraft represents the total number of block hours divided by the total number of aircraft.(5) Available Seat Kilometres, or ASKs, are the total number of flights multiplied by route by the total number of actual seats perflight multiplied by the distance per flight measured in kilometres.(6) Revenue Passenger Kilometres, or RPKs, are the number of passengers multiplied by the distance flown. It is a measure of theamount of total capacity sold during a period.(7) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy class configuration.(8) Utilisation is a measure of Aer Lingus’ efficiency in using its fleet to produce capacity. Aer Lingus defines Utilisation as ASKs perSeat Equivalent which represents the amount of available capacity, measured in ASKs, produced by each Seat Equivalent in itsfleet.59

Part VIIIInformation on Aer LingusThe following table sets out key financial data for Aer Lingus for the six months ended 30 June 2006 and2005 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses oncommercial hedging arrangements and exceptional items), together with the amounts excluded fromUnderlying data:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited) (2) (unaudited) (2)Revenues (0 in millions) **** 508.3 — 508.3 451.6 — 451.6EBITDAR (0 in millions) (3) *** 63.0 (18.8) 44.2 62.9 35.4 98.3Yield (Revenues per RPK,in 0 cent) ************** 7.99 — 7.99 7.69 — 7.69Unit Revenue (Revenues perASK, in 0 cent) ********* 6.16 — 6.16 6.22 — 6.22Unit Cost (Cash OperatingCosts per ASK,in 0 cent) (4) ************* 5.39 0.23 5.62 5.35 (0.49) 4.86Total Utilisation (ASKs perSeat Equivalentin millions) ************* 1.07 — 1.07 1.00 — 1.00EBITDAR per Seat Equivalent(0 in thousands) (5) ******* 8.2 (2.4) 5.8 8.6 4.9 13.5Unit Cost Excluding Fuel(Cash Operating Costsexcluding fuel and oilcosts per ASK, in 0 cent) 4.30 0.04 4.34 4.57 (0.04) 4.53PR Ann I,20.4.3Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financial andoperating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six months ended30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.For the six months ended 30 June 2006, the approximately 3(18.8) million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the period of approximately 3(12.7) million; (2) Taxation of approximately 3(1.8) million; and(3) Exceptional items of approximately 3(4.3) million. The 0.23 cent excluded from Unit Cost comprised approximately 0.18 centof Fuel and oil costs and approximately 0.05 cent of Other (gains)/losses, net, and the 0.04 cent excluded from Unit CostExcluding Fuel comprised approximately 0.04 cent of Other (gains)/losses, net.For the six months ended 30 June 2005, the approximately 335.4 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the period of approximately 331.0 million; and (2) Taxation of approximately 34.4 million. The (0.49)cent excluded from Unit Cost comprised approximately (0.45) cent of Fuel and oil costs and approximately (0.04) cent of Other(gains)/losses, net, and the (0.04) cent excluded from Unit Cost Excluding Fuel comprised approximately (0.04) cent of Other(gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for thesix months ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.60

Part VIIIInformation on Aer Lingus(2) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excluding Revenues, areconsidered non-GAAP financial measures which Aer Lingus believes are important to an understanding of its performance.These measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute foranalysis of Aer Lingus’ results as reported under GAAP.(3) EBITDAR is defined as profit for the period plus exceptional items, net interest expense (finance expense), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share. EBITDAR is considered a non-GAAP financial measure. Aer Lingus believes that EBITDAR is an important measure of its performance and is a usefulsupplement to profit for the period and other income statement data. Aer Lingus believes EBITDAR is useful to management andinvestors in comparing its performance to that of other companies in its industry, as it removes the impact of (a) differences incapital structure, including the effects of finance income and expense, (b) differences among the tax regimes to which AerLingus and comparable companies are subject and (c) differences in the age, method of acquisition and approach todepreciation and amortisation of productive assets. However, because other companies may calculate EBITDAR differently thanAer Lingus does, it may be of limited usefulness as a comparative measure. EBITDAR has limitations as an analytical tool andinvestors should not consider it in isolation or as a substitute for analysis of its results as reported under GAAP. Some of theselimitations are: (a) EBITDAR does not reflect cash expenditures, or future requirements for capital expenditures or contractualcommitments; (b) EBITDAR does not reflect changes in, or cash requirements for, Aer Lingus’ working capital needs; (c) EBITDARdoes not reflect the finance expenses, or the cash requirements necessary to service Aer Lingus’ principal payments on its debt;(d) EBITDAR does not reflect taxation or the cash requirements for any tax payments; and (e) although depreciation, amortisationand impairment are non-cash charges, the assets being depreciated and amortised will often have to be replaced in the future,and EBITDAR does not reflect any cash requirements for such replacements. A reconciliation of EBITDAR to profit for the periodunder IFRS and on an Underlying basis is set out in the table below.(4) Cash Operating Costs are operating expenses other than net interest expense (finance expense), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share.(5) EBITDAR per Seat Equivalent is based on the annual average number of aircraft operated during the period.The following table sets out a reconciliation of EBITDAR to profit for the period under IFRS and also on an Underlying basis for the sixmonths ended 30 June 2006 and 2005:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying Underlying Total Underlying Underlying Total(2 in millions) (2 in millions)(unaudited) (1) (unaudited) (1)Profit for the period****** 3 16.3 3 (12.7) 2 3.6 3 14.5 3 31.0 2 45.5Exceptional items ********** — (4.3) (4.3) — — —Finance (income)/expense,net ******************** (9.2) — (9.2) (5.0) — (5.0)Taxation ****************** 3.5 (1.8) 1.7 1.0 4.4 5.4Depreciation, amortisationand impairment ********* 27.9 — 27.9 31.5 — 31.5Aircraft operating lease costs 24.5 — 24.5 20.9 — 20.9Employee profit share ****** — — — — — —EBITDAR***************** 3 63.0 3 (18.8) 2 44.2 3 62.9 3 35.4 2 98.3PR Ann I,20.4.3Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of thisProspectus. EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.61

Part VIIIInformation on Aer LingusThe following table sets out key financial data for Aer Lingus for the years ended 31 December 2005 and PR Ann I2004 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses on 20.4.3commercial hedging arrangements and exceptional items), together with the amounts excluded fromUnderlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited) (2) (unaudited) (2)Revenues (0 in millions) ****** 1,002.6 — 1,002.6 1,009.6 — 1,009.6EBITDAR (0 in millions) (3) ****** 187.1 8.4 195.5 215.6 22.5 238.1Yield (Revenues per RPK, in0 cent)******************* 7.98 — 7.98 9.07 — 9.07Unit Revenues (Revenuesper ASK, in 0 cent) ******** 6.49 — 6.49 7.43 — 7.43Unit Cost (Cash Operating Costsper ASK, in 0 cent) (4) ******* 5.28 (0.05) 5.23 5.84 (0.16) 5.68Total Utilisation (ASKs per SeatEquivalent in millions) ****** 2.08 — 2.08 1.94 — 1.94EBITDAR per Seat Equivalent (0in thousands) (5) ************ 25.2 1.1 26.3 30.8 3.2 34.0Unit Cost Excluding Fuel (CashOperating Costs excludingfuel and oil costs per ASK,in 0 cent) **************** 4.38 (0.02) 4.36 5.06 (0.01) 5.05PR Ann I,20.4.3Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financial andoperating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the Operating expense items of Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.For the year ended 31 December 2005, the approximately 38.4 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the year of approximately 37.4 million and (2) Taxation of approximately 31.0 million. The (0.05) centexcluded from Unit Cost comprised approximately (0.03) cent of Fuel and oil costs and approximately (0.02) cent of Other(gains)/losses, net, and the (0.02) cent excluded from Unit Cost Excluding Fuel comprised approximately (0.02) cent of Other(gains)/losses, net.For the year ended 31 December 2004, the approximately 322.5 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the year of approximately 3(70.0) million, (2) Taxation of approximately 3(10.0) million and(3) Exceptional items of approximately 3102.5 million. The (0.16) cent excluded from Unit Cost comprised approximately0.15 cent of Fuel and oil costs and approximately (0.01) cent of Other (gains)/losses, net and the (0.01) cent excluded from UnitCost Excluding Fuel comprised approximately (0.01) cent of Other (gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(2) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excluding Revenues, areconsidered non-GAAP financial measures which Aer Lingus believes are important to an understanding of its performance.These measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute foranalysis of Aer Lingus’ results as reported under GAAP.62

Part VIIIInformation on Aer LingusThe following table sets out a reconciliation of EBITDAR to profit for the year under IFRS and also on an Underlying basis for 2005 and2004:PR Ann 120.4.3Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying Underlying Total Underlying Underlying Total(2 in millions) (2 in millions)(unaudited) (1) (unaudited) (1)Profit for the year ************************* 3 81.5 37.4 2 88.9 3 92.9 3(70.0) 2 22.9Exceptional items**************************** — — — — 102.5 102.5Finance (income)/expense, net***************** (10.2) — (10.2) (7.3) — (7.3)Taxation************************************ 10.1 1.0 11.1 14.4 (10.0) 4.4Depreciation, amortisation and impairment ***** 60.8 — 60.8 63.8 — 63.8Aircraft operating lease costs ***************** 44.9 — 44.9 41.2 — 41.2Employee profit share************************ — — — 10.6 — 10.6EBITDAR ********************************** 3187.1 38.4 2195.5 3215.6 3 22.5 2238.1Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of this Prospectus.EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.The following table sets out key financial data for Aer Lingus for the years ended 31 December 2004 and2003 under Irish GAAP:Year ended31 December2004 2003(unaudited) (1)Revenues (0 in millions)*************************************************************** 906.8 888.3EBITDAR (0 in millions) *************************************************************** 216.7 186.8Yield (Revenues per RPK, in 0 cent)***************************************************** 8.14 8.92Unit Revenue (Revenues per ASK, in 0 cent) ********************************************* 6.67 7.24Unit Cost (Cash Operating Costs per ASK in 0 cent) ************************************** 5.08 5.72Total Utilisation (ASKs per Seat Equivalent in millions) ************************************* 1.94 1.80EBITDAR per Seat Equivalent (0 in thousands)******************************************** 30.9 27.5Unit Cost Excluding Fuel (Cash Operating Costs excluding fuel and oil costs per ASK, in 0 cent) 4.30 4.99Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financial andoperating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.PR Ann I,20.4.3,20.4.2All measures in the table above, excluding Revenues, are considered non-GAAP financial measures which Aer Lingus believes areimportant to an understanding of its performance. These measures have limitations as analytical tools and investors should notconsider them in isolation or as a substitute for analysis of Aer Lingus’ results as reported under GAAP.(1) All data in this table is unaudited financial information, except Revenues which is audited.63

Part VIIIInformation on Aer LingusThe following table sets out a reconciliation of EBITDAR to profit for the year under Irish GAAP for the years ended 31 December 2004and 2003:PR Ann I,Year ended31 December2004 2003(2 in millions)Profit for the year ******************************************************************************* 3 1.2 3 69.2(unaudited) (1)Exceptional items ********************************************************************************* 102.5 — 20.4.3Finance (income)/expense, net ********************************************************************** (7.3) (5.3)20.4.2Taxation ***************************************************************************************** (0.1) 10.2Depreciation, amortisation and impairment *********************************************************** 68.6 69.7Aircraft operating lease costs *********************************************************************** 41.2 34.2Employee profit share ***************************************************************************** 10.6 8.8EBITDAR **************************************************************************************** 3216.7 3186.8Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of this Prospectus.EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.More detailed information about Aer Lingus’ financial condition and results of operations is set out inPart IX (Operating and Financial Review) and Part XII (Historical Financial Information) of this Prospectus.2. CURRENT TRADING AND PROSPECTSPR Ann I,12.1,Aer Lingus’ historical financial information for the six months ended 30 June 2006 is included in Part XII 12.2(Historical Financial Information) of this Prospectus. Aer Lingus’ business is seasonal and historicallyAer Lingus’ revenues for July, August and September have been higher than in other months. Aer Lingus’performance for the six months to 30 June 2006 was in line with the same period in 2005. AlthoughAer Lingus’ revenues for July 2006 were higher than for July 2005, operating profit for July 2006 was lowerthan for the same period in 2005. This shortfall resulted primarily from an increase in fuel and oil costs.On 10 August 2006, there was a terrorism alert in the United Kingdom which led to additional securityrestrictions at UK airports. During the period between 10 August and 17 August 2006, Aer Lingus had tocancel a number of its flights between Dublin and London Heathrow due to the disruption at LondonHeathrow. In addition, since 10 August 2006, there has been some negative impact on Aer Lingus’ advancepassenger bookings for August, September and October 2006, although passenger bookings for Novemberand December 2006 are in line with the comparable period as at the same point in 2005.In light of the impact of the terrorism alert on Aer Lingus’ passenger bookings, since the middle of August2006, Aer Lingus has been actively managing its business to generate demand to mitigate this shortfall,using tactical pricing initiatives to stimulate passenger demand. Aer Lingus believes that it is well-positionedto continue to develop its business in line with its strategy.These forward-looking statements may be affected by the factors set out in Part III (Risk Factors) of thisProspectus.3. HISTORY AND DEVELOPMENTAer Lingus was founded by the Irish Government in 1936 to provide passenger services between the UnitedKingdom and Ireland. Following the Second World War, Aer Lingus commenced cargo transportationservices and expanded its route network to include flights from Dublin to Continental Europe and additionalUK destinations. Aer Lingus began its services to New York and Boston in 1958.PR Ann I,5.1.564

Part VIIIInformation on Aer LingusAer Lingus embarked on a substantial diversification programme in the 1970s, and by the early 1980s itsassets included hotels, tour operators, a computer processing company, personnel and projectmanagement services, a helicopter operation, airframe maintenance, engine overhaul and other aviationrelatedbusinesses.In common with most other European airlines, Aer Lingus was adversely affected by the global aviationindustry downturn and the world-wide economic recession in the early 1990s. As a result, Aer Lingusintroduced a restructuring plan in 1993. As part of this plan, the Irish Government contributedapproximately 0222 million in exchange for new shares of Aer Lingus. As part of the 1993 restructuringplan, Aer Lingus divested its ownership in Copthorne Hotels, Cara Data Processing, PARC, Irish Helicopters,Airmotive Ireland (Holdings) Limited, TEAM Aer Lingus and the maintenance business of SRS AviationServices. In addition, since 1998, Aer Lingus has divested its ground handling businesses outside of Ireland,most of its equity interest in Futura (in which Aer Lingus retains a 20% shareholding), and all of its equityinterests in Timas Limited and Aviation Services (Ireland) Limited.A combination of events in 2001, including the terrorist attacks in New York and Washington DC on11 September 2001, an outbreak of foot-and-mouth disease in the United Kingdom, and a general globaleconomic downturn, particularly in the United States, had a significant adverse impact on the globalaviation industry, including Aer Lingus. In addition, the competitive environment in which Aer Lingusoperated experienced fundamental changes, including the increasing number of low-cost airlines and theimpact of high aviation fuel prices.Beginning in October 2001, Aer Lingus implemented a restructuring plan and significantly changed itsbusiness model in order to meet these challenges and return to profitability. The major elements of thisrestructuring plan included significantly reducing the number of full-time equivalent employees and relatedstaff costs, significantly reducing distribution costs (for example, by promoting aerlingus.com as its principaldistribution channel) and other operating expenses, increasing aircraft capacity, improving the Utilisation ofits fleet (including minimising aircraft turnaround times and increasing the average daily flight hours),significantly increasing the number of short-haul routes, increasing its focus on dynamic revenuemanagement and de-emphasising non-core activities. As part of its new business model, Aer Lingusintroduced the ‘‘Low Fares. Way Better’’ initiative in August 2003.The measures implemented as part of this plan in 2001 and the significant operational changes introducedsince 2001 returned Aer Lingus to profitability and transformed its operations, repositioning Aer Lingus as alow-cost, low-fares airline.In 2004, Aer Lingus implemented a number of measures designed to increase its profitability and control itscosts including: (1) introducing one-way non-refundable fares with minimal restrictions on all routes;(2) eliminating complementary in-flight food and beverages on short-haul flights and introducing in-flightsales of food and beverages; (3) phasing out its business class cabin on short-haul flights and re-configuringaircraft cabins to optimise overall fleet capacity; (4) implementing FastPass, a self-service electronic terminalcheck-in system; and (5) limiting cargo transportation services to higher revenue generating routes such asthe United States, Germany, the United Kingdom and, to a lesser extent, the Netherlands.In March 2005, Aer Lingus completed the elimination of its business class cabin on all remaining short-haulflights. Aer Lingus has now completed the reconfiguration of its aircraft cabins to optimise capacity, andhas replaced its aircraft fleet on short-haul routes with the Airbus A320 family of aircraft.As part of the expansion of long-haul routes, in March 2006, Aer Lingus began operating a two-classservice to Dubai, United Arab Emirates.In May 2006, Aer Lingus announced that, with effect from April 2007, it will exit the oneworld globalalliance. Since Aer Lingus joined the oneworld alliance in 2000, its business model has changedfundamentally as Aer Lingus has repositioned itself as a low-cost, low-fares airline. As a result, membershipin the oneworld alliance has become less relevant for Aer Lingus. Aer Lingus is currently in the process of65

Part VIIIInformation on Aer Lingusnegotiating agreements with certain members of the oneworld alliance which are intended to take effectfrom April 2007.Aer Lingus Group plc is the holding company of the Group. ALL is the operating company of the Group,which conducts all the passenger and cargo transportation services of the Group. Aer Lingus BeacheyLimited is the Group’s aircraft leasing and financing subsidiary. Details of the undertakings in which theCompany holds a proportion of the capital likely to have a significant effect on the assessment of its assetsand liabilities, financial position or profits and losses are set out in paragraph 3 (Details of Subsidiaries andAssociated Companies) of Part XV (Additional Information) of this Prospectus.PR Ann I,7.14. STRENGTHSAer Lingus believes that its principal strengths are:➤ Returns-focused business model designed for a competitive market➤ Proven track record of financial performance➤ Strong presence in growing Irish market➤ Enhanced service offering➤ Positive brand recognition➤ Leading position between Ireland and the United States➤ Key competitive position at Dublin and London Heathrow airports➤ Strong capital structure➤ Experienced management team4.1 Returns-Focused Business Model Designed for a Competitive MarketAer Lingus’ strong financial performance over the past four years has been driven by its proven businessmodel, which is designed to achieve high Utilisation of its aircraft fleet in conjunction with a disciplinedfocus on minimising Unit Cost and maximising Unit Revenue. The combination of these elements hasprovided Aer Lingus with high returns on invested capital, which Aer Lingus measures asEBITDAR/Replacement Value. The Company currently has a target of 15% for this metric. Aer Lingusbelieves that its business model is scalable and that significant economies of scale can be generated fromincremental increases in capacity.(a) High Utilisation of Aircraft FleetLike many capital intensive businesses, Aer Lingus generates returns by optimising the use of its capital — inAer Lingus’ case, its aircraft fleet. Aer Lingus monitors aircraft Utilisation based on the industry standardunit measure of capacity, ASKs. To achieve high ASKs, Aer Lingus’ dedicated network planning functiondetermines the optimum portfolio and frequency of routes to be operated. Aer Lingus has focused onmaximising its ASKs by minimising aircraft turnaround times and increasing the average daily flight hours.Aer Lingus’ increasing point-to-point network focus has also driven high Utilisation by reducing the requiredground time at airports. As a result, in the year ended 31 December 2005, Aer Lingus generated an averageof 9.4 block hours per aircraft per day on short-haul routes and an average of 13.3 block hours per aircraftper day on long-haul routes, achieving Utilisation of 2.1 million ASKs per Seat Equivalent.(b) Minimising Unit CostAer Lingus adopts a disciplined approach to productivity and cost efficiency. Aer Lingus’ strategy is to aimfor the lowest Unit Cost required to provide the services that it believes its customers are prepared to pay66

Part VIIIInformation on Aer Lingusfor, and the Deputy Chief Executive leads a team dedicated to monitoring and controlling costs. Aer Lingusreduces its Unit Cost by:➤ operating a young aircraft fleet supplied by a single manufacturer in each of its short-haul and long-haulnetworks, which minimises maintenance, pilot and crew training and procurement costs;➤ providing a simplified on-board service offering, which minimises operational complexity;➤ promoting aerlingus.com as its principal distribution channel;➤ increasing staff productivity;➤ moving corporate business travel onto the Aer Lingus corporate portal;➤ increasing emphasis on direct marketing;➤ making selective investments in new technologies that deliver operational improvements (such asFastPass and eTickets); and➤ increasingly operating point-to-point networks, which reduces operational complexity as less emphasis isplaced on interlining and transfers to other airlines.In addition, Aer Lingus’ focus on maximising fleet Utilisation delivers Unit Cost efficiency as a portion of itscosts is fixed (such as staff costs and maintenance expenses).(c) Maximising Unit RevenueAer Lingus’ low Unit Cost structure enables it to offer low fares, thereby stimulating customer demand forits services and driving high passenger load factors. At the same time, Aer Lingus’ technology allows it tomonitor changes in market demand on a real-time basis, which facilitates dynamic management of Yieldand passenger load factor, enabling it to maximise Unit Revenue.On short-haul routes, Aer Lingus believes that its customers have been willing to pay a premium over itslow-cost competitors for its enhanced service offering, including seat allocation and flying to centrallylocatedcity airports. As discussed in paragraphs 4.1(c) (Ancillary Revenues) and 5.2(a) (Revenues) of Part IX(Operating and Financial Review) of this Prospectus, in recent years, an important element of Aer Lingus’Unit Revenue growth has been an increasing focus on cross-selling ancillary products such as in-flightcatering items on short-haul routes, and car rentals, hotel accommodation and travel insurance throughaerlingus.com.(d) Scalable Business ModelAer Lingus believes that it is well-positioned to achieve significant economies of scale and productivity gainsfrom expanding its aircraft fleet as there are significant Unit Cost benefits to be realised by increasing theoverall fleet size in areas such as maintenance, distribution, staff productivity and fleet financing.Aer Lingus primarily focuses on increasing frequencies on existing routes and introducing scheduled serviceson new routes that have identifiable customer demand.4.2 Proven Track Record of Financial PerformanceBeginning with its restructuring plan in 2001, Aer Lingus’ returns-focused business model has generatedhigh operating profitability, measured by EBITDAR per Seat Equivalent, by focusing on its Unit Revenue,Unit Cost and Utilisation. In 2005, Aer Lingus achieved an EBITDAR margin (EBITDAR as a percentage oftotal revenues) under IFRS of 19.5% and on an Underlying basis (excluding the impact of fair value of gainsand losses on commercial hedging arrangements) of 18.7% (Source: Management accounts and internalfinancial and operating reporting systems). Aer Lingus actively plans and monitors its route profitability andbelieves that this financial discipline is central to generating financial returns.67

Part VIIIInformation on Aer LingusAer Lingus’ Unit Cost (Cash Operating Cost per ASK, in 0 cent) has decreased from 8.08 cent in 2001 to4.53 cent in 2005 under Irish GAAP. In addition, its EBITDAR per Seat Equivalent (in thousands) hasincreased from 09.86 in 2001 to 024.79 in 2005 under Irish GAAP. (Source: Management accounts andinternal financial and operating reporting systems). In 2005, Aer Lingus generated operating profit underIrish GAAP of 072.4 million compared to an operating loss under Irish GAAP of 052.1 million in 2001.4.3 Strong Presence in Growing Irish MarketAer Lingus has a significant share of all air passenger traffic to and from Ireland. From 2001 to 2005, thetotal number of passengers travelling through Dublin airport increased by 28.7% (Source: Dublin AirportAuthority plc, Annual Report and Accounts 2005). Aer Lingus’ total passenger numbers have grownfollowing the introduction of lower fares. Irish outward passenger traffic has experienced significant growthdue to the high-growth Irish economy, high levels of disposable income and increased property ownershipoutside of Ireland by Irish people. Ireland has also experienced strong overall population growth, increasingby 8.3% from approximately 3.9 million people in 2001 to approximately 4.2 million people in 2006(Source: CSO Regional Population Projections, 2006-2021). Inward passenger traffic has also grownsignificantly, driven by foreign investment in Ireland, increased propensity for international travel, as well assignificant immigration, primarily from the EU accession states in central and eastern Europe. In 2005,approximately 46% of Aer Lingus’ passenger flight bookings originated from outside Ireland.Strong growth of the Irish economy is forecast to continue, and the subsequent growth in disposableincome and population should continue to enhance demand for Aer Lingus’ services in Ireland. Theprojected population growth from 2006 to 2011 is 7.7% (Source: CSO Regional Population Projections,2006-2021). Central and Eastern European economies and other growth economies outside Ireland areexpected to continue to stimulate demand for Aer Lingus’ services and generate increased traffic on itsroutes to and from destinations in those regions. The Directors believe that the combination of Aer Lingus’ PR Ann I,strong slot position at Dublin and London Heathrow airports, its significant share of current passenger 6.5traffic flows to and from Ireland, and the positive recognition of its brand in the key markets in which itoperates, position Aer Lingus to achieve a continued strong market presence in the Irish market in themedium term.4.4 Enhanced Service OfferingThrough its ‘‘Low Fares. Way Better’’ initiative, Aer Lingus offers a high quality service, while maintaininglow fares with minimal restrictions on all its routes. Aer Lingus places a strong emphasis on providing anenhanced travel experience by giving its customers the ability to book one-way fares and seat allocation,facilitating an efficient check-in through innovations such as its FastPass kiosks, providing quality in-flightservices, providing a frequent flyer loyalty programme and flying to centrally-located city airports. AerLingus focuses on providing reliable and frequent services in a friendly, professional and efficient manner.Aer Lingus also provides enhanced customer care in the event of flight delays or other unexpected traveldisruptions.4.5 Positive Brand RecognitionThe Aer Lingus brand, as represented by its distinctive green shamrock logo, has a strong association withIreland and positive recognition in the key markets in which it operates. In recent years, the brand hasdeveloped significantly through the increased use of aerlingus.com. Aer Lingus believes that its customersassociate the Aer Lingus brand with its core principles of value-for-money, enhanced travel experience, astrong safety culture, reliability, professionalism and efficiency. Aer Lingus supports its brand image byfocused marketing activities.4.6 Leading Position between Ireland and United StatesAer Lingus is the only Irish airline currently operating between Ireland and the United States under theIreland/United States bilateral treaty. It has achieved the leading position in this market by providingfrequent services to key cities in the United States, marketing Aer Lingus as an Irish airline in the UnitedStates, and offering attractive and competitive pricing on its transatlantic routes. Aer Lingus currentlyprovides 48% of all capacity (total seats available) on direct flights between Ireland and the United States.Its nearest competitor provides 17% of all capacity. (Source: Innovata Schedules data provided by68

Part VIIIInformation on Aer Linguswww.rati.com, July 2006). Through its relationship with American Airlines, Aer Lingus offers connectingservices to numerous locations within the United States.Aer Lingus believes that it is positioned to benefit from any liberalisation of the restrictions under theexisting Ireland/United States bilateral treaty as a result of the proposed EU/US open skies agreement or anyliberalisation of the Ireland/United States bilateral treaty. An EU/US open skies agreement or liberalisation ofthe Ireland/United States bilateral treaty would provide Aer Lingus with potentially significant opportunitiesto expand its long-haul network by providing non-stop services to additional destinations in the UnitedStates and increasing frequencies on routes flown. Aer Lingus believes that its low-cost business model,strong financial position, positive brand recognition and current leading position on routes between Irelandand the United States will allow it to compete effectively against other transatlantic carriers on new USroute opportunities.Aer Lingus believes that the ability of passengers from Dublin and Shannon airports to obtain USimmigration pre-clearance at those airports (the only airports in Europe where this clearance is available),affords Aer Lingus an advantage over airlines offering transatlantic flights between Ireland and the UnitedStates via other EU Member States. Further details about the status of negotiations on the EU/US open skiesagreement are set out in paragraph 1.3 (EU/US Open Skies and Transitional Arrangements) of Part X(Regulation) of this Prospectus.4.7 Key Competitive Position at Dublin and London Heathrow AirportsAer Lingus enjoys a strong slot position at Dublin and London Heathrow airports. For example, Aer Lingus PR Ann I,controls 31,082 slots for the 2006 summer season at Dublin airport, which is equivalent to 27% of the total 6.5allocation. For the same period, Aer Lingus controls 52% of the 8,070 departure slots in the peak periodbetween 6:00 am and 7:30 am. Operating slots during this period is a key component of Aer Lingus’competitive position as those slots are at departure times which are attractive to certain passengers(including business passengers). With the anticipated introduction of the new terminal at Dublin airport in2009, Aer Lingus believes that it will be well-positioned to take advantage of the additional capacity.Aer Lingus currently controls the fourth largest number of slots at London Heathrow airport for the 2006summer season, ranking behind British Airways, bmi and Lufthansa. Of Aer Lingus’ 23 slot pairs at LondonHeathrow airport for the 2006 summer season, 14 are used for operating flights to Dublin, four are usedfor operating flights to each of Cork and Shannon, and one is leased. Aer Lingus provides more frequentservices on the London Heathrow-Dublin route than any other airline, operating 14 of the 21 daily servicesbetween London Heathrow and Dublin. Information about the restrictions on disposals of slots by AerLingus at London Heathrow airport contained in Aer Lingus’ Articles of Association is set out inparagraph 5.2(p) (Disposal of London Heathrow Slots) of Part XV (Additional Information) of thisProspectus.4.8 Strong Capital StructureAer Lingus’ has a relatively ungeared balance sheet compared to the current position of many of itscompetitors. Aer Lingus expects that this will enable it to take advantage of growth opportunities andprovides some protection against deterioration in business conditions, including increased competitiveactivity, economic recession in key markets, as well as extraordinary events affecting the aviation industry. Inaddition, Aer Lingus’ strong liquidity position and credit strength, together with the net proceeds of theOffer, will enable it to take advantage of buying opportunities in the aircraft market, enhance its positionwith aircraft manufacturers and other suppliers, permit financing flexibility and assist in obtaining access tofinance.4.9 Experienced Management TeamAer Lingus’ Senior Management Team, led by Dermot Mannion (Chief Executive), and including GregO’Sullivan (Finance Director), Niall Walsh (Deputy Chief Executive), Enda Corneille (Commercial Director),Stephen Kavanagh (Planning Director), Dick Butler (Ground Operations Director) and Liz White (HumanResources Director), has extensive airline industry expertise, in Ireland and internationally, with an averageof approximately 17 years of experience in the aviation industry. Mr Mannion has significant experience ininternational passenger aviation, particularly in developing new markets and routes and managing long-69

Part VIIIInformation on Aer Lingushaul networks. The other members of the Senior Management Team participated in delivering the 2001restructuring plan, transforming Aer Lingus into a low-cost, low-fares airline. Aer Lingus has a strong trackrecord of promoting its management team from within its organisation.5. STRATEGYAer Lingus intends to increase profitability by expanding its fleet and route network, maintaining disciplinedcost control, offering widely available low fares with a service and brand that distinguish it from itscompetitors. The key elements of Aer Lingus’ strategy are:➤ Low Fares. Way Better➤ Growing capacity through fleet investment➤ Maximising passenger revenues➤ Maintaining disciplined cost control➤ Promoting aerlingus.com as its principal distribution channel➤ Growing ancillary revenues5.1 Low Fares. Way BetterAer Lingus’ strategy is to offer an enhanced travel experience while maintaining low fares. Aer Lingusoperates a single economy class service on its short-haul network and a two-class service on its long-haulnetwork. Aer Lingus believes that its customers have been willing to pay a premium on short-haul routes forits enhanced service offering. These services include flying to centrally-located city airports, seat allocation,providing one-way fares, competitive scheduling/frequencies, efficient check-in through FastPass kiosks(which, for the six months ended 30 June 2006, accounted for approximately 64% of total Aer Linguspassenger check-ins at Dublin airport, 33% of total Aer Lingus passenger check-ins at Cork airport, 77% oftotal Aer Lingus passenger check-ins at London Heathrow airport and 66% of total Aer Lingus passengercheck-ins at John F. Kennedy (New York) airport), customer care in the event of disruption and providingreliable and frequent services in a friendly, professional and efficient manner.5.2 Growing Capacity through Fleet InvestmentAer Lingus believes that there is considerable scope to expand its fleet capacity while maintaining high unitprofitability. Over time, Aer Lingus expects that additional aircraft can be utilised efficiently by increasingfrequency on existing routes and adding new routes that have identifiable customer demand. Aer Lingushas identified potentially significant opportunities for growth on its existing short-haul routes and otherdestinations in the UK and Continental Europe. Aer Lingus’ management expects to prioritise capacitygrowth on existing routes (primarily through increasing frequencies) relative to opening routes to newdestinations. Based on recent experience, capacity growth on existing short-haul routes has had a positiveeffect on financial returns on such routes.Aer Lingus also intends to take advantage of opportunities to expand its transatlantic network that mayarise from EU/US open skies or changes to the Ireland/United States bilateral treaty (which would provideAer Lingus with potentially significant opportunities to expand its long-haul network by providing non-stopservices to additional destinations in the United States and increasing frequencies on existing routes served),and has identified a number of other long-haul opportunities, including east and south of Europe.Significant numbers of passengers fly between Dublin and long-haul destinations using connecting servicesvia hub airports (such as London Heathrow, Paris CDG, Frankfurt or Amsterdam Schiphol). The top 20destinations served from Dublin via such hub airports accounted for in excess of 700,000 passengers in2005 (Source: Dublin Airport Authority Presentation to Aer Lingus, 25 April 2006). Aer Lingus does notcurrently provide direct services to most of these destinations, and expects that commencing direct servicesto some of these destinations would enable it to capture a share of these traffic flows as well as to grow themarket. Further details about the status of negotiations on the EU/US open skies agreement are set out inparagraph 1.3 (EU/US Open Skies and Transitional Arrangements) of Part X (Regulation) of this Prospectus.70

Part VIIIInformation on Aer LingusAer Lingus’ capital expenditure plans include investment of approximately 02 billion through 2012 for theexpansion of its aircraft fleet, including expanding its short-haul aircraft fleet by approximately 50% and itslong-haul aircraft fleet by approximately 100%, as well as for the replacement of a portion of its existingaircraft fleet. These investment plans may be affected by various factors, including the availability ofappropriate aircraft, whether Aer Lingus purchases aircraft or acquires aircraft under operating leases orfinance leasing arrangements, the availability of required financing on terms acceptable to Aer Lingus, andthe finalisation of the proposed EU/US open skies agreement or the liberalisation of the existing Ireland/United States bilateral treaty.Aer Lingus has agreed to lease two additional A320 aircraft for its short-haul fleet, which are scheduled fordelivery in May 2007, and to purchase, using its current cash resources and/or future financings, anadditional A330-200 for its long-haul fleet for delivery in May 2007, as well as purchasing anotherA330-300 for its long-haul fleet for delivery in June 2007. Apart from these aircraft, Aer Lingus currentlydoes not have any further aircraft on order. Aer Lingus has also recently reached agreement with Airbus inrelation to the terms of purchase for two additional A320 aircraft for its short-haul fleet which would bescheduled for delivery in late 2007. Aer Lingus expects that a contract for the purchase of these aircraft willbe signed shortly after the completion of the Offer. Aer Lingus’ strategy is to continue to expand its fleetusing aircraft types supplied by a single manufacturer on each of its short-haul and long-haul networks,which it believes will continue to generate significant operational benefits. Aer Lingus intends to finance thecapital expenditure required for the expansion and replacement of its aircraft fleet through the net proceedsof the Offer, together with existing and future available cash resources and future financings. Aer Linguscurrently anticipates that these future financings will include bank financings and aircraft finance leasearrangements.5.3 Maximising Passenger RevenuesAer Lingus will continue to focus on maximising the passenger revenues it generates from its fleet bymaintaining high Utilisation rates throughout the next period of fleet expansion. Aer Lingus will continue tobe disciplined in selecting the appropriate route portfolio (determined as the optimal combination of routesand frequencies that maximise the return on Aer Lingus’ fleet) and to focus operations on achieving highASKs. Aer Lingus will also continue to focus on dynamically optimising the target Yield and passenger loadfactors that maximise the passenger revenues it generates on any specific route.5.4 Maintaining Disciplined Cost ControlAer Lingus intends to continue controlling its costs by maintaining a young aircraft fleet supplied by a singlemanufacturer on each of its short-haul and long-haul networks, continuing to focus operations on point-topointnetworks, maintaining a low-cost distribution model through aerlingus.com, increasing its staffproductivity and making focused investments in new technologies such as FastPass and online check-in. TheDeputy Chief Executive leads a team that is tasked with monitoring and controlling costs and ensuring thatfuture expansion of Aer Lingus’ business takes place without incurring a proportionate increase in costs.71

Part VIIIInformation on Aer LingusThe following table sets out Aer Lingus’ Unit Cost Excluding Fuel for the six months ended 30 June 2006and 2005 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses oncommercial hedging arrangements and exceptional items), together with the amounts excluded fromUnderlying data:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfromfromUnderlying Underlying IFRS Total Underlying Underlying IFRS Total(unaudited)(unaudited)Unit Cost Excluding Fuel (CashOperating Costs excludingfuel and oil costs per ASK,in 0 cent)***************** 4.30 0.04 4.34 4.57 (0.04) 4.53PR Ann I,20.4.3Source: Management accounts and internal financial and operating reporting systems.The following table sets out Aer Lingus’ Unit Cost Excluding Fuel for the years ended 31 December 2005 PR Ann Iand 2004 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses on 20.4.3commercial hedging arrangements and exceptional items), together with the amounts excluded fromUnderlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfromfromUnderlying (1) Underlying IFRS Total Underlying (1) Underlying IFRS Total(unaudited)(unaudited)Unit Cost Excluding Fuel(Cash Operating Costsexcluding fuel and oil costsper ASK, in 0 cent) ******** 4.38 (0.02) 4.36 5.06 (0.01) 5.05Source: Management accounts and internal financial and operating reporting systems.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercial hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to exclude the amounts set outunder the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains and losses measured underIFRS on commercial hedging arrangements entered into by Aer Lingus in connection with its fuel, aircraft financing, foreigncurrency and interest rate obligations which do not fulfil the requirements for hedge accounting under IFRS-IAS 39. Underlyingdata is provided for the operating expense items Fuel and oil costs and Other (gains)/losses, net. Underlying data also excludesExceptional items and the taxation impact of amounts excluded from Underlying data.The (0.02) cent and (0.01) cent excluded from Unit Cost Excluding Fuel for the years ended 31 December 2005 and 2004,respectively are comprised of Other (gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies. Underlying datais not intended to be a substitute for IFRS measurements of profits. Further information regarding the presentation of IFRS andUnderlying historical financial information is set out in paragraph 1.2 (IFRS and Underlying Historical Financial Information) ofPart IX (Operating and Financial Review) of this Prospectus, and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.72

Part VIIIInformation on Aer LingusThe following table sets out Aer Lingus’ Unit Cost Excluding Fuel for the years ended 31 December 2004and 2003 under Irish GAAP:PR Ann I,20.4.3Year ended31 December2004 2003(unaudited)Unit Cost Excluding Fuel (Cash Operating Costs excluding fuel and oil costs per ASK, in0 cent) ************************************************************************* 4.30 4.99Source: Management accounts and internal financial and operating reporting systems.5.5 Promoting aerlingus.com as its Principal Distribution ChannelAer Lingus’ strategy is to promote the use of aerlingus.com as its principal distribution channel whereverpossible, while recognising that agency distribution is important in certain markets outside of Ireland andthe United Kingdom. Aer Lingus actively encourages the use of its website for direct ticket sales byimposing an additional booking fee for telephone bookings. In 2005, approximately 71% of Aer Lingus’total passenger ticket sales were generated from direct bookings by customers through aerlingus.com. AerLingus believes that it can support a substantial increase in internet bookings through its website withoutincurring significant incremental expenses.5.6 Growing Ancillary RevenuesAer Lingus’ strategy is to grow its ancillary revenues significantly. Ancillary revenues are generatedprincipally from activities such as in-flight catering (Sky Café) and in-flight sales (Sky Shopping), excessbaggagecharges, flight-change fees and refund fees, and commission-based revenue from online sales ofcar rentals, hotel accommodation and travel insurance. Aer Lingus believes that ancillary revenues will growas its route network expands and its passenger traffic increases. Aer Lingus has also identified furthergrowth opportunities for its ancillary revenues through (1) commission-based initiatives such as dynamicpackaging of car rentals, hotel accommodation and travel insurance through aerlingus.com, (2) baggagecharges for each item of checked-in luggage on all short-haul routes and (3) expanding the range ofproducts available for in-flight sales.6. MARKETS AND COMPETITION6.1 European Airline MarketThe airline sector in Europe has evolved significantly since the liberalisation of the EU air transportationmarket in the 1990s. This changed the nature of competition in European aviation and paved the way forthe growth of no-frills operators, which resulted in the emergence of companies such as easyJet andRyanair as major participants in the European airline market. Since 2001, Aer Lingus has responded to thechallenges presented by these airlines by transforming itself into a low-cost, low-fares airline.PR Ann I,6.2Although the global airline industry is cyclical, over the long term, passenger traffic has increased. Amongother factors driving demand, this increase has been significantly driven by reductions in air fares. Demandfor air travel varies as a function of general global and local economic conditions, and may also be affectedby terrorist attacks, such as those in New York and Washington D.C. on 11 September 2001, as well asepidemics, such as the outbreak of Severe Acute Respiratory Syndrome in 2003. IATA predicts growth in airtravel over the next few years, forecasting average annual growth rates in international passenger traffic of5.6% per annum until 2009 (Source: IATA Industry Times, Edition 9 November 2005).The following table sets out forecast growth in the number of international passengers travelling withinEurope from 2005 to 2009:2006 2007 2008 2009Percentage growth ************************************************ 5.1% 5.0% 4.9% 4.8%Source: IATA Passenger and Freight Forecast Publications, October 2005.73

Part VIIIInformation on Aer LingusGrowth in the European low-fares sector which Aer Lingus is targeting is forecast to be significantly higherthan growth in the total market, with a forecast passenger compound annual growth rate of 13% between2004 and 2010 (Source: McKinsey Report — Billigflieger in Europe — Die Boombranche vor demWendepunkt 23 June 2005).As of May 2006, the market share of low-cost carriers in Europe, excluding Aer Lingus (measured by thenumber of flights in the EUROCONTROL statistical reference area), was 16.3%. The Ireland-United Kingdommarket represented the fourth largest individual low-cost carrier market in terms of flight movements (afterUK domestic, United Kingdom-Spain and Germany domestic), accounting for 5.4% of European low-costcarrier flight movements (which, for these purposes, does not include Aer Lingus) in the period fromJanuary to May of 2006 (Source: EUROCONTROL Low-Cost Carrier Market Update, May 2006).6.2 Irish Airline MarketAer Lingus operates short-haul flights to the United Kingdom and Continental Europe and long-haul flightsto the United States and the United Arab Emirates. All of Aer Lingus’ flights either originate or terminate inIreland and, in 2005, approximately 55% of sales of its passenger flights originated in Ireland, makingIreland Aer Lingus’ key market.Demand for air travel services to and from Ireland has significantly grown since 2001. Passenger trafficthrough the main Irish airports (Dublin, Cork and Shannon) has increased from approximately 18.5 millionpassengers in 2001 to approximately 24.5 million passengers in 2005.The following table sets out the number of passengers in millions travelling through Irish airports from 2002to 2005, together with the percentage growth for each year:2002 2003 2004 2005Total number of passengers (in millions) ****************************** 19.3 20.4 21.8 24.5Percentage growth ************************************************ 4.3% 5.8% 6.6% 12.4%Number of passengers travelling through Dublin (in millions) ************ 15.1 15.9 17.1 18.5Percentage growth ************************************************ 5.2% 5.1% 8.1% 7.7%Number of passengers travelling through Shannon (in millions) ********** 2.4 2.4 2.4 3.3Percentage growth ************************************************ (2.1)% 2.0% (0.2)% 37.9%Number of passengers travelling through Cork (in millions) ************* 1.9 2.2 2.3 2.7Percentage growth ************************************************ 5.6% 16.4% 3.3% 21.1%Source: Dublin Airport Authority plc, Annual Report and Accounts 2005, Five-Year Summary of Passenger Statistics.In the period from July 2005 to June 2006, 54% of Aer Lingus’ total passenger revenues, 43% of AerLingus’ passenger revenues on London and UK Provincial routes, 66% of Aer Lingus’ passenger revenues onroutes to Continental Europe, and 46% of Aer Lingus’ passenger revenues on transatlantic routesoriginated in Ireland.The growth in airline travel has been driven by a number of factors, including:➤ Ireland has been one of the fastest growing economies in the European Union over the past 10 years.The average annual growth rate of GNP in Ireland over the period from 1995 to 2005 was 7.1%. Theprojected annual average growth rate in GNP in Ireland for 2005 to 2010 is 4.6% (Source: OECDEconomic Surveys: Ireland 2006). Population growth, supported by significant net immigration to Irelandin recent years, is forecast to continue. The CSO predicts that the population will grow from 4.17 millionin 2006 to 4.49 million by 2011 (Source: CSO Regional Population Projections). In May 2006, Ireland hadan unemployment rate of 4.3%, one of the lowest in the European Union (Source: Eurostat NewsRelease, 3 July 2006).➤ High economic growth has resulted in increased business travel, increased demand for holiday traveloutside of Ireland, increased immigration, increased ownership of overseas property and, as a74

Part VIIIInformation on Aer Lingusconsequence, a rise in airline traffic to and from Ireland. The emergence of low-fares airlines has alsocontributed significantly to this increase, as increased supply at an affordable cost has increased demand.The only alternative to air travel for people travelling to and from Ireland is to travel by sea, with typicallysignificantly longer journey times than by air.➤ Ireland’s population and GNP are expected to continue to grow over the medium term (Source: OECDEconomic Surveys: Ireland 2006), and Aer Lingus expects that, as a consequence, demand for its airlineservices to and from Ireland will continue to increase. The Directors believe Aer Lingus is well positionedto service this demand. As of 1 August 2006 Aer Lingus had 31,082 slots for the summer season 2006 atDublin airport, which was equivalent to 27% of the total allocation for all airlines. In particular, AerLingus controls 52% of the 8,070 departure slots in Dublin airport between 6:00 am and 7:30 am for thesummer season 2006.Dublin Airport Authority has also commenced a large infrastructural programme for Dublin airport. Theprogramme includes the construction of a new passenger terminal, Terminal 2, two new piers, D and E, andan extension to the existing Piers A and B. Other developments include a new ground floor check-in area(Area 14) in Terminal 1 (in addition to other improvements to the terminal). The programme also involvesapron and apron related development, new rapid exit taxiways and aircraft stands, as well as theconstruction of a new road infrastructure and new car parks. The new terminal will cater for up to15 million passengers a year and Dublin Airport Authority expects it to be operational by the final quarter of2009. The new Pier D is expected to provide 14 new aircraft boarding gates and is scheduled to beoperational for the autumn of 2007. The new Pier E is expected to provide boarding gates for up to 19short-haul aircraft or up to eight long-haul aircraft and the Dublin Airport Authority expects it to beoperational by the first quarter of 2009. In addition, Dublin Airport Authority has submitted a planningapplication for a new parallel runway, which would allow Dublin airport to accommodate approximately30 million passengers per year when fully operational. Aer Lingus expects that the additional capacity atDublin airport that will become available upon implementation of this infrastructural programme willfacilitate Aer Lingus’ expansion plans.6.3 Aer Lingus’ MarketsPR Ann I,6.2Aer Lingus operates short-haul routes to the United Kingdom and Continental Europe and long-haul routesto the United States and Dubai.(a)(i)Short-Haul RoutesIreland/United Kingdom MarketThe market for scheduled passenger air travel between Ireland and the United Kingdom (excludingNorthern Ireland) is the largest individual air travel market from Ireland in terms of passengers, accountingfor approximately 45% of all passengers travelling through the main Irish airports Dublin, Cork andShannon in 2005. The following table sets out the number of passengers in millions travelling through Irishairports to or from the United Kingdom (excluding Northern Ireland) from 2002 to 2005, together with thepercentage growth for each year:2002 2003 2004 2005Number of passengers (in millions) ************************************** 9.6 9.9 10.3 11.0Percentage growth**************************************************** 5.4% 2.7% 4.5% 6.6%Source: Dublin Airport Authority plc, Annual Report and Accounts 2005.Aer Lingus is the second largest operator in the Ireland/United Kingdom air travel market, accounting forapproximately 24% of the available seat capacity in this market in July 2006.75

Part VIIIInformation on Aer LingusThe following table sets out Aer Lingus’ share of available capacity on Ireland/United Kingdom routescompared with certain of its competitors in July 2006:Ryanair Aer Lingus bmi/bmibaby Aer Arann easyjet British Airways OthersShare of available seatcapacity ************ 54.2% 23.8% 4.8% 4.8% 3.0% 2.0% 7.4%Source: SRS Analyser, July 2006.The Ireland/United Kingdom market is characterised by its relative geographic proximity and relatively shortaverage flight times, which makes it a relatively price sensitive market requiring low Unit Costs and highlevels of Utilisation. Additional key competitive criteria are the convenience of flight schedules(departure/arrival times and frequencies) and choice of airports to serve particular city pairs.The market for scheduled passenger air travel between Ireland and the United Kingdom can be divided intotwo principal segments, the Ireland/London market and the Ireland/provincial United Kingdom market.The Ireland/London market is served by flights to and from Dublin as well as provincial locations in Ireland.The Dublin-London route is the second busiest international air corridor in the world (after Hong Kong-Taipei) (Source: Airline Fleet and Network Management, March/April 2006) with flights from Dublin to allfive London airports: Heathrow, Gatwick, Stansted, Luton and London City.Aer Lingus currently serves the London area with flights from Dublin, Cork and Shannon to LondonHeathrow, one of the world’s largest international airports and the largest airport in the London area. AerLingus believes that its services to London Heathrow cater particularly to the demands of business travellersand tourists who require connections from Ireland to or via the London Heathrow gateway. Aer Lingusbelieves that it achieves higher average fares on London Heathrow services than would be achievable onroutes to other London area airports.Aer Lingus has a strong market position on the Dublin to London Heathrow route due to the slots it holds atboth Dublin and London Heathrow, operating 14 out of the 21 daily services on the Dublin-LondonHeathrow route. bmi is the only other airline currently flying between Heathrow and Dublin. Aer Linguscontrols the fourth largest number of slots at London Heathrow for the 2006 summer season. Only BritishAirways, bmi and Lufthansa operate more slots at London Heathrow airport.Aer Lingus also serves a number of provincial UK routes from Dublin. These provincial UK destinations areGlasgow, Edinburgh, Manchester, Birmingham, Bristol and, from October 2006, Newcastle. Aer Lingus alsooperates a route between Cork and Birmingham.(ii) Ireland/Continental Europe MarketsThe market for scheduled passenger air travel between Ireland and Continental Europe is the second largestand fastest growing individual air travel market from Ireland in terms of passengers.The following table sets out the number of passengers in millions travelling to Continental Europe throughIrish airports from 2002 to 2005, together with the percentage growth for each year:2002 2003 2004 2005Number of passengers (in millions) ***************************************** 6.7 7.3 8.1 9.7Percentage growth******************************************************* 11% 9% 11% 21%Source: Dublin Airport Authority plc, Annual Report and Accounts 2005.Aer Lingus is the largest operator in the Ireland/Continental Europe air travel market, accounting forapproximately 43% of the available seat capacity in this market as of July 2006.76

Part VIIIInformation on Aer LingusThe following table sets out Aer Lingus’ share of available seat capacity on Ireland/Continental Europeanroutes compared with certain of its competitors as of July 2006:AerLingus Ryanair OthersShare of available seat capacity ******************************************* 43.2% 32.1% 24.7%Source: SRS Analyser, July 2006.The Ireland/Continental Europe market is characterised by relatively longer average flight times compared tothe Ireland/United Kingdom market. While price is a major competitive criterion in the Ireland/ContinentalEurope market, Aer Lingus believes that the value to customers of its ’’Low fares. Way better’’ initiativeincreases with sector length, while the relative unit cost advantage accruing to the lowest cost producerdiminishes. For this reason, Aer Lingus believes that its short-haul business model is particularly wellpositionedin this market. The Ireland/Continental Europe market has been the major growth area for AerLingus since 2001.The most popular Continental European destinations for Irish residents are Spain, France, Italy and Portugal(Source: CSO Household Travel Survey Q4 2005, published 24 May 2006). There is also a trend towardsleisure travel involving more frequent short breaks which is establishing many European cities as touristdestinations.IATA forecasts that some of the best medium-term prospects for more rapid growth in passenger trafficwithin Europe are likely to come from destinations in central and eastern Europe, especially among the newEU Member States (Source: IATA: Passenger & Freight Forecast Publications, October 2005). Traffic inEastern and Mediterranean countries has grown faster than traffic in north-west Europe. The main driversfor the current growth include economic growth, which is picking up and is stronger in the new EUaccession states, for example, than in the euro-zone, and the availability of low-cost air travel (Source:EUROCONTROL: Short-Term Forecast, 31 May 2006 and Medium-Term Forecast, volume 1). Economicgrowth is expected to be the key driver of passenger growth in central and eastern European countries inthe medium term (Source: IATA: Passenger & Freight Forecast Publications, October 2005). Aer Lingus isconsidering offering a number of new routes to central and eastern European countries to meet theforecast growth in demand.The demand from Ireland’s immigrant workers, principally those from central and eastern Europe, for flightsto their countries of origin has resulted in a large number of new routes opening to destinations in the EUaccession states. Poland and the Baltic states of Estonia, Latvia, and Lithuania are connected with directflights to Dublin, as are the Czech Republic, Hungary, Slovakia and Slovenia.(b)Long-Haul Markets(i) Ireland/United StatesThe market for scheduled passenger air travel between Ireland and North America accounted for 2.0 millionpassengers travelling through the main Irish airports at Dublin and Shannon in 2005.The following table sets out the number of passengers in millions travelling to and from North Americathrough Irish airports from 2002 to 2005, together with the percentage growth for each year:2005 2004 2003 2002Number of passengers (in millions) *************************************** 2.0 1.8 1.7 1.4Percentage growth***************************************************** 11% 6% 21% (12)%Source: Dublin Airport Authority plc, Annual Report and Accounts 2005Strong US economic growth has boosted business traffic levels on the Ireland/United States route. The Irishtransatlantic market has also benefitted from the unique cultural demographics of the United States, with77

Part VIIIInformation on Aer Lingusapproximately 34 million Americans claiming Irish ancestry (Source: American Community Survey Profile2002, table 2).Aer Lingus’ expansion opportunities into the United States have been limited by the terms of the Ireland/United States bilateral treaty which stipulates that, for every direct flight to or from Dublin airport to theUnited States, there must be a flight to or from Shannon airport to the United States. This has limited theexpansion of direct flights to the United States from Dublin airport. In addition, the treaty only permits AerLingus to fly to four gateways (New York, Boston, Chicago and Los Angeles) in the United States. An EU/USopen skies agreement, if implemented, would present Aer Lingus with significant opportunities to expandits long-haul network to the United States. During the transition period agreed between Ireland and theUnited States which would take effect if the EU/US Open Skies Agreement were approved, the IrishGovernment would be able to nominate up to three additional US gateways and only one Shannon airport/United States service would be required for every three direct services to or from Dublin airport to theUnited States. The European Commission and US authorities concluded the EU/US negotiations on openskies on 18 November 2005. The agreement was considered by the EU Council of Transport Ministers on5 December 2005, where the text of the agreement received unanimous support, subject to change in theUS policy concerning foreign ownership of US airlines.The US has recently announced that a delay in rulemaking on foreign control has arisen, and that theadministration needs more time to address all the concerns raised by the US Congress. However, aspokesperson for the US State Department has said that the administration is holding to pledges made bythe two sides in June 2006 on concluding an EU/US open skies agreement by the end of 2006 (Source:US State Department Daily Press Briefing 17 August 2006). The Minister for Transport has assured AerLingus that he remains confident that an EU/US open skies agreement can be reached within a reasonabletimeframe, and that he intends to pursue the earliest possible implementation of the transitionalagreement. The Minister for Transport has confirmed to the Company that, in the event that an EU/US openskies agreement is not achievable within a reasonable timeframe, he intends to seek to implement, inaccordance with applicable European Community law, the essential elements of the transitional agreementby way of an amendment to the Ireland/United States bilateral treaty. Further details about the EU/US openskies agreement are set out in paragraph 1.3 (EU/US Open Skies and Transitional Arrangements) of Part X(Regulation) of this Prospectus.Further information about the Ireland/United States bilateral treaty is set out in paragraph 2.3 (Maintenanceof existing air traffic rights is important to Aer Lingus’ business. Failure to finalise the proposed EU/US openskies agreement or otherwise to liberalise the restrictions in the existing Ireland/United States bilateral treatymay adversely affect Aer Lingus’ expansion plans) of Part III (Risk Factors) and in paragraph 1 (InternationalRegulatory Framework) of Part X (Regulation) of this Prospectus.Aer Lingus intends to pursue the potential growth opportunities presented by both the transitionalarrangements and the full unrestricted open skies arrangement if the EU/US open skies agreement isfinalised. However, these changes are also expected to lead to greater competition as US and EU carrierswill be able to compete more freely between the United States and Ireland. This issue is discussed further inparagraph 2.4 (Amendments to the existing Ireland/United States bilateral treaty or the adoption of anopen skies regime by the European Union and the United States may lead to increased competition on AerLingus’ route network, particularly between Ireland and the United States) of Part III (Risk Factors) of thisProspectus.Aer Lingus believes that the ability of passengers from Dublin and Shannon airports to obtain USimmigration pre-clearance at those airports (the only airports in Europe where this clearance is available),affords Aer Lingus an advantage over airlines offering transatlantic flights between Ireland and the UnitedStates via other EU Member States.(ii) Other Long-HaulAer Lingus is currently the only operator on the Dublin to Dubai route, which commenced in March 2006.Aer Lingus believes that passenger traffic on this route will grow significantly as a result of increased leisure78

Part VIIIInformation on Aer Lingusand business travel demand to and from Dubai and the Middle East, as well as from the transferopportunities to Emirates’ extensive long-haul network.IATA forecasts that passenger traffic to Europe originating in the Middle East will increase significantly overthe next three years.The following table sets out the projected growth in passenger traffic from Europe to the Middle East from2006 to 2009:2006 2007 2008 2009Middle East — Europe ********************************************* 7.0% 6.0% 6.2% 5.4%Source: IATA Aviation Information & Research — Passenger and Freight Forecast Publications 2005-2009.In addition to expanding its Dublin/Dubai service, Aer Lingus has also identified other long-haul growthopportunities east and south of Europe in the medium term.6.4 Competition(a) Short-HaulOn the Ireland/UK routes, Aer Lingus’ main competitors are Ryanair (since 1986) and bmi (since 1989). bmiis the only other airline to fly from Dublin to London Heathrow. The Irish regional carrier, Aer Arann,competes on some UK provincial routes.On the Ireland/Continental Europe routes, competitors include Ryanair, Air France, Lufthansa, Iberia,Centralwings and Alitalia. Aer Lingus also faces competition from charter airlines in the holiday market.Management believes that Aer Lingus has successfully positioned itself as a low-fares carrier with a PR Ann I,differentiated product offering. Aer Lingus offers an enhanced service with professional and friendly staff, 6.5allocated seating, centrally-located city airports and efficient customer service. It therefore occupies aposition between the no-frills airlines and the full-fare scheduled airlines.Aer Lingus also benefits from its historic rights to slots in London Heathrow and Dublin airports.(b) Long-HaulThe United States is Aer Lingus’ key long-haul market. On transatlantic routes, Delta Air Lines, ContinentalAirlines, US Airways and American Airlines all provide direct services between Ireland and the United States.Aer Lingus currently offers 48% of all capacity (total seats available) on direct flights between Ireland andthe United States. Its nearest competitor has 17% of all capacity. (Source: Innovata Schedules data providedby www.rati.com, July 2006).Aer Lingus believes that any liberalisation of the Ireland/United States bilateral treaty will provideopportunities to expand the number of destinations it serves in the United States and increase thefrequency of flights on routes flown. However, these changes are expected to also lead to greatercompetition as US and EU carriers will be able to compete more freely between the United States andIreland.Aer Lingus also faces competition from airlines providing transatlantic services from London and, to a lesser PR Ann I,extent Amsterdam and Paris. These include British Airways, American Airlines, United Airlines, Virgin 6.5Atlantic, Air Canada, KLM, Air France, Delta Air Lines and Continental Airlines. By offering direct servicesout of Ireland, Aer Lingus believes that it has certain advantages over these airlines in Ireland.7. ROUTE NETWORKAer Lingus categorises its network into five route groups: London, UK provincial and Continental Europe(collectively, the short-haul network), transatlantic and other long-haul (collectively, the long-haul network).79PR Ann I,6.1.1

Part VIIIInformation on Aer LingusAer Lingus’ route network has grown significantly from 44 routes in 2001 to 73 routes in 2005, principallyas a result of the addition of new routes to Continental Europe.In developing its route network, Aer Lingus has increasingly followed a point-to-point strategy, which isfocused on origin and destination passenger traffic flows rather than transfer passenger traffic flows. Thestructure of Aer Lingus’ route network has enabled Aer Lingus to generate high aircraft Utilisation byminimising aircraft turnaround times and increasing the average daily flight hours. It has also generatedUnit Cost efficiencies by, for example, minimising crew overnight stays on short-haul routes.At the centre of Aer Lingus’ network planning and route development is a focus on return on investedcapital, which is measured by Aer Lingus as EBITDAR/Replacement Value. Aer Lingus’ business model isbased on creating and sustaining market demand through its low fares and enhanced travel experience.Opportunities for route development are evaluated and prioritised based on their anticipated financial andstrategic contribution to Aer Lingus’ business. A systematic analysis of variables such as current andestimated traffic volumes, commercial links, and economic trends is undertaken in the development ofbusiness plans for long-haul routes.Aer Lingus reviews the need for adjustments in its route network and flight frequencies on an ongoingbasis. It closely monitors its routes to ensure that they remain commercially viable and profitable, comparingactual performance to projections. Aer Lingus’ network management enables it to make decisions on atimely basis about whether to continue underperforming routes and to recognise opportunities to increaseflight frequencies on under-served routes.Aer Lingus intends to continue to develop its route network by:➤ increasing the frequency of flights on existing routes where there is significant additional demand, whichhas the effect of generating additional Unit Cost efficiencies as well as consolidating Aer Lingus’ positionon those routes;➤ establishing direct flights to long-haul and short-haul destinations that Aer Lingus passengers cancurrently only connect to by using other airlines; and➤ serving additional destinations in the United States if the open skies agreement between the EuropeanUnion and the United States is agreed or if the terms of the existing Ireland/United States bilateral treatyare otherwise relaxed.7.1 Short-Haul NetworkAer Lingus’ short-haul operating strategy is focused on developing point-to-point services, which delivershigh fleet Utilisation. The principal base for Aer Lingus’ short-haul network is at Dublin airport. There are 22aircraft based at Dublin airport serving 55 routes, four aircraft based at Cork airport serving 11 routes, andtwo aircraft based at London Heathrow airport serving the Dublin-London Heathrow route.The following table sets out the number of routes served by Aer Lingus to London, UK Provincial andContinental Europe for 2005, 2004, 2003, 2002, 2001:Number of routes from Ireland2005 2004 2003 2002 2001London********************************************************* 3 3 5 5 5UK Provincial **************************************************** 7 7 5 5 6Continental Europe ********************************************** 54 41 27 23 16Domestic ******************************************************* — — 1 2 4Source: Internal operating reporting systems.Aer Lingus concentrates on offering frequent, reliable services from airports in Ireland to centrally-locatedcity airports outside of Ireland. These airports are particularly attractive to business passengers and to many80

Part VIIIInformation on Aer Lingusleisure passengers who value the convenience of these airports. Aer Lingus’ short-haul network has and willcontinue to develop based on strategic fit and projected traffic flows, with significant demand beinggenerated from routes to the Iberian peninsula and Eastern Europe.7.2 Long-Haul NetworkAer Lingus’ long-haul operating strategy is focused on developing routes where substantial customerdemand already exists. Given the costs, such as aircraft-related expenditure and staff costs, of introducingnew routes, long-haul route development is a resource-intensive activity.In the United States, Aer Lingus flies to Boston, Chicago, New York and Los Angeles. Aer Lingus believesthat EU/US open skies or a potential relaxation of the existing restrictions under the Ireland/United Statesbilateral treaty will offer Aer Lingus significant opportunities to develop additional profitable transatlanticroutes. Further details about the status of negotiations on the EU/US open skies agreement are set out inparagraph 1.3 (EU/US Open Skies and Transitional Arrangements) of Part X (Regulation) of this Prospectus.Aer Lingus operates interline agreements with American Airlines on US internal flights providing extensiveconnectivity from Aer Lingus’ destinations in the United States to other US destinations, and has acodesharing agreement with American Airlines for Aer Lingus flights to the United States.Since March 2006, Aer Lingus has operated a service from Dublin to Dubai, which serves both point-topointleisure and business travel as well as offering connectivity to Emirates’ extensive long-haul network.Aer Lingus will continue to assess other long-haul route opportunities where there is demonstrablecustomer demand.8. CAPITAL EXPENDITUREAer Lingus incurred capital expenditures of 039.7 million and 043.7 million under IFRS in the six months PR Ann I,ended 30 June 2006 and 2005, respectively, and 077.4 million and 0124.1 million under IFRS in 2005 and S.2.12004, respectively, and 0133.0 million and 043.2 million under Irish GAAP in 2004 and 2003, respectively.These capital expenditures principally related to the acquisition of aircraft and other flight equipment(including the capitalisation of the cost of maintenance performed and advance payments to aircraft andaircraft engine manufacturers), property and ground equipment and other assets (including informationtechnology, infrastructure expenditures and capital expenditures for aerlingus.com and FastPass). Apartfrom these assets, Aer Lingus does not have any material fixed assets or plant and equipment. Other thanthe aircraft acquisitions described in paragraph 9 (Fleet) of this Part VIII, Aer Lingus has not entered into anyfirm commitments to acquire any material fixed assets or plant and equipment.More detailed information about Aer Lingus’ aircraft and the financing arrangements for its aircraft (whererelevant) is set out in paragraph 9 (Fleet) of this Part VIII and in paragraphs 8.5 (Aircraft Operating LeaseAgreements) and 8.6 (Aircraft Purchase and Finance Lease Agreements) of Part XV (Additional Information)of this Prospectus.9. FLEETAer Lingus’ fleet objectives are to provide capacity at competitive cost, consistent with commercial demand,and to retain the flexibility to respond to changes in market conditions.Aer Lingus’ strategy is to operate a single fleet type on each of its short-haul and long-haul networks(currently the Airbus A320 family on short-haul and the Airbus A330 family on long-haul). The advantagesof a single fleet include the reduction in pilot and crew training, the elimination of multiple crew reservepools and the simplification of the support infrastructure for the fleet. Aer Lingus is focused on maintaininga young, modern fleet with significant emphasis on low fuel consumption, high reliability and high aircraftUtilisation.PR Ann I,6.1.15.2.2,5.2.381

Part VIIIInformation on Aer LingusIn advance of any aircraft acquisition, Aer Lingus performs detailed analyses on expected investmentreturns. Aer Lingus’ growth strategy, together with aircraft replacement, is expected to result in significantcapital expenditure over the medium term to finance the acquisition of aircraft. See paragraph 6.5 (CapitalExpenditure) of Part IX (Operating and Financial Review) of this Prospectus. Other than the aircraft that ithas agreed to take delivery of in 2007, which are referred to in paragraphs 9.1 (Short-Haul Fleet) and 9.2(Long-Haul Fleet) of this Part VIII, Aer Lingus has not entered into any commitments to purchase or leaseadditional aircraft. Aer Lingus will continue to monitor its fleet requirements and market conditions with aview to acquiring additional aircraft on a favourable basis. In expanding its long-haul fleet, Aer Lingus willevaluate both Airbus and Boeing aircraft alternatives. Aircraft will be evaluated using standard business andindustry criteria such as acquisition and operating cost, payload and range, performance and availabilityresidual value and transition costs.9.1 Short-Haul FleetAer Lingus’ short-haul fleet currently consists of 22 A320 aircraft and six A321 aircraft. 22 aircraft in AerLingus’ fleet are based at Dublin airport, four are based at Cork airport and the remaining two are based atLondon Heathrow airport. The average age of its short-haul fleet was 2.9 years as at 31 December 2005.The following table sets out the key characteristics of Aer Lingus’ short-haul fleet:NumberNumber of of SeatRegistration Type Delivery Ownership Actual Seats Equivalents (1)EI-CPC ************************* A321-211 08 May 98 Operating Lease 212 220EI-CPD ************************* A321-211 19 Jun 98 Operating Lease 212 220EI-CPE ************************* A321-211 11 Dec 98 Finance Lease 212 220EI-CPF ************************* A321-211 09 Apr 99 Operating Lease 212 220EI-CPG ************************* A321-211 28 May 99 Finance Lease 212 220EI-CPH ************************* A321-211 21 Nov 99 Finance Lease 212 220EI-CVA************************* A320-214 22 Jun 00 Finance Lease 174 180EI-CVB ************************* A320-214 08 Feb 01 Finance Lease 174 180EI-CVC************************* A320-214 06 Apr 01 Finance Lease 174 180EI-CVD************************* A320-214 10 May 01 Owned 174 180EI-DEA ************************* A320-214 30 Apr 04 Operating Lease 174 180EI-DEB ************************* A320-214 19 May 04 Operating Lease 174 180EI-DEC ************************* A320-214 04 Jun 04 Operating Lease 174 180EI-DEE ************************* A320-214 27 Aug 04 Finance Lease 174 180EI-DEF ************************* A320-214 02 Sep 04 Finance Lease 174 180EI-DEG ************************* A320-214 10 Sep 04 Finance Lease 174 180EI-DEH ************************* A320-214 20 Oct 04 Finance Lease 174 180EI-DEJ************************** A320-214 03 Feb 05 Finance Lease 174 180EI-DEl ************************** A320-214 14 Feb 05 Operating Lease 174 180EI-DEK ************************* A320-214 24 Mar 05 Operating Lease 174 180EI-DEM ************************ A320-214 07 Apr 05 Finance Lease 174 180EI-DEL ************************* A320-214 13 Apr 05 Operating Lease 174 180EI-DEN ************************* A320-214 13 May 05 Operating Lease 174 180EI-DEO ************************* A320-214 06 Jul 05 Finance Lease 174 180EI-DEP ************************* A320-214 07 Oct 05 Operating Lease 174 180EI-DER ************************* A320-214 03 Nov 05 Operating Lease 174 180EI-DES ************************* A320-214 22 Dec 05 Operating Lease 174 180EI-DET ************************* A320-214 28 Jun 06 Operating Lease 174 180Source: Internal operating reporting systems.(1) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy class configuration.Aer Lingus has agreed to lease two additional A320 aircraft in May 2007 for its short-haul fleet. Aer Lingushas also recently reached agreement with Airbus in relation to the terms of purchase for two additionalA320 aircraft for its short-haul fleet, scheduled for delivery in late 2007. Aer Lingus expects that a contractfor the purchase of these aircraft will be signed shortly after the completion of the Offer. Of Aer Lingus’82

Part VIIIInformation on Aer Lingus28 short-haul aircraft, 14 are owned or held by way of finance lease and 14 are held under operatingleases. The terms of the operating leases provide Aer Lingus with flexibility for fleet-planning purposes:three expire in 2009, three expire in 2011 and the remaining eight expire in 2012. In almost every case, AerLingus has options to extend the leases by periods ranging from one year to five years.9.2 Long-Haul FleetAer Lingus operates a two-class service on its long-haul network. Aer Lingus’ long-haul fleet consists of fourA330-300s and three A330-200s. Five long-haul aircraft are based at Dublin airport and the remaining twoare based at Shannon airport. The average age of the long-haul fleet was 8.9 years as at 31 December2005.The following table sets out the key characteristics of Aer Lingus’ long-haul fleet:Number ofNumber ofSeatRegistration Type Delivery Ownership Actual Seats (1) Equivalents (2)EI-DUB ******************** A330-301 11 May 94 Operating Lease 327 375EI-CRK********************* A330-301 17 Nov 94 Operating Lease 327 375EI-JFK ********************* A330-301 11 Jul 95 Operating Lease 327 375EI-ORD ******************** A330-301 01 Jul 97 Owned 327 375EI-LAX ********************* A330-202 20 Apr 99 Finance Lease 275 375EI-EWR ******************** A330-202 09 May 00 Operating Lease 275 375EI-DAA ******************** A330-202 17 Apr 01 Owned 275 375Source: Internal operating reporting systems.(1) Aer Lingus’ long-haul fleet is configured for economy and business classes as Aer Lingus offers a two-class service on its long-haulroutes.(2) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy class configuration.Four of Aer Lingus’ long-haul aircraft are held under operating leases. The other three are owned byAer Lingus or held by it under finance leases. Two operating leases expire in 2008, one in 2009 and one in2011. Aer Lingus has an option to extend two of the four operating leases. Aer Lingus has entered into apurchase agreement with Airbus S.A.S. for an additional A330-200 for delivery in May 2007 and anadditional A330-300 for delivery in June 2007, to be paid for using Aer Lingus’ existing cash resourcesand/or future financings, which may include bank financing and aircraft finance leases. Further informationabout the purchase agreement with Airbus S.A.S. is set out in paragraph 8.2 (Purchase Agreement withAirbus) of Part IX (Operating and Financial Review) of this Prospectus.PR Ann I,9.3 Fleet Expansion and ReplacementS.2.2Aer Lingus does not have a rigid policy determining the useful life of its aircraft. The effective useful life ofan aircraft is dependent upon economic conditions and relative advances in competing airframe and enginetechnology. Useful lives and residual values are regularly reappraised. Pursuant to its accounting policies atthe date of this Prospectus, Aer Lingus currently depreciates its short-haul aircraft over an 18 year period toa residual value of 10%, and its long-haul aircraft over a 20 year period to a residual value of 10% using thestraight-line method. Aer Lingus’ accounting policies do not determine the useful life of its aircraft foroperating purposes. As discussed in paragraphs 9.1 (Short-Haul Fleet) and 9.2 (Long-Haul Fleet) above, AerLingus has four new aircraft on order. Further information about these orders, and Aer Lingus’ methods offinancing aircraft acquisitions are set out in paragraphs 8.2 to 8.6 of Part IX (Operating and FinancialReview) and paragraphs 8.5 (Operating Lease Agreements) and 8.6 (Aircraft Purchase and Finance LeaseAgreements) of Part XV (Additional Information) of this Prospectus. Aer Lingus intends to finance thecapital expenditure required for the expansion and replacement of its fleet through the net proceeds of theOffer together with existing and future available cash resources and future financings. Aer Lingus currentlyanticipates that these future financings will include bank financings and aircraft finance leasearrangements.83

Part VIIIInformation on Aer LingusIn addition to acquiring new aircraft, Aer Lingus plans to upgrade the quality of its economy and businessclass cabins on long-haul routes from October 2006 through March 2007.10. PROPERTY, PLANT AND EQUIPMENTPC Ann I,8-1As at 30 June 2006, Aer Lingus had 0521.9 million of property, plant and equipment, including0496.0 million of aircraft and engines. The principal properties owned or occupied by Aer Lingus are set outin paragraph 14 (Premises) of Part XV (Additional Information) of this Prospectus. The only material plantand equipment owned by Aer Lingus are its aircraft, which are described in detail in paragraph 9 (Fleet) ofthis Part VIII.11. REVENUE MANAGEMENTRevenue management is the application of science to maximise revenues and profits and is comprised ofpricing and Yield management. Yield management is the process of forecasting demand, and optimisingthe allocation of inventory (seats) at the different fare levels on each flight. Revenue management, thecombined efforts of pricing and Yield management, is central to any airline’s revenue earning efforts, andkey to its profitability. Revenue management is therefore a central component of Aer Lingus’ returnsfocusedbusiness model.In September 2004, Aer Lingus significantly changed its revenue management strategy, focusing onproviding one-way low fares with minimal restrictions. Like other low-fares airlines, Aer Lingus offered arange of fares determined solely by expected demand rather than by purpose of travel or length of stay. TheAer Lingus short-haul business model is a high passenger load factor, low fare model, with high passengerload factors achieved by offering a significant number of low-fare seats on a year round basis.Using the PROS revenue management system, Aer Lingus revenue management team analyses key trends inbookings, passenger load factors, internet sales and regional performance to manage the inventory on eachflight Aer Lingus actively monitors the prices offered by its competitors and, where Aer Lingus deems itappropriate, adjusts its own pricing strategies accordingly.Due to the seasonal nature of Aer Lingus’ business, it uses different revenue management controls fordifferent times of the year. In the winter season, the focus is to achieve volume, which may require asignificant amount of inventory to be sold at very low fares. In the summer season, demand is strong andpassengers book further in advance of travel, which provides Aer Lingus with greater scope to enhanceYield with the sale of higher fares closer to departure. Further information on the seasonality of Aer Lingus’business, is set out in paragraph 3.3 (Seasonal Fluctuations) of Part IX (Operating and Financial Review) ofthis Prospectus.12. SCHEDULING AND SLOT MANAGEMENT12.1 SchedulingAer Lingus designs its flight schedules to maximise the block availability of its aircraft so as to increase theUtilisation of its aircraft. Aer Lingus increasingly operates a point-to-point network, which results indecreased aircraft waiting times at airports, handling costs and potential flight delays that may arise whenconnecting passengers are delayed. Aer Lingus’ flight schedules are also designed to ensure, to the extentpossible, that its fleet returns to base in Ireland on a daily basis, thereby minimising the crew and other costsassociated with aircraft and crew staying overnight at bases other than Dublin, Cork and Shannon airports.84

Part VIIIInformation on Aer LingusThe following table sets out the aircraft Utilisation generated by Aer Lingus’ scheduling activities for the sixmonths ended 30 June 2006 and 2005 and the years ended 31 December 2005, 2004 and 2003.PR Ann I,20.4.3Six MonthsendedYear ended30 June 31 December2006 2005 2005 2004 2003(unaudited)Short-HaulUtilisation (ASKs per Seat Equivalent in millions) ********************** 0.89 0.80 1.66 1.39 1.23Average block hours per aircraft per day **************************** 9.6 9.3 9.4 8.8 8.3Long-HaulUtilisation (ASKs per Seat Equivalent in millions) ********************** 1.41 1.36 2.84 2.86 2.77Average block hours per aircraft per day **************************** 13.3 12.8 13.3 13.2 12.8Source: Internal operating reporting systems.Aer Lingus’ historical levels of aircraft Utilisation have been achieved through a number of strategicinitiatives, including:➤ reducing turnaround times between flights by boarding passengers by seat row number and minimisingcatering requirements;➤ extending the operational day for its aircraft by up to four hours since 2000;➤ operating a young, common aircraft fleet which requires less scheduled maintenance and providesgreater flexibility in the event of unscheduled maintenance; and➤ using cabin crew to assist with aircraft cleaning.12.2 Slot Management36 airports of the total 46 airports in the European Union served by Aer Lingus have been designated underEuropean regulations as co-ordinated airports subject to slot control. Dublin airport is currently not a coordinatedairport. At a co-ordinated airport, airlines are allocated take-off and landing slots by anindependent co-ordinator operating at that airport.The key principles established by the European Union for the acquisition of airport slots include:➤ recognition of the long-established principle of ‘‘grandfather rights’’ under which an airline holding andusing a slot in a season has first claim on that slot in the next equivalent season; and➤ the ‘‘use it or lose it’’ principle — airlines must use their slots for at least 80% of the period for whichthey are held or, subject to certain exceptions, the slots will be withdrawn and placed in the pool to beallocated to other airlines.Further information about co-ordinated airports and the allocation of slots is set out in paragraph 2.2(Allocation of Slots) of Part X (Regulation) of this Prospectus.Aer Lingus controls 31,082 slots for the 2006 summer season at Dublin airport, which is equivalent to 27%of the total allocation. For the same period, Aer Lingus controls 52% of the 8,070 departure slots in Dublinairport between 6:00 am and 7:30 am each day.At London Heathrow airport, Aer Lingus controls the fourth largest number of slots for the 2006 summerseason (after British Airways, bmi and Lufthansa). Aer Lingus’ Articles of Association contain provisionsrequiring shareholder approval for the disposal of slots at London Heathrow airport. If Aer Lingus proposesto dispose of any of its existing slots at London Heathrow, it is required to notify its shareholders in themanner set out in the Articles of Association, and shareholders representing 20% or more of the Ordinary85

Part VIIIInformation on Aer LingusShares may require, within 28 days of notification, that the matter be submitted to an extraordinary generalmeeting. The majority of shareholder votes required at such extraordinary general meeting of the Companyto approve the disposal of slots will be X% of the votes cast at such meeting (where ‘X’ is equal to 100minus the number of Ordinary Shares held by the Selling Shareholder at the record date of such meeting ofthe Company (but excluding the Option Shares), expressed as a percentage of the total number of issuedOrdinary Shares as at such record date, plus 5%) provided that if the value of ‘X’ under this formula isgreater than 75, ‘X’ shall be deemed to be 75. Further information about the restrictions on disposals ofslots at London Heathrow airport contained in Aer Lingus’ Articles of Association is set out inparagraph 5.2(p) (Disposal of London Heathrow Slots) of Part XV (Additional Information) of thisProspectus.In addition, as part of a job and work security agreement that ALL reached in March 1999 with the IrishAirline Pilots’ Association (‘‘IALPA’’), ALL committed not to sell any of its slots at London Heathrow airport.Either party may, on serving six months’ notice on the other, review that agreement.13. DISTRIBUTIONAs part of its transition to a low-cost, low-fares airline, Aer Lingus successfully increased its tickets salesthrough aerlingus.com, which is now the primary channel of distribution for Aer Lingus. This has been, andcontinues to be, an important element in reducing Unit Cost as Aer Lingus increases the numbers of seatssold through aerlingus.com. In pursuit of its strategy to promote aerlingus.com as its primary distributionchannel, Aer Lingus has now made aerlingus.com available in French, Spanish, German, Italian, Polish,Dutch and Portuguese, as well as English.Aer Lingus sells tickets on its flights through all major distribution channels, including throughaerlingus.com, Aer Lingus offices/reservation call-centres, travel agents/tour operators, other airlines andother websites.The following table sets out the percentage of total passenger ticket sales for 2003 and 2005 generatedfrom Aer Lingus’ distribution channels:PR Ann I,20.4.32005 2003(as a percentageof total passengerticket sales)(unaudited)aerlingus.com *********************************************************************** 71% 35%Aer Lingus offices/reservation call centres *********************************************** 8 15Other airlines (codeshare or interline) *************************************************** 10 20Travel agents/tour operators*********************************************************** 11 30Source: Management estimates.For the six months ended 30 June 2006, approximately 85% of total passenger ticket sales in Ireland andthe United Kingdom were generated from aerlingus.com.Aer Lingus’ distribution costs under Irish GAAP decreased significantly from 2001 to 2005. The key factorsin reducing Aer Lingus’ distribution costs were shifting sales from the traditional travel agency channel toaerlingus.com and discontinuing bulk ticket sales to charter and package tour operators. Additional factorsincluded the movement of corporate business travel onto the Aer Lingus corporate portal, increasedemphasis on direct marketing and closing ticket offices. The major components in distribution costs areadvertising expenses, computer reservation systems costs, credit card commissions, UK debit card fees,frequent flyer programme fees and fees from telephone reservations payable by Aer Lingus as well as travelagents’ commissions and interline service charges and codeshare commissions. Commissions payable byAer Lingus to travel agents decreased from 9% in 2001 to 1% in 2005. Aer Lingus has also significantlyreduced the classes of fares that are distributed by computer reservation systems to travel agents in Ireland86

Part VIIIInformation on Aer Lingusand the United Kingdom, thereby reducing computer reservation systems costs. Aer Lingus continues todistribute all fare classes through computer reservation systems to agents located in other markets where ithas greater reliance on sales by travel agents. Aer Lingus’ distribution strategy is to continue to grow itssales through aerlingus.com and to reduce its reliance on traditional sales channels such as travel agentsand tour operators.Aer Lingus has call centre facilities in Ireland and in the United States for ticket sales. The operation of thecall centre facility in Ireland is outsourced to a third party. The call centre in the United States is operated byAer Lingus.Further information about Aer Lingus’ distribution costs, including the reasons for changes in Aer Lingus’distribution costs since 2003, is set out in paragraphs 4.2(h) (Distribution Costs), 5.1(b) (OperatingExpenses), 5.2(b) (Operating Expenses) and 5.3(b) (Operating Expenses) of Part IX (Operating and FinancialReview) of this Prospectus.14. BRAND AND MARKETINGThe Aer Lingus brand, as represented by its distinctive green shamrock logo, has a strong association withIreland and positive recognition in the key markets in which it operates. Aer Lingus believes that itscustomers associate the Aer Lingus brand with its core principles of value-for-money, enhanced travelexperience, a strong safety culture, reliability, professionalism and efficiency. Aer Lingus believes that thecore characteristics of its service offering, reflected through the marketing initiative ‘‘Low Fares. WayBetter’’, are:➤ year-round low fares;➤ one-way fares;➤ professional and efficient customer service;➤ self-service electronic terminal check-in through FastPass kiosks;➤ centrally-located city airports;➤ seat allocation, including advance seat selection through aerlingus.com;➤ customer care in event of disruption; and➤ extensive route network.Aer Lingus markets its business through a number of different forms including traditional media (print,television, radio and outdoor) and digital media (email marketing, search engine marketing, onlineadvertising). Aer Lingus seeks to utilise the most cost-effective marketing channel in each region in which itoperates. In 2005, the breakdown of Aer Lingus’ advertising expenses across the various media types was80% press, 11% online or digital, 5% outdoor, 3% radio and 1% television.Digital marketing is an increasingly important aspect of the company’s marketing. Digital marketingactivities comprise email marketing (whereby customers are sent emails promoting special offers for flightsand ancillary products), online advertising (such as banner ads), and PPC (Pay-per-Click, whereby Aer Linguspays search engines such as Google for every click on an Aer Lingus sponsored link).On average, Aer Lingus sends approximately 900,000 marketing emails a month. Aer Lingus email responserates for flight-related emails are above the average for service industries (which includes travel-relatedindustries). Open rates (i.e. rates at which emails are opened by recipients) are 54% higher than average forservice industries and click through rates (i.e. rates at which respondents click through to the supplier’s87

Part VIIIInformation on Aer Linguswebsite) are 79% higher than the average for service industries. (Source: Epsilon Interactive, Email TrendsUpdate and Benchmark Data, Q1 2006).Given its measurability and efficiency at driving direct sales, Aer Lingus believes that digital marketing canprovide considerable opportunities to further enhance its marketing strategy.Aer Lingus also engages in loyalty marketing through its frequent flyer programme, Gold Circle. Thisprogramme targets regular business travellers and it has approximately 10,000 members. There are threetiers of membership status (Elite, Prestige and Gold), which offer different levels of membership privilegesand awards.15. CARGO OPERATIONSAer Lingus provides cargo and mail transportation services in the bellyhold space of its passenger aircraft oncertain routes. Aer Lingus does not operate, own or lease any dedicated cargo aircraft. Aer Lingus’ cargooperations generated total revenues of 041.5 million in the year ended 31 December 2005. Transatlanticcargo revenues represented 93% of total cargo flown route revenues in the year ended 31 December 2005.Aer Lingus’ principal direct competitors on its transatlantic cargo operations are American Airlines and DeltaAirlines. There is also significant indirect competition from cargo services offered indirectly through LondonHeathrow by either bmi’s Dublin-London Heathrow service or trucking companies to bring cargo to LondonHeathrow where it connects with transatlantic services operated by various carriers. The transatlantic cargomarket is competitive and Aer Lingus’ yields have fallen in recent years. The IT and pharmaceutical PR Ann I,industries have been key drivers of demand for Aer Lingus’ transatlantic cargo operations. Aer Lingus 6.1.2believes that its Dublin to Dubai route, which commenced in March 2006, provides opportunities to growits cargo business to and from the Far East, with the potential development of Dublin as a gateway in thecargo market, linking the United States with the Middle East, the Far East and Australasia.Following a strategic review, Aer Lingus scaled back its short-haul cargo operation in late 2004, with theresult that cargo operations are now limited to those services which generate the highest revenues. Inparticular, Aer Lingus currently provides cargo transportation services on its operations to the United States,Germany and to a lesser extent, the Netherlands, most of which connect with Aer Lingus’ transatlanticservices. Aer Lingus also provides limited mail transportation services to the United Kingdom. The maincompetition in the short-haul network is provided by numerous trucking companies.Aer Lingus provides its own cargo handling services at Dublin and Shannon airports. It relies on third-partyhandling service providers at all other airports. In addition, Aer Lingus provides third-party cargo handlingservices to Singapore Airlines, SAS and Lufthansa at Dublin and Shannon airports.16. ANCILLARY REVENUESIn addition to revenues generated from passenger ticket sales and cargo services, Aer Lingus generatesrevenues from the sale of ancillary products and services that are ancillary to its core passenger flightoperations. These ancillary revenues include:➤ in-flight sales of merchandise (including duty-free sales on flights outside the European Union);➤ in-flight sales of beverages and hot and cold meals on short-haul routes and in-flight sales of alcoholicbeverages on long-haul routes;➤ baggage charges, excess baggage charges, flight-change fees and refund fees;➤ commissions from online sales of car rentals, hotel accommodation and travel insurance throughaerlingus.com; and88

Part VIIIInformation on Aer Lingus➤ fees for upgrading tickets from the economy cabin to the business class cabin on long-haul routes, feesfor passenger access to airport lounges, commissions from online currency conversion and advertisingrevenues generated by Aer Lingus’ in-flight magazine.In 2005, total ancillary revenues under IFRS accounted for 048.2 million, or 4.8% of Aer Lingus’ totalrevenues. Ancillary revenues per passenger under IFRS were 06.00 in 2005 compared to 04.83 in 2004.Aer Lingus has identified opportunities to increase its ancillary services, including through the use ofdynamic packaging which permits customers to book car rental, hotel accommodation and travel insuranceas a package through aerlingus.com as opposed to the current practice, which requires the transfer of thecustomer to a third-party website. Dynamic packaging of car rental is expected to be implemented in thefinal quarter of 2006, and dynamic packaging of hotel accommodation and travel insurance is expected tobe implemented in the first quarter of 2007.17. MAINTENANCEAircraft maintenance, repair and overhaul are critical to the safety and comfort of Aer Lingus’ passengers,the efficient use of its aircraft and the optimisation of its fleet Utilisation.Aircraft maintenance primarily takes the form of line maintenance, ‘‘A’’ Checks and ‘‘C’’ Checks. Linemaintenance is the routine daily and transit checks on all aircraft. ‘‘A’’ checks are due on Aer Lingus’ fleet ofA320 and A330 aircraft after every 600 hours of flying time. ‘‘C’’ Checks are due on the A320 fleet every20 months and on the A330 fleet every 18 months. The ‘‘A’’ Checks and ‘‘C’’ Checks are carried out inaccordance with a maintenance schedule approved by the IAA. Heavy checks are carried out every six yearson A320 aircraft, and every five years on A330 aircraft.The Aer Lingus maintenance system is subject to repeated audit programmes from the IAA and IOSA (IATAOperational Safety Audits).Aer Lingus outsources the majority of its general aircraft maintenance to two main providers, SR TechnicsIreland Limited for aircraft maintenance and GE Engine Services for engine overhauls. Under the agreementwith SR Technics Ireland Limited, which expires in October 2008, SR Technics Ireland Limited performs allscheduled and unscheduled aircraft maintenance at Dublin airport (with the exception of some technicalservices that are performed in-house by Aer Lingus) on Aer Lingus’ A330 family aircraft and on 20 of itsA320 family aircraft. Aer Lingus currently performs line maintenance on the remainder of its A320 aircraftat Dublin airport and on all of its aircraft at Cork, Shannon and London Heathrow airports. In relation toengine overhauls, Aer Lingus has long-term agreements in place with GE Engine Services for the enginesinstalled on both its A320 and A330 family aircraft.A summary of Aer Lingus’ aircraft maintenance agreement with SR Technics Ireland Limited is set out inparagraph 8.4 (SR Technics Ireland Limited Maintenance Agreement) of Part XV (Additional Information) ofthis Prospectus.18. SAFETY, TRAINING AND INSURANCEAer Lingus’ commitment to safety is paramount, and it is a member of a number of airline organisationscommitted to air safety, including IATA, IAA Safety Management Working Group, the United KingdomFlight Safety Committee, the Flight Safety Foundation, the Runway Safety Committee and the National BirdHazard Committee. Aer Lingus is subject to regular safety reviews, in particular from the IAA and otherairlines.Aer Lingus’ training programmes are designed to prevent accidents and cover all aspects of flightoperations, such as handling dangerous goods, aviation security and air safety. Staff training in all89

Part VIIIInformation on Aer Lingusoperational departments is mandatory. Training records and processes are regularly subject to externalreview and audit.Aer Lingus has developed a comprehensive crisis plan, which is fully documented. This plan is tested everysix months to ensure that it is current and that Aer Lingus is prepared to respond to adverse events.Aer Lingus has had no air safety incidents involving fatalities since 1968. Aer Lingus is exposed to potentialcatastrophic losses that may be incurred in the event of an aircraft accident or terrorist incident. Aer Lingusmaintains aviation insurances (covering liability to passengers and crew, third-party liability, terroristincidents and aircraft loss or damage) and general insurances (for example, property, motor, employers’liability, directors and officers) in amounts that are consistent with industry standards and that meet itsobligations under applicable laws and regulations. Aer Lingus’ aviation insurance is procured jointly withBritish Airways, and this arrangement is expected to continue after Aer Lingus’ exit from the oneworldglobal alliance. Aer Lingus believes that this enables it to obtain insurance on more competitive terms thanwould be the case if it was procured individually.19. AIRPORT GROUND OPERATIONSAer Lingus provides its own aircraft and passenger handling services at Dublin, Shannon and Cork airports.Handling services include check-in, catering, cleaning, baggage-handling, arrivals passenger services, rampand ground support.Outside of Dublin, Shannon and Cork airports, handling services are provided by third-party contractors fora fee. Most of the agreements with these contractors are short-term agreements, the principal exceptionbeing the ground handling agreement at London Heathrow airport where the contract term is for five yearsbeginning in May 2005. Further information about this agreement is set out in paragraph 8.7 (MenziesGround Handling Agreement) of Part XV (Additional information) of this Prospectus.20. EMPLOYEESFollowing the downturn in the global aviation industry after the terrorist attacks in New York andWashington DC on 11 September 2001, Aer Lingus implemented a restructuring plan. Aer Lingus’workforce has been reduced by more than 2,500 employees since 2001 as a result of this restructuring planand other voluntary severance plans introduced between 2002 and 2005.As at 30 June 2006, Aer Lingus had 3,242 permanent employees. As at 30 June 2006, Aer Lingus had671 temporary full-time and 36 temporary part-time employees. There are seasonal variations in thenumbers of temporary employees of Aer Lingus, who are employed on fixed-term contracts, primarily ascabin crew, catering staff and in ground handling operations.The following tables set out the number of permanent employees by category of activity and geographiclocation as at 30 June 2006:PR Ann I,17.1Cabin Cargo Flight GroundCrew Agents Catering Clerical Crew Handling Maintenance Management Other TotalPermanent employees ** 1,047 29 138 588 419 616 215 33 157 3,242Source: Internal operating reporting systems.UnitedUnited Continental United ArabIreland Kingdom Europe States Emirates TotalPermanent employees ***************** 3,098 37 8 99 0 3,242Source: Internal operating reporting systems.90

Part VIIIInformation on Aer LingusThe following table sets out increases in staff productivity over the period from 2001 to 2005:2005 2004 2003 2002 2001Staff costs per passenger carried (0) ********************** 31.0 35.31 36.59 37.01 38.29Passengers flown per FTE ******************************* 2,315 1,782 1,540 1,336 1,033Source: Internal operating reporting systems.As at 30 June 2006, approximately 92% of Aer Lingus’ employees were members of trade unions. As ofthat date, approximately 51.7% of its unionised employees were members of SIPTU, approximately 44.5%were members of IMPACT and approximately 3.8% were members of various other trade unions.Aer Lingus has adhered to the principles of social partnership in Ireland. The most recent national wageagreement expired on 1 July 2006. A new national wage agreement has been agreed which would provideemployees with pay increases of 10% phased over 27 months effective from 1 July 2006. This nationalwage agreement entitled ‘‘Towards 2016’’ has been ratified by both the Irish Business and EmployersConfederation and the Irish Congress of Trade Unions. Aer Lingus intends to adhere to this latest nationalwage agreement, subject to receiving a commitment from the trade unions representing Aer Lingus’employees reaffirming their commitment to ongoing change.The Company and the trade unions representing Aer Lingus’ employees have agreed that continuousimprovement in efficiency, productivity and cost-effectiveness will be achieved through a process ofconsultation and agreement between management and those trade unions. Aer Lingus along with thetrade unions have agreed that Aer Lingus will, to the extent possible, and with the co-operation of the tradeunions and employees, address any resulting surplus of staff by way of redeployment, transfer and/orvoluntary unpaid leave or voluntary redundancies. Aer Lingus has confirmed that, in the context ofcontinuous improvement, it does not intend to pursue any further outsourcing of its operations under the2006-2010 long term strategic plan.20.1 Recommendation of Labour CourtThe trade unions representing Aer Lingus’ employees submitted pay and related claims to Aer Lingus in2005 based on the contributions made by employees in connection with the restructuring of Aer Lingus.Following the submission of these claims, Aer Lingus and the trade unions representing Aer Lingus’employees entered into discussions on the claims. As the discussions did not result in an agreed positionbetween Aer Lingus and those trade unions, the matter was referred to the Labour Court.The Labour Court issued its non-binding recommendation on 1 August 2006. The Labour Courtrecommended that Aer Lingus implement a pay increase for all its Irish employees (other than its pilots) of4%, of which 3.5% would be payable from 1 September 2006 and 0.5% would be payable from 1 April2007. The Labour Court also recommended that certain one-off lump sum payments of amounts ofbetween 0400 and 04,400, depending on length of service, also be made to Irish and UK employees (otherthan pilots) by Aer Lingus. The aggregate amount of the recommended lump sum payments would beapproximately 010 million. The Labour Court further recommended that the benefit payable by Aer Lingusto Irish employees (other than pilots) under its death-in-service scheme should be increased from one times’salary to two and one half times’ salary and that certain modifications be made to the timing of theincremental salary increases provided by Aer Lingus to employees on attaining specified lengths of service asan employee. The Company has agreed to make these payments subject to the implementation of the0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation.Aer Lingus has proposed to the trade unions representing Aer Lingus’ employees that the Labour Courtrecommendation will not be implemented in full and instead Aer Lingus will capitalise 0.5% of thisrecommended pay increase to fund the acquisition of Offer Shares by the ESOT. Aer Lingus’ unionisedemployees (other than its pilots) are being asked in ballots organised by the Irish Congress of Trade Unionsto approve this proposal (the ‘‘Employee Ballot’’). This ballot has commenced and will be completed on15 September 2006. Aer Lingus has taken all steps open to it to ensure that this proposal will be approvedas a result of the Employee Ballot. Further information is set out in paragraph 3.3 (If the 0.5% Capitalisation91

Part VIIIInformation on Aer LingusRecommendation and the Pilots Pay Tribunal Recommendation cannot be implemented by Admission, thearrangements with the ESOT and Aer Lingus’ employees described in this Prospectus will be subject tovariation) of Part III (Risk Factors) of this Prospectus.20.2 Recommendation of Pilots Pay TribunalOn 11 August 2006, the Pilots Pay Tribunal issued its recommendations in relation to pay and related claimsof the Irish Airline Pilots Association (‘‘IALPA’’). The principal recommendation of the Pilots Pay Tribunal wasthat Aer Lingus implement a pay increase for its pilots of 4%, of which 3.5% would be payable on1 September 2006 and 0.5% would be payable on 1 April 2007. In addition, the Pilots Pay Tribunalrecommended that the pilots employed by Aer Lingus should be entitled to be paid lump sums inconnection with the Offer in the same amount and on the same conditions as are being paid to other AerLingus employees as a result of the recommendation of the Labour Court. The aggregate amount of therecommended lump sum payments for Aer Lingus’ pilots is approximately 01.6 million. Furthermore, thePilots Pay Tribunal recommended that certain modifications be made to the timing of the incremental salaryincreases provided by Aer Lingus to pilots on attaining specified lengths of service as a pilot andrecommended that ‘‘in the event that the rest of the workforce, other than pilots accept the proposal toforego 0.5% of the Labour Court Recommendation to facilitate the purchase of shares, the pilot bodyshould likewise forego 0.5% of this pay award for such purpose from the same date’’ (the ‘‘Pilots PayTribunal Recommendation’’). This recommendation is subject to the approval of the pilots and is the subjectof ongoing discussions with the pilots. Further information is set out in paragraph 3.3 (If the 0.5%Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation cannot be implemented byAdmission, the arrangements with the ESOT and Aer Lingus’ employees described in this Prospectus will besubject to variation) of Part III (Risk Factors) of this Prospectus. The Pilots Pay Tribunal recommended that thepilot body cooperate with the introduction of new routes and a ‘‘fly anywhere’’ policy and that no furtherremuneration shall be payable in respect of such introduction.20.3 The New Profit Share ArrangementIn connection with the Offer, Aer Lingus has made a contractual commitment in the ESOT Deed of FurtherCovenant to establish a new employee profit share arrangement, which (provided the 0.5% CapitalisationRecommendation and the Pilots Pay Tribunal Recommendation are implemented by Admission) will beeffective from 1 January 2006 (the ‘‘New Profit Share Arrangement’’). The percentage of the Group’s profitbefore taxation and exceptional items that will be paid under the New Profit Share Arrangement each yearwill depend upon the Group’s return on average shareholders’ funds before any unrealised revaluationreserves as follows:Group return onEmployee share of Group profitaverage shareholders’ funds before taxation and exceptional itemsπ3.5% and ≤7% 2.5%π7% and ≤10% 5.0%π10% 7.5%The New Profit Share Arrangement is to be used primarily for the purchase of Ordinary Shares on or beforethe fifth anniversary of Admission and to discharge expenses. The New Profit Share Arrangement willterminate on the earlier of the fifth anniversary of Admission and the date the ESOT acquires the samenumber of Ordinary Shares as is equal to the number of Ordinary Shares which can be acquired under theESOT Option, either through exercise of the ESOT Option or market purchases or a combination of both.However, the New Profit Share Arrangement will continue to fund the repayment of all borrowings (capitaland interest) used to fund such purchases or the exercise of the ESOT Option where such purchases orexercises occur on or before the fifth anniversary of Admission. Further information about the ESOT Optionand the New Profit Share Arrangement is set out in paragraph 11 (The ESOT Option and the New ProfitShare Arrangement) of Part XIV (The Offer) of this Prospectus. Further information about the ESOT Deed ofFurther Covenant is set out in paragraph 8.10 (ESOT Deed of Further Covenant) of Part XV (AdditionalInformation) of this Prospectus.20.4 Travel Benefits and ConcessionsCurrent employees of Aer Lingus enjoy travel privileges, which are dependent on length of service andseniority. Retired employees of Aer Lingus maintain travel privileges similar to those they were entitled to as92

Part VIIIInformation on Aer LingusAer Lingus employees. In addition, persons employed at the date of disposal of certain entities sold by AerLingus maintain travel privileges similar to those they were entitled to prior to the date of the disposal. AerLingus makes provision for these privileges in its financial statements.21. PENSIONSAer Lingus operates two main occupational pension schemes, one for its pilots (the ‘‘Pilots’ Scheme’’) andone multi-employer plan for its other employees (the ‘‘Main Scheme’’) (collectively, ‘‘the Irish PensionSchemes’’). Although similar rules apply to both Irish Pension Schemes, the contribution rates and benefitsdiffer between the schemes. Under the Irish Pension Schemes, pension increases are not guaranteed andare payable at the discretion of the trustees out of available actuarial surpluses. In the past, the trustees ofthe Irish Pension Schemes have exercised their discretion to grant increases to pensions in payment in linewith rises in the Consumer Price Index.The actuary to the Main Scheme has noted that current funding levels are unlikely to allow for ongoingincreases at current levels. Further details of this actuarial valuation are set out in paragraph 7.1 (The IrishAirlines (General Employees) Superannuation Scheme) of Part XV (Additional Information) of thisProspectus. The Company, with the agreement of SIPTU and IMPACT proposes to establish and makecontributions to two supplemental trusts (the ‘‘Supplemental Funds’’), one for past service and one forfuture service. The purpose of the Supplemental Funds will be to seek to provide, insofar as available fundspermit and subject to their trustees’ discretion, increases to pensions in payment for those members of theMain Scheme who are also participants in the Supplemental Funds where the trustees of the Main Schemedo not grant increases to pensions in payment in line with rises in the Consumer Price Index. TheSupplemental Funds do not apply to the Pilots’ Scheme because, even after allowing for discretionaryincreases to pensions in payment, at the most recent actuarial valuation, the Pilots’ Scheme disclosed asurplus.The implementation of the Supplemental Funds is contingent upon agreement on the principal terms of theSupplemental Funds being reached by the Company and SIPTU and IMPACT, and the subsequentcompletion of the detailed legal documentation required to establish the Supplemental Funds.If established, the first Supplemental Fund will receive a one-off contribution from the Company which shallnot be less than 049.87 million and not more than 070 million. The exact amount to be contributed will bedetermined by reference to a formula based on the number of employees of the Company who elect tocontribute to the second Supplemental Fund. This first Supplemental Fund will apply in respect of serviceprior to its establishment.The second Supplemental Fund will apply to future service. If established, the Company will make a one-offcontribution to the second Supplemental Fund and will also pay ongoing contributions. The Company’sone-off contribution to the second Supplemental Fund will not exceed 034 million, but the exact amount ofthe Company’s one-off contribution will again be determined by reference to a formula based on thenumber of employees of the Company who elect to contribute to the second Supplemental Fund.Following the establishment of the second Supplemental Fund, employees of the Company who elect toparticipate in that fund (‘‘Participating Employees’’) will make contributions at the rate of 2% per annum ofpensionable salary and the Company will make contributions in respect of Participating Employees at therate of 4% per annum of pensionable salary. SIPTU and IMPACT have indicated that their agreement tothese terms is on the basis that such agreement is without prejudice to such claims, (if any), which anyemployees of SR Technics Ireland Limited who were formerly employed by the Company might makeagainst the Company.The participants in the first Supplemental Fund will be pensioners of the Main Scheme who were employeesof the Company at the time of their retirement and Deferred Members who were employees of theCompany when they ceased to contribute to the Main Scheme and who have left their benefit in the MainScheme. Current employees of the Company cannot participate in the first Supplemental Fund unless theyelect to contribute to the second Supplemental Fund.93

Part VIIIInformation on Aer LingusAs is the case with the Main Scheme, the Supplemental Funds will be established on the basis that neitherthe Company nor a Participating Employee can be obliged to pay into either Supplemental Fund more thanthe foregoing specified contributions without their written consent.A term sheet outlining details of the two Supplemental Funds has been agreed with representatives ofSIPTU and IMPACT.Further information about pensions is set out in paragraph 2.10 (A default in the payment of basic pensionbenefits under the Company’s Irish Pension Schemes could possibly result in a future claim against theCompany) of Part III (Risk Factors) and paragraph 7 (Pensions) of Part XV (Additional Information) of thisProspectus. Further information about certain potential claims with respect to the Supplemental Funds is setout in paragraph 9.2C (Potential claims by Former TEAM Aer Lingus Employees Regarding SupplementalFunds) of Part XV (Additional Information) of this Prospectus.22. ESOT AND ESPSIn 1996, Aer Lingus established an Employee Share Participation Scheme (‘‘ESPS’’). As a result, 12,180,503Ordinary Shares in Aer Lingus, representing 4.7% of its then issued share capital, were issued to the ESPS.The ESPS was amended to become the Aer Lingus Approved Profit Sharing Scheme (‘‘APSS’’) on 28 April2003.In addition, the Aer Lingus Employee Share Ownership Plan (‘‘ESOP’’) was established in 2003 under theterms of the restructuring plan implemented in 2001. As a result, 30,472,725 Ordinary Shares, representing10.6% of the Company’s then issued share capital, were issued to the Aer Lingus Employee ShareOwnership Trust (‘‘ESOT’’) in August 2004 in consideration for changes to employee work practices andemployees agreeing to forego pay.Of the 42,653,228 Ordinary Shares issued pursuant to the ESPS and ESOP and held by Aer Lingus ESOP PR Ann III,Trustee Limited (amounting to 14.9% of the Company’s issued share capital), as of 8 September 2006, the S.3.3latest practicable date prior to publication of this Prospectus, approximately 12.6% were held for thebenefit of the Beneficiaries with the balance of 2.3% held for the benefit of APSS Participants.The statutory pre-emption rights of the existing shareholders in the Company, including the ESOT, tosubscribe for the New Ordinary Shares were disapplied at an extraordinary general meeting of the Companyon 11 September 2006. At the same meeting, the Pre-Admission Articles were amended so as to removethe ESOT Anti-Dilution Right and the APSS Anti-Dilution Right. Except with respect to the ESOT Subscriptionand the APSS Allocation, there will be no pre-emption rights to subscribe for Offer Shares vested in theexisting shareholders of the Company.The ESOT has agreed to subscribe for Offer Shares with an aggregate value of up to 033 million at the OfferPrice (the ‘‘ESOT Subscription’’). Based on the Offer Assumptions, this would result in the ESOT acquiring13,750,000 Offer Shares (representing 2.78% of the Company’s issued share capital immediately followingAdmission) pursuant to the Offer. The ESOT intends to fund the acquisition of these Offer Shares through acombination of its existing cash resources, additional profit share currently due to it under the existingemployee profit share arrangements, which were established as part of Aer Lingus’ 2001 restructuring plan,and a payment from the Company pursuant to the 0.5% Capitalisation Recommendation, if accepted, asdescribed further in paragraph 20 (Employees) of this Part VIII. Further information is set out inparagraph 3.3 (If the 0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendationcannot be implemented by Admission, the arrangements with the ESOT and Aer Lingus’ employeesdescribed in this Prospectus will be subject to variation) of Part III (Risk Factors) of this Prospectus.In addition, the Selling Shareholder has agreed to grant to the ESOT an option (the ‘‘ESOT Option’’) toacquire that number of Ordinary Shares currently held by the Selling Shareholder in the Company (the‘‘Option Shares’’) equal to the number of New Ordinary Shares as would be required to be issued to theESOT so as to restore the percentage shareholding of the ESOT in the issued share capital of the Company94

Part VIIIInformation on Aer Lingusto the level it was immediately prior to Admission (having taken into account the effect of any dilutioncaused by the subsequent issue of the Bonus Shares). The ESOT Option will be exercisable by the ESOT for aperiod of five years commencing on the date of Admission. Under the ESOT Option, the purchase price perOrdinary Share will be the Offer Price although, if and for so long as the Selling Shareholder holds 30% ormore of the issued Ordinary Share capital of the Company in certain circumstances the ESOT may be able topurchase Option Shares at a price which is the lower of the Offer Price and the average market price of theOrdinary Shares over a period prior to the date on which the ESOT Option is exercised. It is currentlyanticipated that any exercise of the ESOT Option would be paid for by the ESOT under the New Profit ShareArrangement. If Bonus Shares are issued, the number of Option Shares will be increased to maintain theESOT’s ability to restore its shareholding to 12.6%, as referred to above. The Selling Shareholder has agreedto vote the Option Shares as directed by the ESOT for the duration of the ESOT Option.If the 0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation cannot beimplemented by Admission, the ESOT will only be able to subscribe for 021 million of Offer Shares in theESOT Subscription and the ESOT Option will not come into effect.Under the Articles of Association, the ESOT is entitled (but not obliged) to nominate for appointment, havemaintained, and to remove up to two Directors for as long as its shareholding represents 5% or more of theOrdinary Shares in issue. Where the ESOT’s shareholding represents less than 5% but more than 1% of theOrdinary Shares in issue, the ESOT is entitled to nominate one Director for as long as its shareholding stayswithin these levels. Of the current Directors, Michael Johns is the nominee of the ESOT. Therefore, on thebasis of the Offer Assumptions, immediately following Admission the ESOT will have the right to nominateone further Director.Further information about the ESPS and the ESOT is set out in paragraph 6 (Employee Share Ownership) ofPart XV (Additional Information) of this Prospectus.23. INFORMATION TECHNOLOGYThe key operational systems of Aer Lingus are aerlingus.com, Astral and FastPass. Aer Lingus’ IT strategy isto prioritise the development and customisation of aerlingus.com and Astral. Aer Lingus’ preferredapproach is to buy and integrate software solutions, rather than to internally develop software products.23.1 aerlingus.comaerlingus.com is Aer Lingus’ primary distribution channel. The site is hosted by BT Ireland on behalf of AerLingus. Aer Lingus believes that the aerlingus.com infrastructure, which is based on a Sun/Solaris platformwith dual checkpoint firewalls, is both secure and has sufficient redundant capacity. aerlingus.com is fullyintegrated with the Astral reservation system using software provided by Datalex. A team of 14 IT staff isdedicated to developing and supporting the aerlingus.com website and its infrastructure.Current business initiatives include the introduction of dynamic packaging (the ability to purchase ancillaryservices (car rental, hotel accommodation and travel insurance) on aerlingus.com without needing to visit athird-party website) and the introduction of internet check-in through aerlingus.com. Dynamic packagingof car rental and internet check-in through aerlingus.com are expected to be implemented in the finalquarter of 2006, with the implementation of dynamic packaging of hotel accommodation and travelinsurance expected to follow in 2007.23.2 AstralAstral is Aer Lingus’ proprietary IT system for reservations, check-in, load-planning and schedule change. Itcontrols all bookings, inventory and availability on all Aer Lingus flights. Astral may be customised to meetAer Lingus’ business needs, in particular to facilitate its integration with aerlingus.com. In the opinion ofAer Lingus, it provides a reliable and secure operational environment for managing Aer Lingus’ business andinventory. Aer Lingus has eight development staff and six support staff dedicated to Astral.95

Part VIIIInformation on Aer Lingus23.3 FastPassFastPass provides self-service kiosks in airport terminals. This service is designed to increase customerconvenience by reducing queues at check-in and to deliver cost efficiency. Aer Lingus has deployed FastPassin Dublin airport since 2004. It has subsequently been introduced at Cork, London Heathrow and John F.Kennedy (New York) airports. For the six months ended 30 June 2006, FastPass accounted forapproximately 64% of total Aer Lingus passenger check-ins at Dublin airport, 33% of total Aer Linguspassenger check-ins at Cork airport, 77% of total Aer Lingus passenger check-ins at London Heathrowairport and 66% of total Aer Lingus passenger check-ins at John F. Kennedy (New York) airport. TheFastPass kiosk system is supported by IBM.23.4 Other Operational SystemsThe other principal operational systems used by Aer Lingus are AMOS (for control of all aircraftmaintenance data), NewRos for revenue management (this is the PROS industry standard revenuemanagement software deployed with certain customisation specific to Aer Lingus) and SOLAR (a proprietaryrevenue accounting and data management system).Aer Lingus’ systems have a strong record for operational stability and Aer Lingus has not experiencedprotracted system failures in the past that have had material adverse effects on its business.24. INTELLECTUAL PROPERTYAer Lingus believes that its name, logo and aerlingus.com website are integral parts of the Aer Lingus brandand have significant value to the Aer Lingus business.PR Ann I,6.4Aer Lingus has registered its name and logo as a trademark in Ireland, the European Union and the UnitedStates. In addition, it has registered aerlingus.com as a trademark and internet domain.25. REGULATIONThe air transport industry has historically been subject to significant governmental regulation both in Irelandand internationally. The regulatory framework in Ireland, in the European Union and internationally (outsidethe European Union) has had a significant influence on Aer Lingus’ business and operations. Examples ofthis influence would be:➤ Aer Lingus intends to expand its long-haul business, in particular to the United States. This is dependenton the EU/US open skies agreement on the liberalisation of the existing Ireland/United States bilateraltreaty. The European Commission and US authorities concluded the EU/US open skies negotiations on18 November 2005. The agreement was considered by the EU Council of Transport Ministers on5 December 2005, where the text of the agreement received unanimous support, subject to change inthe US policy concerning foreign ownership of US airlines. The US has recently announced that a delay inrulemaking on foreign control has arisen, and that the administration needs more time to address all theconcerns raised by Congress. However, a spokesperson for the US State Department has said that theadministration is holding to pledges made by the two sides in June 2006 on concluding an EU/US openskies agreement by the end of 2006 (Source: US State Department Daily Press Briefing 17 August 2006).The Minister for Transport has assured Aer Lingus that he remains confident that an EU/US open skiesagreement can be reached within a reasonable timeframe, and that he intends to pursue the earliestpossible implementation of the transitional agreement. The Minister for Transport has confirmed to theCompany that, in the event that an EU/US open skies agreement is not achievable within a reasonabletimeframe, he intends to seek to implement, in accordance with the applicable European Communitylaw, the essential elements of the transitional agreement by way of an amendment to the Ireland/UnitedStates bilateral treaty. Further details about the EU/US open skies agreement are set out in paragraph 1.3(EU/US Open Skies and Transitional Arrangements) of Part X (Regulation) of this Prospectus.PR Ann I,9.2.396

Part VIIIInformation on Aer Lingus➤ The legal framework in relation to the control of slots and in relation to airport charges is particularlyrelevant to Aer Lingus. Further information about the allocation of slots is set out in paragraph 2.2(Allocation of Slots) of Part X (Regulation) of this Prospectus. In addition, Aer Lingus’ Articles ofAssociation contain provisions requiring shareholder approval for the disposal of slots at LondonHeathrow airport. Further information about these provisions is set out in paragraph 5.2(p) (Disposal ofLondon Heathrow slots) of Part XV (Additional Information) of this Prospectus.➤ Since ALL’s entitlement to obtain or to continue to hold or enjoy the benefit of the licences, permits,consents or privileges that enable ALL to carry on business as an air carrier in Ireland and/orinternationally (‘‘ALL’s air carrier rights’’) can be adversely affected if too many of the Company’s sharesare held by persons with certain nationalities (‘‘Non-Qualifying Nationals’’), the Company’s Directors aregiven certain powers under the Articles of Association to take action to ensure that shareholdings ofNon-Qualifying Nationals in the Company’s share capital are not of a such size or type which couldjeopardise ALL’s air carrier rights. Information about the nationality-based restrictions on ownership ofshares in the Company set out in the Articles of Association are set out in paragraph 4.4 (ShareOwnership Restrictions) of Part XV (Additional Information) of this Prospectus.Further information on the regulatory framework for Aer Lingus’ business is set out in Part X (Regulation) ofthis Prospectus.26. STRATEGIC CO-OPERATIONIn 1999, Aer Lingus entered into a strategic alliance with British Airways and American Airlines. As part ofthe strategic alliance, Aer Lingus entered into codesharing agreements with British Airways and AmericanAirlines, as well as agreements in relation to the co-ordination of frequent flyer programmes and access tobusiness class lounges.On 1 June 2000, Aer Lingus extended its strategic alliance with British Airways and American Airlines bybecoming a member of the oneworld alliance, the global airline alliance formed by British Airways andAmerican Airlines and comprising a number of international airlines.The primary objectives of Aer Lingus’ strategic alliance with American Airlines are to ensure connectivity toUS points beyond the four gateways served by Aer Lingus and to benefit from the American Airlines globalsales effort for high yield passengers. Under the terms of the codesharing agreement, American Airlinesmay sell tickets and place its code on an Aer Lingus operated transatlantic flight when sold as part of aconnecting journey from another US city (e.g., Dallas-Chicago-Dublin). Similarly, the primary objectives ofthe strategic relationship with British Airways are to enable Aer Lingus to compete effectively on aworldwide basis. Under the terms of the codesharing arrangement, British Airways may sell tickets andplace its code on Aer Lingus operated services between Ireland and London Heathrow when sold as part ofa connecting journey (e.g., Dublin — London Heathrow — Bangkok). For 2005, approximately 5.4% of AerLingus’ passenger revenues derived from its interline and codesharing arrangements with American Airlinesand British Airways (Source: Management accounts and internal financial and operating reporting systems).On 30 May 2006, Aer Lingus announced its intention to exit the oneworld alliance, which is expected tobecome effective in April 2007. Since Aer Lingus joined oneworld in 2000, its business model has changedfundamentally as Aer Lingus has repositioned itself as a low-cost, low-fares airline. As a result, membershipof the oneworld alliance has become less relevant for Aer Lingus.However, going forward, it is part of Aer Lingus’ strategy to maintain strong bilateral relationships with itsexisting oneworld partners. In particular, Aer Lingus intends to maintain codesharing and interlinearrangements with British Airways and American Airlines and negotiations are currently ongoing withAmerican Airlines and British Airways to determine the shape of new arrangements which will come intoeffect following the exit of Aer Lingus from oneworld. It is the intention of Aer Lingus that the new bilateralagreements will retain the key elements of its existing arrangements with both American Airlines and BritishAirways.In addition, Aer Lingus has, since 1995 operated pursuant to a codesharing agreement with KLM. KLMcodeshares on Aer Lingus operated flights between Dublin and Amsterdam and Cork and Amsterdam. AerLingus also currently has interline agreements in place with 36 carriers.97

Part IXOperating and Financial ReviewPR Ann I,9,10,1220.4.2PR Ann I,20.4.31. PRESENTATION OF HISTORICAL FINANCIAL INFORMATION1.1 OverviewExcept as otherwise disclosed in this Prospectus, the financial information in this Part IX has been extractedwithout material adjustment from Part XII (Historical Financial Information) of this Prospectus and is basedon the audited consolidated financial statements of the Group, including (1) financial statements as at andfor the six months ended 30 June 2006 and 2005, which have been prepared on the basis of IFRS,(2) financial statements as at and for the years ended 31 December 2005 and 2004, which have beenprepared on the basis of IFRS, and (3) financial statements as at and for the years ended 31 December 2004and 2003, which have been prepared in accordance with Irish GAAP. See ‘‘Presentation of Financial andOperating Information’’ on page 5 of this Prospectus.In addition to historical consolidated financial information, the following discussion contains forwardlookingstatements that reflect Aer Lingus’ plans, estimates and beliefs. Aer Lingus’ actual results coulddiffer materially from those discussed in the forward-looking statements. See ‘‘Forward-LookingStatements’’ on page 4 of this Prospectus. Factors that could cause or contribute to these differencesinclude those discussed below and elsewhere in this Prospectus, particularly in Part III (Risk Factors) of thisProspectus.1.2 IFRS and Underlying Historical Financial InformationFor the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004, Aer Lingus presents financial information under IFRS. With respect to certain financialinformation included in this Prospectus, Aer Lingus also presents adjusted financial informationunder the caption ‘‘Underlying’’ which reflects its commercial hedging arrangements andexceptional items.To qualify for hedge accounting under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement), an entity must formally designate its hedging arrangements as hedges prior toentering into such arrangements and document its risk management strategy in respect of eachhedged item. In addition, it must be established that each hedging arrangement was highlyeffective to hedge the applicable risk as at each applicable balance sheet date and that there is anexpectation that the hedging arrangement will continue to be highly effective in the future.Aer Lingus has satisfied the prescribed hedge accounting requirements under IFRS-IAS 39 withrespect to all its foreign currency, fuel and interest rate hedging arrangements since 1 January2006. Aer Lingus did not meet the prescribed hedge accounting requirements with respect to allits hedging arrangements prior to 1 January 2006, primarily because the prescribeddocumentation was not in place and the related hedge effectiveness testing requirements werenot satisfied at the time the commercial hedging arrangements were entered into. As a result,changes in the fair value of the arrangements which do not satisfy the prescribed requirementsare recognised immediately in the income statement, rather than being originally recorded inshareholders’ equity in the balance sheet each time they are fair valued and subsequentlyrecorded in the income statement in the period in which the hedged item affects the incomestatement. The impact of Aer Lingus not satisfying these IFRS requirements is that certain gainson fuel and other commercial hedging arrangements in respect of Aer Lingus’ debt obligationsare recognised in the income statement in earlier accounting periods than they would otherwisebe under Irish GAAP.The notes to the audited consolidated financial statements for the six months ended 30 June2006 and 2005 and the years ended 31 December 2005 and 2004 prepared on the basis of IFRSseparately disclose Aer Lingus’ underlying financial performance under the caption ‘‘Underlying’’as if these commercial hedging arrangements had qualified in full for hedge accountingtreatment under IFRS-IAS 39 prior to 1 January 2006 by excluding the amounts set out under the98

Part IXOperating and Financial Reviewheading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gains andlosses, measured under IFRS, on such commercial hedging arrangements not qualifying for hedgeaccounting and by excluding exceptional items and the taxation impact of excluded items.Underlying data is provided for the Operating expense items of Fuel and oil costs and Other(gains)/losses, net. Underlying data also excludes Exceptional items and the taxation impact ofamounts excluded from Underlying data. Aer Lingus believes that the Underlying data providesinvestors with additional useful information on underlying trends in its business and operations.Underlying data may not be comparable with similarly-titled profit measurements reported byother companies. Underlying data is not intended to be a substitute for IFRS measurements ofprofits. Further information regarding the presentation of IFRS and Underlying historical financialinformation is set out in Note 2 (Underlying Performance Measures) of the notes to the historicalfinancial information for the six months ended 30 June 2006 and 2005 and Note 2 (UnderlyingPerformance Measures) of the notes to the historical financial information for the years ended31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.1.3 Reconciliation between Irish GAAP and IFRSAs IFRS differs in certain material respects from Irish GAAP, a description of the principal differencesbetween IFRS and Irish GAAP is set out in paragraph 12 (Reconciliation between Irish GAAP and IFRS) of thisPart IX which includes a quantitative and qualitative reconciliation of differences to show the transition fromIrish GAAP to IFRS as at and for the years ended 31 December 2005 and 2004. See also Note 31 of thenotes to the 2005 and 2004 historical financial information in Part XII (Historical Financial Information) ofthis Prospectus.2. OVERVIEW2.1 BackgroundAer Lingus is a low-cost, low-fares Irish airline, principally providing passenger transportation services. Forthe six months ended 30 June 2006, Aer Lingus operated a single economy class service on its short-haulroutes, including a maximum of ten routes to the United Kingdom and 56 routes to Continental Europe,and a two-class service on its long-haul routes, including a maximum of nine routes to the United Statesand one route to the United Arab Emirates. Aer Lingus provides cargo transportation services on itspassenger aircraft, primarily on its long-haul routes. Aer Lingus also provides various services ancillary to itspassenger transportation services, including in-flight sales of food, beverages and merchandise and sales ofcar rentals, hotel accommodation and travel insurance through aerlingus.com. Passenger, cargo andancillary revenues accounted for approximately 91%, 4% and 5%, respectively, of Aer Lingus’ totalrevenues for 2005.Although Aer Lingus was profitable for a sustained period prior to 2001, the 11 September 2001 terroristattacks in New York and Washington DC, an outbreak of foot-and-mouth disease in the United Kingdomand a general global economic downturn, particularly in the United States, had a significant adverse impacton the global aviation industry, including Aer Lingus. In addition, the environment in which Aer Lingusoperated experienced fundamental changes, including the increasing number of low-cost airlines and theimpact of high aviation fuel prices.PR Ann I,9.2.29.2.1Beginning in October 2001, Aer Lingus implemented a restructuring plan and significantly changed itsbusiness model in order to meet these challenges and return to profitability. As a result, Aer Lingus achievedan operating profit from continuing operations under Irish GAAP of 057.9 million in 2002 compared to anoperating loss from continuing operations under Irish GAAP of 052.1 million in 2001 (Source: Aer LingusGroup plc Annual Report 2002). The major elements of this restructuring plan included significantlyreducing the number of full-time equivalent employees and related staff costs, significantly reducingdistribution costs and other operating expenses (excluding fuel), increasing aircraft capacity, improving theUtilisation of its fleet, significantly increasing the number of short-haul routes, increasing its focus ondynamic revenue management and de-emphasising non-core activities.99

Part IXOperating and Financial Review➤ Significantly reducing operating expenses. Aer Lingus’ total operating expenses from continuingoperations significantly decreased from 2001 to 2005. Aer Lingus reduced the number of its full-timeequivalent employees from continuing operations by over 43% from 2001 to 2005, including asignificant reduction in its management team. Aer Lingus also implemented a staff pay freeze in 2002and 2003. Aer Lingus significantly reduced its distribution costs, including the amount of commissionspaid to travel agents, by: (1) shifting sales from the traditional travel agency channel to aerlingus.com,(2) achieving higher recovery of airport charges from its passengers; and (3) discontinuing bulk ticketsales to charter and package tour operators in October 2004. In 2005, approximately 71% of Aer Lingus’total passenger ticket sales was generated from direct bookings by customers through aerlingus.comcompared with less than 10% in 2001. In order to further reduce its other operating expenses, AerLingus began phasing out its business class cabin on short-haul routes in April 2004. Aer Lingus reducedits crew costs and in-flight catering costs in connection with the elimination of complimentary in-flightfood and beverages and the introduction of in-flight sales of food and beverages on all short-haul routesin the first quarter of 2004. Aer Lingus reduced its ground operations costs by introducing FastPass, itsself-service electronic terminal check-in system, at Dublin airport beginning in 2004 and subsequently atCork, London Heathrow and John F. Kennedy (New York) airports. For the six months ended 30 June2006, FastPass accounted for approximately 64% of total Aer Lingus passenger check-ins at Dublinairport, 33% of total Aer Lingus passenger check-ins at Cork airport, 77% of total Aer Lingus passengercheck-ins at London Heathrow airport and 66% of total Aer Lingus passenger check-ins at John F.Kennedy (New York) airport.➤ Increasing aircraft capacity; improving the Utilisation of its fleet. Aer Lingus began reconfiguring itsaircraft cabins following the phasing out of its business class cabin on short-haul routes in order tooptimise overall fleet capacity. Aer Lingus has been replacing its aircraft fleet on short-haul routes withthe Airbus A320 family of aircraft and its aircraft fleet on long-haul routes with the Airbus A330 family ofaircraft. The advantages of a single fleet include increased economies of scale and overall fleet flexibilitythrough the reduction in pilot and crew training, the elimination of multiple crew reserve pools and thesimplification of the support infrastructure of the fleet. Each A320 aircraft has a capacity of 180 SeatEquivalents and each A321 aircraft has a capacity of 220 Seat Equivalents. Aer Lingus has focused onmaximising its ASKs by minimising aircraft turnaround times and increasing the average daily flighthours. Aer Lingus’ increasing point-to-point network focus has also driven higher Utilisation by reducingrequired ground waiting times at airports.➤ Significantly increasing number of short-haul routes. From 2001 to 2005, Aer Lingus increased thenumber of short-haul routes it served from 31 to 64, with routes to Continental Europe increasing from16 to 54.➤ Increasing focus on dynamic revenue management. As a key part of its ongoing revenue management,Aer Lingus has focused on dynamic pricing and Yield management by analysing and setting theappropriate fare levels on each route as well as forecasting demand and optimising the allocation ofinventory (seats) at the different fare levels on each flight. Aer Lingus’ technology allows it to monitorchanges in market demand on a real-time basis which facilitates dynamic management of Yield andpassenger load factor, enabling it to maximise Unit Revenues. Aer Lingus introduced the ‘‘Low Fares.Way Better’’ initiative in August 2003 and one-way fares with minimal restrictions on all short-haul andlong-haul routes in September 2004. As a result of these initiatives, Aer Lingus’ average fare (includingairport charges and other taxes) on short-haul routes reduced from 0100.77 for 2004 to 087.55 for 2005and on long-haul routes reduced from 0270.60 for 2004 to 0262.07 for 2005.➤ De-emphasising non-core activities. Aer Lingus has de-emphasised its non-core activities by using thirdpartyproviders for services which it previously provided, such as airframe maintenance and engineoverhauls and handling services at airports outside of Ireland. It also sold its non-core computerisedreservation system subsidiary as well as most of its shareholding in Futura, which operates a charterbusiness and in which Aer Lingus retains a 20% shareholding.100

Part IXOperating and Financial ReviewThe following table sets out the changes over the periods presented in the number of routes served by AerLingus, its full-time equivalent employees and its aircraft fleet size:Full-TimeEquivalentAircraft FleetPeriod Routes (1) Employees (2) Owned (3)(4) Leased (4)(5) Total (4)(5)2001 ********************************** 44 6,108 21 18 392002 ********************************** 42 4,647 21 13 342003 ********************************** 47 4,281 21 9 302004 ********************************** 62 3,906 14 17 312005 ********************************** 73 3,475 17 17 342006 (through 30 June) ****************** 76 3,551 17 18 35Source: Internal operating reporting systems.(1) Includes the maximum number of short-haul, long-haul and Irish domestic routes served during the periods presented; excludesall Dublin/Shannon routes flown on long-haul flights between Ireland and the United States.(2) Reflects the average number of full-time equivalent employees from continuing operations during the period. Full-timeequivalent employees represent the total number of hours worked per week by all employees in each respective departmentdivided by the standard number of hours worked per week by all employees in each respective department aggregated across alldepartments.(3) Includes aircraft directly owned and aircraft subject to finance leases as at 31 December.(4) For the year ended 31 December 2003, excludes six aircraft which were withdrawn from service in October 2003 and returnedto lessors from 2004 to 2006.(5) Excludes aircraft leased under short-term wet leases.The changes in the number of routes served by Aer Lingus, its full-time equivalent employees and its aircraftfleet size from 2001 to 30 June 2006 illustrated in the table above show the effects of the initiativesimplemented by Aer Lingus as part of its 2001 restructuring plan. The increase in the number of routesserved was a result of Aer Lingus’ focus on expanding its short-haul network, the reduction in the numberof full-time equivalent employees was a result of Aer Lingus’ effort to reduce operating expenses and thedecrease in the number of aircraft was a result of Aer Lingus’ decision to replace its existing aircraft with asingle fleet of aircraft on each of its short-haul and long-haul networks and reconfigure its aircraft cabinsfollowing the phasing out of its business class cabin on short-haul routes in order to optimise overall fleetcapacity.By offering customers direct services to popular destinations at widely available low, value-for-money, onewayfares, Aer Lingus believes that it has been able to position itself in the low-cost carrier market segmentin Europe and has successfully participated in the strong growth of this market segment over the past fewyears.Aer Lingus’ 2001 restructuring plan is substantially complete. Aer Lingus continues to focus on controllingcosts as it expands its route network and increases its revenues.In order to increase profitability and maintain disciplined cost control, Aer Lingus has initiated a number ofmeasures that have been or are expected to be implemented in 2006 and 2007, including:) increasing the frequency of flights on its existing routes to meet additional demand;) expanding its short-haul route network, including an additional five new routes to the United Kingdomand Continental Europe in the final quarter of 2006;) expanding its long-haul route network, including commencing flights to Dubai in March 2006, and toadditional destinations in the United States if the open skies agreement between the European Unionand the United States is finalised or if the terms of the existing Ireland/United States bilateral treaty areotherwise relaxed;101

Part IXOperating and Financial Review) improving the overall quality of its economy and business class cabins on long-haul routes from October2006 through March 2007;) introducing a fuel surcharge on all long-haul passenger flights booked since 15 May 2006;) expanding its fleet, initially by leasing two additional Airbus A320 and purchasing two additional AirbusA330 aircraft for delivery in May and June 2007. Aer Lingus has recently reached an agreement withAirbus in relation to the terms of purchase for two additional A320 aircraft for its short-haul fleet whichwould be scheduled for delivery in late 2007 and expects that a contract for the purchase of theseaircraft will be signed shortly after the completion of the Offer;) promoting online sales of car rentals through the use of dynamic packaging on aerlingus.com in the finalquarter of 2006 and hotel accommodation and travel insurance in the first quarter of 2007;) introducing baggage charges for each item of checked-in luggage on all short-haul flights booked after8 August 2006 and flown after 17 January 2007 and reducing the checked-in baggage weightallowance on long-haul routes; and) maintaining disciplined cost control by maintaining a young, common aircraft fleet on each of its shorthauland long-haul networks, maintaining a low-cost distribution network, increasing staff productivityand making focused investments in new technologies such as online check-in beginning in the finalquarter of 2006.The success of these measures on Aer Lingus’ future results of operations will depend on a number offactors described in detail in paragraph 3 (Factors Affecting Aer Lingus’ Results of Operations) of thisPart IX.2.2. Recent DevelopmentsAer Lingus’ historical financial information for the six months ended 30 June 2006 is included in Part XII(Historical Financial Information) of this Prospectus. Aer Lingus’ business is seasonal and historicallyAer Lingus’ revenues for July, August and September have been higher than in other months. Aer Lingus’performance for the six months to 30 June 2006 was in line with the same period in 2005. AlthoughAer Lingus’ revenues for July 2006 were higher than for July 2005, operating profit for July 2006 was lowerthan for the same period in 2005. This shortfall resulted primarily from an increase in fuel and oil costs.On 10 August 2006, there was a terrorism alert in the United Kingdom which led to additional securityrestrictions at UK airports. During the period between 10 August and 17 August 2006, Aer Lingus had tocancel a number of its flights between Dublin and London Heathrow due to the disruption at LondonHeathrow. In addition, since 10 August 2006, there has been some negative impact on Aer Lingus’ advancepassenger bookings for August, September and October 2006, although passenger bookings for Novemberand December 2006 are in line with the comparable period as at the same point in 2005.In light of the impact of the terrorism alert on Aer Lingus’ passenger bookings, since the middle of August2006, Aer Lingus has been actively managing its business to generate demand to mitigate this shortfall,using tactical pricing initiatives to stimulate passenger demand. Aer Lingus believes that it is well-positionedto continue to develop its business in line with its strategy.The following forward-looking statements may be affected by the factors set out in Part III (Risk Factors) ofthis Prospectus.3. FACTORS AFFECTING AER LINGUS’ RESULTS OF OPERATIONS3.1 OverviewAer Lingus’ historical results of operations discussed in this Part IX may not be indicative of its futureoperating performance. Aer Lingus’ business, financial position and historical results of operations,PR Ann I,9.2.1102

Part IXOperating and Financial Reviewas well as the period-to-period comparability of its financial results, are affected by a number offactors. Aer Lingus’ future results of operations may be affected by, among other things:) aviation fuel prices;) seasonal fluctuations in passenger travel;) developments in government regulations and labour relations;) the future development of Dublin airport;PR Ann I,9.2.3) overall passenger traffic;) the high level of fixed costs in its operations;) foreign currency fluctuations, in particular between the euro and the US dollar;) changes in aircraft acquisition, leasing and other operating expenses;PR Ann I,9.2.3) the airline ticket pricing environment in a period of increased competition;) the finalisation of the proposed EU/US open skies agreement or the proposed relaxation of theexisting Ireland/United States bilateral treaty;) the ability to finance its planned acquisition of aircraft and to discharge any resulting debt serviceobligations;) higher landing fees;) the availability of additional slots or landing rights at existing airports and the availability of newairports for expansion;) increases in restrictions at airports and in airspace;) interest rate fluctuations;) extraordinary events, such as accidents, terrorist attacks or threats of terrorist attacks, naturaldisasters and outbreaks of contagious diseases;) the rates of taxes payable; andPR Ann I,9.2.3) general economic conditions in Ireland, the European Union and the United States.For further details on these and other factors which may affect Aer Lingus’ business and results ofoperations, see Part III (Risk Factors) of this Prospectus.As additional aircraft and related flight equipment are acquired, Aer Lingus expects its revenues andoperating expenses to continue to increase. In addition, the financing of new aircraft will increasethe total amount of Aer Lingus’ outstanding debt and the payments it is required to make to servicesuch debt.Some of the major factors that have materially influenced Aer Lingus’ financial condition and resultsof operations during the periods under review and are expected to continue to influence its financialcondition and results of operations are discussed in more detail below.PR Ann I,9.2.3PR Ann I,9.2.2103

Part IXOperating and Financial Review3.2 Increases in Aviation Fuel PricesAviation fuel prices are a significant variable that has substantially affected Aer Lingus’ results of PR Ann I,operations in recent years. Aviation fuel prices have historically been subject to volatility and wide 9.2.1fluctuations as a result of sudden disruptions in supply and increasing global demand. Aviation fuelprices may continue to increase as a result of the increased global demand for fuel, the currentshortage of fuel production capacity and/or production restrictions imposed by fuel oil producers.The following table sets out Aer Lingus’ fuel and oil costs and usage for the six months ended30 June 2006 and 2005 under IFRS and also on an Underlying basis (excluding the impact of fairvalue gains and losses on aviation fuel commercial hedging arrangements and exceptional items),together with the amounts excluded from Underlying data:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited)(unaudited)Effective average price perUS gallon of aviationfuel (2) ****************** $1.64 $0.27 $1.91 $1.18 $(0.68) $0.50Volume of aviation fuelpurchased (US gallonsin thousands) *********** 67,529 — 67,529 62,160 — 62,160Total fuel and oil costs (0 inmillions) *************** 090.6 015.0 1105.6 056.4 0(32.5) 123.9Total fuel and oil costs ($ inmillions) *************** $110.5 $18.4 $128.9 $73.3 $(42.2) $31.1Fuel and oil costs as a % oftotal revenues ********** 17.8% 3.0% 20.8% 12.5% (7.2%) 5.3%Fuel and oil costs per ASK(in 0 cent)************** 1.10 0.18 1.28 0.78 (0.45) 0.33PR Ann I,20.4.3n/m means not meaningful.Source: Management accounts and internal financial and operating reporting systems.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six monthsended 30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to excludethe amounts set out under the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gainsand losses measured under IFRS on aviation fuel commercial hedging arrangements entered into by Aer Lingus whichdo not fulfil the requirements for hedge accounting under IFRS-IAS 39.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX, and Note 2 of the notes to the historical financial information for the sixmonths ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.(2) Includes into-plane fees, which represent the costs of delivering fuel from suppliers to aircraft.104

Part IXOperating and Financial ReviewThe following table sets out Aer Lingus’ fuel and oil costs and usage for the years ended31 December 2005 and 2004 under IFRS and also on an Underlying basis (excluding the impact offair value gains and losses on aviation fuel commercial hedging arrangements and exceptionalitems), together with the amounts excluded from Underlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited)(unaudited)Effective average price perUS gallon of aviationfuel (2) ****************** $1.32 ($0.04) $1.28 $1.06 ($0.21) $0.85Volume of aviation fuelpurchased (US gallonsin thousands) *********** 131,166 — 131,166 122,698 — 122,698Total fuel and oil costs (0 inmillions) *************** 0138.9 (04.7) 1134.2 0105.8 (020.8) 185.0Total fuel and oil costs ($ inmillions) *************** $173.6 ($6.0) $167.6 $130.1 ($25.5) $104.6Fuel and oil costs as a % oftotal revenues ********** 13.9% (0.5%) 13.4% 10.5% (2.1%) 8.4%Fuel and oil costs per ASK(in 0 cent) ************** 0.90 (0.03) 0.87 0.77 (0.15) 0.62PR Ann I,20.4.3Source: Management accounts and internal financial and operating reporting systems.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to excludethe amounts set out under the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gainsand losses measured under IFRS on aviation fuel commercial hedging arrangements entered into by Aer Lingus whichdo not fulfil the requirements for hedge accounting under IFRS-IAS 39.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX, and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(2) Includes into-plane fees, which represent the costs of delivering fuel from suppliers to aircraft.The following table sets out Aer Lingus’ fuel and oil costs and usage for the years ended31 December 2004 and 2003 under Irish GAAP, which gives effect to Aer Lingus’ aviation fuelcommercial hedging arrangements:Year ended31 December2004 2003Effective average price per US gallon of aviation fuel (1) *************************** $1.06 $0.88Volume of aviation fuel purchased (US gallons in thousands) ********************* 122,698 114,040Total fuel and oil costs (0 in millions) ****************************************** 0105.8 089.6Total fuel and oil costs ($ in millions) ****************************************** $130.1 $100.4Fuel and oil costs as a % of total revenues************************************* 11.7% 10.1%Fuel and oil costs per ASK (in 0 cent) ***************************************** 0.77 0.73Source: Management accounts and internal financial and operating reporting systems.(1) Includes into-plane fees, which represent the costs of delivering fuel from suppliers to aircraft.105

Part IXOperating and Financial ReviewAs Aer Lingus’ fuel purchase obligations are denominated in US dollars, increases in aviation fuelprices from 2004 through 2006 resulted in an increase of Aer Lingus’ annual US dollar deficit. Thisincrease was partially offset by the strengthening of the average mid-day exchange rate for the euroagainst the US dollar to $1.22:01 for the six months ended 30 June 2006, $1.25:01 for 2005 and$1.23:01 for 2004 from $1.12:01 for 2003.Aer Lingus actively hedges its aviation fuel price exposure. As at 30 June 2006, Aer Lingus hadentered into fuel hedging contracts with respect to 83% and 16% of its projected aviation fuelrequirements for the remainder of 2006 and 2007, respectively. The mark-to-market value of AerLingus’ fuel commercial hedging arrangements as at 30 June 2006 was 030.6 million. Aer Lingusintroduced a fuel surcharge of 035 ($40) per passenger per sector on all long-haul routes bookedsince 15 May 2006. As of 31 July 2006, this fuel surcharge was increased to 040 ($46) per passengerper sector on all long-haul routes, except for the Los Angeles route which was increased to 045($53). Aer Lingus believes that the introduction of the fuel surcharge has not had a material impacton passenger traffic to date but there is no assurance that the fuel surcharge will not have a materialimpact on passenger traffic in the future. In addition, it may not be feasible to introduce fuelsurcharges on short-haul routes. Further information on aviation fuel price fluctuations is set out inparagraph 1.1 (The airline industry is exposed to aviation fuel price fluctuations. Increased costsand/or restricted availability of aviation fuel may affect Aer Lingus’ business, financial condition andresults of operations) of Part III (Risk Factors) of this Prospectus.Aer Lingus has applied a fuel surcharge with respect to its cargo transportation services since 2000.Aer Lingus records fuel surcharges with respect to its long-haul passenger and cargo services asrevenues, while gains and losses on fuel hedging contracts which meet the prescribed IFRSrequirements for hedge accounting under IFRS-IAS 39 (Financial Instruments: Recognition andMeasurement) are recorded as a component of fuel and oil costs on its income statement. Seeparagraph 1.1 (The airline industry is exposed to aviation fuel price fluctuations. Increased costsand/or restricted availability of aviation fuel may affect Aer Lingus’ business, financial condition andresults of operations) of Part III (Risk Factors) of this Prospectus and paragraph 10.4 (Aviation FuelPrice Exposures) of this Part IX.3.3 Seasonal Fluctuations(a)(b)Passenger and Ancillary RevenuesAer Lingus’ results of operations vary significantly from quarter to quarter within the financial yearand the second half of the year is generally stronger than the first half of the year. Historically, AerLingus has generated a substantial portion of its passenger revenues during the summer periodbetween June and September when many Europeans take their annual holiday and, to a lesserextent, during the Easter and Christmas/New Year periods. Average fares are generally higher duringthese periods. As a result, any disruption to Aer Lingus’ business during this part of the financial yearleading to lower Utilisation, lower Yields or reduced passenger load factor, would have adisproportionate impact on Aer Lingus’ results of operations. Aer Lingus generally generates lowerpassenger revenues from October through May. As the majority of Aer Lingus’ costs are incurredmore evenly throughout the year, Aer Lingus generally records lower operating results in the firstand fourth quarters of its financial year. As a result of seasonality of demand, together with its highrelative level of fixed costs, Aer Lingus’ passenger and ancillary revenues and profitability have variedand are expected to continue to vary significantly from quarter to quarter within the financial year.See paragraph 1.5 (Profitability in the airline industry can be cyclical and may be adversely affectedby political and economic uncertainty) and paragraph 1.6 (Profitability in the airline industry issubject to seasonal fluctuations) of Part III (Risk Factors) of this Prospectus.Cargo RevenuesIn contrast to passenger revenues, Aer Lingus’ cargo revenues are not seasonal and vary dependingon market opportunities, including from one-off contracts awarded to Aer Lingus.106

Part IXOperating and Financial Review(c)Maintenance ExpensesHeavy maintenance checks are typically performed in the off-peak winter season, from November toApril, when fewer aircraft are in use due to the decrease in passenger demand. Line maintenance orminor checks of aircraft occur throughout the year.3.4 High Level of Fixed CostsThe nature of Aer Lingus’ business, similar to that of other airlines, requires that a substantialpercentage of its operating expenses are fixed. A significant portion of Aer Lingus’ air transportexpenses, including certain staff costs, depreciation, maintenance expenses, aircraft overhaulexpenses, fuel and oil costs, aircraft handling fees, air traffic control charges, finance costs andaircraft operating lease costs, vary minimally based on passenger load factor. As a result, changes inAer Lingus’ operating expenses may not correspond, and historically have not corresponded, tochanges in its revenues. See paragraph 1.4 (Airlines have high fixed costs and low profit margins,which make them more vulnerable to relatively small changes in the numbers of passengers or in the PR Ann I,pricing or traffic mix) of Part III (Risk Factors) of this Prospectus.9.2.33.5 Foreign Currency Translation and Exchange Rate EffectsThe reporting currency of Aer Lingus is the euro. Aer Lingus generates revenues and incurs expensesin many other currencies due to the international nature of its operations. The primary currencies,other than the euro, in which it trades are the US dollar and, to a lesser extent, Sterling. Aer Lingushas an annual net deficit in US dollars, primarily because of the high level of US dollar expenses,including aircraft ownership and leasing expenses, aviation fuel costs, maintenance expenses andaviation insurance premiums, and an annual net surplus in Sterling.Aer Lingus hedges its foreign currency trading exposures in accordance with its treasury policy,which requires it to maintain minimum cover levels of 50% for the current financial year and 25%for the following financial year. As at 30 June 2006, Aer Lingus hedged its US dollar exposure at63% for the remainder of 2006 and 28% for 2007 at an average exchange rate of $1.24:01 foreach of 2006 and 2007 and hedged its Sterling exposure at 50% and 25% for 2006 and 2007,respectively, at an average exchange rate of £0.70:01 and £0.69:01, respectively. In connection withits aircraft purchase commitments as at 30 June 2006, Aer Lingus hedged its committed US dollarexposure at 98% for the remainder of 2006 and 70% for 2007 at an average exchange rate of$1.21: 01 and $1.23: 01, respectively. Cover levels are monitored and reviewed on an ongoing basisin light of market developments and the overall needs of the business. As at 30 June 2006,Aer Lingus also hedged balance sheet foreign currency exposures by matching foreign currencyassets and liabilities in order to minimise translation adjustments, as described in greater detail inparagraph 10.2 (Exchange Rate Exposures) of this Part IX. See paragraph 2.15 (Currency exchange PR Ann I,rate and interest rate movements may adversely affect Aer Lingus’ profitability) of Part III (Risk 9.2.3Factors) of this Prospectus.3.6 Interest Rate ExposureAer Lingus’ interest expenses primarily relate to its aircraft financing arrangements. Aer Lingus alsohas exposure to interest rate fluctuations in respect of certain of its finance and operating leaseswhich are at floating rates. Aer Lingus uses forward contracts and/or maintains matching currencydenominateddeposits, principally US dollars, as natural interest rate and currency hedges in respectof its debt and other financing arrangements. The interest rate risk in relation to Aer Lingus’ debtand aircraft lease portfolio is managed on a selective hedging basis using approved financial marketinstruments. Aer Lingus’ treasury policy requires that a minimum of 50% of its total long-term netdebt is at fixed interest rates, as described in greater detail in paragraph 10.3 (Interest RateExposures) of this Part IX. See paragraph 2.15 (Currency exchange rate and interest rate movementsmay adversely affect Aer Lingus’ profitability) of Part III (Risk Factors) of this Prospectus.3.7 Aircraft ExpensesAer Lingus has a number of fleet planning objectives, including maintaining an appropriate mix ofowned and leased aircraft, maintaining a relatively young aircraft fleet and spreading thereplacement of aircraft in its fleet over time. Achievement of these objectives is a function of a107

Part IXOperating and Financial Reviewnumber of considerations, including aircraft market dynamics, operating expenses and performancerequirements.Changes in Aer Lingus’ aircraft depreciation, amortisation and impairment, aircraft operating leasecosts and finance income/(expense) have primarily reflected changes in the mix of owned and leasedaircraft during the periods under review. As Aer Lingus expands its aircraft fleet in the next fewyears, its objective is to own, subject to market conditions, a higher percentage of its aircraftcompared to aircraft subject to operating leases than has been the case historically. Accordingly, tothe extent it achieves this objective, Aer Lingus expects its depreciation and amortisation and interestexpenses to be a higher percentage, and aircraft operating lease costs to be a lower percentage, ofits operating expenses than in the periods covered in this Part IX.4. REVENUES AND EXPENSES OVERVIEW4.1 RevenuesAer Lingus generates revenues from scheduled passenger, cargo, ancillary and other airtransportation operations.(a)Passenger RevenuesPassenger revenues under IFRS for the six months ended 30 June 2006 and 2005 represented shorthauland long-haul passenger revenues generated from scheduled passengers on short-haul routesand long-haul routes operated by Aer Lingus where passengers purchased their tickets throughAer Lingus or through other carriers. Short-haul and long-haul passenger revenues also includedadjustments principally relating to the recognition of revenues from unflown flights and ticketrelatedchange fees, as well as airport, security and insurance charges recoverable from passengers.Passenger revenues under IFRS for the years ended 31 December 2005 and 2004 represented(1) short-haul and long-haul passenger revenues generated from scheduled passengers on shorthaulroutes and long-haul routes operated by Aer Lingus where passengers purchased their ticketsthrough Aer Lingus or through other carriers and (2) other passenger revenues generated fromcharter flights. Short-haul and long-haul passenger revenues also included adjustments principallyrelating to the recognition of revenues from unflown flights and ticket-related change fees, as wellas airport charges and other costs recoverable from passengers.Passenger revenues under Irish GAAP for the years ended 31 December 2004 and 2003 represented(1) short-haul and long-haul passenger revenues generated from scheduled passengers on shorthaulroutes and long-haul routes operated by Aer Lingus where passengers purchased their ticketsthrough Aer Lingus or through other carriers and (2) other passenger revenues which are generatedfrom adjustments principally relating to the recognition of revenues from unflown flights and ticketrelatedchange fees. For 2004 and 2003 under Irish GAAP, passenger revenues did not includeairport charges and other costs recoverable from passengers, as these were netted against airportcharges.In 2005, Aer Lingus participated in interline agreements with 36 carriers and codesharingagreements with American Airlines, British Airways and KLM. These interline and codesharingarrangements represented approximately 10.5% of Aer Lingus’ total passenger revenues for 2005under IFRS.Passenger revenues under IFRS accounted for 88.9% and 90.2% of Aer Lingus’ total revenues forthe six months ended 30 June 2006 and 2005, respectively, and 90.6% and 90.2% of Aer Lingus’total revenues for the year ended 31 December 2005 and 2004, respectively. Passenger revenuesunder Irish GAAP accounted for 88.1% and 87.8% of Aer Lingus’ total revenues for the years ended31 December 2004 and 2003, respectively.108

Part IXOperating and Financial ReviewPassenger revenues under IFRS from short-haul routes accounted for 61.6% and 60.7% of totalrevenues for the six months ended 30 June 2006 and 2005, respectively, and 60.0% and 57.7% oftotal revenues for the years ended 31 December 2005 and 2004. Passenger revenues under IFRSfrom long-haul routes accounted for 27.3% and 29.5% of total revenues for the six months ended30 June 2006 and 2005, respectively, and 30.6% and 31.7% of total passenger revenues for theyears ended 31 December 2005 and 2004, respectively.Passenger revenues under Irish GAAP from short-haul routes accounted for 50.8% and 51.4% oftotal revenues for the years ended 31 December 2004 and 2003, respectively. Passenger revenuesunder Irish GAAP from long-haul routes accounted for 32.6% and 31.0% of total revenues for theyears ended 31 December 2004 and 2003, respectively. Other passenger revenues under Irish GAAPaccounted for 4.8% and 5.4% of total revenues for the years ended 31 December 2004 and 2003,respectively.Passenger capacity, or the number of seats offered for sale, is measured in terms of ASKs whichcorrespond to the number of seats available to passengers on a flight multiplied by the number ofkilometres flown. Passenger capacity utilisation is measured in terms of RPKs which correspond tothe total number of passengers multiplied by the distance flown per passenger represented inkilometres. The ratio of RPKs to ASKs is the passenger load factor.Passenger revenues are the product of the number of passengers and the average fare received perpassenger. The average fare received per passenger is the ticket price plus applicable taxes andairport charges under IFRS for the six months ended 30 June 2006 and 2005 and the years ended31 December 2005 and 2004 and ticket price only under Irish GAAP for the years ended31 December 2004 and 2003. Unit Revenues are determined as total revenues per ASK and varymainly due to the global economy and competitive pressures affecting price, exchange rates andpassenger load factor.Although Aer Lingus added 33 new short-haul routes from 2001 to 2005, growth of its long-haulroutes to the United States has been restricted by the existing terms of the Ireland/United Statesbilateral treaty. However, if the proposed EU/US open skies agreement is finalised or the restrictionsof the existing Ireland/United States bilateral treaty are otherwise relaxed, Aer Lingus expects thatthere will be opportunities to expand its US route network in the future. Aer Lingus commencedflights to Dubai, United Arab Emirates in March 2006. Further details about the status ofnegotiations on the EU/US open skies agreement are set out in paragraph 1.3 (EU/US Open Skiesand Transitional Arrangements) of Part X (Regulation) of this Prospectus.Aer Lingus focuses on maximising passenger revenues by maintaining high Utilisation rates. AerLingus is disciplined in selecting the appropriate route portfolio (determined as the optimalcombination of routes and frequencies that maximise the return on its fleet) and focusing itsoperations on achieving high ASKs. Aer Lingus focuses on dynamically optimising the target Yieldand passenger load factor that maximise the passenger revenues it generates on any specific route.109

Part IXOperating and Financial ReviewAer Lingus’ passenger revenues include ticket sales to passengers through aerlingus.com, Aer Lingusoffices, other airlines pursuant to interline and codesharing agreements and travel agents (includingonline travel websites). Prior to October 2004, Aer Lingus’ passenger revenues also included bulkticket sales to charter and package tour operators. The following table sets out the percentage oftotal passenger ticket sales for the six months ended 30 June 2006 and 2005 and the years ended31 December 2005, 2004 and 2003 generated from Aer Lingus’ distribution channels:Six Monthsended Year ended30 June 31 December2006 2005 2005 2004 2003(as a percentage of totalpassenger ticket sales)(unaudited)aerlingus.com*************************************************** 70% 68% 71% 50% 35%Aer Lingus offices/reservation call centres *************************** 9 8 8 11 15Other airlines (codeshare or interline) ****************************** 8 12 10 17 20Travel agents/tour operators ************************************** 13 12 11 22 30Source: Management estimates.For the six months ended 30 June 2006, approximately 85% of total passenger ticket sales in Irelandand the United Kingdom were generated from aerlingus.com.Consistent with its major low-cost competitors, Aer Lingus sells tickets on a fully non-refundablebasis on all short-haul routes and in the economy class cabin on all long-haul routes. Aer Lingusoffers refundable tickets exclusively to passengers in the business class cabin on long-haul routes.According to Aer Lingus’ current fare rules, passengers may change their tickets for a fee. Tickets onshort-haul and long-haul routes may generally be rebooked on to another flight at any time up toone hour prior to the scheduled departure, if the departure date for the rebooked flight is no morethan 330 days after the date originally booked. A rebooking fee of 035 per sector is added to anydifference in cost between the original ticket price and the ticket price available at the time thechange is made and any change made to the name of the ticketed passenger is subject to anadditional fee of 070. Changes made to business class tickets on long-haul routes are not subject toadditional fees.Passengers in the economy class cabin who cancel their flights, or otherwise do not travel, may onlybe refunded the amount of the airport taxes, fees and charges paid in connection with their ticket,subject to an administration charge. Passengers in the business class cabin on long-haul routes maycancel their flights at any time up to one hour prior to the scheduled flight departure for a fullrefund of the ticket price and all airport taxes, fees and charges paid in connection with their ticket,subject to a 10% cancellation fee.Prior to October 2004, Aer Lingus made bulk ticket sales to charter and package tour operators for aspecified number of seats on a particular flight at a set price. Tour operators would then sell thetickets to their customers, generally as part of a package tour. Tickets sold to tour operators weregenerally non-refundable.PR Ann I,20.4.3(b)Cargo RevenuesCargo revenues are comprised of total cargo flown route revenues and other cargo revenues. Totalcargo flown route revenues are derived from the transportation of cargo and mail in the bellyholdspace of passenger aircraft on certain passenger routes operated by Aer Lingus. Other cargorevenues include the provision of cargo handling services at Dublin and Shannon airports, as well asfuel and insurance surcharges, and terminal and mail revenues. Aer Lingus provides cargotransportation services on its scheduled passenger routes and does not own or lease any dedicatedcargo aircraft.110

Part IXOperating and Financial ReviewCargo revenues under IFRS accounted for 4.7% and 4.5% of total revenues for the six monthsended 30 June 2006 and 2005, respectively, and 4.1% and 5.0% of total revenues for the yearsended 31 December 2005 and 2004, respectively. Cargo revenues under Irish GAAP accounted for5.6% and 5.9% of total revenues for the years ended 31 December 2004 and 2003, respectively. Ascargo revenues represent a relatively small percentage of Aer Lingus’ total revenues, at the end of2004 Aer Lingus decided to limit the transportation of cargo to routes long-haul which generatedproportionately higher cargo revenues and Germany. The IT and pharmaceutical industries havebeen key drivers of Aer Lingus’ transatlantic cargo operations. In addition to providing its own cargohandling services at Dublin and Shannon airports, Aer Lingus provides third-party cargo handlingservices to Singapore Airlines at Dublin airport, SAS at Dublin airport and Lufthansa at Shannonairport.Cargo revenues under IFRS generated from long-haul routes accounted for 93.6% and 93.1% oftotal cargo flown route revenues for the six months ended 30 June 2006 and 2005, respectively, and92.9% and 83.4% of total cargo flown route revenues for the years ended 31 December 2005 and2004, respectively. Cargo revenue under Irish GAAP generated from long-haul routes accounted for83.4% and 81.9% of total cargo flown route revenues for the years ended 31 December 2004 and2003, respectively.Cargo traffic is measured in terms of scheduled cargo tonnes. Scheduled cargo tonnes on short-haulroutes were 1,234 and 996 for the six months ended 30 June 2006 and 2005, respectively, and2,178, 6,192 and 7,951 for the years ended 31 December 2005, 2004 and 2003, respectively.Scheduled cargo tonnes on long-haul routes were 10,906 and 9,289 for the six months ended30 June 2006 and 2005, respectively, and 18,895, 21,261 and 20,435 for the years ended31 December 2005, 2004 and 2003, respectively.(c)Ancillary RevenuesAncillary revenues include in-flight sales of merchandise, including duty-free sales on flights outsidethe European Union, as well as sales of alcoholic and non-alcoholic beverages, and hot and coldmeals on all short-haul routes following the elimination of complimentary in-flight food andbeverages and the introduction of in-flight sales of food and beverages on all short-haul routes inthe first quarter of 2004. Ancillary revenues also include excess-baggage charges, flight-change feesand refund fees as well as commissions from online sales of car rentals, hotel accommodation andtravel insurance. For the six months ended 30 June 2006 and 2005 and the years ended31 December 2005 and 2004 under IFRS, ancillary revenues also included online booking fees andfees for telephone reservations, which were recoverable from passengers. For 2004 and 2003 underIrish GAAP, ancillary revenues did not include these commissions and fees. Other ancillary revenuesinclude fees for upgrading tickets from the economy cabin to the business class cabin on long-haulroutes, fees for passenger access to airport lounges, commissions from online currency conversionwhich began in September 2005, and advertising revenues generated by Aer Lingus’ in-flightmagazine.Aer Lingus’ strategy is to grow its ancillary revenues significantly. Aer Lingus believes that ancillaryrevenues will grow as its route network expands and its passenger traffic increases. In addition,Aer Lingus has identified further growth opportunities for its ancillary revenues through(1) commission-based initiatives such as dynamic packaging of car rentals, hotel accommodation andtravel insurance through aerlingus.com, (2) baggage charges for each item of checked-in luggage onall short-haul routes and (3) expanding the range of products available for in-flight sales.(d)Other RevenuesOther revenues consist primarily of revenues from interline service charges received by Aer Linguswhen passengers fly on other airlines having originally purchased tickets through Aer Lingus, rentalincome from Aer Lingus’ owned and leased properties, and traffic handling charges.For the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004 under IFRS, other revenues did not include airport, security and insurance charges recoverable111

Part IXOperating and Financial Reviewfrom passengers. For 2004 and 2003 under Irish GAAP, other revenues included these charges. AsAer Lingus has phased out its traffic handling activities since October 2004, revenues generatedfrom these activities have declined accordingly over the period and were minimal in 2005.4.2 Operating ExpensesAer Lingus focuses on keeping its operating expenses low by maintaining a relatively young aircraftfleet with an average age as at 31 December 2005, of approximately three years for short-haulroutes and approximately nine years for long-haul routes maintaining high aircraft Utilisation rates,offering a single class of service on its short-haul routes, controlling its labour costs, implementingeffective use of third-party services for non-core activities, and controlling its distribution costs.Aer Lingus’ operating expenses include staff costs, depreciation, amortisation and impairment,aircraft operating lease costs, fuel and oil costs, maintenance expenses, airport charges, en-routecharges, distribution costs, ground operations, catering and other operating costs, and other(gains)/losses, net. Aer Lingus also includes ‘‘Employee profit share’’ as part of its total operatingexpenses. To a large extent, changes in operating expenses for Aer Lingus, similar to other airlines,are affected by changes in overall aircraft fleet capacity, expressed in terms of ATKs.(a)Staff CostsStaff costs include wages and salaries, year-end bonuses, pension and other benefits costs, othercrew costs and expenses, and contributions to a national social welfare plan (social welfareexpenses). Aer Lingus expects its staff costs to increase in accordance with a new Irish national wageagreement, which would provide employees with pay increases of 10.0%, which will be phased inover 27 months effective from 1 July 2006, of which 3.0% was payable in July 2006, 2.0% ispayable in January 2007 and 2.5% is payable in each of October 2007 and April 2008. Aer Linguswill not implement a Labour Court recommendation of a 4.0% per annum pay increase in full butwill instead pay its Irish staff (other than pilots) a one-time 3.5% salary increase, of which 3.0% ispayable from September 2006 and 0.5% is payable from April 2007. Aer Lingus will also pay itspilots a 3.0% and 0.5% per annum salary increase over the same period pursuant to arecommendation by the Pilots Pay Tribunal. Aer Lingus has proposed to the trade unionsrepresenting Aer Lingus’ employees that a further 0.5% of the Labour Court’s recommended payincrease will not be paid but instead will be capitalised to fund the acquisition of Offer Shares by theESOT. This proposal is the subject of a ballot which has been organized by the Irish Congress ofTrade Unions for Aer Lingus’ unionised employees (other than pilots), which is to be completed by15 September 2006. If approved and if the Pilots Pay Tribunal Recommendation is implemented, the0.5% increase will be capitalised and paid directly to the ESOT. Further information on thesearrangements is set out in paragraph 20 (Employees) of Part VIII (Information on Aer Lingus) of thisProspectus.Staff costs do not include (1) employee profit share payments, which are recorded as a separate lineitem under the heading ‘‘Employee profit share’’, or (2) payments made under Aer Lingus’ employeevoluntary severance and early retirement programme, which are recorded as exceptional items.Further information on employee profit share payments is set out in paragraph 4.2(k) (EmployeeProfit Share) of this Part IX.(b)Depreciation, Amortisation and ImpairmentDepreciation, amortisation and impairment includes the depreciation of all fixed assets, principallyowned aircraft and engines, and impairment of certain fixed assets, as discussed in detail inparagraph 11.3 (Property, Plant and Equipment) of this Part IX.112

Part IXOperating and Financial Review(c)(d)(e)(f)Aircraft Operating Lease CostsAircraft operating lease costs include costs for aircraft leases pursuant to operating leases.Fuel and Oil CostsFuel and oil costs include the cost of fuel and oil used to operate its aircraft fleet and the cost ofdelivering fuel from suppliers to aircraft. Fuel and oil costs have increased over each of the periodspresented and Aer Lingus expects these costs to continue to increase.Maintenance ExpensesMaintenance expenses include costs for airframe checks, component overhauls and enginemaintenance for leased aircraft. The majority of Aer Lingus’ general aircraft maintenance is providedby two main providers, SR Technics Ireland Limited for aircraft maintenance and GE Engine Servicesfor engine overhauls. Aer Lingus’ existing contract with SR Technics Ireland Limited expires inOctober 2008. See paragraph 8.4 (SR Technics Ireland Limited Maintenance Agreement) of Part XV(Additional Information) of this Prospectus. Maintenance expenses are expensed when incurred,except in the case of major inspections and overhauls where (1) in the case of owned aircraft,expenditures are capitalised and are depreciated over the period to the next major inspection, and(2) in the case of aircraft subject to operating leases, expenditures are provided for over the period tothe next major inspection.Airport ChargesAirport charges include tariffs levied by airports for use of terminal services, or load fees, landing ornavigation charges (which are higher at Dublin airport than at Cork and Shannon airports), parkingfees and charges from handling agents for passenger and baggage handling (including costsassociated with checking-in passengers and issuing tickets/boarding passes). Aer Lingus provides itsown handling services at Dublin, Cork and Shannon airports and the related costs are included instaff costs and ground operations, catering and other operating costs.For the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004 under IFRS, (1) airport charges represented the total amount of all charges paid by Aer Lingus,including charges which were ultimately recovered by Aer Lingus from passengers, and (2) theamount of airport charges which were recovered from passengers were recorded as passengerrevenues. For 2004 and 2003 under Irish GAAP, (1) airport charges included only the net amount ofsuch charges which were not recovered from passengers, and (2) no amounts in respect of airportcharges were recorded as passenger revenues.(g)(h)En-route ChargesEn-route charges are tariffs imposed by most governments in connection with the use of airspacebased on distance flown.Distribution CostsDistribution costs include advertising expenses, computer reservation systems costs, credit card fees,fees from telephone reservations service providers payable by Aer Lingus, travel agents’commissions, interline service charges and codeshare commissions, as well as other commissions andincentives.For the six months ended 30 June 2006 and 2005 and the years ended 31 December 2005 and2004 under IFRS, (1) distribution costs included the total amount of credit card fees, UK debit cardfees and fees from telephone reservations service providers payable by Aer Lingus and (2) the totalamount of online and telephone booking fees received from passengers were recorded as ancillaryrevenues. For 2004 and 2003 under Irish GAAP, (1) distribution costs included only the net amountof such fees payable by Aer Lingus, net of amounts received from passengers, and (2) no amountsreceived from passengers were recorded as ancillary revenues.Although distribution costs decreased significantly from 2003 to 2005 and Aer Lingus intends tocontinue controlling its distribution costs by maintaining a low-cost distribution network through113

Part IXOperating and Financial Reviewaerlingus.com, Aer Lingus does not expect distribution costs to decrease significantly in the future. Inaccordance with Aer Lingus’ recognition of distribution costs and ancillary revenues under IFRS, AerLingus expects distribution costs to increase in line with increases in passenger traffic and expects acorresponding increase in ancillary revenues, reflecting increased amounts recoverable frompassengers.(i)(j)(k)Ground Operations, Catering and Other Operating CostsGround operations, catering and other operating costs include expenses relating to Aer Lingus’ground operations (Aer Lingus office space, utilities, professional advisory fees, software licence fees,information technology expenses, property and general insurance, personnel training, miscellaneouscosts for ground operations, customer relations costs, frequent flyer programme costs and cargocosts), catering costs and other miscellaneous operating costs. Aer Lingus expects its catering coststo increase in line with the expansion of its in-flight sales of food and beverages.Other (Gains)/Losses, NetOther (gains)/losses, net reflect the impact of exchange rate fluctuations on Aer Lingus’ foreignexchange positions and operations.Employee Profit ShareAs part of Aer Lingus’ 2001 restructuring plan, an employee profit sharing arrangement wasestablished. Subject to certain conditions, Aer Lingus agreed to make 10% of its profit before taxand exceptional items available annually to the ESOT by way of profit share for the benefit ofemployees up to an aggregate maximum of 025.4 million over the life of the ESOT. No provision wasmade for the employee profit share in 2005 as the aggregate maximum amount of 025.4 millionwas reached in 2004, of which 016.1 million remains payable by Aer Lingus at any time upondemand by the ESOT.The terms of the profit sharing arrangement provide that the aggregate maximum of 025.4 millionwould be increased by 05.0 million to 030.4 million if the ESOT requires this additional amount tomaintain the ESOT’s percentage shareholding in Aer Lingus at the level existing immediately prior tothe date of the event resulting in an increase in Aer Lingus’ share capital. For the year ended31 December 2006, Aer Lingus will be required to make a provision for this additional 05.0 millionfollowing the completion of the Offer and the issuance of additional Ordinary Shares of Aer Lingusin connection with the Offer. Further information on Aer Lingus’ profit sharing arrangement is setout in paragraph 22 (ESOT and ESPS) of Part VIII (Information on Aer Lingus) and paragraph 7(Pensions) of Part XV (Additional Information) of this Prospectus.In connection with the Offer, Aer Lingus has made a contractual commitment in the ESOT Deed ofFurther Covenant to establish a new employee profit share arrangement, which (provided the 0.5%Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation are implemented byAdmission) will be effective from 1 January 2006 (the ‘‘New Profit Share Arrangement’’). Thepercentage of the Group’s profit before taxation and exceptional items that will be paid under theNew Profit Share Arrangement each year will depend upon the Group’s return on averageshareholders’ funds before any unrealised revaluation reserves as follows:Group return onEmployee share of Group profitaverage shareholders’ funds before taxation and exceptional itemsπ3.5% and ≤7% 2.5%π7% and ≤10% 5.0%π10% 7.5%114The New Profit Share Arrangement is to be used primarily for the purchase of Ordinary Shares on orbefore the fifth anniversary of Admission, and to discharge expenses. The New Profit ShareArrangement will terminate on the earlier of the fifth anniversary of Admission and the date theESOT acquires the same number of Ordinary Shares as is equal to the number of Ordinary Shareswhich can be acquired under the ESOT Option, either through the exercise of the ESOT Option ormarket purchases or a combination of both. However, the New Profit Share Arrangement will

Part IXOperating and Financial Reviewcontinue to fund the repayment of all borrowings (capital and interest) used to fund such purchasesor the exercise of the ESOT Option where such purchases or exercises occur on or before the fifthanniversary of Admission. Further information about the ESOT Option and the New Profit ShareArrangement is set out in paragraph 11 (The ESOT Option and the New Profit Share Arrangement)of Part XIV (The Offer) of this Prospectus. Further information about the ESOT Deed of FurtherCovenant is set out in paragraph 8.10 (ESOT Deed of Further Covenant) of Part XV (AdditionalInformation) of this Prospectus.5. RESULTS OF OPERATIONS5.1 Six Months Ended 30 June 2006 compared with Six Months Ended 30 June 2005 underIFRSThe following table sets out changes in certain of Aer Lingus’ income statement items for the sixmonths ended 30 June 2006 and 2005 under IFRS, the percentage of total revenues and thepercentage changes in those items:PR Ann I,9.1Six Months ended 30 JunePR Ann I,2006 200520.4.2Percent ofPercent ofTotal Percent TotalRevenues Change Revenues(1 in millions, except %)(audited, except %)Revenues ************************************************** 0508.3 100% 12.6% 0451.6 100%Operating expenses:— Cost of sales and other operating expenses ***************** (516.5) (101.6) 27.3 (405.6) (89.8)— Employee profit share************************************ — — — — —Operating profit/(loss) before exceptional items************** (8.2) (1.6) (117.8) 46.0 10.2Exceptional items ******************************************** 4.3 0.8 — — —Operating profit/(loss) after exceptional items *************** (3.9) (0.8) (108.5) 46.0 10.2Finance income/(expense), net ********************************* 9.2 1.8 84.0 5.0 1.1Profit before taxation*************************************** 5.3 1.0 (89.6) 51.0 11.3Taxation **************************************************** (1.7) (0.3) (68.5) (5.4) (1.2)Profit for the period **************************************** 0 3.6 0.7% (92.1)% 0 45.6 10.1%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.115

Part IXOperating and Financial ReviewThe following table sets out changes in certain of Aer Lingus’ income statement items for the six months ended 30 June 2006and 2005 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses on commercialhedging arrangements and exceptional items), together with the amounts excluded from Underlying data, the percentage oftotal revenues and the percentage changes in those items on an Underlying basis:Six Months ended 30 June2006 2005Amounts Underlying Amounts UnderlyingExcluded Percent of Percent Excluded Percent offrom IFRS Total Change from IFRS TotalUnderlying (1) Underlying Total Revenues Underlying Underlying (1) Underlying Total Revenues(2 in millions, except %)(audited, except %)Revenues *************** 3 508.3 3 — 2 508.3 100% 12.6% 3 451.6 3 — 2 451.6 100%Operating expenses ******* (497.8) (18.7) (516.5) 97.9 12.9 (441.1) 35.5 (405.6) 97.7— Cost of sales andother operatingexpenses ************ (497.8) (18.7) (516.5) 97.9 12.9 (441.1) 35.5 (405.6) 97.7— Employee profit share — — — — — — — — —Operating profit/(loss)before exceptionalitems ***************** 10.5 (18.7) (8.2) 2.1 — 10.5 35.5 46.0 2.3Exceptional items ********* — 4.3 4.3 — — — — — —Operating profit/(loss)after exceptional items 10.5 (14.4) (3.9) 2.1 — 10.5 35.5 46.0 2.3Finance income/(expense),net ******************* 9.2 — 9.2 1.8 84.0 5.0 — 5.0 1.1Profit before taxation *** 19.7 (14.4) 5.3 3.9 27.1 15.5 35.5 51.0 3.4Taxation ***************** (3.5) 1.8 (1.7) (0.7) (1.0) (4.4) (5.4) (0.2)Profit for the period***** 3 16.3 3 (12.7) 2 3.6 3.2% 11.7% 3 14.5 3 31.1 2 45.5 3.2%PR Ann I,20.4.2Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six monthsended 30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to excludethe amounts set out under the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gainsand losses measured under IFRS on commercial hedging arrangements entered into by Aer Lingus in connection with itsfuel, aircraft financing, foreign currency and interest rate obligations which do not fulfil the requirements for hedgeaccounting under IFRS-IAS 39. Underlying data is provided for the Operating expense items of Fuel and oil costs andOther (gains)/losses, net. Underlying data also excludes Exceptional items and the taxation impact of amounts excludedfrom Underlying data.For the six months ended 30 June 2006, the approximately 3(18.7) million excluded from Operating expenses (Cost ofsales and other operating expenses) on an Underlying basis comprised approximately 3(15.0) million of Fuel and oilcosts and approximately 3(3.7) million of Other (gains)/losses, net. Approximately 34.3 million is excluded fromExceptional items and 31.8 million is excluded from Taxation.For the six months ended 30 June 2005, the approximately 335.5 million excluded from Operating expenses (Cost ofsales and other operating expenses) on an Underlying basis comprised approximately 332.5 million of Fuel and oil costsand approximately 33.0 million of Other (gains)/losses, net. Approximately 3(4.4) million is excluded from Taxation.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX, and Note 2 of the notes to the historical financial information for the sixmonths ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.116

Part IXOperating and Financial ReviewThe following table sets out certain unaudited scheduled passenger and cargo operating data forAer Lingus for the six months ended 30 June 2006 and 2005, together with the percentage changesin those items:PR Ann I,20.4.3Six Months ended 30 June2006 Percent Change 2005(unaudited)Long-haulNumber of routes flown (1) ********************************** 10 11.1% 9Number of sectors flown (flights) *************************** 2,234 5.2 2,124Average sector length (in kilometres) (2) *********************** 5,527 (1.0) 5,582Number of passengers (in thousands) ************************ 533 (4.3) 557Average fare (including airport charges/taxes) (in 0)************ 259.93 8.9 238.67Average block hours per aircraft per day (3) ******************** 13.3 3.9 12.8ASKs (in millions) (4) **************************************** 3,697 3.9 3,557RPKs (in millions) (5) **************************************** 2,915 (4.7) 3,060Passenger load factor (flown RPKs per ASK) ****************** 79% (8.1) 86%Average number of Seat Equivalents (6) *********************** 2,625 — 2,625Utilisation (ASKs per Seat Equivalent in millions) (7) ************* 1.41 3.7 1.36Average number of aircraft********************************* 7.0 — 7.0Short-haulNumber of routes flown (1) ********************************** 66 15.8 57Number of sectors flown (flights) *************************** 26,785 4.1 25,728Average sector length (in kilometres) ************************ 935 10.3 848Number of passengers (in thousands) ************************ 3,619 12.0 3,230Average fare (including airport charges/taxes) (in 0)************ 86.49 1.9 84.86Average block hours per aircraft per day (3) ******************** 9.6 3.2 9.3ASKs (in millions) (4) **************************************** 4,560 23.0 3,707RPKs (in millions) (5) **************************************** 3,445 22.6 2,810Passenger load factor (flown RPKs per ASK) ****************** 76% — 76%Average number of Seat Equivalents (6) *********************** 5,102 9.5 4,658Utilisation (ASKs per Seat Equivalent in millions) (7) ************* 0.89 11.3 0.80Average number of aircraft********************************* 27.0 6.3 25.4Other Operating dataATKs (in millions) (8) **************************************** 915 12.5 813RTKs (in millions) (9) **************************************** 642 9.0 589Scheduled cargo tonnes *********************************** 12,139 18.0 10,285Source: Management accounts and internal financial and operating reporting systems.(1) Incudes the maximum number of routes served during the periods presented; excludes all Dublin/Shannon routes flownon long-haul flights between Ireland and the United States.(2) Flights between Ireland and the United States which have a stopover in Ireland are treated as one sector length.(3) Block hours per aircraft represents the total number of block hours divided by the total number of aircraft.(4) Available Seat Kilometres, or ASKs, are the total number of flights multiplied by route by the number of actual seats perflight multiplied by the distance per flight measured in kilometres.(5) Revenue Passenger Kilometres, or RPKs, are the number of passengers multiplied by the distance flown. It is a measureof the amount of total capacity sold during a period.(6) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy classconfiguration.(7) Utilisation is a measure of Aer Lingus’ efficiency in using its fleet to enhance capacity. Aer Lingus defines Utilisation asASKs per Seat Equivalent which represents the amount of available capacity, measured in ASKs, produced by each SeatEquivalent in its fleet.(8) Available Tonne Kilometres, or ATKs, are the number of tonnes of capacity available for the carriage of passenger andcargo load multiplied by the distance flown.(9) Revenue Tonne Kilometres, or RTKs, are the number of tonnes of revenue load carried on each sector of a flightmultiplied by the distance flown.117

Part IXOperating and Financial ReviewThe following table sets out key financial data for Aer Lingus for the six months ended 30 June 2006and 2005 under IFRS and also on an Underlying basis (excluding the impact of fair value gains andlosses on commercial hedging arrangements and exceptional items), together with the amountsexcluded from Underlying data:Six Months ended2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited) (2) (unaudited) (2)Revenues (0 in millions) ******* 508.3 — 508.3 451.6 — 451.6EBITDAR (0 in millions) (3) ******* 63.0 (18.8) 44.2 62.9 35.4 98.3Yield (Revenues per RPK,in 0 cent) ***************** 7.99 — 7.99 7.69 — 7.69Unit Revenues (Revenues perASK, in 0 cent)************* 6.16 — 6.16 6.22 — 6.22Unit Cost (Cash OperatingCosts per ASK, in 0 cent) (4) ** 5.39 0.23 5.62 5.35 (0.49) 4.86Total Utilisation (ASKs per SeatEquivalent in millions) ******* 1.07 — 1.07 1.00 — 1.00EBITDAR per Seat Equivalent(0 in thousands) (5) ********** 8.2 (2.4) 5.8 8.6 4.9 13.5Unit Cost Excluding Fuel(Cash Operating Costsexcluding fuel and oil costsper ASK, in 0 cent) ********* 4.30 0.04 4.34 4.57 (0.04) 4.53PR Ann I,20.4.3Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financialand operating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six monthsended 30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to excludethe amounts set out under the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gainsand losses measured under IFRS on commercial hedging arrangements entered into by Aer Lingus in connection with itsfuel, aircraft financing, foreign currency and interest rate obligations which do not fulfil the requirements for hedgeaccounting under IFRS-IAS 39. Underlying data is provided for the Operating expense items of Fuel and oil costs andOther (gains)/losses, net. Underlying data also excludes Exceptional items and the taxation impact of amounts excludedfrom Underlying data.For the six months ended 30 June 2006, the approximately 3(18.8) million excluded from EBITDAR on an Underlyingbasis comprised: (1) Profit for the period of approximately 3(12.7) million; (2) Taxation of approximately 3(1.8) million;and (3) Exceptional items of approximately 3(4.3) million. The 0.23 cent excluded from Unit Cost comprisedapproximately 0.18 cent of Fuel and oil costs and approximately 0.05 cent of Other (gains)/losses, net, and the0.04 cent excluded from Unit Cost Excluding Fuel comprised approximately 0.04 cent of Other (gains)/losses, net.For the six months ended 30 June 2005, the approximately 335.4 million excluded from EBITDAR on an Underlyingbasis comprised: (1) Profit for the period of approximately 331.0 million; and (2) Taxation of approximately 34.4 million.The (0.49) cent excluded from Unit Cost comprised approximately (0.45) cent of Fuel and oil costs and approximately(0.04) cent of Other (gains)/losses, net, and the (0.04) cent excluded from Unit Cost Excluding Fuel comprisedapproximately (0.04) cent of Other (gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX, and Note 2 of the notes to the historical financial information for the sixmonths ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.(2) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excludingRevenues, are considered non-GAAP financial measures which Aer Lingus believes are important to an understandingof its performance. These measures have limitations as analytical tools and investors should not consider them inisolation or as a substitute for analysis of Aer Lingus’ results as reported under GAAP.118

Part IXOperating and Financial Review(3) EBITDAR is defined as profit for the period plus exceptional items, net interest expense (finance expense), taxation,depreciation, amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share. EBITDARis considered a non-GAAP financial measure. Aer Lingus believes that EBITDAR is an important measure of itsperformance and is a useful supplement to profit for the period and other income statement data. Aer Lingus believesEBITDAR is useful to management and investors in comparing its performance to that of other companies in its industry,as it removes the impact of (a) differences in capital structure, including the effects of finance income and expense,(b) differences among the tax regimes to which Aer Lingus and comparable companies are subject and (c) differences inthe age, method of acquisition and approach to depreciation and amortisation of productive assets. However, becauseother companies may calculate EBITDAR differently than Aer Lingus does, it may be of limited usefulness as acomparative measure. EBITDAR has limitations as an analytical tool and investors should not consider it in isolation or asa substitute for analysis of its results as reported under GAAP. Some of these limitations are: (a) EBITDAR does notreflect cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) EBITDARdoes not reflect changes in, or cash requirements for, Aer Lingus’ working capital needs; (c) EBITDAR does not reflectthe finance expenses, or the cash requirements necessary to service Aer Lingus’ principal payments on its debt;(d) EBITDAR does not reflect taxation or the cash requirements for any tax payments; and (e) although depreciation,amortisation and impairment are non-cash charges, the assets being depreciated and amortised will often have to bereplaced in the future, and EBITDAR does not reflect any cash requirements for such replacements. A reconciliation ofEBITDAR to profit for the period under IFRS and on an Underlying basis is set out in the table below.(4) Cash Operating Costs are operating expenses other than net interest expense (finance expense), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share.(5) EBITDAR per Seat Equivalent is based on the annual average number of aircraft operated during the period.The following table sets out a reconciliation of EBITDAR to profit for the period under IFRS and also on an Underlying basis forthe six months ended 30 June 2006 and 2005:Six Months ended 30 June2006 2005AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying Underlying Total Underlying Underlying Total(2 in millions) (2 in millions)(unaudited) (1) (unaudited) (1)Profit for the period ************ 3 16.3 3 (12.7) 2 3.6 3 14.5 3 31.0 2 45.5Exceptional items **************** — (4.3) (4.3) — — —Finance (income)/expense, net ***** (9.2) — (9.2) (5.0) — (5.0)Taxation ************************ 3.5 (1.8) 1.7 1.0 4.4 5.4Depreciation, amortisation andimpairment ******************* 27.9 — 27.9 31.5 — 31.5Aircraft operating lease costs ****** 24.5 — 24.5 20.9 — 20.9Employee profit share ************ — — — — — —EBITDAR *********************** 3 63.0 3 (18.8) 2 44.2 3 62.9 3 35.4 2 98.3PR Ann I,20.4.3Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of thisProspectus. EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.119

Part IXOperating and Financial Review(a)RevenuesThe following table sets out an overview of Aer Lingus’ revenue items for the six months ended30 June 2006 and 2005 under IFRS on an absolute basis and as a percentage of total revenues,together with the percentage change in those items:PR Ann I,6.2Six Months ended 30 JunePR Ann I,2006 200520.4.2PercentPercentof Total Percent of TotalRevenues Change Revenues(1 in millions, except %)(audited, except %) (1)Passenger revenues ***************************** 0451.6 88.9% 10.9% 0407.1 90.2%— Long-haul ********************************** 138.6 27.3 4.2 133.0 29.5— Short-haul ********************************** 313.0 61.6 14.2 274.1 60.7Cargo revenues ******************************** 24.2 4.7 18.0 20.5 4.5Ancillary revenues ****************************** 29.9 5.9 41.0 21.2 4.7Other revenues ******************************** 2.6 0.5 (7.1) 2.8 0.6Total revenues ******************************** 0508.3 100% 12.6% 0451.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus, except for components of Passengerrevenues which are extracted from management accounts.(1) All data in this table is audited, except for percentage calculations and the components of Passenger revenues which areunaudited.The following table sets out an overview of Aer Lingus’ revenue items for the six months ended 30June 2006 and 2005 under IFRS on a geographic basis (by journey destination point) and as apercentage of total revenues, together with the percentage change in those items:Six Months ended 30 June2006 2005PercentPercentof Total Percent of TotalRevenues Change Revenues(1 in millions, except %)(audited, except %)Europe**************************************** 0313.6 61.7% 14.1% 0275.0 60.9%Rest of world ********************************** 149.0 29.3 3.5 143.9 31.9Ancillary and other unallocated revenue *********** 45.7 9.0 39.5 32.7 7.2Total revenues ******************************** 0508.3 100% 12.6% 0451.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.Aer Lingus’ total revenues increased by 12.6% to 0508.3 million in the six months ended 30 June2006 from 0451.6 million in the six months ended 30 June 2005, as a result of increases inpassenger, cargo and ancillary revenues, partially offset by a slight decrease in other revenues. UnitRevenues per ASK decreased by 1.0% to 6.16 cent in the six months ended 30 June 2006 comparedto 6.22 cent in the six months ended 30 June 2005.Passenger Revenues. Passenger revenues increased by 10.9% to 0451.6 million in the six monthsended 30 June 2006 from 0407.1 million in the six months ended 30 June 2005 as a result ofincreases in both short-haul and long-haul passenger revenues. The increase in passenger revenuesincludes a 37.8% increase in the amount of airport, security and insurance charges recoverable frompassengers to 080.8 million in the six months ended 30 June 2006 from 058.6 million for the six120

Part IXOperating and Financial Reviewmonths ended 30 June 2005. This increase was partially offset by a 25.4% decrease in the amountof revenues from unflown tickets to 012.3 million in the six months ended 30 June 2006 from016.5 million in the six months ended 30 June 2005.Short-haul passenger revenues increased 14.2% to 0313.0 million in the six months ended 30 June2006 from 0274.1 million in the six months ended 30 June 2005. This increase was due to anincrease in short-haul passenger traffic by 12.0% to 3.6 million passengers in the six months ended30 June 2006 from 3.2 million passengers in the six months ended 30 June 2005 primarily as a resultof the addition of new routes and increased frequencies, mostly in Continental Europe, and anincrease in the average fare of 1.9% to 086.49 in the six months ended 30 June 2006 from 084.86in the six months ended 30 June 2005. Short-haul capacity increased by 23.0% to 4.6 billion ASKs inthe six months ended 30 June 2006 from 3.7 billion ASKs in the six months ended 30 June 2005primarily as a result of the introduction of new routes, increased frequencies on existing routes, thereplacement of Boeing 737 aircraft with Airbus A320 aircraft with additional seating capacity,increased seating capacity on the A321 aircraft and the net addition of 1.6 aircraft to Aer Lingus’short-haul fleet. Short-haul capacity utilisation increased by 22.6% to 3.4 billion RPKs in the sixmonths ended 30 June 2006 from 2.8 billion RPKs in the six months ended 30 June 2005. Thepassenger load factor remained unchanged at 76% in both periods.Long-haul passenger revenues increased by 4.2% to 0138.6 million in the six months ended 30 June2006 from 0133.0 million in the six months ended 30 June 2005 primarily as a result of an 8.9%increase in the average fares to 0259.93 in the six months ended 30 June 2006 from 0238.67 in thesix months ended 30 June 2005 due, in part, to the introduction of the fuel surcharge on all longhaulflights booked since 15 May 2006. This increase was partially offset by a decrease in long-haulpassenger traffic by 4.3% to 533,204 passengers in the six months ended 30 June 2006 from556,939 passengers in the six months ended 30 June 2005 primarily as a result of thediscontinuation of the Orlando route in January 2006 and the delay between the discontinuation ofthe Orlando route and the commencement of the Dubai route in March 2006. Long-haul capacityincreased by 3.9% to 3.7 billion ASKs in the six months ended 30 June 2006 from 3.6 billion ASKs inthe six months ended 30 June 2005. Long-haul capacity utilisation decreased by 4.7% to 2.9 billionRPKs in the six months ended 30 June 2006 from 3.1 billion RPKs in the six months ended 30 June2005. The passenger load factor decreased to 79% in the six months ended 30 June 2006 from86% in the six months ended 30 June 2005 primarily as a result of increased frequencies ontransatlantic routes and the launch of the Dubai route in March 2006, as new routes tend to have alower initial passenger load factor than more established routes.Cargo Revenues. Cargo revenues increased by 18.0% to 024.2 million in the six months ended30 June 2006 from 020.5 million in the six months ended 30 June 2005, primarily as a result of anincrease in fuel surcharges by 78.6% to 05.0 million in the six months ended 30 June 2006 from02.8 million in the six months ended 30 June 2005. Scheduled cargo tonnes on short-haul routesincreased by 23.9% to 1,234 tonnes in the six months ended 30 June 2006 from 996 tonnes in thesix months ended 30 June 2005, and scheduled cargo tonnes on long-haul routes increased by17.4% to 10,906 tonnes in the six months ended 30 June 2006 from 9,289 tonnes in the six monthsended 30 June 2005.Ancillary Revenues. Ancillary revenues increased by 41.0% to 029.9 million in the six monthsended 30 June 2006 from 021.2 million in the six months ended 30 June 2005, primarily as a resultof: (1) increases in in-flight sales of 24.7% primarily driven by an increase in revenues generated onshort-haul flights as a result of an increase in short-haul passenger traffic; (2) increases in excessbaggagecharges of 95.0%; (3) increases in car rental commissions of 58.1%; and (4) increases inrevenues generated from web booking handling fees of 39.7%. The increase was also due toincreases in hotel accommodation commissions, call centre booking fees, upgrade fees, as well asincreases in commissions from online currency conversion which began in September 2005.Other Revenues. Other revenues decreased by 7.1% to 02.6 million in the six months ended 30June 2006 from 02.8 million in the six months ended 30 June 2005, primarily as a result of adecrease in traffic handling activities provided by Aer Lingus to third parties and a decrease in the121

Part IXOperating and Financial Reviewamounts paid by SR Technics Ireland Limited to Aer Lingus as a result of a reduction in thecommunications, IT, payroll and other ancillary services provided by Aer Lingus to SR Technics. Thisdecrease was partially offset by an increase in leasing revenues.(b)Operating ExpensesOperating expenses under IFRS basis increased by 27.3% to 0516.5 million in the six months ended30 June 2006 from 0405.6 million in the six months ended 30 June 2005, against the backdrop of a12.6% increase in total revenues. Operating expenses under IFRS per ASK increased by 12.2% to6.26 cent in the six months ended 30 June 2006 from 5.58 cent in the six months ended 30 June2005. Excluding fuel and oil costs, operating expenses under IFRS per ASK decreased by 5.3% to4.98 cent in the six months ended 30 June 2006 from 5.26 cent in the six months ended 30 June2005.Operating expenses on an Underlying basis (excluding the impact of fair value gains and losses oncommercial hedging arrangements) increased by 12.9% to 0497.8 million in the six months ended30 June 2006 from 0441.1 million in the six months ended 30 June 2005. Operating expenses on anUnderlying basis per ASK decreased by 0.7% to 6.03 cent in the six months ended 30 June 2006from 6.07 cent in the six months ended 30 June 2005. Excluding fuel and oil costs, operatingexpenses on an Underlying basis per ASK decreased by 7.0% to 4.93 cent in the six months ended30 June 2006 from 5.30 cent in the six months ended 30 June 2005.The following table sets out Aer Lingus’ operating expenses for the six months ended 30 June 2006and 2005 under IFRS, the percentage of total revenues and the percentage changes in those items:Six Months ended 30 June (1)PR Ann I,2006 200520.4.2Percent ofPercent ofTotal Percent TotalTotal Revenues Change Total Revenues(1 in millions, except %)(audited, except %)Staff costs******************************************** 0133.7 26.3% 9.1% 0122.6 27.1%Depreciation, amortisation and impairment *************** 27.9 5.5 (11.4) 31.5 7.0Aircraft operating lease costs *************************** 24.5 4.8 17.2 20.9 4.6Fuel and oil costs ************************************* 105.6 20.8 341.8 23.9 5.3Maintenance expenses ********************************* 35.2 6.9 (5.9) 37.4 8.3Airport charges *************************************** 94.9 18.7 13.1 83.9 18.6En-route charges ************************************** 23.3 4.6 15.3 20.2 4.5Distribution costs************************************** 24.1 4.7 5.7 22.8 5.1Ground operations, catering and other operating costs ***** 42.6 8.4 (2.1) 43.5 9.6Other (gains)/losses, net ******************************** 4.7 0.9 n/m (1.1) (0.3)Total ************************************************ 0516.5 101.6% 27.3% 0405.6 89.8%n/m means not meaningful.Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the six monthsended 30 June 2006 and 2005 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement). Accordingly, Underlying data is calculated to exclude the impact of fair value gains andlosses measured under IFRS on commercial hedging arrangements entered into by Aer Lingus in connection with itsfuel, aircraft financing, foreign currency and interest rate obligations which do not fulfil the requirements for hedgeaccounting under IFRS-IAS 39. Underlying data is provided for the operating expense items Fuel and oil costs and Other(gains)/losses, net.For the six months ended 30 June 2006 and 2005 on an Underlying basis, Fuel and oil costs were 390.6 million (whichexcluded 315.0 million) and 356.4 million (which excluded 3(32.5) million), respectively, and Other (gains)/losses, netwere 31.1 million (which excluded 33.7 million) and 31.9 million (which excluded 3(3.0) million), respectively.Accordingly, for the six months ended 30 June 2006 and 2005, total operating expenses on an Underlying basis were3497.8 million (which excluded 318.7 million) and 3441.0 million (which excluded 3(35.5) million), respectively.122

Part IXOperating and Financial ReviewUnderlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX and Note 2 of the notes to the historical financial information for the sixmonths ended 30 June 2006 and 2005 in Part XII (Historical Financial Information) of this Prospectus.Staff costs. Staff costs increased by 9.1% to 0133.7 million in the six months ended 30 June 2006from 0122.6 million in the six months ended 30 June 2005. Staff costs per ASK decreased to1.62 cent in the six months ended 30 June 2006 from 1.69 cent in the six months ended 30 June2005. The increase in overall staff costs was driven primarily by overall increases in salaries due inpart to increases required by the national wage agreement, performance-related pay increases forpilots and increases in overtime payments for crew and line maintenance staff. The increase in staffcosts was also due to increased costs associated with overnight stays for cabin crew.Depreciation, amortisation and impairment. Depreciation, amortisation and impairment decreasedby 11.4% to 027.9 million in the six months ended 30 June 2006 from 031.5 million in the sixmonths ended 30 June 2005, primarily as a result of a flight equipment impairment of approximately02.6 million in the six months ended 30 June 2005 in connection with the upgrade of cabins oncertain Airbus A330 aircraft. Depreciation, amortisation and impairment per ASK decreased by20.9% to 0.34 cent in the six months ended 30 June 2006 from 0.43 cent in the six months ended30 June 2005.Aircraft operating lease costs. Aircraft operating lease costs increased by 17.2% to 024.5 million inthe six months ended 30 June 2006 from 020.9 million in the six months ended 30 June 2005. Thisincrease was largely due to the replacement of Boeing 737 aircraft with Airbus A320 aircraft.Fuel and oil costs. Fuel and oil costs under IFRS increased by 341.8% to 0105.6 million in the six PR Ann I,months ended 30 June 2006 from 023.9 million in the six months ended 30 June 2005, primarily 9.2.1due to higher fuel prices and a 13.7% increase in total ASKs. The average effective price per USgallon of aviation fuel (including into-plane fees) paid by Aer Lingus under IFRS increased by 282.0%to $1.91 in the six months ended 30 June 2006 from $0.50 in the six months ended 30 June 2005.Aer Lingus’ fuel and oil costs per ASK under IFRS was 1.28 cent in the six months ended 30 June2006 compared to 0.33 cent in the six months ended 30 June 2005.Fuel and oil costs on an Underlying basis (excluding the impact of fair value gains and losses onaviation fuel commercial hedging arrangements) increased by 60.6% to 090.6 million in the sixmonths ended 30 June 2006 from 056.4 million in the six months ended 30 June 2005. The averageeffective price per US gallon of aviation fuel (including into-plane fees) paid by Aer Lingus on anUnderlying basis (excluding the impact of fair value gains and losses on aviation fuel commercialhedging arrangements) increased by 39.0% to $1.64 in the six months ended 30 June 2006 from$1.18 in the six months ended 30 June 2005. Aer Lingus’ fuel and oil costs per ASK on anUnderlying basis was 1.10 cent in the six months ended 30 June 2006 compared to 0.78 cent in thesix months ended 30 June 2005.Maintenance expenses. Maintenance expenses decreased by 5.9% to 035.2 million in the sixmonths ended 30 June 2006 from 037.4 million in the six months ended 30 June 2005, primarily asa result of a decrease in airframe check costs of 40.4% to 06.2 million in the six months ended30 June 2006 from 010.4 million in the six months ended 30 June 2005 primarily as a result ofphasing out the Boeing 737 aircraft. This decrease was partially offset by an increase in enginemaintenance costs of 9.9% to 011.1 million in the six months ended 30 June 2006 from010.1 million in the six months ended 30 June 2005 and an increase of component overhaul costs of9.4% to 09.3 million in the six months ended 30 June 2006 from 08.5 million in the six monthsended 30 June 2005, in line with the expansion of routes.Airport charges. Airport charges increased by 13.1% to 094.9 million in the six months ended30 June 2006 from 083.9 million in the six months ended 30 June 2005 against a 9.6% increase inpassengers for the six months ended 30 June 2005 compared to the six months ended 30 June123

Part IXOperating and Financial Review2006. The higher airport charges in the six months ended 30 June 2006 were largely due to higherlanding charges, which increased by 10.6% to 023.0 million in the six months ended 30 June 2006from 020.8 million in the six months ended 30 June 2005, higher handling fees, which increased by11.5% to 027.2 million in the six months ended 30 June 2006 from 024.4 million in the six monthsended 30 June 2005, and higher passenger load fees, which increased by 16.1% to 042.5 million inthe six months ended 30 June 2006 from 036.6 million in the six months ended 30 June 2005.En-route charges. En-route charges increased by 15.3% to 023.3 million in the six months ended30 June 2006 from 020.2 million in the six months ended 30 June 2005, primarily as a result ofincreased air traffic resulting from an increase in the number of routes/frequencies served by AerLingus. In the six months ended 30 June 2006, as compared to the six months ended 30 June 2005,Aer Lingus introduced ten new routes, primarily to Continental Europe and ceased operating oneroute.Distribution costs. Distribution costs increased by 5.7% to 024.1 million in the six months ended30 June 2006 from 022.8 million in the six months ended 30 June 2005. This increase was primarilyas a result of an increase in advertising expenses of 54.2% to 07.4 million in the six months ended30 June 2006 from 04.8 million in the six months ended 30 June 2005 as a result of Aer Lingus’focus on promoting sales in response to increased competition, as well as an increase in credit cardhandling charges payable by Aer Lingus of 15.6% to 07.4 million in the six months ended 30 June2006 from 06.4 million in the six months ended 30 June 2005. This increase was partially offset bydecreased commissions paid to travel agents as a result of an increase in the percentage of ticketssold on aerlingus.com, as well as decreased interline service charges and codeshare commissionspayable by Aer Lingus.Ground operations, catering and other operating costs. Ground operations, catering and otheroperating costs decreased by 2.1% to 042.6 million in the six months ended 30 June 2006 from043.5 million in the six months ended 30 June 2005. This decrease was primarily as a result of a42.1% decrease in the short-term hire of aircraft to replace Aer Lingus aircraft undergoingunscheduled maintenance, to 02.2 million in the six months ended 30 June 2006 from 03.8 millionin the six months ended 30 June 2005.Other (gains)/losses, net. Other (gains)/losses, net under IFRS changed to a loss of 04.7 million inthe six months ended 30 June 2006 from a gain of 01.1 million in the six months ended 30 June2005 primarily as a result of losses arising on maturing foreign exchange options and forwardcontracts in the six months ended 30 June 2006 while the related fair value gains were accountedfor in previous years.Other (gains)/losses, net on an Underlying basis (excluding the impact of fair value gains and losseson commercial hedging arrangements) decreased by 42.1% to a loss of 01.1 million in the sixmonths ended 30 June 2006 from a loss of 01.9 million in the six months ended 30 June 2005.(c)Operating Profit/(Loss) before Exceptional ItemsDue to the foregoing factors, Aer Lingus had an operating loss before exceptional items under IFRS PR Ann I,of 08.2 million in the six months ended 30 June 2006 compared to an operating profit before 9.1exceptional items under IFRS of 046.0 million in the six months ended 30 June 2005.Operating profit before exceptional items on an Underlying basis (excluding the impact of fair valuegains and losses on commercial hedging arrangements) was 010.5 million in the six months ended30 June 2006 compared to 010.5 million in the six months ended 30 June 2005.(d)Exceptional ItemsAer Lingus had an exceptional profit of 04.3 million in the six months ended 30 June 2006 whichrelated principally to the sale of spare Boeing 737 engines, compared to no exceptional items in thesix months ended 30 June 2005.124

Part IXOperating and Financial Review(e)Finance Income/(Expense), netAer Lingus’ net finance income increased by 84.0% to 09.2 million in the six months ended 30 June PR Ann I,2006 from 05.0 million in the six months ended 30 June 2005. This increase was primarily due to 9.1higher cash and cash equivalents in the six months ended 30 June 2006 compared to the six monthsended 30 June 2005.Finance expense will be reduced by the amount of interest payable by Aer Lingus on the loan fromthe Selling Shareholder following repayment of the loan in full upon completion of the Offer. Furtherinformation on Aer Lingus’ interest obligations on the loan from the Selling Shareholder is set forthin paragraph 13.7 (Loan from Selling Shareholder to Aer Lingus) of Part XV (Additional Information)of this Prospectus.(f)(g)TaxationAer Lingus recorded a taxation charge under IFRS of 0(1.7) million in the six months ended 30 June2006 compared with a taxation charge of 0(5.4) million in the six months ended 30 June 2005,primarily because Aer Lingus had a higher profit before taxation.Aer Lingus recorded a taxation charge on an Underlying basis (excluding the impact of fair valuegains and losses on commercial hedging arrangements and exceptional items) of 0(3.5) million in thesix months ended 30 June 2006 compared with a taxation charge of 0(1.7) million in the six monthsended 30 June 2005.Profit for the PeriodDue to the foregoing factors, Aer Lingus generated a profit for the period under IFRS of 03.6 million PR Ann I,in the six months ended 30 June 2006 compared with 045.6 million in the six months ended 30 June 9.12005.Aer Lingus generated a profit for the period on an Underlying basis (excluding the impact of fairvalue gains and losses on commercial hedging arrangements and exceptional items) of 016.3 millionin the six months ended 30 June 2006 compared with a profit for the period on an Underlying basisof 014.5 million in the six months ended 30 June 2005.125

Part IXOperating and Financial Review5.2 Year Ended 31 December 2005 compared with Year Ended 31 December 2004 under IFRSThe following table sets out changes in certain of Aer Lingus’ income statement items for the yearsended 31 December 2005 and 2004 under IFRS, the percentage of total revenues and thepercentage changes in those items:Year ended 31 DecemberPR Ann I,2005 200420.4.2PercentPercentof Total Percent of TotalRevenues Change Revenues(1 in millions, except %)(audited, except %)Revenues *********************************** 01,002.6 100% (0.7)% 01,009.6 100%Operating expenses:*************************** (912.8) (91.0) (2.9) (887.1) (87.9)— Cost of sales and other operating expenses ** (912.8) (91.0) 4.1 (876.5) (86.8)— Employee profit share********************* — — (100.0) (10.6) (1.1)Operating profit before exceptional items **** 89.8 9.0 (26.7) 122.5 12.1Exceptional items ***************************** — — (100.0) (102.5) (10.1)Operating profit/(loss) after exceptional items 89.8 9.0 349.0 20.0 2.0Finance income/(expense), net ****************** 10.2 1.0 39.7 7.3 0.7Profit before taxation *********************** 100.0 10.0 266.3 27.3 2.7Taxation ************************************* (11.1) (1.1) 152.3 (4.4) (0.4)Profit for the year *************************** 0 88.9 8.9% (288.2)% 0 22.9 2.3%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.126

Part IXOperating and Financial ReviewThe following table sets out changes in certain of Aer Lingus’ income statement items for the years ended 31 December 2005and 2004 under IFRS and also on an Underlying basis (excluding the impact of fair value gains and losses on commercialhedging arrangements and exceptional items), together with the amounts excluded from Underlying data, the percentage oftotal revenues and the percentage changes in those items on an Underlying basis:Year ended 31 December2005 2004Amounts Underlying Amounts UnderlyingExcluded Percent of Percent Excluded Percent offrom IFRS Total Change from IFRS TotalUnderlying (1) Underlying Total Revenues Underlying Underlying (1) Underlying Total Revenues(2 in millions, except %)(audited, except %)Revenues *************** 31,002.6 3 — 21,002.6 100% (0.7)% 31,009.6 3 — 21,009.6 100%Operating expenses:******* (921.2) 8.4 (912.8) (91.9) 1.3 (909.6) 22.5 (887.1) (90.1)— Cost of sales andother operatingexpenses ************ (921.2) 8.4 (912.8) (91.9) 2.5 (899.0) 22.5 (876.5) (89.0)— Employee profit share — — — — (100) (10.6) — (10.6) (1.1)Operating profit beforeexceptional items ***** 81.4 8.4 89.8 8.1 (18.6) 100.0 22.5 122.5 9.9Exceptional items ********* — — — — — — (102.5) (102.5) —Operating profit/(loss)after exceptional items 81.4 8.4 89.8 8.1 (18.6) 100.0 (80.0) 20.0 9.9Finance income/(expense),net ******************* 10.2 — 10.2 1.0 39.7 7.3 — 7.3 0.7Profit before taxation *** 91.6 8.4 100.0 9.1 (14.6) 107.3 (80.0) 27.3 10.6Taxation ***************** (10.1) (1.0) (11.1) (1.0) n/m (14.4) 10.0 (4.4) (1.4)Profit for the year******* 3 81.5 3 7.4 2 88.9 8.1% (12.3)% 3 92.9 3 (70.0) 2 22.9 9.2%PR Ann I,20.4.2n/m means not meaningful.Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its hedgingarrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to excludethe amounts set out under the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gainsand losses measured under IFRS on hedging arrangements entered into by Aer Lingus in connection with its fuel,aircraft financing, foreign currency and interest rate obligations which do not fulfil the requirements for hedgeaccounting under IFRS-IAS 39. Underlying data is provided for the Operating expense items of Fuel and oil costs andOther (gains)/losses, net. Underlying data also excludes Exceptional items and the taxation impact of amounts excludedfrom Underlying data.For the year ended 31 December 2005, the approximately 38.4 million excluded from Operating expenses (Cost of salesand other operating expenses) on an Underlying basis comprised approximately 34.7 million of Fuel and oil costs andapproximately 33.7 million of Other (gains)/losses, net. Approximately 3(1.0) million is excluded from Taxation.For the year ended 31 December 2004, the approximately 322.5 million excluded from Operating expenses (Cost ofsales and other operating expenses) on an Underlying basis comprised approximately 320.8 million of Fuel and oil costsand approximately 31.7 million of Other (gains)/losses, net. Approximately 3(102.5) million is excluded from Exceptionalitems and approximately 310.0 million is excluded from Taxation.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.127

Part IXOperating and Financial ReviewThe following table sets out certain unaudited scheduled passenger and cargo operating data forAer Lingus for the years ended 31 December 2005 and 2004, together with the percentage changesin those items:Year ended 31 December2005 Percent Change 2004(unaudited)Long-haulNumber of routes flown (1) ************************************ 9 (18.2)% 11Number of sectors flown (flights) ****************************** 4,457 (1.6) 4,529Average sector length (in kilometres) (2) ************************* 5,589 1.0 5,532Number of passengers (in thousands) ************************** 1,169 (1.2) 1,183Average fare (including airport charges/taxes) (in 0) ************** 262.07 (3.2) 270.60Average block hours per aircraft per day (3) ********************** 13.3 0.8 13.2ASKs (in millions) (4) ****************************************** 7,467 (0.6) 7,514RPKs (in millions) (5) ****************************************** 6,426 (0.2) 6,437Passenger load factor (flown RPKs per ASK)********************* 86% — 86%Average number of Seat Equivalents (6) ************************** 2,625 — 2,625Utilisation (ASKs per Seat Equivalent in millions) (7) **************** 2.84 (0.6) 2.86Average number of aircraft *********************************** 7.0 — 7.0Short-haulNumber of routes flown (1) ************************************ 64 25.5 51Number of sectors flown (flights) ****************************** 52,870 9.8 48,130Average sector length (in kilometres)*************************** 869 6.9 813Number of passengers (in thousands) ************************** 6,875 19.0 5,776Average fare (including airport charges/taxes) (in 0) ************** 87.55 (13.1) 100.77Average block hours per aircraft per day (3) ********************** 9.4 6.8 8.8ASKs (in millions) (4) ****************************************** 7,973 31.2 6,075RPKs (in millions) (5) ****************************************** 6,135 30.5 4,700Passenger load factor (flown RPKs per ASK)********************* 77% — 77%Average number of Seat Equivalents (6) ************************** 4,792 9.4 4,379Utilisation (ASKs per Seat Equivalent in millions) (7) **************** 1.66 19.4 1.39Average number of aircraft *********************************** 25.9 4.9 24.7Other Operating dataATKs (in millions) (8) ****************************************** 1,727 14.0 1,514RTKs (in millions) (9) ****************************************** 1,254 13.6 1,104Scheduled cargo tonnes************************************** 21,073 (23.2) 27,453PR Ann I,20.4.3Source: Management accounts and internal financial and operating reporting systems.(1) Includes the maximum number of routes served during the periods presented; excludes all Dublin/Shannon routes flownon long-haul flights between Ireland and the United States.(2) Flights between Ireland and the United States which have a stopover in Ireland are treated as one sector length.(3) Block hours per aircraft represents the total number of block hours divided by the total number of aircraft.(4) Available Seat Kilometres, or ASKs, are the total number of flights multiplied by route by the number of actual seats perflight multiplied by the distance per flight measured in kilometres.(5) Revenue Passenger Kilometres, or RPKs, are the number of passengers multiplied by the distance flown. It is a measureof the amount of total capacity sold during a period.(6) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy classconfiguration.(7) Utilisation is a measure of Aer Lingus’ efficiency in using its fleet to enhance capacity. Aer Lingus defines Utilisation asASKs per Seat Equivalent, which represents the amount of available capacity, measured in ASKs, produced by each SeatEquivalent in its fleet.(8) Available Tonne Kilometres, or ATKs, are the number of tonnes of capacity available for the carriage of passenger andcargo load multiplied by the distance flown.(9) Revenue Tonne Kilometres, or RTKs, are the number of tonnes of revenue load carried on each sector of a flightmultiplied by the distance flown.128

Part IXOperating and Financial ReviewThe following table sets out key financial data for Aer Lingus for the years ended 31 December 2005and 2004 under IFRS and also on an Underlying basis (excluding the impact of fair value gains andlosses on commercial hedging arrangements and exceptional items), together with the amountsexcluded from Underlying data:Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying (1) Underlying Total Underlying (1) Underlying Total(unaudited) (2) (unaudited) (2)Revenues (0 in millions) 1,002.6 — 1,002.6 1,009.6 — 1,009.6EBITDAR (0 inmillions) (3) ********** 187.1 8.4 195.5 215.6 22.5 238.1Yield (Revenues perRPK, in 0 cent) ***** 7.98 — 7.98 9.07 — 9.07Unit Revenues(Revenues per ASK,in 0 cent)********** 6.49 — 6.49 7.43 — 7.43Unit Cost (CashOperating Costs perASK, in 0 cent) (4) *** 5.28 (0.05) 5.23 5.84 (0.16) 5.68Total Utilisation (ASKsper Seat Equivalent inmillions) *********** 2.08 — 2.08 1.94 — 1.94EBITDAR per SeatEquivalent (0in thousands) (5) ****** 25.2 1.1 26.3 30.8 3.2 34.0Unit Cost Excluding Fuel(Cash OperatingCosts excluding fueland oil costs per ASK,in 0 cent) ********** 4.38 (0.02) 4.36 5.06 (0.01) 5.05PR Ann I,20.4.3Source: All measures in the table above, excluding Revenues, are extracted from management accounts and internal financialand operating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement) and to exclude Exceptional items. Accordingly, Underlying data is calculated to excludethe amounts set out under the heading ‘‘Amounts Excluded from Underlying’’ to reflect the impact of fair value gainsand losses measured under IFRS on commercial hedging arrangements entered into by Aer Lingus in connection with itsfuel, aircraft financing, foreign currency and interest rate obligations which do not fulfil the requirements for hedgeaccounting under IFRS-IAS 39. Underlying data is provided for the Operating expense items of Fuel and oil costs andOther (gains)/losses, net. Underlying data also excludes Exceptional items and the taxation impact of amounts excludedfrom Underlying data.For the year ended 31 December 2005, the approximately 38.4 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the year of approximately 37.4 million; and (2) Taxation of approximately 31.0 million. The(0.05) cent excluded from Unit Cost comprised approximately (0.03) cent of Fuel and oil costs and approximately(0.02) cent of Other (gains)/losses, net, and the (0.02) cent excluded from Unit Cost Excluding Fuel comprisedapproximately (0.02) cent of Other (gains)/losses, net.For the year ended 31 December 2004, the approximately 322.5 million excluded from EBITDAR on an Underlying basiscomprised: (1) Profit for the year of approximately 3(70.0) million; (2) Taxation of approximately 3(10.0) million; and(3) Exceptional items of approximately 3102.5 million. The (0.16) cent excluded from Unit Cost comprisedapproximately (0.15) cent of Fuel and oil costs and approximately (0.01) cent of Other (gains)/losses, net, and the(0.01) cent excluded from Unit Cost Excluding Fuel comprised approximately (0.01) cent of Other (gains)/losses, net.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding the129

Part IXOperating and Financial Reviewpresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(2) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excludingRevenues, are considered non-GAAP financial measures which Aer Lingus believes are important to an understandingof its performance. These measures have limitations as analytical tools and investors should not consider them inisolation or as a substitute for analysis of Aer Lingus’ results as reported under GAAP.(3) EBITDAR is defined as profit for the year plus exceptional items, net interest expense (finance expense), taxation,depreciation, amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share. EBITDARis considered a non-GAAP financial measure. Aer Lingus believes that EBITDAR is an important measure of itsperformance and is a useful supplement to profit for the year and other income statement data. Aer Lingus believesEBITDAR is useful to management and investors in comparing its performance to that of other companies in its industry,as it removes the impact of (a) differences in capital structure, including the effects of finance income and expense,(b) differences among the tax regimes to which Aer Lingus and comparable companies are subject and (c) differences inthe age, method of acquisition and approach to depreciation and amortisation of productive assets. However, becauseother companies may calculate EBITDAR differently than Aer Lingus does, it may be of limited usefulness as acomparative measure. EBITDAR has limitations as an analytical tool and investors should not consider it in isolation or asa substitute for analysis of its results as reported under GAAP. Some of these limitations are: (a) EBITDAR does notreflect cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) EBITDARdoes not reflect changes in, or cash requirements for, Aer Lingus’ working capital needs; (c) EBITDAR does not reflectthe finance expenses, or the cash requirements necessary to service Aer Lingus’ principal payments on its debt;(d) EBITDAR does not reflect taxation or the cash requirements for any tax payments; and (e) although depreciation,amortisation and impairment are non-cash charges, the assets being depreciated and amortised will often have to bereplaced in the future, and EBITDAR does not reflect any cash requirements for such replacements. A reconciliation ofEBITDAR to profit for the year under IFRS and on an Underlying basis is set out in the table below.(4) Cash Operating Costs are operating expenses other than net interest expense (finance expense), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share.(5) EBITDAR per Seat Equivalent is based on the annual average number of aircraft operated during the period.The following table sets out a reconciliation of EBITDAR to profit for the year under IFRS and also on an Underlying basisfor the years ended 31 December 2005 and 2004:I,Year ended 31 December2005 2004AmountsAmountsExcludedExcludedfrom IFRS from IFRSUnderlying Underlying Total Underlying Underlying Total(2 in millions) (2 in millions)Profit for the year ********* 3 81.5 37.4 2 88.9 3 92.9 3 (70.0) 2 22.9(unaudited) (1) (unaudited) (1)Exceptional items *********** — — — — 102.5 102.5Finance (income)/expense, net (10.2) — (10.2) (7.3) — (7.3)PR Ann20.4.3Taxation ******************* 10.1 1.0 11.1 14.4 (10.0) 4.4Depreciation, amortisation andimpairment ************** 60.8 — 60.8 63.8 — 63.8Aircraft operating lease costs 44.9 — 44.9 41.2 — 41.2Employee profit share ******* — — — 10.6 — 10.6EBITDAR ****************** 3187.1 38.4 2195.5 3215.6 3 22.5 2238.1Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) ofthis Prospectus. EBITDAR is extracted from management accounts and internal financial and operating reportingsystems.(1) All data in this table is audited financial information, except for EBITDAR which is unaudited.130

Part IXOperating and Financial Review(a)RevenuesThe following table sets out an overview of Aer Lingus’ revenue items for the years ended31 December 2005 and 2004 under IFRS on an absolute basis and as a percentage of total revenues,together with the percentage change in those items:PR Ann I,6.2PR Ann I,Year ended 31 December2005 2004Percent ofPercent ofTotal Percent TotalRevenues Change Revenues(1 in millions, except %)Passenger revenues ************************ 0 908.6 90.6% (0.2)% 0 910.8 90.2%(audited, except %) (1)— Long-haul****************************** 306.5 30.6 (4.2) 320.1 31.7 20.4.2— Short-haul ***************************** 601.9 60.0 3.4 582.1 57.7— Other (charter)************************** 0.2 — (97.7) 8.6 0.8Cargo revenues**************************** 41.5 4.1 (17.3) 50.2 5.0Ancillary revenues************************** 48.2 4.8 41.8 34.0 3.4Other revenues **************************** 4.3 0.4 (70.6) 14.6 1.4Total revenues *************************** 01,002.6 100% (0.7)% 01,009.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus, except for components of Passengerrevenues which are extracted from management accounts.(1) All data in this table is audited, except for percentage calculations and the components of Passenger revenues which areunaudited.The following table sets out an overview of Aer Lingus’ revenue items for the years ended31 December 2005 and 2004 under IFRS on a geographic basis (by journey destination point) and asa percentage of total revenues, together with the percentage change in those items:Year ended 31 December2005 2004Percent ofPercent ofTotal Percent TotalRevenues Change RevenuesPR Ann I,(1 in millions, except %)(audited, except %)20.4.2Europe *********************************** 0 603.5 60.2% 2.7% 0 587.7 58.2%Rest of world ***************************** 328.2 32.7 (5.8) 348.3 34.5Ancillary and other unallocated revenue******* 70.9 7.1 (3.7) 73.6 7.3Total revenues *************************** 01,002.6 100% (0.7)% 01,009.6 100%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.Aer Lingus’ total revenues decreased by 0.7% to 01,002.6 million in 2005 from 01,009.6 million in2004, primarily as a result of decreases in passenger, cargo and other revenues partially offset by anincrease in ancillary revenues. Unit Revenues per ASK decreased by 12.6% to 6.49 cent in 2005compared to 7.43 cent in 2004, largely due to a decrease in average fares.Passenger Revenues. Passenger revenues decreased by 0.2% to 0908.6 million in 2005 from0910.8 million in 2004 primarily as a result of decreases in both long-haul and other (charter)passenger revenues, partially offset by a 3.4% increase in short-haul passenger revenues to0601.9 million in 2005 from 0582.1 million in 2004. The decrease was also offset by an 18.9%increase in airport, security and insurance charges recoverable from passengers to 0131.5 million in131

Part IXOperating and Financial Review2005 from 0110.6 million in 2004, reflecting the recovery of a higher proportion of these chargesfrom passengers.Short-haul passenger revenues increased by 3.4% to 0601.9 million in 2005 from 0582.1 million in2004. This reflected an increase of 19.0% in passenger traffic from 2005 to 2004 resulting from theintroduction of one-way low fares, additional capacity on Aer Lingus’ aircraft due to its switch tolarger aircraft and the reconfiguration of certain aircraft to all economy class, higher fleet Utilisationand the addition of 13 new routes in Continental Europe. The increase in short-haul revenues waspartially offset by a decrease of 13.1% in average fares on short-haul routes to 087.55 in 2005 from0100.77 in 2004, in connection with the introduction of one-way fares with minimal restrictions inSeptember 2004 and the phasing out of the business class cabin from April to October 2004 on allshort-haul routes except for four major routes (Heathrow, Brussels, Birmingham and Manchester),where the business class cabin was later discontinued in March 2005. This decrease was also partiallydue to a decline in interline revenues as Aer Lingus increased its focus on direct point-to-pointpassenger service. Short-haul capacity increased by 31.2% to 8.0 billion ASKs in 2005 from6.1 billion ASKs in 2004 primarily as a result of the introduction of new routes, increased frequencieson existing routes, the replacement of Boeing 737 aircraft with Airbus A320 aircraft with additionalseating capacity, and the net addition of 1.2 aircraft to Aer Lingus’ short-haul fleet. Short-haulcapacity utilisation increased by 30.5% to 6.1 billion RPKs in 2005 from 4.7 billion RPKs in 2004. Thepassenger load factor remained unchanged at 77% in both years.Long-haul passenger revenues decreased by 4.2% to 0306.5 million in 2005 from 0320.1 million in2004 primarily as a result of the decrease in average fares, the introduction of one-way fares inSeptember 2004 and the discontinuation of the Baltimore, Maryland route in December 2004. Thedecrease in average fares on long-haul routes of 3.2% to 0262.07 in 2005 from 0270.60 in 2004was lower than the decrease in average fares on short-haul routes as Aer Lingus continued to offerhigher-fare business class tickets on all of its long-haul routes. Long-haul capacity decreased by0.6% to marginally less than 7.5 billion ASKs in 2005 from 7.5 billion ASKs in 2004. Long-haulcapacity utilisation was virtually unchanged at 6.4 billion RPKs in both years. The passenger loadfactor was also unchanged at 86% in both years.Cargo Revenues. Cargo revenues decreased by 17.3% to 041.5 million in 2005 from 050.2 millionin 2004, primarily as a result of a significant decrease in December 2004 in the number of routestransporting cargo. In 2005, scheduled cargo tonnes on short-haul decreased by 64.8% to 2,178tonnes from 6,192 tonnes in 2004, and scheduled cargo tonnes on long-haul routes decreased by11.1% to 18,895 tonnes in 2005 from 21,261 tonnes in 2004. The decrease in cargo revenues waspartially offset by an increase in miscellaneous cargo revenues, including fuel surcharges and mailrevenues.Ancillary Revenues. Ancillary revenues increased by 41.8% to 048.2 million in 2005 from034.0 million in 2004, primarily as a result of increases in (1) in-flight sales of 21.5% primarily drivenby an increase in in-flight sales of food and beverages on all short-haul routes, in connection withthe elimination of complimentary in-flight food and beverages and the introduction of in-flight salesof food and beverages on all short-haul routes in the first quarter of 2004, as well as sales ofalcoholic beverages on long-haul routes, (2) excess-baggage charges of 67.5% driven by an increasein the number of passengers by 14.3% to approximately 8.0 million in 2005 from approximately7.0 million in 2004, a reduction in the baggage allowance weight threshold and an increased focuson the enforcement of Aer Lingus’ excess-baggage charge policy, and (3) web booking handlingfees and fees for telephone reservations recoverable from passengers of 65.2%. This increase wasalso due to an increase in the amount of commissions generated by sales of car rentals, hotelaccommodation and travel insurance on aerlingus.com.Other Revenues. Other revenues decreased by 70.6% to 04.3 million in 2005 from 014.6 million in2004, primarily as a result of a decrease of 96.7% in traffic handling activities provided by Aer Lingusto third parties to 00.2 million in 2005 from 06.0 million in 2004 due to the discontinuation of traffic132

Part IXOperating and Financial Reviewhandling activities by Aer Lingus beginning in October 2004. Other revenues also decreased as aresult of decreases in commissions and revenues from its frequent flyer programmes.(b)Operating ExpensesOperating expenses under IFRS increased by 2.9% to 0912.8 million in 2005 from 0887.1 million in2004 against a backdrop of a 0.7% decrease in total revenues. Operating expenses under IFRS perASK decreased by 9.5% to 5.91 cent in 2005 from 6.53 cent in 2004. Excluding fuel and oil costs,operating expenses under IFRS per ASK decreased by 14.6% to 5.04 cent in 2005 from 5.90 centin 2004.Operating expenses on an Underlying basis (excluding the impact of fair value gains and losses oncommercial hedging arrangements) increased by 1.3% to 0921.2 million in 2005 from0909.6 million in 2004. Operating expenses on an Underlying basis per ASK decreased by 10.8% to5.97 cent in 2005 from 6.69 cent in 2004. Excluding fuel and oil costs, operating expenses on anUnderlying basis per ASK decreased by 14.3% to 5.07 cent in 2005 from 5.92 cent in 2004.The following table sets out Aer Lingus’ operating expenses for the years ended 31 December 2005and 2004 under IFRS, the percentage of total revenues and the percentage changes in those items:Year ended 31 December (1)2005 2004Percent ofPercent ofTotal Percent TotalTotal Revenues Change Total Revenues(1 in millions, except %)(audited, except %)Staff costs******************************************* 0249.4 24.9% 1.5% 0245.7 24.3% PR Ann I,Depreciation, amortisation and impairment ************** 60.8 6.1 (4.7) 63.8 6.3Aircraft operating lease costs ************************** 44.9 4.5 9.0 41.2 4.120.4.2Fuel and oil costs ************************************ 134.1 13.4 57.8 85.0 8.4Maintenance expenses ******************************** 75.3 7.5 (1.8) 76.7 7.6Airport charges ************************************** 178.7 17.8 9.7 162.9 16.1En-route charges ************************************* 43.5 4.3 11.0 39.2 3.9Distribution costs************************************* 42.4 4.2 (20.2) 53.1 5.3Ground operations, catering and other operating costs **** 89.9 9.0 (9.3) 99.1 9.8Other (gains)/ losses, net ****************************** (6.2) (0.6) (163.3) 9.8 1.0Cost of sales and other operating expenses ************** 912.8 91.0 4.1 876.5 86.8Employee profit share********************************* — — — 10.6 1.1Total *********************************************** 0912.8 91.0% 2.9% 0887.1 87.9%Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Underlying data is separately disclosed in the notes to the audited consolidated financial statements for the years ended31 December 2005 and 2004 and in this table to show Aer Lingus’ financial performance as if all of its commercialhedging arrangements had qualified in full for hedge accounting treatment under IFRS-IAS 39 (Financial Instruments:Recognition and Measurement). Accordingly, Underlying data is calculated to exclude the impact of fair value gains andlosses measured under IFRS on commercial hedging arrangements entered into by Aer Lingus in connection with itsfuel, aircraft financing, foreign currency and interest rate obligations which do not fulfil the requirements for hedgeaccounting under IFRS-IAS 39. Underlying data is provided for the operating expense items Fuel and oil costs and Other(gains)/losses, net.For the years ended 31 December 2005 and 2004 on an Underlying basis, Fuel and oil costs were 3138.9 million (whichexcludes 34.7 million) and 3105.8 million (which excludes 320.8 million), respectively and Other (gains)/losses, net were32.5 million (which excluded 33.7 million) and 311.5 million (which excluded 31.7 million), respectively. Accordingly,for the years ended 31 December 2005 and 2004, total operating expenses (before employee profit share) on anUnderlying basis were 3921.2 million (which excluded 38.4 million) and 3909.6 million (which excluded 322.5 million),respectively.Underlying data may not be comparable with similarly-titled profit measurements reported by other companies.Underlying data is not intended to be a substitute for IFRS measurements of profits. Further information regarding thepresentation of IFRS and Underlying historical financial information is set out in paragraph 1.2 (IFRS and UnderlyingHistorical Financial Information) of this Part IX and Note 2 of the notes to the historical financial information for theyears ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.133

Part IXOperating and Financial Review134Staff costs. Staff costs increased by 1.5% to 0249.4 million in 2005 from 0245.7 million in 2004.Staff costs per ASK decreased to 1.62 cent in 2005 from 1.81 cent in 2004. The increase in overallstaff costs was driven primarily by pay increases, an increase in performance-related pay for pilots, anincrease in overtime payments for cabin crew and general staff and an increase in cabin crewcommission on in-flight sales. These increases were partially offset by an 11.0% reduction in theaverage number of full-time equivalent employees to 3,475 during 2005 from 3,906 for 2004 aspart of Aer Lingus’ ongoing restructuring plan, reflecting an increase in staff productivity.Depreciation, amortisation and impairment. Depreciation, amortisation and impairment decreasedby 4.7% to 060.8 million in 2005 from 063.8 million in 2004 primarily as a result of a decrease indepreciation of property, ground equipment and other equipment of 29.1%, to 010.0 million in2005 from 014.1 million in 2004, as well as the impairment of certain fixed assets. Depreciation,amortisation and impairment per ASK decreased by 17.0% to 0.39 cent in 2005 from 0.47 centin 2004.Aircraft operating lease costs. Aircraft operating lease costs increased by 9.0% to 044.9 million in2005 from 041.2 million in 2004. This increase was largely due to the replacement of Boeing 737aircraft with Airbus A320 aircraft.Fuel and oil costs. Fuel and oil costs under IFRS increased by 57.8% to 0134.1 million in 2005 from PR Ann I,085.0 million in 2004, primarily due to higher fuel prices and a 13.6% increase in total ASKs. The 9.2.1average effective price per US gallon of aviation fuel (including into-plane fees) paid by Aer Lingusunder IFRS increased by 50.6% to $1.28 in 2005 from $0.85 in 2004. Aer Lingus’ fuel and oil costsper ASK under IFRS was 0.87 cent in 2005 compared to 0.63 cent in 2004.Fuel and oil costs on an Underlying basis (excluding the impact of fair value gains and losses onaviation fuel commercial hedging arrangements) increased by 31.3% to 0138.9 million in 2005 from0105.8 million in 2004. The average effective price per US gallon of aviation fuel (including intoplanefees) paid by Aer Lingus on an Underlying basis (excluding the impact of fair value gains andlosses on aviation fuel commercial hedging arrangements) increased by 24.5% to $1.32 in 2005from $1.06 in 2004. Aer Lingus’ fuel and oil costs per ASK on an Underlying basis was 0.90 cent in2005 compared to 0.78 cent in 2004.Maintenance expenses. Maintenance expenses decreased by 1.8% to 075.3 million in 2005 from076.7 million in 2004, primarily as a result of a decrease in component overhaul costs of 15.7% to015.0 million in 2005 from 017.8 million in 2004 primarily as a result of the replacement ofBoeing 737 aircraft by new Airbus A320 aircraft for short-haul routes. This decrease was partiallyoffset by an increase in engine maintenance costs of 8.4% to 023.3 million in 2005 from 021.5million in 2004 in line with the expansion of routes.Airport charges. Airport charges increased by 9.7% to 0178.7 million in 2005 from 0162.9 millionin 2004 against a 15.6% increase in passengers from 2004 to 2005. The higher airport charges in2005 were largely due to an 18.9% increase in landing charges to 044.6 million in 2005 from037.5 million in 2004 due to an increase in passenger traffic partially offset by lower landing chargeson certain new routes as well as an 11.0% increase in passenger load fees to 078.5 million from070.7 million in 2004.En-route charges. En-route charges increased by 11.0% to 043.5 million in 2005 from039.2 million in 2004, primarily as a result of increased air traffic resulting from an increase in thenumber of routes served by Aer Lingus in 2005. In 2005, when compared with 2004, Aer Lingusintroduced 16 new routes, primarily to Continental Europe and ceased operating five routes.Distribution costs. Distribution costs decreased by 20.2% to 042.4 million in 2005 from053.1 million in 2004. This decrease was primarily as a result of decreased commissions paid totravel agents as a result of an increase in the percentage of tickets sold on aerlingus.com as well asthe discontinuation of bulk ticket sales to charter and package tour operators in October 2004. From

Part IXOperating and Financial Review2004 to 2005, the percentage of tickets sold on aerlingus.com increased from approximately 50%to approximately 71% of total passenger ticket sales.Ground operations, catering and other operating costs. Ground operations, catering and otheroperating costs decreased by 9.3% to 089.9 million in 2005 from 099.1 million in 2004. Thisdecrease was primarily as a result of decreases in expenses relating to premises, utilities, professionaladvisory services, general insurance, as well as reduced catering costs in connection with theelimination of complimentary in-flight food and beverages and the introduction of in-flight sales offood and beverages on all short-haul routes in the first quarter of 2004.Other (gains)/losses, net. Other (gains)/losses, net under IFRS changed to a gain of 06.2 million in2005 from a loss of 09.8 million in 2004, primarily as a result of the relatively stable level of AerLingus’ foreign exchange position in 2005 compared to a more volatile position in 2004 due to theweakening of the US dollar.Other (gains)/losses, net on an Underlying basis (excluding the impact of fair value gains and losseson commercial hedging arrangements) changed to a gain of 02.5 million in 2005 from a loss of011.5 million in 2004.Employee profit share. Aer Lingus was not required to make any provisions for employee profit sharein 2005 because it had previously made the maximum provision of 025.4 million under the terms ofthe scheme. Aer Lingus made a provision for the employee profit share of 010.6 million in 2004.(c)(d)Operating Profit before Exceptional ItemsDue to the foregoing factors, Aer Lingus had an operating profit before exceptional items under IFRSof 089.8 million in 2005 compared to 0122.5 million in 2004.Operating profit before exceptional items on an Underlying basis (excluding the impact of fair valuegains and losses on commercial hedging arrangements) was 081.4 million in 2005 compared to0100.0 million in 2004.Exceptional ItemsAer Lingus had no exceptional items in 2005 compared with exceptional costs of 0102.5 million in2004, which related principally to provisions for payments and payments made under Aer Lingus’employee voluntary severance and early retirement programme.PR Ann I,9.1(e)(f)Finance Income/(Expense), NetAer Lingus’ net finance income increased by 39.7% to 010.2 million in 2005 from 07.3 million in PR Ann I,2004. This increase was primarily due to higher cash and cash equivalents in 2005 compared to 9.12004.TaxationAer Lingus recorded a taxation charge under IFRS of 011.1 million in 2005 compared with a taxationcharge of 04.4 million in 2004, primarily because no exceptional costs were incurred in 2005 and, asa result, Aer Lingus had a higher profit before taxation.(g)Aer Lingus recorded a taxation charge on an Underlying basis of 010.1 million in 2005 comparedwith a taxation charge of 014.4 million in 2004 reflecting the taxation impact of amounts excludedfrom Underlying data.Profit for the YearDue to the foregoing factors, Aer Lingus generated a profit for the year under IFRS of 088.9 millionin 2005 compared with 022.9 million in 2004.PR Ann I,9.1135

Part IXOperating and Financial ReviewAer Lingus generated a profit for the year on an Underlying basis (excluding the impact of fair valuegains and losses on commercial hedging arrangements and exceptional items) of 081.5 million in2005 compared with 092.9 million in 2004.5.3 Year Ended 31 December 2004 compared with Year Ended 31 December 2003 underIrish GAAPThe following table set out changes in certain of Aer Lingus’ revenue and expense items for theyears ended 31 December 2004 and 2003 under Irish GAAP on an absolute basis and as apercentage of total revenues, together with the percentage changes in those items:Year ended 31 December2004 2003Percent ofPercent ofTotal Percent TotalRevenues Change Revenues(1 in millions, except %)(audited, except %)Revenues ***************************** 0906.8 100% 2.1% 0888.3 100% PR Ann I,Operating expenses********************** (810.5) (89.4) (0.4) (814.1) (91.7) 20.4.2— Cost of sales and other operatingexpenses ************************** (799.9) (88.2) (0.7) (805.3) (90.7)— Employee profit share *************** (10.6) (1.2) 20.5 (8.8) (1.0)Operating profit before exceptionalitems ******************************* 96.3 10.6 29.8 74.2 8.3Exceptional items************************ (102.5) (11.3) 100.0 — —Operating profit/(loss) after exceptionalitems ******************************* (6.2) (0.7) (108.3) 74.2 8.3Finance income/(expense), net ************ 7.3 0.8 40.4 5.2 0.6Profit before taxation ****************** 1.1 0.1 (98.6) 79.4 8.9Taxation ******************************* 0.1 — n/m (10.2) (1.1)Profit for the year ********************* 0 1.2 0.1% (98.3)% 0 69.2 7.8%n/m means not meaningful.Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.136

Part IXOperating and Financial ReviewThe following table sets out certain unaudited scheduled passenger and cargo operating data forAer Lingus for the years ended 31 December 2004 and 2003, together with the percentage changesin those items:Year ended 31 December2004 Percent Change 2003(unaudited)Long-haulNumber of routes flown (1) ************************************* 11 22.2%PR Ann I,9 20.4.3Number of sectors flown (flights) ******************************* 4,529 6.7 4,246Average sector length (in kilometres) (2) *************************** 5,532 0.3 5,517Number of passengers (in thousands)**************************** 1,183 7.2 1,104Average fare (excluding airport charges/taxes) (in 0) *************** 249.65 — 249.57Average block hours per aircraft per day (3) *********************** 13.2 3.1 12.8ASKs (in millions) (4) ******************************************** 7,514 7.1 7,016RPKs (in millions) (5) ******************************************** 6,437 7.3 5,997Passenger load factor (flown RPKs per ASK) ********************** 86% — 85%Average number of Seat Equivalents (6) *************************** 2,625 3.7 2,531Utilisation (ASKs per Seat Equivalent in millions) (7) ***************** 2.86 3.2 2.77Average number of aircraft ************************************ 7.0 2.9 6.8Short-haulNumber of routes flown (1) ************************************* 51 34.2 38Number of sectors flown (flights) ******************************* 48,130 (4.2) 50,261Average sector length (in kilometres) **************************** 813 11.8 727Number of passengers (in thousands)**************************** 5,776 5.2 5,491Average fare (excluding airport charges/taxes) (in 0) *************** 79.73 (4.0) 83.08Average block hours per aircraft per day (3) *********************** 8.8 6.0 8.3ASKs (in millions) (4) ******************************************** 6,075 15.6 5,256RPKs (in millions) (5) ******************************************** 4,700 18.5 3,966Passenger load factor (flown RPKs per ASK) ********************** 77% 2.7 75%Average number of Seat Equivalents (6) *************************** 4,379 2.5 4,271Utilisation (ASKs per Seat Equivalent in millions) (7) ***************** 1.39 13.0 1.23Average number of aircraft ************************************ 24.7 (5.7) 26.2Other Operating dataATKs (in millions) (8) ******************************************** 1,514 11.8 1,355RTKs (in millions) (9) ******************************************** 1,104 10.4 1,000Scheduled cargo tonnes *************************************** 27,453 (3.3) 28,386Source: Management accounts and internal financial and operating reporting systems.(1) Includes the maximum number of routes served during the periods presented; excludes all Dublin/Shannon routes flownon long-haul flights between Ireland and the United States.(2) Flights between Ireland and the United States which have a stopover in Ireland are treated as one sector length.(3) Block hours per aircraft represents the total number of block hours divided by the total number of aircrafts.(4) Available Seat Kilometres, or ASKs, are the total number of flights multiplied by route by the number of actual seats perflight multiplied by the distance per flight measured in kilometres.(5) Revenue Passenger Kilometres, or RPKs, are the number of passengers multiplied by the distance flown. It is a measureof the amount of total capacity sold during a period.(6) Seat Equivalent represents the equivalent of a seat on an aircraft based on the manufacturer’s all-economy classconfiguration.(7) Utilisation is a measure of Aer Lingus’ efficiency in using its fleet to enhance capacity. Aer Lingus defines Utilisation asASKs per Seat Equivalent, which represents the amount of available capacity, measured by ASKs, produced by each SeatEquivalent in its fleet.(8) Available Tonne Kilometres, or ATKs, are the number of tonnes of capacity available for the carriage of passenger andcargo load multiplied by the distance flown.(9) Revenue Tonne Kilometres, or RTKs, are the number of tonnes of revenue load carried on each sector of a flightmultiplied by the distance flown.137

Part IXOperating and Financial ReviewThe following table sets out certain key financial data for Aer Lingus for the years ended31 December 2004 and 2003 under Irish GAAP:PR Ann I,20.4.3Year ended31 December2004 2003(unaudited) (1)Revenues (0 in millions)********************************************************* 906.8 888.3EBITDAR (0 in millions) (2) ******************************************************** 216.7 186.8Yield (Revenues per RPK, in 0 cent) ********************************************** 8.14 8.92Unit Revenues (Revenues per ASK, in 0 cent) ************************************** 6.67 7.24Unit Cost (Cash Operating Costs per ASK, in 0 cent) (3) ****************************** 5.08 5.72Total Utilisation (ASKs per Seat Equivalent in millions) ******************************* 1.94 1.80EBITDAR per Seat Equivalent (0 in thousands) (4) ************************************ 30.9 27.5Unit Cost Excluding Fuel (Cash Operating Costs excluding fuel and oil costs per ASK, in0 cent) ********************************************************************* 4.30 4.99Source: All measures in the table above, excluding revenues, are extracted from management accounts and internal financialand operating reporting systems. Revenues is extracted from Part XII (Historical Financial Information) of this Prospectus.(1) All data in this table is unaudited, except for Revenues which is audited. All measures in the table above, excludingRevenues, are considered non-GAAP financial measures which Aer Lingus believes are important to an understandingof its performance. These measures have limitations as analytical tools and investors should not consider them inisolation or as a substitute for analysis of Aer Lingus’ results as reported under GAAP.(2) EBITDAR is defined as profit for the year plus exceptional items net interest expense (finance expense), taxation,depreciation, amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share. EBITDARis considered a non-GAAP financial measure. Aer Lingus believes that EBITDAR is an important measure of itsperformance and is a useful supplement to profit for the year and other income statement data. Aer Lingus believesEBITDAR is useful to management and investors in comparing its performance to that of other companies in its industry,as it removes the impact of (a) differences in capital structure, including the effects of finance income and expense,(b) differences among the tax regimes to which Aer Lingus and comparable companies are subject and (c) differences inthe age, method of acquisition and approach to depreciation and amortisation of productive assets. However, becauseother companies may calculate EBITDAR differently than Aer Lingus does, it may be of limited usefulness as acomparative measure. EBITDAR has limitations as an analytical tool and investors should not consider it in isolation or asa substitute for analysis of its results as reported under GAAP. Some of these limitations are: (a) EBITDAR does notreflect cash expenditures, or future requirements for capital expenditures or contractual commitments; (b) EBITDARdoes not reflect changes in, or cash requirements for, Aer Lingus’ working capital needs; (c) EBITDAR does not reflectthe finance expenses, or the cash requirements necessary to service Aer Lingus’ principal payments on its debt; (d)EBITDAR does not reflect taxation or the cash requirements for any tax payments; and (e) although depreciation,amortisation and impairment are non-cash charges, the assets being depreciated and amortised will often have to bereplaced in the future, and EBITDAR does not reflect any cash requirements for such replacements. A reconciliation ofEBITDAR to profit for the year under IFRS and on an Underlying basis is set out in the table below.(3) Cash Operating Costs are operating expenses other than net interest expense (finance expense), taxation, depreciation,amortisation and impairment, rentals (aircraft operating lease costs) and employee profit share.(4) EBITDAR per Seat Equivalent is based on the annual average number of aircraft operated during the period.138

Part IXOperating and Financial ReviewThe following table sets out a reconciliation of EBITDAR to profit for the year under Irish GAAP forthe years ended 31 December 2004 and 2003:PR Ann I,20.4.3Year ended31 December2004 2003(2 in millions)(unaudited) (1)Profit for the year************************************************************ 3 1.2 3 69.2Exceptional items ************************************************************** 102.5 —Finance (income)/expense, net *************************************************** (7.3) (5.3)Taxation ********************************************************************** (0.1) 10.2Depreciation, amortisation and impairment **************************************** 68.6 69.7Aircraft operating lease costs **************************************************** 41.2 34.2Employee profit share ********************************************************** 10.6 8.8EBITDAR ********************************************************************* 3216.7 3186.8Source: All data in the table above, excluding EBITDAR, is extracted from Part XII (Historical Financial Information) of thisProspectus. EBITDAR is extracted from management accounts and internal financial and operating reporting systems.(1) All data in this table is audited financial information except for EBITDAR which is unaudited.(a)RevenuesThe following table sets out an overview of Aer Lingus’ revenue items for the years ended31 December 2004 and 2003 under Irish GAAP on an absolute basis and as a percentage of totalrevenues, together with the percentage change in those items:PR Ann I,6.2PR Ann I,Year ended 31 December2004 2003Percent ofPercent ofTotal Percent TotalRevenues Change Revenues(1 in millions, except %)Passenger revenues **************************** 0799.0 88.1% 2.5% 0779.8 87.8%(unaudited) (1)— Long-haul ********************************* 295.3 32.5 7.2 275.5 31.0 20.4.2— Short-haul********************************* 460.6 50.8 0.9 456.3 51.4— Other************************************* 43.1 4.8 (10.2) 48.0 5.4Cargo revenues ******************************* 50.2 5.6 (4.2) 52.4 5.9Ancillary revenues ***************************** 23.9 2.6 359.6 5.2 0.6Other revenues ******************************* 33.7 3.7 (33.8) 50.9 5.7Total revenues ******************************* 0906.8 100% 2.1% 0888.3 100%Source: Management accounts.(1) All data in this table is unaudited except for total revenues which are audited.Aer Lingus’ total revenues increased by 2.1% to 0906.8 million in 2004 from 0888.3 million in 2003,primarily as a result of increases in passenger and ancillary revenues partially offset by decreases incargo and other revenues. Unit Revenues per ASK decreased by 7.8% to 6.67 cent in 2004compared to 7.24 cent in 2003, largely due to a decrease in average fares.Passenger Revenues. Passenger revenues increased by 2.5% to 0799.0 million in 2004 from0779.8 million in 2003.Short-haul passenger revenues increased to 0460.6 million in 2004 from 0456.3 million in 2003.This increase was driven by an increase in short-haul passenger traffic of 5.2% from 2003 to 2004139

Part IXOperating and Financial Reviewpartially due to the introduction of the ‘‘Low Fares. Way Better’’ initiative in August 2003, theintroduction of one-way fares with minimal restrictions in September 2004. Short-haul capacityincreased by 15.6% to 6.1 billion ASKs in 2004 from 5.3 billion ASKs in 2003 primarily as a result ofthe introduction of new routes, increased frequencies on existing routes, and the replacement ofBAe146 aircraft and Boeing 737 aircraft with Airbus A320 aircraft with additional seating capacity.Short-haul capacity utilisation increased by 18.5% to 4.7 billion RPKs in 2004 from 4.0 billion RPKsin 2003. The passenger load factor increased to 77% in 2004 from 75% in 2003.Long-haul passenger revenues increased by 7.2% to 0295.3 million in 2004 from 0275.5 million in2003, primarily as a result of an increase in long-haul passenger traffic of 7.2% from 2003 to 2004Long-haul capacity increased by 7.1% to 7.5 billion ASKs in 2004 from 7.0 billion ASKs in 2003.Long-haul capacity utilisation increased by 7.3% to 6.4 billion RPKs in 2004 from 6.0 billion RPKs in2003. The passenger load factor increased to 86% in 2004 from 85% in 2003.Cargo Revenues. Cargo revenues decreased by 4.2% to 050.2 million in 2004 from 052.4 millionin 2003, primarily as a result of a significant decrease in December 2004 in the number of routestransporting cargo as well as the adverse impact of a weaker US dollar on scheduled cargo yields. In2004, scheduled cargo tonnes on short-haul routes decreased by 22.1% to 6,192 tonnes from7,951 tonnes in 2003 and scheduled cargo tonnes on long-haul routes increased by 4.0% to 21,261tonnes in 2004 from 20,435 tonnes in 2003.Ancillary Revenues. Ancillary revenues increased by 359.6% to 023.9 million in 2004 from PR Ann I,05.2 million in 2003, principally as a result of an increase in in-flight sales to 018.2 million in 2004 9.2.1from 01.2 million in 2003 partially due to the elimination of complimentary in-flight food andbeverages and the introduction of in-flight sales of food and beverages on all short-haul routes inthe first quarter of 2004, as well as sales of alcoholic beverages on long-haul routes.Other Revenues. Other revenues decreased by 33.8% to 033.7 million in 2004 from 050.9 millionin 2003, primarily as a result of no leasing revenues in 2004, compared with leasing revenues of04.0 million in 2003, a decrease in third-party traffic handling activities by 43.3% to 05.9 million in2004 from 010.4 million in 2003 as a result of the discontinuation of traffic handling activitiesbeginning in October 2004, and decreases in commissions and revenues from its frequent flyerprogrammes.(b)Operating ExpensesOperating expenses decreased by 0.4% to 0810.5 million in 2004 from 0814.1 million in 2003, PR Ann I,against the backdrop of a 2.1% increase in total revenues. Operating expenses per ASK decreased 9.2.2by 10.1% to 5.96 cent in 2004 from 6.63 cent in 2003. Excluding fuel and oil costs, operatingexpenses per ASK decreased by 12.0% to 5.19 cent in 2004 from 5.90 cent in 2003.140

Part IXOperating and Financial ReviewThe following table sets out Aer Lingus’ items of operating expenses for the years ended31 December 2004 and 2003 under Irish GAAP, on an absolute basis and as a percentage of totalrevenues, together with the percentage change in those items:Year ended 31 December2004 2003PR Ann I,Percent ofPercent of20.4.2Total Percent TotalTotal Revenues Change Total Revenues(1 in millions, except %)(unaudited)Staff costs******************************************** 0245.7 27.1% 1.8% 0241.4 27.2%Depreciation, amortisation and impairment *************** 68.6 7.6 (1.6) 69.7 7.8Aircraft operating lease costs *************************** 41.2 4.5 20.1 34.2 3.9Fuel and oil costs ************************************* 105.8 11.7 18.1 89.6 10.1Maintenance expenses ********************************* 76.7 8.5 (14.3) 89.5 10.1Airport charges *************************************** 71.4 7.9 (9.7) 79.1 8.9En-route charges ************************************** 39.2 4.3 16.3 33.7 3.8Distribution costs************************************** 41.8 4.6 (29.6) 59.4 6.7Ground operations, catering and other operating costs ***** 99.2 10.9 (4.1) 103.4 11.6Other (gains)/losses, net ******************************** 10.3 1.1 94.3 5.3 0.6Costs of sales and other operating expenses ************** 799.9 88.2 (0.7) 805.3 90.7Employee profit share********************************** 10.6 1.2 20.5 8.8 1.0Total ************************************************ 0810.5 89.4% (0.4)% 0814.1 91.7%Source: Management accounts; internal financial and operating reporting systems.Staff costs. Staff costs increased by 1.8% to 0245.7 million in 2004 from 0241.4 million in 2003.This increase was driven primarily by pay increases, an increase in performance-related pay for pilotsand an increase in overtime payments to crew and general staff. These increases were partially offsetby a reduction in the number of full-time equivalent employees of 8.8% to 3,906 in 2004 from4,281 in 2003 as part of Aer Lingus’ ongoing restructuring plan. Staff costs per ASK decreased to1.81 cent from 1.97 cent over this period.Depreciation, amortisation and impairment. Depreciation, amortisation and impairment decreasedby 1.6% to 068.6 million in 2004 from 069.7 million in 2003. This decrease was largely due todecreased depreciation charges on premises of 19.0% to 03.4 million in 2004 from 04.2 million in2003 and ground equipment of 13.2% to 03.3 million in 2004 from 03.8 million in 2003, as well asthe impairment of certain fixed assets. Depreciation, amortisation and impairment per ASKdecreased by 12.3% to 0.50 cent in 2004 from 0.57 cent in 2003.Aircraft operating lease costs. Aircraft operating lease costs increased by 20.5% to 041.2 million in2004 from 034.2 million in 2003. This increase was largely due to an increase in the number ofleased aircraft in the Aer Lingus fleet.Fuel and oil costs. Fuel and oil costs increased by 18.1% to 0105.8 million in 2004 from089.6 million in 2003, primarily due to higher fuel prices and a 10.7% increase in total ASKs. Theaverage effective price per US gallon of aviation fuel (including into-plane fees) paid by Aer Lingusincreased by 20.5% to $1.06 in 2004 from $0.88 in 2003. Aer Lingus’ fuel cost per ASK was 0.78cent in 2004 compared to 0.73 cent in 2003.Maintenance expenses. Maintenance expenses decreased by 14.3% to 076.7 million in 2004 from089.5 million in 2003, primarily because there were no maintenance costs on the BAe146 aircraft in2004 compared with maintenance expenses of 010.5 million in 2003 due to the withdrawal fromservice of these aircraft in late 2003.Airport charges. Airport charges decreased by 9.7% to 071.4 million in 2004 from 079.1 million in2003. Despite higher landing charges, handling fees and load fees, airport charges in 2004 were141

Part IXOperating and Financial Reviewlower than 2003 due to the 29.5% increase in the amount of airport charges recoverable frompassengers to 091.5 million in 2004 from 070.7 million in 2003.En-route charges. En-route charges increased by 16.3% to 039.2 million in 2004 from033.7 million in 2003, primarily as a result of increased air traffic resulting from the increase in thenumber of routes served by Aer Lingus in 2004.Distribution costs. Distribution costs decreased by 29.6% to 041.8 million in 2004 from059.4 million in 2003. This decrease was primarily as a result of reduced interline service charges of68.5% to 06.3 million in 2004 from 020.0 million in 2003 and reduced central reservation servicefees of 31.6% to 011.9 million in 2004 from 017.4 million in 2003, stemming from a substantialincrease in the number of direct bookings through aerlingus.com. From 2003 to 2004, thepercentage of tickets sold on aerlingus.com increased from approximately 35% to approximately50% of total passenger ticket sales.Ground operations, catering and other operating costs. Ground operations, catering and otheroperating costs decreased marginally to 099.2 million in 2004 from 0103.4 million in 2003.Other (gains)/losses, net. Other losses increased by 94.3% to 010.3 million in 2004 from05.3 million in 2003, primarily as a result of the weakening of the US dollar.Employee profit share. Aer Lingus’ provision for employee profit share increased by 20.5% to010.6 million in 2004 from 08.8 million in 2003.(c)(d)(e)(f)(g)Operating Profit before Exceptional ItemsDue to the foregoing factors, Aer Lingus had an operating profit of 096.3 million in 2004 comparedwith an operating profit of 074.2 million in 2003.Exceptional ItemsAer Lingus had exceptional costs of 0102.5 million in 2004 compared with no exceptional costs in2003. Exceptional costs in 2004 related principally to provisions for payments and payments madeunder the employee voluntary severance and early retirement programme.Finance Income/(Expense), NetAer Lingus’ net finance income increased by 40.4% to 07.3 million in 2004 from 05.2 million in2003. This increase was primarily due to an increase in cash, short-term deposits and liquid resourcesand to a decrease in the average interest rate on loans and finance lease obligations in 2004compared to 2003.TaxationAer Lingus recorded a tax credit of 00.1 million in 2004 compared with a tax expense of010.2 million in 2003. This tax credit was primarily as a result of the effect of incurring exceptionalcosts of 0102.5 million in 2004, resulting in a lower profit before taxation.Profit for the YearDue to the foregoing factors, Aer Lingus had a profit for the year of 01.2 million (after netexceptional costs of 0102.5 million) in 2004 compared with a profit for the year of 069.2 million in2003.PR Ann I,9.16. LIQUIDITY AND CAPITAL RESOURCES6.1 OverviewAer Lingus’ business is capital intensive. Aer Lingus’ principal sources of liquidity used to finance its PR Ann I, 10.1capital requirements have been, and following the Offer and the receipt of the net proceeds from PR Ann I, 10.3the Offer will continue to be, a combination of cash flows from operations, debt financing142

Part IXOperating and Financial Reviewarrangements for the acquisition of new aircraft and, to a lesser extent, proceeds from the sale ofaircraft. Aer Lingus’ principal uses of cash will be for operating expenses, capital expenditures,working capital requirements and debt service requirements. The Company is of the opinion that,taking into consideration available bank and other facilities, the working capital available to AerLingus is sufficient for its present requirements and, in particular, is sufficient for at least the next12 months from the date of this Prospectus. Cash equivalents, other deposits and available for salefinancial assets under IFRS were 0942.2 million, 0880.9 million and 0814.2 million at 30 June 2006, PR Ann I,31 December 2005 and 31 December 2004, respectively, including 0165.8 million, 0196.4 million 10.4and 0241.4 million at 30 June 2006, 31 December 2005 and 31 December 2004, respectively, of‘‘restricted cash’’ held on deposit, principally in order to meet certain finance lease obligationsentered into by Aer Lingus with respect to its aircraft financing obligations.6.2 Cash Flows for the Six Months Ended 30 June 2006 and 2005The following table sets out Aer Lingus’ cash flows under IFRS for the six months ended 30 June2006 and 2005:PR Ann I,20.4.2Six Months ended30 June2006 2005(1 in millions)(audited)Net cash inflow from operating activities**************************************** 0 122.6 0 64.4Net cash outflow from investing activities *************************************** (112.5) (42.3)Net cash outflow from financing activities*************************************** (18.2) (27.3)Net increase in cash, cash equivalent and bank overdrafts******************** 0 (8.1) 0 (5.2)Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.Further information on Aer Lingus’ cash flows under IFRS is provided on page 272 (Group Cash FlowStatement) of Part XII (Historical Financial Information) of this Prospectus.(a)Operating ActivitiesThe majority of Aer Lingus’ cash inflows from operating activities are derived from ticket sales. Netoperating cash flows from operating activities are also affected by movements in tradepayables/creditors, trade receivables/debtors and payments made under restructuring and employeeseverance programmes. In general, Aer Lingus’ creditor days outstanding are greater than its debtordays outstanding due to the low levels of debtors. With a high proportion of credit card sales, AerLingus believes that there is little credit risk associated with trade receivables as reflected in the lowlevel of debtor defaults in the past.Net cash flows from operating activities increased by 058.2 million, or 90.4%, to 0122.6 million inthe six months ended 30 June 2006 from 064.4 million in the six months ended 30 June 2005. Themovement was driven by an increase in cash generated from working capital of 022.2 million(working capital was a source of funds of 0110.1 million in the six months ended 30 June 2006compared to a source of funds of 087.9 million in the six months ended 30 June 2005) andfavourable movements in adjustments for non-cash items of 077.8 million in the six months ended30 June 2006 (primarily comprising non-cash gains in the fair value of derivative financialinstruments of 019.6 million in the six months ended 30 June 2006 compared to non-cash losses of062.9 million in the six months ended 30 June 2005), partially offset by a reduction in profit for theperiod of 041.9 million.Interest paid decreased by 04.5 million during the period to 07.5 million in the six months ended30 June 2006 compared to 012.0 million in the six months ended 30 June 2005 due to a higherproportion of the interest charge in the six months ended 30 June 2006 being paid after the periodend than occurred in the six months ended 30 June 2005. Income tax payments increased during the143

Part IXOperating and Financial Reviewperiod by 04.4 million, resulting from a payment of 04.0 million in the six months ended 30 June2006 compared to a refund of 00.4 million in the six months ended 30 June 2005, primarily due tothe increased level of taxable profits in the year ended 31 December 2005 compared to the yearended 31 December 2004.(b)Investing ActivitiesNet cash used in investing activities increased by 166.0%, or 070.2 million, to 0112.5 million in thesix months ended 30 June 2006 from 042.3 million in the six months ended 30 June 2005.Purchases of property, plant, equipment and intangible assets decreased by 04.4 million to040.5 million in the six months ended 30 June 2006 from 044.9 million in the six months ended30 June 2005, primarily due to decreased expenditure on aircraft and flight equipment in the sixmonths ended 30 June 2006 compared to the six months ended 30 June 2005. Proceeds from thesale of property, plant and equipment increased by 00.7 million to 04.2 million in 2006 compared to03.5 million in 2005.Net cash invested in available for sale financial assets decreased by 09.4 million and net cashinvested in other deposits increased by 083.4 million in the six months ended 30 June 2006compared to the six months ended 30 June 2005. Further information about the movements inavailable for sale financial assets and net cash invested in other deposits is set forth on page 272(Group Cash Flow Statement) and in Notes 13, 17 and 28 of the notes to the audited consolidatedfinancial information for the six months ended 30 June 2006 and 2005 in Part XII (Historical FinancialInformation) of this Prospectus. Interest and dividends received decreased by 01.3 million over thesame period. Interest received decreased by 02.9 million to 012.4 million in the six months ended30 June 2006 from 015.2 million in the six months ended 30 June 2005 due to an increase in theamount of interest earned but not received on available for sale financial assets and cash, cashequivalents and other deposits in the six months ended 30 June 2006 compared with the six monthsended 30 June 2005. Dividends of 01.6 million were received in the six months ended 30 June 2006compared with no dividends received in the six months ended 30 June 2005.(c)Financing ActivitiesNet cash used in financing activities decreased by 33.3%, or 09.1 million, to 018.2 million in the sixmonths ended 30 June 2006 compared to 027.3 million in the six months ended 30 June 2005.This decrease was the result of a decrease in repayments of borrowings of 010.6 million to047.2 million in the six months ended 30 June 2006 compared to 057.8 million in the six monthsended 30 June 2005, partially offset by a decrease in proceeds from borrowings of 01.5 million to029.0 million in the six months ended 30 June 2006 compared to 030.5 million in the six monthsended 30 June 2005.6.3 Cash Flows for the Years Ended 31 December 2005 and 2004 under IFRSThe following table sets out Aer Lingus’ cash flows under IFRS for the years ended 31 December2005 and 2004:PR Ann I,10.220.4.2Year ended 31December2005 2004(1 in millions)(audited)Net cash inflow from operating activities ***************************************** 0 8.5 0 72.0Net cash outflow from investing activities **************************************** (59.3) (199.6)Net cash inflow from financing activities ***************************************** 49.0 127.9Net (decrease)/increase in cash, cash equivalent and bank overdrafts*********** 0 (1.8) 0 0.3Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.144

Part IXOperating and Financial ReviewDuring the last three years, Aer Lingus’ primary cash requirements have been for operatingexpenses, the acquisition of additional aircraft, including advance payments in respect of new AirbusA320 aircraft and related flight equipment, payments on related indebtedness and payments ofcorporation tax. Cash generated from operations has been the principal source of these cashrequirements, supplemented primarily by aircraft-related bank loans.Further information on Aer Lingus’ cash flows under IFRS is provided on page 201 (Group Cash FlowStatement) of Part XII (Historical Financial Information) of this Prospectus.(a)Operating ActivitiesWhile profit in the period increased by 066.0 million, or 288.2%, to 088.9 million in 2005 from022.9 million in 2004, net cash flows from operating activities decreased by 063.5 million, or88.2%, to 08.5 million in 2005 from 072.0 million in 2004. This movement was driven by adverseworking capital movements of 031.6 million (which were a source of funds of 08.8 million in 2005compared to a source of funds of 040.4 million in 2004), adverse movements on foreign exchangerate fluctuations of 026.7 million (representing non-cash gains of 028.0 million in 2005 compared tonon-cash gains of 01.2 million in 2004), movements in the fair value of derivative instruments (whichgenerated non-cash gains of 09.6 million in 2005 compared to 2004) and a decrease in provisionsprimarily for restructuring and employee severance of 064.7 million. Also included in 2004 werepayments to the ESOT to subscribe for Ordinary Shares in Aer Lingus.Interest paid increased by 00.8 million during the period to 024.5 million in 2005 compared to023.7 million in 2004 while a tax refund of 01.2 million was obtained in 2005 compared to a net taxpayment of 01.2 million in 2004.(b)Investing ActivitiesNet cash used in investing activities decreased by 70.2% to 059.3 million in 2005 from0199.7 million in 2004. This decrease was largely due to payments made in 2005 and 2004 inrelation to purchases of property, plant and equipment in the amount of 077.4 million in 2005 and0124.1 million in 2004 offset by the proceeds from the disposal of property, plant and equipment in2005 (03.5 million) and 2004 (068.8 million) including one Boeing 737 aircraft in 2005 and10 Boeing 737 aircraft in 2004.Net cash invested in available for sale financial assets and other deposits increased by 011.9 millionand 0173.0 million in 2005 and 2004, respectively.(c)Financing ActivitiesNet cash provided by financing activities decreased by 61.7% to 049.0 million in 2005 compared to0127.9 million in 2004.This decrease primarily reflected a decrease in net cash provided by long-term aircraft-related debt of089.8 million as a result of new aircraft finance leases of 099.4 million in 2005 from 0189.2 millionin 2004.These decreases were partially offset by a decrease in lease capital repayments of 039.7 million to039.4 million in 2005 from 079.1 million in 2004, and a decrease in loan capital repayments of015.4 million to 011.0 million in 2005 from 026.4 million in 2004. Aer Lingus also received044.2 million net proceeds from the issuance of new Ordinary Shares to the ESOT in 2004, whereasthere was no such share issuance in 2005.145

Part IXOperating and Financial Review6.4 Cash Flows for the Years Ended 31 December 2004 and 2003 under Irish GAAPThe following table sets out Aer Lingus’ cash flows under Irish GAAP for 2004 and 2003:PR Ann I,20.4.2Year ended31 December2004 2003(1 in millions)(audited)Net cash inflow from operating activities ****************************************** 0102.7 0111.7Returns on investment and servicing of finance ************************************ 7.7 7.5Taxation ********************************************************************** (1.2) 0.2Capital expenditure and financial investment ************************************** (64.1) (43.3)Acquisitions and disposals******************************************************* 3.7 3.0Cash inflow before use of liquid resources and financing **************************** 48.8 79.1Management of liquid resources ************************************************* (194.0) (32.0)Financing— Issue of shares to ESOT **************************************************** 44.2 —— Increase/(decrease) in debt ************************************************* 101.3 (43.0)Increase in cash in year ********************************************************* 0 0.3 0 4.1Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.Further information on Aer Lingus’ cash flows under Irish GAAP is provided on page 250 (Cash flowstatements — Irish GAAP) of Part XII (Historical Financial Information) of this Prospectus.(a)Operating ActivitiesNet cash inflow from operating activities decreased by 09.0 million, or 8.1%, to 0102.7 million in2004 from 0111.7 million in 2003.This movement was driven by an increase in operating profit before exceptional items but afteremployee profit share of 022.2 million (to 096.3 million in 2004 from 074.1 million in 2003),favourable working capital movements of 055.0 million (which were a source of funds of044.0 million in 2004 compared to a use of funds of 011.0 million in 2003), a decrease indepreciation of 01.1 million, a favourable movement in foreign exchange of 09.8 million, a paymentof 044.2 million to the employee share trust to subscribe for shares, business repositioning paymentsof 047.3 million and an adverse movement of 03.4 million in provisions (a reduction of 04.4 millionin 2004 compared to a reduction of 00.9 million in 2003).(b)(c)(d)(e)Returns on Investments and Servicing of FinanceNet interest income increased by 00.2 million in 2004, with interest received decreasing by01.1 million and interest paid decreasing by 01.3 million.TaxationThere was a tax payment of 01.2 million in 2004 compared to a tax refund of 00.2 million in 2003.Capital Expenditure and Financial InvestmentNet cash outflow for capital expenditure and financial investment increased by 020.8 million, or48.0%, to 064.1 million in 2004 from 043.3 million in 2003, primarily due to the purchase oftangible fixed assets (mainly Airbus A320 aircraft and other flight equipment) of 0133.0 million in2004 compared to 043.4 million in 2003, and the sale of tangible fixed assets (mainly Boeing B737aircraft and other flight equipment) of 068.9 million in 2004 compared to 00.1 million in 2003.Acquisitions and DisposalsThe sale of interests in subsidiary companies increased by 00.7 million, or 23.3%, to 03.7 million in2004 from 03.0 million in 2003.146

Part IXOperating and Financial Review(f)Management of Liquid ResourcesThe amount invested in cash deposits and liquid resources increased by 0162.0 million to0194.0 million in 2004 from 032.0 million in 2003.PR Ann I, 5.2(g) FinancingThere was a funds inflow of 044.2 million in 2004 due to the issue of shares to the ESOT. There wasa further cash inflow of 0101.3 million in 2004 from debt funding (due to an excess of new debtover debt repayments and increases in restricted deposits) compared to an outflow of 043.0 millionin 2003 (due to an excess of debt repayments).6.5 Capital Expenditure5.2.2Aer Lingus incurred capital expenditures of 039.7 million and 043.7 million under IFRS in the six 5.2.3months ended 30 June 2006 and 2005, respectively, and 077.4 million and 0124.1 million underIFRS in 2005 and 2004, respectively. Aer Lingus incurred capital expenditures of 0133.0 million and043.2 million under Irish GAAP in 2004 and 2003, respectively. These capital expenditures principallyrelated to the acquisition of aircraft and other flight equipment (including the capitalisation of thecost of aircraft maintenance performed and advance payments to aircraft and aircraft enginemanufacturers), property and ground equipment (including aircraft-related expenditures such asspare parts and aircraft modifications), and other assets (including information technology,infrastructure expenditures and capital expenditures for aerlingus.com and FastPass).Aer Lingus’ capital expenditure plans include investment of approximately 02 billion through 2012for the expansion of its aircraft fleet, including its short-haul aircraft fleet by approximately 50% andits long-haul aircraft fleet by approximately 100%, as well as for the replacement of a portion of itsexisting aircraft fleet. This investment is subject to various factors, including the availability ofappropriate aircraft, whether Aer Lingus purchases aircraft or acquires aircraft under operating leasesor financing leasing arrangements, the availability of required financing on terms acceptable to AerLingus, and the finalisation of the proposed EU/US open skies agreement or the liberalisation of theexisting Ireland/United States bilateral treaty.These forward-looking statements may be affected by the factors set forth in Part III (Risk Factors) ofthis Prospectus.PR Ann I, 10.6.6 Capital ResourcesPR Ann I, 10.Aer Lingus has been able to generate sufficient funds from operations to meet its working capital PR Ann I, 10.requirements. Aer Lingus intends to use the net proceeds from the Offer (after the payment of Aer PR Ann I, 10.Lingus’ portion of the fees, commissions and expenses payable in relation to the Offer andAdmission as well as the payment of approximately 0104 million to the Supplemental Funds),together with its existing and future available cash resources, and future financings to fund theequity portion of the purchase price of its fixed aircraft commitments in 2006 and 2007. Aer Linguscurrently anticipates that these future financings will include bank financings and aircraft financelease arrangements.As at 30 June 2006, Aer Lingus’ total debt was 0521.4 million, of which approximately 0502 millionrelated to Aer Lingus’ aircraft financing arrangements, approximately 06.3 million related toAer Lingus’ loan from the Selling Shareholder, and approximately 013.1 million related to amountsowing to banks on current accounts in the records of Aer Lingus (including 010.1 million in respectof Ulster Bank current accounts). Due to normal timing differences between payments beingrecorded in the books of Aer Lingus and payments being cleared through the banking system, all AerLingus current accounts were, in fact, in credit in the records of its banks as at 30 June 2006. AerLingus had one overdraft facility as at 30 June 2006 in a maximum amount of up to 012.7 million.This facility related to its current accounts with Ulster Bank. Further information on Aer Lingus’financing arrangements is set out in paragraphs 8.3 (Financing of Owned Aircraft) and 8.4 (FinanceLease Arrangements) of this Part IX and further information on the loan from the Selling Shareholderis set out in paragraph 13.7 (Loan from Selling Shareholder to Aer Lingus) of Part XV (AdditionalInformation) of this Prospectus.147

Part IXOperating and Financial ReviewAer Lingus’ funding and treasury policy is to manage its cash resources to ensure the minimal level ofborrowings consistent with the aims and strategy for the business. When seeking financing inconnection with the acquisition of aircraft and related capital expenditures, the Board considers thecommercial terms available and, in consultation with their advisers, consider whether such termsshould be fixed or variable and are based on, among other factors, the associated restrictions on theoperation of the business, appropriate to the requirements of the business. Where surplus cash isgenerated, it is placed on short-term deposit accounts at standard bank rates so as to maximiseinterest earned whilst maintaining the liquidity requirements of the business.Aer Lingus has not entered into any restrictive covenants with lenders which could have a materialeffect on its liquidity.7. BALANCE SHEETThis section provides information on the financial position of Aer Lingus as contained in the Group’sbalance sheets. No material acquisitions or disposals of businesses occurred in the period from1 January 2003 through 30 June 2006. Accordingly, all balance sheet movements during this periodresulted from normal trading activities in continuing operations.7.1 Balance Sheet Data under IFRSThe following table sets out certain of Aer Lingus’ key balance sheet data as at 30 June 2006 and2005 and as at 31 December 2005 and 2004 under IFRS:PR Ann I,20.4.2As at 30 June As at 31 December2006 2005 2005 2004(1 in millions)(audited)AssetsNon-current assetsProperty, plant and equipment****************************************************** 0521.9 0502.3 0508.0 0492.1Available for sale financial assets **************************************************** 146.8 142.7 160.0 117.4Other deposits ******************************************************************* 160.7 195.2 191.9 235.6Current assetsDerivative financial instruments ***************************************************** 26.5 47.4 37.6 17.6Trade and other receivables ******************************************************** 81.2 86.2 60.2 52.9Cash, cash equivalents and other deposits******************************************** 634.7 536.5 529.0 461.1Total assets ********************************************************************* 1,582.1 1,534.7 1,494.0 1,389.7EquityShare capital ********************************************************************* 357.8 357.8 357.8 357.8Capital conversion reserve fund ***************************************************** 5.1 5.1 5.1 5.1Retained earnings***************************************************************** 35.1 (11.9) 31.5 (57.4)Total equity ********************************************************************* 404.7 365.4 403.4 318.1LiabilitiesNon-current liabilitiesBorrowings ********************************************************************** 461.5 441.8 501.7 387.8Deferred tax liabilities************************************************************** 16.1 14.4 16.3 8.3Provisions for other liabilities and charges ******************************************** 75.9 91.0 80.1 86.2Current liabilitiesTrade and other payables ********************************************************** 495.1 470.8 364.5 349.7Borrowings ********************************************************************** 59.9 53.9 54.1 94.1Provisions for other liabilities and charges ******************************************** 52.3 92.1 65.2 118.7Total liabilities ****************************************************************** 1,177.4 1,169.3 1,090.6 1,071.6Total equity and liabilities ******************************************************* 01,582.1 01,534.7 01,494.0 01,389.7Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(a)Property, Plant and EquipmentProperty, plant and equipment increased by 3.9% to 0521.9 million as at 30 June 2006 from0502.3 million as at 30 June 2005.148

Part IXOperating and Financial ReviewProperty, plant and equipment increased by 3.2% to 0508.0 million as at 31 December 2005 from0492.1 million as at 31 December 2004.The increases in property, plant and equipment during these periods are primarily due to thepurchase of seven Airbus A320 aircraft in 2004 and 2005 in replacement for Aer Lingus’Boeing B737 aircraft fleet which it sold in 2004 and 2005.Further information about the movements in property, plant and equipment is set out in Note 10 ofthe notes to the audited financial information for the six months ended 30 June 2006 and 2005 andfor the years ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of thisProspectus.(b)Available for Sale Financial AssetsAvailable for sale financial assets increased by 2.9% to 0146.8 million as at 30 June 2006 from0142.7 million as at 30 June 2005.Available for sale financial assets increased by 36.3% to 0160.0 million as at 31 December 2005from 0117.4 million as at 31 December 2004.Available for sale financial assets are unlisted securities the Group invests in, which have similarmaturity dates as Aer Lingus’ aircraft finance leasing arrangements. The increase occurring in theyear ended 31 December 2005 was primarily the result of additional securities purchased and anincrease in security values due to exchange rate movements.Further information about the movements in available for sale financial assets is set out in Note 13 ofthe notes to the audited financial information for the six months ended 30 June 2006 and 2005 andfor the years ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of thisProspectus.(c)Other DepositsOther deposits (non-current) decreased by 17.7% to 0160.7 million as at 30 June 2006 from0195.2 million as at 30 June 2005.Other deposits (non-current) decreased by 18.6% to 0191.9 million as at 31 December 2005 from0235.6 million as at 31 December 2004.When considering the reason for these movements in other deposits (non-current), they should betaken together with the movements in cash, cash equivalents and other deposits (current). In bothcases, the decrease in other deposits is more than offset by increases in cash, cash equivalents andother deposits. The reason for the net movement is therefore discussed in paragraph (f) (Cash, CashEquivalents and Other Deposits) below.(d)Derivative Financial InstrumentsDerivative financial instruments decreased by 44.1% to 026.5 million as at 30 June 2006 from047.4 million as at 30 June 2005.Derivative financial instruments increased by 113.6% to 037.6 million as at 31 December 2005 from017.6 million as at 31 December 2004.Derivative financial instruments comprise mainly forward foreign exchange contracts and aircraftfuel price contracts. These contracts are entered into in the normal course of business of the Groupand in both cases the movements are not deemed to have had a material affect on the Group’sfinancial position.Further information about the movements in derivative financial instruments is set out in Note 14 ofthe notes to the audited financial information for the six months ended 30 June 2006 and 2005 and149

Part IXOperating and Financial Reviewfor the years ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of thisProspectus.(e)Trade and Other ReceivablesTrade and other receivables decreased by 5.8% to 081.2 million as at 30 June 2006 from086.2 million as at 30 June 2005.Trade and other receivables increased by 13.8% to 060.2 million as at 31 December 2005 from052.9 million as at 31 December 2004.In both cases, the movements in trade and other receivables reflect the normal continuing activitiesof the business and the movements are not deemed to have had a material affect on the Group’sfinancial position.Further information about the movements in trade and other receivables is set out in Note 16 of thenotes to the audited financial information for the six months ended 30 June 2006 and 2005 and forthe years ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of thisProspectus.(f)Cash, Cash Equivalents and Other DepositsCash, cash equivalents and other deposits increased by 18.3% to 0634.7 million as at 30 June 2006from 0536.5 million as at 30 June 2005.Cash, cash equivalents and other deposits increased by 14.7% to 0529.0 million as at 31 December2005 from 0461.1 million as at 31 December 2004.The total of cash, cash equivalents and other deposits (current) and other deposits (non-current)increased by 063.7 million to 0795.4 million as at 30 June 2006 compared to 0731.7 million as at30 June 2005 and increased by 024.2 million to 0720.9 million as at 31 December 2005 comparedto 0696.7 million as at 31 December 2004. The increases in both cases are primarily due to net cashgenerated from operations (including passenger sales in advance) and proceeds from borrowings,partially offset by purchases of property, plant and equipment and the repayment of borrowings.Further information about the movements in cash, cash equivalents and other deposits is set out inGroup Cash Flow Statement on pages 272 and 201 and in Note 17 of the notes to the auditedfinancial information for the six months ended 30 June 2006 and 2005 and for the years ended31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(g)BorrowingsBorrowings (non-current) increased by 4.5% to 0461.5 million as at 30 June 2006 from0441.8 million as at 30 June 2005.Borrowings (non-current) increased by 29.4% to 0501.7 million as at 31 December 2005 from0387.8 million as at 31 December 2004.In both cases, the increases in non-current borrowing were primarily due to increases in finance leaseobligations, which obligations were undertaken to finance the purchase of Airbus A320 aircraft.Further information about the movements in borrowings is set out in Note 19 of the notes to theaudited financial information for the six months ended 30 June 2006 and 2005 and for the yearsended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(h)Provisions for Other Liabilities and ChargesProvisions for other liabilities and charges (non-current) decreased by 16.6% to 075.9 million as at30 June 2006 from 091.0 million as at 30 June 2005.150

Part IXOperating and Financial ReviewProvisions for other liabilities and charges (non-current) decreased by 7.1% to 080.1 million as at31 December 2005 from 086.2 million as at 31 December 2004.The reasons for the movements in provisions for other liabilities and charges (non-current andcurrent) are considered in paragraph (k) (Provisions for Other Liabilities and Charges) below.(i)Trade and Other PayablesTrade and other payables increased by 5.2% to 0495.1 million as at 30 June 2006 from0470.8 million as at 30 June 2005.Trade and other payables increased by 4.2% to 0364.5 million as at 31 December 2005 from0349.7 million as at 31 December 2004.In both cases, the movements in trade and other payables reflected the normal continuing activitiesof the business and the movements are not deemed to have a material affect on the Group’sfinancial position.Further information about the movements in trade and other payables is set out in Note 18 of thenotes to the audited financial information for the six months ended 30 June 2006 and 2005 and forthe years ended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of thisProspectus.(j)BorrowingsBorrowings (current) increased by 11.1% to 059.9 million as at 30 June 2006 from 053.9 million asat 30 June 2005.Borrowings (current) decreased by 42.5% to 054.1 million as at 31 December 2005 from094.1 million as at 31 December 2004.The increase in borrowings (current) as at 30 June 2006 compared to 30 June 2005 was primarilydue to an increase in the overdrawn balance in the books of Aer Lingus under the Ulster Bankoverdraft facility. As these facilities are used continuously, the balances fluctuate on a daily basis. Thedecrease in borrowings (current) as at 31 December 2005 compared to 31 December 2004 reflectedthe differing borrowing repayment profile in the two years.Further information about the movements in borrowings is set out in Note 19 of the notes to theaudited financial information for the six months ended 30 June 2006 and 2005 and for the yearsended 31 December 2005 and 2004 in Part XII (Historical Financial Information) of this Prospectus.(k)Provisions for Other Liabilities and ChargesProvisions for other liabilities and charges (current) decreased by 43.2% to 052.3 million as at30 June 2006 from 092.1 million as at 30 June 2005.Provisions for other liabilities and charges (current) decreased by 45.1% to 065.2 million as at31 December 2005 from 0118.7 million as at 31 December 2004.Total provisions for other liabilities and charges (current and non-current) decreased by 054.9 millionto 0128.2 million as at 30 June 2006 compared to 0183.1 million as at 30 June 2005 and decreasedby 059.6 million to 0145.3 million as at 31 December 2005 compared to 0204.9 million as at31 December 2004. In both cases, the decrease was primarily due to business repositioningpayments, principally employee severance costs.Further information about the movements in provision for other liabilities and charges is set out inNote 20 of the notes to the audited financial information for the six months ended 30 June 2006and 2005 and for the years ended 31 December 2005 and 2004 in Part XII (Historical FinancialInformation) of this Prospectus.151

Part IXOperating and Financial Review7.2 Balance Sheet Data under Irish GAAPThe following table sets out certain of Aer Lingus’ key balance sheet data as at 31 December 2004and 2003 under Irish GAAP:PR Ann I,20.4.2As at 31December2004 2003(1 in millions)(audited)AssetsFixed assetsTangible assets ***************************************************************** 0568.1 0591.3Current assetsDebtors *********************************************************************** 52.0 67.4Cash, short-term deposits and liquid resources— Free cash ***************************************************************** 559.5 384.8— Restricted cash ************************************************************ 247.2 271.4Creditors (amounts due within one year) ******************************************* (442.1) (408.9)Total assets less current liabilities ********************************************** 985.4 907.3Creditors (amounts due after more than one year) ********************************** (400.2) (383.5)Provisions for liabilities and charges *********************************************** (219.0) (201.9)Net assets ******************************************************************** 366.2 321.9Capital and reservesCalled-up share capital ********************************************************** 357.8 319.7Shareholders’ funds — equity interests ***************************************** 0366.2 0321.9Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(a)(b)(c)(d)(e)(f)Tangible AssetsTangible assets decreased by 3.9% to 0568.1 million as at 31 December 2004 from 0591.3 millionas at 31 December 2003, primarily due to asset disposals and depreciation exceeding additionsduring 2004.DebtorsDebtors decreased by 22.8% to 052.0 million as at 31 December 2004 from 067.4 million as at31 December 2003, primarily due to reductions in trade and other debtors.Cash, Short-Term Deposits and Liquid ResourcesCash, short-term deposits and liquid resources increased by 22.9% to 0806.7 million as at31 December 2004 from 0656.2 million as at 31 December 2003, primarily due to cash generatedfrom operations and increased debt funding, reduced by capital expenditure.Creditors (Amounts Due within One Year)Creditors (amounts due within one year) increased by 8.1% to 0442.1 million as at 31 December2004 from 0408.9 million as at 31 December 2003, primarily due to increases in finance leaseobligations, trade creditors and advance ticket sales, partially offset by reductions in the amountsdue to the ESOT.Creditors (Amounts Due after More than One Year)Creditors (amounts due after more than one year) increased by 4.4% to 0400.2 million as at31 December 2004 from 0383.5 million as at 31 December 2003, primarily due to increased loanand finance lease obligations to fund the purchase of Airbus A320 aircraft.Provisions for Liabilities and ChargesProvisions for liabilities and charges increased by 8.5% to 0219.0 million as at 31 December 2004from 0201.9 million as at 31 December 2003, primarily due to an increase in the provision forbusiness repositioning, partially offset by reductions in provisions for aircraft maintenance andmaintenance contracts.152

Part IXOperating and Financial Review8. SCHEDULE OF OBLIGATIONS8.1 OverviewThe following table sets out Aer Lingus’ contractual obligations under IFRS as at 31 December 2005:Payments due by periodLess thanMore thanTotal 1 year 1-5 years 5 years(1 in millions)(audited)Finance lease obligations (1) *************************** 0500.9 032.3 0243.1 0225.5 PR Ann I,Other long-term borrowings (2) ************************ 54.8 21.8 33.0 — 20.4.2Aircraft operating lease obligations ******************* 120.8 5.9 13.7 101.2Other operating lease obligations (3) ******************* 60.8 1.5 2.0 57.3Aircraft, equipment and other purchase commitments *** 10.5 10.5 — —Total ********************************************* 0747.8 072.0 0291.8 0384.0Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.(1) Excludes amounts classified as interest.(2) Includes current maturities of long-term borrowings but excludes amounts classified as interest and amounts associatedwith interest rate swap agreements.(3) Includes primarily operating lease commitments with airports to ensure access to terminal, loading, maintenance andother facilities and long-term office lease commitments.8.2 Purchase Agreement with AirbusIn March 2006, Aer Lingus entered into a purchase agreement with Airbus S.A.S. for the purchase oftwo Airbus A330 aircraft for delivery in the second quarter of 2007. Aer Lingus has also recentlyreached an agreement with Airbus in relation to the terms of purchase for two additional A320aircraft for its short-haul fleet which would be scheduled for delivery in late 2007 and expects that acontract will be signed shortly after the completion of the Offer.The purchase price of the fixed order aircraft is based on Airbus’ published list price of the airframeand the engines, together with any increases or decreases to such price as separately agreed in theform of a specification change notice. This amount is then adjusted by an escalation factor that isdesigned to increase the list price for each individual aircraft by applying a formula reflectingadjustments for changes in the prevailing economic conditions as measured by the US Departmentof Labor.In addition to delivering the purchased aircraft, Airbus is required to provide ongoing productsupport for the aircraft and Aer Lingus’ operations, which includes providing warranties, spare parts,technical support and training for personnel as well as field service support. Airbus also providescustomer support through software, technical manuals and certain online services.8.3 Financing of Owned AircraftAer Lingus currently owns one Airbus A330 which is unencumbered by debt. Aer Lingus alsocurrently has two aircraft (one Airbus A330 and one Airbus A320 aircraft) in its fleet that it ownswhich are financed under bank financing arrangements. The financing is typically secured by amortgage over the respective aircraft. At the expiry of the bank financing arrangements, the bankfinancing will be repaid and the mortgage discharged, at which point the aircraft will either be soldto a third party on the open market or retained. The aircraft financing arrangements generally maybe terminated prior to the end of their term, subject to the payment of the prescribed fees. Furtherinformation relating to Aer Lingus’ financing agreements for its owned aircraft is set out inparagraph 8.6 (Aircraft Purchase and Finance Lease Agreements) of Part XV (Additional Information)of this Prospectus.153

Part IXOperating and Financial ReviewPR Ann I,10.58.4 Finance Lease ArrangementsAer Lingus currently operates 14 aircraft (one Airbus A330, three Airbus A321 and 10 Airbus A320aircraft) pursuant to finance lease arrangements. In finance leases, the lessee of the aircraft paysleasing instalments which, together with the prescribed termination value at the end of the term,amortise the purchase cost of the aircraft to the lessor over the term agreed and provide the lessoran acceptable return-on-investment. Where Aer Lingus has the right to purchase an aircraft from themanufacturer and decides to finance the acquisition of the aircraft by way of a finance lease, its rightto acquire title from the manufacturer is generally assigned to the lessor so that the lessor is theowner of the aircraft for the duration of the lease. When a finance lease expires, the lessee has theoption of acquiring the aircraft for a purchase price set out in the lease agreement. Aer Lingustypically exercises this purchase option. Several of Aer Lingus’ finance lease arrangements containrelatively standard change of control provisions which are affected by the completion of the Offerand may, in limited circumstances, allow for termination. Aer Lingus’ counterparties to these financelease arrangements have agreed to waive the change of control provisions in the arrangements,subject to execution of the appropriate documentation. Further information about finance leasearrangements is set out in paragraph 8.6 (Aircraft Purchase and Finance Lease Agreements) ofPart XV (Additional Information) of this Prospectus.8.5 Operating Lease ArrangementsAer Lingus currently has 18 aircraft in its fleet that are operated under operating lease arrangementsentered into with International Lease Finance Corporation (‘‘ILFC’’) or a wholly-owned subsidiary ofILFC (16 aircraft), Airbus Financial Services (a wholly-owned subsidiary of Airbus) (one aircraft) andCIT Aerospace International (a wholly-owned subsidiary of CIT Leasing Corporation) (one aircraft). Inaddition, Aer Lingus has entered into an operating leasing agreement with ILFC and has signed aletter of intent with AerCap B.V., for the delivery of two Airbus A320 aircraft in the second quarterof 2007. In connection with its A330 aircraft, two of Aer Lingus’ operating leases expire in 2008,one operating lease expires in 2009, and one expires in 2011.Operating leases have enabled Aer Lingus to increase its operating capacity in the short andmedium-term by obtaining aircraft without having to invest its capital in the financing of the aircraft.Under operating lease arrangements, the residual value risk of the aircraft is retained by the aircraftowner, with Aer Lingus as lessee responsible for the risks associated with the actual operation of theaircraft. As at 30 June 2006, Aer Lingus’ operating lease arrangements had an average remainingduration of approximately 4.5 years. In general, the leasing of the aircraft terminates at the end ofthe lease term, although Aer Lingus typically extends its operating lease agreements. Aer Lingus’aggregate commitments under the operating lease arrangements are set out in the table inparagraph 8.1 (Overview) of this Part IX. As required by IFRS and Irish GAAP, assets and obligationsunder operating leases are not included in Aer Lingus’ consolidated balance sheet. Aer Lingus’operating lease arrangements do not contain change of control provisions which would be affectedby completion of the Offer. Further information on Aer Lingus’ operating leases is set out inNote 26(b) (Lease commitments) of the notes to the consolidated financial statements prepared inaccordance with IFRS for 2005 and 2004 and Note 24(b) (Lease commitments) of the notes to theconsolidated financial statements prepared in accordance with Irish GAAP for 2004 and 2003,contained in Part XII (Historical Financial Information) of this Prospectus.8.6 Wet Lease ArrangementsAer Lingus leases aircraft on an as-needed, short-term basis under wet lease arrangements inexceptional circumstances, such as to replace aircraft on its scheduled routes during periods whenany aircraft in its fleet is undergoing unscheduled maintenance. A wet lease arrangement is a leaseof aircraft for a minimum number of block hours and a duration of less than six months, wherebythe lessor assumes certain operational responsibilities, including the procurement of insurance andmaintenance as well as provision of the services of the cockpit crew and/or the cabin crew. Thepayments under wet lease agreements depend on the amount of block hours that the aircraft areutilised by Aer Lingus. Aer Lingus’ aggregate expenses under wet lease agreements under IFRS were154

Part IXOperating and Financial Review04.7 million for the year ended 31 December 2005 and 02.2 million for the six months ended30 June 2006.9. OFF-BALANCE SHEET ARRANGEMENTSAn off-balance sheet arrangement includes any contractual obligation, agreement or transactionarrangement involving an unconsolidated entity under which a company has (1) retained a contingentinterest in transferred assets, (2) an obligation under derivative instruments classified as equity, (3) anyobligation arising out of a material variable interest in an unconsolidated entity that provides financing,liquidity, market risk or credit risk support to Aer Lingus, or that engages in leasing, hedging or researchand development services with Aer Lingus or (4) made guarantees. Aer Lingus currently has no sucharrangements.10. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK10.1 OverviewIn the normal course of business as an international air transportation company, Aer Lingus isexposed to market risks relating to fluctuations in exchange rates, interest rates and aviation fuelcosts.The treasury risk arising from these fluctuations is managed in accordance with treasury policiesapproved by the Board. Aer Lingus’ treasury policy sets out clearly defined statements andparameters for the execution of key treasury functions of funding and risk management in a secureand cost effective manner in accordance with the airline’s business objectives. The emphasis is onrisk management and, where possible, the protection of the business from the financial impact ofvolatility in the financial and fuel markets. Aer Lingus’ treasury policy and the associated proceduresmanual are designed to ensure that appropriate reporting procedures and controls are in place. Allfinancial activities are solely entered into to hedge underlying financial exposures of the airline and inno circumstances does the airline enter into transactions for speculative purposes.In implementing its risk management strategies, Aer Lingus uses financial and commodity derivativeinstruments and enters into contracts with counterparties. However there is always the risk thatcounter-parties may not be able to deliver at the maturity of contracts and to minimise the exposureto such risks Aer Lingus will only enter into contracts with counterparties that have minimum creditratings from Standard & Poor’s, Moody’s Investors Service, Inc. or Fitch Ratings/IBCA and/orcounter-parties that are approved by the Board. Risk management strategies cannot entirely relievethe airline from the foregoing exposures but can minimise the impact on the financial statementsand assist in the protection of shareholder value.10.2 Exchange Rate ExposuresAer Lingus is exposed to exchange rate movements resulting from its trading and capital investmentactivities and its funding operations. The reporting currency of Aer Lingus is the euro. The mainexposure is to the US dollar in which Aer Lingus has an annual net deficit mainly due to US dollardenominated fuel and aircraft related costs. To a lesser extent, Aer Lingus has exposure to Sterling, inwhich it has a net surplus driven by its UK revenues.The exchange rate exposure is managed on a selective hedging basis. Minimum cover levels are setout in Aer Lingus’ treasury policy in relation to the trading cash flow and the major capitalinvestment exchange rate exposures, based on projected exposures at that point in time. Theminimum cover levels for trading cash flow exposures is to maintain 50% cover in respect of thecurrent financial year and 25% cover relating to the following financial year. In respect of majorcapital expenditures, 50% of committed capital expenditures are hedged on signing of the contract.Balance sheet and accounting translation exposures are managed by maintaining, where possible,matched positions in relation to foreign currency assets and liabilities. Cover levels are monitored155

Part IXOperating and Financial Reviewand reviewed on an ongoing basis in light of market developments and the overall needs of thebusiness.As at 30 June 2006, Aer Lingus’ net US dollar exposure was hedged at 63% and 28% for theremainder of 2006 and 2007, respectively, based on estimated exposures at that point in time at anaverage exchange rate of $1.24:01 and $1.24:01, respectively. In addition Aer Lingus’ Sterlingexposure was hedged at 50% and 25%, respectively, at an average exchange rate of £0.70:01 and PR Ann I,£0.69:01, respectively. The notional principal amounts of the outstanding foreign exchange 9.2.3contracts as at 30 June 2006 are 0283.0 million.10.3 Interest Rate ExposuresAer Lingus has exposure to interest rate fluctuations in respect of certain of its finance and operatingleases which are at floating rates. Interest rate risk in respect of the Aer Lingus debt and aircraft leaseportfolio is managed on a selective hedging basis, using approved financial market instruments. AerLingus’ treasury policy requires that a minimum of 50% of its total long-term net debt will be atfixed interest rates. As at 30 June 2006, approximately 60% of Aer Lingus’ aircraft financing debt,adjusted for defeasance, was at fixed interest rates after giving effect to interest rate swaparrangements which were an integral part of the financing structures. As at 30 June 2006, AerLingus had entered into interest rate swaps with a nominal value of $227.3 million and an amortisedvalue of 0213.8 million as an integral part of the financing structures in relation to eight AirbusA320 aircraft, whereby fixed rate interest on US dollar denominated debt was swapped into floatingrate interest. In addition, Aer Lingus has entered into a cross currency interest rate swap whereby itwill receive $18.5 million for 020.2 million in 2011.10.4 Aviation Fuel Price ExposuresAer Lingus manages its aviation fuel price exposures on a selective hedging basis, using approvedcommodity market instruments. Additionally fuel surcharges are applied to long-haul passengertickets and freight customers.Aer Lingus’ treasury policy requires that a minimum of 40% cover will be maintained for the currentfinancial year and 20% for the following financial year with respect to aviation fuel price exposures.The minimum levels are reviewed on an ongoing basis and are subject to change with the approvalof the Chief Executive and the Finance Director of Aer Lingus based on the overall needs of thebusiness and fuel market dynamics.As at 30 June 2006, Aer Lingus had entered into fuel hedging contracts with respect to 83% and16% of its projected aviation fuel requirements for the remainder of 2006 and 2007, respectively. Aderogation from the treasury policy with respect to the 2007 minimum cover level was approved bythe Chief Executive and the Finance Director. The mark-to-market value of Aer Lingus’ fuel hedgingcontracts as at 30 June 2006 was 030.6 million. The average hedged price of aviation fuel per tonnein the six months ended 30 June 2006 was $506.156

Part IXOperating and Financial Review10.5 Amounts of Derivative Financial InstrumentsAs at 31 December 2005, the fair market values of Aer Lingus’ hedging instruments with respect tofluctuations in aviation fuel prices, interest rates and foreign exchange rates were as follows:Hedging at fairmarket values(1 in millions)Forward fuel price contracts **************************************************** 033.9Cross currency interest rate swaps *********************************************** (4.9)Forward-exchange transactions************************************************** 4.1Total ************************************************************************ 033.1Source: Extracted from Part XII (Historical Financial Information) of this Prospectus.The items in the table above were recorded under other current assets and other current liabilities onAer Lingus’ balance sheet.11. CRITICAL ACCOUNTING POLICIES UNDER IFRSThe preparation of Aer Lingus’ consolidated financial statements and notes thereto requires themanagement of Aer Lingus to make estimates and judgments that affect the reported amount of assetsand liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during the reporting period. Aer Lingusbases its estimates on historical experience, changes in the business environment and various otherassumptions that management believes are reasonable under the circumstances. Management evaluatesthese estimates and underlying assumptions on an ongoing basis. Management’s estimates andassumptions have been prepared on the basis of the most current reasonably available information. Theresults of these estimates form the basis for making judgments about the carrying values of assets andliabilities that are not readily apparent from other sources. Actual results could differ from these estimatesunder different assumptions and conditions. Revisions to accounting estimates are recognised in the periodin which the estimate is revised if the revision affects only that period or in the period of the revision andfuture periods if the revision affects both current and future periods.Critical accounting policies are those accounting estimates that require management to make assumptionsabout matters that are highly uncertain at the time the estimates are made and would have resulted inmaterial changes to the consolidated financial statements if different estimates, which managementreasonably could have used, were made. Aer Lingus has several critical accounting policies, which aredescribed below, that are both important to the portrayal of its financial condition and results of operationsand require management to make subjective and complex judgments. Typically, the circumstances thatmake these judgments complex and difficult relate to making estimates about the effect of matters that areinherently uncertain.11.1 Revenue RecognitionAer Lingus generally recognises passenger revenues when the transportation is provided (i.e., whenthe flight is flown) and not when the ticket is sold. When a flight has not been provided at the endof a financial year, the unearned revenue is included as a liability on Aer Lingus’ balance sheet under‘‘accruals and deferred income’’ until the earlier of the date on which the transportation is providedand two years from the end of that financial year. The accruals and deferred income amount isestimated based on historical experience, including past general passenger behaviour.Revenues earned under interline agreements (including codesharing agreements) are allocatedbetween the interline partners based on the existing contractual arrangements and are recognisedas revenues when the transportation is provided.157

Part IXOperating and Financial ReviewAer Lingus receives prepayments for its ticket sales which are recorded as advance payments on itsbalance sheet. Prior to October 2004, when Aer Lingus ceased making bulk ticket sales, it receivedpayments from charter and package tour operators for bulk ticket sales in the month the flight wasflown. Accordingly, for the period during which bulk ticket sales were made, Aer Lingus generallydid not incur a liability for advanced payments for such sales.Aer Lingus generally recognises cargo revenues when the transportation is provided, which typicallyoccurs shortly after the time of booking.Aer Lingus recognises ancillary and other revenues when the services are rendered.11.2 Derivative Financial Instruments and Hedging ActivitiesAer Lingus initially recognises derivatives at fair value on the date a derivative contract is entered intoand subsequently re-measures them at their fair value. The method of recognising the resulting gainor loss depends on whether the derivative is designated as a hedging instrument, and if so, thenature of the item being hedged. Aer Lingus designates certain derivatives as either hedges of:) the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or) a particular risk associated with a recognised asset or liability or a highly probable forecasttransaction (cash flow hedge).(a)Fair value hedgeFair value hedges are principally used to manage the interest rate risk in certain fixed rate exposures.Changes in the fair value of derivatives that are designated and qualify as fair value hedges arerecorded in the income statement, together with any changes in the fair value of the hedged assetor liability that are attributable to the hedged risk. The gain or loss relating to the effective portion ofinterest rate swaps, hedging fixed rate assets and borrowings is recognised in the income statementwithin ‘‘financing income or expense’’, along with the changes in the fair value of the hedged fixedrate assets and borrowings attributable to interest rate risk. The gain or loss relating to theineffective portion of the interest rate swaps is recognised in the income statement within ‘‘FinanceExpense’’.If a hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amountof a hedge item for which the effective interest method is used is amortised to profit or loss over theperiod to maturity.(b)Cash flow hedgeCash flow hedges are principally used to hedge the commodity price risk associated with Aer Lingus’forecasted fuel purchases as well as certain foreign exchange and interest rate exposures. Theeffective portion of changes in the fair value of derivatives that are designated and qualify as cashflow hedges are recognised in equity. The gain or loss relating to the ineffective portion is recognisedimmediately in the income statement within ‘‘Fuel and oil costs’’ in the case of fuel purchases, and‘‘Other gains/(losses) — net’’ in the case of foreign exchange hedges.Amounts accumulated in equity are reclassified in the income statement in the periods when thehedged item affects profit or loss (for instance when the forecast purchase that is hedged takesplace). They are included under the relevant caption in the financial statements which reflect thenature and purpose of the hedge.(c)Derivatives that do not qualify for hedge accountingSome derivatives, while being economic hedges, do not meet the detailed hedge accounting criteriaunder IFRS. Changes in the fair value of these instruments are recognised immediately in the incomestatement. As Aer Lingus believes that the arrangements entered into in relation to its fuel andforeign exchange requirements are effective commercial hedges, the underlying financialperformance is separately disclosed as if these hedges had qualified in full for hedge accounting.158

Part IXOperating and Financial Review11.3 Property, Plant and EquipmentIn accounting for property, plant and equipment, Aer Lingus must make estimates about theexpected useful lives of the assets, the expected residual values of the assets and the potential forimpairment based on the fair value of the assets and the cash flows they generate.In estimating the lives and expected residual values of its aircraft, Aer Lingus has primarily relied onmarket values published by independent appraisers, industry experience and recommendations fromthe manufacturers of Aer Lingus’ owned aircraft. The depreciation period of the aircraft is based onthe estimated useful life of 20 years for long-haul fleet, 18 years for short-haul fleet and five to11 years for rotable spares after consideration of their relative estimated residual values. The residualvalues and the useful life are reviewed every year.Subsequent revisions to these estimates, including estimated maintenance costs, which may besignificant, could be caused by changes to Aer Lingus’ maintenance programme, changes inUtilisation of the aircraft, governmental regulations on ageing of aircraft and changing market pricesfor new and used aircraft of the same or similar types. Aer Lingus evaluates its estimates andassumptions in each reporting period and, when warranted, adjusts these assumptions. Generally,these adjustments are accounted for on a prospective basis, through depreciation and amortisationexpense.Aer Lingus periodically evaluates its property, plant and equipment for impairment. Factors thatwould indicate potential impairment would include, but are not limited to, significant decreases inthe market value of property, plant and equipment, a significant change in property, plant andequipment’s physical condition, and operating or cash-flow losses associated with the use of theproperty, plant and equipment. While the airline industry as a whole has experienced many of thesefactors from time to time, Aer Lingus has not yet been seriously impacted and continues to recordpositive cash flows from these long-lived assets. This accounting policy, in combination with thedepreciation policy described above, could result in any individual aircraft’s fair market value beingdifferent from its book value for financial reporting purposes. Aer Lingus will continue to monitor itslong-lived assets and the general airline operating environment.Under IFRS 1 ‘‘First time adoption of international financial reporting standards’’, Aer Lingus hasavailed of the exemption to use the fair value of certain flight equipment as the deemed cost as atthe date of transition. This has resulted in a decrease in the net book value of these assets, with acorresponding entry in opening reserves and a recurring reduction in the depreciation charge for theyear. This resulted in a reduction of 059.3 million in the net book value of property, plant andequipment at 31 December 2005. See paragraph 12 (Reconciliation between Irish GAAP and IFRS) ofthis Part IX.11.4 Major Inspection and OverhaulWhen Aer Lingus acquires new aircraft outright or under a finance lease, a portion of the purchaseprice is attributed on acquisition to future maintenance costs for airframe and engine overhaulwhich are capitalised and depreciated separately from the aircraft and engines over a period until theexpected date of the next major maintenance or overhaul, for a period of up to 12 years dependingon the type of maintenance required and the type of aircraft. Further information on maintenancechecks is set out in paragraph 17 (Maintenance) of Part VIII (Information on Aer Lingus) of thisProspectus. Also, where Aer Lingus has a commitment under an operating lease to perform aircraftmaintenance or compensate the lessor for future maintenance expenses incurred in relation tooperating leased aircraft, a provision is made during the lease term for this obligation. Both of theseaccounting policies involve the use of estimates in determining the quantum of the initial purchaseprice to be allocated between the initial estimate of maintenance costs and the aircraft’s componentassets (e.g., airframe and engine) and/or the amount of provision for aircraft held under operatingleases to be set aside and the respective periods over which such amounts are charged to income. Inmaking such estimates, Aer Lingus has primarily relied on industry experience, industry regulationsand recommendations from the manufacturers of its aircraft. However, these estimates can bePR Ann I,8.1159

Part IXOperating and Financial Reviewsubject to revision, depending on a number of factors, such as the timing of the plannedmaintenance, the ultimate Utilisation of the aircraft, changes to government regulations andincreases and decreases in the estimated costs. Aer Lingus evaluates its estimates and assumptions ineach reporting period and, when warranted, adjusts these assumptions, which generally impactmaintenance and depreciation and amortisation expense in the income statement, on a prospectivebasis.11.5 ProvisionsAer Lingus recognises provisions as a result of a present legal or constructive obligation arising frompast events, where it is more likely than not that an outflow of resources will be required to settle theobligation and the amount has been reliably estimated. Provisions are measured at the estimatedpresent value of the expenditures that are expected to be required to settle the obligation using apre-tax market interest rate that reflects the time to the estimated settlement date and the risksspecific to the obligation. The increase in a provision with the passage of time is recognised asinterest expense.11.6 PensionsAer Lingus operates various pension schemes. The principal pension schemes are the Irish PensionSchemes, one of which, the Main Scheme, is operated in conjunction with other employers. Underthe Irish Pension Schemes, Aer Lingus and its employees contribute a fixed percentage of salarieseach year to the Irish Pension Schemes which does not vary according to the funded level of theschemes.Under International Financial Reporting Standards IAS 19 (Employee Benefits), a defined contributionscheme is a pension scheme under which an employer pays fixed contributions into a separate fundand an employer has no legal or constructive obligations to pay further contributions if the funddoes not hold sufficient assets to pay all employees the benefits relating to employee service in thecurrent and prior periods. A defined benefit scheme is a pension scheme that is not a definedcontribution scheme.Aer Lingus pays contributions into the Irish Pension Schemes in accordance with the trust deed. AerLingus has no further payment obligations once the contributions have been paid. The contributionsare recognised as an employee benefit expense when they are due. Prepaid contributions arerecognised as an asset to the extent that a cash refund or a reduction in the future payments isavailable.As the provisions of the trust deeds governing the Irish Pension Schemes are such that no changes tothe contribution rates are possible without the prior consent of the Company, the Company hasconcluded that it has no obligation, legal or constructive, to increase its contributions beyond thoselevels. As such, it has accounted for the Irish Pension Schemes as defined contribution schemesunder the provisions of International Financial Reporting Standards IAS 19 (Employee Benefits) and,as a result, has not recognised the schemes’ liabilities on the Company’s balance sheet at the date oftransition to IFRS or thereafter.If any legal or constructive obligation to vary the Company’s contributions based on the fundingstatus of the Irish Pension Schemes arises, IFRS requires the Company to include any liabilitiesrelating to its share of any pension fund deficits on its balance sheet and reflect any period on periodmovements in its income statement.Further information on Aer Lingus’ pension schemes is set forth in paragraph 7 (Pensions) of Part XV(Additional Information) of this Prospectus.160

Part IXOperating and Financial Review12. RECONCILIATION BETWEEN IRISH GAAP AND IFRSUp to and including the year ended 31 December 2005, Aer Lingus’ statutory financial statements wereprepared in accordance with Irish GAAP. Following admission to the Official List of the Irish Stock Exchangeand the Financial Services Authority in accordance with European Union Regulations, Aer Lingus will berequired to prepare statutory consolidated financial statements for the year ending 31 December 2006 andsubsequent periods in accordance with IFRS as adopted by the EU and IFRIC interpretations adopted bythe EU. In compliance with the Prospectus Regulations 2005, the Directors have prepared financialinformation for Aer Lingus for the years ended 31 December 2004 and 31 December 2005, on the basisexpected to be applicable, in so far as this is currently known, for the financial statements to be preparedfor the year ending 31 December 2006, except where otherwise required or permitted by IFRS 1 ‘‘First-timeadoption of International Financial Reporting Standards’’.Aer Lingus’ transition date to IFRS is 1 January 2004. The rules for first time adoption of IFRS are set out inIFRS 1. It requires Aer Lingus to determine its IFRS accounting policies and apply these retrospectively todetermine the opening balance sheet position under IFRS at the date of transition.The following is a summary explanation of the most significant changes required to Aer Lingus’consolidated financial statements as a result of the transition to IFRS. Further information on the transitionto IFRS is set out in Note 31 (Transition to IFRS) of Part XII (Historical Financial Information) of thisProspectus.12.1 Current and Deferred taxesUnder Irish GAAP, deferred taxation is recognised on all timing differences where the transaction orevent that gives rise to an obligation to pay more tax in the future or a right to pay less tax in thefuture, have occurred by the balance sheet date using rates of tax that have been enacted by thebalance sheet date. Deferred tax assets are recognised when it is more likely than not that they willbe recovered. Deferred taxation is not provided in respect of timing differences arising from the saleor revaluation of fixed assets unless, by the balance sheet date, a binding commitment to sell theasset has been entered into.Under IFRS, deferred taxation is recognised in respect of all temporary differences at the balancesheet date between the tax bases of assets and liabilities and their carrying value for financialreporting purposes. Deferred tax is determined using tax rates that have been enacted orsubstantially enacted by the balance sheet date. Deferred tax related to fair value re-measurement ofavailable for sale investments and cash flow hedges, which are charged or credited directly to equity,is also credited or charged directly to equity and is subsequently recognised in the income statementtogether with the deferred gain or loss. Deferred tax assets are recognised to the extent that it isprobable that future taxable profit will be available against which the temporary differences can beutilised.IFRS requires deferred tax to be provided in respect of undistributed profits of overseas subsidiariesunless the parent is able to control the timing of remittances and it is probable that such remittanceswill not be made in the foreseeable future. As Aer Lingus is able to control the timing of remittancesfrom overseas subsidiaries and no such remittances are anticipated in the foreseeable future, noprovision has been made for any tax on undistributed profits of overseas subsidiaries. Similarly, nodeferred tax assets or liabilities have been recognised in respect of temporary differences associatedwith investments in subsidiaries. The deferred tax liability has decreased from 021.7 million underIrish GAAP to 016.3 million under IFRS (2004: 014.1 million to 08.3 million), primarily as a result ofthe tax effect of the adjustments listed below.12.2 Intangible assetsUnder Irish GAAP, computer software is capitalised and included within tangible assets where futureeconomic benefits are expected to arise from the asset. These assets are amortised over theirexpected useful lives. Under IFRS, acquired computer software licences are capitalised on the basis of161

Part IXOperating and Financial Reviewthe costs incurred to acquire and bring into use the specific software. These costs are amortised onthe basis of their expected useful lives.Costs that are directly associated with the production of identifiable and unique software productscontrolled by Aer Lingus and which will probably generate economic benefits exceeding costsbeyond one year, are recognised as intangible assets and amortised over their useful lives. As a resultof this adjustment, computer software has been reclassified from tangible to intangible assets.12.3 Derivative Financial InstrumentsUnder Irish GAAP, derivatives used in order to hedge exposures to changes in interest rates, currencymovements or fuel prices are accounted for on an accruals basis consistent with the accountingtreatment of the underlying transaction. The fair value gains and losses on these derivatives are notrecognised in the income statement. Profits and losses related to qualifying hedges of firmcommitments and anticipated transactions are deferred and taken to the profit and loss accountwhen the hedged transactions occur.Under IFRS derivatives are initially recognised at fair value on the date on which a derivative contractis entered into and are subsequently re-measured at their fair value at each reporting date. Themethod of recognising the resulting fair value gain or loss depends on whether the derivative isdesignated as a hedging instrument, and if so, the nature of the item being hedged. Aer Lingusdesignates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilitiesor firm commitments (fair value hedge); or, (2) hedges of highly probable future cash flowsattributable to a recognised asset or liability, or a forecasted transaction (cash flow hedge). To soqualify, IFRS requires that the risk management strategy in respect of each hedged item isdocumented in advance, that the effectiveness of the hedge can be reliably measured and that thehedge is assessed on an ongoing basis and determined actually to have been highly effectivethroughout the financial reporting periods for which the hedge was designated. Changes in the fairvalue of derivatives that are designated and qualify as fair value hedges are recorded in the incomestatement, together with any changes in the fair value of the hedged asset or liability that areattributable to the hedged risk. The effective portion of changes in the fair value of derivatives thatare designated and qualify as cash-flow hedges are recognised in equity. The gain or loss relating tothe ineffective portion is recognised immediately in the income statement. Amounts accumulated inequity are reclassified to the income statement in the periods in which the hedged item will affectprofit or loss. In the case of derivative instruments that do not qualify for hedge accounting, changesin their fair value are recognised immediately in the income statement.As Aer Lingus did not fulfil the documentation and testing requirements of IFRS for hedgeaccounting during the financial years ended 31 December 2004 and 31 December 2005, allderivative financial instruments held by Aer Lingus have been measured in full at fair value in theBalance Sheet, with a corresponding entry to the Income Statement. Some of these derivativefinancial instruments comprised foreign exchange forwards used in the purchase of certain propertyplant and equipment additions in 2004 and 2005. As these forwards did not meet thedocumentation and hedging requirements of IFRS for hedge accounting they did not qualify ashedges and their impact on the capitalised cost of these additions has been written back to theincome statement. Certain other items recognised as accrued interest receivable or payable underIrish GAAP are categorised as derivative financial instruments under IFRS, and have been categorisedand valued accordingly.12.4 Classification of Financial InstrumentsUnder Irish GAAP, all debt securities were included in the balance sheet under the caption of ’cash,short-term deposits and liquid resources’, with additional disclosures provided in the footnotes.162

Part IXOperating and Financial ReviewUnder IFRS, Aer Lingus has classified its non-derivative financial assets as either:(a)(b)Other depositsThis category includes non-derivative financial assets with fixed or determinable payments,and a maturity date in excess of three months that are not quoted in an active market.Available for Sale investmentsAvailable for sale investments are those intended to be held for an indefinite period of time,which may be sold in response to needs for liquidity or changes in interest rates, exchangerates or equity prices.Financial assets are initially recognised at fair value. Available for sale financial assets aresubsequently carried at fair value through equity or the income statement respectively. Loansand receivables maturity investments are subsequently carried at amortised cost using theeffective interest method. Interest receivable and payable are included in the carrying value ofthe underlying on an effective interest rate basis. As a result of this adjustment, certaindeposits and other investments have been reclassified on the balance sheet. In addition, theAvailable for sale financial assets have been fair valued at the transition date with subsequentmovements in fair value being posted directly to reserves.12.5 Foreign CurrenciesIFRS also provides specific guidance on how the functional currency (i.e., the currency that an entityshould use to record its transactions) of a company should be determined. This has resulted in one ofAer Lingus subsidiaries changing its functional currency to euro.12.6 Deemed Cost of Property, Plant and EquipmentIn respect of certain flight equipment, Aer Lingus has availed of the exemption in IFRS 1 to use thefair value of the flight equipment as the deemed cost as at the date of transition. This has resulted ina decrease in the net book value of these assets, with a corresponding entry in opening reserves, anda recurring reduction in the depreciation charge for the year.12.7 Revenue OffsetUnder Irish GAAP, certain passenger charges and fees were netted against the related operatingexpenses. Under IFRS, for items of revenue and expense to be offset, there must be an intention tosettle net or to realise the underlying asset and liability simultaneously. This has resulted in thegrossing up of both revenues and operating expenses to reflect the impact of these certainpassenger charges and fees.12.8 ReconciliationThe following tables set forth a summary reconciliation to IFRS of Aer Lingus’ Irish GAAPconsolidated balance sheet as at 31 December 2005 and income statement for the year ended31 December 2005, illustrating the most significant effects of the transition to IFRS:163

Part IXOperating and Financial ReviewAs at 31 December 2005Financial FinancialIrish Instruments Instruments/ Property Plant DeferredPR Ann I,GAAP Classification Measurement & Equipment Tax Other IFRS20.4.2(1 in millions)(audited)Balance Sheet DataNon-Current AssetsProperty, plant andequipment ************ 0 598.3 0 — 0(25.3) 0(59.3) 0 — 0(5.7) 0 508.0Intangible assets ********* — — — — — 5.7 5.7Derivative financialinstruments *********** — — 0.4 — — — 0.4Available for sale financialassets **************** — 156.7 3.4 — — — 160.1Other deposits*********** — 191.9 — — — — 191.9Trade and otherreceivables ************ — 0.1 — — — — 0.1Total Non-Current Assets 0 598.3 0 348.7 0(21.5) 0(59.3) 0 — 0 — 0 866.2Current AssetsInventories ************** 0 1.1 0 — 0 — 0 — 0 — 0 — 0 1.1Trade and otherreceivables ************ 59.1 1.5 (0.4) — — — 60.2Cash and other deposits ** 877.6 (348.6) — — — — 529.0Derivative financialinstruments *********** — — 37.6 — — — 37.6Total Current Assets **** 0 937.8 0(347.1) 0 37.2 0 — 0 — 0 — 0 627.9Current LiabilitiesTrade and other payables 0(363.3) 0 (1.6) 0 0.4 0 — 0 — 0 — 0(364.5)Current income taxliabilities ************** (3.9) — — — — — (3.9)Interest bearing loans andborrowings *********** (54.1) — — — — — (54.1)Derivative financialinstruments *********** — — — — — — —Provisions for liabilities andcharges*************** — (65.2) — — — — (65.2)Total Current Liabilities 0(421.3) 0 (66.8) 0 0.4 0 — 0 — 0 — 0(487.7)Non-Current LiabilitiesTrade and other payables 0 — 0 — 0 — 0 — 0 — 0 — 0 —Interest bearing loans andborrowings *********** (506.1) — 4.4 — — — (501.7)Deferred income taxliabilities ************** (21.7) 0.2 (1.9) 7.4 (0.3) — (16.3)Provisions for liabilities andcharges*************** (145.3) 65.2 — — — — (80.1)Derivative financialinstruments *********** — — (4.9) — — — (4.9)Retirement benefitobligations ************ — — — — — — —Total Non-CurrentLiabilities ************ 0(673.1) 0 65.4 0 (2.4) 0 7.4 0(0.3) 0 — 0(603.0)EquityCapital attributable toequity holders ********* 0 357.8 0 — 0 — 0 — 0 — 0 — 0 357.8Share premium accounts ** 6.1 — — — — — 6.1Other reserves *********** 5.1 — — — — — 5.1Fair value reserve ******** — — 2.9 — — — 2.9Retained earnings******** 72.8 0.2 10.7 (51.9) (0.3) — 31.5Net Assets ************* 0 441.8 0 0.2 0 13.6 0(51.9) 0(0.3) 0 — 0 403.4164

Part IXOperating and Financial ReviewYear ended 31 December 2005PR Ann I,Financial Property,20.4.2Irish GAAP Instruments/ Plant and DeferredIncome Statement Data as reported Offset Measurement Equipment Tax Other IFRS(1 in millions)(audited)Revenues *************** 0 883.0 0 119.6 0 — 0 — 0 — 0 — 01,002.6Operating expenses******** (809.8) (119.6) 5.8 4.7 — — (918.9)Other gains/(losses) — net (0.8) — 3.7 — — 3.3 6.2Operating Profit ********* 0 72.4 0 — 0 9.5 0 4.7 0 — 03.3 0 89.9Finance income *********** 0 36.7 0 — 0 — 0 — 0 — 0 — 0 36.7Finance expense ********** (26.5) — — — — — (26.5)Foreign exchangegains/(losses) — other *** — — — — — — —Profit before Taxation *** 0 82.6 0 — 0 9.5 0 4.7 0 — 03.3 0 100.1Taxation ***************** (10.2) — (1.2) (0.6) 0.9 — (11.1)Profit for the Year ******* 0 72.4 0 — 0 8.3 0 4.1 00.9 03.3 0 89.0The following tables set forth a summary reconciliation to IFRS of Aer Lingus’ Irish GAAPconsolidated balance sheet as at 31 December 2004 and income statement for the year ended31 December 2004, illustrating the most significant effects of the transition to IFRS.As at 31 December 2004PR Ann I,Financial Financial20.4.2Irish Instruments Instruments/ Property Plant DeferredGAAP Classification Measurement & Equipment Tax Other IFRS(1 in millions)(audited)Balance Sheet DataNon-Current AssetsProperty, plant andequipment ************ 0 568.1 0 — 0 (5.7) 0(64.0) 0 — 0(6.2) 0 492.2Intangible assets ********* — — — — — 6.2 6.2Derivative financialinstruments *********** — — 5.7 — — — 5.7Available for sale financialassets **************** — 110.0 7.5 — — — 117.5Other deposits*********** — 235.6 — — — — 235.6Trade and otherreceivables ************ — 0.1 — — — — 0.1Total Non-Current Assets 0 568.1 0 345.7 0 7.5 0(64.0) 0 — 0 — 0 857.3Current AssetsInventories ************** 0 0.8 0 — 0 — 0 — 0 — 0 — 0 0.8Trade and otherreceivables ************ 52.0 1.2 (0.2) — — — 53.0Cash and other deposits ** 806.7 (345.6) — — — — 461.1Derivative financialinstruments *********** — — 17.6 — — — 17.6Total Current Assets **** 0 859.5 0(344.4) 0 17.4 0 — 0 — 0 — 0 532.5Current LiabilitiesTrade and other payables 0(354.3) 0 (1.3) 0 5.9 0 — 0 — 0 —PR Ann I,0(349.7) 20.4.2Current income taxliabilities ************** (0.1) — — — — — (0.1)165

Part IXOperating and Financial ReviewAs at 31 December 2004Financial FinancialIrish Instruments Instruments/ Property Plant DeferredGAAP Classification Measurement & Equipment Tax Other IFRS(1 in millions)(audited)Interest bearing loans andborrowings *********** (94.1) — — — — — (94.1)Derivative financialinstruments *********** — — (19.7) — — — (19.7)Provisions for liabilities andcharges*************** — (118.6) — — — — (118.6)Total Current Liabilities 0(448.5) 0(119.9) 0(13.8) 0 — 0 — 0 — 0(582.2)Non-Current LiabilitiesTrade and other payables 0 — 0 — 0 — 0 — 0 — 0 — 0 —Interest bearing loans andborrowings *********** (393.9) — 6.0 — — — (387.9)Deferred income taxliabilities ************** (14.1) 0.2 (1.3) 8.0 (1.1) — (8.3)Provisions for liabilities andcharges*************** (204.9) 118.7 — — — — (86.2)Derivative financialinstruments *********** — — (7.1) — — — (7.1)Retirement benefitobligations ************ — — — — — — —Total Non-CurrentLiabilities ************ 0(612.9) 0 118.9 0 (2.4) 0 8.0 0(1.1) 0 — 0(489.5)EquityCapital attributable toequity holders ********* 0 357.8 0 — 0 — 0 — 0 — 0 — 0 357.8Share premium accounts ** 6.1 — — — — — 6.1Fair value reserve ******** — — 6.5 — — — 6.5Other reserves *********** 5.1 — — — — — 5.1Retained earnings******** (2.8) 0.2 2.3 (56.0) (1.1) — (57.4)Net Assets ************* 0 366.2 0 0.2 0 8.8 0(56.0) 0(1.1) 0 — 0 318.1166

Part IXOperating and Financial ReviewYear ended 31 December 2004PR Ann I,Financial Property,20.4.2Irish GAAP Instruments/ Plant and DeferredIncome Statement Data as reported Offset Measurement Equipment Tax Other IFRS(1 in millions)(audited)Revenues ************** 0 906.8 0 102.8 0 — 0 — 0 — 0 — 01,009.6Operating expenses ****** (789.5) (102.8) 20.9 4.7 — — (866.7)Employee profit share***** (10.6) — — — — — (10.6)Foreign Exchangegains/(losses) — trading (10.4) — 1.7 — — (1.1) (9.8)Operating Profit beforeExceptional Items***** 0 96.3 0 — 022.6 0 4.7 0 — 0(1.1) 0 122.5Exceptional items ******** (102.5) — — — — — (102.5)Operating Profit/(Loss)after exceptionalitems **************** 0 (6.2) 0 — 022.6 0 4.7 0 — 0(1.1) 0 20.0Finance income ********** 33.5 — — — — — 33.5Finance expense ********* (26.2) — — — — — (26.2)Foreign exchangegains/(losses) — other ** — — — — — — —Profit before taxation*** 0 1.1 0 — 022.6 0 4.7 0 — 0(1.1) 0 27.3Taxation **************** 0.1 — (2.8) (0.6) (1.1) — (4.4)Profit for the year ****** 0 1.2 0 — 019.8 0 4.1 0(1.1) 0(1.1) 0 22.9167

Part XRegulationPR Ann I,9.2.3The regulatory framework for civil aviation applicable to Aer Lingus consists of three levels: international,European Union and national.1. INTERNATIONAL REGULATORY FRAMEWORK1.1 IntroductionThe regulatory system for international air transport has been based upon the principles laid down by theChicago Convention to which Ireland became a signatory in 1946. The Chicago Convention laid down thegeneral principle that each contracting state has complete and exclusive sovereignty over the airspaceabove its territory and has the right to control the operation of scheduled international air services over orinto its territory. As a result, within the framework of the Chicago Convention, international air transporthas been founded on a collection of transport rights, which the participant states grant to each other (theconcept of ‘‘traffic rights’’) by entering into bilateral air transport treaties negotiated between individualstates. These bilateral air transport treaties between states have generally contained conditions governingthe designation of airlines and airports for the operation of specified routes, the capacity offered by suchairlines and procedures for the agreement of tariffs. Furthermore, many of these bilateral treaties requireairlines to demonstrate that they are substantially owned and effectively controlled by the relevantcontracting state or by nationals of the relevant contracting state. Under these bilateral treaties, if an airlineceases to be designated by one of the states or if it ceases to be substantially owned and effectivelycontrolled by that state or its nationals or companies, the other state will be entitled to deny, or restrict, theexercise of traffic rights by that airline under the bilateral treaty.1.2 Bilateral TreatiesIreland is party to a number of bilateral treaties including one with the United States. Irish airlinesdesignated under this agreement are permitted to operate from Ireland to and from Boston, New York,Chicago and Los Angeles. In addition, until recently Aer Lingus operated a service to Baltimore, Marylandunder extra-bilateral authority. A key requirement of the Ireland/United States bilateral treaty is that theairlines operating the services covered by the agreement must be substantially owned and effectivelycontrolled by either Irish or US nationals. Consequently, if Aer Lingus were not to continue beingsubstantially owned or effectively controlled by Irish citizens or corporations at any time, the United Statescould deny Aer Lingus landing rights in the United States.ALL is also formally designated in respect of the bilateral treaties entered into by Ireland with Israel, SouthAfrica, Canada, Kuwait, Singapore, the United Arab Emirates and Croatia. The Minister for Transport hasconfirmed that ALL’s designation in respect of these bilateral treaties will not be withdrawn by Ireland otherthan in circumstances where ALL ceases to hold an Operating License granted in accordance with CouncilRegulation EEC 2407/92 (or any replacement licenses or certificates necessary by virtue of re-enactments oramendments to the applicable regulatory regime). In addition, the Minister for Transport has confirmed toAer Lingus that the only criteria that it shall be required to satisfy to be eligible for designation by Irelandunder other bilateral treaties entered into by Ireland (including those with China, Cuba, India, Kenya andTurkey) is the holding of an Operating License granted in accordance with Council Regulation EEC 2407/92(or any replacement licenses or certificates necessary by virtue of re-enactments or amendments to theapplicable regulatory regime) provided that any such designation is made in accordance with therequirements of EU Regulation 847/2004.A series of judgments in November 2002 by the Court of Justice of the European Communities (‘‘ECJ’’),declared as incompatible with EU law a number of air service bilateral treaties entered into between eightEU Member States and the United States containing nationality restrictions which restricted traffic rights toairlines substantially owned and controlled by nationals of the EU Member State as opposed to the EuropeanUnion as a whole. The principles of the ECJ cases apply to other air service bilateral treaties with similarprovisions. The European Commission has called on EU Member States, including Ireland, with bilateraltreaties with the United States which contain such nationality provisions to apply the denunciation provisionsin the treaties or unilaterally terminate such treaties. However, as at 8 September 2006 (the latest practicable168

Part XRegulationdate before the publication of this Prospectus) the European Commission has not issued a ‘‘reasonedopinion’’ to Ireland, which would be the precursor to the initiation of proceedings before the ECJ to requireIreland to terminate its bilateral treaty with the USA. Indeed, as described below, the European Commission isactively negotiating an EU-wide open skies treaty with the USA that would remove any legal concerns aboutthe current nationality requirements.Following the ECJ cases, the European Council adopted Regulation EC 847/2004 and as regards the USA,gave the European Commission a mandate to negotiate an open skies agreement between the EuropeanUnion as a whole and the USA. Regulation (EC) 847/2004 governs the conditions of negotiation andimplementation of air service agreements between EU Member States and third countries. The purpose ofthis Regulation is to provide a framework for the replacement of all existing bilateral treaties between EUMember States and third countries that contain provisions incompatible with EU law, particularly nationalityclauses. Given the large number of bilateral treaties that are currently in place, EU Member States havebeen authorised to negotiate with third countries to conclude new agreements or modify existing ones,provided that negotiations have not been entered into by the European Union with the third country, andthat the EU Member States comply with Regulation EC 847/2004. A procedure for notifying andauthorising bilateral negotiations conducted by EU Member States has been established to ensure theintroduction of standard clauses and to ensure that such negotiations will not result in an agreement that isincompatible with EU law. Regulation EC 847/2004 also imposes obligations to ensure that nondiscriminatoryprocedures are established for the consultation of stakeholders and for the distribution oftraffic rights during the negotiations. Where an EU Member State concludes an agreement that limits theuse of traffic rights or the number of EU air carriers eligible to be designated to take advantage of trafficrights, the EU Member State shall ensure the traffic rights are distributed amongst EU carriers on the basisof non-discriminatory and transparent procedure. Since the implementation of Regulation (EC) 847/2004the Irish Government has re-negotiated its agreement with Australia and negotiated two new agreementswith Bahrain and Qatar. These agreements allow designated Irish carriers (which may include Aer Lingus) tofly to these destinations.On 5 May 2006, the European Union signed a political agreement with Albania, Bosnia and Herzegovina,Bulgaria, Croatia, the Former Yugoslav Republic of Macedonia, Romania, Serbia and Montenegro, theUN Mission in Kosovo, Iceland and Norway to create a European Common Aviation Area. The agreementprovides for new market opportunities for the European aviation industry, including Aer Lingus, by creatinga single market for aviation consisting of 35 countries and more than 500 million people. This agreementhas been signed but is not yet in force.An air services agreement was reached with Morocco in December 2005, which creates new marketopportunities to reach a population of approximately 31 million. Agreements have also been reached withChile, Ukraine, Moldova, Georgia, Australia, New Zealand and Singapore, which remove nationalityrestrictions as between EU nationals contained in the bilateral agreements between these countries and EUMember States, including Ireland. Similar agreements with other countries are negotiated regularly.Agreements such as those described above open up potential new markets for Aer Lingus’ services, andmay facilitate the expansion of Aer Lingus’ route network.1.3 EU/US Open Skies and Transitional ArrangementsIn June 2003, the European Council granted the European Commission a mandate to enter negotiationswith the United States, the aim of which is to replace existing arrangements between individual EU MemberStates and the United States with a single comprehensive EU/US agreement and to cover all thearrangements governing air transport between the European Union and the United States, includingmarket access (routes, capacity, frequency), how airfares are set, the application of the competition rules,the maintenance of airline safety standards and aviation security, the opening of each side’s internal marketto the airlines of the other side, and the amendment of the restrictions that currently apply to foreignownership and control of airlines in the United States and the European Union (known as the ‘‘EU/US openskies agreement’’).169

Part XRegulationOn 18 November 2005, US and EU negotiators announced agreement on the text of a comprehensive‘‘first-step air transport agreement’’ which must be approved by the EU Council of Transport Ministers. Theagreement, if approved, would authorise every EU and US airline (i) to fly between every city in theEuropean Union and every city in the United States, (ii) to operate without restrictions on the number offlights, the aircraft used or the routes chosen, including unlimited rights to fly beyond the European Unionand the United States to points in third countries, (iii) to set fares freely in accordance with market demand,and (iv) to enter into co-operation arrangements (including codesharing, interline and leasing) with otherairlines. The announcement indicated that the agreement represents the first stage of opening markets andenhancing co-operation. The text agreed between the negotiators also provides that the European Unionand United States will begin a second stage of negotiations within 60 days of application of the agreement.The EU Council of Transport Ministers expressed their unanimous support for the draft agreement, subjectto change in the US policy concerning foreign ownership of US airlines.As regards the US policy concerning foreign ownership of US airlines, on 7 November 2005, the USDepartment of Transportation issued a Notice of Proposed Rulemaking (‘‘NPRM’’) which proposed tobroaden the permissible scope of foreign influence over many purely economic decisions of US airlines, suchas choice of markets, type of equipment and rate-setting. The NPRM was subject to legislative actionseeking to block or delay its adoption. On 5 May 2006, the US Department of Transportation published aSupplemental Notice of Proposed Rulemaking (‘‘SNPRM’’) containing a revised rule proposal with anadditional 60 days following the publication of the SNPRM for comment. The US Department ofTransportation has recently announced that a final rule will not be adopted before late 2006. This meansthat the European Union is unlikely to be in a position to assess the acceptability of any final rule at theOctober meeting of the EU Council of Transport Ministers as previously envisaged. However, aspokesperson for the US State Department has said that the administration is holding to pledges made bythe two sides in June 2006 on concluding an EU/US open skies agreement by the end of 2006. (Source: USState Department Daily Press Briefing 17 August 2006).The current open skies negotiations propose that any EU airline will have the benefit of the open skiesregime so long as it is substantially owned and effectively controlled by nationals of the EU Member States.For this reason, the Articles of Association will provide that in the event of there being an open skies regimebetween the United States and for so long as, and to the extent that, the holding or enjoyment by AerLingus, or any of its subsidiaries, of any present or future operating right is conditional on Aer Lingus beingto any degree (i) owned or controlled by Irish or EU, as the case may be, nationals and/or (ii) not owned orcontrolled by non-Irish or non-EU, as the case may be, nationals and/or non-Irish or non-EU, as the case maybe, nationals connected in any way with the provision of air services, Aer Lingus has the authority andpower to ensure that such conditions can be satisfied.On 11 November 2005, the Minister for Transport announced that Ireland had secured a transitionalagreement with the United States on Shannon airport, which would take effect if the EU/US agreementwere approved. The agreement is part of and conditional upon the EU/US open skies agreement enteringinto force and was intended to operate from November 2006 to April 2008. If the EU/US open skiesagreement were to enter into force the current requirement for Irish carriers in the Ireland/United Statesbilateral treaty that for every non-stop transatlantic service to Dublin, there be a service to Shannon, wouldbe changed to a requirement that for every three transatlantic direct services to Dublin there be a service toShannon during the transition period. Rights to operate services to three additional points in the UnitedStates during the transition period have also been granted in the context of this agreement. At theexpiration of the transitional agreement, the full EU/US open skies regime would apply.The Minister for Transport has assured the Company that he remains confident that an EU/US open skiesagreement can be reached within a reasonable timeframe, and that he intends to pursue the earliestpossible implementation of the transitional agreement. The Minister for Transport has confirmed to AerLingus that, in the event that an EU/US open skies agreement is not achievable within a reasonabletimeframe, he intends to seek to implement, in accordance with the applicable European Community law,the essential elements of the transitional agreement by way of an amendment to the Ireland/United Statesbilateral treaty.170

Part XRegulationAer Lingus intends to grow its long-haul business to the United States, which is dependent on finalisation ofthe proposed EU/US open skies agreement or the liberalisation of the restrictions in the existingIreland/United States bilateral treaty. If Irish/US liberalisation or EU/US open skies do not occur, Aer Lingus’expansion plans may be adversely affected. This issue is discussed further in paragraph 2.3 (Maintenance ofexisting air traffic rights is important to Aer Lingus’ business. Failure to finalise the proposed EU/US openskies agreement or to otherwise liberalise the restrictions in the existing Ireland/United States bilateral treatymay adversely affect Aer Lingus’ expansion plans) of Part III (Risk Factors) of this Prospectus.1.4 Passenger Name Record InformationIn the aftermath of the terrorist attacks in New York and Washington DC on 11 September 2001, theUS Congress passed a law requiring air carriers operating passenger flights to or from the United States tomake Passenger Name Record (‘‘PNR’’) information available to US authorities. Airlines which fail to complywith this requirement could be fined or lose US landing rights if they failed to make such data available. On28 May 2004, the European Union and the United States signed an International Agreement on Processingand Transfer of PNR Data by air carriers that makes it possible to transfer certain categories of air passengerdata to US authorities, subject to certain conditions. On 30 May 2006, the ECJ held that the EuropeanCommission and Council of Ministers did not have an adequate legal basis for entering into thePNR agreement arrangements and annulled the Commission and Council’s Decisions with effect from30 September 2006. The Commission has launched a number of initiatives to comply with the ECJ ruling.As at the date of this Prospectus, Aer Lingus complies with the PNR requirements imposed by the USauthorities in relation to its passenger flights to or from the United States.1.5 International Air Transport AssociationThe International Air Transport Association provides a forum for tariff co-ordination on certain internationalroutes and for international co-operation in areas such as technical safety, security, navigation services,flight operations and the development of communication standards and administrative procedures.1.6 International Civil Aviation OrganisationThe Chicago Convention also established the International Civil Aviation Organisation (‘‘ICAO’’) whichoperates as a specialised agency of the United Nations. The ICAO sets international standards andregulations necessary for the safety, security, efficiency and regularity of air transport and serves as themedium for cooperation in all fields of civil aviation among the 189 countries that are currently members.Ireland is a member of the ICAO and the European Commission has proposed to the European Council thatthe European Union commences negotiations for European Community Membership of the ICAO.2. EUROPEAN REGULATORY FRAMEWORK2.1 GeneralIn 1987, the European Commission adopted three sets of measures known as the First, Second and ThirdPackages which were subsequently enacted into European Community law. The Third Package,implemented in 1992, included measures aimed at putting an end to certain aspects of the monopolies ofvarious national airline companies. The Third Package applies to scheduled, non-scheduled and cargoservices and includes the following principal terms:(a)National rules governing the grant of Operating Licences to airlines based in the European Unionwere harmonised by provisions for the grant of a common European Operating Licence (RegulationEC 2407/92). EU airlines which meet the requirements of this Regulation are able to benefit from theThird Package measures and obtain an Operating Licence in any member state of the EuropeanUnion subject to having a valid AOC and demonstrating to the relevant licensing authority that it canmeet its actual and potential obligations for a period of 24 months from the start of operations andthat it can meet its fixed and operational costs for a period of three months from the start ofoperations. EU airlines must have their principal place of business and registered office in a memberstate of the European Union, must have air transport as their principal activity and must be ownedand effectively controlled by member states of the European Union or nationals of member states ofthe European Union and continue to be so owned and controlled.171

Part XRegulation(b)(c)EU airlines are now permitted to fix their own fares on services provided within the European Union,subject to safeguards against predatory pricing or unreasonable price rises (Regulation EC 2409/92).This Regulation has increased the flexibility of EU airlines, including Aer Lingus, in fixing their fares.All EU airlines may now operate any routes within the European Union including routes withinmember states of the European Union, and capacity restrictions on such routes are no longerpermissible (Regulation EC 2408/92). However, Regulation EC 2408/92 includes provisions enablingEU Member States to restrict access to routes in order to distribute traffic between airports or airportsystems or where environmental issues or concerns about congestion exist, but such restrictionsmust not be discriminatory and are subject to review by the European Commission in advance ofimplementation. EU Member States may also enter into agreements with airlines in regard to certain‘‘public services’’ obligations with respect to the continuity, regularity, capacity and pricing of ascheduled service to a peripheral or development region in its territory following consultations withother Member States concerned and after having informed the European Commission and aircarriers operating on the relevant routes. This Regulation affords EU airlines, including Aer Lingus,greater freedom in choosing which routes to serve within the European Union. Aer Lingus’ access toroutes is not currently restricted, nor does it have any public service obligations pursuant toRegulation EC 2408/92.The European Commission has recently proposed a new regulation aimed at revising andconsolidating Regulations EC 2407/92, 2408/92 and 2409/02. The proposals were made followingan open consultation process conducted by the European Commission. The proposed regulationseeks to streamline the financial conditions that all EU airlines must fulfil in order to obtain anOperating Licence and to improve the monitoring of these conditions by EU Member States. It isintended to clarify the criteria for the granting and validity of Operating Licences in the EuropeanUnion and to introduce uniform standards for the review and monitoring of Operating Licences inEU Member States. It is proposed to simplify the procedure for fulfilling public service obligations,though stricter criteria are proposed for the imposition of public service obligations. The proposedregulation also clarifies the framework for relations with third countries and seeks to ensure thattraffic rights for non-EU airlines to operate between European cities are negotiated at Europeanlevel. If the proposed Regulation is implemented, Aer Lingus does not expect this to result in amaterial adverse effect on its business, financial condition or results of operations.2.2 Allocation of SlotsThe rules for the allocation of slots at airports in the European Union are contained in Regulation EC 95/93,as amended by Regulation EC 793/2004. The objective of Regulation EC 95/93 as amended is to facilitatecompetition and to encourage and provide strong support for new entrants in the European Union airlinemarket. The main principles of Regulation EC 95/93 as amended which affect slot allocation are thefollowing:(a)(b)Recognition of the long established principle of ‘‘grandfather rights’’, under which an airline holdingand using a series of slots for a particular scheduling period shall be entitled to that series of slots inthe next equivalent period if requested within certain time limits.Recognition of the secondary rules. Airport co-ordinators should take into account additional rulesand guidelines established by the air transport industry worldwide or in the European Union as wellas any local guidelines approved by the relevant EU Member State for the airport in questionprovided that such rules and guidelines do not affect the independent status of the co-ordinator.The creation of a slot pool into which newly created slots (through increases in hourly schedulinglimits) are placed, slots returned either voluntarily or under the ‘‘use-it/lose-it’’ principle and slotsotherwise unclaimed under grandfather rights or international secondary rules. The ‘‘use it/lose it’’principle means that to maintain its rights over slots in the next equivalent scheduling period, thecarrier must demonstrate operation of the slots for at least 80% of the time during the schedulingperiod for which they have been allocated. If 80% cannot be demonstrated, all the slots constitutingthe series are placed in the slot pool.172

Part XRegulation(c)50% of the pool slots must be allocated to new entrants unless they request a lesser number. Newentrants are defined as (i) an airline requesting as part of a series of slots a slot at an airport on anyday on which that airline holds or has been allocated fewer than five slots or (ii) airlines which haverequested a series of slots for a non-stop service between two airports in the European Union whereat most two other carriers operate a direct service between those airports or airport systems on thatday and where the applicant airline holds or has been allocated fewer than five slots on that day forthat service or (iii) any air carrier requesting a series of slots at an airport for a non-stop servicebetween that airport and a regional airport where no other air carrier operates an air servicebetween those airports on that day, where the applicant holds or would hold fewer than five slots atthat airport on that day for that service. Any airline with more than 5% of all slots at an airport ormore than 4% of slots at an airport system (being two or more airports grouped together andserving the same city or conurbation, as listed in Annex II to Regulation EEC 2408/92 cannot qualifyas a new entrant.Regulation 95/93 as amended also provides for the designation of congested airports for co-ordination byEU Member States. The Regulation draws a distinction between ‘‘co-ordinated’’ airports and ‘‘schedulesfacilitated’’ airports. A schedules facilitated airport is an airport where there is potential for congestionduring some periods of the day, week or year, which is amenable to resolution by voluntary co-operationbetween air carriers and where a schedules facilitator has been appointed to facilitate the operations of aircarriers operating services or intending to operate services at that airport.A co-ordinated airport means an airport where, in order to land or take off, it is necessary for an air carrieror any other aircraft operator to have been allocated a slot by a co-ordinator. Dublin airport is currently nota co-ordinated airport but is a schedules facilitated airport. EU Member States are obliged to carry out athorough capacity analysis of an airport (1) when they consider it necessary, (2) when requested to do soeither by air carriers representing more than half of the operations at the airport in question or the airport’smanaging body, or (3) upon request from the European Commission. The EU Member State will make itsdecision whether to designate an airport as co-ordinated on the basis of this capacity report and theconsultation period with the managing body of the airport, the air carriers, their representatives andrepresentatives of general aviation and air traffic control. Several of Aer Lingus’ destination airportsincluding London Heathrow, Manchester and several airports in Continental Europe (including Amsterdam,Frankfurt and Paris Charles de Gaulle airports) are currently co-ordinated airports.Slots are not route or aircraft specific and may be used by an airline for any aircraft or destination. Slots maynot be sold but may be exchanged one for one with other airlines. A change of use such as a newdestination or aircraft type may require different terminal facilities such as gates, which may or may not beavailable. At London Heathrow airport and certain other airports a practice has developed whereby airlinesexchange a valuable slot for a less valuable one, which is then returned to the slot pool and in considerationa payment is made by the airline receiving the valuable slot. This has allowed airlines to receivecompensation payments of several hundred thousand pounds for valuable slots. The English High Courtruled that this practice is compatible with Regulation 95/93 in R v Airport Co-ordination Limited ex parteStates of Guernsey Transport Board [1999] EULR 745.In September 2004, following the adoption of Regulation 793/2004, the European Commission issued aconsultation paper which considers further possible changes to the mechanisms for slot allocation at EUairports. The consultation paper considers the introduction of primary and/or secondary trading in airportslots, including for monetary consideration. It also considers a range of other possible measures to facilitatethe allocation of slots to new market entrants, including measures which might include the possibleremoval of a proportion of the slots held by established operators and their allocation to new entrants. Theconsultation paper has been subject to numerous revisions and, as at the date of this Prospectus, it isunclear what the outcome of the European Commission’s consultation process will be and when this willtake place. If changes are made to the provisions of the European Commission slot allocation regulationsconcerning ‘‘grandfather rights’’ (for example, if a mechanism for random cancellation of slots wereadopted), some of the slots currently held by Aer Lingus might be lost, which could affect Aer Lingus’ abilityto expand in the future, or have an adverse effect on its business, financial condition and results ofoperations.173

Part XRegulationThe Company’s Articles of Association contain provisions requiring shareholder approval for the disposal ofslots at London Heathrow airport. ‘‘Disposal’’ is defined to include other transactions of equivalent effect. IfAer Lingus proposes to dispose of any of its slots at London Heathrow, it is required to notify shareholdersin the manner set out in the Articles of Association, and the Company’s shareholders may require that thematter be submitted to an extraordinary general meeting. Further information about the restrictions ondisposals of slots contained in the Company’s Articles of Association is set out in paragraph 5.2(p) (Disposalof London Heathrow Slots) of Part XV (Additional Information) of this Prospectus.2.3 Air Carrier LiabilityEU Council Regulation 202 7/97 as amended by Regulation (EC) 889/2002 imposed equivalent provisions tothe Montreal Convention in respect of the carriage of passengers and their baggage by air. The MontrealConvention, which was implemented in Ireland by the Air Navigation and Transport (InternationalConventions) Act 2004, imposes strict liability on airlines in the event of death or injury to passengers up toa maximum of the equivalent of 100,000 Special Drawing Rights (approximately 0120,000 per passenger).Thereafter, liability is unlimited but an airline can escape liability if it proves either that it was not negligentor guilty of a wrongful act or omission, or that the accident was caused by the fault of a third party. Theairline is also required to compensate passengers, or their survivors, for their expenses in the immediateaftermath of an accident within 15 days. Liability for loss, damage or delay to baggage is limited to 1,000Special Drawing Rights (approximately 01,200). The implementation of this Regulation, which applies to allEU airlines, has not had any material adverse effect on Aer Lingus’ business, financial condition or results ofoperations.2.4 Passenger Rights and CompensationCouncil Regulation (EC) 261/2004 establishes common rules on compensation and assistance to passengersin the event of denied boarding, cancellation or long delay of flights.The rights apply to any flights, including charters, from an EU airport or to an EU airport from one outsidethe European Union when operated by an EU airline. Where a passenger is denied boarding against his will,the airline must offer compensation and assistance, together with a choice of reimbursement of the fullcost of the ticket, and a return flight to point of first departure, or re-routing to the passenger’s finaldestination except where there are reasonable grounds to deny them boarding such as reasons of health,safety or security or inadequate travel documentation. The compensation amounts payable vary between0250 and 0600, depending upon the length of the flight.The Regulation also imposes obligations with regard to care and assistance of passengers in the case ofdelays which exceed certain defined durations, ranging from two hours to four hours depending on thelength of the delayed flight. A right of reimbursement also arises if a flight is delayed by more than fivehours.Where a flight is cancelled, the airline must offer a passenger care and assistance together with the choicebetween a refund of the passenger’s ticket and a return flight to the first point of departure, or re-routingto the passenger’s final destination. Compensation may also payable in the case of a cancellation at thesame amounts as are applicable to denied boarding unless the airline can prove that the cancellation wascaused by extraordinary circumstances which could not have been avoided even if all reasonable measureshad been taken. The implementation of this Regulation, which applies to all EU airlines, has not had anymaterial adverse effect on Aer Lingus’ business, financial condition or results of operations.2.5 Ground HandlingAccess to the market for ground handling at EU airports has been liberalised under Directive (EC) 96/67,which was transposed into Irish law by the European Communities (Access to the Ground Handling Marketat Community Airports) Regulations 1998 (SI 505 of 1998). This Directive is aimed at providing open accessto the ground handling market at European airports. The EU Member States are obliged to ensure thataccess to the ground handling market is granted by the airport authorities under a transparent andimpartial procedure that prevents airport authorities or airlines from maintaining certain barriers to marketentry. The implementation of the Directive by the Regulations has not materially affected Aer Lingus’business, financial condition or results of operations.174

Part XRegulation2.6 Joint Aviation Authorities (‘‘JAA’’)Ireland is a member of the JAA. The JAA is an associated body of the European Civil Aviation Conferencerepresenting the civil aviation regulatory authorities of a number of European States who have agreed toco-operate in developing and implementing common safety regulatory standards and procedures. Themembers of the JAA have agreed common comprehensive and detailed aviation requirements, referred toas the Joint Aviation Requirements, with a view to inter alia, regulating commercial air transport operationsthroughout Europe.2.7 European Aviation Safety AgencyThe European Aviation Safety Agency is an agency of the European Union set up under CouncilRegulation 1592/02, which will progressively take over the functions of the JAA. It currently regulatesaircraft type certification and maintenance standards. There are discussions ongoing about broadening itsresponsibilities to take over more of the functions currently carried out by the JAA.2.8 Rights for Disabled PassengersRegulation 1107/2006 strengthening the rights of disabled air passengers and passengers with reducedmobility (‘‘disabled passengers’’) was formally adopted on 5 July 2006 and entered into force on 15 August2006. Subject to certain exceptions, the provisions of this regulation are not applicable until 26 July 2008.This Regulation is binding on all EU airlines, including Aer Lingus.The Regulation bans air carriers from refusing reservations or boarding to disabled passengers on thegrounds of their disability. All assistance to disabled passengers must be provided free of charge.Wheelchairs and recognised assistance dogs must be accommodated on aircraft.Reservations and boarding by disabled passengers may be refused on safety grounds or where the size ofthe aircraft makes embarkation or carriage physically impossible. If a disabled passenger is refusedboarding, he must either be re-routed on other flights or be reimbursed. The passenger must be informedin writing of the reasons why his reservation or boarding was refused.Airlines will be responsible for all assistance on board aircraft. Airport managing bodies will be responsiblefor all assistance in airports, but may recover the ensuing costs from airlines, which may be asked to pay acharge proportional to the total quantity of passengers which it embarks and disembarks at the airport. Thecharge would be independent of the number of passengers with reduced mobility which the airline carries.Aer Lingus does not believe that the implementation of this Regulation will have a material adverse effecton Aer Lingus’ business, financial condition or results of operations.3. IRISH REGULATORY FRAMEWORKAir service providers who transport passengers, cargo or mail and have their principal place of business inIreland must be authorised in accordance with the relevant EU Regulations by the Irish Commission forAviation Regulation (‘‘CAR’’), which was established on 27 February 2001 under the AviationRegulation Act 2001 (the ‘‘2001 Act’’). In order to operate such air transport services, an Irish carrier musthold both an Air Carrier Operating Licence (‘‘ACOL’’) and an Air Operator’s Certificate (‘‘AOC’’). An ACOLis an authorisation granted by the CAR and relates to economic regulation of the carrier (includingnationality and financial fitness). An AOC is issued by the Irish Aviation Authority (‘‘IAA’’) in the case of anIrish carrier and relates to safety regulation of the carrier.Operating Licences are granted in accordance with the Air Navigation and Transport Act 1965 (Section 8)Regulations 1993 which give effect to Regulation EC 2407/92 (as is discussed in greater detail inparagraph 2 (European Regulatory Framework) of this Part X. The CAR will not grant an ACOL unless it issatisfied that the carrier complies with EU regulations and is in possession of an AOC. The carrier must alsonotify the CAR in advance of all air services it proposes to operate to a new region and of any intendedmergers and acquisitions. The ACOL is subject to review one year after it is granted and every five yearsthereafter. AOCs are issued by the IAA in accordance with the rules of the European JAA and an AOC175

Part XRegulationaffirms that the carrier has the professional ability and organisational resources to secure the safe operationof aircraft for its aviation activities. In addition, all airline operators in Ireland must comply with thestandards set by the IAA, which regulates safety standards in Irish civil aviation and provides air trafficmanagement in Irish controlled airspace. Aer Lingus holds an ACOL and an AOC.3.1 AircraftThe Irish Aviation Authority (Nationality and Registration of Aircraft) Order 2005 (the ‘‘2005 Order’’)regulates the registration of aircraft in Ireland. In order to be registered, an aircraft must be wholly ownedby either (1) a citizen of Ireland or a citizen of another EU Member State having a place of residence orbusiness in Ireland, or (2) a company registered in and having a place of business in Ireland and having itsprincipal place of business in Ireland or in another member state of the European Union of which not lessthan two thirds of the directors are citizens of Ireland or of member states of the European Union. Anaircraft will also fulfil these conditions if it is wholly owned by such citizen or company in combination.Notwithstanding that these particular conditions may not be met, the IAA retains discretion to registeraircraft in Ireland so long as the other conditions for registration under the 2005 Order are complied withon an ongoing basis. Any such registration may, however, be made subject to certain conditions.Information about the nationality based restrictions on ownership of shares in the Company set out in theArticles of Association are set out in paragraph 4.4 (Share Ownership Restrictions) of Part XV (AdditionalInformation) of this Prospectus.In order to be registered, an aircraft must also continue to comply with any applicable provisions of Irishlaw. The registration of any aircraft can be cancelled if it is found that it is in breach of the requirements ofthe 2005 Order and, in particular, (i) if the ownership requirements are not met, (ii) if the aircraft has failedto comply with any applicable safety requirements specified by the IAA in relation to the aircraft or aircraftof a similar type, or (iii) if the IAA decides in any case that it is satisfied that it is inexpedient in the publicinterest for the aircraft to remain registered in Ireland. All of Aer Lingus’ aircraft are registered with the IAA.3.2 Airport Charges and SlotsIn addition to the functions set out above, the CAR regulates airport charges and aviation terminal servicescharges payable by Irish airlines, including Aer Lingus. The CAR currently sets maximum levels of airportcharges and aviation terminal service charges in respect of Dublin airport. The CAR issued its determinationin September 2005 in relation to the maximum levels of airport charges at Dublin airport for the period2006-2009 in which the average price cap per passenger over the 4-year period was fixed at 06.14 perpassenger. Following an appeal by the Dublin Airport Authority, the CAR increased the average price cap06.14 to 06.34.The CAR also has responsibility for the discharge of Ireland’s responsibilities for schedule facilitation and slotco-ordination and the appointment, where necessary, of a schedule facilitator or slot co-ordinator.Following a request by the airport authority in 2002, the CAR undertook a review of the designation statusof Dublin airport and concluded in May 2003 that coordination was not required at that time. However,after a further review, the CAR decided in April 2005 to designate Dublin Airport as a coordinated airportwith effect from the scheduling season for the summer of 2006. This decision was the subject of judicialreview proceedings brought in the Irish High Court by Ryanair which resulted in the CAR’s decision todesignate Dublin airport as a coordinated airport being declared invalid. Consequently, Dublin airport hasreverted to being a schedules facilitated airport. The Commission for Aviation Regulation has recentlyannounced that it intends to commission a new capacity analysis of Dublin Airport in order to assess itsappropriate scheduling status. Further information about the European Regulatory Framework is set out inparagraph 2 (European Regulatory Framework) of this Part X.3.3 CAR LevyUnder the 2001 Act, the CAR is empowered to make regulations imposing a levy on undertakings specifiedby it in order to meet the costs and expenses of the CAR. The levy for 2006 is provided for in the AviationRegulation Act 2001 (Levy No. 6) Regulations 2005. This levy may be increased under the 2001 Act but mayonly take effect in the year after the appropriate Regulations have been made. All Irish airlines, includingAer Lingus, are subject to this levy.176

Part XRegulation4. OTHER LEGAL AND REGULATORY DEVELOPMENTS4.1 Flight Time LimitationsThe European Commission has proposed amending EU Regulation 3922/1991 on EU Civil Aviation Ruleswhich if adopted will impose restrictions on maximum total duty time, duty block time and daily flight dutyperiods for crew members as well as stipulated rest periods.4.2 Inclusion of Taxes, Charges and Fees in Quoted PricesThe European Commission has recently proposed a regulation aimed at further harmonising rules applicableto aviation in the European Union. This proposal would, inter alia, require that fares include all applicabletaxes, charges and fees and would expressly prohibit price discrimination between passengers solely on thebasis of their place of residence within the European Union. If a Regulation implementing these proposalswere adopted it may affect Aer Lingus’ marketing and sales strategy for its fares but Aer Lingus does notbelieve that it would have a material adverse effect on its financial position or profitability relative to that ofother Irish airlines.4.3 Emissions TradingThe European Commission has been tasked with putting forward a proposal with a view to including theaviation sector in the existing EU emissions trading scheme (‘‘ETS’’), one of the mechanisms whereby theEuropean Union seeks to meet its emission reduction targets under the Kyoto Protocol. The EuropeanCommission is expected to present detailed legal proposals to implement this proposal by the end of 2006.The earliest the ETS could come into force for the aviation sector is some time after 2008 although theEuropean Parliament has recommended a pilot scheme from 2008.PR Ann I,8.2With the existing ETS, the initial allocation of free allowances to each company was undertaken by nationalauthorities largely on the basis of past emissions of each company. This meant that companies with thehighest historic emissions received a larger number of allowances for the future than companies thatalready used environmentally friendly technologies. If this was adopted in the aviation industry it wouldmean that low-cost carriers, which tend to fly more modern and environmentally efficient aircraft thantraditional carriers, could be disadvantaged.The European Commission is considering setting up an allowance fund from which it could allocateallowances to rapidly growing companies such as low-cost airlines. If no allowance fund is established, or ifthe fund is too small in size, companies requiring additional allowances due to expanding business mayhave to purchase allowances on the open market.It is unclear whether it will be feasible for the EU to include aviation in the ETS before 2012, when the entirescheme is up for its next review. The European Commission has already indicated that it will not be possibleto include aviation under the 2008 review, but the European Parliament has recommended a pilot schemefrom 2008. It is unclear how quickly thereafter inclusion could take place.4.4 Other LegislationIn addition to the above, there is a wide variety of legislation adopted in different countries which impactson air services to or from the relevant country. The French government decided in November 2005 tointroduce a surcharge on all tickets for flights departing France as of 1 July 2006. The ensuing revenue isexpected to be approximately 0200 million. For economy class tickets, the surcharge will be 01 for adomestic or intra-EU economy class flight and 04 for an international flight to a third country (business andfirst class flights: 010 and 040 respectively).There have been discussions in other EEA states about introducing similar measures and it is possible thatsimilar measures may be introduced in other EEA States. If Ireland were to implement legislation similar tothat discussed above in this paragraph, the surcharges would affect all Irish airlines, including Aer Lingus.However, as at 8 September 2006, the latest practicable date prior to publication of this Prospectus, AerLingus was not aware of any proposals to introduce similar measures in Ireland.177

Part XRegulationIf the provisions discussed in paragraphs 4.1 (Flight Time Limitations) to 4.3 (Emissions Trading) (inclusive) ofthis Part X are implemented by the European Union, they will become binding on Irish airlines, including AerLingus, because Ireland is a member of the European Union. Further details of how the regulatory changesmay affect airlines, including Aer Lingus, are set out in paragraph 1.9 (The airline industry is highly regulatedand airlines cannot always pass on to their customers the costs associated with regulation. Regulatorychanges can have an adverse impact on airlines’ costs, flexibility, marketing strategy, business model andability to expand) of Part III (Risk Factors) of this Prospectus.178

Part XIDirectors, Senior Management and Corporate Governance1. BOARD OF DIRECTORS1.1 The Directors of the Company, all of Dublin airport, County Dublin, Ireland, as at the date of thisProspectus, are set out below:Date of FirstName Position Age Appointment Expiry Date of Current AppointmentPR Ann I,14.1, 16.1LR3.4.3John Sharman********* Chairman 57 21 March 2003 20 March 2007Dermot Mannion ****** Chief Executive 48 8 August 2005 Until such date as he ceases to beChief Executive of the CompanyGreg O’Sullivan******** Finance Director 47 25 August 2006 24 August 2008Ivor Fitzpatrick ******** Director 51 5 June 2002 4 June 2007Sean FitzPatrick ******* Director 58 11 March 2004 10 March 2007Danuta Gray ********** Director 47 25 August 2006 24 August 2008Francis Hackett ******** Director 43 9 February 2006 8 February 2008Michael Johns********* Director 58 25 August 2006 24 August 2008Anne Mills************ Director 58 22 March 2004 21 March 2007Thomas Moran ******** Director 53 25 August 2006 24 August 2008Chris Wall ************ Director 63 23 December 1998 22 December 2006John Sharman, ChairmanJohn Sharman was appointed to the Board in 2003, appointed Chairman in 2004 and served asExecutive Chairman between January and August 2005. Mr Sharman’s career has been spent ininternational finance particularly in the shipping and aviation sectors, including seven years inSingapore. Since 1980, his focus has been on the provision of corporate finance advice and theprovision of financing for aviation, working globally with airlines, aircraft and engine manufacturersand service providers such as air traffic control and airports. Mr Sharman was a founding shareholderof Spectrum Capital Limited, and currently runs Spectrum’s activities outside the United States.Mr Sharman graduated MA from Oxford University, is a Fellow of the Royal Aeronautical Society andwas a member of the UK Department of Trade and Industry’s Aerospace Committee from 1998-2004.Dermot Mannion, Chief ExecutiveDermot Mannion, a chartered accountant and graduate of Trinity College, Dublin, was appointedChief Executive in August 2005. After initially working with Ulster Investment Bank for two years inIreland, he joined Emirates Airlines in 1987 as Treasury Manager. As President Group SupportServices of Emirates, he led the US$500 million bond issue at the airline. Mr Mannion was also adirector of Sri Lankan Airlines, 43% owned by Emirates Airlines, and was centrally involved in theturnaround of that business. Mr Mannion currently has a total of 20 years experience in the airlineindustry at senior management level.Greg O’Sullivan, Finance DirectorGreg O’Sullivan was appointed to the Board on 25 August 2006. Mr. O’Sullivan, a charteredaccountant, and a graduate of University College Dublin, joined Aer Lingus as Group FinancialController in August 1997. Prior to this, he worked with PricewaterhouseCoopers in Ireland and theUnited States where he advised listed clients on mergers and acquisitions, due diligence andaccounting matters. From October 2001 to August 2006, Mr O’Sullivan was also Company Secretaryof Aer Lingus. In January 2005, Mr O’Sullivan was appointed to the Senior Management Team asHead of Finance and was appointed Finance Director in March 2006.(1) Subject to prior expiry if Dermot Mannion ceases to be Chief Executive.(2) Between persons who became or who were last reappointed Director on the same day those to retire shall be determined(unless they otherwise agree among themselves) by lot.179

Part XIDirectors, Senior Management and Corporate GovernanceIvor FitzpatrickIvor Fitzpatrick was appointed to the Board in June 2002. He is a solicitor and the founding partnerof Ivor Fitzpatrick & Co. Solicitors. Mr Fitzpatrick practices and has extensive experience in the legalprofession and is also involved in various commercial and business activities.Sean FitzPatrickSean FitzPatrick was appointed to the Board in March 2004. Mr FitzPatrick is a graduate of UniversityCollege Dublin and is a qualified chartered accountant. He is currently Chairman of Anglo Irish BankCorporation plc. He is a past president of the Irish Bankers Federation. He is also a non-executivedirector of the Dublin Docklands Development Authority and Greencore Group plc.Danuta GrayDanuta Gray was appointed to the Board on 25 August 2006. Ms Gray is Chief Executive of O 2Ireland, a position she has held since 2001. Ms Gray is a graduate of the University of Leeds and hasalso studied at Lausanne and the London Business School. She has been appointed to the newlyformed O 2 Group board. She is also director of Irish Life & Permanent plc and a member of the IMICouncil and Dublin Chamber of Commerce.Francis HackettFrancis Hackett was appointed to the Board in February 2006. Mr Hackett is a solicitor and theManaging Partner of O’Donnell Sweeney, Solicitors. He is a graduate of University College Dublinand has been admitted as a Solicitor in Ireland since 1988 and as a Barrister and Solicitor in SouthAustralia since 1990. Mr Hackett has extensive experience in commercial law, corporate law,regulatory, telecommunications and information technology law. He has provided legal counsel innumerous very significant transactions including acting as corporate counsel to Telecom Éireannduring its strategic alliance with KPN and Telia and its subsequent initial public offering in 1999.Michael JohnsMichael Johns was appointed to the Board on 25 August 2006. He is a solicitor and has been apartner at Ashurst, solicitors since 1987. Mr Johns is a graduate of Oxford University. He hasextensive experience in the areas of commercial, corporate, corporate finance and energy law. Hehas provided legal counsel to the Eircom employee share ownership trust since 2001.Anne MillsAnne Mills was appointed to the Board in March 2004. Ms Mills is a Chartered Civil Engineer whohas over 37 years experience in the public service and is currently a senior engineer in Dublin CityCouncil. She is a graduate of University College Galway and has previously specialised in the areas oftraffic and transportation in Córas Iompair Éireann, the Irish Transport Authority, and in the areas ofbuilding and development control in Dublin County Council. She is presently with Dublin CityCouncil and is responsible for the multi million euro re-development of O’Connell Street and thecentral area of Dublin City. She is also a member of the Building Regulations Advisory Bodyestablished by the Department of the Environment and Local Government.Thomas MoranThomas Moran was appointed to the Board on 25 August 2006. Mr Moran has served as Chairmanof the Board of Mutual of America Life Insurance Company since June 2005 and has served as itsPresident and Chief Executive Officer since October 1994. He has participated in its growth from asmall retirement association to a mutual life insurance company. Mr Moran is a graduate ofManhattan College and has extensive business experience and is a member of the Taoiseach’s (thePrime Minister of Ireland) Economic Advisory Board, as well as the Boards of the Irish Chamber ofCommerce in the USA and the Ireland-United States Council for Commerce and Industry, Inc. He isalso very involved in charity work and has been presented by the Taoiseach with the ConcernWorldwide Humanitarian Award.180

Part XIDirectors, Senior Management and Corporate GovernanceChris WallChris Wall was appointed to the Board in December 1998. Mr Wall has varied experience in thecommercial sector. He is a business consultant and has held directorships on the boards of variouscompanies including ACC Bank. Currently, he also holds a seat on the Private Security AppealsBoard.1.2 As at the date of this Prospectus, the Directors of the Company have been appointed by the Ministerfor Transport pursuant to Section 12 of the Air Companies Act 1966. Following the commencementof Section 2 of the 2004 Act, which repeals the Air Companies Act 1966, any further Directors willbe appointed pursuant to the Articles of Association of the Company.PR Ann I,14.2LR3.4.4Pursuant to the Articles of Association:➤ The Minister for Transport is entitled (but not obliged) to nominate for appointment, to havemaintained, and to remove, up to three persons as Directors; and➤ the ESOT is entitled (but not obliged) to nominate for appointment, to have and to remove up totwo persons as Directors,subject to Section 182 of the Companies Act 1963 of Ireland, which permits a company to remove adirector by passing an ordinary resolution if the provisions of that section are otherwise compliedwith. These rights are conditional upon the Selling Shareholder and the ESOT holding certainpercentages of the total issued ordinary share capital of the Company. The nomination rights of theSelling Shareholder, which are conditional upon the percentage of Ordinary Shares held by theSelling Shareholder, are exercisable by the Minister for Transport.Further details of the procedure for the appointment of Directors under the Articles of Association ofthe Company are set out in paragraph 5.2(m) (Directors) of Part XV (Additional Information) of thisProspectus. Further details of the 2004 Act are set out in paragraph 2.2 of Part XV (AdditionalInformation) of this Prospectus.As of the date of this Prospectus, of the current Directors, Francis Hackett is a nominee of the SellingShareholder, and Michael Johns is a nominee of the ESOT. Therefore, on the basis of the OfferAssumptions and immediately following Admission, the Selling Shareholder will be entitled tonominate two further Directors, and the ESOT will have the right to nominate one further Director.1.3 There are no family relationships between or among any Directors or any of the Senior ManagementTeam.1.4 Except as described below, none of the Directors currently is, or has during the five years prior to thedate of this Prospectus been, a partner in any partnership:Director Current Partnerships Previous PartnershipsSean FitzPatrick ******* The Capital Partnership NoneThe Beacon PartnershipThe Kilkenny PartnershipThe Clonmel PartnershipIvor Fitzpatrick ******** Ivor Fitzpatrick & Co NoneThe Christina Limited PartnershipFrancis Hackett ******** O’Donnell Sweeney NoneKings Sligo PartnershipMichael Johns********* Ashurst, Solicitors None181

Part XIDirectors, Senior Management and Corporate Governance1.5 In addition to their directorship of the Company and certain subsidiaries of the Company, theDirectors have held the following directorships in the five years prior to the date of this Prospectus:PR Ann I,14.1Director Current Directorships Previous DirectorshipsJohn Sharman********* Spectrum Capital Limited Tanker Transport Services CompanySpectrum Capital London Limited LimitedPearl Aviation LimitedSpectrum Aircraft LimitedSpectrum Sales Finance LimitedVulcan to the Sky TrustBirchin Holdings LimitedBirchin Capital LimitedBirchin Investments LimitedDermot Mannion ****** None Sri Lankan AirlinesGreg O’Sullivan******** Irish Airline Pilots Pensions Limited Cargo Community Systems LimitedAer Lingus ESOP Trustee LimitedIvor Fitzpatrick ******** Atlantic Helicopters Limited Appleby Developments LimitedAutumn Leaves LimitedAverview LimitedBremgreen Properties LimitedEmarwood LimitedBriarglen LimitedG-Tech LimitedCase Construction LimitedKagel Investments LimitedCanton Caseys LimitedLPA LimitedCaymore Properties LimitedThe Manrest Lodge LimitedChelsea Harbour SARLSherak Holdings LimitedChristina GP LimitedSpecial Communications ServicesCrisglen LimitedLimitedDecember Property Holdings LimitedDiamondframe LimitedDirectdivide LimitedEleygrove LimitedFateline LimitedHillside Properties LimitedIdyll Investments LimitedIvor Fitzpatrick & CoMaquis Investments LimitedMergot LimitedMetrospa LimitedNovember Property Holdings LimitedOctober Property Holdings LimitedPelbrook LimitedPepper Canister Nominees LimitedPivotal Holdings LimitedPowerscreen Equipment (Vietnam)LimitedPowerscreen Indo-China LimitedResearch Institute for a Tobacco FreeSociety LimitedSandyway Investments LimitedShayna LimitedSpearridge Properties LimitedSubmitquest LimitedTrans-Line LimitedVeton Properties Limited182

Part XIDirectors, Senior Management and Corporate GovernanceDirector Current Directorships Previous DirectorshipsSean FitzPatrick ******* AIBC Holding AG Anglo Irish Asset Management LimitedAnglo Irish Bank (Austria) AGAnglo Irish Assurance Company LimitedAnglo Irish Finance LimitedAnglo Irish Bank ESOP LimitedAnglo Irish Leasing LimitedAnglo Irish Bank LimitedAnglo Irish Asset Finance PLCAnglo-Irish Bank (Nominees) LimitedAnglo Irish Bank CorporationAnglo Irish Corporate Bank LimitedPublic Limited CompanyAnglo Irish Financial Services LimitedBusiness in the Community Limited Anglo Irish International FinanceCBD Investment LimitedAnglo Irish International FinancialCBD (UK) LimitedServices LimitedDublin Docklands AuthorityAnglo Irish Nominees LimitedDunside Holdings LimitedAnsbacher Bankers LimitedFinance 2000 PLCAragone Financial Services LimitedFoilseachain na Rosann Teoranta Buyway Group LimitedGartmore Irish Growth Fund plc Block Finance LimitedGartmore Limited Issue Irish Growth Celt Securities LimitedFund LimitedC.F. LimitedGlenfort LimitedEnterprise Investment Company LimitedGreencore Group Public Limited Farmington InvestmentsCompanyFitzwilliam Leasing LimitedInternational Colour Web Limited Geranth LimitedIrbanco Nominees LimitedIBOC LimitedKesdale Freight LimitedIFT Nominees LimitedLithographic FinanceIndustrial Funding Trust LimitedThe Lithographic Group Limited Irish Buyway LimitedLithographic Web Press Limited Lindesfarne Investments LimitedLithographic Universal LimitedLithoset LimitedMAC Communications LimitedMasnoon LimitedMAC Publishing LimitedModify 5 LimitedMarketing SalesModify 6 LimitedModify 1 LimitedModify 7 LimitedModify 3 LimitedModify 9 LimitedModify 8 LimitedPagnol LimitedNational Investment Trust Limited Pampa InvestmentsThe Philippe Fund Public Limited Pegasus Nominees LimitedCompanyPhoenix Finance Trust LimitedSolitude LimitedPlatnium One LimitedSutherland Finance and Leasing PLC Reliance Credit Company LimitedThe AlphaGen Volantis Fund Limited Santella LimitedVisitor Publications LimitedSinger & Friedlander High IncomeWinstone Publishing LimitedFund Public Limited CompanySinger & Friedlander InvestmentFunds Public Limited CompanySinger & Friedlander Total AssetManagement LimitedSinger & Friedlander Roll-upFunds Public Limited CompanySparta Financial ServicesS&T Fitzpatrick LimitedVector Workplace and FacilityManagement Limited183

Part XIDirectors, Senior Management and Corporate GovernanceDirector Current Directorships Previous DirectorshipsDanuta Gray ********** Cellular World Limited Business in the Community LimitedCenturion Collections LimitedCommon Purpose LimitedCommercial Communications Sales Concert Global Networks (Deutschland)LimitedGMBHDigifone MM02 LimitedTadpole BVEire Cumarsaide Teoranta02 Airwave Ireland Limited02 Cellular Networks Ireland Limited02 Communications02 Communications (Ireland) Limited02 Investments Ireland02 Retail (Ireland) LimitedIrish Life & Permanent plcManx Telecom Limited02 plcSt. Patricks Festival BoardFrancis Hackett ******** O’Donnell Sweeney Legal Copyright Association of Ireland LimitedSupport ServicesIntec Billing IrelandO.D.S CompanyGolden Pages LimitedOne Earlsfort RentalsSteorn LimitedThe Secretarial Company Limited ERFT Holdings LimitedKandel LimitedKyoto Capital Partners LimitedKyoto Funds LimitedSwitch Distribution LimitedTMCO LimitedFinavera Renewables LimitedHeatherly Securities LimitedBioderm Sciences LimitedAbcon Industrial Products LimitedThe Mandela Rhodes FoundationTomsk Oil LimitedMichael Johns********* Esher and District Citizens Advice Teesside Energy Trading LimitedBureauGreenwaves Management CompanyLimitedAshurst Business ServicesAshurst Healthcare Trustee LimitedAnne Mills************ None NoneThomas Moran ******** Mutual of America Life Insurance Co. Manhattan CollegeThe Governor and Company of the Leader of Leader InstituteBank of Ireland(formerly The Peter DruckerLife Insurance Council of NYFoundation)Concern Worldwide (US)National Center for Disability ServicesSmurfit Graduate School of Business at American Cancer SocietyUCD (US)Thirteen WNET New YorkNational Committee on AmericanForeign PolicyCitizens Budget CommissionIreland-US Council on CommerceIrish Chamber of Commerce USAmerican Cancer Society FoundationGreater New York Councils of the BoyScouts of AmericaUnited Way of NYCChris Wall ************ None None184

Part XIDirectors, Senior Management and Corporate Governance1.6 Save as disclosed in paragraph 1.7 to this Part XI, at the date of this Prospectus, no Director has,during the five years prior to the date of this Prospectus:PR Ann I,14.1(a)(b)(c)(d)any convictions in relation to fraudulent offences; orbeen associated with any bankruptcies, receiverships or liquidations in their capacity as amember of the administrative, management or supervisory bodies or a senior manager of acompany; orbeen the subject of any official public incrimination or sanctions by any statutory orregulatory authorities (including, where relevant, designated professional bodies); orbeen disqualified by a court from acting as a member of the administrative, management orsupervisory bodies of a company or from acting in the management or conduct of the affairsof any company.1.7 The following Directors have been associated with solvent voluntary liquidations:Greg O’Sullivan was a director of Derent Limited, an Irish company wound up in 2003, andSkywell Limited, a Cypriot company wound up in 2004, when each was placed in liquidation. Bothcompanies were wound up as part of a reorganisation of the Group on the basis that neithercontinued to fulfil any purpose. Both liquidations were solvent and the creditors of both companieswere paid in full.Francis Hackett was a director of ERFT Holdings Limited which was struck off the Register ofCompanies on 2 February 2006 because its annual return was not filed on time. Application is beingmade to restore the company to the Register of Companies.2. SENIOR MANAGEMENT TEAM2.1 The members of the Senior Management Team, all of Dublin Airport, County Dublin, Ireland, theirpositions of employment and years of appointment to their current positions are as follows:PR Ann I,14.1Age PositionYear of CurrentAppointmentDermot Mannion ************************* 48 Chief Executive 2005Greg O’Sullivan*************************** 47 Finance Director 2006Dick Butler******************************* 55 Ground Operations Director 2006Enda Corneille *************************** 41 Commercial Director 2006Stephen Kavanagh************************ 39 Planning Director 2006Niall Walsh ****************************** 50 Deputy Chief Executive 2006Liz White ******************************** 45 Human Resources Director 2002Dermot Mannion, Chief ExecutiveDermot Mannion’s biography is set out at paragraph 1.1 of this Part XI.Greg O’Sullivan, Finance DirectorGreg O’Sullivan’s biography is set out at paragraph 1.1 of this Part XI.Dick Butler, Ground Operations DirectorDick Butler joined the Cargo Department of Aer Lingus in 1970, and progressed through a range ofsupervisory roles within Cargo Operations with responsibility for Cargo Terminals at Dublin, Corkand Shannon. Mr Butler was appointed manager of the Catering Department in 1994, then DublinStation Manager in 1996 with responsibility for all areas of customer and operational delivery at185

Part XIDirectors, Senior Management and Corporate GovernanceDublin airport. Mr Butler was appointed Commercial Operations Manager in 1999. In January 2005,he was appointed to the Senior Management Team as Head of Operations and in March 2006 wasappointed Ground Operations Director.Enda Corneille, Commercial DirectorEnda Corneille joined Aer Lingus in 1986 as an Interline Revenue Analyst. He was promoted toPricing Distribution in 1989, contributing to the design and implementation of Aer Lingus worldwidepricing policy. Mr Corneille has held Commercial Management positions in Switzerland, theNetherlands, UK and Ireland. He was appointed Head of European Sales in 2002, with overallresponsibility for sales in the Irish, UK, and wider European region. During this time he implementeda significant change programme to drive sales in Ireland/UK/Continental Europe onto aerlingus.com.Mr Corneille was appointed to the Senior Management Team in March 2006 as CommercialDirector.Stephen Kavanagh, Planning DirectorStephen Kavanagh is a graduate of University College Dublin and joined the Company in 1988. Heundertook a number of analytical and management roles in fleet scheduling and business planningdepartments before being appointed Operations Planning Manager in 2003. In this position,Mr Kavanagh was responsible for the integration of network, aircraft and crew planning, with afocus on improved productivity and asset utilisation. Mr Kavanagh was appointed to the SeniorManagement Team in March 2006 as Planning Director.Niall Walsh, Deputy Chief ExecutiveNiall Walsh, a chartered accountant, was appointed Group Procurement, IT and Property Executive in1994. In March 1996, he became services director responsible for Group procurement, I.T., Catering,transport, facilities and Security. In February 2001 Mr Walsh became responsible for costmanagement in addition to his responsibility for Group procurement. In January 2005, he becameChief Operating Officer, before becoming Deputy Chief Executive in March 2006. Prior to joiningAer Lingus, Mr Walsh worked with Dunnes Stores in a senior management position in the operationof retail outlets throughout Ireland, England and Spain.Liz White, Human Resources DirectorLiz White joined Aer Lingus in 2002 as Human Resources Director and a member of the SeniorManagement Team. Immediately Prior to joining the Company, Ms White worked for eircom from2000 to 2002 as Head of Compensation and Benefits, and Head of HR (Retail). She worked forVauxhall UK from 1999 to 2000 as Head of Human Resources (Sales, Marketing and After Sales), forIBC Vehicles (a subsidiary of General Motors Europe) from 1991 to 1998 primarily as EmployeeRelations Manager and Director of Human Resources, and for Ford Motor Company from 1987 to1991 primarily as Employee Relations Officer and Education Development Specialist.2.2 None of the Senior Management Team currently is, or has during the five years prior to the date ofthis Prospectus been, a partner in any partnership.2.3 In addition to their directorships of certain of the companies in the Group, the Senior ManagementTeam have held the following directorships in the five years prior to the date of this Prospectus:Current DirectorshipsPrevious Directorships(1) (1)Dermot Mannion ***************************Dick Butler ******************************** — —Enda Corneille ***************************** — —Stephen Kavanagh************************** — —Greg O’Sullivan ****************************(1) (1)Niall Walsh ******************************** — —Liz White********************************** — —186(1) As set out at paragraph 1.5 of this Part XI.

Part XIDirectors, Senior Management and Corporate Governance2.4 No Senior Management Team member has, during the five years prior to the date of this Prospectus: PR Ann I,14.1(a) any convictions in relation to fraudulent offences; or(b)(c)(d)been associated with any bankruptcies, receiverships or liquidations in their capacity as amember of the administrative, management or supervisory bodies or a senior manager of acompany; orbeen the subject of any official public incrimination or sanctions by any statutory orregulatory authorities (including, where relevant, designated professional bodies); orbeen disqualified by a court from acting as a member of the administrative, management orsupervisory bodies of a company or from acting in the management or conduct of the affairsof any company.3. INTERESTS IN ORDINARY SHARESAs at 8 September 2006, the latest practicable date prior to publication of this Prospectus, the Directors andthe Senior Management Team had the following beneficial interests in Ordinary Shares, representingapproximately 0.02% of the Company’s issued ordinary share capital:PR Ann I,17.2Percentage of issuedNumber of ordinary share capitalDirector/Senior Management Team Ordinary Shares (1) of the CompanyDick Butler **************************************************** 11,278 0.0039%Enda Corneille ************************************************* 11,278 0.0039Ivor Fitzpatrick ************************************************* — —Sean FitzPatrick ************************************************ — —Danuta Gray ************************************************** — —Francis Hackett ************************************************ — —Michael Johns *************************************************Stephen Kavanagh ********************************************* 11,278 0.0039Dermot Mannion*********************************************** — —Anne Mills **************************************************** — —Thomas Moran ************************************************ — —Greg O’Sullivan ************************************************ 10,056 0.0035John Sharman ************************************************* — —Chris Wall***************************************************** — —Niall Walsh **************************************************** 11,278 0.0039Liz White ***************************************************** 8,381 0.0029(1) Includes notional allocations of shares under the ESOP. In addition, on 12 July 2006, the ESOT purchased 685,531 shares whichit had not notionally allocated among its participants as at 8 September 2006. The notional allocation will be effective as of12 July 2006 when it is made.The Directors and Senior Management Team do not hold any options over Ordinary Shares.PR Ann I,21.1.6187

Part XIDirectors, Senior Management and Corporate Governance4. DIRECTORS’ SERVICE CONTRACTS AND LETTERS OF APPOINTMENTThe Directors each have a service contract or letter of appointment with a member of the Group as follows:4.1 Executive Directors’ Service Contracts(a)Dermot MannionPR Ann I,16.2On 22 April 2005, Aer Lingus entered into a service agreement with Dermot Mannion appointinghim as its Chief Executive for a fixed term of three years from the date of commencement, whichmay be extended for up to four rolling one-year periods, under which he is entitled to a basic salarycurrently set at 0380,000, subject to annual review. Mr. Mannion’s contract also entitles him to anannual performance-related bonus subject to a maximum of 25% of his annual salary, severance payof one year’s basic pay in the event that employment is not continued following the expiration of thefixed term of his employment in full and fixed settlement of all claims and demand, together with anannual contribution of 25% of his annual salary to a pension plan, health insurance, life assurance, acar allowance of 015,000 subject to annual review and reimbursement of expenses (includingrelocation expenses). Under the service agreement, Mr. Mannion is also eligible for the payment of aspecial bonus of up to one-year’s salary for exceptional performance on a one-time basis during theperiod of his service agreement, such payment to be made at the discretion of the RemunerationCommittee. Exceptional performance could include completion of a process to put the Company ona footing of long-term sustainable, profitability and viability and a change in ownership of theCompany. This service agreement may be terminated by Aer Lingus with 12 months’ notice and, incertain exceptional circumstances, without notice (or with pay in lieu). Mr. Mannion may terminatethe contract with six months’ notice. Following any such termination, Mr. Mannion remains subjectto a restrictive covenant for a period of 12 months relating to soliciting or engaging an executivedirector or senior executive and working for or having an interest in quoted shares, stocks ordebentures exceeding 1% of the total shares, stocks or debentures in any competing airline orassociated business in Ireland, the United States or the European Union (unless such termination is aresult of Aer Lingus terminating the contract otherwise than for cause or where the term of thecontract expires and Aer Lingus is unwilling to offer a renewal of the contract). He is also subject toan unlimited covenant relating to confidential information. In addition, as a Director of theCompany, Mr. Mannion is currently paid a director’s fee of 017,500.(b)Greg O’SullivanOn 23 May 2003, Aer Lingus entered into a service agreement with Greg O’Sullivan appointing himas its Company Secretary/Group Financial Controller from 11 August 1997, as amended by asubsequent letter of appointment dated 6 March 2006 appointing him as its Finance Director.Pursuant to these agreements, he is entitled to an annual salary currently set at 0210,000 andsubject to yearly review. Mr. O’Sullivan is also entitled to an annual performance-related bonus,subject to a maximum of 40% of his annual salary, membership in the Irish Airlines (GeneralEmployees) Superannuation Scheme, death-in service benefits, personal accident insurance, ascheme covering sickness or disability of a permanent nature, personal liability insurance, healthinsurance, a car allowance of 030,000, subject to annual review and reimbursement of expenses.The contract may be terminated by the Company with six months’ notice and, in certain exceptionalcircumstances, without notice (or with pay in lieu). Mr O’Sullivan may terminate the contract withthree months’ notice. Following any such termination, Mr. O’Sullivan remains subject to a restrictivecovenant for a period of six months relating to soliciting or engaging an executive director or seniorexecutive and working for or having an interest in quoted shares, stocks or debentures exceeding1% of the total shares, stocks or debentures in any competing airline or associated business inIreland, the United States or the European Union. He is also subject to an unlimited covenant relatingto confidential information. In addition, as a Director of the Company, Mr. O’Sullivan is currentlypaid a director’s fee of 017,500.188

Part XIDirectors, Senior Management and Corporate Governance4.2 Non-executive Directors’ Letters of AppointmentThe terms upon which each of the directors have been appointed are currently set out inappointment letters issued to each of them by the Minister. Under these letters, their terms of officecommenced on the dates set out in paragraph 1.1 in this Part XI. Immediately following Admission,the Chairman and each of the independent Non-executive Directors will execute new letters ofappointment in substitution for their warrants of appointment in which the expiry dates of theirappointments will be formally recorded. These letters of appointment will reflect the formrecommended by the Combined Code.Each of the independent Non-executive Directors would be appointed for a fixed period notexceeding three years, subject to satisfactory performance and re-election at any annual generalmeeting where this is required. Their appointments may be terminated at any time upon onemonth’s written notice by either the Company or the relevant non-executive independent Director.Each of the Directors must maintain confidential all information acquired during their appointmentas non-executive Director. None of the Non-executive Directors is a party to any service contract withAer Lingus that provides for benefits upon termination.5. REMUNERATION5.1 The aggregate amount of remuneration paid (including any contingent or deferred compensation), PR Ann I,and benefits in kind granted, to the Directors for services in all capacities to the Group for the 15.1financial year ended 31 December 2005 was as follows:Defined contributionPerformance RelatedSalary and Fees Benefits in Kind (1) pension payments Expenses Allowance Annual Bonus Other Payments Total(1 in thousands)0870 09 0330 026 0161 014 01,410(1) Benefits in kind comprise concession vacation travel and complimentary membership of the Aer Lingus Gold Circle.5.2 The amount of remuneration paid (including any contingent or deferred compensation), andbenefits in kind granted to the Senior Management Team for services in all capacities to the Groupfor the financial year ended 31 December 2005 was 02,632,000.5.3 Executive Directors and the Senior Management Team are entitled to an annual performance-relatedbonus between 0% and 40% of their annual salary.5.4 The total amount set aside or accrued by the Group to provide pension, retirement or similar benefits PR Ann I,for the Directors and Senior Management Team for the financial year ended 31 December 2005 was 15.20442,000.5.5 Following Admission, the Remuneration Committee will implement the recommendation of theCombined Code so that the performance-related elements of remuneration should form asignificant proportion of the total remuneration package of executive directors and should bedesigned to align their interests with those of shareholders and to give these directors keenincentives to perform at the highest levels. In designing schemes of performance-relatedremuneration, the Remuneration Committee will follow the provisions in Schedule A to theCombined Code.5.6 Following the Offer, the Remuneration Committee will seek advice from independent remunerationconsultants with regard to the appropriate quantum of directors’ fees to take account of theincrease in directors’ responsibilities.6. CONFLICTS OF INTERESTPR Ann I,14.2Michael Johns is a Director appointed on the nomination of the ESOP. Francis Hackett is a Directorappointed on the nomination of the Selling Shareholder. Potential conflicts of interest may arise between189

Part XIDirectors, Senior Management and Corporate Governancethe duties owed by such Directors to the Company and their duties to their appointors. Section 194 of theCompanies Act 1963 requires each Director who is in any way, whether directly or indirectly, interested in acontract or proposed contract with the Company to declare the nature of his interest at a meeting of theDirectors of the Company. From time to time such declarations have been received by the Company andthe Company keeps a record of all such declarations which may be inspected by any director, secretary,auditor or member of the Company at the registered office of the Company and required to be is producedat every general meeting of the Company. With the exception of the matters disclosed by Directors in suchdeclarations, the Company is not aware of any other potential conflicts of interest between the duties tothe Company of the Directors or members of the Senior Management Team and their private interests.The Articles of Association generally prohibit Directors from voting at Board meetings or meetings ofCommittees of the Board on any resolution concerning a matter in which they have a direct or indirectinterest which is material, or a duty which conflicts or may conflict with the interests of the Company.Directors may not be counted in the quorum in relation to resolutions on which they are not entitled tovote.However, a Director will be entitled (in the absence of some other material interest than is indicated below)to vote (and be counted in the quorum) in respect of any resolutions concerning any of the followingmatters:6.1 the giving of any security, guarantee or indemnity to him in respect of money lent by him to theCompany or any of its subsidiary or associated companies or obligations incurred by him or by anyother person at the request of or for the benefit of the Company or any of its subsidiary orassociated companies;6.2 the giving of any security, guarantee or indemnity to a third party in respect of a debt or obligationof the Company or any of its subsidiary or associated companies for which he himself has assumedresponsibility in whole or in part and whether alone or jointly with others under a guarantee orindemnity or by the giving of security;6.3 any proposal concerning any offer of shares or debentures or other securities of or by the Companyor any of its subsidiary or associated companies for subscription, purchase or exchange in whichoffer he is or is to be interested as a participant in the underwriting or sub-underwriting thereof;6.4 any proposal concerning any other company in which he is interested, directly or indirectly andwhether as an officer or shareholder or otherwise howsoever, provided that he is not the holder ofor beneficially interested in 1% or more of the issued shares of any class of such company or of thevoting rights available to members of such company (or of a third company through which hisinterest is derived);6.5 any proposal concerning the adoption, modification or operation of a superannuation fund orretirement benefits scheme under which he may benefit and which has been approved by or issubject to and conditional upon approval for taxation purposes by the appropriate revenueauthorities;6.6 any proposal concerning the adoption, modification or operation of any scheme for enablingemployees (including full time executive Directors) of the Company and/or any subsidiary thereof toacquire shares in the Company or any arrangement for the benefit of employees of the Company orany of its subsidiaries under which the Director benefits or may benefit; or6.7 any proposal concerning the giving of any indemnity against all costs, charges, losses, expenses andliabilities incurred by him in the execution and discharge of his duties or the discharge of the cost ofany directors and officers insurance cover purchased or maintained by the Company.If a question arises at a meeting of Directors or of a committee of Directors as to the materiality of aDirector’s interest or as to the right of any Director to vote and such question is not resolved by his190

Part XIDirectors, Senior Management and Corporate Governancevoluntarily agreeing to abstain from voting, the question may be referred, before the conclusion of themeeting, to the chairman of the meeting and his ruling in relation to any Director other than himself shallbe final and conclusive. In relation to the chairman of the meeting, the question may be resolved by amajority vote of the Directors (other than the chairman of the meeting) present at the meeting.7. CORPORATE GOVERNANCEPR Ann I,16.4Following the introduction of the Department of Finance’s Code of Practice for the Governance of StateBodies in 1992, the Company adopted formal corporate governance procedures in line with theseguidelines. The Company’s corporate governance procedures have since been updated from time to time,in particular to take into account the changes introduced by the 2001 revision of the Department ofFinance’s Code of Practice for the Governance of State Bodies. These revised guidelines reflect many of theprovisions of the predecessor to the current Combined Code. As part of its preparation for Admission, theBoard has updated and amended its corporate governance procedures for the purposes of complying withthe Combined Code. Except as disclosed in paragraph 5.5 of this Part XI, and in paragraph 5.2(m)(Directors) of Part XV (Additional Information) of this Prospectus, as at the date of this Prospectus theCompany complies with all relevant provisions of the Combined Code, and the Company intends tocontinue to do so following Admission.As at 8 September 2006 (being the latest practicable date prior to publication of this Prospectus), the Boardconsisted of the Chairman, the Chief Executive, the Finance Director and eight other non-executiveDirectors, one of whom, Sean FitzPatrick is the senior independent Director.Ivor Fitzpatrick, Sean FitzPatrick, Danuta Gray, Anne Mills, Thomas Moran and Chris Wall of the nonexecutiveDirectors are considered to be independent because they display a high level of integrity andindependence acquired from their extensive and diverse business backgrounds and are not employees ofAer Lingus or appointed to represent shareholders of the Company. This satisfies the Combined Coderequirement that at least half the Board, excluding the Chairman, should comprise Non-executive Directorsdetermined by the Board to be independent.The Board has a fixed schedule of meetings each year and may meet more frequently as required. Forregular Board meetings, the agenda will usually comprise reports from the Chief Executive and the FinanceDirector. The practice will be to have the agenda and supporting papers circulated to the Directorsseven days ahead of each meeting. It is inevitable that there will be occasions when circumstances arise toprevent Directors from attending meetings. In such circumstances, the usual practice is for the absentdirector to review the Board papers with the Chairman and convey any views on specific issues. It shouldalso be noted that the time commitment expected of Non-executive Directors is not restricted to Boardmeetings. All of the Directors are to be available for consultation on specific issues falling within theirparticular fields of expertise.The duties of the Board and its committees are set out clearly in formal terms of reference which will bereviewed regularly and state the items specifically reserved for decision by the Board. The Board willestablish overall Group strategy, including new activities and withdrawal from existing activities. It approvesthe Group’s commercial strategy and the operating budget and monitors performance through the receiptof monthly management accounts. The approval of acquisitions is a matter to be reserved for the Board.Similarly, there are authority levels covering capital expenditure which can be exercised by the ChiefExecutive or by the Chairman and Chief Executive jointly. Beyond these levels of authority, projects are to bereferred to the Board for approval.Other matters reserved to the Board include:➤ treasury;➤ control, audit and risk management;➤ remuneration;191

Part XIDirectors, Senior Management and Corporate Governance➤ pension schemes; and➤ the appointment or removal of the Company Secretary.The division of responsibilities between the Chairman and the Chief Executive is clearly established. TheChairman and the Company Secretary work closely together in planning a forward programme of Boardmeetings and establishing their agendas. As part of this process, the Chairman ensures that the Board issupplied in a timely manner with information in a form and of a quality to enable it to discharge its duties.There is in place a procedure under which the Directors, in furtherance of their duties, are able to takeprofessional advice, if necessary, at the Company’s expense. The Company Secretary is responsible forensuring that Board procedures are followed and all Directors have access to his advice and services.The Board regularly reviews the chairmanship of its committees. Appointments to committees are for aperiod of three years, which may be extended for two further three-year periods provided the directorremains independent, or in the case of some committees, a majority of the directors on the committeeremain independent. As such, the Board does not consider that a Director should not be a member of thesame Board committee for more than six years. Recommendations to shareholders for the re-election ofNon-executive Directors for terms beyond six years will be made only after review by the Board.The Selling Shareholder and the ESOT each has specific rights in relation to the nomination, appointmentand rotation of Directors which may not comply with the requirement under the Combined Code that theAppointments Committee lead the process for Board appointments and make recommendations to theBoard regarding Board appointments, and the requirement under the Combined Code that all Directors besubmitted for re-election at regular intervals. Further details of these rights are set out in paragraph 5.2(m)(Directors) of Part XV (Additional Information) of this Prospectus and paragraph 1 (Board of Directors) of thisPart XI.7.1 Internal ControlPR Ann I,The Board acknowledges that it is responsible for the Group’s system of internal control and for 16.3reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk offailure to achieve business objectives and can provide reasonable, but not absolute, assuranceagainst material misstatement or loss. As recommended by guidance for directors on internal control(The Turnbull Guidance) there is an ongoing process for identifying, evaluating and managing thesignificant risks faced by the Group.7.2 Audit CommitteePR Ann I,The Board has established an Audit Committee consisting of three Non-executive Directors 16.3considered by the Board to be independent. They are Ivor FitzPatrick (Chairman), Sean FitzPatrickand Danuta Gray. The Audit Committee has at least one member possessing what the revisedCombined Code describes as recent and relevant experience: Sean FitzPatrick, a charteredaccountant, is currently chairman of Anglo Irish Bank Corporation plc and is a past president of theIrish Bankers Federation. The other members of the Audit Committee also bring to it a wide range ofexperience.The main role and responsibilities of the Audit Committee are set out in written terms of reference,which encompass those set out in the revised Combined Code, including:(a) to monitor the integrity of the financial statements of the Company and any formalannouncements relating to the Company’s financial performance and reviewing significantfinancial judgments contained therein;(b) to review the Company’s internal financial controls and its internal controls and riskmanagement systems;192

Part XIDirectors, Senior Management and Corporate Governance(c) to monitor and review the results of the Company’s internal audit function and the annualinternal audit plan;(d) to make recommendations to the Board in relation to the appointment, re-appointment andremoval of the external auditor and to approve the terms of engagement of the externalauditors;(e) to monitor and review the external auditors’ independence and objectivity and the effectivenessof the audit process taking into consideration relevant professional and regulatory requirements;(f) to develop and implement policy on the engagement of the external auditors to supply non-auditservices, taking into account relevant ethical guidance regarding the provision of non-auditservices by the external audit firm and to report to the Board.7.3 Remuneration CommitteeThe Board has established a Remuneration Committee consisting of John Sharman (Chairman), IvorFitzpatrick and Chris Wall. The Remuneration Committee determines the conditions of employmentof executive Directors and the Senior Management Team.The Remuneration Committee’s principal duties in relation to Directors’ remuneration include:(a) to determine and agree with the Board the policy for the remuneration of the Chief Executive,the Chairman of the Board, the executive Directors and the Company Secretary, and such othersenior management members as it is designated to consider;(b) to set remuneration policy so as to ensure that senior management are provided withappropriate incentives to encourage performance and are rewarded for their individualcontributions to the success of the Company in a fair and responsible manner;(c) to approve the design of, and determine targets for, any performance-related pay schemesoperated by the Company and approve the total annual payments made under such schemes;and(d) to monitor and approve the total remuneration package of each executive Director and relevantsenior management members, within the terms of the agreed policy.In making its decisions, the Committee will take advice from the Chairman and the Chief Executivewho are invited to attend meetings of the Committee as and when appropriate.The remuneration of Non-executive Directors is a matter for the Chairman and the executiveDirectors. As such no Directors are involved in any decisions as to their own remuneration.7.4 Appointments CommitteeThe Board has established an Appointments Committee consisting of Sean FitzPatrick (Chairman),John Sharman and Thomas Moran. Following Admission, the Appointments Committee will lead theprocess for considering Board appointments. The Appointments Committee may not be chaired bythe Chairman of the Board on any matter concerning the succession to the chairmanship of theBoard.The Appointments Committee’s terms of reference include the following:(a) to review regularly the structure, size and composition (including the skills, knowledge andexperience) required of the Board compared to its current position and make recommendationsto the Board with regard to any changes;193

Part XIDirectors, Senior Management and Corporate Governance(b) to give full consideration to succession planning for Directors and senior management, takinginto account the challenges and opportunities facing the Company; and(c) to be responsible for identifying and nominating, for the approval of the Board, candidates to fillBoard vacancies as and when they arise.Before recommending an appointment, the Committee will evaluate the balance of skills,knowledge and experience of the Board.All Directors will receive induction training on joining the Board under an approach that seeks tomatch the Director’s needs and experience. The Company Secretary is responsible for advising theBoard on all corporate governance matters.Information on the nomination, appointment and rotation of Directors, including information on thespecific rights of the Selling Shareholder and the ESOT in this regard, is set out in paragraph 5.2(m)(Directors) of Part XV (Additional Information) and paragraph 1 (Board of Directors) of this Part XI.7.5 Safety CommitteeThe Board has a Safety Committee, which assists the Board in discharging its responsibility for safety,including ensuring that adequate safety regulations and procedures are in place across the Group,that such regulations and procedures are complied with and reviewed from time to time, and alsoensuring that appropriate procedures are in place so that any crisis or accident can be properlymanaged. The Safety Committee is composed of John Sharman (Chairman), Chris Wall and AnneMills.7.6 Risk CommitteeThe Board has a Risk Committee, established to consider the significant risks facing the Group (otherthan those relating to safety) and the manner in which they are addressed, and to recommend to theBoard the most effective way of assessing these risks. The Risk Committee also conducts, on behalfof the Board, an annual review of Aer Lingus’ system of internal financial control. The RiskCommittee is composed of Sean FitzPatrick (Chairman), Francis Hackett and Michael Johns.194

INDEX TO FINANCIAL INFORMATIONAer Lingus Group plcIFRS Financial Information for Financial Years 2005 and 2004Accountant’s Report **************************************************************** 196Group Income Statement ************************************************************ 198Group Balance Sheet **************************************************************** 199Group Statement of Changes in Equity ************************************************ 200Group Cash Flow Statement********************************************************** 201Basis of Preparation and Statement of Accounting Policies ******************************** 202Notes to the IFRS Financial Information ************************************************ 213Irish GAAP Financial Information for Financial Years 2004 and 2003Accountant’s Report **************************************************************** 245Consolidated Profit and Loss Account************************************************** 247Statement of Total Recognised Gains and Losses **************************************** 248Consolidated Balance Sheet ********************************************************** 249Cash Flow Statement**************************************************************** 250Notes to the Irish GAAP Financial Information******************************************* 251IFRS Financial Information for the Six Months Ended 30 June 2006 and 2005Accountant’s Report **************************************************************** 267Group Income Statement ************************************************************ 269Group Balance Sheet **************************************************************** 270Group Statement of Changes in Equity ************************************************ 271Group Cash Flow Statement********************************************************** 272Basis of Preparation and Statement of Accounting Policies ******************************** 273Notes to the IFRS Financial Information ************************************************ 274195

Part XIIHistorical Financial InformationSECTION A: ACCOUNTANTS’ REPORT AND FINANCIAL INFORMATION FOR AER LINGUSGROUP PLC IN RESPECT OF THE TWO FINANCIAL YEARS ENDED 31 DECEMBER 2005 AND31 DECEMBER 2004 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIALREPORTING STANDARDS (‘‘IFRS’’)PR Ann I,20.1,20.4.1LR3.3.3(1)PricewaterhouseCoopersP.O. BoxGeorge's QuayDublin 2IrelandThe DirectorsAer Lingus Group plcDublin AirportCo. DublinThe DirectorsAIB Corporate Finance Limited85 Pembroke RoadBallsbridgeDublin 4LR3.3.3(1)(c), (d), (e)UBS Limited1/2 Finsbury AvenueLondonEC2M 2PP12 September 2006Ladies and GentlemenAer Lingus Group plcWe report on the IFRS financial information set out on pages 198 to 244 of the Prospectus dated12 September 2006 of Aer Lingus Group plc and its consolidated subsidiaries (‘‘the Company’’) for theyears ended 31 December 2004 and 31 December 2005 (‘‘the IFRS Financial Information’’). The IFRSFinancial Information has been prepared for inclusion in the Prospectus dated 12 September 2006 (the‘‘Prospectus’’) on the basis described in the Basis of Preparation and Accounting Policies on pages 202 to212. This report is required by item 20.1 of Annex I of the EU Prospectus Regulation and is given for thepurpose of complying with that item and for no other purpose.ResponsibilitiesThe Directors of the Company are responsible for preparing the IFRS Financial Information on the basis ofpreparation set out on pages 202 to 203 and on the basis of IFRS.It is our responsibility to form an opinion as to whether the IFRS Financial Information gives a true and fairview, for the purposes of the Prospectus, and to report our opinion to you.Basis of opinionWe conducted our work in accordance with the Standards for Investment Reporting issued by the AuditingPractices Board in the United Kingdom and published by the Institute of Chartered Accountants in Ireland.196

Part XIIHistorical Financial InformationOur work included an assessment of evidence relevant to the amounts and disclosures in the financialinformation. It also included an assessment of significant estimates and judgments made by thoseresponsible for the preparation of the financial information and whether the accounting policies areappropriate to the Company’s circumstances, consistently applied and adequately disclosed.We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that thefinancial information is free from material misstatement whether caused by fraud or other irregularity orerror.Our work has not been carried out in accordance with auditing standards generally accepted in the UnitedStates of America or auditing standards of the Public Company Accounting Oversight Board (United States)and accordingly should not be relied upon as if it had been carried out in accordance with those standards.OpinionIn our opinion, the IFRS Financial Information gives, for the purposes of the Prospectus dated 12 September2006, a true and fair view of the state of affairs of the Company as at 31 December 2004 and 31 December2005 and of its profits, cash flows and changes in equity for the years then ended, in accordance with thebasis of preparation on pages 202 to 203 and on the basis of IFRS.DeclarationFor the purposes of Paragraph 2(2)(f) of schedule 1 of the Prospectus Regulations 2005, we are responsible PR Ann I,for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that 1.2the information contained in this report is, to the best of our knowledge, in accordance with the facts and PR Ann III,contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance 1.2with item 1.2 of Annex I of the EU Prospectus Regulation.Yours faithfullyPricewaterhouseCoopersChartered Accountants197

Part XIIHistorical Financial InformationGroup Income StatementPR Ann I,20.1(b)2005 20041’000 1’000Note Total TotalRevenue ************************************************************* 1 1,002,658 1,009,586Operating Expenses:LR3.4.2(1)Staff costs************************************************************* 7 249,377 245,703Depreciation, amortisation and impairment ******************************** 60,803 63,769Aircraft operating lease costs ******************************************** 44,902 41,240Fuel and oil costs******************************************************* 134,142 84,979Maintenance expenses ************************************************** 75,276 76,672Airport charges ******************************************************** 178,715 162,885En-route charges ******************************************************* 43,477 39,237Distribution costs******************************************************* 42,356 53,076Ground operations, catering and other operating costs ********************** 89,940 99,142Other (gains)/ losses — net ********************************************** 3 (6,190) 9,733Employee profit share*************************************************** 7 — 10,644912,798 887,080Operating profit before exceptional items****************************** 89,860 122,506Exceptional Items******************************************************* 5 — (102,500)Operating profit after exceptional items ******************************* 89,860 20,006Finance income ******************************************************** 6 36,667 33,485Finance expense ******************************************************* 6 (26,480) (26,161)Profit before taxation ************************************************* 100,047 27,330Taxation charge ******************************************************** 8 (11,140) (4,382)Profit for the year **************************************************** 88,907 22,948Attributable to:Equity holders of the Company ****************************************** 88,907 22,948Earnings per share for profit attributable to the equity holders of theCompany (expressed in 0 per share)— basic and diluted **************************************************** 9 31.1c 8.6cThe notes on pages 213 to 244 are an integral part of this consolidated financial information.198

Part XIIHistorical Financial InformationGroup Balance SheetPR Ann I,20.1(a)As at 31 December2005 2004Note 1’000 1’000ASSETSNon-current assetsProperty, plant and equipment ****************************************** 10 508,006 492,132Intangible assets ******************************************************* 11 5,707 6,188Available for sale financial assets ***************************************** 13 159,998 117,436Derivative financial instruments ****************************************** 14 434 5,728Trade and other receivables ********************************************* 16 100 100Other Deposits ******************************************************** 17 191,921 235,628866,166 857,212Current assetsInventories ************************************************************ 15 1,053 772Derivative financial instruments ****************************************** 14 37,548 17,636Trade and other receivables ********************************************* 16 60,173 52,927Cash, cash equivalents and other deposits********************************* 17 529,027 461,121627,801 532,456Total assets ********************************************************** 1,493,967 1,389,668EQUITYShare capital ********************************************************** 22 357,829 357,829Share premium ******************************************************** 23 6,095 6,095Capital conversion reserve fund ****************************************** 23 5,048 5,048Other reserves********************************************************* 23 2,921 6,530Retained earnings****************************************************** 31,470 (57,437)Total equity********************************************************** 403,363 318,065LIABILITIESNon-current liabilitiesBorrowings *********************************************************** 19 501,652 387,838Derivative financial instruments ****************************************** 14 4,932 7,067Deferred tax liabilities ************************************************** 21 16,252 8,288Provisions for other liabilities and charges ********************************* 20 80,132 86,237602,968 489,430Current liabilitiesTrade and other payables *********************************************** 18 364,527 349,656Current income tax liabilities ******************************************** 3,889 70Borrowings *********************************************************** 19 54,075 94,120Derivative financial instruments ****************************************** 14 — 19,680Provisions for other liabilities and charges ********************************* 20 65,145 118,647487,636 582,173Total liabilities ******************************************************* 1,090,604 1,071,603Total equity and liabilities ******************************************** 1,493,967 1,389,668The notes on pages 213 to 244 are an integral part of this consolidated financial information.199

Part XIIHistorical Financial InformationGroup Statement of Changes in EquityPR Ann I,20.1(c)Attributable to equity holders of the CompanyCashCapital Flow AvailableShare Share Redemption Hedging for Sale Retained Totalcapital Premium Reserve Reserve Reserve earnings equityNote 1’000 1’000 1’000 1’000 1’000 1’000 1’000Balance at 1 January 2004****** 22,23 319,738 — 5,048 — 7,373 (80,385) 251,774Profit for the year *************** — — — — — 22,948 22,948Fair value gains/(losses), net of tax:— available for sale financial assets — — — — (843) — (843)Total recognised income for2004 ************************ — — — — (843) 22,948 22,105Issue of shares to ESOT atpremium********************* 22 38,091 6,095 — — — — 44,186Balance at 31 December 2004 ** 22,23 357,829 6,095 5,048 — 6,530 (57,437) 318,065Profit for the year *************** 88,907 88,907Fair value gains/(losses), net of tax:— available for sale financial assets — — — — (3,609) — (3,609)Total recognised income for2005 ************************ — — — — (3,609) 88,907 85,298Balance at 31 December 2005 ** 22,23 357,829 6,095 5,048 — 2,921 31,470 403,363The notes on pages 213 to 244 are an integral part of this consolidated financial information.200

Part XIIHistorical Financial InformationGroup Cash Flow StatementPR Ann I,20.1(d)Year ended31 December2005 20041’000 1’000Cash flows from operating activitiesCash generated from operations **************************************************** 31,910 96,945Interest paid********************************************************************** (24,538) (23,729)Income tax paid******************************************************************* 1,159 (1,212)Net cash generated from operating activities ****************************************** 8,531 72,004Cash flows from investing activitiesDisposals of subsidiary ************************************************************* — 3,750Purchases of property, plant and equipment (PPE) ************************************* (77,363) (124,138)Proceeds from sale of PPE ********************************************************** 3,532 68,766Purchases of intangible assets ******************************************************* (2,313) (2,980)Purchases of available for sale financial assets ***************************************** (16,828) (67,413)Movements in other deposits ******************************************************* 4,936 (105,539)Interest received ****************************************************************** 28,708 27,895Net cash used in investing activities ************************************************** (59,328) (199,659)Cash flows from financing activitiesProceeds from issuance of ordinary shares ******************************************** — 44,186Proceeds from borrowings ********************************************************** 99,353 189,279Repayments of borrowings ********************************************************* (50,357) (105,521)Net cash used in financing activities ************************************************* 48,996 127,944Net (decrease)/increase in cash, cash equivalents and bank overdrafts ************** (1,801) 289Cash, cash equivalents and bank overdrafts at beginning of the year ********************* 1,513 (143)Exchange gains on cash and bank overdrafts****************************************** 85 1,367Cash, cash equivalents and bank overdrafts at end of the year********************* (203) 1,513The notes on pages 213 to 244 are an integral part of this consolidated financial information.201

Part XIIHistorical Financial InformationBASIS OF PREPARATION AND STATEMENT OF ACCOUNTING POLICIESBasis of preparation and general informationPR Ann I,20.1(e)IntroductionThe principal activity of Aer Lingus Group plc (‘‘the Company’’) and its subsidiaries (together, with theCompany, ‘‘the Group’’) is the provision of low-fares short and long-haul air travel services from Ireland tothe UK and Europe (’short-haul’) and also to the US and Middle East (’long-haul’). The financial informationpresented is for the Group for the financial years ended 31 December 2004 and 31 December 2005. Theprincipal companies within the Group during the years ended 31 December 2004 and 31 December 2005are disclosed in note 12.Basis of preparationFollowing admission to the Official List of the Irish Stock Exchange and the Financial Services Authority inaccordance with European Union (‘‘EU’’) Regulations, the Company will be required to prepare statutoryconsolidated financial statements for the year ended 31 December 2006 and subsequently in accordancewith International Financial Reporting Standards (‘‘IFRS’’) as adopted by the EU, International FinancialReporting Interpretations Committee (‘‘IFRIC’’) interpretations adopted by the EU, and with those parts ofthe Companies Acts applicable to companies reporting under IFRS.As a company seeking admission, the Company is required by Item 20.1 of Annex I to the ProspectusRegulations 2005 to prepare and present in its prospectus the last two years audited historical financialinformation in a form consistent with the accounting policies to be adopted in the Company’s nextpublished annual financial statements. Therefore in addition to financial information for the Group inaccordance with Irish GAAP for the years ended 31 December 2003 and 31 December 2004, the directorsof the Company (the ‘‘Directors’’) have prepared financial information for the Group (the ‘‘IFRS FinancialInformation’’) for the years ended 31 December 2004 and 31 December 2005, on the basis expected to beapplicable, in so far as this is currently known, for the financial statements to be prepared for the yearended 31 December 2006, except where otherwise required or permitted by IFRS 1 ‘‘First-time adoption ofInternational Financial Reporting Standards’’.The IFRS Financial Information has been prepared in accordance with the recommendations of theCommittee of European Securities Regulators (‘‘CESR’’) for the consistent implementation of the EuropeanCommission’s Regulation on Prospectuses 809/2004 (CESR/05-054b) as to the presentation of financialinformation for entities transitioning to IFRS as adopted by the EU. Accordingly the Company is considereda first time adopter of IFRS for the purpose of application of IFRS 1 for the year ended 31 December 2005.The Group’s transition date to IFRS is 1 January 2004 and the comparative financial information for the yearended 31 December 2004 has been restated on a consistent basis with those accounting policies applied bythe Group in preparing the IFRS financial information for the year ended 31 December 2005, except whereotherwise required or permitted by IFRS 1.The transition to IFRS is accounted for in accordance with IFRS 1. This standard sets out how to adopt IFRSfor the first time and mandates that most standards are to be fully applied retrospectively. There are certainlimited exemptions. The Accounting Policies below describe how, in preparing the IFRS financialinformation the Directors have applied IFRSs as adopted by the EU under the first time adoption provisionsset out in IFRS 1, and the assumptions they have made about the standards and interpretations expected tobe effective and the policies they expect to adopt in the financial statements for the year ended31 December 2006. The impact of IFRS on the financial statements for the year ended 31 December 2004and 31 December 2005, including the exemptions the Group has elected to apply under IFRS 1, is set out inNote 31 below.The preparation of financial statements in conformity with IFRS requires the use of estimates andassumptions that affect the reported amounts of assets and liabilities at the date of the financial statementsand the reported amounts of revenues and expenses during the reporting period. Although these estimatesare based on management’s best knowledge of the amount, event or actions, actual results ultimately maydiffer from those estimates. It also requires management to exercise its judgment in the process of applying202

Part XIIHistorical Financial Informationthe Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areaswhere assumptions and estimates are significant to the consolidated financial statements, are disclosed inAccounting Policy 2.21 below.If the standards or interpretations applicable to the Group’s consolidated financial statements for the yearended 31 December 2006 are different from those applied in the IFRS Financial Information, the financialinformation for the year ended 31 December 2005 may require adjustment before constituting thecomparative financial information to be included in the Group’s consolidated financial statements for theyear ended 31 December 2006.203

Part XIIHistorical Financial InformationAccounting Policies2.1 First time adoption of IFRSIn preparing this consolidated financial information the Group has elected to apply certain exemptionsavailable under IFRS 1. These are set out in Note 31. Except as discussed below and as stated in Note 31 inconnection with the first time adoption of IFRS, the following principal accounting policies have beenapplied consistently in the preparation of this consolidated financial information.This consolidated financial information has been prepared on the basis of IFRS as adopted by the EU andIFRIC interpretations and with those parts of the Companies Acts applicable to companies reporting underIFRS.The IFRS financial information for the year ended 31 December 2004 and 31 December 2005 has beenprepared under the historical cost convention, as modified by the revaluation of certain financialinstruments, available for sale investments and derivatives.2.2 ConsolidationSubsidiaries are all entities over which the Group has the power to govern the financial and operatingpolicies, generally accompanying a shareholding of more than one-half of the voting rights. The existenceand effect of potential voting rights that are currently exercisable or convertible are considered whenassessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date onwhich control is transferred to the Group and cease to be consolidated from the date that control ceases.The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Thecost of an acquisition is measured as the fair value of the assets given, equity instruments issued andliabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date, irrespective of the extent of any minorityinterest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable netassets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assetsof the subsidiary acquired, the difference is recognised directly in the income statement.Inter-company transactions, balances and unrealised gains on transactions between group companies areeliminated. Unrealised losses are also eliminated but considered an impairment indicator of the assettransferred.The financial year end of all subsidiaries is 31 December.2.3 Segment reportingA business segment is a group of assets and operations engaged in providing services that are subject torisks and returns that are different from those of other business segments. A geographical segment isengaged in providing products or services within a particular economic environment that are subject to risksand returns that are different from those of segments operating in other economic environments.The Group’s primary segments are based on the nature of the services provided (‘‘business segment’’)whereas the secondary segments are based on the journey destination point of the booking (‘‘geographicalsegment’’).Expenses incurred centrally, including expenses incurred by support and administrative functions arecharged to the business segments in accordance with their estimated proportionate share of overallactivities.Segment assets and liabilities are those assets and liabilities that are directly attributable to the operatingactivities of the segment.204

Part XIIHistorical Financial Information2.4 Foreign currency translationThe consolidated financial statements are presented in euro, which is the functional and presentationcurrency of the parent company and all of its trading subsidiaries.Foreign currency transactions are translated into euro using the exchange rates prevailing at the dates ofthe transactions. Foreign exchange gains and losses resulting from the settlement of such transactions andfrom the translation at year-end exchange rates of monetary assets and liabilities denominated in foreigncurrencies are recognised in the income statement, except when deferred in equity as qualifying cash flowhedges.2.5 Property, plant and equipmentAll property, plant and equipment is stated at historical cost less depreciation. Historical cost includesexpenditure that is directly attributable to the acquisition of the items. Cost may also include transfers fromequity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plantand equipment.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to theGroup and the cost of the item can be measured reliably. All other repairs and maintenance are charged tothe income statement during the financial period in which they are incurred.Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocatetheir cost to their residual values over their estimated useful lives, as follows:Flight EquipmentAircraft fleet and major spares— Short-haul aircraft ******************************************* 18 years 10% Residual Value— Long-haul aircraft ******************************************* 20 years 10% Residual ValueRotable Spares************************************************* 5-11 years NilModifications to leased aircraft ********************************** Period of lease NilPropertyFreehold ****************************************************** Principally 50 years NilLeasehold***************************************************** Period of lease NilEquipmentGround equipment********************************************* 3-20 years NilOther equipment ********************************************** 2-10 years NilThe assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheetdate. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’scarrying amount is greater than its estimated recoverable amount.The costs of major airframe and engine maintenance checks on owned and finance leased aircraft arecapitalised and depreciated over the shorter of the period to the next check or the remaining life of theaircraft.2.6 Intangible assetsAcquired computer software licences are capitalised on the basis of the costs incurred to acquire and bringto use the specific software. These costs are amortised over their estimated useful lives (three to five years).Costs associated with developing or maintaining computer software programmes are recognised as anexpense as incurred. Costs that are directly associated with the production of identifiable and uniquesoftware products controlled by the Group, and that will probably generate economic benefits exceedingcosts beyond one year, are recognised as intangible assets. Computer software development costsrecognised as assets are amortised over their estimated useful lives (not exceeding three years).205

Part XIIHistorical Financial Information2.7 Impairment of Non Financial AssetsAssets that are subject to amortisation are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognisedfor the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverableamount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessingimpairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows(cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewedfor possible reversal of the impairment at each reporting date.2.8 Financial assetsThe Group classifies its financial assets in the following categories: loans and receivables, held-to-maturityinvestments, and available for sale financial assets. The financial assets which meet the criteria to bedesignated as loans and receivables and held-to-maturity investments, as set out below, are so designated,with all other financial assets classified as available for sale. This determination was made on transition toIFRS and, in the case of assets acquired post this date, on initial recognition.(a) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. They are included in current assets on the balance sheet, except for those withmaturities greater than 12 months after the balance sheet date, which are included in non-current assets.Loans and receivables are included within ’trade and other receivables’ in the balance sheet and are carriedat amortised cost using the effective interest method.(b) Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments andfixed maturities that the Group has the positive intention and ability to hold to maturity. Were the Group tosell other than an insignificant amount of held-to-maturity assets, the entire category would be reclassifiedas available for sale.Held-to-maturity investments are initially recognised at fair value plus transaction costs and aresubsequently carried at amortised cost using the effective interest method. They are derecognised when therights to receive cash flows from the investments have expired or have been transferred and the Group hastransferred substantially all risks and rewards of ownership.(c) Available for sale financial assetsAvailable for sale financial assets are non-derivatives which are not classified as loans and advances or heldto-maturityinvestments. They are included in non-current assets on the balance sheet unless managementintends to dispose of the investment within 12 months of the balance sheet date. Interest on available forsale securities, calculated using the effective interest method, is recognised in the income statement.Purchases and sales of available for sale financial assets are recognised on the trade-date — the date onwhich the Group commits to purchase or sell the asset. They are initially recognised at fair value plustransaction costs. They are derecognised when the rights to receive cash flows from the investments haveexpired or have been transferred and the Group has transferred substantially all risks and rewards ofownership.Available for sale financial assets are subsequently carried at fair value. Changes in the fair value ofmonetary securities denominated in a foreign currency and classified as available for sale are analysedbetween translation differences resulting from changes in amortised cost of the security and other changesin the carrying amount of the security. The translation differences are recognised in profit or loss, and otherchanges in carrying amount are recognised in equity. The fair values of quoted investments are based oncurrent bid prices. If the market for a financial asset is not active (and for unlisted securities), the Groupestablishes fair value by using valuation techniques. These include the use of recent arm’s lengthtransactions, reference to other instruments that are substantially the same and discounted cash flowanalysis.206

Part XIIHistorical Financial InformationWhen securities classified as available for sale are sold or impaired, the accumulated fair value adjustmentsrecognised in equity are included in the income statement. The Group assesses at each balance sheet datewhether there is objective evidence that a financial asset or a group of financial assets is impaired. In thecase of equity securities classified as available for sale, a significant or prolonged decline in the fair value ofthe security below its cost is considered as an indicator that the securities are impaired. If any such evidenceexists for available for sale financial assets, the cumulative loss — measured as the difference between theacquisition cost (net of principle repayments and amortisation) and the current fair value, less anyimpairment loss on that financial asset previously recognised in the income statement — is removed fromequity and recognised in the income statement.Impairment losses recognised in the income statement on equity instruments are not reversed through theincome statement.2.9 Derivative financial instruments and hedging activitiesDerivatives are used by the Group to manage interest rate, foreign exchange and commodity price risk.Derivatives are initially recognised at fair value on the date a derivative contract is entered into and aresubsequently re-measured at their fair value. The method of recognising the resulting gain or loss dependson whether the derivative is designated as a hedging instrument, and if so, the nature of the item beinghedged. The Group designates certain derivatives as either➤ hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);➤ hedges of a particular risk associated with a recognised asset or liability or a highly probable forecasttransaction (cash flow hedge);The Group is required to document at the inception of the transaction the relationship between hedginginstruments and hedged items, as well as its risk management objectives and strategy for undertakingvarious hedge transactions. The Group also documents its assessment, both at hedge inception and on anongoing basis, of whether the derivatives that are used in hedging transactions are highly effective inoffsetting changes in fair values or cash flows of hedged items.(a) Fair value hedgeFair value hedges are principally used to manage the interest rate risk in certain fixed rate exposures.Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded inthe income statement, together with any changes in the fair value of the hedged asset or liability that areattributable to the hedged risk. The gain or loss relating to the effective portion of interest rate swapshedging fixed rate assets and borrowings is recognised in the income statement within ‘Finance income orexpense’, along with the changes in the fair value of the hedged fixed rate assets and borrowings which isattributable to interest rate risk. The gain or loss relating to the ineffective portion of the interest rate swapsare recognised in the income statement within ‘Others gains/losses, net’.If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of ahedge item for which the effective interest method is used is amortised to profit or loss over the period tomaturity.(b) Cash flow hedgeCash flow hedges are principally used to hedge the commodity price risk associated with the Group’sforecasted fuel purchases as well as certain foreign exchange and interest rate exposures. The effectiveportion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges arerecognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in theincome statement within ’Fuel and Oil’ in the case of fuel purchases, and ‘Other Gains/(Losses) — net’ inthe case of interest rate swaps and foreign exchange derivatives.Amounts accumulated in equity are reclassified to the income statement in the periods when the hedgeditem affects profit or loss (for instance when the forecast purchase that is hedged takes place). They are207

Part XIIHistorical Financial Informationincluded under the relevant caption in the financial statements which reflect the nature and purpose of thehedge.When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedgeaccounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognisedwhen the forecast transaction is ultimately recognised in the income statement. When a forecasttransaction is no longer expected to occur, the cumulative gain or loss that was reported in equity isimmediately transferred to the income statement. If the hedge no longer meets the criteria for hedgeaccounting, the adjustment to the carrying amount of a hedged item for which the effective interestmethod is used is amortised to profit or loss over the period to maturity.(c) Derivatives that do not qualify for hedge accountingSome derivatives, while being hedges from a commercial perspective, do not meet the detailed hedgeaccounting criteria under IFRS. Changes in the fair value of these instruments are recognised immediately inthe income statement. As the Group believes that the arrangements entered into are effective commercialhedges, the underlying financial performance is separately disclosed as if these hedges had qualified in fullfor hedge accounting.2.10 InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined using the weightedaverage invoice price. Net realisable value is the estimated selling price in the ordinary course of business,less applicable disposal costs.2.11 Trade receivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost usingthe effective interest method, less provision for impairment. A provision for impairment of trade receivablesis established when there is objective evidence that the Group will not be able to collect all amounts dueaccording to the original terms of receivables. The amount of the provision is the difference between theasset’s carrying amount and the present value of estimated future cash flows, discounted at the effectiveinterest rate.2.12 Cash, cash equivalents and depositsCash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highlyliquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts areshown within borrowings in current liabilities on the balance sheet.Deposits comprise short and medium-term deposits. Given the maturity of these investments fall outsidethe three months timeframe for classification as cash and cash equivalents under IAS 7 Cash FlowStatements, the related balances have been classified as other deposits.2.13 BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) andthe redemption value is recognised in the income statement over the period of the borrowings using theeffective interest method.Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least 12 months after the balance sheet date.2.14 TaxationCurrent tax payable on profits, based on the applicable tax law in each jurisdiction, is recognised as anexpense in the period in which profits arise. The tax effects of income tax losses available for carry forwardare recognised as an asset when it is probable that future taxable profits will be available against whichthese losses can be utilised.208

Part XIIHistorical Financial InformationDeferred tax is provided in full, using the liability method, on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferredincome tax is determined using tax rates (and laws) that have been enacted or substantially enacted by thebalance sheet date and are expected to apply when the related deferred income tax asset is realised or thedeferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it isprobable that future taxable profit will be available against which the temporary differences can be utilised.Deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transactionother than a business combination that at the time of the transaction affects neither accounting nor taxableprofit or loss.Deferred tax is provided on temporary differences arising on investments in subsidiaries, except where thetiming of the reversal of the temporary difference is controlled by the Group and it is probable that thetemporary difference will not reverse in the foreseeable future.Deferred tax related to fair value remeasurement of available for sale investments and cash flow hedges,which are charged or credited directly to equity, is also credited or charged directly to equity and issubsequently recognised in the income statement together with the deferred gain or loss.2.15 Employee benefits(a) Pension obligationsThe Group companies operate various pension schemes. The schemes are generally funded throughpayments to trustee-administered funds. A defined contribution scheme is a pension scheme under whichthe Group pays fixed contributions into a separate fund and the Group has no legal or constructiveobligations to pay further contributions if the fund does not hold sufficient assets to pay all employees thebenefits relating to employee service in the current and prior periods. A defined benefit scheme is a pensionscheme that is not a defined contribution scheme.For defined contribution schemes, the Group pays contributions into the pension schemes in accordancewith the trust deed. The Group has no further payment obligations once the contributions have been paid.The contributions are recognised as employee benefit expense when they are due. Prepaid contributions arerecognised as an asset to the extent that a cash refund or a reduction in the future payments is available.(b) Other post-employment obligationsCertain employees are entitled to additional post-retirement benefits. The expected costs of these benefitsare accrued over the period of employment using the same accounting methodology as used for definedbenefit pension plans. These obligations are valued annually by independent qualified actuaries.2.16 ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of pastevents, it is more likely than not that an outflow of resources will be required to settle the obligation andthe amount has been reliably estimated.Provisions are made on a time apportioned basis for aircraft maintenance costs to be incurred in connectionwith major airframe and engine overhauls on operating leased aircraft where the terms of the lease imposeobligations on the lessee to have these overhauls carried out. The actual cost of the overhauls are chargedagainst the provision.Provisions are measured at the present value of the expenditures expected to be required to settle theobligation using a pre-tax rate that reflects current market assessments of the time value of money and therisks specific to the obligation. The increase in the provision due to passage of time is recognised as interestexpense.2.17 Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of services in theordinary course of the Group’s activities, and can be divided into scheduled passenger, cargo and ancillary209

Part XIIHistorical Financial Informationrevenue. Scheduled passenger revenue is shown inclusive of passenger taxes, charges and other fees to theextent that these are recovered directly from customers at the point of sale. Revenue is recognised asfollows:(a) RevenuesScheduled passenger and cargo revenues are recognised when transportation is provided. The value of salesmade for which transportation has not been provided at the balance sheet date is included in trade andother payables under the caption of ticket sales in advance. Expired tickets are recognised as revenue on asystematic basis. Fees charged for any changes to flight tickets are recognised as revenue immediately.Ancillary revenues are recognised in the income statement in the period the associated services areprovided.(b) Interest incomeInterest income is recognised on a time-proportion basis using the effective interest method.(c) Dividend incomeDividend income is recognised when the right to receive payment is established.2.18 LeasesAssets held under finance leases, which transfer substantially all the risks and rewards of ownership to theGroup, are initially recorded on the balance sheet at their fair value at the inception of the lease. Theequivalent liability, categorised as appropriate, is included under ’borrowings’. Finance lease charges arerecognised in the income statement over the period of the lease using the effective interest method.Certain lease contracts contain interest rate swaps that are closely related to the underlying financing andas such, they are not split out and accounted for as an embedded derivative.Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net of any incentives received fromthe lessor) are charged to the income statement on a straight-line basis over the period of the lease.2.19 Exceptional itemsExceptional items are material non-recurring items that derive from events or transactions that fall withinthe ordinary activities of the Group and which individually or, if of a similar type, in aggregate, areseparately disclosed by virtue of their size or incidence. Such items may include business repositioning costs,profit or loss on disposal of significant items of property, plant and equipment, litigation costs andsettlements, profit or loss on disposal of investments and impairment of assets. Judgement is used by theGroup in assessing the particular items which should be disclosed in the income statement and relatednotes as exceptional items.2.20 Underlying measuresIn addition to the reported profit and earnings per share, the Group also discloses underlying performancemeasures. The Group believes that these underlying performance measures provide additional usefulinformation on underlying trends to shareholders. The term underlying is not defined in IFRS and thereforemay not be comparable with similarly titled profit measurements reported by other companies. It is notintended to be a substitute for or superior to IFRS measurements of profit.Underlying measures are calculated based on reported profit, excluding the effects of derivatives which donot fulfil the requirements for hedge accounting, the ineffectiveness on derivatives which do fulfil therequirements for hedge accounting and exceptional items.2.21 Critical Accounting EstimatesThe Group believes that of its significant accounting policies and estimates, the following may involve ahigher degree of judgment and complexity.210

Part XIIHistorical Financial Information(a) ProvisionsThe Group makes provision for legal or constructive obligations which it knows to be outstanding at thebalance sheet date. These provisions are generally made based on historical or other pertinent information,adjusted for recent trends where relevant. However, they are estimates of the financial cost of events whichmay not occur for some years. The actual outturn may differ significantly from that estimated.(b) Revenue recognitionPassenger revenue is initially recorded as a liability for sales in advance, with revenue from ticket salesrecognised at the time that the Group provides the transportation. In respect of unused ticket revenuerecognised, the Group makes estimates based on historical trends regarding liability for tickets sold but notyet processed, the timing and amount of tickets used for travel on other airlines and the amount of ticketssold that will not be used. These are used to determine the timing and amount of unused ticket revenuerecognised. Changes to these estimation methods could have a material effect on the presentation of theGroup’s financial results. Any adjustments, which can be significant, are included in results of operations inlater periods on an established systematic basis. These adjustments relate primarily to differences betweenthe statistical estimation of certain revenue transactions and other items for which final settlement occurs inperiods subsequent to the sale of the related tickets as well for tickets sold which were not used.(c) Property, Plant and EquipmentThe Group has a net book value of approximately 0508 million in aircraft, property, equipment and othertangible assets as at 31 December 2005. This includes an adjustment of 068.7 million to adjust the cost ofcertain aircraft to fair value on transition to IFRS (‘‘deemed cost exemption’’ as permitted by IFRS).Depreciation is calculated to write off the cost, less the estimated residual value, on a straight-line basis.Changes to the Group’s policies relating to the estimation of useful lives, residual values or other policiescould have a material effect on the presentation of the Group’s financial position and results of operations.Further information relating to the Group’s accounting for property, plant and equipment is provided in theaccounting policies on page 205.(d) Post retirement benefitsAs the provisions of the trust deeds governing the Irish Pension Schemes are such that no changes to thecontribution rates are possible without the prior consent of the Company, the Company has concluded thatit has no obligation, legal or constructive, to increase its contributions beyond those levels. As such, it hasaccounted for the Irish Pension Schemes as defined contribution schemes under the provisions ofInternational Financial Reporting Standards IAS 19 (Employee Benefits) and, as a result, has not recognisedthe scheme’s liabilities on the balance sheet at the date of transition to IFRS or thereafter.If any legal or constructive obligation to vary the Company’s contributions based on the funding status ofthe Irish Pension Schemes arises, IFRS requires the Company to include any liabilities relating to its share ofany pension fund deficits on its balance sheet and reflect any period on period movements in its incomestatement.2.22 Prospective accounting developmentsForthcoming changes which will have an impact on the Financial Statements of the Group mainly concernthe introduction of IFRS 7 Financial Instruments: Disclosures which contains new requirements in addition tothose contained within IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 FinancialInstruments: Recognition and Measurement, under which this financial information has been prepared. IFRS7 will be implemented by the Group, as required, in respect of annual periods beginning after 31 December2006.IFRIC 8 ‘‘Scope of IFRS 2’’ addresses the issue of whether IFRS 2 ‘‘Share Based Payment’’ applies totransactions in which the entity cannot identify specifically some or all of the goods or services received.IFRIC 8 is applicable for accounting periods beginning on or after 1 May 2006.IFRIC 9 ‘‘Reassessment of Embedded Derivatives’’ prohibits reassessment of the treatment of embeddedderivatives subsequent to initial recognition unless there is a change in the terms of the contract that211

Part XIIHistorical Financial Informationsignificantly modifies the cash flows that otherwise would be required under the contract, in which casereassessment is required. IFRIC 9 is applicable for accounting periods beginning on or after 1 June 2006.IFRIC 10, ‘‘Interim Financial Reporting and Impairment’’ prohibits the impairment losses recognised in aninterim period on goodwill and investments in equity instruments and in financial assets carried at cost frombeing reversed at a subsequent balance sheet date. IFRIC 10 is applicable for accounting periods beginningon or after 1 November 2006.The above standards and interpretations are not expected to have a material impact on the results of theGroup.International Financial Reporting Standards exist in Exposure Draft form in respect of proposedamendments to IAS 27 Consolidated and Separate Financial Statements, IFRS 3 Business Combinations, andIAS 37 Provisions, Contingent Liabilities and Contingent Assets.212

Part XIIHistorical Financial InformationNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION1. SEGMENTAL INFORMATIONThe group considers that its business segments are its primary basis of analysing financial performance andreflect the internal management structure and reporting. Information is also provided on a geographicsegment basis.The Group is primarily organised into two business segments; passenger (which includes revenues and costsrelating to the carriage of passengers) and cargo (which relates to the revenues and costs from thetransportation of cargo). Ancillary revenues, including on board sales, are included in the passengersegment together with their associated costs. For internal management purposes, direct operating costs areallocated between the segments based on their contributions to route revenue. Certain costs, assets andliabilities (including the aircraft and their related financing arrangements) contribute to both the passengerand cargo segments and as such cannot be directly attributed to either segment and are therefore shown asunallocated.PR Ann I,(i) By Business Segment6.2Year ending 31 December 2005Passenger Cargo Unallocated (1) Total2005 2005 2005 20051’000 1’000 1’000 1’000Passenger revenue********************************************* 908,561 — — 908,561Ancillary revenue ********************************************** 48,233 — — 48,233Other revenue ************************************************ 4,306 — — 4,306Cargo revenue ************************************************ — 41,558 — 41,558Segment revenue ********************************************* 961,100 41,558 — 1,002,658Segment result before exceptional items************************** 131,612 6,942 (48,694) 89,860Segment result after exceptional items *************************** 131,612 6,942 (48,694) 89,860Finance income *********************************************** 36,667Finance expense ********************************************** (26,480)Profit before taxation ****************************************** 100,047Taxation charge *********************************************** (11,140)Profit for the year ********************************************* 88,907(1) Unallocated includes depreciation relating to unallocated assets of (359.6 million), the impact of non-qualifying hedges of38.4 million and foreign exchange gains of 32.5 million.213

Part XIIHistorical Financial InformationYear ending 31 December 2004Passenger Cargo Unallocated (2) Total2004 2004 2004 20041’000 1’000 1’000 1’000Passenger revenue********************************************* 910,807 — — 910,807Ancillary revenue ********************************************** 33,999 — — 33,999Other revenue ************************************************ 14,606 — — 14,606Cargo revenue ************************************************ — 50,174 — 50,174Segment revenue ********************************************* 959,412 50,174 — 1,009,586Segment result before exceptional items************************** 168,376 12,326 (58,196) 122,506Segment result after exceptional items *************************** 168,376 12,326 (160,696) 20,006Finance income *********************************************** 33,485Finance expense ********************************************** (26,161)Profit before taxation ****************************************** 27,330Taxation charge *********************************************** (4,382)Profit of the Year********************************************** 22,948(2) Unallocated includes depreciation relating to unallocated assets of (358.6 million), the impact of non-qualifying hedges of322.5 million, foreign exchange losses of (311.5 million) and employee profit share of (310.6 million).Assets and LiabilitiesAssetsLiabilities2005 2004 2005 20041’000 1’000 1’000 1’000Passenger ******************************************* 39,727 43,543 207,923 199,353Cargo ********************************************** 2,936 5,348 3,023 5,670Common assets and liabilities************************** 1,451,304 1,340,777 879,658 866,580Total *********************************************** 1,493,967 1,389,668 1,090,604 1,071,603Other segment informationCapital additions (3) Depreciation (3)2005 2004 2005 20041’000 1’000 1’000 1’000Passenger ***************************************************** 1,658 6,508 3,823 4,824Cargo ******************************************************** 38 151 154 114Unallocated *************************************************** 77,980 120,459 56,826 58,831Total ********************************************************* 79,676 127,118 60,803 63,769(3) Includes intangible assets214

Part XIIHistorical Financial Information(ii) By Geographic SegmentPR Ann I,6.2Revenue2005 20041’000 1’000Europe *********************************************************************** 603,549 587,707Rest of the World************************************************************** 328,197 348,322Ancillary and other unallocated revenue******************************************* 70,912 73,557Total revenue****************************************************************** 1,002,658 1,009,586Assets and capital additionsAssets Capital additions (4)2005 2004 2005 20041’000 1’000 1’000 1’000Europe************************************************** 1,290,453 1,243,415 79,577 125,257Rest of the World **************************************** 5,534 5,453 99 1,861Unallocated********************************************** 197,980 140,800 — —Total**************************************************** 1,493,967 1,389,668 79,676 127,118(4) Includes intangible assetsRevenues, and related assets and liabilities, are allocated to geographic segments based on the journeydestination point of each booking. Other assets and liabilities are allocated on the basis of physical location.215

Part XIIHistorical Financial Information2. UNDERLYING PERFORMANCE MEASURESIn addition to the reported profit and earnings per share, the Group also discloses underlying performancemeasures. The Group believes that these underlying performance measures provide additional usefulinformation on underlying trends to shareholders. The term underlying is not defined in IFRS and thereforemay not be comparable with similarly titled profit measurements reported by other companies. It is notintended to be a substitute for or superior to IFRS measurements of profit.Underlying measures are calculated based on the reported profit under IFRS (as shown in the incomestatement), excluding the effects of derivatives which do not fulfil the requirements for hedge accounting,ineffectiveness on derivatives which do fulfil the requirements for hedge accounting and exceptional items.The taxation impact of the amounts excluded from underlying profit is also separately disclosed.AmountsAmountsexcludedexcludedfromfromUnderlying underlying Total IFRS Underlying underlying Total IFRS2005 2005 2005 2004 2004 20041’000 1’000 1’000 1’000 1’000 1’000Revenue ********************* 1,002,658 — 1,002,658 1,009,586 — 1,009,586Operating Expenses:Staff costs ******************** 249,377 — 249,377 245,703 — 245,703Depreciation, amortisation andimpairment****************** 60,803 — 60,803 63,769 — 63,769Aircraft operating lease costs **** 44,902 — 44,902 41,240 — 41,240Fuel and oil costs (1) ************* 138,857 (4,715) 134,142 105,772 (20,793) 84,979Maintenance expenses ********** 75,276 — 75,276 76,672 — 76,672Airport charges **************** 178,715 — 178,715 162,885 — 162,885En-route charges *************** 43,477 — 43,477 39,237 — 39,237Distribution costs*************** 42,356 — 42,356 53,076 — 53,076Ground operations, catering andother operating costs ********* 89,940 — 89,940 99,142 — 99,142Other (gains)/ losses — net (2) **** (2,477) (3,713) (6,190) 11,477 (1,744) 9,733Employee profit share*********** — — — 10,644 — 10,644921,226 (8,428) 912,798 909,617 (22,537) 887,080Operating profit beforeexceptional items*********** 81,432 8,428 89,860 99,969 22,537 122,506Exceptional Items (3) ************* — — — — (102,500) (102,500)Operating profit/ (loss) afterexceptional items*********** 81,432 8,428 89,860 99,969 (79,963) 20,006Finance income **************** 36,667 — 36,667 33,485 — 33,485Finance expense *************** (26,480) — (26,480) (26,161) — (26,161)Profit before taxation********* 91,619 8,428 100,047 107,293 (79,963) 27,330Taxation charge **************** (10,086) (1,054) (11,140) (14,377) 9,995 (4,382)Profit for the year ************ 81,533 7,374 88,907 92,916 (69,968) 22,948Attributable to:Equity holders of the Company ** 88,907 22,948Earnings per share for profitattributable to the equityholders of the Companyduring the year (expressed in0 per share)— basic and diluted *********** 31.1c 8.6c(1) The Company has entered into fuel derivatives which, although being effective commercial hedging arrangements, do not fulfilthe requirements for hedge accounting under IAS 39. The amount excluded from the underlying measure in the period consists216

Part XIIHistorical Financial Informationof the unrealised gains on these derivative contracts of 324.8 million (2004: 322.7 million), net of the additional cost of fuelarising from non-qualifying fuel derivative contracts (note 4) in the year of 320.1 million (2004: 31.9 million).(2) The Company has entered into interest rate and foreign exchange derivatives which, although being effective commercial hedgearrangements, do not fulfil the requirements for hedge accounting under IAS 39. The amount excluded from the underlyingmeasure in the period are set out in note 3 and consist of fair value gains on foreign exchange option and forward contracts of325.0 million (2004: 38.4 million), losses on foreign exchange options and forward contracts incurred of 320.6 million (2004:35.8 million), fair value gains on interest rate swaps of 30.9 million (2004: losses of 31.7 million) and fair value losses on crosscurrency interest rate swaps of 31.6 million (2004: gains of 30.9 million).In relation to items (1) and (2) above, in order to qualify for hedge accounting under IFRS, IAS 39 (Financial Instruments:Recognition and Measurement), an entity must, amongst other things, designate and document its hedging arrangements ashedges prior to entering into such arrangements as well as its risk management strategy for undertaking the hedge. In addition,it must establish that each hedging arrangement was highly effective in offsetting the designated hedged risk as at each balancesheet date and that there is an expectation that the hedging arrangement will continue to be highly effective in the future. AerLingus has entered into commercial hedging arrangements in relation to its fuel, foreign exchange and financing obligationswhich, prior to 1 January 2006, did not meet these hedge accounting requirements under IAS 39. As a result, changes in the fairvalue of these arrangements are recognised immediately in the Income Statement, rather than being recorded in shareholdersequity in the Balance Sheet at each Balance Sheet date and subsequently recorded in the Income Statement in the period inwhich the hedged item affects the Income Statement.(3) The criteria for determining exceptional items is set out in the accounting policy in paragraph 2.19 which states that exceptionalitems are material non-recurring items that derive from events or transactions that fall within the ordinary activities of the groupand which individually or, if of a similar type, in aggregate, are separately disclosed by virtue of their size or incidence. Such itemsmay include business repositioning costs, profit or loss on disposal of significant items of property, plant and equipment,litigation costs and settlements, profit or loss on disposal of investments and impairment of assets. Judgement is used by theGroup in assessing the particular items which should be disclosed in the income statement and related notes as exceptionalitems. In 2004, exceptional items were recorded in relation to costs of fundamental restructuring, consisting of the estimatedcost of the employee severance and early retirement programme launched in 2004 of 397.9 million and the premium of36.1 million on the 30,472,725 ordinary shares issued to the ESOP during 2004, (provision was made in 2002 for the nominalvalue of these shares) as well as profit on disposal of property, plant and equipment of 30.7 million and the profit on exit fromnon core activities of the group of 30.8 million.3. OTHER (GAINS)/LOSSES, NET2005 20041’000 1’000Derivative instruments: transactions not qualifying for hedge accounting— Fair value gains on foreign exchange option and forward contracts ********************** (24,988) (8,415)— Losses on foreign exchange options and forward contracts incurred********************** 20,579 5,832— Fair value (gains)/losses on interest rate swaps **************************************** (906) 1,745— Fair value losses/(gains) on cross currency interest rate swaps *************************** 1,602 (906)Amounts excluded from underlying financial performance********************************* (3,713) (1,744)Net Foreign Exchange (gains)/losses on operating activities ******************************** (2,477) 11,477(6,190) 9,733217

Part XIIHistorical Financial Information4. EXPENSE BY NATURE2005 20041’000 1’000Depreciation of property, plant & equipment (Note 10)— owned ************************************************************************* 16,140 19,194— held under finance leases ********************************************************* 35,310 34,271Impairment write downs to property, plant & equipment ******************************** 6,559 7,737Amortisation of Intangible Assets (Note 11) ******************************************** 2,794 2,567Operating lease rentals payable— plant and machinery ************************************************************* 91 124— aircraft ************************************************************************* 44,902 41,240— property************************************************************************ 8,052 8,604Unrealised gains on fuel derivatives *************************************************** (24,772) (22,725)Increased fuel cost arising from non-qualifying fuel derivative contracts ******************** 20,057 1,934Auditors’ remuneration ************************************************************* 125 125The Group enters into certain derivative contracts in relation to its fuel costs. While considered to becommercial hedges, these contracts did not fulfil the criteria for hedge accounting criteria under IFRS. Theresultant fair value gains and losses are included in Fuel and Oil costs together with the costs of the fuel.Underlying financial performance, excluding the impact of unrealised fair value gains and losses on thesederivative financial instruments, is separately disclosed in Note 2.5. EXCEPTIONAL ITEMS2005 20041’000 1’000Profit on disposal of Property, plant & equipment (a) *************************************** — 702Profit on exit from Non-core Activities (b) ************************************************ — 793Staff Costs (c)— Employee severance and early retirement programme ********************************** — (97,900)— Employee Share ownership plan **************************************************** — (6,095)— (102,500)(a)(b)Profit on the disposal of property, plant and equipment related mainly to the disposal of flight equipment.Profit on exit from non-core activities related mainly to adjustments to previously reported results from the exit of non-coreactivities.(c) Provision was made in 2004 for the estimated cost of employee severance and early retirement programme launched in 2004.The 30,472,725 shares issued to the ESOP during 2004 were issued at a premium of 36,095,000. Provision was made in 2002for the nominal value of these shares.6. FINANCE EXPENSE AND FINANCE INCOME2005 20041’000 1’000Finance expenseOn bank loans and overdrafts ********************************************************* 1,634 719Finance lease interest **************************************************************** 22,916 23,144Other interest*********************************************************************** 254 254Finance charge on discounted provision ************************************************ 1,676 2,04426,480 26,161Finance incomeInterest on cash and term deposits***************************************************** 30,449 29,976Amortisation of discount ************************************************************* 6,218 3,50936,667 33,485218

Part XIIHistorical Financial Information7. STAFF COSTSThe average number of persons employed by the Group in the financial year was 3,475 (2004: 3,906) andtheir associated payroll costs were as follows:2005 20041’000 1’000Wages and salaries **************************************************************** 214,658 210,618Social welfare costs**************************************************************** 18,840 20,286Pension costs (Note 25) ************************************************************ 15,879 14,799249,377 245,703Profit Sharing Scheme (Note 24)***************************************************** — 10,644249,377 256,347Directors’ emoluments during the period amounted to:2005 20041’000 1’000Fees***************************************************************************** 119 145Other emoluments (including pension contributions) *********************************** 1,288 1,209Pension payments to former director************************************************* 3 1001,410 1,4548. TAXATION(i)Income tax expense recognised in the Income Statement2005 20041’000 1’000Current taxationIrish Corporation Tax ****************************************************************** 2,660 1,070Deferred taxOrigination and reversal of temporary differences ***************************************** 8,480 3,312Total income tax expense ************************************************************** 11,140 4,382(ii)Deferred tax asset recognised directly in Equity2005 20041’000 1’000Available for sale financial assets at 1 January ********************************************** 932 1,054Deferred tax movement on revaluation of Available for Sale Assets **************************** (516) (122)At 31 December *********************************************************************** 416 932219

Part XIIHistorical Financial Information(iii)Reconciliation of effective tax rate2005 20041’000 1’000Profit on ordinary activities before tax multiplied by standard Irish corporation tax rateof 12.5% (2004:12.5%)************************************************************* 12,506 3,416Effects of:Movement in provisions *************************************************************** (1,093) 1,025Expenses not deductible for tax purposes ************************************************ (65) 41Differences in tax rates **************************************************************** (423) (139)Other adjusting items ***************************************************************** 215 39Charge for the year******************************************************************* 11,140 4,382(iv) Factors that may affect future tax rates and other disclosuresNo provision for tax has been recognised in respect of the unremitted earnings of foreign subsidiaries asthere is no commitment to remit earnings.9. EARNINGS PER SHAREBasic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by theweighted average number of ordinary shares outstanding during the year.2005 2004Weighted average number of shares in issue (’000) ************************************ 286,263 267,030Profit for the year (0’000) ********************************************************** 88,907 22,948Earnings per share (cent) *********************************************************** 31.1c 8.6cThere is no difference between the earnings per share calculated above at that on a diluted basis.10. PROPERTY, PLANT AND EQUIPMENTPR Ann I,8.1Flight Ground OtherEquipment Property Equipment Equipment Total1’000 1’000 1’000 1’000 1’000Cost1 January 2004 ****************************** 729,519 41,904 57,017 37,859 866,299Additions************************************ 119,179 401 2,100 2,458 124,138Disposals ************************************ (247,796) (3,138) (10,659) (7,732) (269,325)At 31 December 2004 ************************ 600,902 39,167 48,458 32,585 721,112Accumulated Depreciation1 January 2004 ****************************** 248,129 28,619 40,312 32,416 349,476Depreciation charge for year ******************* 43,417 2,338 2,844 4,866 53,465Impairment losses recognised ****************** 6,213 1,045 479 — 7,737Transfer from maintenance provision ************ 6,087 — — — 6,087Disposals ************************************ (167,879) (3,132) (9,042) (7,732) (187,785)31 December 2004 *************************** 135,967 28,870 34,593 29,550 228,980Cost1 January 2005 ****************************** 600,902 39,167 48,458 32,585 721,112Additions************************************ 72,538 366 1,847 2,612 77,363Disposals ************************************ (23,272) — (286) (37) (23,595)31 December 2005 *************************** 650,168 39,533 50,019 35,160 774,880220

Part XIIHistorical Financial InformationFlight Ground OtherEquipment Property Equipment Equipment Total1’000 1’000 1’000 1’000 1’000Accumulated Depreciation1 January 2005 ****************************** 135,967 28,870 34,593 29,550 228,980Depreciation charge for year ******************* 45,287 1,556 2,074 2,533 51,450Impairment losses recognised ****************** 5,500 133 347 579 6,559Disposals ************************************ (19,807) — (272) (36) (20,115)31 December 2005 *************************** 166,947 30,559 36,742 32,626 266,874Net Book Value31 December 2005 *************************** 483,221 8,974 13,277 2,534 508,00631 December 2004 *************************** 464,935 10,297 13,865 3,035 492,1321 January 2004 ****************************** 481,390 13,285 16,705 5,443 516,823Leased assets included in above(Net Book Value)31 December 2005 *************************** 348,308 — — — 348,30831 December 2004 *************************** 359,122 — — — 359,1221 January 2004 ****************************** 373,850 — — — 373,850As set out in Note 31, the Group has availed of the exemption under IFRS 1 to treat the fair value of certainproperty, plant and equipment (being flight equipment) as their deemed cost from the date of transition toIFRS (1 January 2004). The effect of this election was to reduce the costs of these assets by 0171.3 millionand accumulated depreciation by 0102.6 million. The Group has elected not to revalue its fixed assets on anongoing basis.Management assess at each reporting date whether there is indication that an asset may be impaired. If anysuch an indication exists, impairment is calculated by reference to the expected recoverable amount of theasset in question. At 31 December 2005, impairment losses of 06.6 million (2004: 07.7 million) have beenrecognised. These mainly relate to items of flight equipment which have been written down to a zero valueas they are surplus to requirements.Bank borrowings are secured on flight equipment for the value of 0414.6 million (2004: 0429.4 million)(Note 19).The depreciation expense of 051.5 million (2004: 053.5 million) has been charged in ’Depreciation,amortisation and impairment’ in the Income Statement.221

Part XIIHistorical Financial Information11. INTANGIBLE ASSETS2005 20041’000 1’000Computer SoftwareCostBeginning of year ******************************************************************* 34,474 31,494Additions ************************************************************************** 2,313 2,980End of year************************************************************************* 36,787 34,474Aggregate amortisationBeginning of year ******************************************************************* 28,286 25,719Charge for the year****************************************************************** 2,794 2,567End of year************************************************************************* 31,080 28,286Net Book ValueEnd of year************************************************************************* 5,707 6,188Beginning of year ******************************************************************* 6,188 5,775The useful lives of the computer software are finite and range from three to five years depending on thenature of the asset.The amortisation expense of 02.8 million (2004: 02.6 million) has been charged through ’Depreciation,amortisation and impairment’ in the Income Statement.12. GROUP UNDERTAKINGSAer Lingus Group plc is a company incorporated under the Irish Companies Acts 1963 to 2005. Its headoffice is at Dublin Airport, Co Dublin, Ireland. It is the ultimate parent company in the Aer Lingus Group.The principal Group companies are Aer Lingus Limited and Aer Lingus Beachey Limited, both of which arewholly-owned. Aer Lingus Limited is incorporated in Ireland and is the principal operating company. AerLingus Beachey Limited is incorporated in the Isle of Man and its principal activity is aircraft financing. Fulldetails of all Group companies will be filed with the Company’s annual return, which is available from theCompanies Registration Office, Dublin 1. In addition the Group trades through a number of overseasbranches.The Group holds a 20% interest in Futura, a Spanish registered company. However, this has not beentreated as an associated undertaking as, in the view of the directors, the Group is unable to exercisesignificant influence over the operations of this entity. The Group’s investment in Futura was written offsome years ago.PR Ann I,7.113. AVAILABLE FOR SALE FINANCIAL ASSETS2005 20041’000 1’000Beginning of the year************************************************************* 117,436 50,807Additions *********************************************************************** 16,828 67,413Exchange differences ************************************************************* 23,641 (3,328)Amortisation of discount ********************************************************** 6,218 3,509Revaluation movement transferred to equity ***************************************** (4,125) (965)End of the year ****************************************************************** 159,998 117,436Less: non-current portion********************************************************** (159,998) (117,436)Current portion ****************************************************************** — —222

Part XIIHistorical Financial InformationThere were no impairment provisions on available for sale financial assets in 2005 or 2004. Available forsale financial assets comprise the following:2005 20041’000 1’000Unlisted securities:— Debt securities traded on inactive markets with floating interest rates and maturity datesin September 2009 ************************************************************ 45,181 40,827— Debt securities traded on inactive markets with fixed interest rates ranging from 4.4% to6.9% and maturity dates from September 2009 to September 2015 ****************** 114,817 76,609159,998 117,436The fair values of unlisted securities are based on cash flows discounted using a rate based on the marketinterest rate and the risk premium specific to the unlisted securities.14. DERIVATIVE FINANCIAL INSTRUMENTS2005 2004Assets Liabilities Assets Liabilities1’000 1’000 1’000 1’000Cross currency interest rate swaps ***************************** — 4,932 — 5,866Forward foreign exchange contracts **************************** 4,107 — — 20,881Forward fuel price contracts*********************************** 33,875 — 23,364 —Total ****************************************************** 37,982 4,932 23,364 26,747Less non-current portion:Cross currency interest rate swaps ***************************** — 4,932 — 5,866Forward foreign exchange contracts **************************** 208 — — 1,201Forward fuel price contracts*********************************** 226 — 5,728 —Non-current portion****************************************** 434 4,932 5,728 7,067Current portion ******************************************** 37,548 — 17,636 19,680Forward foreign exchange contractsThe notional principal amounts of the outstanding forward foreign exchange contracts at 31 December2005 are 0146.3 million (2004: 0150.1 million).Cross currency interest rate swapsThe notional principal amounts of the outstanding cross currency interest rate swap contracts at 31December 2005 were 020.2 million (2004: 020.2 million).At 31 December 2005, the fixed interest rates vary from 2.7% to 6.1% (2004: 2.7% to 6.1%) and themain floating rates is EURIBOR.Aircraft fuel price contractsThe Group enters into derivative contracts to fix the price of its forecast aircraft fuel purchases. The notionalprincipal amounts of the outstanding contracts at 31 December 2005 was 093.0 million (2004:090.0 million). The outstanding fuel price contracts at 31 December 2005 amounted to 310,561 metrictonnes of aircraft fuel (2004: 477,809 metric tonnes).223

Part XIIHistorical Financial Information15. INVENTORIES2005 20041’000 1’000Sundry stocks************************************************************************** 1,053 77216. TRADE AND OTHER RECEIVABLES2005 20041’000 1’000CurrentTrade receivables ******************************************************************** 34,323 32,344Amounts receivable from related parties (Note 27) *************************************** 161 299Other amounts receivable ************************************************************ 19,741 12,997Prepayments and accrued income****************************************************** 4,630 6,101Value Added Tax ******************************************************************** 1,318 1,18660,173 52,927Non-currentESOT (see Note 24) ****************************************************************** 100 100There is no geographical concentration of credit risk with respect to trade receivables, as the Group has alarge number of customers, who are internationally dispersed.There is no material difference between the carrying amount and the fair value of the non-current portion.17. CASH, CASH EQUIVALENTS AND OTHER DEPOSITS2005 20041’000 1’000Cash and deposits with an original maturity of less than three months ****************** 4,251 4,926Restricted Deposits *************************************************************** 196,428 241,396Other Deposits ****************************************************************** 520,269 450,427720,948 696,749Less non-current portion ******************************************************** (191,921) (235,628)Current ************************************************************************ 529,027 461,121The effective interest rate on short-term bank deposits was 0.2% (2004: 0.2%); these deposits are payableon demand.Current deposits have maturity terms of between three and twelve months. Given the maturity of theseinvestments fall outside the three months timeframe for classification as cash and cash equivalents underIAS 7 Cash Flow Statements, the related balances have been treated as financial assets. The effectiveinterest rate on financial assets classified as current deposits was 2.9% (2004: 2.3%); these deposits havean average maturity of 84 days (2004: 69 days).Non-current deposits comprise foreign currency deposits held in order to meet certain finance leaseobligations which are denominated in the same currency. The deposits, together with the interest receivablethereon, will be sufficient to meet the lease obligations and related lease interest over the period of theleases. The Group also holds other restricted deposits to meet certain other obligations.224

Part XIIHistorical Financial Information18. TRADE AND OTHER PAYABLES2005 20041’000 1’000Trade payables******************************************************************** 46,558 45,715Amounts payable to related parties (Note 27) ***************************************** 3,848 2,725Accruals and deferred income******************************************************* 102,859 93,395Ticket sales in advance************************************************************* 114,476 115,652Employment related taxes ********************************************************** 8,693 8,633ESOT (Note 24)— profit sharing scheme *********************************************************** 18,716 19,466Other amounts payable ************************************************************ 69,377 64,070364,527 349,65619. BORROWINGS2005 20041’000 1’000Bank OverdraftRepayable — within one year ******************************************************** 4,454 3,413Loan CapitalRepayable — within one year (a) ***************************************************** 17,349 17,349— from one to two years *********************************************************** 33,000 11,000— from two to five years *********************************************************** — 33,000— after five years ****************************************************************** — —50,349 61,349Less current portion **************************************************************** (17,349) (17,349)Non-current portion **************************************************************** 33,000 44,000Finance lease obligationsRepayable — within one year ******************************************************** 32,272 73,358— from one to two years *********************************************************** 32,957 26,011— from two to five years *********************************************************** 210,158 97,100— after five years ****************************************************************** 225,537 220,727500,924 417,196Less current portion **************************************************************** (32,272) (73,358)Non-current portion **************************************************************** 468,652 343,838Total Interest bearing loans and borrowingsCurrent portion ******************************************************************** 54,075 94,120Non-current portion **************************************************************** 501,652 387,838555,727 481,958(a)This includes a loan of 36,349,000 (2004: 36,349,000) advanced by the principal shareholder (Note 22) pursuant to the AirCompanies (Amendment) Act, 1969. Interest is payable thereon, as determined by the Minister for Finance from time to time,and the current rate is 4% per annum (2004 — 4% per annum).Total borrowings include secured liabilities (bank and collateralised borrowings) of 0544.9 million (2004:0472.2 million). Bank borrowings are secured by various items of property, plant and equipment, of theGroup, mainly aircraft (Note 10).225

Part XIIHistorical Financial InformationThe exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at thebalance sheet dates are as follows:2005 20041’000 1’0006 months or less ****************************************************************** 54,803 112,5586-12 months ********************************************************************* — —1-5 years ************************************************************************ 166,445 127,242Over 5 years********************************************************************** 334,479 242,158555,727 481,958The maturity of non-current borrowings is as follows:2005 20041’000 1’000Between 1 and 2 years ************************************************************ 65,957 37,011Between 2 and 5 years ************************************************************ 210,158 130,100Over 5 years********************************************************************** 225,537 220,727501,652 387,838The effective interest rates at the balance sheet date were as follows:2005 20041 US$ £ 1 US$ £Bank overdrafts ************************************************* 3.0% — 3.0% 2.6%Loan Capital **************************************************** 3.3% — — 3.1% — —Finance lease obligations ***************************************** 3.1% 3.6% — 3.8% 3.3%The carrying amounts and fair value of the non-current borrowings are as follows:Carrying amountsFair values2005 2004 2005 20041’000 1’000 1’000 1’000Loan Capital *********************************************** 33,000 44,000 33,000 44,000Finance lease obligations************************************* 468,652 343,838 440,495 338,774501,652 387,838 473,495 382,774The fair values are based on cash flows discounted using a rate based on prevailing forward market rates.The carrying amounts of short-term borrowings approximate their fair value.226

Part XIIHistorical Financial InformationThe carrying amounts of the Group’s borrowings are denominated in the following currencies:2005 20041’000 1’000Euro***************************************************************************** 128,179 190,337US dollar************************************************************************* 427,334 291,621Pound sterling ******************************************************************** 214 —Other currencies ****************************************************************** — —555,727 481,958Finance lease obligations — minimum lease payments2005 20041’000 1’000No later than one year ********************************************************** 43,323 79,308Later than one year but no later than five years ************************************* 299,070 229,692Later than five years************************************************************* 287,216 210,061629,609 519,061Future finance charges on finance leases ******************************************* 128,685 101,865Capital value of finance lease liabilities ********************************************* 500,924 417,196The Group has no undrawn borrowing facilities at 31 December 2005 or 31 December 2004.20. PROVISIONS FOR LIABILITIES AND CHARGESBusiness Aircraft MaintenanceRepositioning (a) Maintenance (b) Contracts (c) Other (d) Total1’000 1’000 1’000 1’000 1’0001 January 2004************************ 56,515 54,234 37,255 38,628 186,632Provided during year ******************* 97,900 14,656 — 2,716 115,272Finance charge on discounted provision*** — — 2,044 — 2,044Utilised during year ******************** (59,311) (4,180) (8,724) (5,225) (77,440)Transfer to property, plant and equipment — (6,087) — — (6,087)Other transfers ************************ 9,457 (22,934) — 228 (13,249)Translation adjustment****************** — (1,770) — (518) (2,288)31 December 2004 ******************* 104,561 33,919 30,575 35,829 204,884Provided during year ******************* — 20,314 — 471 20,785Finance charge on discounted provision*** — — 1,676 — 1,676Utilised during year ******************** (67,127) (2,951) (8,724) (7,218) (86,020)Transfers ***************************** 458 — — (458) —Translation adjustment****************** — 3,703 — 249 3,95231 December 2005 ******************* 37,892 54,985 23,527 28,873 145,277Analysed as current liabilities31 December 2005 ******************* 33,720 17,741 7,428 6,256 65,14531 December 2004 ******************** 95,095 9,687 7,047 6,818 118,647Analysed as non-current liabilities31 December 2005 ******************* 4,172 37,244 16,099 22,617 80,13231 December 2004 ******************** 9,466 24,232 23,528 29,011 86,237227

Part XIIHistorical Financial InformationBusiness Aircraft MaintenanceRepositioning (a) Maintenance (b) Contracts (c) Other (d) Total1’000 1’000 1’000 1’000 1’000Total Provision — end of yearAt 31 December 2005***************** 37,892 54,985 23,527 28,873 145,277At 31 December 2004****************** 104,561 33,919 30,575 35,829 204,884(a)(b)(c)(d)Business repositioningA provision for business repositioning costs is recognised when a constructive obligation exists. The amount of the provision isbased on the terms of business repositioning measures, including employee severance and early retirement measures which havebeen communicated to employees, and fleet rationalisation. They represent the Directors’ best estimate of the cost of thesemeasures, having regard to the current status of negotiations. The major part of the provision is expected to be utilised withintwo years.Aircraft MaintenanceProvision is made on a time apportioned basis for maintenance of leased aircraft. The provisions will be utilised as the majorairframe and engine overhauls take place. When aircraft leases expire and the aircraft pass into Group ownership, or when theopposite occurs, the related maintenance provisions are transferred to or from fixed assets as appropriate.Maintenance ContractsA fair value provision was made for contracts entered into as part of the disposal of the Group’s maintenance activities and isexpected to be utilised over a period of four years.OtherOther provisions relate mainly to frequent flyer provisions, post cessation of employment obligations to current and formeremployees.21. DEFERRED TAXATIONDeferred income tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets against current tax liabilities and when the deferred income taxes relate to the same fiscalauthority. The offset amounts are as follows:2005 20041’000 1’000Deferred income tax assets (deductible temporary differences)Tax losses carried forward ************************************************************ 17,821 16,130Provisions for other liabilities and charges *********************************************** 4,551 13,305At 31 December ******************************************************************** 22,372 29,435Deferred income tax liabilities (taxable temporary differences)Excess of accelerated capital allowances over depreciation********************************* 36,438 36,419Derivative financial instruments ******************************************************** 1,521 326Available for sale financial assets ****************************************************** 416 932Other temporary differences ********************************************************** 249 46At 31 December ******************************************************************** 38,624 37,723Net Deferred Tax Liability ********************************************************** 16,252 8,288228

Part XIIHistorical Financial InformationThe gross movement on the deferred income tax account is as follows:2005 20041’000 1’000At 1 January ************************************************************************* 8,288 5,098Income Statement charge************************************************************** 8,480 3,312Tax credited to equity ***************************************************************** (516) (122)At 31 December ********************************************************************* 16,252 8,288There are no unused tax loans or other tax credits on which Deferred tax has not been provided.22. CALLED-UP SHARE CAPITAL2005 20041’000 1’000Authorised:500,000,000 shares of 01.25 each ************************************************** 625,000 625,000Issued and fully paid:At 1 January ********************************************************************* 357,829 319,738Issued during year***************************************************************** — 38,091At 31 December ****************************************************************** 357,829 357,82985.1% of the issued share capital of the Company was held by the Minister for Finance on behalf of theIrish Government at the balance sheet date.23. SHARE PREMIUM, CAPITAL CONVERSION RESERVE FUND, AND OTHER RESERVESShare premium2005 20041’000 1’000Beginning of year********************************************************************** 6,095 —Shares issued at premium*************************************************************** — 6,095End of year *************************************************************************** 6,095 6,095During 2004, 30,472,725 shares were issued to the ESOT (Note 24) at a premium of 06,095,000.Capital conversion reserve fund2005 20041’000 1’000Balance at beginning and end of year **************************************************** 5,048 5,048229

Part XIIHistorical Financial InformationOther reserves2005 20041’000 1’000Revaluation reserve on available for sale financial assetsBeginning of year ********************************************************************* 6,530 7,373Movement in year********************************************************************* (4,125) (965)Deferred tax on movement in year ****************************************************** 516 122End of year ************************************************************************** 2,921 6,53024. EMPLOYEE PARTICIPATIONEmployee Share Ownership Plan (‘‘ESOP’’)An ESOP was established by a Trust Deed executed on 28 April 2003. Under the terms of the ESOP, apayment of 044.186 million was made to the Aer Lingus Employee Share Ownership Trust (ESOT) during2004 which utilised these funds to subscribe for shares in Aer Lingus Group plc. The ESOT holds theseshares on behalf of participants. Following the issue of these shares, the combined shareholding held onbehalf of participants by the ESOT and the previous Employee Share Participation Scheme established in1996 is 14.9% of the issued share capital of Aer Lingus Group plc.At 31 December 2005, the numbers of shares held by the ESOT and the previous Employee ShareParticipation Scheme were 35,386,476 and 7,266,752 respectively.PROFIT SHARING SCHEMEAs part of the 2001 Survival Plan, a new profit sharing scheme was also established. Subject to confirmationby the Chief Executive that he is satisfied that staff are co-operating with the implementation of the LabourRelations Commission’s proposals issued in 2001 in respect of the Survival Plan, the Group made 10% ofthe Group profit before tax and exceptional items (under Irish GAAP) available annually to the ESOT by wayof profit share for the benefit of employees up to an aggregate maximum of 025.4 million.During 2004, the aggregate maximum of 025.4 million was reached and the profit share was thereforerestricted to 010,644,000.The terms of the profit sharing scheme also provide that the aggregate maximum of 025.4 million would beincreased by 05.0 million to 030.4 million should the ESOT require this additional amount to restore theESOT’s percentage shareholding in the Company to its previous level in the event of an increase in theissued share capital, such restoration to take place within three years of the increase in share capital. As noobligation has yet arisen, provision has not been made for this potential additional profit share payable.Movements on the Profit Sharing Scheme from inception are as follows:Maximum entitlement ************************************************************************* 25.4Provision made in respect of profits for:2002 **************************************************************************************** (5.9)2003 **************************************************************************************** (8.8)2004 **************************************************************************************** (10.7)Balance remaining***************************************************************************** —1mDuring 2005, profit share of 00.75 million was drawn down by the ESOT. The remainder, 018.7 million, hasyet to be drawn. The Group has also granted a loan of 0100,000 to the ESOT which is repayable after morethan one year and is secured on the shares held by the ESOT.230

Part XIIHistorical Financial Information25. PENSIONS AND OTHER POST EMPLOYMENT BENEFITSThe Group operates a number of externally funded pension schemes for the majority of its employees. TheIrish Pension Schemes fall within the definition of defined benefit schemes under the terms of the PensionsAct 1990. One of the Irish Pension Schemes, the Main Scheme, is operated in conjunction with a number ofother employers.The Group and employees contribute a fixed percentage of salaries each year to the Irish Pension Schemeswhich does not vary according to the funded level of the Irish Pension Schemes.The rules of the Irish Pension Schemes provide for the following in the event that there is an actuarialsurplus or deficiency in the schemes:) SurplusIf an actuarial valuation discloses a surplus, it shall be applied by the trustees, after consultation withthe actuary, for the purpose of increasing the benefits to members or reducing the rate ofcontribution by the employers and/or members.) DeficiencyIf an actuarial valuation discloses a deficiency, the trustees shall take such measures as they thinkappropriate, having regard to the recommendations of the actuary, to remedy any such actual oranticipated deficiency provided that no such measures shall, without the consent of the employers,make provision for payment of any increased contribution by the employers or without the consent ofthe members make provision for the payment of any increased contribution by the members.As the company contribution rate is entirely independent of the Irish Pension Schemes’ funding levels, thevalue of the Irish Pension Schemes’ assets and liabilities are not relevant in the context of reporting underIAS 19, Retirement Benefits.The Group’s contributions charged for the year were 015.9 million (2004: 014.8 million), based on ratesspecified by the scheme rules. The actuarial reports are not available for public inspection.26. GUARANTEES AND OTHER FINANCIAL COMMITMENTS(a) Capital commitmentsAt 31 December the Group had capital commitments as follows:2005 20041’000 1’000Contracted for but not provided— Aircraft and equipment ************************************************************ 2,978 62,401— Other *************************************************************************** 3,598 3,226Authorised but not contracted for ***************************************************** 3,901 21,13110,477 86,758231

Part XIIHistorical Financial Information(b) Lease commitmentsAt 31 December 2005 the Group had commitments, under non-cancellable operating leases which fall dueas follows:Plant andProperty Aircraft Machinery1’000 1’000 1’000No later than one year ************************************************ 1,473 5,911 91Later than one year but no later than five years ************************** 1,976 13,709 —Later than five years ************************************************** 57,328 101,238 —60,777 120,858 91(c) Contingent liabilitiesThere are certain legal and other claims which arise from the Group’s activities which the Directors considerwill not materially affect the financial position of the Group.PR Ann III,27. RELATED PARTY TRANSACTIONS7.1The Group is controlled by the Irish Government, which owns 85.1% of the Company’s issued sharecapital. The remaining 14.9% of the shares are held by Aer Lingus ESOP Trustee Limited (see Note 22). Inthe normal course of its business, the Group sells services to and purchases services from other entitiescontrolled by the Irish Government. The following transactions were carried out with entities controlled bythe Irish Government:i) Sales of goods and services2005 20041’000 1’000Ticket Sales *************************************************************************** 5,459 5,317Other services ************************************************************************* 2,195 2,0407,654 7,357All sales were on an arms-length basis.ii)Purchases of goods and services2005 20041’000 1’000Rent, rates and similar charges ******************************************************** 7,149 6,881Other operating purchases************************************************************ 64,414 58,59671,563 65,477All purchases were on an arms-length basis.iii)Interest Payable2005 20041’000 1’000Interest on loan from principal shareholder ************************************************ 254 254232

Part XIIHistorical Financial Informationiv)Key management compensation2005 20041’000 1’000Salaries and other short-term employee benefits ******************************************* 2,019 1,624Post-employment benefits ************************************************************** 442 251Directors fees ************************************************************************* 17 24Other benefits ************************************************************************ 154 1522,632 2,051v) Year-end balances arising from sales/purchases of goods/servicesReceivables from related parties (Note 16):2005 20041’000 1’000Due from state and semi-state entities (all due within one year) ****************************** 161 299Payables to related parties (Note 18):2005 20041’000 1’000Due to state and semi-state entities (all due within one year) ******************************** 3,848 2,725vi) Loans from Related Parties (Note 19)2005 20041’000 1’000Loan from Selling Shareholder *********************************************************** 6,349 6,349This loan is repayable on demand as at 31 December 2005 and 31 December 2004.233

Part XIIHistorical Financial Information28. CASH GENERATED FROM OPERATIONS2005 20041’000 1’000Profit for the period **************************************************************** 88,907 22,948Adjustments for:— Tax (Note 8)********************************************************************* 11,140 4,382— Depreciation and Impairment (Note 10) ********************************************* 58,009 61,202— Amortisation (Note 11) *********************************************************** 2,794 2,567— Profit on sale of property, plant and equipment (see below) *************************** (52) (702)— Net movements in provisions for liabilities and charges ******************************** (65,234) (532)— Net fair value gains on derivative financial instruments ******************************** (34,299) (24,744)— Interest income (Note 6) ********************************************************** (36,667) (33,485)— Interest expense (Note 6) ********************************************************* 26,480 26,161— Exchange gains****************************************************************** (27,987) (1,248)Changes in working capital (excluding the effects of acquisition andexchange differences on consolidation):— Inventories ********************************************************************** (281) 523— Trade and other receivables ******************************************************* (4,990) 13,145— Trade and other payables ********************************************************* 14,190 28,432— Other ************************************************************************** (100) (1,704)Cash generated from operations ***************************************************** 31,910 96,945In the cash flow statement, proceeds from sale of property, plant and equipment comprise:2005 20041’000 1’000Net book amount ******************************************************************** 3,480 68,064Profit on sale of property, plant and equipment******************************************* 52 702Proceeds from sale of property, plant and equipment************************************** 3,532 68,76629. EVENTS AFTER THE BALANCE SHEET DATEThere has been no significant events, outside of the ordinary course of business affecting the Group since31 December 2005.30. FINANCIAL RISK MANAGEMENTFinancial risk factorsThe Group’s activities expose it to a variety of financial risks: currency risk, interest rate risk, liquidity risk(including funding and cash management), commodity price risk. The Group’s overall risk managementprogramme focuses on the reduction or, where possible, elimination of the impact of volatility in currency,interest rates and other markets, on the Group’s performance.The purpose of the Board approved Aer Lingus treasury policy is to regulate how the operations of theindividual treasury activities of Aer Lingus are to be conducted and how the associated risks are to becontrolled.The policy seeks to ensure that activities undertaken will not subject the Group to undesired levels of riskand that the management of treasury activities will contribute to financial performance through focusedmanagement of treasury activities. Aer Lingus adopts a strategic approach to management of its treasuryexposures. This approach involves placing certain levels of cover and developing strategies to manage theremaining exposures based on business risks and an assessment of the likely movement in market rates.This approach is business based, strategic and ongoing. The emphasis is on risk management and reductionand protecting the Group from the financial impact of volatility in financial markets and fuel markets. Aer234

Part XIIHistorical Financial InformationLingus recognises the significant impact treasury exposures can have on corporate financial performance.The management of treasury exposures therefore receives an appropriate level of management attention.The market in which Aer Lingus operates poses significant financial, commercial and commodity price risksfor the Group. The Group recognises that it must manage the financial risks associated with the market inwhich it operates and the treasury function manages the financial (treasury) risks detailed below.a) Currency riskThe main currency exposures result from a deficit in US dollars and a surplus in sterling. A large proportionof Corporate Treasury’s work in relation to currency risk relates to the management of the Group’s cashflowexposures. Significant currency exposures are managed for the current and next financial years on aselective hedging basis. The dollar deficit arises because the dollar costs from fuel and aircraft rentals etc.exceed dollar sales in the US. The sterling surplus arises because UK sales exceeds sterling costs. Profits arereduced by a stronger dollar and/or a weaker sterling.Corporate Treasury manages the following currency risk generating activities; cashflow exposures, noncashflowincome statement exposures and balance sheet exposures. The products used by CorporateTreasury in managing currency risk are predominantly forward foreign exchange contracts. Purchasedcurrency options and option cylinders have also been used, but on a more infrequent basis.Currency risks are hedged on a selective hedging basis. The Group’s risk management policy is to hedge aminimum of 50% cover for these exposures for the current financial year and a minimum of 25% cover forthe following financial year.b) Interest rate riskInterest rate risks arise from interest rate movements relating to debt and surplus cash. Higher interest ratesincrease the costs of net debt and lower interest rates lower the returns from net cash.The Group is exposed to interest rate risk associated with its long-term funding requirements and itsprogramme of surplus funds investment. In relation to the long-term debt portfolio, interest rate risk ismanaged using a selective hedging approach. At a minimum, 50% of long-term net debt, adjusted fordefeased obligations, will be at fixed interest rates.c) Liquidity riskThe principal policy objective, in relation to liquidity, is to ensure that the Group has access, at minimumcost, to sufficient liquidity to enable it to meet its obligations as they fall due and to provide adequately forcontingencies. In implementing this policy, the Group is required to maintain, at all times, access to Boardapproved minimum requirements. In addition, this liquidity requirement, once drawn, must continue to beaccessible for an agreed further period. Cash balances in excess of these levels are normally maintained inorder to enable the Group to take advantage of commercial opportunities and withstand business shocks.The Group has long-term debt almost exclusively associated with aircraft acquisitions. All borrowing isundertaken by Corporate Treasury. Aer Lingus policy is to maintain, at all times, cash and/or committedfacilities for a high proportion of the net forecasted borrowing requirements for the following 12 months.Where borrowings are made to fund the acquisition of aircraft, policy requires at least 80% of suchborrowings must be from facilities that are committed for a period not less than five years.d) Commodity price riskAer Lingus’ fuel requirement exposes the Group to the market volatility of jet fuel prices. Aer Lingus issubject to jet fuel price risk resulting from its operating activities. The volatility of jet fuel prices has beensignificant in recent years and can have a significant effect on profitability in these operations. The primarypolicy objective for the management of fuel price exposure in Aer Lingus is to contribute to achievement ofthe Group’s profitability in a risk managed and cost effective manner.235

Part XIIHistorical Financial InformationCorporate Treasury manages the fuel price exposure associated with its trading activities on a selectivehedging basis. The Group’s risk management policy is to hedge a minimum of 40% cover for fuelexposures for the current financial year and a minimum of 20% for the following financial year.The products used by Corporate Treasury in managing commodity price risk are predominantly commodityswaps, futures and options.e) Fair value estimationThe fair value of financial instruments traded in active markets (such as available for sale securities) is basedon quoted market prices at the balance sheet date. The quoted market price used for financial assets heldby the Group is the current bid price. The fair value of financial instruments that are not traded in an activemarket (for example, over-the-counter derivatives) is determined by using valuation techniques, (principallydiscounted cash flow).31. TRANSITION TO IFRSReconciliation from Irish GAAP to IFRSUp to and including the year ended 31 December 2005, the Group’s statutory financial statements wereprepared in accordance with Irish Generally Accepted Accounting Principles (’Irish GAAP’). Followingadmission to the Official List of the Irish Stock Exchange and the Financial Services Authority in accordancewith European Union Regulations, the Company will be required to prepare statutory consolidated financialstatements for the year ended 31 December 2006 and subsequently in accordance with IFRS as adopted bythe EU and IFRIC interpretations adopted by the EU. In compliance with the Prospectus Regulations 2005,the Directors have prepared financial information for the Group for the years ended 31 December 2004 and31 December 2005, on the basis expected to be applicable, in so far as this is currently known, for thefinancial statements to be prepared for the year ended 31 December 2006, except where otherwiserequired or permitted by IFRS 1 ‘‘First-time adoption of International Financial Reporting Standards’’. Seethe basis of preparation on page 202 to 203 for further information.The Group’s transition date to IFRS is 1 January 2004. The rules for first time adoption of IFRS are set out inIFRS 1. It requires the Group to determine its IFRS accounting policies and apply these retrospectively todetermine the opening balance sheet position under IFRS at the date of transition. The Group’s accountingpolicies under IFRS are set out on pages 204 to 212.IFRS 1 includes a number of voluntary exemptions and mandatory exceptions which are available to theGroup on transition. The impact of each mandatory exceptions and the voluntary exemptions that theGroup chooses to apply are outlined below.Mandatory ExceptionEstimates********************************Assets held for sale and discontinuedoperations*****************************Hedge AccountingDerecognition of financial instruments*******ImpactThe Group’s estimates at the date of transition are consistentwith those under Irish GAAPThe Group has no transactions prior to 1 January 2005 that areaffected by the transitional requirements of IFRS 5 ‘‘Non-currentAssets Held for Sale and Discontinued Operations’’The Group has applied the mandatory exception to hedgeaccounting at 1 January 2004Financial instruments derecognised before 1 January 2004 havenot been re-recognised by the Group under IFRS236

Part XIIHistorical Financial InformationVoluntary ExemptionBusiness Combinations ********************Property, Plant and Equipment *************Comparatives for financial instruments anddesignation of financial assets and liabilitiesImpactBusiness combinations undertaken prior to the transition date of1 January 2004 have not been subject to restatementIn respect of certain flight equipment, the Group has availed ofthe exemption in IFRS 1 to use the fair value of certain of theflight equipment as the deemed cost as at the date of transitionThe Group has elected not to avail of the exemption underIFRS 1, from the requirement to restate comparative informationfor IAS 32: Financial Instruments: Disclosure and Presentation andIAS 39: Financial Instruments: Recognition and MeasurementThe significant differences between the Group’s Irish accounting policies and IFRS accounting policies aresummarised below.(i) Current and deferred taxesUnder Irish GAAP, deferred taxation is recognised on all timing differences where the transaction or eventthat gives rise to an obligation to pay more tax in the future or a right to pay less tax in the future, haveoccurred by the balance sheet date using rates of tax that have been enacted by the balance sheet date.Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferredtaxation is not provided in respect of timing differences arising from the sale or revaluation of fixed assetsunless, by the balance sheet date, a binding commitment to sell the asset has been entered into.Under IFRS, deferred taxation is recognised in respect of all temporary differences at the balance sheet datebetween the tax bases of assets and liabilities and their carrying value for financial reporting purposes.Deferred tax is determined using tax rates that have been enacted or substantially enacted by the balancesheet date. Deferred tax related to fair value re-measurement of available for sale investments and cashflow hedges, which are charged or credited directly to equity, is also credited or charged directly to equityand is subsequently recognised in the income statement together with the deferred gain or loss. Deferredtax assets are recognised to the extent that it is probable that future taxable profit will be available againstwhich the temporary differences can be utilised.IFRS requires deferred tax to be provided in respect of undistributed profits of overseas subsidiaries unlessthe parent is able to control the timing of remittances and it is probable that such remittances will not bemade in the foreseeable future. As the Group is able to control the timing of remittances from overseassubsidiaries and no such remittances are anticipated in the foreseeable future, no provision has been madefor any tax on undistributed profits of overseas subsidiaries. Similarly, no deferred tax assets or liabilitieshave been recognised in respect of temporary differences associated with investments in subsidiaries.The deferred tax liability has decreased from 021.7 million under Irish GAAP to 016.3 million under IFRS(2004: 014.1 million to 08.3 million), primarily as a result of the tax effect of the adjustments listed below.(ii) Intangible assetsUnder Irish GAAP, computer software is capitalised and included within tangible assets where futureeconomic benefits are expected to arise from the asset. These assets are amortised over their expecteduseful lives.Under IFRS, acquired computer software licences are capitalised on the basis of the costs incurred to acquireand bring into use the specific software. These costs are amortised on the basis of their expected usefullives.Costs that are directly associated with the production of identifiable and unique software productscontrolled by the Group and which will probably generate economic benefits exceeding costs beyond oneyear, are recognised as intangible assets and amortised over their useful lives.As a result of this adjustment, computer software has been reclassified from tangible to intangible assets.237

Part XIIHistorical Financial Information(iii) Derivative Financial InstrumentsUnder Irish GAAP, derivatives used in order to hedge exposures to changes in interest rates, currencymovements or fuel prices are accounted for on an accruals basis consistent with the accounting treatmentof the underlying transaction. The fair value gains and losses on these derivatives are not recognised in theincome statement. Profits and losses related to qualifying hedges of firm commitments and anticipatedtransactions are deferred and taken to the profit and loss account when the hedged transactions occur.Under IFRS derivatives are initially recognised at fair value on the date on which a derivative contract isentered into and are subsequently re-measured at their fair value at each reporting date. The method ofrecognising the resulting fair value gain or loss depends on whether the derivative is designated as ahedging instrument, and if so, the nature of the item being hedged. The Group designates certainderivatives as either: (1) hedges of the fair value of recognised assets or liabilities or firm commitments (fairvalue hedge); or, (2) hedges of highly probable future cash flows attributable to a recognised asset orliability, or a forecasted transaction (cash flow hedge). To so qualify, IFRS requires that the risk managementstrategy in respect of each hedged item is documented in advance, that the effectiveness of the hedge canbe reliably measured and that the hedge is assessed on an ongoing basis and determined actually to havebeen highly effective throughout the financial reporting periods for which the hedge was designated.Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded inthe income statement, together with any changes in the fair value of the hedged asset or liability that areattributable to the hedged risk. The effective portion of changes in the fair value of derivatives that aredesignated and qualify as cash-flow hedges are recognised in equity. The gain or loss relating to theineffective portion is recognised immediately in the income statement. Amounts accumulated in equity arereclassified to the income statement in the periods in which the hedged item will affect profit or loss. In thecase of derivative instruments that do not qualify for hedge accounting, changes in their fair value arerecognised immediately in the income statement.As the Group did not fulfil the documentation and testing requirements of IFRS during the financial yearsended 31 December 2004 and 31 December 2005, all derivative financial instruments held by the Grouphave been measured in full at fair value in the Balance Sheet, with a corresponding entry to the IncomeStatement. Some of these derivative financial instruments comprised foreign exchange forwards used in thepurchase of certain property plant and equipment additions in 2004 and 2005. As these forwards did notmeet the documentation and hedging requirements of IFRS they did not qualify as hedges and their impacton the capitalised cost of these additions has been written back to the income statement. Certain otheritems recognised as accrued interest receivable or payable under Irish GAAP are categorised as derivativefinancial instruments under IFRS, and have been categorised and valued accordingly.(iv) Classification of Financial InstrumentsUnder Irish GAAP, all debt securities were included in the Balance Sheet under the caption of ’cash, shorttermdeposits and liquid resources’, with additional disclosures provided in the footnotes.Under IFRS, the Group has classified its non-derivative financial assets as either(a) Other depositsThis category includes non-derivative financial assets with fixed or determinable payments, and a maturitydate in excess of three months that are not quoted in an active market.(b) Available for Sale investmentsAvailable for sale investments are those intended to be held for an indefinite period of time, which may besold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices.Financial assets are initially recognised at fair value. Available for Sale financial assets are subsequentlycarried at fair value through equity or the income statement respectively. Other deposits are subsequentlycarried at amortised cost using the effective interest method. Interest receivable and payable are included inthe carrying value of the underlying on an effective interest rate basis238

Part XIIHistorical Financial InformationAs a result of this adjustment, certain deposits and other investments have been reclassified on the balancesheet. In addition, the Available for Sale financial assets have been fair valued at the transition date withsubsequent movements in fair value being posted directly to reserves.(v) Foreign CurrenciesIFRS also provides specific guidance on how the functional currency (i.e. the currency that an entity shoulduse to record its transactions) of a company should be determined. This has resulted in one of the Group’ssubsidiaries changing its functional currency to euro.(vi) Deemed cost of Property, Plant and EquipmentIn respect of certain flight equipment, the Group has availed of the exemption in IFRS 1 to use the fair valueof the flight equipment as the deemed cost as at the date of transition. This has resulted in a decrease inthe net book value of these assets, with a corresponding entry in opening reserves, and a recurringreduction in the depreciation charge for the year.(vii) OffsetUnder Irish GAAP, certain commissions and fees receivable were previously netted against cost of sales.Under IFRS, for items of revenue and expense to be offset, there must be an intention to settle net or torealise the underlying asset and liability simultaneously.This has resulted in the grossing up of the income statement to reflect the impact of these items.239

Part XIIHistorical Financial InformationReconciliation of Equity — 1 January 2004Financial Financial PropertyIrish Instruments Instruments Plant & DeferredGAAP Reclassification Measurement Classification Equipment Tax Other IFRS1’000 1’000 1’000 1’000 1’000 1’000 1’000 1’000(iv/iii) (iii) (iv) (vi) (i) (ii)Non Current AssetsProperty Plant and Equipment 591,296 — (68,698) (5,775) 516,823Intangible Assets *********** — 5,775 5,775Derivative FinancialInstruments************** 1,728 1,728Available for sale financialassets******************* 42,379 8,428 50,807Other deposits ************* 263,661 — 263,661Trade & other receivables**** 100 — 100591,296 306,140 10,156 — (68,698) — — 838,894Current AssetsInventories **************** 1,295 — 1,295Trade and other receivables ** 67,354 903 — 68,257Cash and other deposits **** 656,244 (306,040) — 350,204Derivative financialinstruments************** 3,890 3,890724,893 (305,137) 3,890 — — — — 423,646Current LiabilitiesTrade and other payables**** (362,212) (1,003) 2,981 (360,234)Current income tax liabilities (212) — (212)Interest bearing loans andborrowings ************** (46,484) — (46,484)Derivative financialinstruments************** (20,410) (20,410)Provisions for liabilities andcharges ***************** (58,092) — (58,092)(408,908) (59,095) (17,429) — — — — (485,432)Non-Current LiabilitiesTrade & Other Payables ***** — —Interest bearing loans andborrowings ************** (383,527) 5,166 (378,361)Deferred income tax liabilities (15,254) 125 1,444 8,587 (5,098)Provisions for liabilities andcharges ***************** (186,632) 58,092 — (128,540)Derivative FinancialInstruments************** (13,335) (13,335)Retirement benefitobligations ************** — —(585,413) 58,217 (6,725) — 8,587 — — (525,334)321,868 125 (10,108) (60,111) — 251,774EquityCapital attributable to equityholders ***************** 319,738 — 319,738Share premium accounts **** — — —Fair value reserve*********** 7,373 7,373Other Reserves************* 5,048 — 5,048Retained Earnings ********** (2,918) 125 (17,481) (60,111) (80,385)321,868 125 (10,108) — (60,111) — — 251,774240

Part XIIHistorical Financial InformationReconciliation of Net Income for the year to 31 December 2004FinancialIrish GAAP Instruments/ Property, Plant Deferredas reported Offset Measurement and Equipment Tax Other IFRS1’000 1’000 1’000 1’000 1’000 1’000 1’000(vii) (iii) (vi) (i) (v)Revenue *************** 906,836 102,750 1,009,586Operating Expenses ****** (789,533) (102,750) 20,890 4,690 — (866,703)Employee profit share **** (10,644) (10,644)Other gains/losses — net (10,345) 1,744 (1,132) (9,733)Operating Profit beforeexceptional items **** 96,314 — 22,634 4,690 — (1,132) 122,506Exceptional Items ******** (102,500) — — — — (102,500)Operating profit/(loss) afterexceptional items **** (6,186) — 22,634 4,690 (1,132) 20,006Finance income ********** 33,485 — 33,485Finance expense ********* (26,161) — (26,161)Foreign exchange gains/(losses) — other ******* — — —Profit before taxation*** 1,138 — 22,634 4,690 (1,132) 27,330Taxation **************** 98 (2,829) (586) (1,065) (4,382)Profit for the year ****** 1,236 — 19,805 4,104 (1,065) (1,132) 22,948241

Part XIIHistorical Financial InformationReconciliation of Equity as at 31 December 2004Financial Financial PropertyIrish Instruments Instruments Plant & DeferredGAAP Classification Measurement Equipment Tax Other IFRS1’000 1’000 1’000 1’000 1’000 1’000 1’000(iii/iv) (iii) (vi) (i) (ii)Non-Current AssetsProperty Plant and Equipment 568,063 — (5,735) (64,008) (6,188) 492,132Intangible Assets ************ — — 6,188 6,188Derivative Financial Instruments — 5,728 5,728Available for sale financialassets ******************** 109,972 7,464 117,436Other deposits ************** 235,628 — 235,628Trade & other receivables ***** 100 — 100568,063 345,700 7,457 (64,008) — — 857,212Current AssetsInventories****************** 772 — — 772Trade & other receivables ***** 51,951 1,185 (209) 52,927Cash and other deposits****** 806,722 (345,601) — 461,121Derivative financial instruments — 17,636 17,636859,445 (344,416) 17,427 — — — 532,456Current LiabilitiesTrade & Other Payables******* (354,279) (1,285) 5,908 (349,656)Current income tax liabilities ** (70) — — (70)Interest bearing loans andborrowings *************** (94,120) — — (94,120)Derivative financial instruments — (19,680) (19,680)Provisions for liabilities andcharges ****************** (118,647) — (118,647)(448,469) (119,932) (13,772) — — — (582,173)Non-Current LiabilitiesTrade & Other Payables******* — —Interest bearing loans andborrowings *************** (393,865) — 6,027 (387,838)Deferred income tax liabilities (14,086) 161 (1,258) 8,001 (1,106) (8,288)Provisions for liabilities andcharges ****************** (204,884) 118,647 — (86,237)Derivative Financial Instruments — (7,067) (7,067)Retirement benefit obligations — — —(612,835) 118,808 (2,298) 8,001 (1,106) — (489,430)366,204 160 8,814 (56,007) (1,106) — 318,065EquityCapital attributable to equityholders******************* 357,829 — — 357,829Share premium accounts ***** 6,095 — — 6,095Fair value reserve ************ — 6,530 6,530Other Reserves ************** 5,048 — — 5,048Retained Earnings *********** (2,768) 160 2,284 (56,007) (1,106) — (57,437)366,204 160 8,814 (56,007) (1,106) — 318,065242

Part XIIHistorical Financial InformationReconciliation of Net Income for the year to 31 December 2005Financial Property,Irish GAAP Instruments/ Plant and Deferredas reported Offset Measurement Equipment Tax Other IFRS1’000 1’000 1’000 1’000 1’000 1’000 1’000(vii) (iii) (vi) (i) (v)Revenue ******************* 883,025 119,633 — — — 1,002,658Operating expenses*********** (809,795) (119,633) 5,750 4,690 — (918,988)Other gains/ (losses) — net **** (810) — 3,713 3,287 6,190Operating Profit ************ 72,420 — 9,463 4,690 — 3,287 89,860Finance income ************** 36,667 — — — — 36,667Finance expense ************* (26,480) — — — — (26,480)Foreign exchange gains/(losses) — other************ — — — — — —Profit before taxation ******* 82,607 — 9,463 4,690 — 3,287 100,047Taxation********************* (10,249) — (1,183) (586) 878 (11,140)Profit for the year ********** 72,358 — 8,280 4,104 878 3,287 88,907243

Part XIIHistorical Financial InformationReconciliation of Equity as at 31 December 2005Financial Financial PropertyIrish Instruments Instruments Plant & DeferredGAAP Classification Measurement Equipment Tax Other IFRS1’000 1’000 1’000 1’000 1’000 1’000 1’000(iii/iv) (iii) (vi) (i) (ii)Non-Current AssetsProperty Plant and Equipment 598,309 — (25,278) (59,318) (5,707) 508,006Intangible Assets ************ — — 5,707 5,707Derivative Financial Instruments — 434 434Available for sale financialassets ******************** 156,660 3,338 159,998Other deposits ************** 191,921 — 191,921Trade & other receivables ***** 100 — 100598,309 348,681 (21,506) (59,318) — — 866,166Current AssetsInventories****************** 1,053 — — 1,053Trade and other receivables *** 59,100 1,450 (377) 60,173Cash and other deposits****** 877,608 (348,581) — 529,027Derivative financial instruments — 37,548 37,548937,761 (347,131) 37,171 — — — 627,801Current LiabilitiesTrade and other payables ***** (363,326) (1,550) 349 (364,527)Current income tax liabilities ** (3,889) — — (3,889)Interest bearing loans andborrowings *************** (54,075) — — (54,075)Derivative financial instruments — — —Provisions for liabilities andcharges ****************** (65,145) — (65,145)(421,290) (66,695) 349 — — — (487,636)Non-Current LiabilitiesTrade and other payables ***** — — —Interest bearing loans andborrowings *************** (506,077) — 4,425 (501,652)Deferred income tax liabilities (21,675) 194 (1,937) 7,415 (249) (16,252)Provisions for liabilities andcharges ****************** (145,277) 65,145 — (80,132)Derivative Financial Instruments — (4,932) (4,932)Retirement benefit obligations — — —(673,029) 65,339 (2,444) 7,415 (249) — (602,968)441,751 194 13,570 (51,903) (249) — 403,363EquityCapital attributable to equityholders******************* 357,829 — — 357,829Share premium accounts ***** 6,095 — — 6,095Other Reserves ************** 5,048 — — 5,048Fair value reserve ************ — — 2,921 2,921Retained Earnings *********** 72,779 194 10,649 (51,903) (249) 31,470441,751 194 13,570 (51,903) (249) 403,363244

Part XIIHistorical Financial InformationSECTION B: ACCOUNTANTS’ REPORT AND FINANCIAL INFORMATION FOR AER LINGUSGROUP PLC IN RESPECT OF THE TWO FINANCIAL YEARS ENDED 31 DECEMBER 2004 AND31 DECEMBER 2003 PREPARED IN ACCORDANCE WITH IRISH GAAP.PricewaterhouseCoopersP.O. BoxGeorge's QuayDublin 2IrelandThe DirectorsAer Lingus Group plcDublin AirportCo. DublinThe DirectorsAIB Corporate Finance Limited85 Pembroke RoadBallsbridgeDublin 4UBS Limited1/2 Finsbury AvenueLondonEC2M 2PP12 September 2006Ladies and GentlemenAer Lingus Group PlcPR Ann I,We report on the financial information set out on pages 247 to 266 of the Prospectus dated 12 September 20.1,2006 of Aer Lingus Group plc and its consolidated subsidiaries (the ‘‘Company’’) for the years ended 20.4.131 December 2003 and 31 December 2004. This financial information has been prepared for inclusion inthe prospectus dated 12 September 2006 (‘‘the Prospectus’’) on the basis of the accounting policies innote 2. This report is required by item 20.1 of Annex I to the EU Prospectus Regulation and is given for thepurpose of complying with that item and for no other purpose.ResponsibilitiesThe Directors of the Company are responsible for preparing the financial information on the basis ofpreparation set out on page 251 to the financial information and in accordance with the accountingstandards issued by the Accounting Standards Board and published by the Institute of CharteredAccountants in Ireland (Generally Accepted Accounting Practice in Ireland) (‘‘Irish GAAP’’).It is our responsibility to form an opinion as to whether the financial information gives a true and fair view,for the purposes of the Prospectus, and to report our opinion to you.Basis of opinionWe conducted our work in accordance with the Standards for Investment Reporting issued by the AuditingPractices Board in the United Kingdom and published by the Institute of Chartered Accountants in Ireland.Our work included an assessment of evidence relevant to the amounts and disclosures in the financialinformation. It also included an assessment of significant estimates and judgments made by those245

Part XIIHistorical Financial Informationresponsible for the preparation of the financial information and whether the accounting policies areappropriate to the Company’s circumstances, consistently applied and adequately disclosed.We planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that thefinancial information is free from material misstatement whether caused by fraud or other irregularity orerror.Our work has not been carried out in accordance with auditing standards generally accepted in the UnitedStates of America or auditing standards of the Public Company Accounting Oversight Board (United States)and accordingly should not be relied upon as if it had been carried out in accordance with those standards.OpinionIn our opinion, the financial information gives, for the purposes of the Prospectus dated 12 September2006, a true and fair view of the state of affairs of the Company as at 31 December 2003 and 31 December2004 and of its profit, cash flows and recognised gains and losses for the years then ended in accordancewith the basis of preparation set out in note 1 and in accordance with Irish GAAP as described in note 2.DeclarationFor the purposes of Paragraph 2(2)(f) of Schedule I of the Prospectus Regulations 2005, we are responsible PR Ann I,for this report as part of the Prospectus and declare that we have taken all reasonable care to ensure that 1.2the information contained in this report is, to the best of our knowledge, in accordance with the facts and PR Ann III,contains no omission likely to affect its import. This declaration is included in the Prospectus in compliance 1.2with item 1.2 of Annex I of the EU Prospectus Regulation.Yours faithfullyPricewaterhouseCoopersChartered Accountants246

Part XIIHistorical Financial InformationAER LINGUS GROUP PLCConsolidated Profit and Loss Accounts — Irish GAAPPR Ann I,20.1(b)2004 2003Notes 1’000 1’000Turnover ************************************************************** 3 906,836 888,298Cost of Sales *********************************************************** 3 (695,503) (651,598)Gross Profit *********************************************************** 211,333 236,700Other operating expenses:— operating************************************************************ 3 (104,375) (153,735)— employee profit share ************************************************* 22 (10,644) (8,822)(115,019) (162,557)Operating Profit ******************************************************* 3 96,314 74,143Exceptional ItemsCost of fundamental restructuring ***************************************** 4 (103,995) —Profit on disposal of fixed assets******************************************* 4 702 —Profit on exit from non-core activities ************************************** 4 793 —(Loss)/Profit on Ordinary Activities before Interest *********************** (6,186) 74,143Interest receivable and similar income ************************************** 33,485 32,592Interest payable and similar charges**************************************** 5 (26,161) (27,332)Profit on Ordinary Activities before Taxation **************************** 6 1,138 79,403Taxation *************************************************************** 9 98 (10,186)Profit for the Year ***************************************************** 1,236 69,217Earnings per Share (cent) ********************************************** 10 0.5c 27.1cEarnings per Share — before exceptional items (cent) ******************* 10 34.1c 27.1cThe notes on pages 251 to 266 are an integral part of this consolidated financial information247

Part XIIHistorical Financial InformationStatements of Total Recognised Gains and Losses — Irish GAAP2004 20031’000 1’000Profit for the year ******************************************************************** 1,236 69,217Other movements, principally currency translation adjustmentsProfit and loss account ************************************************************* (1,086) (2,952)Total recognised gains for the year ************************************************** 150 66,265The notes on pages 251 to 266 are an integral part of this consolidated financial information248

Part XIIHistorical Financial InformationConsolidated Balance Sheets — Irish GAAPPR Ann I,20.1(a)2004 2003Notes 1’000 1’000Fixed AssetsTangible assets********************************************************** 11 568,063 591,296Current AssetsStocks ***************************************************************** 12 772 1,295Debtors **************************************************************** 13 51,951 67,354Cash, short-term deposits and liquid resourcesFree cash ************************************************************ 14 559,478 384,807Restricted cash******************************************************** 14 247,244 271,437859,445 724,893Creditors: Amounts falling due within one year ***************************** 15 (442,120) (408,908)Net Current Assets***************************************************** 417,325 315,985Total Assets less Current Liabilities************************************** 985,388 907,281Creditors: Amounts falling due after more than one year ******************** 16 (400,214) (383,527)Provisions for Liabilities and Charges *********************************** 17 (218,970) (201,886)Net Assets ************************************************************ 366,204 321,868Capital and ReservesCalled-up share capital*************************************************** 18 357,829 319,738Share premium ********************************************************* 18 6,095 —Capital conversion reserve fund ******************************************* 5,048 5,048Profit and loss account*************************************************** 20 (2,768) (2,918)Shareholders’ Funds — equity interests ********************************* 19 366,204 321,868The notes on pages 251 to 266 are an integral part of this consolidated financial information.249

Part XIIHistorical Financial InformationCash flow statements — Irish GAAPPR Ann I,20.1(d)2004 2003Notes 1’000 1’000Net cash inflow from Operating Activities ******************************* 21A 102,666 111,663Returns on Investments and Servicing of Finance ************************ 21B 7,675 7,482Taxation *************************************************************** (1,212) 210Capital Expenditure and Financial Investment **************************** 21B (64,073) (43,240)Acquisitions and Disposals ********************************************** 21B 3,750 3,020Cash inflow before use of liquid resources and financing ********************** 48,806 79,135Management of Liquid Resources *************************************** 21C (193,990) (32,033)Financing— issue of shares to ESOT ********************************************** 22 44,186 —— increase/(decrease) in debt******************************************** 21B 101,287 (43,020)Increase in cash in year *************************************************** 289 4,082The notes on pages 251 to 266 are an integral part of this consolidated financial information250

Part XIIHistorical Financial InformationNOTES TO THE IRISH GAAP FINANCIAL INFORMATION1. BASIS OF PREPARATION AND ACCOUNTING POLICIESThe principal activity of Aer Lingus Group plc (‘‘the Company’’) and its subsidiaries (together ‘‘the Group’’)is the provision of low fares air travel services. The financial information presented is for Group for thefinancial years ended 31 December 2003 and 31 December 2004. The principal companies within theGroup during the years ended 31 December 2003 and 31 December 2004 are disclosed in Note 25.The consolidated information presented has been prepared on a going concern basis in accordance withthe historical cost convention. The accounting policies outlined below have been consistently appliedthroughout the consolidated financial information presented.PR Ann I,20.1(e)2. ACCOUNTING POLICIESIncome RecognitionTurnover comprises revenues (excluding VAT and similar taxes and trade discounts) from air travel servicesarising in the normal course of business.Revenues are recognised when transportation is provided. The value of sales made, for whichtransportation has not been provided at year-end, is included in creditors falling due within one year underthe caption ‘‘Ticket sales in advance’’. Expired tickets are recognised as revenue on a systematic basis.Pension and Other Post-Retirement ObligationsThe Group provides pensions to substantially all employees through contributions to a variety of separatelyadministered pension schemes. The nature of these schemes is described in Note 23.The expected cost of providing pensions and other retirement benefits to employees is charged to the profitand loss account as incurred over the period of employment of pensionable employees.TaxationIrish and overseas corporation tax payable is provided on taxable profits at current rates.Deferred taxation is provided, using the liability method, on material timing differences at the average taxrates expected to apply when such timing differences are expected to reverse.Tangible Fixed AssetsAll tangible fixed assets are stated at cost, net of accumulated depreciation.Depreciation is provided on all tangible fixed assets at rates calculated to write off the cost less estimatedresidual value of each asset on a straight line basis over its expected useful life.251

Part XIIHistorical Financial InformationUseful lives and residual values are re-appraised regularly and currently fall in the following ranges:Useful life Residual value(Years) (%)Flight Equipment:Aircraft fleet and major spares— Short-haul aircraft************************************************** 18 10— Long-haul aircraft ************************************************** 20 10Rotable spares ********************************************************* 5 to 11 NilModifications to leased aircraft ******************************************* Period of lease NilDepreciable Property:Freehold*************************************************************** Principally 50 NilLeasehold ************************************************************* Period of lease NilEquipment:Ground equipment ***************************************************** 3 to 20 NilOther ***************************************************************** 2 to 10 NilA proportion of the cost of owned aircraft, equivalent to the estimated cost of the next major airframe andengine overhaul, is amortised over the period to the date of the next major maintenance check. The costsof major airframe and engine overhauls for owned aircraft are capitalised as part of the cost of the aircraft.Financial Fixed AssetsInterests in subsidiary undertakings are stated in the Company’s balance sheet at cost, less provision for anypermanent impairment in value.StocksStocks are stated at the lower of cost and net realisable value.Cost is based on average invoice price. Net realisable value is based on estimated normal selling price, lessfurther costs expected to be incurred to completion and disposal. Stocks which are known to be obsolete atthe balance sheet date are written off and provision is made in respect of stocks which may becomeobsolete in the future.Cash and Liquid ResourcesCash is defined as cash on hand together with deposits repayable on demand. Deposits repayable ondemand are defined as those which can be withdrawn at any time and without penalty or where a maturityor period of notice of not more than 24 hours has been agreed.Liquid resources are defined as stores of value which are readily convertible into known amounts of cash ator close to their carrying amount without curtailing or disrupting the business. They primarily consist ofdeposits held with a period of notice greater than 24 hours.LeasesAssets held under finance leases, which transfer substantially all the risks and rewards of ownership to theGroup, are initially recorded at their fair value at the inception of the lease. The equivalent liability,categorised as appropriate, is included under ‘‘Creditors due within and after one year’’. Assets aredepreciated over the lease term or their useful economic lives, as appropriate. Finance lease charges areallocated over the periods of the leases to produce constant rates of return on the outstanding balances.Rentals under operating leases are charged on a straight line basis over the lease term.Aircraft maintenanceProvision is made, on a time apportioned basis, for aircraft maintenance costs to be incurred in connectionwith major airframe and engine overhauls on operating leased aircraft where the lease terms imposeobligations on the lessee to have these overhauls carried out. The actual costs of the overhauls are chargedagainst the provision.252

Part XIIHistorical Financial InformationForeign CurrencyIn the accounts of individual companies, transactions denominated in foreign currencies are recorded in thelocal currency at actual exchange rates at the date of the transaction or, where appropriate, at the rates ofexchange in related forward exchange contracts. Monetary assets and liabilities denominated in foreigncurrencies are translated using the rates of exchange prevailing at the balance sheet date or, whereappropriate, the rates of exchange in related forward exchange contracts.Gains and losses arising from foreign currency translations and on settlement of amounts receivable andpayable in foreign currency are dealt with in the profit and loss account.For the purposes of consolidation of subsidiaries, the closing rate/net investment method is used, underwhich translation gains or losses are shown as movements on reserves. Profit and loss accounts of overseassubsidiaries are translated at average exchange rates.Treasury InstrumentsThe Group enters into transactions in the normal course of business using a variety of treasury instrumentsin order to hedge against exposures to fluctuating exchange rates, interest rates and fuel costs. Thesetransactions are accounted for in accordance with their economic substance.The principal transactions are forward contracts and currency swaps entered into in order to change thecurrency exposure of foreign currency debt positions. Such forward contracts and swaps are revalued atclosing spot rates of exchange and the resulting gains and losses are accounted for on a consistent basiswith gains and losses on the retranslation of the related debt (Accounting Policy — Foreign Currency). Theinterest effect of these transactions is accounted for evenly over the duration of the contracts.Forward contracts and related instruments designed to hedge future transactions, such as foreign currencyexpenditure, are disclosed in the accounts as commitments and are accounted for on a consistent basis withthe related transactions.3. TURNOVER AND OPERATING PROFIT2004 20031’000 1’000Turnover ************************************************************************* 906,836 888,298Cost of sales ********************************************************************* 695,503 651,598Gross Profit ********************************************************************* 211,333 236,700Operating expensesSelling and marketing************************************************************** 53,544 79,857Administrative ******************************************************************** 40,486 68,561Loss on exchange ***************************************************************** 10,345 5,317Employee profit sharing scheme (Note 22) ******************************************** 10,644 8,822115,019 162,557Operating profit ***************************************************************** 96,314 74,143Segmental disclosure of turnover by source and destination, and of the results and net assets of the Groupare not provided as the Directors are of the opinion that disclosure of such information would be prejudicialto the interests of the Group.253

Part XIIHistorical Financial Information4. EXCEPTIONAL ITEMS2004 20031’000 1’000Cost of Fundamental Restructuring— Employee severance and early retirement programme (a) *************************** (97,900) —— Employee Share Ownership Plan (b) ********************************************* (6,095) —(103,995) —Profit on Disposal of Fixed Assets *********************************************** 702 —Profit on Exit from Non-Core Activities******************************************* 793 —Net exceptional items before tax *************************************************** (102,500) —Tax on exceptional items ********************************************************** 12,812 —Net exceptional items after tax***************************************************** (89,688) —(a) Provision has been made for the estimated cost of the employee severance and early retirement programme launched in 2004.(b) The 30,472,725 shares issued to the ESOP during 2004 (Note 22) were issued at a premium of 36,095,000. Provision was madein 2002 for the nominal value of these shares.5. INTEREST PAYABLE AND SIMILAR CHARGES2004 20031’000 1’000On bank loans, overdrafts and other loans:— repayable within five years, by instalments ***************************************** 719 2,197Finance lease interest **************************************************************** 23,144 22,481Other interest*********************************************************************** 254 254Finance charge on discounted provision ************************************************ 2,044 2,40026,161 27,3326. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION2004 20031’000 1’000Profit on ordinary activities before taxation is stated after charging:Depreciation of tangible fixed assets— owned ************************************************************************** 28,090 43,631— held under finance leases ********************************************************** 40,466 26,077Operating lease rentals payable— plant and machinery ************************************************************** 124 777— aircraft ************************************************************************** 41,240 34,183— property************************************************************************* 8,604 8,431Auditors’ remuneration*************************************************************** 125 125254

Part XIIHistorical Financial Information7. DIRECTORS’ EMOLUMENTS2004 20031’000 1’000Fees ********************************************************************************* 145 35Other emoluments (including pension contributions) **************************************** 1,209 898Pension payments to former director ***************************************************** 100 1011,454 1,0348. STAFF COSTSThe average number of persons employed by the Group in the financial year was 3,906 (2003: 4,281) andtheir associated payroll costs were as follows:2004 20031’000 1’000Wages and salaries **************************************************************** 210,618 206,983Social welfare costs**************************************************************** 20,286 20,055Pension costs (Note 23) ************************************************************ 14,799 14,267245,703 241,305Profit Sharing Scheme (Note 22)***************************************************** 10,644 8,822256,347 250,1279. TAXATIONThe tax charge for the year comprises:2004 20031’000 1’000Current taxIrelandCorporation tax********************************************************************** 1,070 212Revision of previous years’ provisions *************************************************** — (230)Total current tax ******************************************************************* 1,070 (18)Deferred taxOrigination and reversal of timing differences ******************************************** (1,168) 6,887Other ****************************************************************************** — 3,317Total deferred tax ****************************************************************** (1,168) 10,204Total******************************************************************************* (98) 10,186255

Part XIIHistorical Financial InformationThe differences between profit on ordinary activities multiplied by the standard Irish corporation tax rate of12.5% (2003: 12.5%) and the current tax charge for the year are:2004 20031’000 1’000Profit on ordinary activities before tax multiplied by standard Irish corporation tax rate of 12.5%(2003: 12.5%) *********************************************************************** 142 9,925Effects of:Expenses not deductible for tax purposes ************************************************ 41 49Depreciation in excess of capital allowances ********************************************** 956 (268)Movement in tax losses *************************************************************** (1,620) (7,824)Movement in provisions *************************************************************** 1,832 (788)Differences in tax rates **************************************************************** (281) (882)Revision of previous years’ provisions **************************************************** — (230)Current tax charge/(credit) for year****************************************************** 1,070 (18)10. EARNINGS PER SHARE2004 2003Weighted average number of shares in issue (’000) ************************************ 267,030 255,790Profit for the year (0’000) ********************************************************** 1,236 69,217Earnings per share (cent) *********************************************************** 0.5c 27.1cProfit for the yearbefore exceptional items (0’000) **************************************************** 90,924 69,217Earnings per sharebefore exceptional items (cent) ****************************************************** 34.1c 27.1c11. TANGIBLE ASSETSPR Ann I,8.1Flight Ground OtherEquipment Property Equipment Equipment Total1’000 1’000 1’000 1’000 1’000Cost1 January 2004 ************************** 900,773 41,904 57,017 69,353 1,069,047Additions ******************************* 125,011 401 2,100 5,438 132,950Disposals******************************** (247,796) (3,138) (10,659) (7,732) (269,325)31 December 2004 *********************** 777,988 39,167 48,458 67,059 932,672Depreciation1 January 2004 ************************** 350,685 28,619 40,312 58,135 477,751Charge for year ************************** 54,417 3,383 3,323 7,433 68,556Transfer from maintenance provisions(Note 17) ***************************** 6,087 — — — 6,087Disposals******************************** (167,879) (3,132) (9,042) (7,732) (187,785)31 December 2004 *********************** 243,310 28,870 34,593 57,836 364,609Net Book Value31 December 2004 *********************** 534,678 10,297 13,865 9,223 568,0631 January 2004 ************************** 550,088 13,285 16,705 11,218 591,296256

Part XIIHistorical Financial InformationFlight Ground OtherEquipment Property Equipment Equipment Total1’000 1’000 1’000 1’000 1’000Leased assets included in the above:Net book value at 31 December 2004******* 463,479 — — — 463,479Net book value at 1 January 2004 ********** 404,197 — — — 404,19711A. TANGIBLE ASSETSPropertyFlight Freehold/ Ground OtherEquipment Leasehold Equipment Equipment Total1’000 1’000 1’000 1’000 1’000Cost1 January 2003 ************************** 906,652 41,422 59,054 72,382 1,079,510Additions ******************************* 38,832 509 329 3,483 43,153Transfer to maintenance provisions *********** (324) — — — (324)Reclassifications ************************** (301) (27) (721) (6,410) (7,459)Disposals******************************** (44,086) — (1,645) (102) (45,833)31 December 2003 *********************** 900,773 41,904 57,017 69,353 1,069,047Depreciation1 January 2003 ************************** 349,747 24,211 38,164 53,142 465,264Transfer to maintenance provisions *********** (4,066) — — — (4,066)Charge for year ************************** 52,028 4,222 3,887 9,571 69,708Reclassifications ************************** (2,938) 186 (231) (4,476) (7,459)Disposals******************************** (44,086) — (1,508) (102) (45,696)31 December 2003 *********************** 350,685 28,619 40,312 58,135 477,751Net Book Value31 December 2003 *********************** 550,088 13,285 16,705 11,218 591,2961 January 2003 ************************** 556,905 17,211 20,890 19,240 614,246Leased assets included in the above:Net book value - 31 December 2003******** 404,197 — — — 404,197Net book value - 1 January 2003 *********** 426,242 — — — 426,24212. STOCK2004 20031’000 1’000Sundry stocks************************************************************************** 772 1,295The replacement cost of stocks is not significantly different from their balance sheet values.257

Part XIIHistorical Financial Information13. DEBTORS2004 20031’000 1’000Amounts falling due within one year:Trade debtors *********************************************************************** 31,358 41,776Other debtors*********************************************************************** 13,206 16,003Prepayments and accrued income****************************************************** 6,101 6,109Value Added Tax ******************************************************************** 1,186 1,214ESOT (Note 22) ********************************************************************* — 2,15251,851 67,254Amounts falling due after more than one year:ESOT (Note 22) ********************************************************************* 100 10051,951 67,35414. CASH, SHORT-TERM DEPOSITS AND LIQUID RESOURCES2004 20031’000 1’000Free cash:Cash and demand deposit balances************************************************** 4,926 3,738Other deposit balances and liquid resources******************************************* 554,552 381,069559,478 384,807Restricted cash:Restricted cash deposit balances held to repay certain finance lease obligations (a) *********** 230,480 257,720Other restricted deposits (b) ********************************************************** 16,764 13,717247,244 271,437Total **************************************************************************** 806,722 656,244(a)(b)The Group holds foreign currency deposits in order to meet certain finance lease obligations which are denominated in the samecurrency. The deposits together with the interest receivable thereon will be sufficient to meet the lease obligations and relatedlease interest over the period of the leases.The Group also held other restricted deposits to meet certain other obligations.258

Part XIIHistorical Financial Information15. CREDITORS — AMOUNTS FALLING DUE WITHIN ONE YEAR2004 20031’000 1’000Bank loans and overdrafts (Note 16) ************************************************* 14,413 15,207Finance lease obligations (Note 16) ************************************************** 73,358 31,277Trade creditors ******************************************************************** 48,440 32,954Accruals and deferred income******************************************************* 98,018 99,414Ticket sales in advance************************************************************* 115,652 110,310Taxation and Social Welfare (a) ****************************************************** 18,032 14,746ESOT (Note 22)— new shares to be issued ******************************************************* — 38,091— profit sharing scheme ********************************************************* 19,466 14,756Other creditors******************************************************************** 54,741 52,153442,120 408,908(a)Taxation and Social Welfare creditors include:PAYE ************************************************************************ 5,698 3,146Social Welfare **************************************************************** 2,935 2,018Overseas taxation ************************************************************* 9,329 9,370Corporation tax ************************************************************** 70 21218,032 14,74616. CREDITORS — AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR2004 20031’000 1’000Loan capitalRepayable — within one year (Note 15) *********************************************** 14,413 15,207— from one to two years *********************************************************** 11,000 9,943— from two to five years *********************************************************** 33,000 3,661— after five years (a) ***************************************************************** 6,349 6,34964,762 35,160Included in Creditors falling due within one year (Note 15)******************************* (14,413) (15,207)50,349 19,953Finance lease obligationsRepayable — within one year (Note 15) *********************************************** 73,358 31,277— from one to two years *********************************************************** 26,011 80,863— from two to five years *********************************************************** 103,127 116,245— after five years ****************************************************************** 220,727 166,466423,223 394,851Included in Creditors falling due within one year (Note 15)******************************* (73,358) (31,277)349,865 363,574400,214 383,527(a)(b)(c)This loan was advanced by the principal shareholder (Note 18). Interest is payable thereon, as determined by the Minister forFinance from time to time, and the current rate is 4% per annum (2003 — 4% per annum).Loan capital and lease obligations of 3478 million (2003 - 3421m) are secured on various assets of the Group, principally aircraft.Loan capital and lease obligations of 3279 million (2003 - 3253m) at 31 December 2004 are denominated in various foreigncurrencies, principally US Dollars and Sterling.259

Part XIIHistorical Financial Information17. PROVISIONS FOR LIABILITIES AND CHARGESPostBusiness Aircraft Maintenance Deferred EmploymentRepositioning (a) Maintenance (b) Contracts (c) Taxation Benefits (d) Other (e) Total1’000 1’000 1’000 1’000 1’000 1’000 1’000Beginning of year ****** 56,515 54,234 37,255 15,254 19,579 19,049 201,886Provided during year *** 97,900 14,656 — — 65 2,651 115,272Finance charge ondiscounted provision** — — 2,044 — — — 2,044Utilised during year***** (59,311) (4,180) (8,724) (1,168) (3,295) (1,930) (78,608)Transfers to fixed assets — (6,087) — — — — (6,087)Other transfers ******** 9,457 (22,934) — — — 228 (13,249)Translation adjustment ** — (1,770) — — (134) (384) (2,288)End of year *********** 104,561 33,919 30,575 14,086 16,215 19,614 218,970(a)(b)(c)(d)(e)Business RepositioningA provision for business repositioning costs is recognised when a constructive obligation exists. The amount of the provision isbased on the terms of business repositioning measures, including employee severance and early retirement measures which havebeen communicated to employees, and fleet rationalisation. They represent the Directors’ best estimate of the cost of thesemeasures, having regard to the current status of negotiations. The major part of the provision is expected to be utilised withintwo years.Aircraft MaintenanceProvision is made on a time apportioned basis for maintenance of leased aircraft. The provisions will be utilised as the majorairframe and engine overhauls take place. When aircraft leases expire and the aircraft pass into Group ownership, or when theopposite occurs, the related maintenance provisions are transferred to or from fixed assets as appropriate.Maintenance ContractsA fair value provision was made for contracts entered into as part of the disposal of the Group’s maintenance activities and isexpected to be utilised over a period of four years.Post Employment BenefitsThis comprises a provision for post cessation of employment/retirement obligations to current and former employees.OtherOther provisions relate mainly to expected costs of terminating financing arrangements in relation to aircraft sold in 1994 andfrequent flyer provisions.The deferred tax provision comprises:2004 20031’000 1’000Accelerated capital allowances ******************************************************* 44,420 45,376Tax losses carried forward *********************************************************** (16,130) (17,750)Provisions ************************************************************************* (14,204) (12,372)Provision for deferred tax************************************************************ 14,086 15,254Provision — beginning of year ******************************************************* 15,254 5,050(Credit)/charge in profit and loss account ********************************************** (1,168) 10,204Provision — end of year************************************************************* 14,086 15,254260

Part XIIHistorical Financial Information18. CALLED-UP SHARE CAPITAL2004 20031’000 1’000Authorised:500,000,000 shares of 01.25 each ************************************************** 625,000 625,000Issued and fully paid:At 1 January ********************************************************************* 319,738 319,738Issued during year***************************************************************** 38,091 —At 31 December ****************************************************************** 357,829 319,738During 2004, 30,472,725 shares were issued to the ESOT (Note 22) at a premium of 06,095,000 (Note 4).The issued share capital at 31 December 2004 was 286,263,280 shares.85.1% of the issued share capital of the Company was held by the Minister for Finance on behalf of theIrish Government at the balance sheet date. In the ordinary course of its business, the Group purchasesservices from entities controlled by the Irish Government.19. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS2004 20031’000 1’000Beginning of year *************************************************************** 321,868 255,603Total recognised gains for the year ************************************************** 150 66,265Issue of share capital ************************************************************** 38,091 —Share premium ******************************************************************* 6,095 —End of year ********************************************************************** 366,204 321,86820. MOVEMENTS ON PROFIT AND LOSS ACCOUNT2004 20031’000 1’000Beginning of year****************************************************************** (2,918) (69,183)Profit retained for year *************************************************************** 1,236 69,217Currency translation and other movements********************************************** (1,086) (2,952)End of year************************************************************************* (2,768) (2,918)261

Part XIIHistorical Financial Information21. CONSOLIDATED CASH FLOW STATEMENTSA. Reconciliation of Operating Profit to Net Cash Inflow from Operating ActivitiesPR Ann I,20.1(d)2004 20031’000 1’000Operating profit before exceptional items ********************************************* 96,314 74,143Profit on disposal of fixed assets ***************************************************** (52) (112)Depreciation of tangible fixed assets************************************************** 68,556 69,708Movement in provisions ************************************************************ (4,361) (920)Decrease in stocks ***************************************************************** 523 297Decrease in debtors **************************************************************** 13,842 12,451Increase/(decrease) in creditors ******************************************************* 29,654 (23,742)Loss/(profit) on exchange *********************************************************** 1,687 (8,145)Net Cash Inflow from Operating Activities before Restructuring Payments*********** 206,163 123,680Business repositioning payments ***************************************************** (59,311) (12,017)Payment to ESOT to subscribe for shares (Note 22) ************************************* (44,186) —Net Cash Inflow from Operating Activities ***************************************** 102,666 111,663B. Analysis of Cash Flows for Headings netted in the Cash Flow Statement2004 20031’000 1’000Returns on investments and servicing of financeInterest received ****************************************************************** 31,404 32,524Interest paid********************************************************************** (2,287) (4,688)Finance lease interest paid********************************************************** (21,442) (20,354)Net cash inflow for returns on investments and servicing of finance**************** 7,675 7,482Capital expenditure and financial investmentPurchase of tangible fixed assets **************************************************** (133,029) (43,369)Sale of tangible fixed assets ******************************************************** 68,956 129Net cash outflow for capital expenditure and financial investment ***************** (64,073) (43,240)Acquisitions and disposalsSale of interests in subsidiary undertakings******************************************** 3,750 3,020Net cash inflow from acquisitions and disposals *********************************** 3,750 3,020FinancingCapital element of finance leases**************************************************** (79,081) (17,167)Inception of finance leases ********************************************************* 134,279 —New loan capital ****************************************************************** 55,000 —Repayment of loan capital********************************************************** (26,440) (27,719)Decrease in restricted deposits ****************************************************** 17,529 1,866Net cash inflow/(outflow) from financing ***************************************** 101,287 (43,020)262

Part XIIHistorical Financial InformationC. Analysis of Changes in Net Funds (Debt)Net FundsNet Funds(Debt) Exchange (Debt)01 Jan 04 Cash Flow Movement 31 Dec 041’000 1’000 1’000 1’000CASHCash in hand, at bank********************************* 3,738 1,212 (24) 4,926Overdrafts ******************************************* (2,371) (923) (119) (3,413)1,367 289 (143) 1,513FINANCEDebt due within one year ****************************** (12,836) 1,836 — (11,000)Debt due after one year ******************************* (19,953) (30,396) — (50,349)Finance leases **************************************** (394,851) (55,198) 26,826 (423,223)Restricted deposits ************************************ 271,437 (17,529) (6,664) 247,244(156,203) (101,287) 20,162 (237,328)LIQUID RESOURCESOther cash deposits and liquid resources ***************** 381,069 193,990 (20,507) 554,552TOTAL ********************************************** 226,233 92,992 (488) 318,737Net FundsNet Funds(Debt) Exchange (Debt)01 Jan 03 Cash Flow Movement 31 Dec 031’000 1’000 1’000 1’000CASHCash in hand, at bank********************************* 3,721 760 (743) 3,738Overdrafts ******************************************* (6,044) 3,322 351 (2,371)(2,323) 4,082 (392) 1,367FINANCEDebt due within one year ****************************** (28,145) 15,309 — (12,836)Debt due after one year ******************************* (34,646) 12,410 2,283 (19,953)Finance leases **************************************** (456,541) 17,167 44,523 (394,851)Restricted deposits ************************************ 313,040 (1,866) (39,737) 271,437(206,292) 43,020 7,069 (156,203)LIQUID RESOURCESOther cash deposits and liquid resources ***************** 363,565 32,033 (14,529) 381,069TOTAL ********************************************** 154,950 79,135 (7,852) 226,23322. EMPLOYEE PARTICIPATIONEmployee Share Ownership Plan (‘‘ESOP’’)An ESOP was established by a Trust Deed executed on 28 April 2003. Under the terms of the ESOP, apayment of 044.186 million was made to the Aer Lingus Employee Share Ownership Trust (ESOT) during2004 which utilised these funds to subscribe for shares in Aer Lingus Group plc. Aer Lingus ESOP TrusteeLimited holds these shares on behalf of ESOP participants. Following the issue of these shares, thecombined shareholding held by Aer Lingus ESOP Trustee Limited on behalf of participants in the ESOT andthe previous Employee Share Participation Scheme established in 1996 is 14.9% of the issued share capitalof Aer Lingus Group plc.At 31 December 2004, the numbers of shares held by Aer Lingus ESOP Trustee Limited on behalf of theESOT and the previous Employee Share Participation Scheme were 33,205,501 and 9,447,727 respectively.263

Part XIIHistorical Financial InformationProfit Sharing SchemeAs part of the 2001 Survival Plan, a new profit sharing scheme was also established. Subject to confirmationby the Chief Executive that he is satisfied that staff are co-operating with the implementation of the LabourRelations Commission’s proposals issued in 2001 in respect of the Survival Plan, the Group will make 10%of the Group profit before tax and exceptional items available annually to the ESOT by way of profit sharefor the benefit of employees up to an aggregate maximum of 025.4 million. The profit sharing charge forthe year included in the profit and loss account for 2004 is determined as follows:Gross profit ******************************************************************************* 211,333Operating expenses ************************************************************************ (104,375)Interest receivable and similar income********************************************************* 33,485Interest payable and similar charges ********************************************************** (26,161)114,282Profit share (10% subject to aggregate maximum of 025.4m) ************************************ 10,6441’000During 2004, the aggregate maximum of 025.4 million was reached and the profit share is thereforerestricted to 010,644,000.Movements on the Profit Sharing Scheme from inception are as follows:Maximum entitlement ************************************************************************* 25.4Provision made in respect of profits for:2002 **************************************************************************************** (5.9)2003 **************************************************************************************** (8.8)2004 **************************************************************************************** (10.7)Balance remaining***************************************************************************** —1mDuring 2004, the profit share for 2002 of 05.9 million was drawn down by the ESOT. The 2003 and 2004profit shares totalling 019.5 million remain to be drawn. The Group has also granted a loan of 0100,000 tothe ESOT which is repayable after more than one year and is secured on the shares held by the ESOT.23. PENSIONSThe Group operates a number of externally funded pension schemes for the majority of its employees. TheIrish Pension Schemes fall within the definition of defined benefit schemes under the terms of the PensionsAct 1990. One of the Irish Pension Schemes, the Main Scheme, is operated in conjunction with a number ofother employers.The Group and employees contribute a fixed percentage of salaries each year to the Irish Pension Schemeswhich does not vary according to the funding level of the Irish Pension Schemes.The rules of the Irish Pension Schemes provide for the following in the event that there is an actuarialsurplus or deficiency in the Irish Pension Schemes:) SurplusIf an actuarial valuation discloses a surplus, it shall be applied by the trustees, after consultation with theactuary, for the purpose of increasing the benefits to members or reducing the rate of contribution by theemployers and/or members.264

Part XIIHistorical Financial Information) DeficiencyIf an actuarial valuation discloses a deficiency, the trustees shall take such measures as they thinkappropriate, having regard to the recommendations of the actuary, to remedy any such actual oranticipated deficiency provided that no such measures shall, without the consent of the employers, makeprovision for payment of any increased contribution by the employers or without the consent of themembers make provision for the payment of any increased contribution by the members.As the company contribution rate is entirely independent of the scheme funding level, the value of theschemes’ assets and liabilities are not relevant in the context of reporting under FRS 17, Retirement Benefits.The Group’s contributions charged for the year were 014.8 million (2003: 014.3 million), based on ratesspecified by the scheme rules. The actuarial reports are not available for public inspection.24. GUARANTEES AND OTHER FINANCIAL COMMITMENTS(a) Capital commitmentsAt 31 December 2004 and 31 December 2003 the Group had capital commitments as follows:2004 20031’000 1’000Contracted for but not provided— Aircraft and equipment*********************************************************** 62,401 155,174— Other ************************************************************************** 3,226 1,572Authorised but not contracted for **************************************************** 21,131 28,50286,758 185,248(b) Lease commitmentsAt 31 December 2004 the amounts payable in the following 12 months under operating leases were as setout below:Plant andProperty Aircraft Machinery1’000 1’000 1’000Operating leases which expire:Within one year******************************************************* 1,302 7,510 10Between two and five years ******************************************** 1,612 18,568 93After five years******************************************************** 3,412 6,142 —6,326 32,220 103At 31 December 2003 the amounts payable in the following 12 months under operating leases were as setout below:Plant andProperty Aircraft Machinery1’000 1’000 1’000Operating leases which expire:Within one year******************************************************* 1,185 4,212 267Between two and five years ******************************************** 2,273 30,153 104After five years******************************************************** 2,588 4,238 —6,046 38,603 371265

Part XIIHistorical Financial Information(c)Contingent liabilities(i) The Company has irrevocably guaranteed the liabilities as defined in Section 5(c) of theCompanies (Amendment) Act, 1986 of the following subsidiary undertakings incorporated inIreland: Aberport Limited, Aer Lingus Limited, Crodley Limited, Dirnan Ireland Limited,Duneast Limited, Santain Developments Limited, Seres Limited and Shinagh Limited.(ii)There are certain legal and other claims which arise from the Group’s activities which theDirectors consider will not materially affect the financial position of the Group.(d) Treasury contractsDue to the scale of its international operations and the nature of its business, the Group is exposed to theeffects of fluctuations in exchange rates and interest rates. These exposures arise principally in relation toforeign currency debt, anticipated revenues and expenditure commitments. In order to hedge against theseexposures, the Group has entered into various treasury arrangements to change the currency exposureof certain debt and to fix interest rates and exchange rates. The principal commitments outstandingunder treasury arrangements at 31 December 2004 are forward purchases of US Dollars 157.2 million(2003: US Dollars 181 million and Sterling £16 million) and forward sales of Sterling £39.1 million(2003: US Dollars 48 million and Sterling £60 million).25. GROUP COMPANIESNamePrincipal ActivityHolding Company (as at 31 December 2003 and 31 December 2004)Aer Lingus Group plc ******************************************* Holding CompanySubsidiary Undertakings (as at 31 December 2003 and 31 December 2004)Incorporated and operating principally in Ireland other than as noted:Aer Lingus Limited ********************************************* Provision of low fare air travel servicesAberport Limited *********************************************** Dormant companyAer Lingus Beachey Limited************************************** Aircraft leasing/financeDirnan Insurance Company Limited ******************************* Captive InsuranceSantain Developments Limited *********************************** Dormant companyDuneast Limited************************************************ Dormant companyCrodley Limited ************************************************ Dormant companyShinagh Limited************************************************ Dormant companySeres Limited ************************************************** Dormant companyAer Lingus ESOP Trustee Limited********************************** Trustee companySkywell Limited ************************************************ Dormant companyDirnan Ireland Limited ****************************************** Dormant companyEasthills Limited ************************************************ Dormant companyPR Ann I,7.1,25.1,7.2The registered office of the companies above incorporated in Ireland is Dublin Airport, County Dublin,Ireland.Aer Lingus Beachey Limited is incorporated and operates principally in the Isle of Man. Its registered office isAnalyst House, Peel Road, Douglas, Isle of Man IMI4LZ.Dirnan Insurance Company Limited is incorporated and operates principally in Bermuda. Its registered officeis PO Box HM2450, Hamilton HMIX, Bermuda.All of the above companies were wholly owned.26. EVENTS AFTER THE BALANCE SHEET DATEThere have been no significant events outside of the ordinary course of business affecting the Group since31 December 2004.266

Part XIIHistorical Financial InformationSECTION C: ACCOUNTANTS’ REPORT AND FINANCIAL INFORMATION FOR AER LINGUS GROUP PLCIN RESPECT OF THE TWO SIX MONTH PERIODS ENDED 30 JUNE 2006 AND 30 JUNE 2005 PREPAREDIN ACCORDANCE WITH IFRSLR3.3.3(1)(b)20.6.1PricewaterhouseCoopersP.O. BoxGeorge's QuayDublin 2IrelandThe DirectorsAer Lingus Group plcDublin AirportCo. DublinThe DirectorsAIB Corporate Finance Limited85 Pembroke RoadBallsbridgeDublin 4UBS Limited1/2 Finsbury AvenueLondonEC2M 2PP12 September 20063.3.3(1)(b)Ladies and GentlemenAer Lingus Group plcWe report on the IFRS financial information set out on pages 269 to 296 of the Prospectus dated 12September 2006 (the ‘‘Prospectus’’) of Aer Lingus Group plc and its consolidated subsidiaries (‘‘theCompany’’) for the six months ended 30 June 2006 and 30 June 2005 (‘‘the IFRS Financial Information’’).The IFRS Financial Information has been prepared for inclusion in the Prospectus dated 12 September 2006(the ‘‘Prospectus’’) on the basis described in the Basis of Preparation and Accounting Policies on page 273.This report is required by the Irish Stock Exchange listing rule 3.3.3(1)(b) and is given for the purpose ofcomplying with that item and for no other purpose.ResponsibilitiesThe Directors of the Company are responsible for preparing the IFRS Financial Information on the basis ofpreparation set out on page 273 and on the basis of IFRS.It is our responsibility to form an opinion as to whether the IFRS Financial Information gives a true and fairview, for the purposes of the Prospectus, and to report our opinion to you.Basis of opinionWe conducted our work in accordance with the Standards for Investment Reporting issued by the AuditingPractices Board in the United Kingdom and published by the Institute of Chartered Accountants in Ireland.Our work included an assessment of evidence relevant to the amounts and disclosures in the financialinformation. It also included an assessment of significant estimates and judgments made by thoseresponsible for the preparation of the financial information and whether the accounting policies areappropriate to the Company’s circumstances, consistently applied and adequately disclosed.267

Part XIIHistorical Financial InformationWe planned and performed our work so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance that thefinancial information is free from material misstatement whether caused by fraud or other irregularity orerror.Our work has not been carried out in accordance with auditing standards generally accepted in the UnitedStates of America or auditing standards of the Public Company Accounting Oversight Board (United States)and accordingly should not be relied upon as if it had been carried out in accordance with those standards.OpinionIn our opinion, the IFRS Financial Information gives, for the purposes of the Prospectus dated 12 September2006, a true and fair view of the state of affairs of the Company as at 30 June 2006 and 30 June 2005 andof its results, cash flows and changes in equity for the six month periods then ended, in accordance withthe basis of preparation on page 273 and on the basis of IFRS.DeclarationFor the purposes of 2.(2)(f) of schedule 1 of the Prospectus Regulations 2005, we are responsible for thisreport as part of the Prospectus and declare that we have taken reasonable care to ensure that theinformation contained in this report is, to the best of our knowledge, in accordance with the facts andcontains no omission likely to affect its import. This declaration is included in the Prospectus in compliancewith item 1.2 of Annex I of the EU Prospectus Regulation.Yours faithfullyPricewaterhouseCoopersChartered Accountants.268

Part XIIHistorical Financial InformationGroup Income StatementSix months Six monthsendedended30 June 30 June2006 2005Note 1000 1000Revenue ************************************************************* 1 508,320 451,571Operating Expenses:Staff costs************************************************************* 7 133,672 122,592Depreciation, amortisation and impairment ******************************** 27,876 31,517Aircraft operating lease costs ******************************************** 24,530 20,891Fuel and oil costs******************************************************* 105,602 23,914Maintenance expenses ************************************************** 35,231 37,373Airport charges ******************************************************** 94,883 83,859En-route charges ******************************************************* 23,252 20,240Distribution costs******************************************************* 24,110 22,781Ground operations, catering and other operating costs ********************** 42,573 43,537Other losses/(gains) — Net ********************************************** 3 4,747 (1,122)516,476 405,582Operating (loss)/profit before exceptional items ************************ (8,156) 45,989Exceptional items******************************************************* 5 4,259 —Operating (loss)/profit after exceptional items************************** (3,897) 45,989Finance income ******************************************************** 6 22,885 17,881Finance expense ******************************************************* 6 (13,713) (12,893)Profit before taxation ************************************************* 5,275 50,977Taxation charge ******************************************************** 8 (1,674) (5,438)Profit for the period ************************************************** 3,601 45,539Attributable to:Equity holders of the Company ****************************************** 3,601 45,539Earnings per share for profit attributable to the equity holders of theCompany (expressed in 0 per share)— basic and diluted **************************************************** 9 1.3c 15.9cThe notes on pages 274 to 296 are an integral part of this consolidated financial information269

Part XIIHistorical Financial InformationGroup Balance SheetAs at 30 June2006 2005Note 1000 1000ASSETSNon-current assetsProperty, plant and equipment ****************************************** 10 521,872 502,267Intangible assets ******************************************************* 11 5,584 5,948Available for sale financial assets ***************************************** 13 146,810 142,667Derivative financial instruments ****************************************** 14 4,146 17,361Trade and other receivables ********************************************* 16 100 100Other Deposits ******************************************************** 17 160,672 195,185839,184 863,528Current assetsInventories ************************************************************ 15 620 1,152Derivative financial instruments ****************************************** 14 26,471 47,356Trade and other receivables ********************************************* 16 81,189 86,180Cash, cash equivalents and other deposits********************************* 17 634,678 536,490742,958 671,178Total assets ********************************************************** 1,582,142 1,534,706EQUITYShare capital ********************************************************** 22 357,829 357,829Share premium ******************************************************** 23 6,095 6,095Capital conversion reserve fund ****************************************** 23 5,048 5,048Other reserves********************************************************* 23 660 8,355Retained earnings****************************************************** 35,071 (11,898)Total equity********************************************************** 404,703 365,429LIABILITIESNon-current liabilitiesBorrowings *********************************************************** 19 461,500 441,823Derivative financial instruments ****************************************** 14 7,774 5,169Deferred tax liabilities ************************************************** 21 16,120 14,384Provisions for other liabilities and charges ********************************* 20 75,866 90,961561,260 552,337Current liabilitiesTrade and other payables *********************************************** 18 495,052 470,825Current income tax liabilities ******************************************** 1,340 70Borrowings *********************************************************** 19 59,910 53,920Derivative financial instruments ****************************************** 14 7,588 —Provisions for other liabilities and charges ********************************* 20 52,289 92,125616,179 616,940Total liabilities ******************************************************* 1,177,439 1,169,277Total equity and liabilities ******************************************** 1,582,142 1,534,706The notes on pages 274 to 296 are an integral part of this consolidated financial information270

Part XIIHistorical Financial InformationGroup Statement of Changes in EquityAttributable to equity holders of the CompanyCashCapital Flow AvailableShare Share Redemption Hedging for Sale Retained Totalcapital Premium Reserve Reserve Reserve earnings equityNote 1000 1000 1000 1000 1000 1000 1000Balance at 1 January 2005****** 22/23 357,829 6,095 5,048 — 6,530 (57,437) 318,065Profit for the period ************* — — — — — 45,539 45,539Fair value gains/(losses), net of tax:— available for sale financial assets — — — — 1,825 — 1,825Total recognised income for theperiod ********************** — — — — 1,825 45,539 47,364Balance at 30 June 2005 ******* 22/23 357,829 6,095 5,048 — 8,355 (11,898) 365,429Balance at 1 January 2006****** 357,829 6,095 5,048 — 2,921 31,470 403,363Profit for the period ************* — — — — — 3,601 3,601Fair value gains/(losses), net of tax:— available for sale financial assets 23 — — — — (3,802) — (3,802)— derivative financial instruments 23 — — — 1,541 — — 1,541Total recognised income for theperiod ********************** — — — 1,541 (3,802) 3,601 1,340Balance at 30 June 2006 ******* 22/23 357,829 6,095 5,048 1,541 (881) 35,071 404,703The notes on pages 274 to 296 are an integral part of this consolidated financial information271

Part XIIHistorical Financial InformationGroup Cash Flow StatementSix months Six monthsended ended30 June 30 June2006 20051000 1000Cash flows from operating activitiesCash generated from operations ************************************************ 134,108 76,011Interest paid ***************************************************************** (7,509) (11,988)Income tax paid ************************************************************** (4,032) 376Net cash generated from operating activities************************************** 122,567 64,399Cash flows from investing activitiesDisposals of subsidiary*********************************************************Purchases of property, plant and equipment (PPE) ********************************* (39,691) (43,733)Proceeds from sale of PPE****************************************************** 4,220 3,479Purchases of intangible assets ************************************************** (789) (1,157)Purchases of available for sale financial assets************************************* (10,927) (8,086)Proceeds from sale of available for sale financial assets***************************** 12,204 —Movements in other deposits *************************************************** (91,485) (8,038)Interest received ************************************************************** 12,375 15,248Dividends received ************************************************************ 1,567 —Net cash used in investing activities ********************************************* (112,526) (42,287)Cash flows from financing activitiesProceeds from issuance of ordinary shares **************************************** — —Proceeds from borrowings ***************************************************** 29,017 30,492Repayments of borrowings ***************************************************** (47,196) (57,759)Net cash used in financing activities ********************************************* (18,179) (27,267)Net (decrease)/increase in cash, cash equivalents and bank overdrafts********** (8,138) (5,155)Cash, cash equivalents and bank overdrafts at beginning of the period*************** (203) 1,513Exchange gains/(losses) on cash and bank overdrafts******************************* 13 (8)Cash, cash equivalents and bank overdrafts at end of the period (8,328) (3,650)The notes on pages 274 to 296 are an integral part of this consolidated financial information272

Part XIIHistorical Financial InformationBASIS OF PREPARATION AND STATEMENT OF ACCOUNTING POLICIESIntroductionThe principal activity of Aer Lingus Group plc (‘‘the Company’’) and its subsidiaries (together with theCompany, ‘‘the Group’’) is the provision of low fares short and long haul air travel services from Ireland tothe UK and Europe (’short haul’) and also to the US and Middle East (’long haul’). The financial informationpresented is for the Group for the six month financial periods from 1 January 2006 to 30 June 2006 andfrom 1 January 2005 to 30 June 2005. The principal companies within the Group during these periods aredisclosed in note 12.Basis of preparation and accounting policiesFollowing admission to the Official List of the Irish Stock Exchange and the Financial Services Authority inaccordance with European Union (‘‘EU’’) Regulations, the Company will be required to prepare statutoryconsolidated financial statements for the year ending 31 December 2006 and subsequent periods inaccordance with International Financial Reporting Standards (‘‘IFRS’’) as adopted by the EU, InternationalFinancial Reporting Interpretations Committee (‘‘IFRIC’’) interpretations adopted by the EU, and with thoseparts of the Irish Companies Acts, 1963 to 2005, applicable to companies reporting under IFRS.In preparing this financial information, the Directors have used their best knowledge of the expectedstandards and interpretations, facts and circumstances, and accounting policies that will be applied whenthe Group prepares its first set of financial statements, in accordance with IFRS, as of 31 December 2006.As a result, although this financial information is based on management’s best knowledge of expectedstandards and interpretations, and current facts and circumstances, this may change. Therefore, until theGroup prepares its first set of financial statements in accordance with IFRS, the possibility cannot beexcluded that the accompanying financial information may have to be adjusted.The rules for first time adoption of IFRS are set out in IFRS 1 ‘‘First-time Adoption of International FinancialReporting Standards’’. IFRS 1 requires the Group to determine its IFRS accounting policies and apply theseretrospectively to determine the opening balance sheet position under IFRS at the date of transition (1January 2004). Information on the transition to IFRS is set out on pages 236 to 244.The IFRS accounting policies are set out on pages 204 to 212 of the Prospectus.273

Part XIIHistorical Financial InformationNOTES TO THE CONSOLIDATED FINANCIAL INFORMATION1. SEGMENTAL INFORMATIONThe Group considers that its business segments are its primary basis of analysing financial performance andreflect the internal management structure and reporting. Information is also provided on a geographicsegment basis.The Group is primarily organised into two business segments; passenger (which includes revenues and costsrelating to the carriage of passengers) and cargo (which relates to the revenues and costs from thetransportation of cargo). Ancillary revenues, including on-board sales, are included in the passengersegment together with their associated costs. For internal management purposes, direct operating costs areallocated between the segments based on their contributions to route revenue. Certain costs, assets andliabilities (including the aircraft and their related financing arrangements) contribute to both the passengerand cargo segments and as such cannot be directly attributed to either segment and are therefore shown asunallocated.(i)By Business SegmentSix months ending 30 June 2006:Passenger Cargo Unallocated (1) Total2006 2006 2006 20061000 1000 1000 1000Passenger revenue ******************************************** 451,616 — — 451,616Ancillary revenue ********************************************* 29,870 — — 29,870Other revenue************************************************ 2,659 2,659Cargo revenue *********************************************** — 24,175 — 24,175Segment revenue ********************************************* 484,145 24,175 — 508,320Segment result before exceptional items ************************* 34,273 3,205 (45,634) (8,156)Segment result after exceptional items*************************** 34,273 3,205 (41,375) (3,897)Finance income*********************************************** 22,885Finance expense ********************************************** (13,713)Profit before taxation****************************************** 5,275Taxation charge ********************************************** (1,674)Profit for the period******************************************* 3,601(1) Unallocated includes depreciation relating to unallocated assets of (325.8 million), the impact of non-qualifying hedges of(318.7 million) and foreign exchange gains of losses of (31.1 million).274

Part XIIHistorical Financial InformationSix months ending 30 June 2005:Passenger Cargo Unallocated (2) Total2005 2005 2005 20051000 1000 1000 1000Passenger revenue ******************************************** 407,053 — — 407,053Ancillary revenue ********************************************* 21,183 — — 21,183Other revenue************************************************ 2,842 — — 2,842Cargo revenue *********************************************** — 20,493 — 20,493Segment revenue ********************************************* 431,078 20,493 — 451,571Segment result before exceptional items ************************* 38,915 4,018 3,056 45,989Segment result after exceptional items*************************** 38,915 4,018 3,056 45,989Finance income*********************************************** 17,881Finance expense ********************************************** (12,893)Profit before taxation****************************************** 50,977Taxation charge ********************************************** (5,438)Profit for the period******************************************* 45,539(2) Unallocated includes depreciation relating to unallocated assets of (330.5 million), the impact of non-qualifying hedges of335.5 million and foreign exchange losses of (31.9 million).Assets and LiabilitiesAssetsLiabilities2006 2005 2006 20051000 1000 1000 1000Passenger ******************************************* 54,782 66,550 324,346 304,051Cargo ********************************************** 4,181 4,272 3,082 4,330Common assets and liabilities************************** 1,523,179 1,463,884 850,011 860,896Total *********************************************** 1,582,142 1,534,706 1,177,439 1,169,277Other segment informationDepreciation andCapital additions (3) Amortisation (3)2006 2005 2006 20051000 1000 1000 1000Passenger ********************************************* — 1,597 1,912 841Cargo ************************************************ — — 77 62Unallocated ******************************************* 40,480 43,293 25,887 30,614Total ************************************************* 40,480 44,890 27,876 31,517(3) Includes intangible assets275

Part XIIHistorical Financial Information(ii)By Geographic SegmentRevenue2006 20051000 1000Europe ************************************************************************ 313,672 274,945Rest of the World *************************************************************** 148,977 143,885Ancillary and other unallocated revenue******************************************** 45,671 32,741Total revenue******************************************************************* 508,320 451,571Assets and capital additionsAssets Capital additions (4)2006 2005 2006 20051000 1000 1000 1000Europe************************************************ 1,398,394 1,319,595 40,346 44,830Rest of the World ************************************** 6,321 7,727 134 60Unallocated ******************************************* 177,427 207,384 — —Total ************************************************* 1,582,142 1,534,706 40,480 44,890(4) Includes intangible assets.Revenues, and related assets and liabilities, are allocated to geographic segments based on the journeydestination point of each booking. Other assets and liabilities are allocated on the basis of physical location.2. UNDERLYING PERFORMANCE MEASURESIn addition to the reported profit and earnings per share, the Group also discloses underlying performancemeasures. The Group believes that these underlying performance measures provide additional usefulinformation on underlying trends to shareholders. The term underlying is not defined in IFRS and thereforemay not be comparable with similarly-titled profit measurements reported by other companies. It is notintended to be a substitute for or superior to IFRS measurements of profit.Underlying measures are calculated based on the reported profit under IFRS (as shown in the incomestatement), excluding the effects of derivatives which do not fulfil the requirements for hedge accounting,ineffectiveness on derivatives which do fulfil the requirements for hedge accounting and exceptional items.The taxation impact of the amounts excluded from underlying profit is also separately disclosed.276

Part XIIHistorical Financial InformationSix months ended 30 June2006 20051000 1000AmountsAmountsexcludedexcluded1000 from 1000 1000 from 1000Note Underlying underlying Total Underlying underlying TotalRevenue*********************** 1 508,320 — 508,320 451,571 — 451,571Operating Expenses:Staff costs ********************** 7 133,672 — 133,672 122,592 — 122,592Depreciation, amortisation andimpairment ******************* 27,876 — 27,876 31,517 — 31,517Aircraft operating lease costs****** 24,530 — 24,530 20,891 — 20,891Fuel and oil costs (1) ************** 90,560 15,042 105,602 56,388 (32,474) 23,914Maintenance expenses *********** 35,231 — 35,231 37,373 — 37,373Airport charges ***************** 94,883 — 94,883 83,859 — 83,859En-route charges **************** 23,252 — 23,252 20,240 — 20,240Distribution costs **************** 24,110 — 24,110 22,781 — 22,781Ground operations, catering andother operating costs ********** 42,573 — 42,573 43,537 — 43,537Other (gains)/losses — net (2) ****** 3 1,070 3,677 4,747 1,862 (2,984) (1,122)497,757 18,719 516,476 441,040 (35,458) 405,582Operating profit/(loss) beforeexceptional items ************ 10,563 (18,719) (8,156) 10,531 35,458 45,989Exceptional items **************** 5 — 4,259 4,259 — — —Operating profit/(loss) afterexceptional items ************ 10,563 (14,460) (3,897) 10,531 35,458 45,989Finance income ***************** 6 22,885 — 22,885 17,881 — 17,881Finance expense***************** 6 (13,713) — (13,713) (12,893) — (12,893)Profit before taxation ********** 19,735 (14,460) 5,275 15,519 35,458 50,977Taxation charge ***************** 8 (3,481) 1,807 (1,674) (1,006) (4,432) (5,438)Profit for the period *********** 16,254 (12,653) 3,601 14,513 31,026 45,539(1) The Company has entered into fuel derivatives which, although being effective commercial hedge arrangements, do not fulfilthe requirements for hedge accounting under IAS 39. The amount excluded from the underlying measure in the period consistsof the unrealised gains on these derivative contracts of 3nil (2005: 344.8 million), ineffectiveness on qualifying hedges of30.1 million (2005: nil), net of the additional cost of fuel arising from non-qualifying fuel derivative contracts (note 4) recorded inthe year of 315.1 million (2005: 312.3 million).(2) The Company has entered into interest rate and foreign exchange derivatives which, although being effective commercial hedgearrangements, do not fulfil the requirements for hedge accounting under IAS 39. The amounts excluded from the underlyingmeasure in the period are set out in note 3 and consist of fair value gains on foreign exchange option and forward contracts of3nil million (2005: 325.1 million) , losses on foreign exchange options and forward contracts incurred of 33.9 million (2005:321.5 million), fair value losses on interest rate swaps of 30.6 million (2005: gains of 30.7 million) and fair value gains on crosscurrency interest rate swaps of 30.8 million (2005: losses of 31.3 million).In relation to items (1) and (2) above, in order to qualify for hedge accounting under IFRS, IAS 39 (Financial Instruments:Recognition and Measurement), an entity must, amongst other things, designate and document its hedging arrangements ashedges prior to entering into such arrangements as well as its risk management strategy for undertaking the hedge. In addition,it must establish that each hedging arrangement was highly effective in offsetting the designated hedged risk as at each balancesheet date and that there is an expectation that the hedging arrangement will continue to be highly effective in the future. AerLingus has entered into commercial hedging arrangements in relation to its fuel, foreign exchange and financing obligationswhich, prior to 1 January 2006, did not meet these hedge accounting requirements under IAS 39. As a result, changes in the fairvalue of these arrangements are recognised immediately in the Income Statement, rather than being recorded in shareholdersequity in the Balance Sheet at each Balance Sheet date and subsequently recorded in the Income Statement in the period inwhich the hedged item affects the Income Statement.(3) The criteria for determining exceptional items is set out in the accounting policy in paragraph 2.19 which states that exceptionalitems are material non-recurring items that derive from events or transactions that fall within the ordinary activities of the groupand which individually or, if of a similar type, in aggregate, are separately disclosed by virtue of their size or incidence. Such itemsmay include business repositioning costs, profit or loss on disposal of significant items of property, plant & equipment, litigationcosts and settlements, profit or loss on disposal of investments and impairment of assets. Judgement is used by the Group inassessing the particular items which should be disclosed in the income statement and related notes as exceptional items. In 2006exceptional items were recorded in relation to a profit of 34.3 million in respect of the sale of aircraft engines.277

Part XIIHistorical Financial Information3. OTHER (GAINS)/LOSSES — NetSix months ended30 June2006 20051000 1000Derivative instruments: transactions not qualifying for hedge accounting:— Fair value gains on foreign exchange option and forward contracts ********************** — (25,137)— Losses on foreign exchange options and forward contracts incurred********************** 3,870 21,545— Fair value losses/(gains) on interest rate swaps **************************************** 645 (696)— Fair value (gains)/losses on cross currency interest rate swaps *************************** (838) 1,304Amounts excluded from underlying financial performance********************************* 3,677 (2,984)Net Foreign Exchange losses on operating activities ************************************** 1,070 1,8624,747 (1,122)4. EXPENSE BY NATURESix months ended30 June2006 20051000 1000Depreciation of property, plant & equipment (Note 10)— owned ************************************************************************* 12,614 11,033— held under finance leases ********************************************************* 14,350 16,487Impairment write downs to property, plant & equipment ********************************* — 2,600Amortisation of Intangible Assets (Note 11)********************************************* 912 1,397Operating lease rentals payable— plant and machinery************************************************************** 68 46— aircraft ************************************************************************* 24,530 20,891— property ************************************************************************ 3,931 4,026Unrealised gains on fuel derivatives**************************************************** — (44,791)Increased fuel cost arising from non-qualifying fuel derivative contracts ********************* 15,118 12,317Ineffectiveness on fuel derivative contracts********************************************** (76) —The Group enters into certain derivative contracts in relation to its fuel costs. While considered to becommercial hedges, these contracts did not fulfil the criteria for hedge accounting criteria under IFRS. Theresultant fair value gains and losses are included in Fuel and Oil costs together with the costs of the fuel.Underlying financial performance, excluding the impact of unrealised fair value gains and losses on thesederivative financial instruments, is separately disclosed in Note 2.5. EXCEPTIONAL ITEMSSix monthsended30 June2006 20051000 1000Gain on disposal of flight equipment (a) ***************************************************** 4,259 —(a)This profit related to the sale of aircraft engines.278

Part XIIHistorical Financial Information6. FINANCE EXPENSE AND FINANCE INCOMESix months ended30 June2006 20051000 1000Finance expenseOn bank loans and overdrafts ********************************************************* 756 812Finance lease interest **************************************************************** 12,200 11,071Other interest*********************************************************************** 109 172Finance charge on discounted provision ************************************************ 648 83813,713 12,893Finance incomeInterest on cash and term deposits***************************************************** 16,922 15,880Amortisation of discount ************************************************************* 3,180 2,001Dividends Received ****************************************************************** 1,567 —Profit on disposal of available for sale financial asset ************************************* 1,216 —22,885 17,8817. STAFF COSTSThe average number of persons employed by the Group in the financial period was 3,551 (2005: 3,457)and their associated payroll costs were as follows:Six months ended30 June2006 20051000 1000Wages and salaries **************************************************************** 115,519 106,121Social welfare costs**************************************************************** 9,884 8,934Pension costs (Note 25) ************************************************************ 8,269 7,537133,672 122,592Directors emoluments during the period amounted to:2006 20051000 1000Fees ********************************************************************************** 65 60Other emoluments (including pension contributions) ***************************************** 351 965Pension payments to former director ****************************************************** — 3416 1,028279

Part XIIHistorical Financial Information8. TAXATION(i)Income tax expense recognised in the Income StatementSix monthsended30 June2006 20051000 1000Current taxationIrish Corporation Tax ******************************************************************* 1,483 (398)Deferred taxOrigination and reversal of temporary differences ****************************************** 191 5,836Total income tax expense *************************************************************** 1,674 5,438(ii)Income tax asset recognised directly in EquitySix monthsended30 June2006 20051000 1000At 1 January *************************************************************************** 416 932Deferred tax movement on revaluation of Available for Sale Assets **************************** (543) 260Deferred tax movement on cash flow hedges*********************************************** 220 —At 30 June **************************************************************************** 93 1,192(iii)Reconciliation of effective tax rateSix monthsended30 June2006 20051000 1000Profit on ordinary activities before tax multiplied by standard Irish corporation tax rate of 12.5%(2005: 12.5%)********************************************************************** 659 6,372Effects of:Movement in provisions**************************************************************** (14) (1,080)Expenses not deductible for tax purposes************************************************* 20 20Differences in tax rates **************************************************************** 1,009 (113)Other adjusting items****************************************************************** — 239Charge for the period ***************************************************************** 1,674 5,438(iv) Factors that may affect future tax rates and other disclosuresNo provision for tax has been recognised in respect of the unremitted earnings of foreign subsidiaries asthere is no commitment to remit earnings.280

Part XIIHistorical Financial Information9. EARNINGS PER SHAREBasic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by theweighted average number of ordinary shares outstanding during the period.2006 2005Weighted average number of shares in issue (’000) ************************************ 286,263 286,263Profit for the period (0000) ********************************************************* 3,601 45,539Earnings per share (cent) *********************************************************** 1.3c 15.9cThere is no difference between the earnings per share calculated above at that on a diluted basis.10. PROPERTY, PLANT AND EQUIPMENTFlight Ground OtherEquipment Property Equipment Equipment Total1’000 1’000 1’000 1’000 1’000Cost1 January 2005 ******************************* 600,902 39,167 48,458 32,585 721,112Additions ************************************ 39,723 107 1,520 2,383 43,733Disposals ************************************ (23,272) — (128) — (23,400)30 June 2005 ******************************** 617,353 39,274 49,850 34,968 741,445Accumulated Depreciation1 January 2005 ******************************* 135,967 28,870 34,593 29,550 228,980Depreciation charge for period****************** 23,640 852 1,214 1,814 27,520Impairment losses recognised ******************* 2,600 — — — 2,600Disposals ************************************ (19,807) — (115) — (19,922)30 June 2005 ******************************** 142,400 29,722 35,692 31,364 239,178Cost1 January 2006 ******************************* 650,168 39,533 50,019 35,160 774,880Additions ************************************ 35,803 311 1,820 1,757 39,691Disposals ************************************ (5,242) — (55) (21) (5,318)30 June 2006 ******************************** 680,729 39,844 51,784 36,896 809,253Accumulated Depreciation1 January 2006 ******************************* 166,947 30,559 36,742 32,626 266,874Depreciation charge for period****************** 24,129 707 1,058 1,070 26,964Disposals ************************************ (6,381) — (55) (21) (6,457)30 June 2006 ******************************** 184,695 31,266 37,745 33,675 287,381Net Book Value30 June 2006 ******************************** 496,034 8,578 14,039 3,221 521,87230 June 2005 ******************************** 474,953 9,552 14,158 3,604 502,267Leased assets included in the above(Net Book Value)30 June 2006 ******************************** 371,064 — — — 371,06430 June 2005 ******************************** 330,040 — — — 330,040Management assess at each reporting date whether there is any indication that an asset may be impaired. Ifsuch an indication exists, impairment is calculated by reference to the expected recoverable amount of theasset in question. At 30 June 2006, impairment losses of 0nil (2005: 02.6 million) have been recognised.These mainly relate to items of flight equipment which have been written down to a zero value as they aresurplus to requirements.281

Part XIIHistorical Financial InformationBank borrowings are secured on flight equipment for the value of 0435.3 million (2005: 0398.3 million)(Note 19).The depreciation expense of 027.0 million (2005: 027.5 million) has been charged in ‘Depreciation,amortisation and impairment’ in the Income Statement.11. INTANGIBLE ASSETS2006 20051’000 1’000Computer SoftwareCostBeginning of period ***************************************************************** 36,787 34,474Additions ************************************************************************** 789 1,157End of period *********************************************************************** 37,576 35,631Aggregate amortisationBeginning of period ***************************************************************** 31,080 28,286Charge for the period**************************************************************** 912 1,397End of period *********************************************************************** 31,992 29,683Net Book ValueEnd of period *********************************************************************** 5,584 5,948Beginning of period ***************************************************************** 5,707 6,188The useful lives of the computer software are finite and range from three to five years depending on thenature of the asset.The amortisation expense of 00.9m (2005: 01.4m) has been charged through ’Depreciation, amortisationand impairment’ in the Income Statement.12. GROUP UNDERTAKINGSAer Lingus Group plc is a company incorporated under the Irish Companies Acts, 1963-2005. Its head officeis at Dublin Airport, Co Dublin, Ireland. It is the ultimate parent company in the Aer Lingus Group.The principal Group companies are Aer Lingus Limited and Aer Lingus Beachey Limited, both of which arewholly owned. Aer Lingus Limited is incorporated in Ireland and is the principal operating company. AerLingus Beachey Limited is incorporated in the Isle of Man and its principal activity is aircraft financing. Fulldetails of all Group companies will be filed with the Company’s annual return, which will be available fromthe Companies Registration Office, Parnell Square, Dublin 1. In addition the Group trades through anumber of overseas branches.The Group holds a 20% equity interest in Futura, a Spanish registered company. However, this has notbeen treated as an associated undertaking as, in the view of the Directors, the Group is unable to exercisesignificant influence over the operations of this entity. The Group’s investment in Futura was written offsome years ago.282

Part XIIHistorical Financial Information13. INVESTMENT FINANCIAL ASSETSAvailable for sale financial assets2006 20051’000 1’000Beginning of the period*********************************************************** 159,998 117,436Additions *********************************************************************** 10,927 8,086Exchange differences ************************************************************* (10,746) 13,059Amortisation of discount ********************************************************** 3,180 2,001Disposals *********************************************************************** (12,204) —Revaluation surplus transferred to equity ******************************************** (4,345) 2,085End of the period **************************************************************** 146,810 142,667Less: non-current portion********************************************************** 146,810 (142,667)Current portion ****************************************************************** — —There were no impairment provisions on available for sale financial assets in the 6 months ended 30 June2006 or 30 June 2005.Available for sale financial assets comprise the following:2006 20051’000 1’000Unlisted securities:— Debt securities traded on inactive markets with floating interest rates and maturitydates in September 2009 ****************************************************** 41,106 45,287— Debt securities traded on inactive markets with fixed interest rates ranging from 4.4%to 6.9% and maturity dates from September 2009 to September 2015 ************** 105,704 97,380146,810 142,667The fair values of unlisted securities are based on cash flows discounted using a rate based on the marketinterest rate and the risk premium specific to the unlisted securities.14. DERIVATIVE FINANCIAL INSTRUMENTS2006 2005Assets Liabilities Assets Liabilities1000 1000 1000 1000Interest rate swaps******************************************* — 5,576 — 5,169Forward foreign exchange contracts **************************** — 9,786 3,962 —Forward fuel price contracts*********************************** 30,617 — 60,755 —Total ****************************************************** 30,617 15,362 64,717 5,169Less non-current portion:Interest rate swaps******************************************* — 5,576 — 5,169Forward foreign exchange contracts **************************** — 2,198 — —Forward fuel price contracts*********************************** 4,146 — 17,361 —Non current portion****************************************** 4,146 7,774 17,361 5,169Current portion ******************************************** 26,471 7,588 47,356 —283

Part XIIHistorical Financial InformationForward foreign exchange contractsThe notional principal amounts of the outstanding forward foreign exchange contracts at 30 June 2006 are0283.0 million (2005: 0145.2 million).Interest rate swapsThe notional principal amounts of the outstanding interest rate swap contracts at 30 June 2006 were020.2 million (2005: 020.2 million).At 30 June 2006, the fixed interest rates vary from 2.7% to 6.1% (2005: 2.7% to 6.1%) and the mainfloating rates is EURIBOR.Aircraft fuel price contractsThe Group enters into derivative contracts to fix the price of its forecast aircraft fuel purchases. The notionalprincipal amounts of the outstanding contracts at 30 June 2006 was 0117.8 million (2005: 096.9 million).The outstanding fuel price contracts at 30 June 2006 amounted to 292,680 metric tonnes of aircraft fuel(2005: 400,795 tonnes).15. INVENTORIES2006 20051000 1000Sundry stocks ************************************************************************** 620 1,15216. TRADE AND OTHER RECEIVABLES2006 20051000 1000CurrentTrade receivables ******************************************************************** 46,747 59,411Amounts receivable from related parties ************************************************ 159 171Other amounts receivable ************************************************************ 28,479 18,873Prepayments and accrued income****************************************************** 4,247 5,485Value Added Tax ******************************************************************** 1,557 2,24081,189 86,180Non currentESOT (see Note 24) ****************************************************************** 100 100There is no geographical concentration of credit risk with respect to trade receivables, as the Group has alarge number of customers, who are internationally dispersed.There is no material difference between the carrying amount and the fair value of the non-current portion.284

Part XIIHistorical Financial Information17. CASH, CASH EQUIVALENTS AND OTHER DEPOSITS2006 20051000 1000Cash and deposits with an original maturity of less than three months ****************** 4,733 3,929Restricted Deposits *************************************************************** 165,810 199,992Other Deposits ****************************************************************** 624,807 527,754795,350 731,675Less non-current portion ******************************************************** (160,672) (195,185)634,678 536,490The effective interest rate on short-term deposits was 0.2% (2005: 0.2%), these deposits are payable ondemand.Other deposits classified as current have maturity terms of between three and 12 months. Given thematurity of these investments fall outside the three months timeframe for classification as cash and cashequivalents under IAS 7 Cash Flow Statements, the related balances have been treated as financial assets.The effective interest rate on financial assets classified as current deposits was 3.5% (2005: 2.3%); thesedeposits have an average maturity of 102 days (2005: 104 days).Other deposits classified as non-current have maturity terms in excess of 12 months.Restricted deposits comprise foreign currency deposits held in order to meet certain finance leaseobligations which are denominated in the same currency, and also certain other obligations. Restricteddeposits in relation to finance lease obligations, together with the interest receivable thereon, will besufficient to meet the lease obligations and related lease interest over the period of the leases. The Groupalso holds other restricted deposits to meet certain other obligations.18. TRADE AND OTHER PAYABLES2006 20051000 1000Trade payables******************************************************************** 60,294 55,873Amounts payable to related parties ************************************************** 3,819 1,867Accruals and deferred income******************************************************* 105,845 100,409Ticket sales in advance************************************************************* 216,210 209,048Employment related taxes ********************************************************** 7,034 7,035Employee Share Ownership Trust (note 24) ******************************************* 18,716 19,493Other amounts payable ************************************************************ 83,134 77,100495,052 470,825285

Part XIIHistorical Financial Information19. BORROWINGS2006 20051000 1000Bank OverdraftRepayable — within one year ******************************************************* 13,061 7,579Loan CapitalRepayable — within one year (a) **************************************************** 17,349 17,349— from one to two years ********************************************************** 27,500 11,000— from two to five years ********************************************************** — 27,500— after five years ***************************************************************** — —44,849 55,849Less current portion *************************************************************** (17,349) (17,349)Non-current portion *************************************************************** 27,500 38,500Finance lease obligationsRepayable — within one year ******************************************************* 29,500 28,992— from one to two years ********************************************************** 30,381 29,452— from two to five years ********************************************************** 197,776 167,158— after five years ***************************************************************** 205,843 206,713463,500 432,315Less current portion *************************************************************** (29,500) (28,992)Non-current portion *************************************************************** 434,000 403,323Total Interest bearing loans and borrowingsCurrent portion ******************************************************************* 59,910 53,920Non-current portion *************************************************************** 461,500 441,823521,410 495,743(a)This includes a loan of 36,349,000 (2005: 36,349,000) advanced by the principal shareholder (Note 22) pursuant to the AirCompanies (Amendment) Act, 1969. Interest is payable thereon, as determined by the Minister for Finance from time to time,and the current rate is 4% per annum (2005 — 4% per annum).Total borrowings include secured liabilities (bank and collateralised borrowings) of 0502.0 million(2005: 0481.8 million). Bank borrowings are secured by various items of property, plant and equipment, ofthe Group, mainly aircraft (Note 10).The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at thebalance sheet dates are as follows:2006 20051’000 1’0006 months or less ****************************************************************** 57,910 63,4286-12 months ********************************************************************* — —1-5 years ************************************************************************ 183,471 135,886Over 5 years********************************************************************** 280,029 296,429521,410 495,743286

Part XIIHistorical Financial InformationThe maturity of non-current borrowings is as follows:2006 20051’000 1’000Between one and two years ******************************************************** 57,881 40,452Between two and five years ******************************************************** 197,776 194,658Over five years******************************************************************** 205,843 206,713461,500 441,823The effective interest rates at the balance sheet date were as follows:2006 20051 US$ £ 1 US$ £Bank overdrafts*********************************************** 3.5% — 4.7% 2.6% — 4.9%Loan Capital ************************************************* 3.0% — — 3.0% — —Finance lease obligations*************************************** 3.1% 3.8% — 3.1% 3.4% —The carrying amounts and fair value of the non-current borrowings are as follows:Carrying amountsFair values2006 2005 2006 20051’000 1’000 1’000 1’000Loan Capital *********************************************** 27,500 38,500 27,500 38,500Finance lease obligations************************************* 434,000 403,323 367,427 373,037461,500 441,823 394,927 411,537The fair values are based on cash flows discounted using a rate based on prevailing forward market rates.The carrying amounts of short-term borrowings approximate their fair value.The carrying amounts of the Group’s borrowings are denominated in the following currencies:2006 20051’000 1’000Euro***************************************************************************** 128,094 135,710US dollar************************************************************************* 392,044 358,402Pound Sterling ******************************************************************** 1,196 1,576Other *************************************************************************** 76 55521,410 495,743287

Part XIIHistorical Financial InformationFinance lease obligations — minimum lease payments2006 20051’000 1’000No later than one year ********************************************************** 43,310 37,434Later than one year but no later than five years ************************************* 285,272 250,205Later than five years************************************************************* 260,463 259,757589,045 547,396Future finance charges on finance leases ******************************************* (125,545) (115,081)Book value of finance lease liabilities ********************************************** 463,500 432,315The Group had no undrawn borrowing facilities at 30 June 2006 or 30 June 2005.20. PROVISIONS FOR LIABILITIES AND CHARGESBusiness Aircraft MaintenanceRepositioning (a) Maintenance (b) Contracts (c) Other (d) Total1’000 1’000 1000 1’000 10001 January 2005************************ 104,561 33,919 30,575 35,829 204,884Provided during period ***************** — 11,247 — — 11,247Finance charge on discounted provision*** — — 838 — 838Utilised during period ****************** (25,972) (2,943) (4,362) (3,796) (37,073)Transfers ***************************** 458 — — (458) —Translation adjustment****************** — 2,927 — 263 3,19030 June 2005************************* 79,047 45,150 27,051 31,838 183,0861 January 2006************************ 37,892 54,985 23,527 28,873 145,277Provided during period ***************** — 12,991 — 245 13,236Finance charge on discounted provision*** — — 648 — 648Utilised during period ****************** (7,899) (13,367) (4,362) (3,129) (28,757)Transfers ***************************** 3,707 (3,707) — — —Translation adjustment****************** — (2,094) — (155) (2,249)30 June 2006************************* 33,700 48,808 19,813 25,834 128,155Analysed as current liabilities30 June 2006************************* 30,100 7,942 7,631 6,616 52,28930 June 2005 ************************* 71,969 6,648 7,237 6,271 92,125Analysed as non-current liabilities30 June 2006************************* 3,600 40,866 12,182 19,218 75,86630 June 2005 ************************* 7,078 38,502 19,814 25,567 90,961Total Provision — end of periodAt 30 June 2006********************** 33,700 48,808 19,813 25,834 128,155At 30 June 2005 ********************** 79,047 45,150 27,051 31,838 183,086(a)(b)Business repositioningA provision for business repositioning costs is recognised when a constructive obligation exists. The amount of the provision isbased on the terms of business repositioning measures, including employee severance and early retirement measures which havebeen communicated to employees, and fleet rationalisation. They represent the Directors’ best estimate of the cost of thesemeasures, having regard to the current status of negotiations. The major part of the provision is expected to be utilised withintwo years.Aircraft MaintenanceProvision is made on a time apportioned basis for maintenance of leased aircraft. The provisions will be utilised as the majorairframe and engine overhauls take place. When aircraft leases expire and the aircraft pass into Group ownership, or when theopposite occurs, the related maintenance provisions are transferred to or from fixed assets as appropriate.288

Part XIIHistorical Financial Information(c)(d)Maintenance ContractsA fair-value provision was made for contracts entered into as part of the disposal of the Group’s maintenance activities and isexpected to be utilised over a period of four years.OtherOther provisions relate mainly to frequent flyer provisions and post cessation of employment obligations to current and formeremployees.21. DEFERRED TAXATIONDeferred income tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets against current tax liabilities and when the deferred income taxes relate to the same fiscalauthority. The offset amounts are as follows:2006 20051’000 1’000Deferred income tax assets (deductible temporary differences)Tax losses carried forward ************************************************************ 17,821 17,130Provisions for other liabilities and charges *********************************************** 2,961 11,244Derivative Financial Instruments******************************************************** 509 —Available for Sale Financial Assets****************************************************** 127 —At 30 June ************************************************************************* 21,418 28,3742006 20051’000 1’000Deferred income tax liabilities (taxable temporary differences)Excess of accelerated capital allowances over depreciation********************************* 37,538 36,462Derivative financial instruments ******************************************************** — 4,819Available for Sale Financial Assets****************************************************** — 1,192Other temporary differences ********************************************************** — 285At 30 June ************************************************************************* 37,538 42,758Net Deferred Tax Liability ********************************************************** 16,120 14,384The gross movement on the deferred income tax account is as follows:2006 20051’000 1’000At 1 January************************************************************************ 16,252 8,288Income Statement charge ************************************************************ 191 5,836Tax credited to equity **************************************************************** (323) 260At 30 June ************************************************************************* 16,120 14,38422. CALLED-UP SHARE CAPITAL2006 20051’000 1’000Authorised:500,000,000 shares of 01.25 each ************************************************** 625,000 625,000Issued and fully paid:Balance at beginning and end of period********************************************** 357,829 357,829289

Part XIIHistorical Financial Information85.1% of the issued share capital of the Company was held by the Minister for Finance on behalf of theIrish Government at the balance sheet date.23. SHARE PREMIUM, CAPITAL CONVERSION RESERVE FUND, AND OTHER RESERVESShare premium2006 20051000 1000Balance at beginning and end of period ************************************************** 6,095 6,09530,472,725 shares were issued to the ESOT (note 24) at a premium of 06,095,000 during 2004.Capital conversion reserve fund2006 20051000 1000Balance at beginning and end of period ************************************************** 5,048 5,048Other reserves2006 20051000 1000Revaluation reserve on available for sale financial assetsAt 1 January ************************************************************************* 2,921 6,530Movement in period******************************************************************* (4,345) 2,085Deferred tax on movement in period **************************************************** 543 (260)At 30 June *************************************************************************** (881) 8,3552006 20051000 1000Cash Flow Hedging ReserveAt 1 January ************************************************************************ — —Unrealised gains on fuel derivatives***************************************************** 11,859Unrealised losses on foreign exchange derivatives***************************************** (10,022) —Unrealised losses on interest rate derivatives ********************************************* (645)Amounts transferred to income statement*********************************************** 645Ineffectiveness on Fuel Hedges********************************************************* (76) —Deferred tax on movement in period *************************************************** (220) —At 30 June************************************************************************** 1,541 —Other reserves — total2006 20051000 1000At 1 January ************************************************************************** 2,921 6,530At 30 June *************************************************************************** 660 8,355290

Part XIIHistorical Financial Information24. EMPLOYEE PARTICIPATIONEmployee Share Ownership Plan (‘‘ESOP’’)An ESOP was established by a Trust Deed executed on 28 April 2003. Under the terms of the ESOP, apayment of 044.186 million was made to the Aer Lingus Employee Share Ownership Trust (ESOT) during2005 which utilised these funds to subscribe for shares in Aer Lingus Group plc. The ESOT holds theseshares on behalf of participants. Following the issue of these shares, the combined shareholding held onbehalf of participants by the ESOT and the previous Employee Share Participation Scheme established in1996 is 14.9% of the issued share capital of Aer Lingus Group plc.At 30 June 2006, the numbers of shares held by the ESOT and the previous Employee Share ParticipationScheme were 35,386,476 and 7,266,752 respectively.Profit Sharing SchemeAs part of the 2001 Survival Plan, a new profit sharing scheme was also established. Subject to confirmationby the Chief Executive that he is satisfied that staff are co-operating with the implementation of the LabourRelations Commission’s proposals issued in 2001 in respect of the Survival Plan, the Group made 10% ofthe Group profit before tax and exceptional items (under Irish GAAP) available annually to the ESOT by wayof profit share for the benefit of employees up to an aggregate maximum of 025.4 million.During 2004, the aggregate maximum of 025.4 million was reached and the profit share was thereforerestricted to 010,644,000.The terms of the profit sharing scheme also provide that the aggregate maximum of 025.4 million would beincreased by 05 million to 030.4 million should the ESOT require this additional amount to restore theESOT’s percentage shareholding in the Company to its previous level in the event of an increase in theissued share capital, such restoration to take place within three years of the increase in share capital. As noobligation has yet arisen, provision has not been made for this potential additional profit share payable.Movements on the Profit Sharing Scheme from inception are as follows:Maximum entitlement ************************************************************************* 25.4Provision made in respect of profits for:2002 **************************************************************************************** (5.9)2003 **************************************************************************************** (8.8)2004 **************************************************************************************** (10.7)Balance remaining***************************************************************************** —1mDuring 2006, no profit share was drawn down by the ESOT. The remainder, 018.7 million, has yet to bedrawn. The Group has also granted a loan of 0100,000 to the ESOT which is repayable after more than oneyear and is secured on the shares held by the ESOT.25. PENSIONS AND OTHER POST EMPLOYMENT BENEFITSThe Group operates a number of externally funded pension schemes for the majority of its employees. TheIrish Pension Schemes fall within the definition of defined benefit schemes under the terms of the PensionsAct 1990. The Main Scheme, is operated in conjunction with a number of other employers.The Group and employees contribute a fixed percentage of salaries each year to the Irish Pension Schemeswhich does not vary according to the funding level of the Irish Pension Schemes.291

Part XIIHistorical Financial InformationThe rules of the Irish Pension Scheme provide for the following in the event that there is an actuarial surplusor deficiency in the Irish Pension Scheme:) SurplusIf an actuarial valuation discloses a surplus, it shall be applied by the Trustees, after consultation withthe Actuary, for the purpose of increasing the benefits to members or reducing the rate ofcontribution by the employers and/or members.) DeficiencyIf an actuarial valuation discloses a deficiency, the Trustees shall take such measures as they thinkappropriate, having regard to the recommendations of the Actuary, to remedy any such actual oranticipated deficiency provided that no such measures shall, without the consent of the employers,make provision for payment of any increased contribution by the employers or without the consent ofthe members make provision for the payment of any increased contribution by the members.As the company contribution rate is entirely independent of the Irish Pension Scheme funding level, thevalue of the schemes’ assets and liabilities are not relevant in the context of reporting under IAS 19,Retirement Benefits.The Group’s contributions charged for the period were 08.3 million (2005 — 07.5 million), based on ratesspecified by the Irish Pension Scheme rules. The actuarial reports are not available for public inspection.26. GUARANTEES AND OTHER FINANCIAL COMMITMENTS(a) Capital commitmentsAt 30 June 2006 the Group had capital commitments as follows:2006 20051000 1000Contracted for but not provided— Aircraft and equipment*********************************************************** 127,077 25,350— Other ************************************************************************** 2,798 1,369Authorised but not contracted for **************************************************** 20,522 23,228150,397 49,947(b) Lease commitmentsAt 30 June 2006 the Group had commitments, under non-cancellable operating leases which fall due asfollows:Plant andProperty Aircraft Machinery1000 1000 1000No later than one year ************************************************ 1,233 — 98Later than one year but no later than five years ************************** 441 102,224 —Later than five years ************************************************** 58,711 121,918 —60,385 224,142 98(c) Contingent liabilitiesThere are certain legal and other claims which arise from the Group’s activities which the Directors considerwill not materially affect the financial position of the Group.292

Part XIIHistorical Financial Information27. RELATED PARTY TRANSACTIONSThe Group is controlled by the Irish Government, which owns 85.1% of the Company’s issued share PR ANN III,capital. The remaining 14.9% of the shares are held by the Employee Share Ownership Trust (ESOT) (see 7.1note 24). In the normal course of its business, the Group sells services to and purchases services from otherentities controlled by the Irish Government. The following transactions were carried out with entities PR Ann Icontrolled by the Irish Government:19i) Sales of goods and services2006 20051000 1000Ticket Sales *************************************************************************** 2,239 2,234Other services ************************************************************************* 1,870 1,2194,109 3,453All sales were on an arm’s-length basis.ii)Purchases of goods and services2006 20051000 1000Rent, rates and similar charges ******************************************************** 2,673 4,082Other operating purchases************************************************************ 34,341 28,21637,014 32,298All purchases were on an arms length basis.iii)Interest Payable2006 20051000 1000Interest on loan from principal selling shareholder ******************************************* 127 127Interest is payable on this loan at a rate of 4% per annum as set by the Minister for Finance from time totime (see note 19).iv)Key management compensation2006 20051000 1000Salaries and other short-term employee benefits ******************************************* 967 1,396Post-employment benefits ************************************************************** 108 338Directors fees ************************************************************************* 6 10Other benefits ************************************************************************ 93 931,174 1,837293

Part XIIHistorical Financial Informationv) Period-end balances arising from sales/purchases of goods/servicesReceivables from related parties (Note 16):2006 20051000 1000Due from state and semi-state entities (all due within one year) ******************************* 159 171Payables to related parties (Note 18):2006 20051000 1000Due to state and semi-state entities (all due within one year) ******************************** 3,819 1,867vi) Loans from Related Parties (Note 19)2006 20051000 1000Loan from principal shareholder ********************************************************* 6,349 6,349This loan is repayable on demand as at 30 June 2006 and 30 June 2005.28 CASH GENERATED FROM OPERATIONS2006 20051’000 1’000Profit for the period **************************************************************** 3,601 45,539Adjustments for:— Tax (Note 8) ******************************************************************** 1,674 5,438— Depreciation (Note 10) *********************************************************** 26,964 30,120— Amortisation (Note 11) *********************************************************** 912 1,397— (Profit)/loss on sale of property, plant and equipment ********************************* (1,103) —— Net movements in provisions for liabilities and charges******************************** (15,521) (25,636)— Net fair value gains on derivative financial instruments ******************************** 19,556 (62,931)— Finance income (Note 6)********************************************************** (22,885) (17,881)— Finance expense (Note 6) ********************************************************* 13,713 12,893— Exceptional items **************************************************************** (4,259) —— Exchange losses/(gains) *********************************************************** 1,307 (840)Changes in working capital (excluding the effects of acquisition and exchange differences onconsolidation):— Inventories********************************************************************** 433 (380)— Trade and other receivables ******************************************************* (15,253) (32,106)— Trade and other payables ********************************************************* 124,969 120,398Cash generated from operations ***************************************************** 134,108 76,011294

Part XIIHistorical Financial InformationIn the cash flow statement, proceeds from sale of property, plant and equipment comprise:2006 20051000 1000Net book amount (inclusive of related maintenance provisions) ***************************** (1,238) 3,479Profit on sale of property, plant and equipment (including exceptional items) ***************** 5,458 —Proceeds from sale of property, plant and equipment ************************************* 4,220 3,47929 EVENTS AFTER THE BALANCE SHEET DATEThere have been no significant events, outside the ordinary course of business, affecting the Group since30 June 2006.30. FINANCIAL RISK MANAGEMENTFinancial risk factorsThe Group’s activities expose it to a variety of financial risks: currency risk, interest rate risk, liquidity risk(including funding and cash management), commodity price risk. The Group’s overall risk managementprogramme focuses on the reduction or, where possible, elimination of the impact of volatility in currency,interest rates and other markets, on the Airline’s performance.The purpose of the Board approved Aer Lingus Treasury policy is to regulate how the operations of theindividual treasury activities of Aer Lingus are to be conducted and how the associated risks are to becontrolled.The policy seeks to ensure that activities undertaken will not subject the Group to undesired levels of riskand that the management of treasury activities will contribute to financial performance through focusedmanagement of treasury activities. Aer Lingus adopts a strategic approach to management of its treasuryexposures. This approach involves placing certain levels of cover and developing strategies to manage theremaining exposures based on business risks and an assessment of the likely movement in market rates.This approach is business based, strategic and ongoing. The emphasis is on risk management and reductionand protecting the Group from the financial impact of volatility in financial markets and fuel markets.Aer Lingus recognises the significant impact treasury exposures can have on corporate financialperformance. The management of treasury exposures therefore receives an appropriate level ofmanagement attention.The market in which Aer Lingus operates poses significant financial, commercial and commodity price risksfor the Group. The Group recognises that it must manage the financial risks associated with the market inwhich it operates and the treasury function manages the financial (treasury) risks detailed below.a) Currency riskThe main currency exposures result from a deficit in US dollars and a surplus in sterling. A large proportionof Corporate Treasury’s work in relation to currency risk relates to the management of the Airline’s cashflowexposures. Significant currency exposures are managed for the current and next financial years on aselective hedging basis. The dollar deficit arises because the dollar costs from fuel and aircraft rentals etc.exceed dollar sales in the US. The sterling surplus arises because UK sales exceeds sterling costs. Profits arereduced by a stronger dollar and/or a weaker sterling.Corporate Treasury manages the following currency risk generating activities; cashflow exposures,non-cashflow income statement exposures and balance sheet exposures. The products used by CorporateTreasury in managing currency risk are predominantly forward foreign exchange contracts. Purchasedcurrency options and option cylinders have also been used, but on a more infrequent basis.295

Part XIIHistorical Financial InformationCurrency risks are hedged on a selective hedging basis. The Group’s risk management policy is to hedge aminimum of 50% cover for these exposures for the current financial year and a minimum of 25% cover forthe following financial year.b) Interest rate riskInterest rate risks arise from interest rate movements relating to debt and surplus cash. Higher interest ratesincrease the costs of net debt and lower interest rates lower the returns from net cash.The Airline is exposed to interest rate risk associated with its long-term funding requirements and itsprogramme of surplus funds investment. In relation to the long-term debt portfolio, interest rate risk ismanaged using a selective hedging approach. At a minimum, 50% of long-term net debt, adjusted fordefeased obligations, will be at fixed interest rates.c) Liquidity riskThe principal policy objective, in relation to liquidity, is to ensure that the Airline has access, at minimumcost, to sufficient liquidity to enable it to meet its obligations as they fall due and to provide adequately forcontingencies. In implementing this policy, the Airline is required to maintain, at all times, access to Boardapproved minimum requirements. In addition, this liquidity requirement, once drawn, must continue to beaccessible for an agreed further period. Cash balances in excess of these levels are normally maintained inorder to enable the Airline to take advantage of commercial opportunities and withstand business shocks.The Airline has long-term debt almost exclusively associated with aircraft acquisitions. All borrowing isundertaken by Corporate Treasury. Airline policy is to maintain, at all times, cash and/or committed facilitiesfor a high proportion of the net forecasted borrowing requirements for the following 12 months. Whereborrowings are made to fund the acquisition of aircraft, policy requires at least 80% of such borrowingsmust be from facilities that are committed for a period not less than five years.d) Commodity price riskAer Lingus’ fuel requirement exposes the Group to the market volatility of jet fuel prices. Aer Lingus issubject to jet fuel price risk resulting from its operating activities. The volatility of jet fuel prices has beensignificant in recent years and can have a significant effect on profitability in these operations. The primarypolicy objective for the management of fuel price exposure in Aer Lingus is to contribute to achievement ofthe airline’s profitability in a risk managed and cost effective manner.Corporate Treasury manages the fuel price exposure associated with its trading activities on a selectivehedging basis. The Group’s risk management policy is to hedge a minimum of 40% cover for fuelexposures for the current financial year and a minimum of 20% for the following financial year.The products used by Corporate Treasury in managing commodity price risk are predominantly commodityswaps, futures and options.e) Fair value estimationThe fair value of financial instruments traded in active markets (such as available for sale securities) is basedon quoted market prices at the balance sheet date. The quoted market price used for financial assets heldby the Group is the current bid price. The fair value of financial instruments that are not traded in an activemarket (for example, over-the-counter derivatives) is determined by using valuation techniques, (principallydiscounted cash flow).296

Part XIIIUnaudited Pro Forma Balance SheetPR Ann I,20.2PR Ann III,10.2PricewaterhouseCoopersP.O. BoxGeorge's QuayDublin 2IrelandThe DirectorsAer Lingus Group plcDublin AirportCo. DublinThe DirectorsAIB Corporate Finance Limited85 Pembroke RoadBallsbridgeDublin 4UBS Limited1/2 Finsbury AvenueLondonEC2M 2PP12 September 2006Dear SirsAer Lingus Group plc (the ‘‘Company’’)We report on the pro forma balance sheet (the ‘‘Pro forma balance sheet’’) set out in Part XIII of theCompany’s prospectus dated 12 September 2006 which has been prepared on the basis described onpage 299, for illustrative purposes only, to provide information about how the Offer might have affectedthe financial information presented on the basis of the accounting policies adopted by the Company inpreparing the financial information for the six month period ended 30 June 2006. This report is required byitem 7 of Annex II of the EU Prospectus Regulation and is given for the purpose of complying with that itemof the EU Prospectus Regulation and for no other purpose.PR Ann II,1ResponsibilitiesIt is the responsibility of the Directors of the Company to prepare the Pro forma balance sheet in accordancewith item 20.2 of Annex I of the EU Prospectus Regulation.It is our responsibility to form an opinion, as required by item 7 of Annex II of the EU Prospectus Regulationon the Pro forma balance sheet as to the proper compilation of the Pro forma balance sheet and to reportour opinion to you.In providing this opinion we are not updating or refreshing any reports or opinions previously made by uson any financial information used in the compilation of the Pro forma balance sheet, nor do we acceptresponsibility for such reports or opinions beyond that owed to those to whom those reports or opinionswere addressed by us at the dates of their issue.297

Part XIIIUnaudited Pro Forma Balance SheetBasis of opinionWe conducted our work in accordance with the Standards for Investment Reporting issued by the AuditingPractices Board in the United Kingdom and published by the Institute of Chartered Accountants in Ireland.The work that we performed for the purpose of making this report, which involved no independentexamination of any of the underlying financial information, consisted primarily of comparing theunadjusted financial information with the source documents, considering the evidence supporting theadjustments and discussing the Pro forma balance sheet with the Directors of the Company.We planned and performed our work so as to obtain the information and explanations we considerednecessary in order to provide us with reasonable assurance that the Pro forma balance sheet has beenproperly compiled on the basis stated and that such basis is consistent with the accounting policies of theCompany.Our work has not been carried out in accordance with auditing standards or other standards and practicesgenerally accepted in the United States of America or auditing standards of the Public CompanyAccounting Oversight Board (United States) and accordingly should not be relied upon as if it had beencarried out in accordance with those standards and practices.OpinionIn our opinion:PR Ann II,7(a)(b)the Pro forma balance sheet has been properly compiled on the basis stated; andsuch basis is consistent with the accounting policies of the Company.DeclarationPR Ann I, 1.2PR Ann III, 1.2For the purposes of Paragraph 2(2) (f) of Schedule 1 of the Prospectus Regulations 2005, we are responsiblefor this report as part of the Prospectus and we declare that we have taken all reasonable care to ensurethat the information contained in this report is, to the best of our knowledge, in accordance with the factsand contains no omission likely to affect its import. This declaration is included in the Prospectus incompliance with item 1.2 of Annex I of the EU Prospectus Regulation.Yours faithfullyPricewaterhouseCoopersChartered Accountants298

Part XIIIUnaudited Pro Forma Balance SheetThe following unaudited pro forma balance sheet for Aer Lingus has been prepared on the basis of IFRS andon the basis of the notes set out below to illustrate how the Offer might have affected the balance sheet of PR Ann II,Aer Lingus Group plc as shown in its audited financial information for the six months ended 30 June 2006 1, 4had it been undertaken at 30 June 2006. The pro forma balance sheet has been prepared for illustrativepurposes only and, because of its nature, addresses a hypothetical situation. The unaudited pro formabalance sheet therefore does not represent the actual financial position or results following the Offer.Unaudited Pro Forma Balance SheetPR Ann I20.4.3As atAdjustmentsFor InitialPro Forma PR Ann II,Balance as at 2, 3, 6, 530 June 2006 Public Offering Notes 30 June 20061 millions 1 millions 1 millionsASSETSNon-current assetsProperty, plant and equipment *********************** 521.9 — 521.9Intangible assets************************************ 5.6 — 5.6Available for sale financial assets********************** 146.8 — 146.8Derivative financial instruments *********************** 4.1 — 4.1Trade and other receivables ************************** 0.1 — 0.1Other Deposits ************************************* 160.7 — 160.7839.2 — 839.2Current assetsInventories***************************************** 0.6 — 0.6Derivative financial instruments *********************** 26.5 — 26.5Trade and other receivables ************************** 81.2 — 81.2Cash, cash equivalents and other deposits ************* 634.6 361.3 (2) 995.9742.9 361.3 1,104.2Total assets *************************************** 1,582.1 361.3 1,943.4EQUITYShare capital *************************************** 357.8 (333.1) (3) 24.7Share premium ************************************* 6.1 459.9 (4) 466.0Capital conversion reserve fund*********************** 5.0 343.5 (5) 348.5Retained earnings ********************************** 35.1 (96.0) (6) (60.9)Other reserves************************************** 0.7 — 0.7Total equity*************************************** 404.7 374.3 779.0LIABILITIESNon-current liabilitiesBorrowings **************************************** 461.5 — 461.5Derivative financial instruments *********************** 7.8 — 7.8Deferred tax liabilities ******************************* 16.1 (13.0) (7) 3.1Provisions for other liabilities and charges ************** 75.9 — 75.9561.3 (13.0) 548.3299

Part XIIIUnaudited Pro Forma Balance SheetAdjustmentsPro FormaAs at For Initial Balance as at30 June 2006 Public Offering Notes 30 June 20061 millions 1 millions 1 millionsCurrent liabilitiesTrade and other payables **************************** 495.0 — 495.0Current income tax liabilities ************************* 1.3 — 1.3Borrowings **************************************** 59.9 — 59.9Derivative financial instruments *********************** 7.6 — 7.6Provisions for other liabilities and charges ************** 52.3 — 52.3616.1 — 616.1Total liabilities ************************************ 1,177.4 (13.0) 1,164.4Total equity and liabilities ************************* 1,582.1 361.3 1,943.4Notes1. The balance sheet of the Group as at 30 June 2006 is prepared on the basis of the Group’s accounting policies on the basis of PR Ann II,IFRS and has been extracted without adjustment from the financial information for the six months ended 30 June 2006, which is 3, 4included in the Accountants’ Report in Part XII (Historical Financial Information) of this Prospectus.2. The increase in cash, cash equivalents and other deposits of 3361.3 million reflects the gross Offer proceeds attributable to theGroup of 3500.3 million, net of expenses of the Offer, which are estimated to be 330.0 million, net of the amount of the Offerproceeds attributable to the Group (3104.0 million) paid as a contribution to the Group’s pension funds and net of the amountof 35.0 million to be paid to the ESOT under the terms of the Employee Profit Sharing Scheme.3. The adjustment of 3331.1 million to Share Capital reflects a decrease of 3343.5 million reflecting the renominalisation of theshare capital from 31.25 per share to 30.05 per share, (with a corresponding entry to the capital redemption reserve fund) andan increase of 310.4 million due to the issue of the 208,444,574 New Ordinary Shares comprised in the Offer.4. The adjustment of 3459.9 million to Share Premium reflects the issue of 208,444,574 shares at a premium of 32.35 per shareover the nominal amount or 3489.9 million in total less the expenses of the Offer (330.0 million).5. The adjustment of 3343.5 million to the capital redemption reserve fund reflects the renominalisation of the share capital from31.25 per share to 30.05 per share.6. The adjustment of 396.0 million made to retained earnings reflects the amount of the Offer (3104.0 million) paid as acontribution on behalf of the Group’s pension funds and shown as an outflow from cash in note 2 above, the amount of35.0 million to be paid to the ESOT under the terms of the Employee Profit Sharing Scheme and the deferred tax amount of313.0 million (see below).7. The adjustment of 313.0 million made to deferred tax liabilities reflects the tax deductibility of the 3104.0 million contribution tothe Group’s pension funds.8. Except as disclosed above, no adjustment has been made to take account of the trading or other transactions of the Group since30 June 2006.300

Part XIVThe Offer1. BACKGROUND TO AND REASONS FOR THE OFFERThe Company is making the Offer of the New Ordinary Shares to raise additional capital. Together with PR Ann III,existing and future available cash resources and future financings, the net proceeds will be used to finance 3.4the expansion and replacement of Aer Lingus’ short-haul and long-haul aircraft fleet and to meet the costsassociated with establishing new routes in a flexible and cost-effective manner. Aer Lingus currentlyanticipates that future financings will include bank financings and aircraft finance and lease arrangements.Admission will facilitate access to equity and debt markets to give the Company flexibility in raising furtherfinancing going forward. The proceeds of the Offer received by the Company will also be used to make aone-off contribution of up to approximately 0104 million in 2006 to the Supplemental Funds, as well aspaying part of the fees, commissions and expenses payable in relation to the Offer and Admission.The Offer will comprise the issue by the Company of the New Ordinary Shares and the sale by the SellingShareholder of the Sale Shares. Based on the Offer Assumptions, 208,444,574 of the Offer Shares will beNew Ordinary Shares, which will be issued by the Company, and 72,663,949 will be Sale Shares, which arecurrently held by, and will be sold by, the Selling Shareholder. The actual number of New Ordinary Shares tobe issued by the Company and Existing Ordinary Shares to be sold by the Selling Shareholder in the Offerwill only be determined at the time the Offer Price is determined and could be higher or lower than thesenumbers.2. THE OFFER SHARESFollowing Admission, the rights attaching to the New Ordinary Shares and the Existing Ordinary Shares willbe uniform in all respects and they will form a single class for all purposes. When issued, all of the OrdinaryShares will rank equally in all respects and, in particular, will rank in full for all dividends and otherdistributions hereafter declared, paid or made on the ordinary share capital of the Company.Each Offer Share carries one vote at a meeting of the Company’s shareholders. There are no restrictions onthe voting rights of the Ordinary Shares other than those discussed in paragraphs 4.4 (Share OwnershipRestrictions) and 5.2 (Articles of Association) of Part XV (Additional Information) of this Prospectus.The ISIN for the Ordinary Shares will be IE00B1CMPN86. The trading symbol for the Ordinary Shares on theIrish Stock Exchange will be EIL1, and on the London Stock Exchange will be AERL.PR Ann III,4.1Except as disclosed in paragraph 18 (Selling Restrictions) of this Part XIV, paragraph 4.4 (Share Ownership PR Ann III,Restrictions) of Part XV (Additional Information) of this Prospectus, and subject to certain provisions in the 4.3, 4.8Company’s Articles of Association, which are described in paragraph 5.2 (Articles of Association) of Part XV(Additional Information) of this Prospectus, the Offer Shares are freely transferable. The Ordinary Shares arein registered form.3. DESCRIPTION OF THE OFFERThe Offer is being made by way of:(a) the Institutional Offer which is comprised of:(I) an offer to certain institutional investors outside the United States; andPR Ann III,5.2.1,5.2.3(a),(II)a Rule 144A Private Placement to qualified institutional buyers in the United States;(b)(c)(d)the Intermediaries Offer;the ESOT Subscription; andthe Employee and APSS Participant Offer.301

Part XIVThe OfferWhile the Offer is being made simultaneously in two or more countries, no tranches of the Offer are PR Ann III,reserved for any country. The Company and Selling Shareholder, in conjunction with the Joint Global 5.2.1Co-ordinators, will determine how the Offer Shares are to be allocated between the Institutional Offer, theIntermediaries Offer and the Employee and APSS Participant Offer.As at the date of this Prospectus, to the extent known to the Company, all of the Directors (other than theExecutive Directors) intend to subscribe for Offer Shares pursuant to the Intermediaries Offer, and theSenior Management Team (which includes the Executive Directors) may choose to subscribe for OrdinaryShares as part of the Employee and APSS Participant Offer.PR Ann III,5.2.2As at the date of this Prospectus, the Company is not aware of any person other than the ESOT whointends to subscribe for more than 5% of the total number of Offer Shares.PR Ann III,5.2.24. ALLOCATION AND PRICINGThe Offer Period will begin on the date of this Prospectus and is expected to end, at the earliest, on26 September 2006.All Offer Shares will be acquired at the Offer Price. The Offer Price and the number of Offer Shares will befixed by the Company, the Selling Shareholder and the Joint Global Co-ordinators on the PriceDetermination Date, which is expected to be 27 September 2006. The allocation of Offer Shares toinstitutions and Intermediaries will be determined at the same time by the Joint Global Co-ordinators. Anumber of factors will be considered in determining the Offer Price and the number of Offer Shares,including the price bid, the level and nature of demand for the Offer Shares, maintaining the required levelof shareholding by Qualifying Nationals, maximising the proceeds of the Offer and encouraging thedevelopment of an orderly and liquid after-market in the Ordinary Shares. Various factors will be consideredin determining the allocation of Offer Shares (for example, whether the prospective investor is considered tobe likely to hold or sell Ordinary Shares after Admission). It is intended that the allocation of the OfferShares will establish a solid shareholder base for the benefit of the Company and its shareholders as awhole. Subject to achieving the allocation objectives described above, it is not expected that applications inthe Intermediaries Offer will be scaled back below 010,000.PR Ann III,5.1.3,5.2.3(g)PR Ann III,5.3.1Pr Ann III,5.2.3(e)PR Ann III,5.2.3(c)In the event that the demand for the Offer exceeds the number of Offer Shares, the Joint Global PR Ann III,Co-ordinators reserve the right to reject orders or to accept them in part only except for the proposed 5.1.5subscription for New Ordinary Shares to a value of up to 033 million by the ESOT and except for thenumber of New Ordinary Shares required to satisfy the APSS Allocation and for applications for 020,000 orless of New Ordinary Shares in the Employee and APSS Participant Offer (which shall not be scaled back). Ifthe Joint Global Co-ordinators exercise the right to reject orders or to accept them in part only in thesecircumstances, any monies received with applications for New Ordinary Shares in respect of shares notallocated to the prospective investor will be returned by cheque to the prospective investor by the relevantIntermediaries through who the applications were made.On the Price Determination Date, an announcement (the ‘‘Offer Price Announcement’’) will be published, PR Ann III,which will contain the Offer Price and the number of Offer Shares which are the subject of the Offer. The 5.1.2, 5.1.9,Offer Price Announcement will be published by means of an announcement to a Regulatory Information 5.3.1, 5.3.2Service, in the Irish Times, the Irish Independent and the Financial Times and will be available on Aer Lingus’website. It is expected that the Offer Price Announcement will be published on or about 27 September2006. Investors who have submitted orders to purchase or subscribe for Offer Shares will not be individuallynotified of publication of the Offer Price Announcement.The Offer Price Range is 02.10 to 02.70. It is currently expected that the Offer Price will be within the Offer PR Ann III,Price Range, although this range is indicative only and the Offer Price may be set within, above or below it. 5.3.2302

Part XIVThe OfferIf the Offer Price Range does change during the course of the Offer, the Company may be required topublish a supplementary prospectus pursuant to Regulation 51(1) of the Prospectus Regulations 2005.5. THE INSTITUTIONAL OFFERUnder the Institutional Offer, Offer Shares will be offered to certain institutional investors outside the UnitedStates and, by way of the Rule 144A Private Placement, in the United States to persons reasonably believedto be QIBs in reliance on Rule 144A or another exemption from, or pursuant to a transaction not subject to,the registration requirements of the US Securities Act.The Joint Global Co-ordinators are soliciting from prospective investors in the Institutional Offer indicationsof interest in acquiring Offer Shares in the Offer. Prospective investors will be required to specify thenumber of Offer Shares they would be prepared to acquire either at different prices or at a particular price.This process, known as ‘‘bookbuilding’’, is expected to continue up to, and cease on or about,26 September 2006.The latest time and date for indications of interest in acquiring Ordinary Shares under the Institutional Offeris 10:00 am on 26 September 2006, but that time may be extended at the discretion of the Joint Global Coordinators(with the agreement of the Company and the Selling Shareholder).Participants in the Institutional Offer will be advised verbally or by electronic mail of their allocation as soonas practicable following pricing and allocation. Prospective investors in the Institutional Offer will becontractually committed to acquire the number of Offer Shares allocated to them at the Offer Price and, tothe fullest extent permitted by law, will be deemed to have agreed not to exercise any rights to rescind orterminate, or otherwise withdraw from, such commitment.PR Ann III,5.2.16. THE INTERMEDIARIES OFFER6.1 OverviewMembers of the public in Ireland and the United Kingdom may apply for New Ordinary Shares pursuant to PR Ann III,the Intermediaries Offer. Members of the public eligible to participate in the Intermediaries Offer who wish 5.2.1,to apply for New Ordinary Shares in the Intermediaries Offer must do so through Intermediaries.5.1.1In addition to the conditions to the Offer described in paragraph 12 (Underwriting Agreement) of this PR Ann III,Part XIV, the Intermediaries Offer is subject to a minimum application amount of 010,000 per application 5.2.3(f)from investors in Ireland and the United Kingdom. All applications above 010,000 will be subject to 5.1.6potential scaling back in the event of oversubscription of the Offer and to all other applicable allocationpolicies which may be applied to the Offer, and which may be notified by the Joint Global Co-ordinators inrelation to the Offer and/or the Intermediaries Offer but, subject to achieving the objectives of theseallocation policies, it is not expected that applications in the Intermediaries Offer will be scaled back below010,000. The Intermediaries Offer is being made to the public in Ireland and the United Kingdom only.Applications received from persons in EEA Member States, other than Ireland or the United Kingdom, whichare not capable of being accepted in a manner which would comply with one of the public offer prospectusexemptions recognised in Article 3.2(a), 3.2(b) or 3.2(c) of the Prospectus Directive, will be rejected. For thepurpose of the nationality requirements on which Aer Lingus’ air traffic rights are conditional, eachapplicant will be required to confirm whether or not they fall into one of the following categories: (1) Irishpassport holder; (2) Irish tax resident; (3) Irish national; (4) passport holder from a country other thanIreland; (5) national of another country without also being an Irish national or also being eligible to benationalised as an Irish citizen (in which case the applicant must state their nationality on their ClientConfirmation Form and (6) (in the case of corporates or other entities) incorporation, principal place ofbusiness or tax residency in Ireland or other relevant connections with Ireland or (if none) applicants muststate their place of incorporation, establishment or organisation and central management and control.Applications from applicants who fail to provide this confirmation will not be processed. No New OrdinaryShares allocated under the Intermediaries Offer will be registered in the name of any personwhose registered address is outside Ireland, the United Kingdom or any other member state ofthe EEA which has implemented the Prospectus Directive.303

Part XIVThe OfferAn application for New Ordinary Shares in the Intermediaries Offer means that the applicantagrees to acquire the shares at the Offer Price. Each applicant must comply with the appropriatemoney laundering checks required by the relevant Intermediary. Where an application is not accepted orthere are insufficient New Ordinary Shares available to satisfy an application in full, the relevantIntermediary will refund the applicant as required and all such refunds shall be made without interest andshall be despatched by post to the return address given by the applicant and at the risk of the relevantapplicant.An application by members of the public in Ireland and the United Kingdom under the Intermediaries Offer PR Ann III,must be made on a Client Confirmation Form and must be sent or delivered to the relevant Intermediary 5.1.3,through which the application is being made so as to be received by that Intermediary no later than 5.1.810.00 am on 21 September 2006 (or such later time as the Company and the Joint Global Co-ordinators 5.2.3(e),may decide). Client Confirmation Forms should be accompanied by a cheque or banker’s draft for the exact 5.2.3(h)euro amount, plus any brokerage charges) payable by the applicant. With the agreement of the relevantIntermediary payment may also be made by way of money transfer from the applicant’s bank account tothe relevant Intermediary’s bank account. Applications made pursuant to the Intermediaries Offer will notbe determined on the basis of the Intermediary through which the application is made. Applications tosubscribe for New Ordinary Shares pursuant to the Intermediaries Offer will not be subject to any maximumlimit and multiple subscriptions will be permitted. The Intermediaries have agreed to cap all brokeragecharges, costs and expenses payable by any applicant in the Intermediaries Offer at a maximum amountequal to 1% of the aggregate Offer Price of the New Ordinary Shares allocated to that applicant.The Intermediaries are as follows:GOODBODY STOCKBROKERSBallsbridge ParkDublin 4BLOXHAM2/3 Exchange Place 8 Cope StreetIFSC Centre Dublin 2Dublin 1MERRION STOCKBROKERSBlock CSweepstakes CentreBallsbridgeDublin 4CAMPBELL O’CONNOR & COMPANYDAVYDOLMEN STOCKBROKERSDavy HouseDolmen House49 Dawson Street 4 Earlsfort TerraceDublin 2 Dublin 2FEXCONCB STOCKBROKERS14 Ely Place 3 Georges DockDublin 2IFSCDublin 1PR Ann III,6.4Each Intermediary will aggregate the applications received by it and enter that amount, together withnationality and other details relating to the underlying applicants, on an Intermediaries Application Form.Any Intermediary who wishes to apply for New Ordinary Shares in the Intermediaries Offer may obtaincopies of this Prospectus and the Intermediaries Application Form during normal business hours, up to andincluding 25 September 2006 from the Joint Global Co-ordinators.Intermediaries must send their applications for New Ordinary Shares on the Intermediaries Application Formto the Receiving Agent by fax to 01 810 2422 or deliver it (during normal business hours only) in person toCapita Corporate Registrars Plc, Unit 5, Manor Street Business Park, Manor Street, Dublin 7, so as to bereceived by not later than 5:00 pm on 25 September 2006 (or such other time and/or date as may benotified to the Intermediaries by the Joint Global Co-ordinators).304

Part XIVThe OfferIntermediaries will be informed by the Joint Global Co-ordinators or the Receiving Agent by 8:00 am on27 September 2006 by fax or e-mail of the aggregate number of New Ordinary Shares allocated to theirunderlying clients (or to the Intermediaries themselves) and the total amount payable in respect thereof.Each Intermediary undertakes to make payment of the consideration for the New Ordinary Shares allocated,at the Offer Price, to the Joint Global Co-ordinators in accordance with details to be communicated on orafter the time of allocation, by means of the CREST system against delivery of the New Ordinary Shares on2 October 2006, or at such other time and/or date after the day of publication of the Offer Price as may beagreed by the Company, the Selling Shareholder and the Joint Global Co-ordinators and notified to theIntermediaries. The issue of any refund cheques to underlying applicants will be the sole responsibility of theIntermediaries.A commission of 0.5% on the value of New Ordinary Shares at the Offer Price will be payable toIntermediaries by the Joint Global Co-ordinators on allocations to successful applicants applying throughsuch Intermediaries. In the event that, for any reason, unconditional dealings in the Ordinary Shares do notcommence, then no commissions will be payable to any Intermediary. No commission will be payable inrespect of any New Ordinary Shares which are not actually subscribed and paid for in the IntermediariesOffer.6.2 The Bonus Share IncentiveHolders of New Ordinary Shares acquired in the Intermediaries Offer (excluding Intermediaries acquiringNew Ordinary Shares for their own benefit) and/or the Employee and APSS Participant Offer willconditionally be allotted one Bonus Share for every 20 New Ordinary Shares subscribed for by them and,provided they hold those New Ordinary Shares for a continuous period of one-year from the date ofAdmission, this one Bonus Share will be issued to them at the end of that one-year period with no furtherpayment required. Fractions of Bonus Shares will be rounded down to the nearest whole share whencalculating individual entitlements. Entitlements to Bonus Shares will be based on the lowest number ofShares held continuously by or on behalf of an applicant from the date of Admission until the firstanniversary of the date of Admission.Persons who dispose of or transfer the beneficial interest in any of the New Ordinary Shares they acquirepursuant to the Intermediaries Offer on or before the first anniversary of Admission will not be eligible toreceive any Bonus Shares in respect of the Ordinary Shares transferred, even if further Ordinary Shares aresubsequently acquired. Persons who dispose of or transfer only some of the New Ordinary Shares theyacquire pursuant to the Intermediaries Offer will be eligible to receive a proportionately reduced number ofBonus Shares. Since the Bonus Shares will be issued by the Company, shareholders in the Company who,for whatever reason, do not receive Bonus Shares will suffer dilution in their holdings of Ordinary Shares onthe issue of the Bonus Shares.In the following circumstances (provided that the Company, whose decision will be final and binding, issatisfied) a transfer of New Ordinary Shares acquired pursuant to the Intermediaries Offer before the firstanniversary of Admission will not result in a loss of entitlement to Bonus Shares:(a)(b)the transfer involves the registration of the New Ordinary Shares, following the death of the owner,in the name of one or more individuals entitled to the New Ordinary Shares under the owner’s will oron his or her intestacy; orthe transfer does not involve any change in the beneficial ownership of the New Ordinary Shares andis to either:(i)a nominee, in which case that nominee may be required to claim the Bonus Shares for thebenefit of the beneficial owner (as described under ‘‘Claims by Nominees and UncertificatedHolders’’ below); or305

Part XIVThe Offer(ii)the beneficial owner immediately prior to the transfer (for example, where New OrdinaryShares were held by a nominee for a beneficiary or by a parent for a child who has sincereached the age of majority); or(c)the New Ordinary Shares are being transferred by joint holders into the name(s) of one or more ofsuch holders (so long as one or more of the transferees were beneficial owners of the New OrdinaryShares at the time of allocation and remain the beneficial owners after the transfer) without theaddition of any other person.In these circumstances the relevant transfer form, when it is submitted to the Registrar for registration,must be accompanied by a valid special certificate (obtainable from the Registrar) which has been dulycompleted. Special certificates can be obtained from the Registrar, Capita Corporate Registrars Plc, Unit 5,Manor Street Business Park, Manor Street, Dublin 7, Ireland.In any such case, the New Ordinary Shares transferred will, for the purpose of calculating Bonus Shareentitlements, be added to any New Ordinary Shares already held by the person to whom the transfer wasmade which entitle that person to receive Bonus Shares.If a joint holder dies, the registration of the holding into the names of any remaining holders by virtue ofsurvivorship will not be treated as a transfer and entitlement to Bonus Shares will not be affected.If the transfer occurs at a time when the New Ordinary Shares being transferred are held by the transferor inuncertificated form in CREST, the provisions set out above will apply in determining whether the transferwill result in a loss of entitlement except that the valid special certificate, on being duly completed, isrequired to be submitted to the Registrar within five Business Days of the date of registration of suchtransfer.Bonus Share entitlements will be calculated separately in respect of New Ordinary Shares held in certificatedform and uncertificated form. In the event of any share capital changes prior to the issue of the BonusShares, the Bonus Shares shall carry no right or entitlement to be adjusted in any way. Bonus Shares shallcarry no right to vote or receive any dividend prior to the date they are issued. In the event that BonusShares are not issued, no repayment of any kind shall be made to subscribers.Bonus Shares will be issued to the persons entitled to them as soon as reasonably practicable after the firstanniversary of Admission. Certain tax consequences of a receipt of Bonus Shares are described in paragraph15 (Taxation Information) of Part XV (Additional Information) of this Prospectus.7. THE EMPLOYEE AND APSS PARTICIPANT OFFERThe terms and conditions of the Employee and APSS Participant Offer are the same as those applicable tothe Intermediaries Offer, except that: (1) the 010,000 minimum application amount does not apply; (2) nobrokers’ commissions are chargeable; (3) in the event of oversubscription of the Offer, APSS Participantsand Eligible Employees (in that order of priority) will not be scaled back below the higher of 020,000 perapplicant or to the extent that the Company is required to issue Ordinary Shares up to the amounts of theAPSS Allocation; and (4) applications by Eligible Employees and APSS Participants must be made directly tothe Company.PR Ann III,5.2.1,5.2.3(d)8. AMOUNT AND USE OF PROCEEDSPR Ann III,5.1.2,The Company intends to use the net proceeds of the Offer received by the Company, together with existing 3.4and future available cash resources and future financings, to finance the expansion and replacement of AerLingus’ short-haul and long-haul aircraft fleet, to meet the costs associated with establishing new routes ina flexible and cost-effective manner and to make a one-off contribution in 2006 of up to approximately306

Part XIVThe Offer0104 million to the Supplemental Funds. Based on the Offer Assumptions, the proceeds of the Offerreceived by the Company are expected to be approximately 0500.3 million and to be used as follows:(in 1 millions)The expansion and replacement of Aer Lingus’ aircraft fleet ********************************* 366.3A one-off contribution in 2006 to the Supplemental Funds********************************** up to 104.0Payment of Aer Lingus’s portion of the fees, commissions and expenses payable in relation to theOffer and Admission***************************************************************** 30.0Further information about the Supplemental Funds is set out in paragraph 7.4 (Supplemental Funds) ofPart XV (Additional Information) of this Prospectus, and further information about the loan from the sellingshareholder to Aer Lingus is set out in paragraph 13.7 (Loan from Selling Shareholder to Aer Lingus) of PartXV (Additional Information) of this Prospectus.PR Ann III,5.4.3The Company will receive proceeds only from the issue of the New Ordinary Shares. The Offer will be fullyunderwritten by the Underwriters in accordance with the terms of the Underwriting Agreement (as isdiscussed in greater detail in paragraph 12 (Underwriting Agreement) of this Part XIV). Based on the OfferAssumptions, the Company will, through the issue of the New Ordinary Shares, raise gross proceeds of0500.3 million, and the Selling Shareholder will, through the sale of the Sale Shares, raise gross proceeds of0174.4 million. These amounts may vary if the Offer Shares are sold at a price outside the Offer Price Rangeor if a greater or lesser portion of the New Ordinary Shares or Sale Shares are issued or sold in the Offerthan assumed in the Offer Assumptions.PR Ann III,5.3.1If the proceeds of the Offer received by the Company are significantly less than 0500.3 million, the amountto be invested in the expansion and replacement of Aer Lingus’ aircraft fleet may be reduced, which mayaffect Aer Lingus’ aircraft expansion and replacement plans. The commissions, fees and expenses of theOffer payable by the Company out of the gross proceeds of the Offer received by the Company areexpected to amount to approximately 030 million. No expenses or stamp duty will be charged to asubscriber or purchaser on the purchase or subscription of Offer Shares by the Company or the SellingShareholder or under Irish law.9. WITHDRAWAL RIGHTSPR Ann III,5.1.7In the event that the Company is required to publish a supplementary prospectus, applicants who haveapplied to buy Ordinary Shares in the Offer shall have at least two clear Business Days following thepublication of the supplementary prospectus within which to withdraw their offer to acquire OrdinaryShares in the Offer in its entirety. The right to withdraw an application to acquire Ordinary Shares in theOffer in these circumstances will be available to investors in the Institutional Offer, the Intermediaries Offerand the Employee and APSS Participant Offer. If the application is not withdrawn within the stipulatedperiod any offer to apply for Ordinary Shares in the Offer will remain valid and binding. Investors wishing toexercise statutory withdrawal rights after the publication of any supplementary prospectus, must do so bylodging a written notice of withdrawal (which shall not include a notice sent by facsimile or any other formof electronic communication) with the Receiving Agent, so as to be received no later than two BusinessDays after the date on which the supplementary prospectus is published. Notice of withdrawal given by anyother means or which is deposited with or received by the Receiving Agent after expiry of such period willnot constitute a valid withdrawal.10. THE ESOT SUBSCRIPTIONThe statutory pre-emption rights of the existing shareholders, including the ESOT, to subscribe for the NewOrdinary Shares in the Company were disapplied at an extraordinary general meeting of the Company on11 September 2006. At the same meeting, the Pre-Admission Articles were amended so as to remove theESOT Anti-Dilution Right and the APSS Anti-Dilution Right. Except for the ESOT Subscription and theEmployee and APSS Participant Offer, there will be no pre-emption rights to subscribe for Offer Sharesvested in the existing shareholders of the Company with respect to the Offer Shares.307

Part XIVThe OfferThe ESOT has agreed to subscribe for Offer Shares (the ‘‘ESOT Subscription’’) with an aggregate value of upto 033 million at the Offer Price. Based on the Offer Assumptions, this would result in the ESOT acquiring13,750,000 Offer Shares (representing 2.78% of the Company’s issued share capital immediately followingAdmission) pursuant to the Offer. The ESOT intends to fund the acquisition of these Offer Shares through acombination of its existing cash resources, additional profit share currently due to it under the existing 2001employee profit share arrangements and a payment from the Company representing the capitalisation ofthe 0.5% element of the pay increase recommended to be paid to employees and pilots as describedfurther in paragraph 20 (Employees) of Part VIII (Information on Aer Lingus) of this Prospectus. Thiscapitalisation payment is subject to the implementation of the 0.5% Capitalisation Recommendation andthe Pilots Pay Tribunal Recommendation. Further information is set out in paragraph 3.3 (If the 0.5%Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation cannot be implemented byAdmission, the arrangements with the ESOT and Aer Lingus’ employees described in this Prospectus will besubject to variation) of Part III (Risk Factors) of this Prospectus. Further details of the existing 2001 employeeprofit share arrangements are set out in paragraph 4.2(k) (Employee Profit Share) of Part IX (Operating andFinancial Review) of this Prospectus.11. THE ESOT OPTION AND THE NEW PROFIT SHARE ARRANGEMENTPR Ann III,5.1.10,The Selling Shareholder has agreed to grant to the ESOT an option (the ‘‘ESOT Option’’) to acquire that 5.2.3(d)number of Ordinary Shares currently held by the Selling Shareholder in the Company (the ‘‘Option Shares’’) 5.3.3equal to the number of new Ordinary Shares as would be required to be issued to ESOT so as to restore the 5.2.3(d)percentage shareholding of the ESOT in the issued share capital of the Company to the level it wasimmediately before the Offer (having taken into account the dilutive effect of the issue of the BonusShares). The ESOT Option will be exercisable by the ESOT for a period of five years from the date ofAdmission. The purchase price per Option Share under the ESOT Option will be the Offer Price although, ifand for so long as the Selling Shareholder holds 30% or more of the issued Ordinary Share capital of theCompany in certain circumstances the ESOT may become entitled to purchase Option Shares at a pricewhich is the lower of the Offer Price and the average market price of the Ordinary Shares for a period priorto the date on which the ESOT Option is exercised. It is currently envisaged that any exercise of the ESOTOption would be paid for by the New Profit Share Arrangement described below.The Selling Shareholder has agreed to vote the Option Shares as directed by the ESOT. This agreement willcease in respect of each relevant Option Share either upon the exercise of the option over such relevantOption Share or upon the relevant Option Share ceasing to be subject to the ESOT Option by virtue either ofthe ESOT Option having expired or the ESOT having purchased Ordinary Shares in the market in which casethe ESOT Option would expire over a corresponding number of Option Shares.If the 0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation are notimplemented by Admission, the ESOT Option will not come into effect.For so long as the ESOT has the possibility of buying Option Shares at the market price (if lower than theOffer Price) under the ESOT Option, (but not necessarily for the entire Option Period) it is not permitted toacquire Ordinary Shares except under the ESOT Option and may not allow its percentage holding in theCompany, taken together with that of the APSS, to exceed 14.9%.In connection with the Offer, Aer Lingus has made a contractual commitment in the ESOT Deed of FurtherCovenant to establish a new employee profit share arrangement, which (provided the 0.5% CapitalisationRecommendation and the Pilots Pay Tribunal Recommendation are implemented by Admission) will beeffective from 1 January 2006 (the ‘‘New Profit Share Arrangement’’). The percentage of the Group’s profitbefore taxation and exceptional items that will be paid under the New Profit Share Arrangement each year308

Part XIVThe Offerwill depend upon the Group’s return on average shareholders’ funds before any unrealised revaluationreserves as follows:Group return onEmployee share of Group profitaverage shareholders’ funds before taxation and exceptional itemsπ3.5% and ≤7% 2.5%π7% and ≤10% 5.0%π10% 7.5%The New Profit Share Arrangement is to be primarily for the purchase of Ordinary Shares on or before thefifth anniversary of Admission, and to discharge expenses. The New Profit Share Arrangement willterminate on the earlier of the fifth anniversary of Admission and the date the ESOT acquires the samenumber of Ordinary Shares as is equal to the number of Ordinary Shares which can be acquired under theESOT Option, either through exercise of the ESOT Option or market purchases or a combination of both.However, the New Profit Share Arrangement will continue to fund the repayment of all borrowings (capitaland interest) used to fund such purchases or the exercise of the ESOT Option where such purchases orexercises occur on or before the fifth anniversary of Admission. Further information about the ESOT Deed ofFurther Covenant is set out in paragraph 8.10 (ESOT Deed of Further Covenant) of Part XV (AdditionalInformation) of this Prospectus.As part of the arrangements which allowed for the amendment of the Articles of Association so as toremove the APSS Anti-Dilution Right, the Company has agreed to offer at the Offer Price New OrdinaryShares to those current and former employees who hold shares through the APSS. To the extent these NewOrdinary Shares are not subscribed for by the APSS Participants, the Company will offer such New OrdinaryShares for sale at the Offer Price to all Eligible Employees of Aer Lingus.12. UNDERWRITING AGREEMENTPR Ann III,5.4.3, 5.4.4The Company, the Directors, the Selling Shareholder, the Minister for Transport, the Underwriters, AIBCapital Markets and AIB Corporate Finance have entered into the Underwriting Agreement dated12 September 2006. Pursuant to the Underwriting Agreement, the Underwriters have agreed, subject tothe execution by all of the parties to the Underwriting Agreement of a purchase memorandum and otherconditions, as well as the determination of the size of the Offer and the Offer Price, to severally procurepurchasers/subscribers for the Offer Shares or, if insufficient purchasers/subscribers are available, topurchase/subscribe themselves for the Offer Shares. All such purchases/subscriptions will be at the OfferPrice.The obligation of the Underwriters to underwrite the Offer is subject to the satisfaction of conditions, PR Ann III,contained in the Underwriting Agreement. These conditions are customary for transactions of this type and 5.1.1, 5.1.4include, among other things, the absence of any material breach of warranty, Admission occurring andbecoming effective not later than 8:00 am on 2 October 2006 or such other date which the Company, theMinisters and the Joint Global Co-ordinators may agree in writing, this document having been approved bythe Financial Regulator and the Offer Price Announcement having been filed with the Financial Regulator,the absence of any material changes affecting the Group’s business, the coming into effect of certainsections of the 2004 Act, the adoption by the Company of the Articles of Association and the UnderwritingAgreement not being terminated at any time prior to Admission for reasons of, among other things, breachof warranty which is materially prejudicial in the context of the Offer, material misstatement in the OfferDocuments, the occurrence of material changes affecting the Group’s business or the occurrence of adversemarket conditions or economic or political events as described in the Underwriting Agreement.If these conditions are not satisfied or waived before Admission, the Offer and the underwritingarrangements will lapse. A commencement order in respect of Section 5 of the 2004 Act was made beforethe Selling Shareholder entered into the Underwriting Agreement. Further information on Section 5 of the2004 Act is set out in paragraph 2.2 of Part XV (Additional Information) of this Prospectus.309

Part XIVThe OfferThe Underwriting Agreement provides for the Underwriters to be paid commissions of 1.9% in respect ofthe Offer Shares to be sold/allotted pursuant to the Offer including the Over-allotment Shares less anycommissions payable to Intermediaries under the Intermediaries Offer.Any Offer Shares acquired by them may be retained or dealt in, by them for their own benefit. Investorsshould be aware that, while the ability of any of the Underwriters to retain shares is not unusual inunderwriting agreements, doing so to any significant degree could, by limiting the number of OrdinaryShares available in the market, affect volatility in the market price of the Ordinary Shares.The Underwriting Agreement provides that, prior to Admission, under certain circumstances theUnderwriters may terminate the Underwriting Agreement and their obligation thereunder to acquire OfferShares. The Underwriting Agreement provides that the Selling Shareholder may terminate the UnderwritingAgreement at any time and for any reason before Admission. If the Underwriting Agreement is terminatedthe Offer will not take place, allocations of underwritten Offer Shares to investors will become ineffective,and investors will not be able to claim delivery of the underwritten Offer Shares. Any claims with respect tosubscription or purchase fees paid and costs incurred by investors in connection with subscriptions orpurchases will arise solely under the legal relationship between the respective investor and the institutionwith which the buy order is placed. The respective investors bear the risk of not being able to fulfil theirobligations under any short sales undertaken by them.Under the Underwriting Agreement, the Company and the Selling Shareholder will give certain customaryrepresentations, warranties and undertakings to the Underwriters. In addition, the Company and the SellingShareholder will indemnify the Underwriters in respect of certain liability and risks in connection with theOffer. In addition the Executive Directors will give certain warranties to the Underwriters.(a)The CompanyThe liability of the Company under its indemnity will be unlimited as to time and amount. Theliability of the Company under the warranties will be limited to the amount equal to the Offer Pricemultiplied by the aggregate number of underwritten Offer Shares and Over-allotment Shares, if any,issued by the Company pursuant to the Offer. The liability of the Company under the warranties willbe limited in time to the date falling 90 days after publication of the Company’s annual report andaccounts for the year ending on 31 December 2008 or, if the Company’s accounting reference datehas changed, the annual report and accounts for the year ending after 31 December 2008.(b)The MinistersThe liability of the Ministers under their indemnity and the warranties will be limited to the amountequal to the Offer Price multiplied by the aggregate number of underwritten Offer Shares and OverallotmentShares, if any, sold by the Selling Shareholder pursuant to the Offer. The liability of theMinisters under the warranties will be limited in time to the date falling 90 days after publication ofthe Company’s annual report and accounts for the year ending on 31 December 2008 or, if theCompany’s accounting reference date has changed, the annual report and accounts for the yearending after 31 December 2008.In circumstances where the Company and the Ministers are both liable under their respectiveindemnities to the Underwriters in respect of the same matter, the Company and the Ministers (upto the limit on their liability) will each be liable for that proportion of the total loss suffered orincurred by the Underwriters as represents the proportion of the gross proceeds received by thempursuant to the Offer.(c)The Executive DirectorsThe Executive Directors will give certain warranties to the Underwriters in the UnderwritingAgreement. The liability of the Executive Directors under these warranties shall expire at the sametime as the Company’s warranties in the Underwriting Agreement expire and, in the case of eachExecutive Director, is subject to a cap equal to 12 months’ basic salary.310

Part XIVThe Offer13. OVER-ALLOTMENT ARRANGEMENTS AND STABILISATIONPR Ann III,5.2.5 (a),In connection with the Offer the Selling Shareholder and the Company have together granted the Joint (b), (c)Global Co-ordinators (on behalf of the Underwriters) the Over-allotment Arrangements over OrdinaryShares equal to approximately 15% of the aggregate number of Ordinary Shares available in the Offer(before the exercise of the Over-allotment Arrangements) at the Offer Price to cover over-allotments if any,made in connection with the Offer and to cover short positions arising from stabilisation transactions.Pursuant to the Over-allotment Arrangements the Selling Shareholder may be required to sell additionalOrdinary Shares equal to approximately 10% of the number of Ordinary Shares available in the Offer(before the exercise of the Over-allotment Arrangements) and the Company may be required to issueadditional Ordinary Shares equal to approximately 5% of the number of Ordinary Shares available in theOffer (before the exercise of the Over-allotment Arrangements).The Over-allotment Arrangements will be exercisable, in whole or in part, at any time up to 30 daysfollowing the Price Determination Date. Pursuant to the Over-allotment Arrangements the StabilisingManager is required to exercise the Over-allotment Arrangements (in the event that it decides to do so) inrespect of all of the Selling Shareholder’s Over-allotment Shares before requiring the issue of theCompany’s Over-allotment Shares. The exercise of the Over-allotment Arrangements is subject to certaincustomary conditions, including, among other things, the conditions in the Underwriting Agreement havingbeen satisfied or waived, the absence of any breach of warranty which is materially prejudicial in thecontext of the Offer, the delivery of certain documents and the compliance by each of the parties with theterms of the Over-allotment Arrangements, Admission not having been terminated or suspended and thenon-occurrence of any adverse market conditions or economic or political events as described in theUnderwriting Agreement.In connection with the Offer, the Stabilising Manager on behalf of the Underwriters may, either by itself orthrough any of its affiliates or agents, over-allot or effect transactions with a view to supporting the marketprice of the Ordinary Shares at a level higher than that which might otherwise prevail for a limited time afterAdmission. However, the Stabilising Manager is under no obligation to initiate such transactions. Therefore,there is no assurance given that such transactions will be undertaken and if commenced, they may bediscontinued at any time without prior notification and, in any event, must be brought to an end after alimited period. Such measures may be taken during the Stabilising Period. Prior to the commencement ofthe Offer Period, pursuant to Article 9(1) of Regulation No. 2273/2003/EC, reasonable notice will be givendisclosing the fact that stabilisation measures may be taken. Within one week of the end of the StabilisingPeriod, a press release will be published, in accordance with Article 9(3) of Regulation No. 2273/2003/EC,announcing whether stabilisation measures were taken, on which date stabilisation measures commenced,the date of the last stabilisation transaction and the price range within which stabilisation transactionsoccurred.PR Ann III,6.5.1,6.5.4PR Ann III,6.5.2The stabilisation measures may result in an exchange or market price for the Ordinary Shares higher thanwould otherwise prevail in the open market without taking such measures. In addition, the exchange ormarket price of Ordinary Shares may reach a level that cannot be maintained on a permanent basis.14. STOCK LENDING AGREEMENTIn connection with the Over-allotment Arrangements, the Stabilising Manager expects to enter into a StockLending Agreement with the Selling Shareholder, pursuant to which the Stabilising Manager will be able toborrow, free of charge, Ordinary Shares on Admission up to an amount equal to 15% of the size of theOffer for the purposes, amongst other things, of allowing the Stabilising Manager to settle, at Admission,over-allocations, if any, made in connection with the Offer. If the Stabilising Manager borrows any OrdinaryShares pursuant to the Stock Lending Agreement it will be required to return equivalent securities to theSelling Shareholder by no later than two Business Days following the end of the Stabilising Period.311

Part XIVThe Offer15. ORDERLY MARKET ARRANGEMENTS15.1 Pursuant to the Underwriting Agreement, the Company has agreed with the Joint GlobalCo-ordinators that during the period of nine months following the date of Admission, it will neither:PR Ann III,7.3(a)(b)directly or indirectly, issue, sell, offer, contract to sell or otherwise dispose of or announce theoffering of any Ordinary Shares; norenter into any transaction (including a derivatives transaction) having an economic effectsimilar to the measures described above,without the prior written consent of the Joint Global Co-ordinators. However, during this period theCompany will be permitted to issue Ordinary Shares or options over Ordinary Shares to the Directorsor employees of the Company or any of its subsidiaries under employee share option schemes orsimilar arrangements which have been approved by Aer Lingus’ shareholders.15.2 Pursuant to the Underwriting Agreement, subject to certain limited exceptions, the SellingShareholder has agreed with the Joint Global Co-ordinators that for a period of 12 months followingthe date of Admission it will not other than in connection with fulfilling its obligations to the ESOT asdescribed in paragraph 11 (The ESOT Option and the New Profit Share Arrangement) of thisPart XIV:(a)(b)offer, sell or market, directly or indirectly, any Ordinary Shares; orenter into any transaction (including a derivatives transaction) having an economic effectsimilar to the measures described above,without the prior written consent of the Joint Global Co-ordinators.15.3 As at 8 September 2006, the latest practicable date prior to publication of this Prospectus, the ESOTheld a total of 36,028,679 Ordinary Shares for the benefit of the Beneficiaries, which constituted12.6% of the Company’s issued share capital as of that date. On 11 September 2006, Aer LingusESOP Trustee Limited resolved that it would not appropriate to Beneficiaries or otherwise dispose of33,295,903 of these Ordinary Shares until 20 August 2007, and 623,172 of these Ordinary Sharesuntil 9 June 2007.16. ADMISSION AND DEALINGSApplication has been made to the Irish Stock Exchange for the Existing Ordinary Shares and the New PR Ann III,Ordinary Shares to be admitted to the Official List of the Irish Stock Exchange and to trading on its 6.1regulated market. Application has been made to the UK Financial Services Authority for the ExistingOrdinary Shares and the New Ordinary Shares to be admitted to the Official List of the UK Financial ServicesAuthority, and to the London Stock Exchange for the Existing Ordinary Shares and the New Ordinary Sharesto be admitted to trading on the London Stock Exchange’s main market for listed securities. No applicationhas been or is currently intended to be made for the Ordinary Shares to be admitted to listing or dealt in onany other exchange.It is expected that Admission to the Official Lists will become effective and that unconditional dealings inthe Ordinary Shares will commence on the Irish Stock Exchange and the London Stock Exchange at 8:00 amon 2 October 2006. All dealings in the Ordinary Shares between the commencement of conditionaldealings, which are expected to commence at 8am on 27 September 2006, and the announcement ofunconditional dealings will be on a ‘‘when issued basis’’ and at the risk of the parties concerned. If theOffer does not become unconditional, these dealings will be of no effect. The Offer may be terminated inthe circumstances described in paragraph 12 (Underwriting Agreement) of this Part XIV. The Offer cannotbe terminated once unconditional dealings in the Ordinary Shares have commenced.PR Ann III,5.1.4312

Part XIVThe Offer17. SETTLEMENTThe Company will apply for the Ordinary Shares to be admitted to CREST with effect from Admission.Settlement of transactions in Ordinary Shares following Admission will take place within CREST.CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by a sharecertificate and transferred without executing written stock transfer forms. The system is designed to reducethe costs of settlement and facilitate the processing of settlements and the updating of registers throughthe introduction of an electronic settlement system. Ordinary Shares will be held in electronic form andevidence of title to Ordinary Shares will be established on an electronic register maintained by the Registrar,which can only be altered by an electronic instruction sent through CREST.Investors in the Ordinary Shares may apply to hold the Ordinary Shares in an existing stockbroker account.Otherwise, the investor may elect to receive a share certificate. Where this happens, the Ordinary Shares willbe settled in the relevant Intermediary’s stockbroker account and, following this settlement, the Companywill issue a share certificate to the relevant shareholder. CREST accounts are expected to be credited withthe Offer Shares allocated to them on 2 October 2006. Share certificates, where requested, will be issued inline with the policy of the relevant Intermediary.With effect from Admission, the Articles of Association will permit the holding of Ordinary Shares in CREST.Temporary documents of title will not be issued.PR Ann III,5.1.8PR Ann III,4.3LR3.3.2318. SELLING RESTRICTIONSNo action has been or will be taken in any jurisdiction (other than Ireland and the United Kingdom) thatwould permit a public offer of the Ordinary Shares, or possession or distribution of this Prospectus or anyother offering material in any country or jurisdiction where action for that purpose is required. Accordingly,the Ordinary Shares may not be offered or sold, directly or indirectly, and this Prospectus may not bedistributed or published in or from any country or jurisdiction except under circumstances that will result incompliance with any and all applicable rules and regulations of any such country or jurisdiction.Persons into whose possession this Prospectus comes should inform themselves about and observe anyrestrictions on the distribution of this Prospectus and the offer of Ordinary Shares contained in thisProspectus. Any failure to comply with these restrictions may constitute a violation of the securities laws ofany such jurisdiction.This Prospectus does not constitute an offer to acquire any of the Offer Shares to any person in anyjurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.18.1 United StatesThe Ordinary Shares have not been and will not be registered under the US Securities Act or qualifiedfor sale under the laws of any state of the United States. The Ordinary Shares may not be offered,sold or delivered in the United States except pursuant to an exemption from, or in a transaction notsubject to, the registration requirements of the US Securities Act. The Ordinary Shares will be offeredand sold in the United States only to Qualified Institutional Buyers (as defined in Rule 144A underthe US Securities Act) in reliance on Rule 144A under the US Securities Act or in off-shoretransactions outside the United States in reliance on Regulation S under the US Securities Act.Any offer or sale of Ordinary Shares in reliance on Rule 144A or another exemption from theregistration requirements of the US Securities Act will be made by broker-dealers who are registeredas such under the US Exchange Act.Until the expiration of 40 days after the later of the commencement of the Offer and the originalissue or sale date of the Ordinary Shares, an offer or sale of Ordinary Shares within the United Statesby a dealer may violate the registration requirements of the US Securities Act if such offer or sale ismade otherwise than pursuant to an exemption from registration under the US Securities Act.313

Part XIVThe Offer(a)Each subscriber or purchaser of the Ordinary Shares outside the United States pursuant toRegulation S under the US Securities Act will be deemed by its acceptance of the OrdinaryShares to have represented and agreed, on its behalf and on behalf of any investor accountsfor which it is subscribing for or purchasing the Ordinary Shares, that none of the Companyor any of the Company’s affiliates nor the Joint Global Co-ordinators, nor any personrepresenting the Company, any of its affiliates or the Joint Global Co-ordinators, has madeany representation to it with respect to the offering or sale of any Ordinary Shares, other thanthe information contained in this Prospectus, which Prospectus has been delivered to it andupon which it is solely relying in making its investment decision with respect to the OrdinaryShares, has had access to such financial and other information concerning the Company andthe Ordinary Shares as it has deemed necessary in connection with its decision to purchaseany of the Ordinary Shares, and that (terms defined in Regulation S shall have the samemeanings when used in this section):(i)(ii)(iii)(iv)(v)the subscriber or purchaser understands and acknowledges that the Ordinary Shareshave not been and will not be registered under the US Securities Act, or with anysecurities regulatory authority of any state of the United States, and may not beoffered, sold or otherwise transferred except in compliance with the registrationrequirements of the US Securities Act or any other applicable securities law, pursuantto an exemption therefrom or in any transaction not subject thereto;the subscriber or purchaser, and the person, if any, for whose account or benefit thesubscriber or purchaser is acquiring the Ordinary Shares, is acquiring the OrdinaryShares in an ‘‘offshore transaction’’ meeting the requirements of Regulation S andwas located outside the United States at the time the buy order for the OrdinaryShares was originated and continues to be outside of the United States and has notpurchased the Ordinary Shares for the benefit of any person in the United States orentered into any arrangement for the transfer of the Ordinary Shares to any person inthe United States;the subscriber or purchaser is aware of the restrictions on the offer and sale of theOrdinary Shares pursuant to Regulation S described in this Prospectus and agrees togive any subsequent purchaser of such Ordinary Shares notice of any restrictions onthe transfer thereof;the Ordinary Shares have not been offered to it by means of any ‘‘directed sellingefforts’’ as defined in Regulation S; andthe Company shall not recognise any offer, sale, pledge or other transfer of theOrdinary Shares made other than in compliance with the above-stated restrictions.(b)Each subscriber or purchaser of the Ordinary Shares within the United States will be deemedby its acceptance of the Ordinary Shares to have represented and agreed on its behalf and onbehalf of any investor accounts for which it is subscribing for or purchasing the OrdinaryShares, that neither the Company or any of the Company’s affiliates nor the Joint GlobalCo-ordinators, nor any person representing the Company, any of its affiliates or the JointGlobal Co-ordinators, has made any representation to it with respect to the offering or sale ofany Ordinary Shares, other than the information contained in this Prospectus, whichProspectus has been delivered to it and upon which it is solely relying in making itsinvestment decision with respect to the Ordinary Shares, has had access to such financial andother information concerning the Company and the Ordinary Shares as it has deemednecessary in connection with its decision to purchase any of the Ordinary Shares, and that(terms defined in Rule 144A shall have the same meanings when used in this section):(i)the subscriber or purchaser is not an affiliate of the Company or a person acting onbehalf of the Company or on behalf of such affiliate; and it is not in the business of314

Part XIVThe Offerbuying and selling securities or, if it is in such business, it did not acquire the OrdinaryShares from the Company or an affiliate thereof in the initial distribution of theOrdinary Shares;(ii)(iii)(iv)(v)(vi)(vii)(viii)the subscriber or purchaser acknowledges that the Ordinary Shares have not been andwill not be registered under the US Securities Act or with any securities regulatoryauthority of any state of the United States and are subject to significant restrictions ontransfer;the subscriber or purchaser (i) is a ‘‘Qualified Institutional Buyer’’ (as defined inRule 144A under the US Securities Act), (ii) is aware that the sale to it is being made inreliance on Rule 144A under the US Securities Act or another exemption from, or in atransaction not subject to, the registration requirements of the US Securities Act, and(iii) is acquiring such Ordinary Shares for its own account or for the account of a‘‘Qualified Institutional Buyer’’, in each case for investment and not with a view to, orfor offer or sale in connection with, any resale or distribution of the Ordinary Shares inviolation of the US Securities Act or any state securities laws;the subscriber or purchaser is aware that the Ordinary Shares are being offered in theUnited States in a transaction not involving any public offering in the United Stateswithin the meaning of the US Securities Act;if, prior to the date that is two years after the later of the date (the ’’Resale RestrictionTermination Date’’) of the Offer and the last date on which the Ordinary Shares wereacquired from the Company or any of the Company’s affiliates in the Offer thesubscriber or purchaser decides to offer, resell, pledge or otherwise transfer suchOrdinary Shares, such Ordinary Shares may be offered, sold, pledged or otherwisetransferred only (i) to a person whom the beneficial owner and/or any person actingon its behalf reasonably believes is a QIB in a transaction meeting the requirements ofRule 144A under the US Securities Act, (ii) in accordance with Regulation S under theUS Securities Act, (iii) in accordance with Rule 144 under the US Securities Act (ifavailable), (iv) in accordance with an effective registration statement under the USSecurities Act, or (v) pursuant to any other available exemption from the registrationrequirements of the US Securities Act in each case in accordance with any applicablesecurities laws of any state of the United States or any other jurisdiction and agrees togive any subsequent purchaser of such Ordinary Shares notice of any restrictions onthe transfer thereof;the Ordinary Shares have not been offered to it by means of any general solicitation orgeneral advertising;the Ordinary Shares are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3)under the US Securities Act and no representation is made as to the availability of theexemption provided by Rule 144 under the US Securities Act for resales of anyOrdinary Shares;the purchaser will not deposit or cause to be deposited such Ordinary Shares into anydepositary receipt facility established or maintained by a depositary bank other than aRule 144A under the US Securities Act, restricted depositary receipt facility, so long assuch Ordinary Shares are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3)under the US Securities Act;315

Part XIVThe Offer(ix)The Ordinary Shares (to the extent they are in certificated form), unless otherwisedetermined by the Company in accordance with applicable law, will bear a legend tothe following effect:THE SECURITY EVIDENCED HEREBY HAS NOT BEEN AND WILL NOT BE REGISTEREDUNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘US SECURITIES ACT’’)OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHERJURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGEDOR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHO THE SELLER ANDANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QUALIFIEDINSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE USSECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AQUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTSOF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 903 ORRULE 904 OF REGULATION S UNDER THE US SECURITIES ACT, (3) PURSUANT TO ANEXEMPTION FROM REGISTRATION UNDER THE US SECURITIES ACT PROVIDED BYRULE 144 THEREUNDER (IF AVAILABLE) OR (4) IN ACCORDANCE WITH AN EFFECTIVEREGISTRATION STATEMENT UNDER THE US SECURITIES ACT, AND (B) INACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THEUNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OFTHE EXEMPTION PROVIDED BY RULE 144 UNDER THE US SECURITIES ACT FORRESALES OF THIS SECURITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY INTHE FOREGOING, THIS SECURITY MAY NOT BE DEPOSITED INTO ANY UNRESTRICTEDDEPOSITARY RECEIPT FACILITY IN RESPECT OF SECURITIES ESTABLISHED ORMAINTAINED BY A DEPOSITARY BANK; and(x)the Company shall not recognise any offer, sale, pledge or other transfer of theOrdinary Shares made other than in compliance with the above-stated restrictions.(c)Each subscriber or purchaser acknowledges that the Company and the Underwriters will relyupon the truth and accuracy of the foregoing acknowledgements, representations andagreements, and agrees that if any of the acknowledgements, representations or warrantiesdeemed to have been made by such subscriber or purchaser by its subscription for orpurchase of shares are no longer accurate, it shall promptly notify the Company and theUnderwriters; if they are acquiring Ordinary Shares as a fiduciary or agent for one or moreinvestor accounts, each subscriber or purchaser represents that they have sole investmentdiscretion with respect to each such account and full power to make the foregoingacknowledgements, representations and agreements on behalf of each such account.Terms defined in Rule 144A or Regulation S shall have the same meanings when used in thisparagraph 18.1.(d)Each subscriber or purchaser of the Ordinary Shares will be deemed by its acceptance of theOrdinary Shares to have represented and agreed that it is purchasing the Ordinary Shares forits own account, or for one or more investor accounts for which it is acting as a fiduciary oragent, in each case for investment, and not with a view to, or for offer or sale in connectionwith, any distribution thereof in violation of the US Securities Act or any state securities laws,subject to any requirement of law that the disposition of its property or the property of suchinvestor account or accounts be at all times within its or their control and subject to its ortheir ability to resell such notes pursuant to Rule 144A, Regulation S or any other exemptionfrom registration available under the US Securities Act.18.2 European Economic Area (‘‘EEA’’)In relation to each member state of the EEA which has implemented the Prospectus Directive (each,a ‘‘relevant member state’’), with effect from and including the date on which the ProspectusDirective was implemented in that relevant member state (the ‘‘relevant implementation date’’) no316

Part XIVThe OfferOrdinary Shares have been offered or will be offered pursuant to the Offer to the public in thatrelevant member state prior to the publication of a prospectus in relation to the Ordinary Shareswhich has been approved by the competent authority in that relevant member state or, whereappropriate, approved in another relevant member state and notified to the competent authority inthe relevant member state, all in accordance with the Prospectus Directive, except that with effectfrom and including the relevant implementation date, offers of Ordinary Shares that may constitutea public offer may be made in that relevant member state at any time:(a)(b)(c)(d)(e)to legal entities which are authorised or regulated to operate in the financial markets or, ifnot so authorised or regulated, whose corporate purpose is solely to invest in securities;to any legal entity which has two or more of (i) an average of at least 250 employees duringthe last financial year (ii) a total balance sheet of more than 043,000,000; and (iii) an annualturnover of more than 050,000,000 as shown in its last annual or consolidated accounts;to any other individual or entity authorised in that relevant member state as a qualifiedinvestor within the meaning of the Prospectus Directive;to fewer than 100 natural or legal persons (other than qualified investors as defined in theProspectus Directive) subject to obtaining the prior consent of the Underwriters; orin any other circumstances which do not require the publication by the Company of aprospectus pursuant to Article 3 of the Prospectus Directive,provided that no such offer of Ordinary Shares shall result in a requirement for the publication of aprospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing theProspectus Directive in a relevant member state and each person who initially acquires any OrdinaryShares or to whom any offer is made under the Offer on the basis of (a), (b) or (c) above will bedeemed to have represented, acknowledged and agreed that it is a ‘‘qualified investor’’ within themeaning of Article 2(1)(e) of the Prospectus Directive.For the purpose of the expression ‘‘offer of any Ordinary Shares to the public’’ in relation to anyOrdinary Shares in any relevant member state means the communication in any form and by anymeans of sufficient information on the terms of the offer and the Ordinary Shares to be offered so asto enable an investor to decide to purchase any Ordinary Shares, as the same may be varied in thatrelevant member state by any measure implementing the Prospectus Directive in that relevantmember state.In the case of any Ordinary Shares being offered to a financial intermediary as that term is used inArticle 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to haverepresented, acknowledged and agreed that the Ordinary Shares acquired by it in the Offer have notbeen acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view totheir offer or resale to persons in circumstances which may give rise to an offer of any OrdinaryShares to the public other than their offer or resale in a relevant member state to qualified investorsas so defined or in circumstances in which the prior consent of the Underwriters has been obtainedto each such proposed offer or resale. The Company and the Underwriters will rely upon the truthand accuracy of the foregoing representation, acknowledgement and agreement.18.3 CanadaThis document is not, and under no circumstances is it to be construed as, a prospectus, anadvertisement or a public offering of the securities described herein in Canada. No securitiescommission or similar authority in Canada has reviewed or in any way passed upon this document orthe merits of the securities described herein, and any representation to the contrary is an offence.317

Part XIVThe Offer(a)Representations and Agreements by PurchasersThe Offer is being made in Canada only in the Canadian provinces of British Columbia,Ontario and Québec (the ‘‘Canadian Jurisdictions’’) by way of a private placement of OfferShares. The Offer in the Canadian Jurisdictions is being made pursuant to this documentthrough the Underwriters named in this document or through their selling agents who arepermitted under applicable law to distribute such securities in Canada. Each Canadianinvestor who purchases the Offer Shares will be deemed to have represented to theCompany, the Selling Shareholder and the Underwriters that: (1) the offer and sale was madeexclusively through this document and was not made through an advertisement of the OfferShares in any printed media of general and regular paid circulation, radio, television ortelecommunications, including electronic display, or any other form of advertising in Canada;(2) such investor has read and understood the terms referred to below under ‘‘CanadianResale Restrictions’’; (3) where required by law, such investor is, or is deemed to be, acquiringthe Offer Shares as principal for its own account in accordance with the laws of the CanadianJurisdiction in which the investor is resident and not as agent or trustee; and (4) such investoror any ultimate investor for which such investor is acting as agent is entitled under applicableCanadian securities laws to acquire the Offer Shares without the benefit of a prospectusqualified under such securities laws, and without limiting the generality of the foregoing: (i) inthe case of an investor resident in a province or territory other than Ontario, without theUnderwriter having to be registered; (ii) in the case of an investor resident in British Columbiaor Québec such investor is an ‘‘accredited investor’’ as defined in section 1.1 of NationalInstrument 45-106 — Prospectus and Registration Exemptions (‘‘NI 45-106’’); (iii) in the caseof an investor resident in Ontario, such investor, or any ultimate investor for which suchinvestor is acting as agent (a) is an ‘‘accredited investor’’, other than an individual, as definedin NI 45-106 and is a person to which a dealer registered as an international dealer within themeaning of section 98 of the Regulation to the Securities Act (Ontario) (the ‘‘Ontario Act’’)may sell the Offer Shares or (b) is an ‘‘accredited investor’’, including an individual, as definedin NI 45-106 who is purchasing the Offer Shares from a fully registered investment dealerwithin the meaning of section 204 of the Regulation to the Ontario Act; and (5) suchinvestor, if not an individual or an investment fund, has a pre-existing purpose and was notestablished solely or primarily for the purpose of acquiring the Offer Shares in reliance on anexemption from applicable prospectus requirements in the Canadian Jurisdictions.Each resident of Ontario who purchases the Offer Shares will be deemed to have represented to theCompany and the Underwriters that such investor: (a) has been notified by the Company (i) that theCompany is required to provide information (‘‘personal information’’) pertaining to the investor asrequired to be disclosed in Schedule I of Form 45-106F1 under NI 45-106 (including its name,address, telephone number and the number and value of any Offer Shares purchased), whichForm 45-106F1 is required to be filed by the Company under NI 45-106; (ii) that such personalinformation will be delivered to the Ontario Securities Commission (the ‘‘OSC’’) in accordance withNI 45-106; (iii) that such personal information is being collected indirectly by the OSC under theauthority granted to it under the securities legislation of Ontario; (iv) that such personal informationis being collected for the purposes of the administration and enforcement of the securities legislationof Ontario; and (v) that the public official in Ontario who can answer questions about the OSC’sindirect collection of such personal information is the Administration Assistant to the Director ofCorporate Finance at the OSC, Suite 1903, Box 5520 Queen Street West, Toronto, Ontario M5H 3S8,Telephone: + 1 (416) 593-8086; and (b) has authorized the indirect collection of the personalinformation by the OSC. Further, the investor acknowledges that its name, address, telephonenumber and other specified information, including the number of Offer Shares it has purchased andthe aggregate purchase price to the purchaser, may be disclosed to other Canadian securitiesregulatory authorities and may become available to the public in accordance with the requirementsof applicable laws. Each resident of a Canadian Jurisdiction other than Ontario who purchases theOffer Shares hereby acknowledges to the Company and the Underwriters that its name and otherspecific information, including the number of Offer Shares it has purchased and the aggregatepurchase price to the investor, may be disclosed to Canadian securities regulatory authorities andbecome available to the public in accordance with the requirements of applicable Canadian318

Part XIVThe Offersecurities laws. By purchasing the Offer Shares, each Canadian investor consents to the disclosure ofsuch information.(b)(c)(d)Selling RestrictionsEach Underwriter has agreed that (a) no prospectus has been issued or will be issued inrespect of the Offer Shares for distribution to the public under applicable Canadian securitieslaws, and (b) the Offer Shares may not be offered or sold, directly or indirectly, in Canadaexcept with the consent of the Underwriters and in compliance with applicable Canadiansecurities laws and accordingly, any sales of Offer Shares will be made (i) through anappropriately registered securities dealer or in accordance with an available exemption fromthe registered securities dealer requirements of applicable Canadian securities laws; and(b) pursuant to an exemption from the prospectus requirements of such laws.Language of DocumentEach purchaser of Offer Shares in Canada that receives a purchase confirmation herebyagrees that it is such purchaser’s express wish that all documents evidencing or relating in anyway to the sale of such Offer Shares be drafted in the English language only. Chaqueacheteur au Canada des valeurs mobilières recevant un avis de confirmation à l’égard de sonacquisition reconnaît que c’est sa volonté expresse que tous les documents faisant foi ou serapportant de quelque manière à la vente des valeurs mobilières soient rédigés uniquementen anglais.Canadian Resale RestrictionsThe distribution of the Offer Shares in the Canadian Jurisdictions is being made on a privateplacement basis. Accordingly, any resale of the Offer Shares must be made (i) through anappropriately registered dealer or in accordance with an available exemption from the dealerregistration requirements of applicable provincial securities laws and (ii) in accordance with,or pursuant to an exemption from, the prospectus requirements of such laws. Such resalerestrictions may not apply to resales made outside of Canada, depending on thecircumstances. Purchasers of Offer Shares are advised to seek legal advice prior to any resaleof Offer Shares.The Company is not, and may never be, a ‘‘reporting issuer’’, as such term is defined underapplicable Canadian securities legislation, in any province or territory of Canada in which the OfferShares will be offered and there currently is no public market for any of the securities of theCompany in Canada, including the Offer Shares, and one may never develop. Under nocircumstances will the Company be required to file a prospectus or similar document with anysecurities regulatory authority in Canada qualifying the resale of the Offer Shares to the public in anyprovince or territory of Canada. Canadian investors are advised that the Company currently has nointention to file a prospectus or similar document with any securities regulatory authority in Canadaqualifying the resale of the Offer Shares to the public in any province or territory in Canada.(e)Rights of Action for Damages or Rescission (Ontario)Securities legislation in Ontario provides investors in Offer Shares pursuant to this Prospectuswith a remedy for damages or rescission, or both, in addition to any other rights they mayhave at law, where this prospectus or any amendment to it, contains a ‘‘Misrepresentation’’.Where used herein, ‘‘Misrepresentation’’ means an untrue statement of a material fact or anomission to state a material fact that is required to be stated or that is necessary to make anystatement not misleading in light of the circumstances in which it was made. These remedies,or notice with respect to these remedies, must be exercised or delivered, as the case may be,by the purchaser within the time limits prescribed by the applicable securities legislation.Section 130.1 of the Ontario Act provides that every purchaser of securities pursuant to an offeringmemorandum (such as this Prospectus) shall have a statutory right of action for damages orrescission against the issuer in the event that the offering memorandum contains aMisrepresentation. A purchaser who purchases securities offered by the offering memorandum319

Part XIVThe Offerduring the period of distribution has, without regard to whether the purchaser relied upon theMisrepresentation, a right of action for damages or, alternatively, while still the owner of thesecurities, for rescission against the issuer provided that:(a)(b)(c)(d)if the purchaser exercises its right of rescission, it shall cease to have a right of action fordamages as against the issuer;the issuer will not be liable if it proves that the purchaser purchased the securities withknowledge of the Misrepresentation;the issuer will not be liable for all or any portion of damages that it proves do not representthe depreciation in value of the securities as a result of the Misrepresentation relied upon; andin no case shall the amount recoverable exceed the price at which the securities were offered.Subject to the paragraph below, all or any one or more of the issuer and any selling securityholderare jointly and severally liable, and every person or company who becomes liable to make anypayment for a Misrepresentation may recover a contribution from any person or company who, ifsued separately, would have been liable to make the same payment, unless the court rules that, in allthe circumstances of the case, to permit recovery of the contribution would not be just andequitable.Despite the paragraph above, the issuer shall not be liable where it is not receiving any proceedsfrom the distribution of the securities being distributed and the Misrepresentation was not based oninformation provided by the issuer, unless the Misrepresentation (a) was based on information thatwas previously publicly disclosed by the issuer, (b) was a misrepresentation at the time of its previouspublic disclosure and (c) was not subsequently publicly corrected or superseded by the issuer prior tothe completion of the distribution of the securities.Section 138 of the Ontario Act provides that no action shall be commenced to enforce these rightsmore than:(a)(b)in the case of an action for rescission, 180 days from the day of the transaction that gave riseto the cause of action; orin the case of an action for damages, the earlier of:(i)(ii)180 days from the day that the purchaser first had knowledge of the facts giving riseto the cause of action; orthree years from the day of the transaction that gave rise to the cause of action.The rights referred to in section 130.1 of the Ontario Act do not apply in respect of an offeringmemorandum (such as this Prospectus) delivered to a prospective purchaser in connection with adistribution made in reliance on the exemption from the prospectus requirement in section 2.3 ofNI 45-106 (the ‘‘accredited investor exemption’’) if the prospective purchaser is:(a)(b)(c)a Canadian financial institution (as defined in NI 45-106) or a Schedule III bank,the Business Development Bank of Canada incorporated under the Business DevelopmentBank of Canada Act (Canada), ora subsidiary of any person referred to in paragraphs (a) or (b), if the person owns all of thevoting securities of the subsidiary, except the voting securities required by law to be ownedby directors of that subsidiary.320

Part XIVThe OfferThe foregoing summary is subject to the express provisions of the Ontario Act and the rules,regulations and other instruments thereunder, and reference is made to the complete text of suchprovisions contained therein. Such provisions may contain limitations and statutory defences onwhich the Company and the Selling Shareholder may rely. Prospective purchasers should referto the applicable provisions of the relevant securities legislation and are advised to consulttheir own legal advisers as to which, or whether any, of such rights may be available tothem. The enforceability of these rights may be limited as described below under ‘‘Enforcement ofLegal Rights’’.The rights of action discussed above will be granted to the purchasers to whom such rights areconferred upon acceptance by the relevant Underwriter of the purchase price for the Offer Shares.The rights discussed above are in addition to and without derogation from any other right or remedywhich purchasers may have at law. Similar rights may be available to investors resident in otherCanadian Jurisdictions under local provincial securities laws.(f)(g)Enforcement of Legal RightsAll of the directors and officers (or their equivalents) of the Company, as well as any expertsnamed herein, may be located outside of Canada and, as a result, it may not be possible forpurchasers to effect service of process within Canada upon the Company or such experts. Allor a substantial portion of the assets of the Company and such experts may be locatedoutside of Canada and, as a result, it may not be possible to satisfy a judgment against theCompany or such experts in Canada or to enforce a judgment obtained in Canadian courtsagainst the Company or such experts outside of Canada.Canadian Tax Considerations and Eligibility for InvestmentThis document does not address the Canadian tax consequences of ownership of the OfferShares. Prospective purchasers of Offer Shares should consult their own tax advisers withrespect to the Canadian and other tax considerations applicable to their individualcircumstances and with respect to the eligibility of the Offer Shares for investment bypurchasers under relevant Canadian legislation.CurrencyThe Offer Price Range, financial statements and certain other financial informationcontained in this Prospectus are presented in euro. The following table sets out for the periodsindicated, the period-end, high, low and average Canadian Noon Rates(1) between the euro and theCanadian dollar (‘‘CAD’’), expressed in 0 per CAD1.00:Period (2) Period End High Low Average (3)Six-months ended 30 June 2006 **************************** 0.7020 0.7395 0.6987 0.70652005 **************************************************** 0.7244 0.7304 0.6131 0.69832004 **************************************************** 0.6138 0.6445 0.5997 0.59982003 **************************************************** 0.6143 0.6557 0.6029 0.62012002 **************************************************** 0.6037 0.7206 0.6236 0.6760(1) The term ‘‘Canadian Noon Rate’’ means the Bank of Canada noon exchange rate.(2) Unless otherwise specified, each reference to a year is a year ended 31 December.(3) The average of the Canadian Noon Rate on the last Business Day of each month in the period.On 8 September 2006, the latest practicable date prior to the publication of this Prospectus,00.7052 = CAD1.00, based on the Bank of Canada noon exchange rate.No representation is made that euros could have been or could be converted into Canadian dollarsat the rates set forth above for the periods indicated.321

Part XIVThe OfferFor a discussion of legislation regarding withholding taxes, please refer to paragraph 15 (TaxationInformation) of Part XV (Additional Information) of this Prospectus.18.4 AustraliaThis section applies only to persons receiving this Prospectus in Australia.Not a prospectus under the Corporations ActThis Prospectus does not constitute a disclosure document or a product disclosure statement for thepurposes of the Corporations Act 2001 of the Commonwealth of Australia (the ‘‘Corporations Act’’)and has not been, and will not be, lodged with the Australian Securities and InvestmentsCommission. No securities commission or similar authority in Australia has reviewed or in any waypassed upon this document or the merits of these securities, and any representation to the contraryis an offence.The Offer Shares will be offered to persons who receive offers in Australia only to the extent thatboth:(a)(b)those persons are ‘‘wholesale clients’’ for the purposes of Chapter 7 of the CorporationsAct; andsuch offer of the Offer Shares for issue or sale does not need disclosure to investors underPart 6D.2 of the Corporations Act.Any offer of the Offer Shares received in Australia is void to the extent that it needs disclosure toinvestors under the Corporations Act. In particular, offers for the issue or sale of the Offer Shares willonly be made, and this Prospectus may only be distributed, in Australia in reliance on variousexemptions from such disclosure to investors provided by section 708 of the Corporations Act(‘‘section 708’’) and where the investors are also ‘‘wholesale clients’’ as described above.No person holds an Australian financial services licenceNo person referred to in this Prospectus holds an Australian financial services licence.Secondary Sale RestrictionAs the offer for the Offer Shares will be made in Australia without disclosure under the CorporationsAct, the offer of the Offer Shares for sale in Australia within 12 months of their issue or sale may,under section 707 or 1012C of the Corporations Act, require disclosure to investors under theCorporations Act if none of the exemptions under the Corporations Act apply. Accordingly, anyperson to whom the Offer Shares are issued or sold pursuant to this document must not, within12 months after the issue, offer (or transfer, assign or otherwise alienate) those Offer Shares toinvestors in Australia except in circumstances where disclosure to investors is not required under theCorporations Act or unless a compliant disclosure document or product disclosure statement isprepared and lodged with the Australian Securities and Investments Commission. Disclosure toinvestors would not generally be required:(a)under Part 6D.2 of the Corporations Act where:(i)(ii)(iii)the Offer Shares are offered for sale outside of Australia;the Offer Shares are offered for sale to categories of ‘‘professional investors’’ referredto in section 708(11) of the Corporations Act; orthe Offer Shares are offered to persons who are ‘‘sophisticated investors’’ that meetthe criteria set out in sections 708(8) or 708(10) of the Corporations Act; and(b)under Chapter 7 of the Corporations Act where the Offer Shares are only offered to personswho are ’wholesale clients’ within the meaning of section 761G of the Corporations Act.322

Part XIVThe OfferHowever, Chapter 6D and Chapter 7 of the Corporations Act are complex, and if in any doubt, youshould confer with your professional advisers regarding the position.General advice onlyThis Prospectus is intended to provide general information only and has been prepared withouttaking into account any particular person’s objectives, financial situation or needs. Investors should,before acting on this information, consider the appropriateness of this information having regard totheir personal objectives, financial situation or needs. Investors should review and consider thecontents of this document and obtain financial advice specific to their situation before making anydecision to make an application for the Offer Shares.This Prospectus is not, and under no circumstances is to be construed as, an advertisement or apublic offering of the Offer Shares in Australia.Investment subject to riskAn investment in the Offer Shares does not represent deposits or other liabilities of any of theUnderwriters or any member company of any of their respective groups. An investment is subject toinvestment risk, including possible delays in repayment and loss of income and capital invested. Therepayment of capital, the payment of income and any particular rate of return are not guaranteed byany of the Underwriters or any of their respective group companies or any other company, unlessspecifically stated in a prospectus.19. SHARE OWNERSHIP RESTRICTIONSFurther information about the nationality-based restrictions on ownership of shares in the Companycontained in the Articles of Association are set out in paragraph 4.4 (Share Ownership Restrictions) ofPart XV (Additional Information) of this Prospectus.20. INTERESTS OF PERSONS INVOLVED IN THE OFFEROther than:PR Ann III,3.320.1 the interests of the Directors and the Senior Management Team disclosed in paragraph 3 (Interests inOrdinary Shares) of Part XI (Directors, Senior Management and Corporate Governance) of thisProspectus;20.2 the interests of the Intermediaries disclosed in paragraph 6 (The Intermediaries Offer) of this Part XIV;20.3 the interests of the Underwriters disclosed in paragraph 12 (Underwriting Agreement) of thisPart XIV; and20.4 the interests of the ESOT and the APSS disclosed in paragraph 11 (The ESOT Option and the NewProfit Share Arrangement) of this Part XIV and paragraph 6 (Employee Share Ownership) of Part XV(Additional Information) of this Prospectus;the Directors are not aware of any interests material to the Offer which are held by persons involvedin the Offer.323

Part XVAdditional Information1. RESPONSIBILITY1.1 The Company and the Directors, whose names are set out on page 20 of this Prospectus, accept PR Ann I,responsibility for the information contained in this Prospectus. To the best of the knowledge and 1.1, 1.2belief of the Company and the Directors (who have taken all reasonable care to ensure that such is PR Ann III,the case), the information contained in this Prospectus is in accordance with the facts and does not 1.1, 1.2omit anything likely to affect the import of such information.1.2 The Selling Shareholder accepts responsibility for the information in this Prospectus that is identifiedbelow. To the best of the knowledge and belief of the Selling Shareholder (who has taken allreasonable care to ensure that such is the case), the information in this Prospectus for which it isresponsible is in accordance with the facts and does not omit anything likely to affect the import ofsuch information.The relevant information for which the Selling Shareholder accepts responsibility is:(a)(b)(c)(d)(e)(f)the statement in paragraph 4.3 (Interests of Major Shareholders) of this Part XV relating tothe number of Ordinary Shares held by the Selling Shareholder before the Offer;the statement in paragraph 8 (Amount and Use of Proceeds) of Part XIV (The Offer) of thisProspectus that no expenses or stamp duty will be charged to a subscriber or purchaser onthe purchase or subscription of Offer Shares by the Selling Shareholder;the statement in paragraph 15.1(e) of this Part XV that, in the case of a transfer of sharesunder the Offer, the Selling Shareholder has agreed that stamp duty will not be charged;the statement in paragraph 3.4 (Existing shareholders may exercise significant influence overthe Company following the Offer and/or their interests may differ from the majority of othershareholders) of Part III (Risk Factors) of this Prospectus that the Irish Government regards AerLingus’ continued access to its slots at London Heathrow airport as being of strategic interestto Ireland;the statements in paragraph 11.1(d) of Part II (Summary) and the first paragraph ofparagraph 4.3(d) of this Part XV in relation to the relationship between the Company and theSelling Shareholder;the statements in paragraph 5.2(p) (Disposal of London Heathrow Slots) of this Part XV inrelation to the grounds on which the Minister for Finance would vote against a resolution todispose of slots at London Heathrow airport.1.3 For the purposes of the Prospectus Regulations 2005, PricewaterhouseCoopers is responsible for itsreports set out in Part XII (Historical Financial Information) and Part XIII (Unaudited Pro Forma BalanceSheet) of this Prospectus, and declares that it has taken all reasonable care to ensure that theinformation contained in these reports is, to the best of its knowledge and belief, in accordance withthe facts and contains no omission likely to affect their import.2. INFORMATION ON THE COMPANY2.1 The Company was incorporated in Ireland on 21 December 1993 under the Companies Acts as apublic company limited by shares with registered number 211168, and is domiciled in Ireland.PR Ann I,5.1.2, 5.1.3,5.1.4LR3.2.1(1)LR3.2.1(2)324

Part XVAdditional InformationThe Company is a holding company. Details of its subsidiaries are set out in paragraph 3 (Details ofSubsidiaries and Associated Companies) of this Part XV.2.2 As at the date of this Prospectus, as well as being a company incorporated under and subject to the PR Ann III,provisions of the Companies Acts, the Company is subject to the provisions of the Air Companies 4.2Acts 1966 to 1993. The Aer Lingus Act 2004 (the ‘‘2004 Act’’) was enacted to give effect to the LR3.2.2(1)ESOP and provide a legal framework to facilitate any future private sector investment in the LR3.2.2(2)Company. The provisions of the 2004 Act do not become effective until the Minister for Transportmakes commencement orders in respect of those sections.Commencement orders in respect of Section 7 (Employee shareholding schemes) and Section 3(Power to hold, sell or dispose of shares in the Company) of the 2004 Act have already been made.Pursuant to Section 3, on 6 July 2006, Dáil Éireann approved the general principles of the Offer.A commencement order in respect of Section 11 (Provisions as to certain loans) of the 2004 Actbecame effective on 11 September 2006. Section 11 provides that the loan from the SellingShareholder to Aerlinte (now Santain Developments Limited, a wholly-owned subsidiary of theCompany) (further details of which are set out in paragraph 13.7 (Loan from Selling Shareholder toAer Lingus) of this Part XV) pursuant to Section 3 of the Air Companies (Amendment) Act 1969 willbe deemed to have been advanced to ALL and will be repaid, together with accrued and unpaidinterest thereon, on 22 September 2006 by ALL to the Selling Shareholder.With effect from various times up to Admission, commencement orders in respect of the followingsections of the 2004 Act will become effective:(a) Section 2 (Repeals), which will substantially repeal the Air Companies Acts 1966 to 1993;(b)(c)(d)(e)(f)(g)Section 4 (Power to issue shares), which permits the Company to issue new shares and subdivideits shares;Section 5 (Agreements relating to sale or issue of shares in Company), which permits theMinister for Finance, having consulted with the Minister for Transport, to enter intoagreements in connection with the sale and/or issue of shares in the Company includingrepresentations, warranties and indemnities and provisions customarily contained in anunderwriting agreement;Section 6 (Number of Directors of Company and of Worker Directors under WorkerParticipation (State Enterprises) Acts 1997 to 2001), which terminates the application of theWorker Participation (State Enterprises) Acts 1997 to 2001 to the Company and increases thenumber of non-worker Directors of the Company to 12;Section 8 (Non-application of Section 60 of Companies Act, 1960), which provides that thestatutory prohibition on companies providing financial assistance for the purpose of or inconnection with the acquisition of its own shares shall not apply to representations,warranties or indemnities given by the Company or any financial obligations undertaken bythe Company in connection with an agreement entered into by the Minister for Financepursuant to Section 5 of the 2004 Act;Section 10 (Expenses), which provides that monies required by the Minister for Finance or theMinister of Transport to meet amounts payable by either or both of them in respect of thedisposal of shares or rights in shares in the Company shall be paid out of moneys provided bythe Oireachtas; andSection 12 (Certain Acts not to apply to the Company), which provides that the Ethics inPublic Office Acts 1995 and 2001, the Prompt Payment of Accounts Act 1997 andSection 521 of the Taxes Consolidation Act 1997 shall cease to apply to the Company.325

Part XVAdditional InformationThe Selling Shareholder has confirmed to the Company that, prior to Admission, any otherlegislation that is applicable to Aer Lingus only because a majority of Aer Lingus’ issued share capitalis owned by the Irish Government, will be disapplied.As a result of these legislative changes, on and from Admission, the principal legislation under whichthe Company will operate will be the Companies Acts and regulations made thereunder. TheOrdinary Shares have been created pursuant to the Companies Acts.PR Ann I,5.1.4The Irish Takeover Panel Act 1997, Takeover Rules 2001 to 2005 as applied, with amendments, by PR Ann III,the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006 (the ‘‘Irish 4.2Takeover Rules’’) and the Irish Takeover Panel Act 1997, Substantial Acquisition Rules 2001 (the PR Ann III,‘‘SARs’’) will also apply to the Company. The Irish Takeover Rules regulate the conduct of takeovers 4.9of, and the SARs regulate substantial acquisitions of shares in, companies listed on a regulatedmarket of the Irish Stock Exchange. Where a person acquires, or unconditionally contracts toacquire, pursuant to a takeover bid, Ordinary Shares amounting to 90% or more of the OrdinaryShares in issue, or carrying 90% or more of the voting rights attaching to Ordinary Shares, thatperson may compulsorily acquire the remaining Ordinary Shares, or the remaining shareholders maycompel that person to acquire their Ordinary Shares pursuant to the procedures set out in theEuropean Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006.2.3 The registered office and principal place of business of the Company is Dublin Airport, CountyDublin, Ireland (Telephone: +353 1 886 2000).2.4 The liability of the shareholders of the Company is limited to amounts, if any, unpaid on the sharesissued to them.PR Ann I,5.1.42.5 The financial year end of the Company is 31 December.326

Part XVAdditional Information3. DETAILS OF SUBSIDIARIES AND ASSOCIATED COMPANIESThe Company is a holding company and has a number of subsidiaries.PR Ann I,7.1, 7.2, 25As at 31 December 2005, the following were the undertakings in which the Company held a proportion ofthe capital which is likely to have a significant effect on the assessment of its assets and liabilities, financialposition or profits and losses:Aer Lingus Dirnan InsuranceName ALL Beachey Limited Company Limited% Issued Share Capital Held*************************** 100 held by 100 held by 100 held by ALLCompany ALLNature of Business ************************************ Trading Aircraft Captive InsuranceLeasing/Financing CompanyCountry of Incorporation ****************************** Ireland Isle of Man BermudaRegistered Office ************************************* Dublin Penthouse Craig Appin House,Airport, Suite, PO Box HM2450,County Analyst House, Hamilton HMIX,Dublin, Peel Road, BermudaIreland Douglas,Isle of ManIMI4LZIssued Share Capital (1 millions) (1) ********************** 107.9 20.0 0.6Reserves (1 millions) (1) ********************************* 40.9 17.7 22.4Profit/(Loss) arising out of ordinary activities (after tax)for last financial year (1 millions) (1) ******************* 68.1 4.2 2.2Value in Company’s accounts (1 millions) (1) ************* 148.8 — —Amount still to be paid up on shares held by Aer Lingus — — —Amount of dividends received by Aer Lingus during lastfinancial year *************************************** — — —Amounts of debt owed to/by Aer Lingus*************** — (—) (—)(1) At 31 December 2005In addition to the above companies, the Company directly or indirectly holds shares in a number ofcompanies that are non-trading or have ceased trading, namely Easthills Limited, Aberport Limited, SantainDevelopments Limited, Duneast Limited, Crodley Limited, Shinagh Limited, Dirnan Ireland Limited and SeresLimited.ALL holds a 20% equity interest in Futura, a Spanish registered company. However this has not beentreated as an associated undertaking as, in the view of the Directors, ALL is unable to exercise significantinfluence over the operations of this entity.327

Part XVAdditional Information4. SHARE CAPITAL4.1 Authorised and Issued Share Capital(a) The authorised, issued and fully paid share capital of the Company as at 31 December 2005was as follows:PR Ann I,21.1.1Authorised Authorised Issued Issued(Number) (Value) (Number) (Value)Ordinary Shares (1) ************ 500,000,000 0625,000,000 286,263,280 0357,829,000(1) Nominal value 31.25There was no change in the authorised, issued and fully paid share capital of the Companybetween 31 December 2004 and 31 December 2005.(b)Based on the Offer Assumptions, the authorised, issued and fully paid share capital of theCompany immediately following Admission will be as follows:Authorised Authorised Issued Issued(Number) (Value) (Number) (Value)Ordinary Shares ************* 900,000,000 045,000,000 494,707,854 024,735,393(c)(d)(e)(f)There are no Ordinary Shares held by or on behalf of any member of the Group. As of the PR Ann I,date of this Prospectus, Aer Lingus ESOP Trustee Limited (the trustee of the ESOT and the 21.1.3APSS as is discussed in greater detail in paragraph 6 (Employee Share Ownership) of thisPart XV) held 42,653,228 Ordinary Shares. The Company did not control Aer Lingus ESOPTrustee Limited and Aer Lingus ESOP Trustee Limited held Ordinary Shares only in its capacityas trustee for the APSS and the ESOP.The Company does not have in issue any security not representing share capital and there areno outstanding convertible or exchangeable securities issued by the Company.Except as described in paragraph 11 (The ESOT Option and the New Profit ShareArrangement) of Part XIV (The Offer) of this Prospectus and paragraph 6 (Employee ShareOwnership) of this Part XV, there are no acquisition rights or obligations over the authorisedbut unissued share capital of the Company or any undertaking to increase the Company’sshare capital.Except as described in paragraph 6 (Employee Share Ownership) of this Part XV, no share orloan capital of the Company is under option or agreed, conditionally or unconditionally, to beput under option.PR Ann I,21.1.2,21.1.4PR Ann I,21.1.5PR Ann I,21.1.64.2 Share Capital History(a)In the financial years ended 31 December 2003, 2004 and 2005, the only change to theCompany’s issued share capital was the issue on 20 August 2004, pursuant to theCompany’s 2001 survival plan, of an additional 30,472,725 Ordinary Shares to Aer LingusESOP Trustee Limited. As a result, the Ordinary Shares held by employees increased from4.76% to 14.9% (approximately 12.6% are currently held for the benefit of the Beneficiarieswith the balance of 2.3% held for the benefit of current or former employees of Aer Lingus).PR Ann I,21.1.7328

Part XVAdditional Information(b)On 25 August 2006, the shareholders of the Company at an extraordinary general meetingof the Company, passed two special resolutions which had the following effect:1 the adoption of new articles of association to apply up until the time of Admission; and2 the reorganisation of the share capital of the Company by a process of consolidationand subdivision so that each issued and each authorised but unissued Ordinary Sharebe subdivided into one Ordinary Share of 00.05 each and one Deferred share of 01.20each with the consequence that:(A)the authorised share capital shall consist of 0625,000,000 divided into500,000,000 Ordinary Shares of 00.05 each and 500,000,000 deferred sharesof 01.20 each; and(B) the issued share capital shall consist of 286,263,280 Ordinary Shares of 00.05each and 286,263,280 deferred shares of 01.20 each.(c)(d)On 11 September 2006, the 286,263,280 deferred shares of 01.20 each were purchased andcancelled by the Company for nil consideration pursuant to sections 41(2) and 43 of theCompanies (Amendment) Act, 1983.On 11 September 2006, the shareholders of the Company at an extraordinary generalmeeting of the Company passed two special resolutions which had the following effect:1 increasing the authorised ordinary share capital of the Company to 045,000,000 bythe creation of 400,000,000 Ordinary Shares of 00.05 each;2 reducing the authorised share capital of the Company by 0600,000,000 by thecancellation of that part of the authorised share capital of the Company which isrepresented by the 500,000,000 deferred shares of 01.20 each;3 the adoption of new Memorandum and Articles of Association to apply fromAdmission which are described in paragraph 5.1 (Memorandum of Association) and5.2 (Articles of Association) of this Part XV;4 authorising the Directors to exercise all the powers of the Company to allot relevantsecurities (within the meaning of Section 20 of the Companies (Amendment) Act,1983) up to an aggregate nominal amount equal to 025,000,000 (Euro Twenty-fivemillion) until expiry of that authority; and5 empowering the Directors pursuant to Section 23 and Section 24(1) of the Companies(Amendment) Act, 1983 to allot equity securities (within the meaning of Section 23 ofthe Companies (Amendment) Act, 1983) for cash as if sub-section (1) of the saidSection 23 did not apply to any such allotment provided that after 30 November 2006this power would be limited to:(A)the allotment of equity securities in connection with any rights issue in favourof ordinary shareholders (other than those holders with registered addressesoutside the State to whom an offer would, in the opinion of the Directors, beimpractical or unlawful in any jurisdiction) and/or any persons having a right tosubscribe for or convert securities into Ordinary Shares in the capital of theCompany where the equity securities respectively attributable to the interestsof such ordinary shareholders or such persons are proportionate (as nearly asmay be) to the respective number of Ordinary Shares held by them or for whichthey are entitled to subscribe or convert into subject to such exclusions or otherarrangements as the Directors may deem necessary or expedient to deal with329

Part XVAdditional Informationany regulatory requirements, legal or practical problems in respect of overseasshareholders, fractional entitlements or otherwise; and(B)the allotment of equity securities up to an aggregate nominal value equal to01,500,000.6 authorising the Company and/or any subsidiary (as defined by Section 155 of theCompanies Act, 1963) of the Company to make market purchases (as defined bySection 212 of the Companies Act, 1990) of shares of any class in the Company(‘‘shares’’) on such terms and conditions and in such manner as the Directors maydetermine from time to time but subject to the provisions of the Companies Act, 1990and to the following restrictions and provisions:-(i)(ii)(iii)the maximum number of Ordinary Shares (as defined in the Articles ofAssociation) authorised to be acquired pursuant to this resolution shall notexceed 03,000,000;the minimum price which may be paid for any share shall be an amount equalto the nominal value thereof;the maximum price which may be paid for any share (a ‘‘relevant share’’) shallbe an amount equal to the higher of (a) the higher of the price of the lastindependent trade and the highest current bid as stipulated by Article 5(1) ofCommission Regulation (EC) 22 December 2003 implementing the MarketAbuse Directive as regards exemptions for buyback programmes andstabilisation of financial instruments (No 2273/2003) and in each case or(b) 105% of the average of the five amounts resulting from determiningwhichever of the following (A) (B) or (C) specified below in relation to theshares of the same class as the relevant share shall be appropriate for each ofthe five Business Days immediately preceding the day on which the relevantshare is purchased, as determined from the information published in the IrishStock Exchange Daily Official List reporting the business done on each of thosefive Business Days:(A)(B)(C)if there shall be more than one dealing reported for the day, the averageof the prices at which such dealings took place; orif there shall be only one dealing reported for the day, the price at whichsuch dealing took place; orif there shall not be any dealing reported for the day, the average of thehigh and low market guide prices for that day; and if there shall be onlya high (but not a low) or a low (but not a high) market guide pricereported, or if there shall not be any market guide price reported, forany particular day then that day shall not count as one of the said fiveBusiness Days for the purposes of determining the maximum price. Ifthe means of providing the foregoing information as to dealings andprices by reference to which the maximum price is to be determined isaltered or is replaced by some other means, then a maximum price shallbe determined on the basis of the equivalent information published bythe relevant authority in relation to dealings on the Irish Stock Exchangeor its equivalent;330

Part XVAdditional Information(e)The authorities conferred by 4, 5 and 6 above expire at the close of business onthe date of the next annual general meeting of the Company or the day whichis 15 calendar months after the date of passing of the resolution.Paragraphs 3 and 6 are effective only on Admission.There have been no takeover bids by third parties in respect of the Company’s equitysecurities during the last financial year or the current financial year.PR Ann III,4.104.3 Interests of Major Shareholders(a) In so far as is known to the Company, the name of each person who, directly or indirectly, is PR Ann I,interested in 3% or more of the Company’s capital, and the amount of such person’s 18.1interest, as at 8 September 2006 (being the latest practicable date before the publication ofthis Prospectus) is as follows:Number of Ordinary Percentage of IssuedShareholder Shares Share CapitalSelling Shareholder (1) ****************************** 243,610,052 85.10Aer Lingus ESOP Trustee Limited (2) ******************* 42,653,228 14.90(1) Legal title to one Ordinary Share is held by each of Pat Ring, Fintan Towey, David Doyle, Julie O’Neill, JohnMurphy and James O’Brien, because the Company is a public limited company and must therefore, pursuant tothe Companies Acts, have a minimum of seven shareholders. Beneficial title to these shares is held by theSelling Shareholder.(2) Of the Ordinary Shares held by Aer Lingus ESOP Trustee Limited, 36,028,679 Ordinary Shares are held onbehalf of the Beneficiaries. The remaining 6,624,549 Ordinary Shares are held on behalf of certain existing andformer Aer Lingus employees with interests in the APSS (formerly the ESPS). On completion of the Offer, theshares currently held by the APSS will be transferred into the names of these existing and former employees.(b)Immediately following Admission, on the basis of the Offer Assumptions, and in so far as isknown to the Company, the name of each person who, directly or indirectly, will beinterested in 3% or more of the Company’s capital, and the amount of such person’sinterest, will be as follows:PR Ann III,9.1Number of % of issued Number of % of issuedOrdinary Shares share capital Ordinary Shares share capitalheld held held heldimmediately immediately immediately immediatelyNumber of % of issued following following following followingOrdinary Shares share capital Admission Admission Admission Admissionheld held (assuming no (assuming no (assuming full (assuming fullimmediately immediately exercise of the exercise of the exercise of the exercise of theprior to prior to Over-allotment Over-allotment Over-allotment Over-allotmentShareholder Admission Admission Arrangements) (i) Arrangements) (i) Arrangements) (i)(ii) Arrangements) (i)(ii)SellingShareholder** 243,610,052 85.1% 170,946,103 34.55% 142,835,251 28.07%Aer LingusESOP TrusteeLimited****** 42,653,228 14.9% 49,778,679 10.06% 49,778,679 9.78%(i)(ii)Assuming the Aer Lingus ESOP Trustee Limited does not hold any shares on behalf of the APSS immediatelyfollowing the Offer.Assuming Over-allotment Arrangements are exercised on or prior to Admission.PR Ann I,18.2(c)Except for the ESOT Option, none of the Company’s major shareholders has different votingrights than other holders of Ordinary Shares. Further details of the ESOT Option are set out inparagraph 11 (The ESOT Option and the New Profit Share Arrangement) of Part XIV (TheOffer) of this Prospectus.331

Part XVAdditional Information(d) While the Selling Shareholder has the voting rights over shares representing in excess of 30%of the Ordinary Shares in the Company, he has confirmed that (i) he will exercise those rightsso as to ensure that the Group is capable at all times of carrying on its business independentlyof him and (ii) all transactions between him and/or the Minister for Transport and the Groupare conducted at arm’s length and on a basis no less favourable to the Group than on anormal commercial basis. Nothing in this confirmation is, however, to prejudice the Ministers’rights in relation to the disposal of London Heathrow slots, particulars of which are fullydetailed in paragraph 5.2(p) (Disposal of London Heathrow Slots) of Part XV (AdditionalInformation) of this Prospectus.Board procedures will be put in place to monitor the above provisions, including regularmonitoring at Board level in relation to transactions between the Selling Shareholder and/orthe Minister for Transport and the Group, to include the question of whether it is appropriatefor the Board representatives of the Minister for Transport to vote in relation to suchtransactions.On the basis of the Offer Assumptions, the Selling Shareholder will be entitled to exercisemore than 30% of the votes attaching to Ordinary Shares following Admission. Howeverdepending on the level of exercise of the Over-allotment Arrangements, his holding ofOrdinary Shares and/or his voting rights may be less than 30% following Admission. TheDirectors believe that, notwithstanding the possible shareholding and voting rights whichmay be held by the Selling Shareholder, and the right of the Minister for Transport, actingthrough the Selling Shareholder to appoint up to three Directors, the Company will becapable at all times following Admission of carrying on its business independently of theSelling Shareholder and his associates. Accordingly, in so far as is known to the Company, theCompany is not directly or indirectly owned or controlled by any natural or legal person,severally or jointly.(e)In so far as is known to the Company, there are no arrangements the operation of which may PR Ann I,at a date subsequent to the date of this Prospectus, result in a change of control of the issuer. 18.44.4 Share Ownership RestrictionsSince ALL’s entitlement to obtain or to continue to hold or enjoy the benefit of the licences, permits,consents or privileges that enable ALL to carry on business as an air carrier in Ireland and/or internationally(‘‘ALL’s air carrier rights’’), can be adversely affected if too many of the Ordinary Shares are held by Non-Qualifying Nationals, the Directors are given certain powers under the Articles of Association to take actionto ensure that shareholdings of Non-Qualifying Nationals in the Company’s share capital are not of such asize or type which could jeopardise ALL’s air carrier rights. The Directors have the power to designate amaximum percentage of the Company’s share capital (a ‘‘Permitted Maximum’’) which may be held byNon-Qualifying Nationals and have determined that this will initially be in excess of 45% but less than 50%.This percentage may be varied by the Directors from time to time. Further information about the regulatoryconditions which govern ALL’s entitlement to exercise its air carrier rights is set out in Part X (Regulation) ofthis Prospectus.(a)Qualifying Nationals and Non-Qualifying NationalsFor the purpose of these share ownership restrictions, Qualifying Nationals means all persons whoare nationals of Ireland. If agreement is reached between the European Commission and the UnitedStates in regard to open skies, Qualifying Nationals shall also include all nationals of any EU MemberState, provided that this shall not prejudice in any material respect ALL’s air carrier rights. Non-Qualifying Nationals shall mean anyone who is not a Qualifying National. In determining whether aperson is or is not a Non-Qualifying National for the purpose of calculating the Permitted Maximumand for the purpose of applying the ownership restrictions and compulsory disposal rights discussedbelow, the Directors may exercise their discretion based on the information collected fromshareholders through the declarations described below. In particular, in relation to corporate332

Part XVAdditional Informationinvestors, the Directors will base their judgment on the shareholder’s place of incorporation, countryof tax residence and/or whether the relevant shareholder has a substantial presence in Ireland. Theywill also take into account any relationship that shareholder has with any airline. The Directors maydetermine that any shareholder should be treated as being either a Qualifying National or Non-Qualifying National for the purpose of the Articles of Association on the basis of any one or more ofthese factors and initially the Directors intend to treat as Qualifying Nationals those shareholders (notbeing members of an airline group) which are institutional or financial investors tax resident inIreland or, otherwise, which are Irish incorporated and are neither substantially owned nor effectivelycontrolled by a non-Irish person. If agreement is reached between the European Commission andthe United States in regard to open skies, the Directors intend to treat as Qualifying Nationals thoseshareholders (not being members of an airline group) which are institutional or financial investors taxresident in an EU Member State or, otherwise, which are incorporated in an EU Member State andare neither substantially owned nor effectively controlled by persons who are not nationals of an EUMember State. The Directors reserve the right to re-categorise any person who might be regardedprima facie as a Qualifying National in the event that their shareholding may endanger any existingor proposed air carrier rights of ALL.(b)(c)(d)Registration of Shares and Registration DeclarationWhen any person subscribes for the Company’s shares or seeks to have some of the Company’sshares transferred into their name, they will be required to furnish a declaration in a form specifiedby the Company giving certain details necessary to assist the Company in identifying the nationalityof the person for the purpose of ALL’s air carrier rights. In the case of certificated shares, no one willbe entitled to be registered as a shareholder unless this declaration has been completed to thesatisfaction of the Directors. In the case of uncertificated shares, the completion of this declaration isnot a precondition to registration but a declaration of nationality will be required to be notifiedthrough CREST as a result of sales or transfers settled in the CREST System. Where this nationalitydeclaration has not been completed to the satisfaction of the Directors, they will have the power tohave the relevant shares withdrawn from CREST and thereafter dispose of such shares as explainedbelow. Information collected from shareholders through these declarations and any other requestswhich are made on behalf of the Directors will be used to assist the Company in compiling aseparate register of Non-Qualifying National shareholders.Disclosure of InterestIn addition to the Company’s shareholders being under a general obligation to inform the Companyif they believe that their nationality and/or their shareholding is of a size or type which couldjeopardise ALL’s entitlement to continue to hold or enjoy the benefit of ALL’s air carrier rights, fromtime to time, the Directors may also require any of the Company’s shareholders, or other personsappearing to be or to have been interested in the Company’s share capital, to disclose suchinformation as they shall require relating to such person’s nationality and/or the ownership of, or anyinterest in, the shares in question. If any member or person appearing to have an interest in theCompany’s shares fails to give the Company, within 21 days of service on him of the disclosurenotice, the information required, the Directors will be entitled to dispose of such shares and/or toimpose restrictions on the exercise of rights attaching to the relevant shares as described below.Restriction on Ownership of SharesIn the event that, among other things, (1) the refusal, withholding, suspension or revocation of anyof ALL’s air carrier rights has taken place; or (2) the Directors receive any indication, notice ordirection from any governmental body or any other body which regulates the provision of airtransport services to the effect that ALL’s air carrier rights may be affected as previously described; or(3) the Directors believe that ALL’s air carrier rights may be so affected as a consequence of the sizeor nature of Non-Qualifying Nationals’ ownership of shares; the Directors can take action pursuantto the Articles of Association to deal with the situation. Such action can include, among otherthings, (1) removal of any director; or (2) identifying those shares which give rise to the need to takeaction; or (3) increasing or reducing the Permitted Maximum number of shares owned by Non-Qualifying Nationals which may subsist at any time and imposing restrictions on any suchshareholdings in excess of this Permitted Maximum; or (4) restricting the rights of the holders of such333

Part XVAdditional Informationshares to attend, vote or appoint proxies in respect of the Company’s general meetings and, wherethe Directors believe this necessary, withholding dividend payments on such shares; or (5) reducingthe total number of shares held by Non-Qualifying Nationals below this Permitted Maximum by acompulsory disposal of shares held on behalf of Non-Qualifying Nationals by the Company asdescribed below, in order to overcome, prevent or avoid anything which the Directors believe mayadversely affect ALL’s air carrier rights.(e)Compulsory Disposal of SharesIf considered desirable to protect ALL’s air carrier rights, the Directors may require the disposal ofshares held by or on behalf of Non-Qualifying Nationals, by serving notice on the relevantshareholders, giving them 21 days to dispose of the shares in question. If no such disposal takesplace within this 21-day period, the Directors may decide which shares held by or on behalf of Non-Qualifying Nationals are to be subject to such a disposal, and proceed with the disposal, on behalf ofsuch shareholders. The proceeds from any such disposal will be held on bare trust by the Companyfor, and paid to, the former registered holder on surrender of the certificate or production of othersuitable evidence of title.In the event that a compulsory disposal is required, the Directors will, in so far as practical, take suchaction firstly in respect of those shares owned by Non-Qualifying Nationals in respect of which thedeclaration which the Directors require on registration has not been furnished or where informationwhich has been requested by the Company, in accordance with the Articles of Association, is notbeing provided within the specified time periods or was provided but has since been shown to befalse. The Directors will also, insofar as practical, have regard to the chronological order in whichdetails of the shares held by or on behalf of Non-Qualifying Nationals have been entered in theCompany’s register, so that the Directors will take such action in respect of the most recentlyregistered of such shares to the extent necessary. The Directors do, however, retain a discretion toapply any other basis of selection if, in the opinion of the Directors, that would be more equitable.Furthermore, the Directors have the power to discriminate between different shareholders, wherethe Directors believe that the identity or nature of the business of such shareholders requires theCompany, in the opinion of the Directors, to take action.5. MEMORANDUM AND ARTICLES OF ASSOCIATION5.1 Memorandum of AssociationPR Ann I,The principal object of the Company is carrying on and fostering the business and pursuit of air 21.2.1transportation in all forms, both within Ireland and internationally. The objects of the Company areset out in full in clause 3 of the Memorandum of Association of the Company which is available forinspection at the address specified in paragraph 17 (Documents on Display) of this Part XV.5.2 Articles of AssociationPR Ann I,21.2.3(a) Issuing SharesSubject to the provisions of the Companies Acts, and without prejudice to any rights attached to anyexisting shares or class of shares, any share may be issued with such rights or restrictions as theCompany may by ordinary resolution determine or, subject to and in default of such determination,as the Board shall determine.Subject to the Articles and to the provisions of the Companies Acts, the Company may issue anyshares which are to be redeemed, or which at the option of the Company or the holder are liable tobe redeemed.334

Part XVAdditional InformationSubject to the Articles and to the provisions of the Companies Acts, the unissued shares of theCompany (whether forming part of the original or any increased capital) are at the disposal of theBoard.(b)Lien and ForfeitureThe Company has a first and paramount lien on every share (not being a fully paid share) for allmonies payable to the Company (whether presently or not) in respect of that share. Subject to theterms of allotment, the Board may from time to time make calls on the members in respect of anymonies unpaid on their shares. If a payment is not made when due, the Board may give not less than14 clear days’ notice requiring payment of the amount unpaid together with any interest which mayhave accrued and any costs, charges and expenses incurred by the Company by reason of such nonpayment.If that notice is not complied with, any share in respect of which it was sent may, at anytime before the payment required by the notice has been made, be forfeited by a resolution of theBoard. The forfeiture shall include all dividends or other monies payable in respect of the forfeitedshare which have not been paid before the forfeiture.(c)Variation of Share Capital and Variation of RightsThe Company from time to time, by ordinary resolution, may increase its authorised share capital bysuch sum to be divided into shares of such amount as the resolution shall prescribe.PR Ann I,21.2.4The Company, by ordinary resolution may:(i)(ii)(iii)consolidate and divide all or any of its share capital into shares of larger amounts; orsubject to the provisions of the Companies Acts, subdivide its shares, or any of them, intoshares of smaller amounts; orcancel any shares that, at the date of the passing of the resolution, have not been taken oragreed to be taken by any person and reduce the amount of its authorised share capital bythe amount of the shares so cancelled.Subject to the Companies Acts, the Company may by special resolution reduce its share capital, anycapital redemption reserve fund or any share premium account.The rights attached to any class may be varied or abrogated with the consent in writing of theholders of three-quarters in nominal value of the issued shares of that class or with the sanction of aspecial resolution passed at a separate general meeting of the holders of the shares of the class andmay be so varied or abrogated either whilst the Company is a going concern or during or incontemplation of winding-up.(d)Transfer of SharesSubject to the restrictions contained in the Articles and to such conditions of issue as may beapplicable, the shares of any member may be transferred by instrument in writing in any usual orcommon form or any other form that the Directors may approve. The Directors in their absolutediscretion and without assigning any reason therefore may decline to register any transfer of a sharewhich is not fully paid or any transfer to or by a minor or person of unsound mind but this shall notapply to a transfer of such a share resulting from a sale of the share through a stock exchange onwhich the share is listed.PR Ann III,4.8The Directors may decline to recognise any instrument of transfer unless:(i)the instrument of transfer is accompanied by the certificate of the shares to which it relatesand such other evidence as the Directors may reasonably require to show the right of thetransferor to make the transfer;335

Part XVAdditional Information(ii)(iii)(iv)the instrument of transfer is in respect of one class of share only;the instrument of transfer is in favour of not more than four transferees; andit is lodged at the registered office or at such other place as the Directors may appoint.(e)(f)Nationality RestrictionsFurther information about the nationality-based restrictions on ownership of shares in the Companyset out in the Articles of Association are set out in paragraph 4.4 (Share Ownership Restrictions) ofthis Part XV.Dividends and other DistributionsSubject to the provisions of the Companies Acts, the Company may, by ordinary resolution, declare PR Ann III,dividends in accordance with the respective rights of the members, but no dividend shall exceed the 4.5amount recommended by the Directors.Subject to the provisions of the Companies Acts, the Board may declare interim dividends if itappears to the Board that they are justified by the profits of the Company available for distribution. Ifthe Board acts in good faith it shall not incur any liability to the holders of shares conferringpreferred rights for any loss they may suffer by the lawful payment of an interim dividend on anyshares having deferred or non-preferred rights. No dividend or other monies payable in respect of ashare shall bear interest against the Company unless otherwise provided by the rights attached tothe share.There are no fixed dates on which entitlements to dividends on the Ordinary Shares arise.A general meeting declaring a dividend may, on the recommendation of the Board by ordinaryresolution, direct that payment of any dividend be satisfied wholly or partly by the distribution ofassets, including without limitation paid up shares or debentures of any body corporate.The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares(other than a holder of treasury shares) the right to elect to receive shares, credited as fully paid,instead of cash in respect of the whole (or some part, to be determined by the Board) of all or anydividend specified by that resolution).PR Ann III,4.5(g)(h)(i)General MeetingsAll general meetings shall be held in Ireland and a general meeting shall only be deemed to be heldin Ireland where each of the members attending that general meeting is present in Ireland in personor by proxy. The Board may call general meetings whenever and at such times and places in Irelandas it shall determine, although no business shall be transacted at any general meeting or annualgeneral meeting unless a quorum is present.PR Ann I21.2.5Voting RightsPR Ann IIIOrdinary Shares carry voting rights. Votes may be given either personally or by proxy. Subject to 4.5rights or restrictions for the time being attached to any class or classes of shares, on a show ofhands, every member present in person and every proxy shall have one vote, so, however, that noindividual shall have more than one vote, and on a poll, every member shall have one vote for everyshare carrying voting rights of which he is the holder.Distribution of Assets on LiquidationPR Ann IIIIn the event that the Company is wound up and the assets available for distribution among the 4.5members are insufficient to repay the whole of the paid up (or credited as paid up) share capital, theassets shall be distributed so that, as nearly as may be, the losses will be borne by the members inproportion to the capital paid up (or credited as paid up) by them at the commencement of thewinding up. If, however, the assets available for distribution among the members are more thansufficient to repay the whole of the paid up (or credited as paid up) share capital, the excess shall be336

Part XVAdditional Informationdistributed among the members in proportion to the capital paid up (or credited as paid up) by themat the commencement of the winding up.(j)(k)Unclaimed DividendsIf the Directors so resolve, any dividend which has remained unclaimed for 12 years from the date ofits declaration shall be forfeited in favour of the Company and cease to remain owing by theCompany. Any dividend which remains unclaimed for one year after having been declared may beinvested or otherwise made use of by the Directors for the benefit of the Company until claimed.The payment by the Directors of any unclaimed dividend or other money’s payable in respect of ashare into a separate account shall not make the Company trustee in respect of the payments.Untraced ShareholdersThe Company may sell at the best price reasonably obtainable any share of a holder, or any share towhich a person is entitled by transmission, if and provided that:(i)(ii)(iii)(iv)for a period of 12 years no cheque or warrant sent by the Company through the post in apre-paid letter addressed to the holder or to the person entitled by transmission to the shareat his address on the Register or at the last known address given by the holder or the personentitled by transmission to which cheques and warrants are to be sent has been cashed andno communication has been received by the Company from the holder or the person entitledby transmission (provided that during such 12 year period at least three dividends shall havebecome payable in respect of such share);at the expiration of the said period of 12 years by advertisement in a national dailynewspaper published in Ireland (and a national daily newspaper published in the UnitedKingdom) and in a newspaper circulating in the area in which the address referred to inparagraph (i) above is located the Company has given notice of its intention to sell suchshare;during the further period of three months after the date of the advertisement and prior to theexercise of the power of sale the Company, has not received any communication from theholder or person entitled by transmission; andthe Company has first given notice in writing to the Irish Stock Exchange and the LondonStock Exchange of its intention to sell such shares.(l)Purchase of Own SharesSubject to and in accordance with the provisions of the Companies Acts and without prejudice toany relevant special rights attached to any class of shares, the Company may purchase any of its ownshares of any class at any price (whether at par or above or below par) and so that any shares to beso purchased may be selected in any manner whatsoever and cancelled or held by the Company astreasury shares. The Company shall not make a purchase of its shares in the Company unless thepurchase has first been authorised by a special resolution of the Company, and by a specialresolution passed at a separate general meeting of the holders of each class of shares or a resolutionpassed by a majority representing three-quarters of the votes cast at a separate general meeting ofthe holders of the Company’s loan stock (if any) which at the date on which the purchase isauthorised by the Company in general meeting, entitle them, either immediately or at any timesubsequently, to convert all or any of the shares or loan stock of that class held by them into equity,share capital of the Company.On 11 September 2006, the shareholders of the Company resolved to give the Board authority tomake such purchases, such authority to expire on the date of the next Annual General Meeting ofthe Company, or 15 months from the date of the passing of this resolution, whichever comes first.337

Part XVAdditional Information(m)DirectorsUnless otherwise determined by the Company in general meeting, the number of Directors shall notbe more than 15 nor less than two.As at the date of this Prospectus, the Directors of the Company have been appointed by the Ministerfor Transport pursuant to Section 12 of the Air Companies Act 1966. Following the commencementof Section 2 of the 2004 Act, which repeals the Air Companies Act 1966, any further Directors willbe appointed pursuant to the Articles of Association of the Company.Pursuant to the Articles of Association and subject to Section 182 of the Companies Act 1963 ofIreland, which permits a company to remove a director by passing an ordinary resolution if theprovisions of that section are otherwise complied with:➤ the Minister for Transport is entitled (but not obliged) to nominate for appointment, to havemaintained, and to remove, up to three persons as Directors; and➤ the ESOT is entitled (but not obliged) to nominate for appointment, to have maintained and toremove up to two persons as Directors.The number of persons who may be nominated and who will, following their nomination, bemaintained as the Minister for Transport’s or the ESOT’s nominated appointees is dependent on theproportion (expressed as a percentage) of the total issued ordinary share capital of the Companyheld from time to time and for the time being by the Selling Shareholder or the ESOT (asappropriate) as registered owner(s).Under the Articles of Association, the Minister for Transport is entitled (but not obliged) to nominatefor appointment, have maintained, and to remove up to three Directors for as long as the SellingShareholder’s shareholding represents 25.1% or more of the Ordinary Shares in issue, up to twoDirectors for as long as the Selling Shareholder’s shareholding represents 5% or more but less than25.1% of the Ordinary Shares in issue, and one Director for as long as the Selling Shareholder’sshareholding represents less than 5% but 1% or more of the Ordinary Shares in issue.Under the Articles of Association, the ESOT is entitled (but not obliged) to nominate forappointment, have maintained, and to remove up to two Directors for as long as its shareholdingrepresents 5% or more of the Ordinary Shares in issue. Where the ESOT’s shareholding representsless than 5% but 1% or more of the Ordinary Shares in issue, the ESOT is entitled to nominate oneDirector for as long as its shareholding stays within these levels.If the number of Ordinary Shares held by the relevant shareholder falls below the thresholds set outabove, a corresponding reduction will be required in the number of nominated appointees on theBoard. The nomination rights of the Selling Shareholder, which are conditional upon the percentageof Ordinary Shares held by the Selling Shareholder, are exercisable by the Minister for Transport.Prior to nominating a person for appointment, the Minister for Transport or the ESOT, as applicable,will engage with the Chairman for the time being of the Company as to the identity of such person.Following such engagement the Chairman may consult with the Appointments Committee (if any)of the Board. If the Company fails to appoint as directed within seven days any nominee of theMinister for Finance that nominee will be deemed to have been appointed.The Company is required to maintain sufficient vacancies on its Board to effect promptly theappointment(s) as Director(s) of any nominee(s) of the Selling Shareholder or the ESOT, as applicablein accordance with these provisions.As at the date of this Prospectus, of the current Directors, Francis Hackett is a nominee of the SellingShareholder, and Michael Johns is a nominee of the ESOT. Therefore on the basis of the OfferPR Ann I,21.2.2338

Part XVAdditional InformationAssumptions and immediately following Admission, the Selling Shareholder will be entitled tonominate two further Directors and the ESOT will be entitled to nominate one further Director.At each annual general meeting of the Company, one-third of the Directors, or if their number is notthree or a multiple of three then the number nearest to one-third shall retire from office. RetiringDirectors may be re-appointed. The Directors to retire will be those who wish to retire and not bereappointed to office and then those who have been longest in office. Any Director who has at thestart of the annual general meeting been in office for more than three years since his lastappointment or re-appointment shall retire at the annual general meeting. As between those whowere appointed or re-appointed on the same day, those to retire will be (unless they otherwiseagree) determined by lot. A retiring Director shall be eligible for re-election. Directors nominated bythe Minister for Transport or the ESOP will not be subject to these provisions and such nominees willnot be taken into account in determining the number to retire.The emoluments of any Director holding executive office for his services as such shall be determinedby the Board, and may be of any description.The ordinary remuneration of the Directors who do not hold executive office for their services(excluding amounts payable under any other provision of the Articles) shall not exceed in aggregate01,500,000 per annum or such higher amount as the Company may from time to time by ordinaryresolution determine. Subject thereto, each such Director shall be paid a fee for their services (whichshall be deemed to accrue from day to day) at such rate as may from time to time be determined bythe Board. In addition, any Director who does not hold executive office and who performs services,which in the opinion of the Board are outside the scope of the ordinary duties of a Director, may bepaid such extra remuneration as the Board may determine.The Board may provide benefits, whether by the payment of gratuities or pensions, insurance orotherwise, for any past or present Director or employee of the Company or any of its subsidiaryundertakings or any body corporate associated with, or any business acquired by, any of them, andfor any members of his family or any person who is or was dependent on him.Any Director who holds an executive office (including for this purpose the office of Chairman orDeputy Chairman) or who serves on any committee or who otherwise performs services which in theopinion of the Directors are outside the scope of the ordinary duties of a Director, may be paid suchextra remuneration by way of salary, commission or otherwise as the Directors may determine.The Directors may provide benefits, whether by way of pensions, gratuities, or otherwise for anyDirector, former Director or other officer or former officer of the Company, or to any person whoholds or has held any employment with the Company or with any body corporate which is or hasbeen a subsidiary of the Company or a predecessor in business of the Company or of any suchsubsidiary and to any member of his family or any person who is or was dependent on him and mayset up, establish, support, alter, maintain and continue any scheme for providing all or any of suchbenefits and for such purposes any Director accordingly may be, become or remain a member of, orrejoin, any scheme and receive and retain for his own benefit all benefits to which he may be orbecome entitled thereunder. The Directors may pay out of the funds of the Company any premiums,contributions or sums payable by the Company under the provisions of any such scheme in respectof any of the persons or class of persons above referred to who are or may be or become membersthereof.Subject to the provisions of the Companies Acts and provided that he has disclosed to the Directorsthe nature and extent of any material interest of his, a Director, notwithstanding his office:(i)may be party to or otherwise interested in, any transaction or arrangement with theCompany or any subsidiary or associated company thereof or in which the Company or anysubsidiary or associated company thereof is otherwise interested;339

Part XVAdditional Information(ii)(iii)may be a Director or other officer of or employed by or a party to any transaction orarrangement with or otherwise interested in, any body corporate promoted by the Company,or in which the Company or any subsidiary or associated company thereof is otherwiseinterested; andshall not be accountable, by reason of his office, to the Company for any benefit which hederives from any such office or employment or from any such transaction or arrangement orfrom any interest in any, such body corporate and no such transaction or arrangement shallbe liable to be avoided on the ground of any such interest or benefit.Save as otherwise provided by the Articles, a Director shall not vote at a meeting of the Directors orcommittee of Directors on any resolution concerning a matter in which he has, directly or indirectly,an interest which (together with any interest of any person connected (within the meaning ofSection 26 of the Companies Act 1990) with him) is material or a duty, which conflicts or mayconflict with the interests of the Company.A Director shall be entitled (in the absence of some other material interest than is indicated below) tovote (and be counted in the quorum) in respect of any resolution concerning any of the followingmatters:(i)(ii)(iii)(iv)(v)(vi)(vii)the giving of any security, guarantee or indemnity to him in respect of money lent by him orany other person to the Company or any of its subsidiary or associated companies, orobligations incurred by him or by any other person at the request of, or for the benefit of, theCompany or any of its subsidiary or associated companies;the giving of any security, guarantee or indemnity to a third party in respect of a debt orobligation of the Company or any of its subsidiary or associated companies for which hehimself has assumed responsibility, in whole or in part and whether alone or jointly withothers, under a guarantee or an indemnity or by the giving of a security;any proposal concerning any offer of shares or debentures or other securities of or by theCompany or any of its subsidiary or associated companies for subscription, purchase orexchange in which offer he is or may be entitled to participate as a holder of securities or heis or is to be interested as, a participant in the underwriting or sub-underwriting thereof;any proposal concerning any other company in which he is interested, directly or indirectlyand whether as an officer, shareholder or otherwise howsoever, provided that he is not theholder of or beneficially interested in 1% or more of the issued shares of any class of theequity share capital of such company or of the voting rights available to members of suchcompany (or of a third company through which his interest is derived) any such interest beingdeemed to be a material interest in all circumstances;any proposal concerning the adoption modification or operation of a superannuation fund orretirement benefits scheme under which he may benefit and which has been approved by oris subject to and conditional upon approval for taxation purposes by the appropriate Revenueauthorities;any proposal concerning the adoption, modification or operation of any scheme for enablingemployees (including full time executive Directors) of the Company and/or any subsidiarythereof to acquire shares in the Company or any arrangement for the benefit of employees ofthe Company or any of its subsidiaries under which the Director benefits or may benefit; orany proposal concerning the giving of any indemnity of the type referred to inparagraph 5.2(o) (Indemnity of Officers) of this Part XV or the discharge of the cost of anyinsurance cover which the Company proposes to maintain or purchase for the benefit ofDirectors or for the benefit of persons (including Directors) pursuant to the Articles.340

Part XVAdditional InformationThe Company, by ordinary resolution, may remove any Director before the expiry of his period ofoffice notwithstanding anything in the Articles or in any agreement between the Company and suchDirector. This does not prevent such a person from claiming compensation or damages in respect ofthe termination.(n)(o)(p)Borrowing PowersThe Directors may exercise all the powers of the Company to borrow or raise money and tomortgage or charge its undertaking, property, assets, and uncalled capital or any part thereof and,subject to Part III of the Companies (Amendment) Act 1983, to issue debentures, debenture stockand other securities, whether outright or as collateral security for any debt, liability or obligation ofthe Company or of any third party, without any limitation as to amount.Indemnity of OfficersSubject to the provisions of, and so far as may be permitted by the Companies Acts, every Director,Managing Director, Auditor, Secretary or other officer of the Company shall be entitled to beindemnified by the Company against all costs, charges, losses, expenses and liabilities incurred byhim in the execution and discharge of his duties or in relation thereto including any liability incurredby him in defending civil or criminal proceedings which relate to anything done or omitted or allegedto have been done or omitted by him as an officer or employee of the Company and in whichjudgment is given in his favour (or the proceedings are otherwise disposed of without any finding oradmission of any material breach of duty on his part) or in which he is acquitted or in connectionwith any application under any statute for relief from liability in respect of any such act or omissionin which relief is granted to him by the Court.Disposal of London Heathrow SlotsThe Articles of Association contain provisions requiring shareholder approval for the disposal of slotsallocated to the Company at London Heathrow Airport. If Aer Lingus proposes to dispose of any ofits existing slots at London Heathrow, it is required to notify its shareholders in the manner set out inthe Articles of Association, and shareholders representing 20% or more of the issued OrdinaryShares may require, within 28 days of notification, that the matter be submitted to an extraordinarygeneral meeting.The disposal may proceed if at the extraordinary general meeting the relevant resolution is passed bynot less than X% of the votes cast at such meeting (where ‘X’ is equal to 100 minus the number ofOrdinary Shares held by the Selling Shareholder at the record date of such meeting of the Company(but excluding the ESOT Option Shares), expressed as a percentage of the total number of issuedOrdinary Shares as at such record date, plus 5%) provided that if the value of ‘X’ under this formulais greater than 75, ‘X’ shall be deemed to be 75.The Minister for Transport considers that four London Heathrow slot pairs for services to and fromCork and that four (summer season) and three (winter season) for services to and from Shannonwould each be critical to ensuring connectivity to these airports because this is the minimumnecessary to ensure a spread of flights throughout the day. On this basis, the Minister for Finance asa shareholder in the Company, acting on the advice of the Minister for Transport, is unlikely tosupport a proposed disposal of any slot pair such that there would be less than the existing LondonHeathrow slot pairs that relate to services between London Heathrow and Cork or Shannon and islikely to request the convening of an extraordinary general meeting, as provided for in the Articles ofAssociation, to consider such matter. In the event of a proposed disposal of a slot pair subject to theabove requirements, the Minister for Transport, when deciding how to advise the Minister forFinance, would take into account the services operated by other carriers from Cork and Shannon toLondon Heathrow and any evolution of services to other connecting airports from Cork andShannon. The Minister for Transport would also take account of any relevant direct long-haul flightsfrom Cork or Shannon (as the case may be).The Minister for Transport considers that the level of slots relating to Dublin that are critical toconnectivity is that which ensures passengers from and to Dublin can connect throughout the course341

Part XVAdditional Informationof the day with key long-haul destination flights to and from London Heathrow. The Minister forFinance, as a shareholder in the Company, acting on the advice of the Minister for Transport, isunlikely to support a proposed disposal of any slot pair relating to services between LondonHeathrow and Dublin that would result in the interval between air services operated using slots onthis route exceeding 90 minutes (not reckoning any time between the last slot on one night and thefirst slot on the following day) and is likely to request the convening of an extraordinary generalmeeting to consider such proposal. In the event of a proposed disposal of a slot pair subject to theabove requirements, the Minister for Transport, when deciding how to advise the Minister forFinance, would take into account the services operated by other carriers between Dublin andLondon Heathrow. The Minister for Transport would also take into account services which could beprovided via other connecting airports, provided that there is relevant available capacity both fromDublin to the other airport and from that airport to key long haul destinations, and any relevantdirect long-haul flights from Dublin.(q)Any new slot (not being part of a swap arrangement) that may be acquired by the Company afterthe Offer would only become subject to the potential constraints on disposal set out above if theCompany decides that any such new slot should be included. Where the Company has decided thatany new slot should not be so included then the Minister for Transport will be entitled to disregardany air services being provided using that slot in considering a proposed disposal of any other slot.PR Ann I,Disclosure of Shareholder Interests21.2.7There are no provisions in the Articles of Association that require the disclosure of ownership ofOrdinary Shares at specific thresholds but other provisions of Irish law require such disclosure:(i)(ii)(iii)Irish companies are required by the Companies Acts to make an annual return to theCompanies Registration Office in Dublin, which will normally include a list of shareholders,giving the names and addresses and number of shares held by each. In addition, theDirectors’ report or notes to the Company’s statutory accounts will state the number andamount of shares or debentures of the Company (or a subsidiary or holding company of theCompany) in which each Director is interested. The Directors’ report and notes to theCompany’s statutory accounts will be sent to shareholders and will be obtainable from theCompanies Registration Office.The Companies Acts require Directors, shadow Directors and the Company Secretary(including, for these purposes, their spouses and minor children) to notify the Company oftheir legal and beneficial interests and dealings in shares and debentures of the Company or asubsidiary or holding company of the Company. The Company must announce the interestsdisclosed to it via a Regulatory Information Service on the day following that disclosure.Where any person (including for these purposes their spouse and minor children andcompanies in which they are interested) acquires or disposes of an interest which brings theirinterest in the Company above or below 5% of the issued share capital of the Company, theCompanies Acts require that they must notify the Company in writing within five days.Where a person is a party to an agreement by a group of people providing for the acquisitionof shares in the Company and imposing obligations or restrictions on any of the parties withrespect to their use, retention or disposal of interests in shares acquired pursuant to theagreement then, for the purposes of the Companies Acts, that person will be treated asbeing interested in any shares acquired by any of the parties to the agreement.The Company will keep a register of the interests disclosed, which is required to be open forinspection during business hours. The Company must also notify a Regulatory InformationService as soon as possible (and in any event by the end of the Business Day following receiptof the information) of the interests disclosed to it in this way and of the particulars of anyinterests of any person (other than a Director) in 3% or more of the nominal value of any342

Part XVAdditional Informationclass of shares carrying voting rights to vote in all circumstances at general meetings of thecompany, if such interest has been notified to the Company.(iv)(v)(vi)(vii)In addition, a person who acquires or disposes of an interest which brings their interest in theCompany above or below 10% or 25% or 50% or 75% of the issued share capital of a classof shares carrying voting rights at general meetings of the company must notify the IrishStock Exchange, which will publish the notification within three days of its receipt.The Market Abuse (Directive 2003/6/EC) Regulations 2005 and the Rules issued by theFinancial Regulator require persons discharging managerial responsibility within the Companyand persons closely associated with them to disclose to the Company and the FinancialRegulator transactions conducted on their own account in the shares of the Company, orderivatives or any other financial instrument(s) relating to those shares.The Irish Substantial Acquisition Rules prohibit substantial acquisitions of shares in theCompany except in specified circumstances, and require disclosure to the Irish StockExchange and the Irish Takeover Panel where a shareholder becomes entitled to 15% or moreof the voting rights in the Company, or (where a shareholder holds 15% or more but lessthan 30% of the voting rights in the Company) where a shareholder’s percentage will beincreased to or beyond any whole percentage figure.Rule 8 of the Irish Takeover Rules requires disclosure of dealings during an offer period by anyperson owning or controlling 1% or more of any class of shares in an offeror or offeree, orwho as a result of any transaction will own or control 1% or more of any such class to theIrish Stock Exchange and the Irish Takeover Panel by twelve noon on the Business Dayfollowing the date of the transaction.(r)(s)RedemptionAny shares in the Company may be issued on the terms that they are, or at the option of theCompany are, liable to be redeemed on such terms and in such manner as the Company maydetermine. In addition, the Company is authorised to redeem any of its shares which have beenconverted into redeemable shares.ConversionThe Company may convert any paid up shares into stock and reconvert any stock into paid up sharesof any denomination. The Holders of stock may transfer the same or any part thereof, in the samemanner, and subject to the same regulations, as and subject to which the shares from which thestock arose might have been transferred before conversion. The Holders of stock shall have,according to the amount of stock held by them, the same rights, privileges and advantages inrelation to dividends, voting at meetings of the Company and other matters as if they held theshares from which the stock arose6. EMPLOYEE SHARE OWNERSHIPThere has been a history of employee share ownership in Aer Lingus for the last ten years.6.1 Aer Lingus Employee Share Participation Scheme (‘‘ESPS’’)The ESPS was established on 13 March 1996 as part of the Cahill Survival Plan. The ESPS operated asa profit sharing scheme whereby employees could receive 10% of the Group’s profits before tax andexceptional items in the form of shares and/or cash. The scheme placed a limit of the lesser of 5% ofthe number of shares in issue in the Company or 12,180,503 shares on the number of shares thatcould be made available under the ESPS. This limit was reached in 1999. The limit on the amount ofthe cash payments under the ESPS was reached 31 December 2002 when a total of approximately015.5 million was earned.PR Ann I,17.3343

Part XVAdditional InformationThe ESPS was approved by the Irish Revenue Commissioners as satisfying the requirements ofChapter IX Part I and Schedule 3 to the Finance Act 1982 (now Part 17 and Schedule 11 to the TaxesConsolidation Act 1997). For this reason, a participant in the ESPS was able to receive OrdinaryShares tax-free provided that the participant did not dispose of his interest in those shares until afterthe third anniversary of the appropriation of the relevant shares for the benefit of the participant.Each year that Ordinary Shares were acquired by the ESPS, the shares were appropriated for thebenefit of the participants in the scheme on the basis that the shares would be beneficially owned bythe participants but the legal title to the shares would be registered in the names of the trustees ofthe ESPS. As at 8 September 2006, the latest practicable date prior to publication of this Prospectus,6,624,549 Ordinary Shares continue to be held on this basis for the benefit of 2,962 participants. Onthe completion of the Offer, ESPS participants will have the right to have the legal title to theseshares transferred into their names.6.2 Aer Lingus Group plc UK Employee Share Participation Scheme (UK ESPS)The UK ESPS was established as a sub-scheme of the ESPS on 22 May 1996 and operates on thesame terms as the ESPS. As at 8 September 2006, the latest practicable date prior to the publicationof this Prospectus, the Ordinary Shares which are held for the benefit of the participants in theUK ESPS form part of the 6,624,549 Ordinary Shares which are registered in the name of Aer LingusESOP Trustee Limited. All of these Ordinary Shares will be distributed to the beneficial owners on oras soon as possible after Admission and will be capable of being sold without restriction.6.3 Aer Lingus Employee Share Ownership Plan (‘‘ESOP’’)Pursuant to the 2001 Survival Plan, and in accordance with an agreement entered into on 28 April2003 between the Minister for Transport, the Minister for Finance, the Company, ALL, Aer LingusESOP Trustee Limited and the Central Representative Council (on behalf of the trade unionsrepresenting Aer Lingus’ employees), the ESOP was established to acquire and hold shares for thebenefit of Eligible Employees. The ESOP consists of two separate trusts, the Aer Lingus EmployeeShare Ownership Trust and the APSS. Aer Lingus ESOP Trustee Limited is the corporate trustee forboth trusts. Aer Lingus ESOP Trustee Limited is required by the Irish Taxes Consolidation Act 1997 tobe resident in Ireland and to be a subsidiary of the founding company, which is the Company. TheCompany is the registered holder of all issued shares in Aer Lingus ESOP Trustee Limited but doesnot exercise control over Aer Lingus ESOP Trustee Limited or have any beneficial interest in the assetsof either the ESOT or the APSS. The accounts of Aer Lingus ESOP Trustee Limited have not been andare not consolidated in the consolidated financial statements of Aer Lingus.6.4 The Aer Lingus Employee Share Ownership Trust (‘‘ESOT’’)The ESOT is an employee share trust that is approved by the Irish Revenue Commissioners assatisfying the requirements of Section 519 and Schedule 12 of the Irish Taxes Consolidation Act1997, which enables Aer Lingus ESOP Trustee Limited to acquire and hold and, by transferringOrdinary Shares to the APSS, distribute those shares on behalf of qualifying current and formeremployees of the Company and its participating subsidiaries, in a manner which is tax efficient forthe individual participants over a period of time.Employees and directors of the Company and ALL are eligible, subject to various exceptions relatingto, among other things, the interest such employee has in the Group and his or her statutoryeligibility to participate in the APSS and in the ESOT after 12 months of qualifying employment. Eachtime shares have been acquired by the ESOT they have been notionally allocated to all eligibleindividuals. The last notional allocation occurred 12 July 2006. The individuals to whom shares havebeen allocated (the ‘‘Beneficiaries’’) do not have a vested interest in any of the shares held by theESOT until the shares are transferred to the APSS, from which they may be distributed to theBeneficiaries. If a Beneficiary ceases to be employed by the Company or ALL, the Beneficiary willremain eligible to receive shares for fifteen years after leaving the company provided that at leasthalf of the shares held at any particular time by the ESOT are subject to an encumbrance in the firstfive years following the acquisition of such shares. Shares held in the ESOT currently secure loansmade to the ESOT by ALL and can only be transferred to the extent the encumbrance is released.344

Part XVAdditional InformationAer Lingus ESOP Trustee Limited can vote all of the Ordinary Shares held in the ESOT as a block. AerLingus ESOP Trustee Limited has the discretion to ballot the Beneficiaries on significant shareholderand trust related issues, including takeovers and additional borrowings, and is required to act inaccordance with the results of such a ballot.The ESOT Trust Deed provides that any borrowings of the ESOT are without recourse to theCompany, its subsidiaries or shareholders. Aer Lingus ESOP Trustee Limited and its directors areindemnified, at the expense of the ESOT, against all losses and liabilities incurred in connection withthe exercise of their duties and powers in connection with the ESOT and the APSS, other than in thecase of fraud, wilful default or, for any director of Aer Lingus ESOP Trustee Limited who providestrustee services for a fee, negligence. The ESOT Trust Deed provides that neither the ESOT nor itsdirectors have any recourse to the Company or its subsidiaries. Aer Lingus ESOP Trustee Limited hasseven directors, four of whom, including the chairman, are directors nominated by electedrepresentatives on behalf of employees of the Company. There are two other directors appointed bythe Company, and one director is an independent director. The articles of association of Aer LingusESOP Trustee Limited provide that decisions of its board of directors are made by majority vote. TheESOT Trust Deed can only be amended by the Company with the consent of Aer Lingus ESOP TrusteeLimited and the consent of the Irish Revenue Commissioners and the representative unions. TheESOT Trust Deed can be terminated by a resolution of the majority of the Beneficiaries employeeswith the consent of the Company and the consent of the representative unions. As at 8 September2006, the latest practicable date prior to publication of this Prospectus, Aer Lingus ESOP TrusteeLimited held, as trustee of the ESOT, 36,028,679 Ordinary Shares.As part of Aer Lingus’ 2001 restructuring plan, an employee profit sharing arrangement was PR Ann I,established. Subject to certain conditions, Aer Lingus agreed to make 10% of its profit before tax 21.1.3and exceptional items available annually to the ESOT by way of profit share for the benefit ofemployees up to an aggregate maximum of 025.4 million over the life of the ESOT. No provision wasmade for the employee profit share in 2005 as the aggregate maximum amount of 025.4 millionwas reached in 2004, of which 016.1 million remains payable by Aer Lingus at any time upondemand by the ESOT.The terms of the profit sharing arrangement provide that the aggregate maximum of 025.4 millionwould be increased by 05.0 million to 030.4 million if the ESOT requires this additional amount tomaintain the ESOT’s percentage shareholding in Aer Lingus at the level existing immediately prior tothe date of the event resulting in an increase in Aer Lingus’ share capital.The statutory pre-emption rights of the existing shareholders in the Company, including the ESOTand the APSS Participants, to subscribe for the New Ordinary Shares, were disapplied at anextraordinary general meeting of the Company on 11 September 2006. At the same meeting, thePre-Admission Articles were amended so as to remove the ESOT Anti-Dilution Right and the APSSAnti-Dilution Right. Except with respect to the ESOT Subscription and the Employee and APSSParticipant Offer, there will be no pre-emption rights to subscribe for Offer Shares vested in theexisting shareholders of the Company.The ESOT has agreed to subscribe for Offer Shares (the ‘‘ESOT Subscription’’) with an aggregatevalue of up to 033 million at the Offer Price. Based on the Offer Assumptions, this would result inthe ESOT acquiring 13,750,000 Ordinary Shares (representing 2.78% of the Company’s issued sharecapital immediately following Admission) pursuant to the Offer. The ESOT intends to fund theacquisition of these Offer Shares through a combination of its existing cash resources, additionalprofit share currently due under existing arrangements and a payment from the Companyrepresenting the capitalisation of the 0.5% element of the pay increase recommended to be paid toemployees and pilots as described further in paragraph 20 (Employees) of Part VIII (Information onAer Lingus).The Selling Shareholder has agreed to grant to the ESOT an option (the ‘‘ESOT Option’’) to acquirethat number of Ordinary Shares currently held by the Selling Shareholder in the Company (the‘‘Option Shares’’) such that, if exercised in full and assuming no further share capital increases (other345

Part XVAdditional Informationthan the Bonus Shares), the number would be equal to the number of new Ordinary Shares as wouldbe required to be issued to ESOT so as to restore the percentage shareholding of the ESOT in theissued share capital of the Company to the level it was immediately before the Offer (having takeninto account the dilutive effect of the issue of the Bonus Shares). The ESOT Option will be exercisableby the ESOT for a period of five years commencing on the date of Admission. The subscription priceper Option Share under the ESOT Option will be the Offer Price. For so long as the SellingShareholder has 30% or more of the issued ordinary share capital of the Company, in certaincircumstances the ESOT may become entitled to purchase Option Shares at a price which is thelower of the Offer Price and the average market price of the Ordinary Shares over a period prior tothe date on which the ESOT Option is exercised. It is currently envisaged that any exercise of theESOT Option would be paid for by the New Profit Share Arrangement. If Bonus Shares are issued,the number of Option Shares will be increased to maintain the ESOT’s ability to restore itsshareholding to 12.6% as referred to above. Further details on the ESOT Option and the New ProfitShare Arrangement are set out in paragraph 11 (The ESOT and the New Profit Share Arrangement)of Part XIV (The Offer) of this ProspectusUnder the Articles of Association, the ESOT shall be entitled to nominate for appointment up to twoDirectors to the Board so long as its shareholding represents at least 5% of the Ordinary Shares inissue. Where the ESOT’s shareholding represents less than 5% but at least 1% of the OrdinaryShares in issue, the ESOT shall be entitled to nominate for appointment one Director to the Board solong as its shareholding remains within these levels. Of the current Directors, Michael Johns is thenominee of the ESOT. Therefore, on the basis of the Offer Assumptions, immediately followingAdmission the ESOT will have the right to have one further Director appointed to the Board.6.5 Aer Lingus Approved Profit Sharing Scheme (‘‘APSS’’)On 28 April 2003, the ESPS was amended to create the APSS. The APSS is an employee share trustthat is approved by the Irish Revenue Commissioners as satisfying the requirements of Part 17 andSchedule 11 to the Irish Taxes Consolidation Act 1997.The APSS may generally distribute shares up to an aggregate value of 012,700 per tax year to eachBeneficiary without the value of such shares giving rise to an income tax liability, provided that theshares have been held by the ESOT and the APSS for an aggregate period of at least three years andthe Beneficiary has participated in the ESOP for at least three years.In accordance with Irish law, the APSS was established under a trust deed that provides for theappointment of the initial trustee and contains rules for the appointment, retirement and removal oftrustees. Under the terms of the ESOT trust deed, when the shares held in the ESOT has been held inthe ESOT for three years and are no longer encumbered, as described above, Aer Lingus ESOPTrustee Limited will at least twice in each calendar year (which occasions shall be at least five monthsapart but, following an amendment which the parties have agreed to make to the ESOT trust deed,at least once a year) invite participants to call for the appropriation of shares to them and transferthe shares to the APSS. The Beneficiaries have a beneficial interest in the number of sharesappropriated under the APSS to them from time to time.Aer Lingus ESOP Trustee Limited is indemnified by the ESOT for all losses and liabilities incurred inconnection with the APSS, other than in the case of fraud, wilful default or, for any director of AerLingus ESOP Trustee Limited who provides trustee services for a fee, negligence. As at 8 September2006, the latest practicable date prior to publication of this Prospectus, Aer Lingus ESOP TrusteeLimited, as trustee of the APSS, held 6,624,549 Ordinary Shares in the Company.The APSS trust deed can only be amended by the Company with the consent of the Irish RevenueCommissioners, Aer Lingus ESOP Trustee Limited and the representative unions. The APSS Trust Deedcan be terminated by a resolution of the majority of participants with the Company’s consent andthe consent of the representative trade unions or by the directors provided that the consent of therepresentative trade unions has been obtained and the obligation of the ESOT to transfer shares hasceased in accordance with the ESOT trust deed.346

Part XVAdditional InformationThe statutory pre-emption rights of the existing shareholders in the Company, including the ESOTand the APSS Participants, to subscribe for the New Ordinary Shares, were disapplied at anextraordinary general meeting of the Company on 11 September 2006. At the same meeting, thePre-Admission Articles were amended so as to remove the ESOT Anti-Dilution Right and the APSSAnti-Dilution Right. Except with respect to the ESOT Subscription and the Employee and APSSParticipant Offer, there will be no pre-emption rights to subscribe for Offer Shares vested in theexisting shareholders of the Company.The Employee and APSS Participant Offer will be open to APSS Participants. The terms andconditions of the Employee and APSS Participant Offer are the same as those applicable to theIntermediaries Offer, except that: (1) the 010,000 minimum subscription amount does not apply;(2) no brokers’ commissions are chargeable; (3) in the event of oversubscription of the Offer, APSSParticipants and Eligible Employees (in that order of priority) will not be scaled back below the higherof 020,000 or to the extent that the Company is required to issue Ordinary Shares pursuant to theAPSS Allocation; and (4) applications by Eligible Employees and APSS Participants will be madedirectly to the Company.If the 0.5% Capitalisation Recommendation and the Pilots Pay Tribunal Recommendation are notimplemented by Admission, the ESOT will only be able to subscribe for 021 million of Offer Shares inthe ESOT Subscription and the ESOT Option will not become effective.7. PENSIONSAer Lingus operates a number of pension schemes. There are two principal schemes (the ‘‘Irish PensionSchemes’’), one known as the Irish Airlines (General Employees) Superannuation Scheme (the ‘‘MainScheme’’) and the other known as the Irish Airlines (Pilots) Superannuation Scheme (the ‘‘Pilots’ Scheme’’).Aer Lingus also operates a number of other schemes in other jurisdictions. Most of these are small schemesset up on a defined contribution basis with the exception of small defined benefit schemes established inthe United States and the United Kingdom.PR Ann I15.27.1 The Irish Airlines (General Employees) Superannuation SchemeThe Main Scheme was established by deed dated 31 March 1954 with effect from 1 April 1950 andis classified as a defined benefit scheme for the purposes of the Pensions Act 1990. Under the termsof the trust deed governing the Main Scheme, the employers’ and employees’ contribution rate isfixed regardless of the funding position of the Main Scheme. The contribution rates for the MainScheme are 6.375% of salary by the member and an equal amount by the employer. Thecontribution rate is reduced by a co-ordination offset in respect of those employees whose benefitsare co-ordinated with the state social welfare system. At the latest valuation date (31 March 2005),the amount of the offset was 07.66 per week (08.26 per week from 01 January 2006). As employercontributions are stipulated to be equal to those paid by the employees, the employers’ contributionis also reduced by this amount. Neither the employer nor the members can be required to makeincreased contributions without their consent. As the Company has no legal or constructiveobligation to alter its contribution, the Main Scheme is accounted for by Aer Lingus as a definedcontribution scheme.The Main Scheme has a normal retiring date of the anniversary of the date of commencement ofpensionable service that occurs after the member reaches age 65 (except in the case of female staffwho joined prior to 31 December 1992 for whom any pension benefits accrued during that periodare payable from the anniversary of joining the Main Scheme after age 60). The principal benefitpayable is 1/60th of the final retiring salary for each completed year of pensionable service, subjectto a maximum of 2/3rds of final retiring salary. The final retiring salary is the pensionable salaryreceived by the member in the 12 months immediately preceding retirement. Membership of theScheme is generally open to regular full-time and regular part-time employees over the age of 20based in Ireland and the United Kingdom. The contribution rate for the Main Scheme is reduced by aco-ordination off-set in respect of employees whose benefits are co-ordinated with Ireland’s social347

Part XVAdditional Informationwelfare system. For new members within 20 years of normal retirement age (65), there is no suchoff-set. As at 31 March 2006 (being the last scheme year-end date prior to publication of thisProspectus), the Main Scheme had 5,546 active members along with 4,252 pensioners and 3,494Deferred Members. Members may retire at any time from the age of 55, with the consent of theemployers, and receive immediate pension benefits or deferred benefits payable from as early asage 55. The assumed average age of retirement for actuarial purposes of male and female membersis currently 61 and 59, respectively, to the extent that the age of retiring members of the MainScheme differs from this (with the employers’ agreement), the member’s employer makes a capitalinjection to protect the finances of the Main Scheme.Spouses’ and children’s pensions are payable on death in service and death in retirement (providedthe member has at least five years accumulated service in the Main Scheme). Spouses’ pensions arepayable on death in deferment. Pension increases are not guaranteed but historically have been paidby the trustees in line with the Consumer Price Index on a discretionary basis out of availableactuarial surpluses. The benefits of members who have joined since 1 April 1970 are integrated withthe state pension. For each year of co-ordinated service, the member’s pension at age 65 is reducedby 1/40th of the single person’s state pension.The Main Scheme is approved by the Irish Revenue Commissioners as a cross-border scheme and isapproved to receive contributions in respect of UK members. Increases to pensions payable to UKmembers are made in line with UK legislation. The Main Scheme is also registered with the IrishPensions Board and has been approved by the UK Inland Revenue.The last actuarial valuation for the Main Scheme was carried out with an effective date of 31 March2005. The result of that valuation disclosed an excess of assets over liabilities of approximately0140 million. It is to be noted that in assessing the liabilities of the Main Scheme the actuary did notmake any allowance for granting future pension increases. In his valuation the actuary noted that, inthe absence of an increase in the rate of contributions to the Main Scheme, it would be difficult tosee how the past practice of increasing pensions in line with inflation could be maintained withoutlimitation. Further details about the funding and accounting treatment of the Main Scheme are setout in paragraph 2.10 (A default in the payment of basic pension benefits under the Company’s IrishPension Schemes could possibly result in a future claim against the Company) of Part III (Risk Factors)and paragraph 7.5 (Accounting Treatment of Aer Lingus Pension Schemes) in this Part XV. Theactuary was also in a position to confirm that as at 31 March 2005, the Main Scheme met theminimum funding standard requirement under the Pensions Act 1990. As at 31 March 2005, theliabilities of the Main Scheme based on pensionable service and pensionable salaries at that datetotalled 01,316 million while the assets of the Main Scheme totalled 01,578 million therebydisclosing a surplus of 0262 million. When allowance was made for projected future service andfuture salary increases the liabilities totalled 01,698 million while the assets (allowing for the value offuture contributions) totalled 01,838 million thereby disclosing a surplus of 0140 million. The actuaryhas also confirmed to the trustees that he is satisfied that, if he had prepared an actuarial fundingcertificate having an effective date of 31 March 2006, he would have been able to certify that theMain Scheme satisfied the funding standard provided for in Section 44 of the Pensions Act, 1990 at31 March 2006. Although pension increases have been excluded from assessment of the liabilities ofthe Main Scheme, there has been a practice to date of granting pension increases where availablesurpluses so permits.The Main Scheme is a multi-employer scheme. The Company is one of a number of participatingemployers in the Main Scheme, the others principally being Dublin Airport Authority plc (formerlyAer Rianta cpt) and SR Technics Ireland Limited (formerly FLS Aerospace (IRL) Limited). The assets andliabilities of the Main Scheme are not segregated so there is no fund or investments designated onlyfor employees of the Company. Accordingly, monies paid in by all the participating employers formpart of a common fund for the benefit of eligible pensioners and employees of all the participatingemployers. All members of the Main Scheme are entitled to benefits on the same basis inaccordance with the rules of the Main Scheme and benefits are paid to members as they fall duewithout differentiating between members on the basis of who is or was their employer. All348

Part XVAdditional Informationparticipating employers and active members pay contributions on the same basis in accordance withthe rules of the Main Scheme.Other than changes required by law, the rules of the Main Scheme can only be changed with theapproval of all the participating employers and the members.7.2 The Irish Airlines (Pilots) Superannuation SchemeThe Pilots’ Scheme was established by deed dated 31 March 1954 and is also classified as a definedbenefit scheme for the purposes of the Pensions Act 1990. However, as in the case with the MainScheme, the employers’ and employees’ contribution rates are fixed regardless of the fundingposition of the Pilots’ Scheme. The employer pays 21% of salary and employees pay 7% of salary.Neither the employer nor the members can be required to make increased contributions withouttheir consent. As the Company has no legal or constructive obligation to alter its contributions, thePilots’ Scheme is accounted for by Aer Lingus as a defined contribution scheme. Aer Lingus is theonly participating employer.Normal retiring date in the Pilots’ Scheme is the member’s 55th birthday. The benefits payable are1/45th of final retiring salary for each year of pensionable service (with a maximum of 30/45ths). Thefinal retiring salary is the pensionable salary received by the member in the 12 months immediatelypreceding retirement. Membership of the Pilots’ Scheme is limited to pilots who have attained20 years of age. As at 31 March 2006 (the latest Scheme year-end date prior to publication of thisProspectus), the Pilots’ Scheme had 423 active members along with 328 pensioners and 53 DeferredMembers. Members may retire at any time from the age of 45, subject to the Company’s consent,and receive immediate pension benefits appropriate to pensionable service. Members can remain inemployment and continue to accumulate pensionable service past their normal retirement date upto age 60. Spouses’ and children’s pensions are payable on death in service or death in retirement.A spouse’s pension is payable on death in deferment. Pension increases are not guaranteed buthistorically have been paid in line with the Consumer Price Index on a discretionary basis out ofavailable actuarial surpluses. The Pilots’ Scheme pension is not integrated with the State pension.The Pilots’ Scheme is approved by the Irish Revenue Commissioners and is registered with thePensions Board.The last actuarial valuation of the Pilots’ Scheme was carried out with an effective date of 31 March2006. As at the valuation date, the actuarial value of the assets of the Pilots’ Scheme wasapproximately 0809 million (including an allowance for the value of future contributions) while theaggregate of past and future service liabilities was approximately 0557 million, representing a netactuarial surplus of 0252 million. Although pension increases have been excluded from anassessment of the liabilities of the Pilots’ Scheme, there has been a practice to date of grantingpension increases where available surpluses so permit.7.3 The Aer Lingus Retirement Plan (United States)There is a defined benefit plan established in the United States. The plan is known as the Aer LingusRetirement Plan. Employees do not contribute to the plan. The current employer contribution rateinto this plan is approximately 21% of the payroll of the staff involved. The plan provides a basicannual pension benefit of approximately 50% of final pensionable salary plus and minus certainamounts based on previous plan membership and length of service. Normal pension age is 65, butparticipants may receive earlier distributions in certain circumstances. As at 1 January 2006, the planhad 105 active members, 35 deferred vested members and 17 pensioners. As at 1 January 2006, thefair market value of the assets of the plan was approximately $4.2 million and the accumulatedbenefit obligations were approximately $9.8 million. An actuarial valuation for this plan was lastcarried out with an effective date of 1 January 2006.7.4 Supplemental FundsThe Company, with the agreement of SIPTU and IMPACT, proposes to establish two SupplementalFunds.349

Part XVAdditional InformationThe purpose of the Supplemental Funds will be to meet, insofar as funds allow and at the discretionof the trustees of these trusts, the costs associated with providing Consumer Price Index (‘‘CPI’’)indexation in respect of the pension benefits of the pensioners, deferred pensioners and currentemployees of Aer Lingus in the Main Scheme in the event that the trustees of the Main Scheme, inany particular year, do not pay CPI indexation to these persons. Therefore, the Supplemental Fundsare being set up to enhance the prospects of members of the Main Scheme who are eligible formembership of its Supplemental Funds receiving increases in the value of their pensions in line withrises in the CPI.The participants in the first Supplemental Fund will be pensioners of the Main Scheme who wereemployees of Aer Lingus at the time of their retirement and Deferred Members who were employeesof Aer Lingus when they ceased to contribute to the Main Scheme and who have left their benefit inthe Main Scheme. Current employees of the Company cannot participate in the first SupplementalFund unless they elect to contribute to the second Supplemental Fund.As in the case of the Main Scheme the Supplemental Funds will be established on the basis thatneither the Company nor a participating employee can be obliged to pay into either fund more thanthe specified contributions without their written consent.7.5 Accounting Treatment of Aer Lingus Pension SchemesThe position of the Company is (and has been since the inception of the Company’s Irish PensionSchemes) that the liability of the Company to contribute to the Irish Pension Schemes is fixed at theircurrent contribution rates. This is reflected in the documentation governing the Company’s IrishPension Schemes. Accordingly, as the Company has determined that it has neither a legal nor aconstructive obligation to increase its contributions to the Irish Pension Schemes, and as there are noprovisions under Irish law that could result in an obligation to change the contribution rates withoutthe consent of the Company, the Irish Pension Schemes are accounted for on the basis that they are,for the purposes of International Financial Reporting Standards IAS 19 (Employee Benefits) definedcontribution schemes.On the basis that the latest actuarial valuation report, made as of the 31 March 2005 by MercerHuman Resources Consulting, demonstrated an aggregate surplus as of 31 March 2005 in the MainScheme as a whole, on an ongoing basis, before taking into account the costs of future discretionaryindexation, of approximately 0140 million and a surplus in the Pilots’ Scheme, on the same basis, asat 31 March 2006, of approximately 0252 million, the Board believes that the risk of the IrishPension Schemes defaulting in the payment of basic benefits is low.If, notwithstanding the above, there was to be a default on the payment of basic benefits undereither Irish Pension Scheme at some future date and if a claim were made by current and/or formeremployees against the Company in respect of any shortfall in the payment of basic benefits resultingfrom such default, the position of the Company, supported by firm legal advice, is that any suchclaim, if made, would be unlikely to succeed. The Board is aware of alternative legal advice providedto the Ministers to the effect that, in the event of a default in the payment of basic benefits underthe Main Scheme, a reasonable case for a claim could be made by a significant number of currentand/or former employees against the Company, independently of the Main Scheme, in respect ofthe shortfall arising from such default. The Company and its legal advisors, having reviewed suchlegal advice, remain of the view that any claim, if made, would, as stated above, be unlikely tosucceed.7.6 Other Pension SchemesAer Lingus also has a number of pension schemes in other jurisdictions in which it has employees,none of which are material.350

Part XVAdditional Information8. SUMMARY OF MATERIAL CONTRACTSPR Ann I,22The following is a summary of material contracts (other than contracts entered into in the ordinary courseof business) to which the Company or any member of the Group is a party for the two years immediatelypreceding the publication of this Prospectus and any other contract (not being a contract entered into in theordinary course of business) entered into by any member of the Group which contains any provision underwhich any member of the Group has any obligation or entitlement which is material to the Group as at thedate of this Prospectus:8.1 Underwriting AgreementFurther information about the Underwriting Agreement is set out in paragraph 12 (UnderwritingAgreement) of Part XIV (The Offer) of this Prospectus.8.2 Indemnity Agreement between Ministers and DirectorsPursuant to an agreement dated 12 September 2006 between the Minister for Finance, theCompany and the Directors, the Minister for Finance has agreed to indemnify (other than in certainspecified circumstances) the Directors in respect of claims, costs and losses made against or incurredby them arising from the Offer, and notified to the Minister for Finance before 7 September 2012 tothe extent that such claims, costs and losses are not otherwise insured.8.3 Futura Investment AgreementALL currently holds 20% of the issued share capital of Futura, with the remaining shares held byGestora de Participaciones Aéreas SL (‘‘GPA’’) and the Corpfin consortium (comprising of a numberof individuals, companies and partnerships). Under the terms of the members’ agreement ofNovember 2002, each of the shareholders is restricted in the manner in which it can sell or purchaseshares in Futura, and ALL and GPA in particular may be required to sell their respective shareholdingsin specified circumstances. If Corpfin decides to sell its shares in Futura, ALL will have the right toparticipate in the transaction and have its shares in Futura sold along with the shares of GPA. Futurahas recently retained an investment banker to identify value options for the shareholders, includingthe possible sale of Futura and an information memorandum has been circulated to a number ofparties inviting them to make an offer for Futura. This process is continuing.8.4 SR Technics Ireland Limited Maintenance AgreementAer Lingus entered into a ten-year exclusive comprehensive aircraft technical support servicesmaintenance agreement with SR Technics Ireland Limited (formerly FLS Aerospace (Irl) Limited andpreviously TEAM (Ireland) Limited) covering its Airbus A320 and A330 families of aircraft inDecember 1998 (amended in December 2005), which is currently scheduled to expire on 31 October2008 (the ‘‘Maintenance Agreement’’). Under the Maintenance Agreement, SR Technics IrelandLimited performs all scheduled and unscheduled aircraft maintenance at Dublin Airport (with theexception of some technical services which are performed in-house by Aer Lingus) on up to eight ofAer Lingus’ Airbus A330 family aircraft and on 20 of its Airbus A320 family aircraft and has the rightto submit bids for maintenance work on the additional aircraft. Aer Lingus has covenanted that, forthe term of the Maintenance Agreement, it will not, subject to certain exceptions, establish, support,retain, finance, maintain or invest in any operation for or with the sole purpose or activity ofproviding aircraft maintenance services and ancillary activities or ground handling services.On 7 September 2006, SR Technics, (the parent company of SR Technics Ireland Limited), announcedthat it was to be acquired by a consortium of three investors from the United Arab Emirates.8.5 Aircraft Operating Lease AgreementsAer Lingus has operating lease agreements in place in respect of 14 of its 28 short-haul aircraft. All PR Ann I,but one of these aircraft are leased from International Lease Finance Corporation (‘‘ILFC’’) or a 10.4wholly-owned subsidiary of ILFC. The remaining lease agreement is with CIT AerospaceInternational. Three of these operating leases expire in 2009, three expire in 2011 with theremaining eight expiring in 2012. Nearly all of these operating lease agreements also containextension options. In addition, Aer Lingus has entered into an operating leasing agreement with ILFC351

Part XVAdditional Informationand for the delivery of an Airbus A320 aircraft in the second quarter of 2007, and has signed a letterof intent with AerCap B.V. in respect of the leasing of another Airbus A320 aircraft, also for deliveryin the second quarter of 2007.In relation to Aer Lingus’ Airbus A330 aircraft, there are operating leases in place in respect of four PR Ann I,of the seven A330 aircraft currently operated by Aer Lingus. Three of these operating lease 10.4agreements are with ILFC or a wholly-owned subsidiary of ILFC, with the remaining aircraft beingleased from a wholly-owned subsidiary of Airbus. Two of the Airbus A330 aircraft operating leasesexpire in 2008, one in 2009 and one in 2011. Aer Lingus also has options to extend two of the fourAirbus A330 aircraft operating leases.8.6 Aircraft Purchase and Finance Lease AgreementsThe remainder of the aircraft in the Aer Lingus fleet were purchased directly from Airbus and areeither owned by Aer Lingus or held by way of finance lease. Currently, 13 of the Airbus A320/321aircraft and an Airbus A330 aircraft are subject to finance lease arrangements.In 2004 and 2005 Aer Lingus took delivery of 17 Airbus A320 aircraft, seven of which were financedusing finance lease arrangements involving commercial banks. These financings have been primarilysupported by the European Investment Bank together with KfW-IPEX Bank, Calyon and ING Bank.Similar financing structures were also used in earlier aircraft deliveries. These financings are typicallyarranged for periods of ten to 12 years and deliver sub-EURIBOR/LIBOR funding to the airline.Aer Lingus has also signed a further purchase agreement with Airbus in respect of an Airbus A330-200 aircraft and an Airbus A330-300 aircraft which are scheduled to be delivered in May 2007 andJune 2007, respectively. Aer Lingus is currently considering financing proposals received in respect ofthese aircraft.8.7 Menzies Ground Handling AgreementALL entered into a five-year ground handling agreement with Menzies Aviation (UK) Limited which iseffective from May 2005. The agreement covers the majority of Aer Lingus’ requirements withrespect to passenger and baggage handling, ground operations and ramp handling at LondonHeathrow airport. It replaces the ground handling agreement between ALL and SwissportUK Limited (‘‘Swissport’’), which terminated when Swissport was placed in administration inNovember 2004, and subsequent temporary arrangements put in place via a recruitment agency.Further information about this agreement between ALL and Swissport is set out in paragraph 9.1(Swissport UK Limited) of this Part XV.As a condition of entering into the Ground Handling Agreement with Menzies Aviation (UK) Limited,Aer Lingus was required to enter into a deed of indemnity indemnifying Menzies Aviation(UK) Limited in the event of Menzies Aviation (UK) Limited incurring certain liabilities as a result ofthe Acquired Rights Directive and/or the Transfer of Undertakings (Protection of Employment)Regulations 1981 (the ‘‘TUPE Regulations’’) being found to apply in respect of persons employed byMenzies for the purposes of the ground handling agreement. Further information about claimsmade by former employees of Swissport against Aer Lingus is set out in paragraph 9.1 (Swissport UKLimited) of this Part XV.8.8 Disposal AgreementsAs part of a restructuring plan introduced in 1993, Aer Lingus divested its ownership in CopthorneHotels, Cara Data Processing, PARC, Irish Helicopters, Airmotive Ireland (Holdings) Limited, TEAMAer Lingus and the maintenance business of SRS Aviation Services. In addition, since 1998, AerLingus has divested its ground handling businesses outside of Ireland, most of its equity interest inFutura (in which Aer Lingus retains a 20% shareholding), and all of its equity interest in TimasLimited and Aviation Services (Ireland) Limited. In making divestments, Aer Lingus has givencustomary warranties, covenants and indemnities, including indemnities relating to environmentalmatters. Aer Lingus is not aware of any outstanding material claims arising under these warranties,352

Part XVAdditional Informationcovenants or indemnities, other than as set out in paragraph 9.2B (Ongoing Issues relating toDisposal of TEAM Aer Lingus) of this Part XV.8.9 ESOT OptionThe Selling Shareholder has agreed to grant to the ESOT an option (the ‘‘ESOT Option’’) to acquirethat number of Ordinary Shares currently held by the Selling Shareholder in the Company (the‘‘Option Shares’’) equal to the number of New Ordinary Shares as would be required to be issued tothe ESOT so as to restore the percentage shareholding of the ESOT in the issued share capital of theCompany to the level it was immediately prior to Admission (having taken into account the effect ofany dilution caused by the subsequent issue of the Bonus Shares). Further information on the ESOTOption is set out in paragraph 11 (The ESOT Option and the New Profit Share Arrangement) ofPart XIV (The Offer) of this Prospectus.8.10 ESOT Deed of Further CovenantThe ESOT Deed of Further Covenant dated 11 September 2006 between the Ministers, theCompany, ALL, Aer Lingus ESOP Trustee Limited and the CRC, was entered into in order to terminatethe terms of a Deed of Covenant dated 28 April 2003 and to amend the terms of the Aer LingusESOP Summary Terms to facilitate the creation of the ESOT Option. Its purpose is to supplement theESOT Option and to comply with the Irish Takeover Rules.The ESOT Deed of Further Covenant provides that the Minister for Finance shall execute theagreement in respect of the ESOT Option so that the ESOT Option shall be exercisable with effectfrom Admission. Under its terms, the Company undertakes to fund the ESOT’s purchase of OfferShares. It also agrees to provide the ESOT with an annual profit share, which the ESOT undertakes toapply to, among other things, the subscription or purchase of Ordinary Shares on or before the fifthanniversary of Admission. This profit share (the ‘‘New Profit Share Arrangement’’) will terminate onthe earlier of the fifth anniversary of the date of Admission or the date the ESOT acquires the samenumber of Ordinary Shares as is equal to the number of Ordinary Shares which can be acquiredunder the ESOT Option, either through exercise of the ESOT Option or market purchases or acombination of both. However, the New Profit Share Arrangement will continue to fund therepayment of all borrowings (capital and interests) used to fund such purchases or the exercise of theESOT Option where such purchases or exercises occur on or before the fifth anniversary ofAdmission. The deed details the manner of exercise of the anti-dilution right conferred on the APSSand provides that the ESOT may nominate two Directors to the Board from the date of Admissionand for so long as the ESOT holds at least 5% of the issued share capital of the Company, and oneDirector for so long as the ESOT holds at least 1% of the issued share capital of the Company.9. GOVERNMENTAL, LEGAL OR ARBITRAL PROCEEDINGSPR Ann I,20.8Except to the extent disclosed below, no member of the Group is engaged in or, so far as the Company isaware, has pending or threatened any governmental, legal or arbitration proceedings which may have, orhave had in the recent past (covering the 12 months preceding the date of this Prospectus) a significanteffect on the Company’s and/or the Group’s financial position or profitability.9.1 Swissport UK LimitedClaims are before the Employment Tribunal in the United Kingdom by approximately 100 formeremployees of Swissport UK Limited (‘‘Swissport’’) against Swissport UK Limited (In Administration)and Aer Lingus arising from their dismissal in November 2004 when Swissport was placed inadministration. Swissport had acquired the ground-handling business of Aer Lingus at LondonHeathrow airport in 1999. The claims allege that a transfer within the meaning of Transfer ofUndertaking (Protection of Employment) Regulations 1981 (the ‘‘TUPE Regulations’’) occurred whenAer Lingus took responsibility for its ground-handling operations at London Heathrow airport afterSwissport was placed into administration. The claims seek damages in respect of, inter alia, failure toinform and consult under the TUPE Regulations, failure to collectively consult on redundancy, unfairdismissal, unlawful deduction of wages and outstanding contractual, statutory and holiday353

Part XVAdditional Informationentitlements. A preliminary hearing took place before the Employment Tribunal in March 2006 toconsider the applicability of the TUPE Regulations. On 8 August 2006, the UK Employment Tribunaldetermined that the provision of ground handling operations by Swissport to ALL at LondonHeathrow airport was not an identifiable undertaking for the purposes of the TUPE Regulations, andno transfer within the meaning of the TUPE Regulations had occurred. The parties have a right toappeal against this judgment until 19 September 2006 although no notice of appeal had been filedprior to 8 September 2006, being the latest practicable date prior to publication of this Prospectus.In a separate claim also arising out of the administration of Swissport, the administrators ofSwissport have issued an application for summary judgment in the UK High Court against Aer Lingusfor the sum of Stg£888,794 plus interest. Aer Lingus is contesting this claim on the basis that itdisputes the amounts claimed and it has a valid counterclaim and right of set off against Swissport inrespect of costs and liabilities incurred by Aer Lingus or which it may incur as a result of theadministration of Swissport. This application is currently scheduled for hearing in the UK High Courton 13 September 2006.The above proceedings are being defended by Aer Lingus. If Aer Lingus is subject to an adversejudgment in any or all of these proceedings, it does not believe that this would have a materialadverse effect on its financial position or profitability.9.2 A. Claims by TEAM Aer Lingus EmployeesIn 1990, Aer Lingus established TEAM Aer Lingus to operate the maintenance division of the Group.At the time Aer Lingus issued letters of comfort to employees transferring from Aer Lingus Limited toTEAM Aer Lingus stating that their rights and benefits would continue on the same basis as that ofAer Lingus’ staff.The financial position of Aer Lingus, including TEAM Aer Lingus, subsequently deteriorated whichled to TEAM Aer Lingus temporarily laying off the vast majority of its workforce in 1994. This led to asignificant number of employees of TEAM Aer Lingus instituting High Court proceedings against AerLingus Plc (now ALL) seeking to enforce the letters of comfort and to claim payment of sums dueduring the period of their lay off.In 1998, TEAM Aer Lingus was sold to FLS Aerospace Ireland Limited (which is now known asSR Technics Ireland Limited), at which time Aer Lingus offered TEAM Aer Lingus employees anincentive package to buy back the letters of comfort and to settle any proceedings issued.Approximately 90 TEAM Aer Lingus employees declined this package. These employees were redeployedto technical positions (where available), and to clerical and operative roles. Thoseemployees who had issued proceedings in 1994 and had not accepted the incentive packagescontinued with those proceedings and also sought to claim damages arising from alleged lossessuffered as a result of their redeployment.There are three ongoing High Court actions for damages involving approximately 66 plaintiffs,although only approximately 25 of those plaintiffs have significant damages claims which arecontested. One of these actions (William King and others v Aer Lingus) was the subject of a decisionin the High Court which was subsequently appealed by the plaintiffs to the Supreme Court, whichissued its judgment in December 2005. Following the decision of the Supreme Court, this matter hasbeen referred back to the High Court for assessment of the plaintiffs’ entitlements. A date has notyet been set for this hearing. The plaintiffs in the remaining two actions are awaiting the outcome ofthe above case before taking additional action in respect of their claims.The plaintiffs in these proceedings have also issued separate High Court proceedings following thejudgment of the Supreme Court seeking a declaration from the High Court that Aer Lingus hasfailed to comply with the declarations and Order of the Supreme Court of 22 March 2006 and theyare seeking associated relief. Aer Lingus is defending those proceedings and Aer Lingus’ position isthat those proceedings are frivolous and vexatious, as the effect of the Supreme Court decision is a354

Part XVAdditional Informationmatter which has already been referred back to the High Court for adjudication within the existingproceedings.If Aer Lingus is subject to an adverse judgment in any of these proceedings, it does not believe thatthis would have a material adverse effect on its financial position or profitability.PR Ann I,B. Ongoing Issues relating to Disposal of TEAM Aer Lingus8.2When TEAM Aer Lingus was sold, Aer Lingus agreed to bear the costs relating to the upgrading ofthe surface water drainage outfall at Hangar 6 at Dublin Airport. Occasional flooding at the AerLingus staff car park adjacent to Hangar 6 at Dublin Airport has been caused by the inadequatesurface water drainage. Aer Lingus is currently in discussions with Dublin Airport Authority with aview to agreeing an appropriate contribution to the cost of a suitable drainage project to address theflooding. Aer Lingus does not believe that its potential liability in respect of resolving this issue wouldhave a material adverse effect on its financial position or profitability.C. Potential Claims by Former TEAM Aer Lingus Employees Regarding Supplemental FundsIn August 2006, it was suggested in the Irish media that employees of SR Technics Ireland Limited(formerly TEAM Aer Lingus) might have a claim against the Company in relation to their exclusionfrom the Supplemental Funds. The Supplemental Funds are discretionary trusts. SR Technics IrelandLimited employees who opted to remain in the Main Scheme are members of the Main Scheme intheir capacity as SR Technics Ireland Limited employees and, therefore, do not have any entitlementto be admitted into either of the Supplemental Funds which are being set up for Aer Linguspensioners, Deferred Members and employees. As discussed above, the employees who transferredto SR Technics Ireland Limited when TEAM Aer Lingus was sold in 1998 accepted incentive packagesat that time to extinguish the letters of comfort previously issued to them, to waive any entitlementsunder the letters and to settle any outstanding proceedings. The Company issued a statement on31 August 2006 noting that it has taken legal advice in relation to this issue, and believes that it hasno liability in respect of this matter.9.3 Former Aer Lingus Cabin CrewThe Company is the subject of claims by approximately 120 former Aer Lingus cabin crew under theAnti-Discrimination (Pay) Act 1974 and the Pensions Act 1990 alleging sex discrimination in respectof access to the Main Scheme for periods during the 1970s when they were employed by Aer Linguson fixed term contracts. These claims were initially referred to the Labour Relations Commission in1998.Under the rules of the Main Scheme, only permanent employees were eligible for membership and,as a result, the claimants were not permitted to join the Main Scheme for the periods during whichthey were employed on fixed-term contracts. The claimants are alleging that this amounted tounlawful sex discrimination and are seeking compensation in respect of losses allegedly incurred.This investigation is still at an early stage.The Company is defending these proceedings. If the Company is subject to an adverse decision inthese proceedings, it does not believe that this would have a material adverse effect on its financialposition or profitability.9.4 US Department of Justice Investigation into the Cargo IndustryThe Company received a grand jury subpoena on 10 May 2006 from the US Department of Justice inrelation to an investigation into alleged price fixing by air cargo operators. The Companyunderstands from media reports that a large number of airlines have been contacted by theauthorities in the EU and the United States in connection with this investigation. This investigation isat an early stage and the Company is co-operating with the US Department of Justice in relation tothe provision of documentation required by the subpoena. The Company has not received anycommunication from the European Commission in relation to its investigation.355

Part XVAdditional InformationAs of the date of this Prospectus, the Company has been advised by the US Department of Justicethat it is not a target of its investigation into possible illegal price fixing in the air cargo industry.However, there can be no assurance that it will not become a target of any United States orEuropean government investigation or action related to illegal price fixing in the air cargo business inthe future.In the event that the Company is found to have violated US or European competition law or anyother anti-trust laws or other laws or regulations in connection with the investigation, the Companymay be subject to criminal prosecution, monetary penalties or fines. As the investigation is at anearly stage, the Company is not yet in a position to indicate whether any such monetary penalties orfines would be of a level that could adversely affect its results of operations and financial conditions.The Company also understands from press reports that class action law suits have been filed in theUnited States against a number of airlines alleging, among other things, that the defendantsengaged in illegal price fixing in relation to their air cargo operations. No such actions have beenfiled against the Company although there can be no assurance that this will not happen in thefuture. If any such civil actions are commenced against the Company and these result in adversejudgments, the Company may be required to pay substantial damages.Further information about the risks involved with this cargo industry investigation is set out inparagraph 2.23 (Authorities in Europe and the United States have initiated an investigation intopossible illegal price fixing in the air cargo transportation industry, which may adversely affect AerLingus’ results of operations and financial condition) of Part III (Risk Factors) of this Prospectus.9.5 Michael FoleyAer Lingus is currently a defendant in a High Court action instituted by a former chief executive ofAer Lingus, Michael Foley. In these proceedings, Mr. Foley has claimed, among other things,substantial damages in respect of the consequences allegedly arising from the termination of hiscontract of employment in June 2001 by Aer Lingus following an investigation into allegations ofsexual harassment which had been made against him by two employees of Aer Lingus. If Aer Lingusis subject to an adverse judgment in these proceedings, it does not believe that this will have amaterial adverse effect on its financial position or profitability.9.6 Appeal of Decision of Pensions OmbudsmanIn 2001, a pensioner member of the Main Scheme queried how the trustees of the Main Schemecalculate pension benefits. The pensioner maintained that pension benefits should be based on amember’s basic salary at the date they exit the Main Scheme while the trustees have consistentlycalculated benefits based on the basic salary received in the 12 months immediately prior to exit. Thepensioner’s claim was rejected under the Main Scheme’s internal dispute resolution procedure andhe subsequently appealed to the Pensions Ombudsman. The Ombudsman made a finaldetermination in this matter on 16 June 2006 and held that the trustees and administrators hadcalculated the complainant’s retirement benefits in accordance with the Main Scheme rules and inline with the interpretation they (i.e. the trustees and administrators) had properly and consistentlyapplied under the Main Scheme. The Ombudsman found that there was no maladministration andconsequently no financial loss was occasioned to the complainant.The pensioner is appealing the Pension Ombudsman’s decision to the High Court. An adverse courtdecision may have the effect of granting greater pension benefits to Main Scheme members asbenefits would be based on a definition of basic salary which would be greater than is currentlyapplied. Under the provisions of the Main Scheme, no employer or active member can be required tomake greater contributions to the Main Scheme without their express consent.Although the Company will not be a party to the High Court proceedings, the Company believesthat the trustees/Pension Ombudsman have a strong defence to the claim.356

Part XVAdditional Information9.7 Increase in Retirement Age for Female EmployeesIn 1992, the Trustees of the Main Scheme made certain changes to the rules of the Main Scheme soas to give effect to Part VII of the Pensions Act 1990 which prohibited discrimination on the groundsof sex in pension schemes. Specifically, the normal retirement age for females was increased from 60to 65 so as to bring it into line with that for males. The rule change was challenged by two femaleemployees in 2003 and the Pensions Ombudsman rejected the challenge to the validity of the rulechange in 2005. His determination was not appealed. Another such challenge is currently before thePensions Ombudsman based on the increased cost of contributions. The Pensions Ombudsman hasnot yet determined if he has jurisdiction or if it is a matter for the Pensions Board. Furthermore, aclaim for a pay increase so as to compensate for the requirement to make employee contributionsbetween the age of 60 and 65 is currently before the Labour Court. If the Company is subject toadverse decisions in these proceedings, it does not believe that they will have a material adverseeffect on its financial position or profitability.10. CAPITALISATION AND INDEBTEDNESSThe following tables set forth the Group’s actual capitalisation and net indebtedness as at 30 June 2006(being the latest date in respect of which the Group’s financial information under IFRS has been audited).The Group’s capitalisation will change after the Offer. Further information about amount and use of theproceeds of the Offer is set out in paragraph 8 (Amount and Use of Proceeds) of Part XIV (The Offer) of thisProspectus.The information in respect of capitalisation is derived from the historical financial information in Part XII(Historical Financial Information) of this Prospectus.There has been no material change in the Group’s capitalisation, as set out in the table below, since30 June 2006.PR Ann III,3.2Capitalisation and IndebtednessAs at 30 June 2006(1 in millions)Total current debt (1) **************************************************************** 0 59.9— Guaranteed current debt*********************************************************** —— Secured current debt (2) ************************************************************* 53.6— Unguaranteed/Unsecured current debt (3) ********************************************** 6.3Total non-current debt (excluding Current debt) (1) ************************************ 461.5— Guaranteed non-current debt******************************************************* —— Secured non-current debt (4) ********************************************************* 461.5— Unguaranteed/unsecured non-current debt ******************************************* —Total debt (1) ************************************************************************ 521.4Shareholders’ equity *************************************************************** 368.9Equity share capital ****************************************************************** 357.8Share premium account ************************************************************** 6.1Capital conversion reserve fund******************************************************** 5.0(1) Debt represents the sum of liabilities due to banks, the Selling Shareholder and amounts due under finance lease obligations.(2) Secured current debt relates to amounts due to banks and finance lease obligations.(3) Unguaranteed/unsecured current debt represents liabilities due to the Selling Shareholder.(4) Secured Non-current debt relates to amounts due to banks and finance lease obligations.The capitalisation and indebtedness table excludes retained earnings and other reserves.The Company has no indirect or contingent indebtedness.357

Part XVAdditional InformationNet IndebtednessAs at 30 June 2006(1 in millions)Cash and cash equivalents (1) *********************************************************** (634.7)Liquidity*************************************************************************** (634.7)Current bank debt ******************************************************************* 13.1Current portion of non-current debt**************************************************** 40.5Other current financial debt *********************************************************** 6.3Current Financial Debt************************************************************** 59.9Net Current Financial Indebtedness/(Surplus) (2) *************************************** (574.8)Non-current deposits (3) *************************************************************** (160.7)Available for sale financial assets (4) ***************************************************** (146.8)Non-current bank loans ************************************************************** 27.5Other non-current loans ************************************************************** 434.0Non-Current Financial Indebtedness ************************************************* 461.5Net Financial Indebtedness/(Surplus) (5) *********************************************** 0(420.8)(1) Cash and cash equivalents are deposit balances and other liquid resources with a maturity of less than 12 months.(2) Surplus represents an excess of liquidity and non current deposits over debt.(3) Non-current deposits are deposits with maturity terms greater than 12 months.(4) Available for sale financial assets comprise unlisted debt securities.(5) Net Financial Indebtedness/(Surplus) represents total debt minus liquidity, non-current deposits and available for sale financialassets.11. WORKING CAPITALThe Company is of the opinion that taking into consideration the net proceeds from the offer to be receivedby the Company, and the available bank and other facilities, the working capital available to the Group issufficient for the Group’s present requirements and, in particular, is sufficient for at least the next twelvemonths from the date of this Prospectus.12. SIGNIFICANT CHANGEExcept as disclosed in paragraph 4 (Current Trading and Prospects) of Part II (Summary) of this Prospectus,there has been no significant change in the Group’s financial or trading position since 30 June 2006, whichwas the end of the last period for which audited financial information of the Group was published by AerLingus.PR Ann I,20.913. RELATED PARTY TRANSACTIONSPR Ann I,19As at 8 September 2006 (being the latest practicable date before the publication of this Prospectus), the PR Ann III,Selling Shareholder owned approximately 85.1% of Aer Lingus’ issued share capital. Based on the Offer 7-1Assumptions immediately following Admission, the Selling Shareholder will own approximately 34.55% ofAer Lingus’ issued share capital. Further information on the share ownership of the Selling Shareholder isset out in paragraph 4.3 (Interests of Major Shareholders) of this Part XV.In the past, Aer Lingus has entered into, and expects to enter into in the future, contractual arrangementswith the Selling Shareholder or entities controlled by the Selling Shareholder. Aer Lingus believes that itsprior and existing transactions and arrangements have been negotiated on an arm’s-length basis andcontain market terms. However, there is the possibility that it could have obtained better terms from thirdparties. Aer Lingus expects that any arrangements entered into in the future with the Selling Shareholder orentities controlled by the Selling Shareholder will be entered into on an arm’s length basis.13.1 Sales of Goods and ServicesThe following table sets out revenues received by Aer Lingus from ticket sales (net of discountsallowed) and other services provided to the Selling Shareholder (and entities controlled by the SellingShareholder) for the six months ended 30 June 2006 and 2005 and for the years ended358

Part XVAdditional Information31 December 2005 and 2004 under IFRS and for the year ended 31 December 2003 under IrishGAAP:IFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Ticket sales (net of discounts) ***************** 02,239 02,234 05,459 05,317 04,624Other services******************************* 1,870 1,219 2,195 2,040 3,11004,109 03,453 07,654 07,357 07,734Other services include cargo transportation services provided by Aer Lingus to the Irish Governmentand entities controlled by the Irish Government (including An Post).Further information regarding the terms of the arrangement between Aer Lingus and the SellingShareholder relating to airline ticket sales is set out in paragraph 13.10 (Irish Government CorporateAirline Agreement) of this Part XV.13.2 Purchases of Goods and ServicesThe following table sets out the amount paid by Aer Lingus to the Dublin Airport Authority, which isa wholly-owned subsidiary of the Selling Shareholder, in respect of rent, rates and similar charges aswell as other operating purchases by Aer Lingus from entities controlled by the Selling Shareholderfor the six months ended 30 June 2006 and 2005 and for the years ended 31 December 2005 and2004 under IFRS and for the year ended 31 December 2003 under Irish GAAP:IFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Rent, rates and similar charges **************** 0 3,079 0 3,701 0 6,785 0 6,692 0 6,081Other operating purchases ******************** 33,935 28,597 64,778 58,785 50,786037,014 032,298 071,563 065,477 056,867Rent, rates and similar charges payable by Aer Lingus are predominantly to the Dublin AirportAuthority and relate primarily to amounts paid in respect of property at Irish airports leased by AerLingus from Dublin Airport Authority. Further information regarding Aer Lingus’ lease with DublinAirport Authority is set out in paragraph 13.9 (Composite Lease with Dublin Airport Authority) ofthis Part XV. Other operating purchases relate primarily to landing charges paid by Aer Lingus to theDublin Airport Authority in respect of each aircraft landed at Dublin, Shannon and Cork airports aswell as amounts paid by Aer Lingus to entities controlled by the Irish Government (principally AnPost and the Electricity Supply Board) primarily in connection with postal and electricity services usedby Aer Lingus in connection with its business and operations.359

Part XVAdditional Information13.3 Interest PayableThe following table sets out interest payable by Aer Lingus on its loan from the Selling Shareholderfor the six months ended 30 June 2006 and 2005 and for the years ended 31 December 2005 and2004 under IFRS and for the year ended 31 December 2003 under Irish GAAP:IFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Interest on loan from Selling Shareholder ******* 0127 0127 0254 0254 0254Further information regarding Aer Lingus’ loan from the Selling Shareholder is set out inparagraph 13.7 (Loan from Selling Shareholder to Aer Lingus) of this Part XV.13.4 Key Management CompensationThe following table sets out key management compensation information for Aer Lingus’ directorsand officers for the six months ended 30 June 2006 and 2005 and for the years ended 31 December2005 and 2004 under IFRS and for the year ended 31 December 2003 under Irish GAAP:IFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Salaries and other short-term employee benefits *** 0967 01,396 02,019 01,624 01,476Post-employment benefits ********************** 108 338 442 251 258Directors’ fees ******************************** 6 10 17 24 6Other benefits ******************************** 93 93 154 152 13801,174 01,837 02,632 02,051 01,878Further information on (1) the service agreements between Aer Lingus and each of DermotMannion, Aer Lingus’ Chief Executive, and Greg O’Sullivan, Aer Lingus’ Finance Director, and (2) theNon-executive Directors’ letters of appointment are set out in paragraph 4 (Directors’ ServiceContracts and Letters of Appointment) of Part XI (Directors, Senior Management and CorporateGovernance) of this Prospectus.13.5 Year-end Balances arising From Sales/Purchases of Goods/ServicesThe following tables set out the outstanding amounts payable by Aer Lingus to the Irish Governmentand entities controlled by the Irish Government and amounts receivable by Aer Lingus from the IrishGovernment and entities controlled by the Irish Government for the six months ended 30 June 2006and 2005 and for the years ended 31 December 2005 and 2004 under IFRS and for the year ended31 December 2003 under Irish GAAP in respect of the goods and services discussed inparagraphs 13.1 (Sales of Goods and Services) and 13.2 (Purchases of Goods and Services) of thisPart XV.360IFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Due from state and semi-state entities (all duewithin one year)*************************** 0159 0171 0161 0299 0579

Part XVAdditional InformationIFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Due to state and semi-state entities (all duewithin one year)*************************** 03,819 01,867 03,848 02,725 02,17313.6 Loans from Related PartiesThe following table sets out amounts outstanding on loans from and to related parties for the sixmonths ended 30 June 2006 and 2005 and for the years ended 31 December 2005 and 2004 underIFRS and for the year ended 31 December 2003 under Irish GAAP:IFRSIrish GAAPSix Months Year ended Year endedended 30 June 31 December 31 December2006 2005 2005 2004 2003(1 in thousands)Loan from Selling Shareholder***************** 06,349 06,349 06,349 06,349 06,349Loan to ESOT ******************************* 100 100 100 100 2,252Further information on the loan from the Selling Shareholder to Aer Lingus is set out inparagraph 13.7 (Loan from Selling Shareholder to Aer Lingus) of this Part XV and further informationon the loan from ALL to the ESOT is set out in paragraph 13.8 (Loan from ALL to the ESOT) of thisPart XV.13.7 Loan from Selling Shareholder to Aer LingusPursuant to Section 3 of the Air Companies (Amendment) Act, 1969, the Selling Shareholderadvanced a repayable on demand loan of 06.349 million to Aerlinte (now Santain DevelopmentsLimited, a wholly-owned subsidiary of the Company) for working capital and general corporatepurposes which, upon the commencement of Section 11 of the 2004 Act, shall be deemed to havebeen advanced to ALL. Interest on the loan is payable at a rate determined by the SellingShareholder. The interest rate for the historical periods covered by this Prospectus was 4% perannum, payable semi-annually. A commencement order in respect of Section 11 of the 2004 Actbecame effective on 11 September 2006. Aer Lingus will repay the outstanding principal amount ofthe loan, together with accrued but unpaid interest thereon, on 22 September 2006. Furtherinformation about the 2004 Act is set out at paragraph 2.2 of this Part XV.13.8 Loan from ALL to the ESOTPursuant to a Facility Agreement dated 28 April 2003, ALL made available to Aer Lingus ESOPTrustee Limited a facility, the aggregate amount of which was not to exceed the lesser of(1) 015,300,000 and (2) the sum of 0100,000 (the ‘‘Initial Drawing’’) and the amount paid by AerLingus ESOP Trustee Limited to acquire 12,180,503 Ordinary Shares from the trustees of the ESPS(subject to a maximum of 01.25 per Ordinary Share). The interest rate on the Initial Drawing is 4%per annum, and all other drawings under this facility are interest-free. The aggregate amount ofInitial Drawing and interest due thereon are repayable on 1 May 2008. All other amounts drawn arerepayable on the earlier to occur of (1) the date on which six months’ notice given by ALL to AerLingus ESOP Trustee Limited to repay expires or the occurrence of an event of default and (2) AerLingus ESOP Trustee Limited giving two Business Days notice to ALL to prepay (without penalty)some or all outstanding amounts. As at the date of this Prospectus, only the amount of the InitialDrawing is outstanding.13.9 Composite Lease with Dublin Airport AuthorityALL entered into a composite lease with Aer Rianta plc (now known as Dublin Airport Authority) on10 April 2000 which governs most of the property occupied and used by Aer Lingus in Dublin,361

Part XVAdditional InformationShannon and Cork airports (the ‘‘Composite Lease’’). The rent payable under the Composite Leasefor these buildings and facilities may be reviewed every five years with the next rent review beingdue in April 2009.In addition to covering the leasing of various multi-user facilities and site lettings at Irish airports, theComposite Lease also covers the site on which Aer Lingus constructed its head office building atDublin airport. The lease of this site expires in 2062, and ALL has a right to renew this lease for anadditional 35 years after this date.A number of ancillary buildings, hangars and car-parks located at Dublin and Shannon airports usedby Aer Lingus on an exclusive basis are also governed by the Composite Lease. The lease of thesepremises expires in April 2019, and ALL has a right to renew this lease for another 35 years after thisdate.The lease rentals payable under the Composite Lease are based on longstanding arrangements andreflect Aer Lingus’ position as the largest occupier of space at Dublin, Cork and Shannon airports.Any new terms that might be reached by Aer Lingus in respect of accommodation in the futuremight not be on terms as favourable as the current arrangements.Under the Composite Lease, Dublin Airport Authority has the right, if it is necessary in the interestsof the operational development of the airport and subject to providing three months notice, torearrange the multi-user facilities used by Aer Lingus. In such event, an equitable adjustment shall bemade to the rent and Dublin Airport Authority shall use its best endeavours to ensure othercomparable accommodation is provided to Aer Lingus.Dublin Airport Authority may terminate the lease in respect of any of the premises on six months’prior notice (12 months in the case of the head office building and other site lettings) where aircraftoperations and developments make this necessary. If this right is exercised, Dublin Airport Authoritymust provide comparable alternative accommodation to ALL.13.10 Irish Government Corporate Airline AgreementALL entered into a Corporate Airline Agreement with unspecified Irish Government Departments(the ‘‘Customer’’) on 1 May 2006, which is valid until 30 April 2007. This agreement applies inrespect of travel booked by the Customer through a nominated travel agent(s) for Aer Lingusservices on routes specified in the agreement. The fares set out in the agreement are subject toreasonable adjustment if there are significant changes to Aer Lingus’ costs. The Customer or ALLmay terminate the agreement by 30 days’ notice if a reasonable adjustment cannot be agreed.14. PREMISESThe Group owns or occupies the following principal establishments:PR Ann I,8.1Location Tenure UseHead Office Site (1) Leasehold (78 years from 1 April OfficeDublin airport 1984)IrelandCommuter Hangar Site (1) Leasehold (35 years from 1 April Aircraft maintenanceDublin airport 1984)IrelandPersonnel and Catering Building (1) Leasehold (35 years from 1 April Staff facilitiesDublin airport 1984)Ireland362

Part XVAdditional InformationLocation Tenure UseDesignated facilities (ticket desk, Leasehold (year to year) Passenger servicesoffices, etc.)Passenger Terminal (1)Dublin airportIrelandOffices Leasehold (year to year) Staff facilitiesPier B (1)Dublin airportIrelandTechnical Building (1) Leasehold (35 years from 1 April 1984) Office flight crew trainingDublin airportIrelandDesignated facilities (customer service Leasehold (year to year)Passenger servicesdesks, offices, maintenance areas,etc.) (1)Cork airportIrelandCargo Terminal (1) Leasehold (35 years from 1 April 1984) Cargo operationsShannon airportIrelandDesignated facilities (customer service Licence (year to year)Passenger servicesdesks, arrivals/departures areas, pierand Wing 4, offices, etc.) (1)Shannon airportIrelandAirbus A330 Hangar Leasehold (35 years from 1 August Aircraft maintenanceShannon airport 2001)IrelandDesignated facilities (offices, tickets Licence (one month notice period) Passenger servicesdesks, stores)London Heathrow airportUnited KingdomCheck-in/customer services desks Licence (one month notice period) Passenger servicesLondon Heathrow airportUnited KingdomCheck-in desks, ticket desk, lounge Licence (expiring 31 December 2010) Passenger servicesJohn F. Kennedy International airportNew YorkUSAPassenger services facilities Leasehold (30 day notice period) Passenger servicesLogan airportBostonUSAPassenger services facilities Leasehold (7 years from 1 April Passenger servicesBradley International airport 2002, subject to a 60 day noticeLos Angelesperiod)USA(1) Properties covered by the composite lease with Dublin Airport Authority.Aer Lingus has also recently been allocated and is occupying space in the new terminal building at CorkAirport, but no formal documentation has yet been entered into in relation to this arrangement.Aer Lingus believes that its head office site at Dublin airport, in which it has a leasehold interest, may havedevelopmental potential. Any development of this site would require the agreement of Dublin Airport363

Part XVAdditional InformationAuthority. No decision has been, as yet, made by the Company to seek to develop this site in conjunctionwith Dublin Airport Authority or otherwise. It is possible, however, that Aer Lingus and Dublin AirportAuthority may decide at some point in the future to seek to develop this site on a joint basis. The AirNavigation and Transport (Amendment) Act 1998 states that the provisions of the Landlord and Tenant Acts1967 to 1994 of Ireland do not apply to lettings effected by Dublin Airport Authority plc.15. TAXATION INFORMATIONThe statements of Irish, United Kingdom and United States tax laws set out below are based on existing PR Ann III,Irish, United Kingdom and United States tax laws, including relevant regulations, administrative rulings and 4.11practices in effect on the date of this Prospectus and which may apply to investors who are the beneficialowners of shares. Legislative, administrative or judicial changes may modify the tax consequences describedbelow.The statements do not constitute tax advice and are intended only as a general summary. Furthermore, thisinformation only applies to Ordinary Shares held as capital assets and does not apply to all categories ofshareholders, such as dealers in securities, trustees, insurance companies, collective investment schemesand shareholders who have, or who are deemed to have, acquired their Ordinary Shares by virtue of anoffice or employment. This summary is not exhaustive and prospective purchasers should consult their owntax advisers as to the tax consequences in Ireland, the United Kingdom, the United States or other relevantjurisdictions of the purchase, ownership and disposition of the Ordinary Shares.15.1 Ireland(a)Withholding Tax on DividendsDistributions made by the Company are generally subject to dividend withholding tax (‘‘DWT’’) atthe standard rate of income tax (currently 20%) unless the shareholder is within one of thecategories of exempt shareholders referred to below. Where DWT applies, the Company isresponsible for withholding DWT at source and forwarding the relevant payment to the IrishRevenue. For DWT purposes, a dividend includes any distribution made by the Company to itsshareholders, including cash dividends, non-cash dividends and additional shares taken in lieu of acash dividend.DWT is not payable where an exemption applies provided that the Company or a relevant qualifyingintermediary (the qualifying intermediary from whom the dividend is received (‘‘Relevant QualifyingIntermediary’’)) has received all necessary documentation required by the relevant legislation fromthe shareholder prior to payment of the dividend.Certain categories of Irish resident shareholders are entitled to an exemption from DWT, including(but not limited to) Irish resident companies, qualifying employee share ownership trusts, charitiesand pension funds. Except in very limited circumstances, distributions by the Company to Irishresident shareholders who are individuals are not exempt from DWT.Certain non-Irish resident shareholders (both individual and corporate) are also entitled to anexemption from DWT. In particular, a non-Irish resident shareholder is not subject to DWT ondividends received from the Company if the shareholder is: (i) an individual shareholder resident fortax purposes in either a member state of the European Union or in a country with which Ireland hasa double tax treaty, and the individual is neither resident nor ordinary resident in Ireland; or (ii) acorporate shareholder that is not resident for tax purposes in Ireland and which is ultimatelycontrolled, directly or indirectly, by persons resident in either a member state of the European Union(apart from Ireland) or in a country with which Ireland has a double tax treaty; or (iii) a corporateshareholder resident for tax purposes in either a member state of the European Union (apart fromIreland) or a country with which Ireland has a double tax treaty provided that the corporateshareholder is not under the control, whether directly or indirectly, of a person or persons who is orare resident in the State; or (iv) a corporate shareholder that is not resident for tax purposes inIreland and whose principal class of shares (or those of its 75% parent) is substantially and regularly364

Part XVAdditional Informationtraded on a recognised stock exchange in either a member state of the European Union (apart fromIreland) or in a country with which Ireland has a double tax treaty or on such other stock exchangeapproved by the Minister for Finance; or (v) a corporate shareholder that is not resident for taxpurposes in Ireland and is wholly owned, directly or indirectly, by two or more companies where theprincipal class of shares of each is substantially and regularly traded on a recognised stock exchangein either a member state of the European Union (apart from Ireland) or in a country with whichIreland has a double tax treaty or on such other stock exchange approved by the Minister forFinance, and provided that, in all cases noted above, the shareholder has made the appropriatedeclaration to the Company or the Relevant Qualifying Intermediary prior to payment of thedividend.(b)Tax on DividendsIrish resident individual shareholders are subject to Irish income tax and levies on the gross dividendat their marginal rate of tax. The gross dividend is the dividend received plus DWT withheld by theCompany. Irish resident individual shareholders are generally entitled to a credit for the DWTdeducted against their income tax liability and to have refunded to them any amount by which DWTexceeds such income tax liability provided that they furnish the statement of DWT suffered to theIrish Revenue.Irish resident corporate shareholders are generally exempt from Irish tax on dividends received fromthe Company. If an Irish resident corporate shareholder is a close company, as defined under Irishlegislation, it may, in certain circumstances, be liable to a 20% investment income surcharge.Non-Irish resident shareholders are, unless entitled to exemption from DWT, liable to Irish income taxon dividends received from the Company. However, the DWT deducted by the Company dischargessuch liability to Irish income tax provided that they furnish the statement of DWT suffered to the IrishRevenue. Where a non-resident shareholder is entitled to exemption from DWT, then no Irish incometax arises.(c)Capital Gains TaxIrish resident or ordinarily resident shareholdersThe rate of capital gains tax in Ireland is currently 20%.A subsequent disposal of the Shares by a shareholder who is resident or ordinarily resident in Irelandmay, depending on circumstances (including the availability of exemptions and reliefs, and takinginto account the price paid for the asset), give rise to a chargeable gain or allowable loss for thepurposes of the Irish taxation of chargeable gains.A shareholder who is an individual and who is temporarily non-resident in Ireland may, under antiavoidancelegislation, still be liable to Irish taxation on any chargeable gain realised.Non-Irish resident shareholdersShareholders who are not resident or, in the case of individuals, ordinarily resident for tax purposesin Ireland should not be liable for Irish tax on chargeable gains realised on a subsequent disposal oftheir Shares unless such Shares are used, held or acquired for the purposes of a trade carried on inthe State through a branch or agency.(d)Capital Acquisitions TaxIrish capital acquisitions tax (‘‘CAT’’) comprises principally of gift tax and inheritance tax. CAT couldapply to a gift or inheritance of Ordinary Shares irrespective of the place of residence, ordinaryresidence or domicile of the parties. This is because the Ordinary Shares of the Company areregarded as property situated in Ireland as the share register of the Company is held in Ireland. Theperson who receives the gift or inheritance is primarily liable for CAT.365

Part XVAdditional InformationCAT is levied at a rate of 20% above certain tax-free thresholds. The appropriate tax-free threshold isdependent upon (1) the relationship between the donor and the donee and (2) the aggregation ofthe values of previous gifts and inheritances received by the donee from persons within the samegroup threshold. Gifts and inheritances passing between spouses are exempt from CAT.(e)Stamp DutyThe Offer will comprise the issue by the Company of the New Ordinary Shares and the sale by theSelling Shareholder of the Sale (Ordinary) Shares. The issue of the New Ordinary Shares will not giverise to a stamp duty liability. The sale of the Sale Shares may, however, give rise to a stamp dutyliability as it will involve a transfer of existing shares. Although any stamp duty liability would bepayable by the person acquiring the shares, the Selling Shareholder has agreed that the stamp duty(if any) will not be charged in the case of a transfer of shares under the Offer only.A subsequent transfer of ordinary shares (including a transfer effected through CREST) will generallybe liable to Irish stamp duty at the rate of 1% of the consideration paid or, in the case of a gift orwhere the purchase price is inadequate or unascertainable, the market value of the Ordinary Shares.The person acquiring the Ordinary Shares is liable for the stamp duty. However, in the case of a giftor a transfer at undervalue, all parties to the transfer are liable for the duty. To avoid interest andpenalties, stamp duty should be paid within 30 days after the transfer is first executed.(f)Bonus Share IncentiveWhile there is no stated precedent for the tax treatment of the Bonus Shares Incentive, the receipt ofBonus Shares by a shareholder entitled to receive them should not result in a tax charge for thatshareholder. This represents the fulfilment of an existing conditional contract and is more likely thannot to be treated as a tax neutral addition to the holding. Where shares are disposed of prior to thecondition being met then the holder will more likely than not be considered to have two differentassets being shares and a conditional contract. Strictly the original cost should be apportionedbetween the two assets, but this treatment should not affect the overall gain or loss for taxpurposes.The general Irish capital gains tax treatment on a disposal of Shares is set out in paragraph (c) above,and applies to disposals of the Bonus Shares also.15.2 United KingdomThe summary only covers the principal UK tax consequences for the absolute beneficial owners ofOrdinary Shares and any dividends paid in respect of them, in circumstances where the dividendspaid are regarded for UK tax purposes as that person’s own income (and not the income of someother person), and who are resident (or, in the case of individuals only, ordinarily resident) in the UKfor tax purposes. In addition, the summary (a) only addresses the tax consequences for holders whohold the Ordinary Shares as capital assets and does not address the tax consequences which may berelevant to certain other categories of holders, for example, dealers; (b) does not address the taxconsequences for holders that are insurance companies, collective investment schemes or personsconnected with the Company; (c) assumes that the holder does not control or hold, either alone ortogether with one or more associated or connected persons, including the immediate family andrelated trusts of a Director or member of the Senior Management Team of Aer Lingus, directly orindirectly, 10 per cent or more of the shares and/or voting power of the Company; (d) assumes thatthere will be no register in the UK in respect of the Ordinary Shares and that the sole register will bemaintained in Ireland; and (e) assumes that the Ordinary Shares will not be paired with shares issuedby a company incorporated in the UK.(a)Dividends paid by the Company to Shareholders Resident in the United KingdomDividends which the Company pays to shareholders resident in the United Kingdom for tax purposes(‘‘UK shareholders’’) will generally be subject to or free from Irish withholding tax as outlined above.UK shareholders subject to the charge to UK tax will generally be subject to tax in the UnitedKingdom on dividends received from the Company.366

Part XVAdditional InformationUK resident individuals are subject to UK income tax on the gross dividends received from thecompany at their marginal rate of tax. As the dividends received are from a non-UK company, thedividend tax credit will not be available.UK resident and domiciled individuals will be charged to income tax on the day that the dividend ispaid to the individual. A UK resident but non-domiciled individual will be charged to income tax onthe date the dividend is remitted to the UK.(b)Stamp DutyUK stamp duty is potentially payable by the transferee at the rate of 0.5% of the considerationpayable, rounded up to Stg£5.00. Irish stamp duty at 1% (see 15.1 (e)) is payable on the transfer ofOrdinary Shares in the Company as the transfer document relates to Irish property. Relief is availablefrom a double charge to stamp duty so that stamp duty is in effect payable at the higher of the ratesapplicable to the United Kingdom and Ireland respectively.No UK stamp duty reserve tax should arise in respect of transfers of Ordinary Shares within CREST.(c)Capital Gains TaxAny capital gain made on a disposal of Ordinary Shares by UK shareholders may, depending on theshareholder’s individual circumstances, be liable to tax in the United Kingdom.For a shareholder not within the charge to corporation tax, such as an individual, trustee or personalrepresentative, taper relief (which reduces a chargeable gain depending on the length of time forwhich an asset is held) may be available to reduce the amount of chargeable gain realised on asubsequent disposal. The availability and extent of taper relief will depend, in part, on the individualcircumstances of the shareholder.Some shareholders may be subject to charges of foreign taxation depending on their personalcircumstances. In addition, individual shareholders who are temporarily non-UK resident may beliable to UK capital gains tax under anti-avoidance legislation.(d)Inheritance TaxOrdinary Shares beneficially owned by an individual may (subject to certain exemptions and reliefs)be subject to inheritance tax on the death of the individual or, in certain circumstances, if theOrdinary Shares are the subject of a gift by such individuals. As the Company’s sole register will bemaintained in Ireland, Ordinary Shares should be assets situated in Ireland for the purposes of UKinheritance tax. Accordingly, inheritance tax should not be payable where the individual shareholderis not domiciled in the UK (nor deemed to be domiciled in the UK under certain rules relating to longresidence or previous domicile).For inheritance tax purposes, a transfer of assets at less than full market value may be treated as agift and particular rules apply to gifts where the donor reserves or retains some benefit. Shareholdersshould consult an appropriate professional adviser if they make a gift of any kind or intend to holdany Ordinary Shares through trust arrangements. Shareholders should also seek professional advicein a situation where there is a potential for a double charge to UK inheritance tax and an equivalenttax in another country.(e)Bonus Share IncentiveWhile there is no stated precedent for the tax treatment of the Bonus Shares Incentive, the receipt ofBonus Shares by a shareholder entitled to receive them should not result in a tax charge for thatshareholder. This represents the fulfilment of an existing conditional contract and is more likely thannot to be treated as a tax neutral addition to the holding. Where shares are disposed of prior to thecondition being met then the holder will more likely than not be considered to have two differentassets being shares and a conditional contract. Strictly the original cost should be apportionedbetween the two assets, but this treatment should not affect the overall gain or loss for taxpurposes.367

Part XVAdditional InformationThe general UK capital gains tax treatment on a disposal of Shares is set out in paragraph (c) above,and applies to disposals of the Bonus Shares also.15.3 United StatesThis disclosure is limited to the US federal tax issues addressed herein. Additional issuesmay exist that are not addressed in this disclosure and that could affect the US federal taxtreatment of the Ordinary Shares. This tax disclosure was written in connection with thepromotion or marketing of the Ordinary Shares by Aer Lingus, and it cannot be used byany holder for the purpose of avoiding penalties that may be asserted against the holderunder the US Internal Revenue Code. Holders should seek their own advice based on theirparticular circumstances from an independent tax adviser.The following is a discussion of certain US federal income tax consequences of purchasing, owningand disposing of Ordinary Shares to US Holders (as described below), but it does not purport to be acomprehensive description of all the tax considerations that may be relevant to a particular person’sdecision to acquire such securities. This discussion does not address US state, local and non-US taxconsequences. The discussion applies only to US Holders who hold Ordinary Shares as capital assetsfor US federal income tax purposes and it does not address special classes of holders, such as certainfinancial institutions, insurance companies, dealers and certain traders in securities or foreigncurrencies, persons holding Ordinary Shares as part of a hedge, straddle, conversion or otherintegrated transaction, persons whose functional currency for US federal income tax purposes is notthe US dollar, partnerships or other entities classified as partnerships for US federal income taxpurposes, persons liable for the alternative minimum tax, tax-exempt organisations or persons thatown or are deemed to own 10% or more of Aer Lingus’ voting stock.This discussion is based on the US Internal Revenue Code of 1986, as amended, administrativepronouncements, judicial decisions, final, temporary and proposed Treasury regulations and theincome tax treaty between Ireland and the United States (the ‘‘Treaty’’), all as of the date hereof.These laws are subject to change, possibly on a retroactive basis. Prospective investors should consulttheir own tax advisers concerning the US federal, state, local and non-US tax consequences ofpurchasing, owning and disposing of Ordinary Shares in their particular circumstances.As used herein, a ‘‘US Holder’’ is a beneficial owner of Ordinary Shares that is, for US federal incometax purposes: (i) a citizen or resident of the United States; (ii) a corporation, or other entity taxable asa corporation, created or organised in or under the laws of the United States or any politicalsubdivision thereof; or (iii) an estate or trust the income of which is subject to US federal incometaxation regardless of its source.(a)Taxation of DistributionsSubject to the discussion in paragraph 15.3(c) (Passive Foreign Investment Company Rules) below,distributions received by a US Holder on Ordinary Shares (other than certain pro rata distributions ofOrdinary Shares to all shareholders), including the amount of any Irish taxes withheld, will constituteforeign-source dividend income to the extent paid out of Aer Lingus’ current or accumulatedearnings and profits (as determined for US federal income tax purposes). The amount of thedividend a US Holder will be required to include in income will equal the US dollar value of the eurodividend, calculated by reference to the exchange rate in effect on the date the payment is receivedby the holder, regardless of whether the payment is converted into US dollars on the date of receipt.If a US Holder realises gain or loss on a subsequent sale or other disposition of euro, it will generallybe US-source ordinary income or loss. Corporate US Holders will not be entitled to claim thedividends-received deduction with respect to dividends paid by Aer Lingus. Subject to applicablelimitations, including the requirement that Aer Lingus not be a PFIC, as described below, in thetaxable year it pays a dividend or in the prior taxable year, dividends received by certain noncorporateUS Holders in taxable years beginning before 1 January 2011 will be taxable at favourablerates, up to a maximum rate of 15%. Non-corporate US Holders should consult their own taxadvisers to determine whether they are subject to any special rules that limit their ability to be taxedat these favourable rates.368

Part XVAdditional InformationIrish taxes withheld from dividends on Ordinary Shares at a rate not exceeding the rate provided inthe Treaty will be creditable against a US Holder’s US federal income tax liability, subject toapplicable restrictions and limitations that may vary depending upon the holder’s circumstances.Instead of claiming a credit, a US Holder may elect to deduct such Irish taxes in computing its taxableincome, subject to generally applicable limitations. The limitation on foreign taxes eligible for creditis calculated separately with respect to specific classes of income. The rules governing foreign taxcredits are complex. Therefore, US Holders should consult their own tax advisers regarding theavailability of foreign tax credits in their particular circumstances.(b)(c)Taxation of Capital GainsSubject to the discussion in paragraph 15.3(c) (Passive Foreign Investment Company Rules) below, aUS Holder will generally recognise US-source capital gain or loss on the sale or other disposition ofOrdinary Shares, which will be long-term capital gain or loss if the holder has held such OrdinaryShares for more than one year. The amount of the US Holder’s gain or loss will be equal to thedifference between the amount realised on the sale or other disposition and such holder’s tax basisin the Ordinary Shares, as determined in US dollars. The deductibility of capital losses is subject tolimitations.Passive Foreign Investment Company RulesIn general, a non-US corporation will be considered a passive foreign investment company (a ‘‘PFIC’’)for US federal income tax purposes for any taxable year in which (i) 75% or more of its gross incomeconsists of passive income or (ii) 50% or more of the average quarterly value of its assets consists ofassets that produce, or are held for the production of, passive income. In computing the abovecalculations, a non-US corporation that directly or indirectly owns at least 25% by value of the stockof another corporation is treated as if it held its proportionate share of the assets of such othercorporation and received directly its proportionate share of the income of such other corporation.Passive income generally includes dividends, interest, rents, royalties and gains from the sale ofassets that produce such income.Aer Lingus has a significant amount of cash and other assets on its consolidated balance sheet thatare or may be considered passive assets for PFIC purposes, which is expected to continue to be thecase in future years. In addition, the market value of Aer Lingus’ assets may be determined in largepart by the market price of the Ordinary Shares, which may fluctuate (possibly considerably) overtime. As a result, Aer Lingus may be a PFIC for the current taxable year or any future taxable year.Aer Lingus’ actual PFIC status for any taxable year will not be determinable until after the end of thetaxable year. If Aer Lingus is a PFIC in any year that a US Holder holds Ordinary Shares, Aer Linguswill generally continue to be treated as a PFIC with respect to such holder in all succeeding years,regardless of whether Aer Lingus continues to meet the income or asset test described above, unlessthe holder makes an election to recognise any gain as if such holder sold its Ordinary Shares as of thelast day of the last taxable year for which Aer Lingus is a PFIC (with the PFIC consequences describedbelow).If Aer Lingus is a PFIC for any taxable year during which a US Holder holds Ordinary Shares and theholder has not made a mark-to-market election as described below, such holder will be subject tothe following US federal income tax rules. In general, any gain recognised upon a disposition(including, under certain circumstances, a constructive disposition) of Ordinary Shares by such USHolder would be allocated ratably over the holder’s holding period for such Ordinary Shares. Theamounts allocated to the taxable year of disposition and to years before Aer Lingus became a PFIC, ifany, would be taxed as ordinary income. The amount allocated to each other taxable year would besubject to tax at the highest rate in effect for such taxable year for individuals or corporations, asappropriate, and an interest charge would be imposed on the tax attributable to such allocatedamounts. Further, any distribution received by such US Holder on its Ordinary Shares in excess of125% of the average of the annual distributions on such Ordinary Shares received during thepreceding three years or the holder’s holding period, whichever is shorter, would be subject totaxation as described above.369

Part XVAdditional InformationUnder certain attribution rules, if Aer Lingus is a PFIC, US Holders will be deemed to own theirproportionate share of any direct or indirect subsidiaries of Aer Lingus that are also PFICs (‘‘subsidiaryPFICs’’), and will generally be subject to US federal income tax as if such holders directly held theshares of such subsidiary PFICs.If Aer Lingus is a PFIC for a taxable year in which it pays a dividend or the prior taxable year, thefavourable dividend rates discussed above with respect to dividends paid to certain non-corporateUS Holders will not apply.To avoid the foregoing rules if Aer Lingus is a PFIC (other than the inapplicability of the favourabledividend rates described in the preceding paragraph), a US Holder may make a mark-to-marketelection with respect to the Ordinary Shares (but not with respect to the shares of any subsidiaryPFICs) if the Ordinary Shares are ‘‘regularly traded’’ on a ‘‘qualified exchange.’’ The Ordinary Shareswill generally be treated as ‘‘regularly traded’’ in any calendar year in which more than a de minimisquantity of Ordinary Shares is traded on a qualified exchange on at least 15 days during eachcalendar quarter. A ‘‘qualified exchange’’ includes a non-US exchange that is regulated by agovernmental authority in which the exchange is located and with respect to which certain otherrequirements are met. Although the matter is not entirely free from doubt, the Irish Stock Exchangeand the London Stock Exchange should each be treated as a ‘‘qualified exchange’’ for this purpose.If a US Holder makes a valid mark-to-market election, for each year in which Aer Lingus is a PFIC, theholder will generally include as ordinary income the excess, if any, of the fair market value of theOrdinary Shares at the end of the taxable year over their adjusted tax basis, and will be permitted anordinary loss in respect of the excess, if any, of the adjusted tax basis of the Ordinary Shares overtheir fair market value at the end of the taxable year (but only to the extent of the net amount ofpreviously included income as a result of the mark-to-market election). If a US Holder makes theelection, the holder’s tax basis in the Ordinary Shares will be adjusted to reflect any such income orloss amounts. Any gain recognised on the sale or other disposition of Ordinary Shares will be treatedas ordinary income. Once made, the election cannot be revoked without the consent of the USInternal Revenue Service unless the Ordinary Shares cease to be marketable. US Holders shouldconsult their own tax advisers regarding the availability and advisability of making a mark-to-marketelection in their particular circumstances. In particular, US Holders should consider carefully theimpact of a mark-to-market election with respect to their Ordinary Shares when Aer Lingus hassubsidiary PFICs.A US shareholder may also be able to mitigate some of the adverse US federal income taxconsequences resulting from holding shares in a PFIC by making a qualified electing fund electionwith respect to the PFIC. However, Aer Lingus will not make available the information necessary forUS Holders to make a qualified electing fund election if it is a PFIC.If a US Holder owns Ordinary Shares during any year in which Aer Lingus is a PFIC, the holder mustfile a separate US Internal Revenue Service Form 8621 with respect to Aer Lingus and each subsidiaryPFIC.Aer Lingus does not intend to monitor its PFIC status. Therefore, US Holders should consult theirown tax advisers concerning the PFIC status of Aer Lingus and its subsidiaries and the taxconsiderations relevant to an investment in a PFIC, including the availability and advisability ofmaking any election discussed above.(d)Bonus Share IncentiveAlthough there is no authority directly on point, it is more likely than not that the receipt of anyBonus Shares by a US Holder participating in the Intermediaries Offer or the Employee and APSSParticipant Offer, as the case may be, would not be a taxable event for US federal income taxpurposes. Rather, the receipt of Bonus Shares by a US Holder would constitute part of the initialpurchase of Ordinary Shares. Assuming this characterization is respected, US Holders participating inthe Intermediaries Offer and the Employee and APSS Participant Offer would allocate their purchase370

Part XVAdditional Informationprice between the Ordinary Shares and the contingent right to receive Bonus Shares. Such USHolders should consult their own tax advisers regarding how the purchase price should be allocatedand when the holding period begins for any Bonus Shares they receive.Alternative characterizations and treatments of the right to receive, and receipt of, Bonus Shares bya US Holder are possible for US federal income tax purposes, including the recognition of ordinaryincome at the time the Bonus Shares are received. Therefore, US Holders participating in either theIntermediaries Offer or the Employee and APSS Participant Offer should consult their own taxadvisers regarding the characterization and treatment of the right to receive, and receipt of, BonusShares for US federal income tax purposes.(e)Information Reporting and Backup WithholdingPayments of dividends and sales proceeds that are made within the United States or through certainUS-related financial intermediaries may be subject to information reporting and to backupwithholding unless the US Holder is a corporation or other exempt recipient or, in the case of backupwithholding, the holder provides a correct taxpayer identification number and certifies that no lossof exemption from backup withholding has occurred. The amount of any backup withholding froma payment to a US Holder will be allowed as a credit against the holder’s US federal income taxliability and may entitle the holder to a refund, provided that the required information is timelyfurnished to the US Internal Revenue Service.16. CONSENTS16.1 PricewaterhouseCoopers, Chartered Accountants and Registered Auditors has given and has notwithdrawn its written consent to the inclusion in this Prospectus of its accountants’ reports on theGroup’s historical financial information set out in Part XII (Historical Financial Information) of thisProspectus and its report on the unaudited pro forma balance sheet relating to the Group set out inPart XIII (Unaudited Pro Forma Balance Sheet) of this Prospectus in the form and context in whichthey are included for the purposes of Section 45 of the Investment Funds, Companies andMiscellaneous Provisions Act 2005 and has authorised the contents of those parts of this Prospectuswhich comprise its reports for the purposes of paragraph 2(2)(f) of Schedule 1 of the ProspectusRegulations 2005.A written consent under the Listing Rules of the Irish Stock Exchange is different from a consent filedwith the US Securities and Exchange Commission under Section 7 of the US Securities Act (the‘‘US Securities Act’’), which is applicable only to transactions involving securities registered under theUS Securities Act. As the offered securities have not been and will not be registered under theUS Securities Act, PricewaterhouseCoopers has not filed a consent under Section 7 of theUS Securities Act.16.2 Mercer Human Resources Consulting has given and has not withdrawn its written consent to theinclusion in this Prospectus of the references to its name in the form and context in which theyappear.PR Ann I,2.1, 23.1PR Ann III,10.317. DOCUMENTS ON DISPLAYPR Ann I,24Copies of the following documents will be available for inspection during normal business hours on anyweekday (Saturdays and public holidays excepted) at the offices of Arthur Cox, Earlsfort Centre, EarlsfortTerrace, Dublin 2, Ireland and Arthur Cox, 29 Ludgate Hill, London EC4M 7J3, England, up to and includingAdmission:➤ the Memorandum and Articles of Association of the Company;➤ the accountants’ reports on the Group’s historical financial information set out in Part XII (HistoricalFinancial Information) of this Prospectus;371

Part XVAdditional Information➤ the accountants’ report on the unaudited pro forma Balance Sheet on the Group set out in Part XIII(Unaudited Pro Forma Balance Sheet) of this Prospectus;➤ Irish Airline (Pilots) Superannuation Scheme Actuarial Valuation as at 31 March 2006;➤ Irish Airlines (General Employees) Superannuation Scheme Actuarial Valuation as at 31 March 2005;➤ the written consents referred to in paragraph 16 (Consents) of this Part XV; and➤ this Prospectus.This Prospectus is dated 12 September 2006.372

Part XVIDefinitions‘‘0.5% Capitalisation means the Company’s proposal to the CRC and the trade unionsRecommendation’’representing unionised employees (other than pilots) to forego thecapitalised value of the 0.5% pay increase that is contained in theLabour Court Recommendation No LCR18660 further details of whichare set out in paragraph 20.1 (Recommendation of Labour Court) inPart VIII (Information on Aer Lingus) of this Prospectus‘‘2001 Act’’ means the Aviation Regulation Act 2001‘‘2004 Act’’ means the Aer Lingus Act 2004‘‘2005 Order’’ means the Irish Aviation Authority (Nationality and Registration ofAircraft) Order 2005‘‘ACOL’’means Air Carrier Operating Licence‘‘Admission’’means admission of the Ordinary Shares to the Official Lists and totrading on the London Stock Exchange becoming effective inaccordance with the Listing Rules and the Admission and DisclosureStandards‘‘Admission and Disclosure means the requirements contained in the current edition of theStandards’’publication ‘‘Admission and Disclosure Standards’’ containing,amongst other things, the admission requirements to be observed bycompanies seeking admission to trading on the London StockExchange’s main market for listed securities‘‘Aer Lingus ESOP Summary means the agreed terms between the Ministers, the Company and theTerms’’CRC for, among other things, the establishment and future operationof an employee share ownership plan for employees of the Companyand its subsidiaries‘‘Aer Lingus’’ or the ‘‘Group’’ means Aer Lingus Group plc and its subsidiary undertakings‘‘AIB Capital Markets’’ means AIB Capital Markets plc, incorporating AIB Corporate Financeand Goodbody Stockbrokers‘‘AIB Corporate Finance’’ means AIB Corporate Finance Limited‘‘ALL’’means Aer Lingus Limited‘‘AOC’’means Air Operator’s Certificate‘‘APSS’’means the Aer Lingus Approved Profit Sharing Scheme‘‘APSS Allocation’’means such number of new Ordinary Shares as would be required tobe issued to the APSS so as to restore the percentage shareholding ofthe APSS in the issued share capital of the Company to the level it wasimmediately before Admission‘‘APSS Anti-Dilution Right’’ means the right set out in the Pre-Admission Articles (and removed atan extraordinary general meeting of the Company on 11 September2006) which enabled APSS Participants to subscribe for or purchasefurther shares to avoid the dilution of their shareholding in theCompany‘‘APSS Participant’’means any existing or former employee of Aer Lingus who is abeneficial owner of Ordinary Shares held in the APSS‘‘Articles’’ or ‘‘Articles of means the articles of association of the Company effective onAssociation’’Admission‘‘Assumptions’’means the Offer Assumptions and the Bonus Share Assumption373

Part XVIDefinitions‘‘Australia’’‘‘Beneficiaries’’‘‘Board’’‘‘Bonus Share Assumption’’means the Commonwealth of Australia, its possessions, territories andall areas subject to its jurisdiction and political subdivisions thereofmeans individuals to whom Ordinary Shares have been allocated by theESOT and ‘‘Beneficiary’’ shall be construed accordinglymeans the Board of Directors of the Company from time to timemeans the Bonus Share Assumption set out on page 8 of thisProspectus‘‘Bonus Share Incentive’’ means the one for 20 Bonus Share issue described in paragraph 6.2(The Bonus Share Incentive) of Part XIV (The Offer) of this Prospectus‘‘Bonus Shares’’‘‘Business Day’’‘‘Cahill Survival Plan’’‘‘Canada’’‘‘CAR’’‘‘CESR’’‘‘Chicago Convention’’‘‘Client Confirmation Form’’‘‘Combined Code’’‘‘Companies Acts’’‘‘Company’’‘‘Consumer Price Index’’‘‘Continental Europe’’means the Ordinary Shares to be issued pursuant to the Bonus ShareIncentivemeans a day/days (not being a Saturday or Sunday) on which banks areopen for business in Dublin, Irelandmeans the restructuring of the Group implemented under thechairmanship of Bernie Cahill from 1993 onwardsmeans Canada, its provinces and territoriesmeans the Irish Commission for Aviation Regulationmeans the Committee of European Securities Regulatorsmeans the Convention on International Civil Aviation, whichestablished the ICAOmeans the form to be completed by the clients of Intermediariespursuant to the Intermediaries Offermeans the Combined Code on Corporate Governance published in July2003 by the Financial Reporting Council, as amended or replaced fromtime to timemeans the Companies Acts 1963 to 2005 of Irelandmeans Aer Lingus Group plc, a public limited company incorporated inIreland with registered number 211168 and whose registered office isat Dublin airport, County Dublinmeans the consumer price index (all items) of Ireland published by theCentral Statistics Office of Irelandmeans the continent of Europe, excluding the United Kingdom andIreland‘‘CRC’’means the Central Representative Council, which acts on behalf of allof the Group’s staff who are members of a trade union‘‘CREST’’ means the relevant system (as defined in the Companies Act 1990(Uncertificated Securities) Regulations 1996 (SI No. 68 of 1996) ofIreland), as amended enabling title to securities to be evidenced andtransferred in dematerialised form operated by CRESTCo Limited‘‘CSO’’means the Central Statistics Office of Ireland‘‘Deferred Members’’‘‘Directors’’‘‘Dublin Airport Authority’’means an individual who is no longer employed by the Group andwhose accrued pension benefits remain in a pension schememeans the directors of the Company from time to timemeans Dublin Airport Authority plc374

Part XVIDefinitions‘‘ECJ’’‘‘EEA’’‘‘Eligible Employees’’‘‘Employee and APSSParticipant ApplicationForm’’‘‘Employee and APSSParticipant Offer’’‘‘Employee Ballot’’‘‘ESOP’’‘‘ESOT’’‘‘ESOT Anti-Dilution Right’’means the Court of Justice of the European Communitiesmeans the European Economic Area, being the 25 EU Member States,plus Iceland, Liechtenstein and Norwaymeans a person who was employed by ALL on 31 August 2006, otherthan employees in the United Statesmeans the application form to be used by Eligible Employees and APSSParticipants pursuant to the Employee and APSS Participant Offermeans the offer to Eligible Employees and APSS Participants, details ofwhich are set out in paragraph 7 (The Employee and APSS ParticipantOffer) of Part XIV (The Offer) of this Prospectusmeans the ballot of Aer Lingus’ unionised employees (other than itspilots) details of which are set out in paragraph 20.1 (Recommendationof Labour Court) of Part VIII (Information on Aer Lingus) of thisProspectusmeans the Aer Lingus Employee Share Ownership Planmeans the Aer Lingus Employee Share Ownership Trustmeans the right set out in the Pre-Admission Articles (and removed atan extraordinary general meeting of the Company on 11 September2006) which enabled the ESOT to subscribe for or purchase furthershares to avoid the dilution of its shareholding in the Company‘‘ESOT Option’’means the option granted to the ESOT to acquire further OrdinaryShares currently held by the Selling Shareholder in the Company asdescribed in paragraph 11 (The ESOT Option and the New Profit ShareArrangement) of Part XIV (The Offer) of this Prospectus‘‘ESOT Subscription’’means the agreement by the ESOT to subscribe for Offer Shares withan aggregate value of up to 033 million at the Offer Price‘‘ESPS’’means the Aer Lingus Employee Share Participation Scheme‘‘ETS’’means EU emissions trading scheme‘‘EU’’ or ‘‘European Union’’ means the European Union‘‘EU Prospectus Regulation’’ means Commission Regulation (EC) No 809/2004 of 29 April 2004implementing Directive 2003/71/EC‘‘EUR’’ or ‘‘1’’means euro, the lawful currency of Ireland‘‘Executive Directors’’means Dermot Mannion and Greg O’Sullivan‘‘Existing Ordinary Shares’’ means the Ordinary Shares in issue in the capital of the Company atthe date of this Prospectus‘‘Financial Regulator’’means the Irish Financial Services Regulatory Authority‘‘FSMA’’means the Financial Services and Markets Act 2000 of the UnitedKingdom (as amended from time to time)‘‘Futura’’means Futura International Airways, S.A.‘‘GAAP’’means generally accepted accounting principles‘‘GNP’’means gross national product375

Part XVIDefinitions‘‘Goodbody Stockbrokers’’‘‘Group’’‘‘IAA’’‘‘IAS’’‘‘IASB’’‘‘IATA’’‘‘ICAO’’‘‘IFRIC’’‘‘IFRS’’‘‘IMPACT’’‘‘Institutional Offer’’‘‘Intermediaries’’‘‘Intermediaries ApplicationForm’’‘‘Intermediaries Offer’’‘‘Ireland’’‘‘Irish GAAP’’‘‘Irish Government’’‘‘Irish Pension Schemes’’‘‘Irish Stock Exchange’’‘‘ISIN’’‘‘IT’’‘‘JAA’’‘‘Japan’’‘‘Joint Global Co-ordinators’’‘‘Listing Rules’’‘‘London Stock Exchange’’‘‘Main Scheme’’‘‘Minister for Finance’’‘‘Minister for Transport’’‘‘Ministers’’means Goodbody Stockbrokers which is regulated by the FinancialRegulator or under the Stock Exchange Act 1995 and is a member ofthe Irish Stock Exchange and is a SETS participant of the London StockExchangemeans Aer Lingus Group plc and its subsidiary undertakingsmeans the Irish Aviation Authoritymeans International Accounting Standardsmeans the International Accounting Standards Boardmeans the International Air Transport Associationmeans the International Civil Aviation Organisationmeans International Financial Reporting Interpretations Committeemeans International Financial Reporting Standardsmeans the Irish Municipal Public and Civil Trade Unionmeans the offer of Ordinary Shares to certain institutional investors atthe Offer Price, including the Rule 144A Private Placementmeans the member firms of the Irish Stock Exchange listed onpage 304 of this Prospectusmeans the application form to be used by the Intermediaries pursuantto the Intermediaries Offerthe offer described in paragraph 6 (The Intermediaries Offer) ofPart XIV (The Offer) of this Prospectusmeans the island of Ireland excluding Northern Ireland, and the word‘‘Irish’’ shall be construed accordinglymeans generally accepted accounting principles in Irelandmeans the government of Ireland from time to timemeans the Main Scheme and the Pilots’ Schememeans The Irish Stock Exchange Limitedmeans the International Securities Identification Numbermeans information technologymeans the Joint Aviation Authoritymeans Japan, its cities, territories and possessionsmeans AIB Capital Markets and UBS Investment Bankmeans the listing rules issued by the Irish Stock Exchange and thelisting rules issued by the UK Financial Services Authority in its capacityas the competent authority for the purposes of Part VI of FSMAmeans the London Stock Exchange plcmeans the Irish Airlines (General Employees) Superannuation Schememeans the Minister for Finance of Irelandmeans the Minister for Transport of Irelandmeans the Minister for Finance and the Minister for Transport376

Part XVIDefinitions‘‘Montreal Convention’’‘‘New Ordinary Shares’’‘‘New Profit ShareArrangement’’‘‘Non-executive Directors’’‘‘Non-qualifying National’’‘‘Northern Ireland’’‘‘Offer’’‘‘Offer Assumptions’’‘‘Offer Period’’‘‘Offer Price’’‘‘Offer Price Announcement’’‘‘Offer Price Range’’‘‘Offer Shares’’‘‘Official Lists’’‘‘Operating Licence’’‘‘Option Shares’’‘‘Ordinary Shares’’‘‘Over-allotmentArrangements’’‘‘Over-allotment Shares’’‘‘Pensions Board’’means the Convention for the Unification of Certain Rules forInternational Carriage by Air signed at Montreal in 1999means those Ordinary Shares to be allotted and issued by the Companypursuant to the Offer and the Bonus Share Incentivemeans the new employee profit share arrangement described inparagraph 20.3 (The New Profit Share Arrangement) of Part VIII(Information on Aer Lingus) of this Prospectusmeans the Directors other than the Executive Directorsmeans anyone who is not a Qualifying Nationalmeans the counties of Antrim, Armagh, Derry, Down, Fermanagh andTyrone on the island of Irelandmeans the offer of Ordinary Shares comprising the Institutional Offer,the Employee and APSS Participant Offer, the ESOT Subscription andthe Intermediaries Offer as described in this Prospectusmeans the Offer Assumptions set out on page 8 of this Prospectusmeans the period during which applications for Offer Shares may besubmitted to the Joint Global Co-ordinators as described in Part XIV(The Offer) of this Prospectusmeans the price per Ordinary Share payable under the InstitutionalOffer, the Employee and APSS Participant Offer and the IntermediariesOffer, which will be determined by the Company, the SellingShareholder and Joint Global Co-ordinators provided however thatwhere any person receives an allotment of a Bonus Share, the paymentmade for every 20 New Ordinary Shares issued to him on Admissionshall be received in payment for the Bonus Share alsomeans the announcement containing the Offer Price and the numberof Offer Shares which is expected to be published on or around27 September 2006means 02.10 to 02.70 per Offer Share, being the indicative price rangewithin which the Offer Price is expected to be determinedmeans the New Ordinary Shares and the Sale Sharesmeans the Official Lists of the Irish Stock Exchange and theUK Financial Services Authoritymeans a licence granted by CAR to operate air transport servicesmeans the Ordinary Shares subject to the ESOT Optionmeans ordinary shares of 00.05 each in the capital of the Companymeans the arrangements pursuant to which the Stabilising Managermay purchase from the Selling Shareholder or subscribe from theCompany, the Over-allotment Shares as described in paragraph 13(Over-allotment Arrangements and Stabilisation) of Part XIV (The Offer)of this Prospectusmeans the existing Ordinary Shares and the New Ordinary Shares whichmay be issued which are the subject of the Over-allotmentArrangementsmeans the Pensions Board, a statutory body set up under the PensionsAct 1990 to regulate occupational pension schemes and personalretirement savings accounts in Ireland377

Part XVIDefinitions‘‘Permitted Countries’’‘‘PFIC’’‘‘Pilots Pay TribunalRecommendation’’‘‘Pilots’ Scheme’’‘‘Pre-Admission Articles’’means Ireland and the United Kingdommeans a passive foreign investment company for US federal income taxpurposesmeans the recommendation contained in the report of the Aer LingusPilots Pay Review Tribunal, which provides that ‘‘in the event that therest of the workforce, other than pilots accept the proposal to forego0.5% of the Labour Court Recommendation to facilitate the purchaseof shares, the pilot body should likewise forego 0.5% of this pay awardfor such purpose from the same date’’means the Irish Airlines (Pilots) Superannuation Schememeans the articles of association of the Company effective immediatelyprior to the extraordinary general meeting of the Company held on11 September 2006‘‘Price Determination Date’’ means the date on which the Offer Price will be determined, which isexpected to be 26 September 2006‘‘Prospectus’’means this document issued by the Company in relation to the Offerprepared, published and approved by and filed with the FinancialRegulator in accordance with the Prospectus Directive and ProspectusRegulations 2005.‘‘Prospectus Directive’’ means Directive 2003/71/EC‘‘Prospectus Regulations means the Prospectus (Directive 2003/71/EC) Regulations 2005 of2005’’ Ireland‘‘QIBs’’means Qualified Institutional Buyers, as such term is defined inRule 144A‘‘Qualifying Date’’means the qualifying date for the Bonus Share Incentive, being oneyear from the date of Admission‘‘Qualifying Nationals’’ means all persons who are nationals of Ireland and, if agreement isreached between the European Commission and the United States inregard to open skies shall also include nationals of any EU MemberState, provided that this shall not prejudice in any material respectALL’s air carrier rights‘‘Receiving Agent’’means Capita Corporate Registrars Plc‘‘Registrar’’means Capita Corporate Registrars Plc‘‘Regulation S’’means Regulation S, as promulgated under the US Securities Act‘‘Regulatory Information means any of the services set out in Schedule 12 of Appendix 2 of theService’’Listing Rules of the Irish Stock Exchange or the CompaniesAnnouncements Office of the Irish Stock Exchange‘‘RSA 421-B’’means Chapter 421-B of the New Hampshire Revised Statutes‘‘Rule 144A’’means Rule 144A under the US Securities Act‘‘Rule 144A Privatemeans a private placement in the United States to persons reasonablyPlacement’’believed to be QIBs in reliance on Rule 144A or another exemptionfrom, or pursuant to a transaction not subject to, the registrationrequirements of the US Securities Act‘‘Sale Shares’’means the Ordinary Shares to be sold by the Selling Shareholderpursuant to the Offer‘‘SEC’’means the US Securities and Exchange Commission378

Part XVIDefinitions‘‘Selling Shareholder’’‘‘Senior Management Team’’‘‘SIPTU’’‘‘Stabilising Manager’’‘‘Stabilising Period’’‘‘Sterling’’ or ‘‘Stg£’’‘‘Stock Lending Agreement’’‘‘Supplemental Funds’’‘‘UBS Investment Bank’’‘‘UK’’ or ‘‘United Kingdom’’‘‘UK Financial ServicesAuthority’’ or ‘‘FSA’’‘‘Underwriters’’‘‘Underwriting Agreement’’‘‘US’’ or ‘‘USA’’ or‘‘United States’’‘‘US Exchange Act’’‘‘US Securities Act’’means the Minister for Financemeans the senior management team of Aer Lingus, whose names areset out in paragraph 2 (Senior Management Team) of Part XI (Directors,Senior Management and Corporate Governance) of this Prospectusmeans the Services, Industrial, Professional and Technical Unionmeans AIB Capital Marketsmeans the period from the date of publication of the Offer PriceAnnouncement to no later than the thirtieth calendar day followingthat datemeans pounds sterling, the lawful currency of the United Kingdommeans the agreement dated 12 September 2006 entered into betweenthe Stabilising Manager and the Selling Shareholder, further details ofwhich are set out in paragraph 14 (Stock Lending Agreement) ofPart XIV (The Offer) of this Prospectusmeans the discretionary schemes proposed to be established by AerLingus in connection with the indexation of pensions on paymentmeans UBS Limitedmeans the United Kingdom of Great Britain and Northern Irelandmeans the Financial Services Authority, acting in its capacity as thecompetent authority in the United Kingdom under Part VI of FSMAmeans Allied Irish Banks p.l.c., UBS Investment Bank, Goldman SachsInternational and Merrion Stockbrokers Limitedmeans the agreement dated 12 September 2006 entered into betweenthe Company, the Directors, the Selling Shareholder, the Minister forTransport, AIB Capital Markets, AIB Corporate Finance and theUnderwriters, further details of which are set out in paragraph 12(Underwriting Agreement) of Part XIV (The Offer) of this Prospectusmeans the United States of America, its territories and possessions, anyState of the United States of America and the District of Columbiameans the US Securities Exchange Act of 1934, as amendedmeans the US Securities Act of 1933, as amendedPR Ann III,6.5.3379

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ARCTICOCEANNORTHAMERICAATLANTICOCEANEUROPEPACIFICOCEANAFRICASOUTHAMERICAUSA AND MIDDLE EAST ROUTE NETWORKKEYRoutes to/from DublinRoutes to/from Shannon