NON-BINDING TRANSLATION OF AN ITALIAN PATHFINDER PROSPECTUS

Relating to an offer for the purchase, sale and trading on the Mercato Telematico
Azionario (Stock Exchange) organised and managed by Borsa Italiana S.p.A. of the ordinary
shares (the Shares) of Eurofly S.p.A. (the Company).

The information in this document, which is in draft form, is subject to updating, com-
pletion, revision, further verification and amendment. In particular, this document refers to cer-
tain events as having occurred at the date it is published. However, these events have not yet
occurred, although they are expected to occur prior to the publication of the prospectus in its
final form. This document does not constitute or form part of an offer to sell or issue, or the so-
licitation of an offer to subscribe for, Shares in any jurisdiction in which such offer or solicitation
is unlawful.

This document is an English translation of the original pathfinder prospectus which

has been prepared in Italian and no guarantee can be given as to the accuracy of this English
translation. This English translation has not been prepared in accordance with the rules of any
other country relating to prospectuses. It is intended that the original Italian prospectus in its final
form will be prepared in accordance with CONSOB rules only, and not the rules of any other
country relating to prospectuses.

This document will be used within the context of the Institutional Placement solely
for the purposes of enabling foreign Institutional Investors (with the exclusion of Institutional
Investors based in the United States, Japan, Canada and Australia) to comprehend the contents
of the Italian prospectus. The investor should only rely on the information contained in the Italian
prospectus in relation to making an investment decision. In case of inconsistency between the
Italian prospectus and this translation, the Italian prospectus shall always prevail. This document
is strictly private and confidential and should not be copied or passed to any third party.

The distribution of this document and the offer of the Shares in certain jurisdictions
may be restricted by law. Persons into whose possession this document comes should inform
themselves about and observe any such restrictions. Any failure to comply with these restric-
tions may constitute a violation of the securities laws of any such jurisdiction.

In relation to each member state of the European Economic Area (each, a relevant
member state) which has implemented Directive 2003/71/EC (the Prospectus Directive), with
effect from and including the date on which the Prospectus Directive was implemented in that
relevant member state (the relevant implementation date) no Shares have been offered or will
be offered pursuant to the Global Offer to the public in that relevant member state prior to the
publication of a prospectus in relation to the Shares which has been approved by the compe-
tent authority in that relevant member state or, where appropriate, approved in another relevant
member state and notified to the competent authority in the relevant member state, all in ac-
cordance with the Prospectus Directive, except that with effect from and including the relevant
implementation date, offers of Shares may be made to the public in that relevant member state
at any time:
(a) to legal entities which are authorised or regulated to operate in the financial markets
or, if not so authorised or regulated, whose corporate purpose is solely to invest in
securities;
(b) to any legal entity which has two or more of (i) an average of at least 250 employees
during the last financial year; (ii) a total balance sheet of more than 43,000,000; and
(iii) an annual turnover of more than 50,000,000, as shown in its last annual or con-
solidated accounts;
(c) to fewer than 100 natural or legal persons (other than qualified investors as defined
in the Prospectus Directive) subject to obtaining the prior consent of the Joint Global
Coordinators; or

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 (d) in any other circumstances which do not require the publication by the Company of
a prospectus pursuant to Article 3 of the Prospectus Directive.

Provided that no such offer of Shares shall result in a requirement for the publication
of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing
the Prospectus Directive in a relevant member state and each person who initially acquires any
Shares or to whom any offer is made under the Global Offer will be deemed to have represent-
ed, acknowledged and agreed that it is a qualified investor within the meaning of Article 2(1)(e)
of the Prospectus Directive.

For the purpose of the expression an offer of any ordinary shares to the public in
relation to any Shares in any relevant member state means the communication in any form and
by any means of sufficient information on the terms of the offer of any Shares to be offered so
as to enable an investor to decide to purchase any Shares, as the same may be varied in that
relevant member state by any measure implementing the Prospectus Directive in that relevant
member state.

In the case of any Shares being offered to a financial intermediary as that term is
used in Article 3(2) of the Prospectus Directive, such financial intermediary will also be deemed
to have represented, acknowledged and agreed that the Shares acquired by it in the Global Offer
have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired
with a view to their offer or resale to persons in circumstances which may give rise to an offer of
any Shares to the public other than their offer or resale in a relevant member state to qualified
investors as so defined or in circumstances in which the prior consent of the Joint Global
Coordinators has been obtained to each such proposed offer or resale. The Company, the Joint
Global Coordinators, the Joint Lead Managers and their affiliates, and others will rely upon the
truth and accuracy of the foregoing representation, acknowledgement, and agreement.
Notwithstanding the above, a person who is not a qualified investor and who has notified the
Joint Global Coordinators of such fact in writing may, with the consent of the Joint Global
Coordinators, be permitted to subscribe for or purchase Shares in the Global Offer.

This document does not constitute or form part of an offer to sell, or the solicitation
of an offer to subscribe for, Shares to any person in the United States. The Shares have not been
and will not be registered under the US Securities Act of 1933, as amended or under the secu-
rities laws or with any securities regulatory authority of any state or other jurisdiction of the
United States. The Shares are being offered and sold only outside the United States to non-US
persons in offshore transactions in reliance on Regulation S under the Securities Act
(Regulation S). The Shares may not be offered or sold in the United States or to US persons
absent an exemption from the applicable registration requirements of the Securities Act. The
terms used in this paragraph have the meanings given to them by Regulation S under the
Securities Act.

No action has been or will be taken by the Company, the Joint Global Coordinators
or the Joint Lead Managers to permit a public offering of the Shares or to permit the possession
or distribution of this document (or any other offering or publicity materials or application form(s)
relating to the Shares) in Australia, Canada or Japan or any other jurisdiction where action for
that purpose may be required. Accordingly, neither this document, nor any advertisement or any
other offering material may be distributed or published in any jurisdiction except under circum-
stances that will result in compliance with any applicable laws and regulations.

In the United Kingdom, this document is being issued solely to and directed at per-
sons having professional experience in matters relating to investments and who are investment
professionals as specified in Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (the Financial Promotions Order), and to persons who are
high net worth companies, unincorporated associations or high value trusts as specified in
Article 49(2) of the Financial Promotions Order (together, Exempt Persons). This document is
exempt from the general restriction on the communication of invitations or inducements to enter
into investment activity on the basis that it is only being made to Exempt Persons, and has there-

2
fore not been approved by an authorised person as would otherwise be required by section 21
of Financial Services and Markets Act 2000. Any investment to which this document relates is
available to (and any investment activity to which it relates will be engaged with) only those
Exempt Persons described in the above paragraph.

Collins Stewart Limited, which is regulated in the United Kingdom by the Financial
Services Authority, is acting for the Company and no-one else in connection with this matter and
will not be responsible to any other person for providing the protections afforded to clients of
Collins Stewart Limited or for providing advice in relation to this matter.

No representation or warranty, express or implied, is made or given by or on behalf

of the Company, the Joint Global Coordinators, the Joint Lead Managers or any of their respec-
tive directors or any other person as to the accuracy, completeness or fairness of the informa-
tion or opinions contained in this document and no responsibility or liability is accepted for any
such information or opinions.

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Eurofly S.p.A. Spinnaker Luxembourg S.A.
Issuer Selling Shareholder

PROSPECTUS
relating to the Public Offer for the purchase, sale and trading

on the Mercato Telematico Azionario (Stock Exchange)

organized and managed by Borsa Italiana S.p.A. of the ordinary shares of

The Public Offer is part of a Global Offer of 6,300,000 ordinary shares of Eurofly S.p.A., inclusive
of a Public Offer for the purchase and sale of a minimum of 1,600,000 shares to the public in
Italy, an Institutional Placement of a maximum of 4,100,000 shares reserved for Professional
Investitures and foreign institutional investors, with the exclusion of the United States of
America, Australia, Canada and Japan, and a Private Placement of a maximum of 600,000
shares for investors who purchase shares having a total value equal to or in excess of 250,000
Euro. A portion of the Public Offer, in the amount of a maximum of 300,000 shares, is reserved
to Euroflys Employees.

Joint Global Coordinator Joint Global Coordinator

Placement Manager and Sponsor

Joint Lead Manager Joint Lead Manager

of the Institutional Placement of the Institutional Placement

Prospectus filed with CONSOB on [ ] subsequent to the authorization to proceed notified by

means of note no. [] of [ ], published on the Companys Internet site (www.eurofly.it) and
on the Placement Managers Internet site (www.centrobanca.it). Compliance with notice requirements regarding
the Prospectus does not infer any judgment by CONSOB as to whether the proposed investment is opportune
or regarding the merits of the data and information relating to it.
INDEX

DEFINITIONS........................................................................................................... page 9
GLOSSARY.............................................................................................................. page 12

SECTION I SUMMARY

SECTION II RISK FACTORS

A. RISKS REGARDING THE ISSUER ................................................................... page 31

1. Information regarding the Companys economic trend during the last three
years and the foreseeable results of the current and next fiscal years ........... page 31
2. Information regarding the Companys net financial position and net working
capital in the fiscal year in course ................................................................... page 32
3. Risks related to the importance of key figures and specialized personnel ..... page 32
4. Risks related to dependence on a limited number of clients........................... page 33
5. Risks related to relationships with personnel................................................... page 33
6. Initiation of a new activity with an All Business aircraft ................................ page 33
7. Distribution of dividends................................................................................... page 34
8. Risks related to statements of competitive position and forecasts................. page 34

B. RISKS RELATED TO THE MARKET IN WHICH THE COMPANY OPERATES..... page 34

1. Risks related to the economic trend ................................................................ page 34
2. Risks related to the trend of the cost of jet fuel, exchange and interest rates page 35
3. Risks related to terrorist attacks, wars or revolts............................................. page 35
4. Risks related to natural disasters or epidemics ............................................... page 35
5. Risks related to the seasonal nature of the request for air transportation ...... page 36
6. Risks related to the competitive framework..................................................... page 36
7. Risks related to the reduction of fares ............................................................. page 36
8. Risks related to operating leverage.................................................................. page 36
9. Risks related to eventual difficulties in purchasing aircraft or the lack of
procurement of the financing necessary for their purchase ............................ page 37
10. Risks related to dependence on third parties .................................................. page 37
11. Risks related to the normative evolution .......................................................... page 37

C. RISKS RELATED TO THE GLOBAL OFFER AND THE ISSUERS FINANCIAL

INSTRUMENTS ................................................................................................ page 38
1. Recent operations regarding the financial instruments that are the object of
the offer............................................................................................................. page 38
2. Risks related to the expiration of the Lock up periods and the possible volatility
of the Eurofly shares .......................................................................................... page 38
3. Temporary undertakings not to transfer the Eurofly shares ............................. page 39
4. Application of new accounting principles ........................................................ page 39
5. Banca Profilos and Centrobancas conflict of interest .................................... page 40

SECTION III INFORMATION REGARDING THE ISSUER

1. Key Persons...................................................................................................... page 43
1.1 Persons responsible for the Prospectus ................................................ page 43

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 1.2 Declaration of responsibility ................................................................... page 43
2. Auditors ............................................................................................................ page 44
2.1 The Issuers auditors............................................................................... page 44
3. Selected financial information ......................................................................... page 45
3.1 Selected financial information relating to the three year period 2002-2004 page 45
3.2 Selected financial information relating to the two six month periods
ended 30 June 2004 and 2005............................................................... page 46
4. Risk factors....................................................................................................... page 47
5. Information regarding the issuer....................................................................... page 48
5.1 The Issuers history and evolution ......................................................... page 48
5.1.1 The Issuers legal and commercial names................................... page 48
5.1.2 The Issuers place of registration and registration number ......... page 48
5.1.3 The Issuers date of incorporation and duration ......................... page 48
5.1.4 The Issuers domicile and legal form, legislation on the basis of
which it operates, country where incorporated as well as address
and telephone number of the registered office.............................. page 48
5.1.5 Important facts regarding the evolution of the Issuers activity... page 48
5.2 Investments............................................................................................. page 51
5.2.1 Investments in intangible assets, tangible assets and long term
investments .................................................................................. page 51
5.2.2 Investments in the course of realization ..................................... page 51
5.2.3 Future investments....................................................................... page 52
6. Overview of activities........................................................................................ page 53
6.1 Principal activities ................................................................................... page 53
6.1.1 Euroflys activity............................................................................ page 53
6.1.1.1 Destinations .................................................................... page 55
6.1.1.2 The aircraft...................................................................... page 56
6.1.1.2.1 The fleet ........................................................ page 56
6.1.1.2.2 Purchase / sale of capacity in wet lease ...... page 59
6.1.1.3 Organizational structure.................................................. page 61
6.1.1.4 Euroflys operational department.................................... page 61
6.1.1.4.1 Planning......................................................... page 62
6.1.1.4.2 Flight Operations........................................... page 62
6.1.1.4.3 Operations Control Center ............................ page 62
6.1.1.4.4 Ground Operations........................................ page 62
6.1.1.4.5 Engineering & Maintenance .......................... page 63
6.1.1.4.6 Crew Training ................................................ page 64
6.1.1.5 Staff functions................................................................. page 64
6.1.1.6 The commercial department .......................................... page 64
6.1.1.6.1 Distribution to tour operators........................ page 64
6.1.1.6.2 Direct distribution .......................................... page 66
6.1.1.6.3 Organization of the commercial department... page 68
6.1.1.7 Seasonal phenomenon characterizing the principal sectors
of activity ......................................................................... page 68
6.1.1.8 Euroflys legal framework and authorizations................. page 70
6.1.1.8.1 Air traffic ........................................................ page 70
6.1.1.8.2 The authorization regime for the performance
of the activity ................................................. page 73
6.1.1.8.3 Ownership and management of the aircraft... page 76

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 6.1.2 New products and strategies....................................................... page 78
6.2 Principal markets .................................................................................... page 79
6.2.1 Division of sales volume according to the primary sectors of
activity.......................................................................................... page 79
6.2.2 Division of sales volume according to the primary geographic
markets ........................................................................................ page 80
6.3 Exceptional factors ..................................................................... page 80
6.4 The Issuers dependence on patents or licenses, industrial,
commercial or financial contracts, or new manufacturing
processes .................................................................................... page 80
6.5 Description of the markets in which Eurofly operates and its
competitive position.................................................................... page 81
6.5.1 Demand ........................................................................................ page 81
6.5.2 Tour operators .............................................................................. page 81
6.5.3 Competitive position ................................................................... page 82
6.5.3.1 The structure of the competition .................................... page 82
6.5.3.2 Market shares ................................................................. page 83
7. Organizational structure.................................................................................... page 85
7.1 If the Issuer is part of a group, briefly describe the group and the position
that it occupies ....................................................................................... page 85
7.2 List of the Issuers most significant subsidiaries .................................... page 85
8. Real property, installations and machinery ...................................................... page 86
8.1 Information relating to existing or forecast tangible assets, including
rented property, with an indication of eventual restrictions on them ..... page 86
8.2 Description of potential environmental problems that might influence
the Issuers use of tangible assets ........................................................ page 87
9. Summary of the management and financial situation...................................... page 88
9.1 Financial situation ................................................................................... page 88
9.1.1 Reclassified statement of assets and liabilities as of 31 December
2002, 2003 2004 and as of 30 June 2005 ..................................... page 88
9.2 The Companys operative management................................................. page 90
9.2.1 Significant events of the three year period 2002-2004 and the
first six months of 2005 .............................................................. page 90
9.2.2 The Companys management trend during the three year period
2002-2004 .................................................................................... page 90
9.2.2.1 Trend of revenue from sales and services...................... page 91
9.2.2.2 Trend of Other Revenue ................................................. page 93
9.2.2.3 Trend of operating costs................................................. page 93
9.2.2.4 Trend of EBITDAR........................................................... page 96
9.2.2.5 Operative charters .......................................................... page 96
9.2.2.6 Trend of EBITDA ............................................................. page 97
9.2.2.7 Depreciation, other appropriations and allocations to the
risk and costs funds ........................................................ page 97
9.2.2.8 Trend of EBIT .................................................................. page 97
9.2.2.9 Financial charges and proceeds .................................... page 97
9.2.2.10 Results of divestment activity......................................... page 97
9.2.2.11 Net extraordinary revenue .............................................. page 98
9.2.2.12 Fiscal year taxes ............................................................. page 98
9.2.3 Euroflys management trend during the first six months of 2004
and 2005 ...................................................................................... page 99
10. Financial Resources.......................................................................................... page 103

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 10.1 Net financial position during the three year period 2002-2004 and the
first six months of 2005 and cash flows................................................. page 103
10.2 Analysis of financial receivables included in long term investments, in
assets that are not fixed assets and available liquidity ......................... page 105
10.3 Analysis of liabilities to credit institutes, liabilities to other lenders and
to leasing companies ............................................................................. page 106
10.3.1 Other information regarding financial resources ......................... page 107
10.4 Limitations on the use of long term investments .................................. page 107
10.5 Financing programmed investments ...................................................... page 107
11. Research and development, patents and licenses .......................................... page 108
12. Information regarding forecast tendencies....................................................... page 110
13. Forecasts or estimates of profits...................................................................... page 112
14. Administrative, management and supervisory organs and top managers ...... page 113
14.1 Name, address and functions with regard to the Issuer of the following
persons, with an indication of the principal activities performed by them
unrelated to the Issuer, as long as they are significant with regard to the
Issuer....................................................................................................... page 113
14.1.1 Members of the administrative, managerial and supervisory organs page 113
14.1.2 General partners........................................................................... page 120
14.1.3 Founding shareholders, if it is a company incorporated for less
than five years .............................................................................. page 120
14.1.4 The Companys key managers..................................................... page 120
14.2 Conflicts of interest of the administrative, managerial and supervisory
organs and other managers.................................................................... page 121
15. Remuneration and benefits .............................................................................. page 124
15.1 In relation to the last fiscal year that has ended, the amount of the re-
muneration (including any potential or deferred remuneration) and ben-
efits in kind paid to the persons set forth in Chapter 14, Paragraph 14.1,
by the Issuer and its subsidiaries for services rendered in any capacity
to the Issuer and its subsidiaries ...................................................... page 124
15.2 Total of the amounts set aside or accumulated by the Issuer or its sub-
sidiaries for the payment of pensions, severance pay or similar benefits page 125
16. Practice of the board of directors .................................................................... page 126
16.1 Expiration date of the period of the current term of office, if such is the
case, and the period during which the person has held such office ....... page 126
16.2 Information regarding the employment contracts stipulated by members
of the administrative, management or supervisory organs with the Issuer
or with its subsidiaries that provide for severance pay ........................... page 126
16.3 Information regarding the Issuers internal board of auditors and emu-
neration committee ................................................................................. page 126
16.4 A statement that attests compliance by the Issuer with outstanding norms
regarding corporate governance in the country where it was incorporated page 126
17. Employees ........................................................................................................ page 129
17.1 Number of employees ............................................................................ page 129
17.2 Shareholdings and stock options with regard to each person indicated
in Chapter 14, Paragraph 14.1. ............................................................... page 130
17.3 Description of eventual shareholders agreements among employees
regarding the Issuers capital .............................................................. page 131
18. Principal shareholders ...................................................................................... page 132
18.1 Indication of the name of the persons, other than members of the ad-
ministrative, managerial or supervisory organs, if known to the Issuer,
who directly or indirectly hold a shareholding or voting rights regard-
ing the Issuer that are subject to notification in accordance with out-

4
 standing law in the Issuers country of origin, as well as an indication of
the amount of the shareholding held by each of the persons in question.
In the absence of such persons, issue a suitable negative statement ..... page 132
18.2 Indicate whether the Issuers principal shareholders have different voting
rights or provide a suitable negative statement ........................................ page 132
18.3 Declare whether, to the extent the Issuer is aware, the Issuer is directly
or indirectly held or controlled by another party, specify the name and
describe the nature of such control and the measures taken to avoid
abuses of the same ............................................................................... page 132
18.4 Description of eventual agreements, of which the Issuer is aware, whose
implementation could give origin at a later date to a variation of the
Issuers controlling position .............................................................. page 133
19. Operations with related parties ........................................................................ page 134
20. Financial information regarding the Issuers assets and liabilities, financial
situation and profits and losses .................................................................... page 135
20.1 Financial information regarding past fiscal years ................................... page 135
20.1.1 Balance sheets of the last three fiscal years ............................... page 135
20.1.1.1 Comparative statements of assets and liabilities .......... page 135
20.1.1.2 Comparative statements of profits and losses ............. page 136
20.1.1.3 Table of movements of net assets ................................. page 136
20.1.1.4 Financial statements....................................................... page 137
20.1.1.5 Accounting principles ..................................................... page 137
20.1.1.6 Comments regarding the comparative statements of
assets and liabilities and statements of profits and losses page 142
20.1.1.7 Comments regarding the financial statements .............. page 156
20.2 Pro-forma financial information ............................................................. page 158
20.3 Balance sheets........................................................................................ page 158
20.4 Audit of the annual financial information relating to past fiscal years.... page 158
20.4.1 The audit reports .......................................................................... page 158
20.4.2 Other financial information ........................................................... page 158
20.5 Date of the most recent financial information ....................................... page 158
20.6 Mid-year financial information and other financial information ............. page 159
20.6.1 Six month balance sheet as of 30 June 2005 ............................. page 159
20.6.1.1 Net worth as of 30 June 2005 ........................................ page 159
20.6.1.2 Statement of profits and losses relative to the first six
months of 2004 and 2005 ............................................. page 160
20.6.1.3 Table of movements of net worth................................... page 160
20.6.1.4 Financial statement as of 30 June 2005 ........................ page 161
20.6.1.5 Accounting principles ..................................................... page 161
20.6.1.6 Comments regarding variations of assets during the first
six months of 2005.......................................................... page 162
20.6.1.7 Comments regarding economic variations of the first six
months of 2004 and 2005 ............................................... page 168
20.6.1.8 Comments regarding the financial statement as of 30
June 2005 ....................................................................... page 172
20.7 Dividend policy ...................................................................................... page 172
20.8 Legal proceedings and arbitration .......................................................... page 172
20.9 Significant changes in the Issuers financial or commercial situation .... page 173
21. Supplemental information................................................................................. page 174
21.1 Share capital ........................................................................................... page 174
21.1.1 Capital issued............................................................................... page 174
21.1.2 Shares not representative of capital ........................................... page 174

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 21.1.3 The Issuers own shares............................................................... page 174
21.1.4 Amount of convertible bonds, exchangeable bonds or with war-
rants ............................................................................................. page 174
21.1.5 Indication of eventual rights and/or purchase obligations regarding
authorized but unissued capital, or an obligation regarding an
increase of capital .................................................................. page 174
21.1.6 Information regarding the capital of eventual members of the
group offered in option................................................................. page 174
21.1.7 Description of the evolution of the share capital ......................... page 174
21.2 Articles of incorporation and By-laws .................................................... page 175
21.2.1 Issuers object and objectives...................................................... page 175
21.2.2 Summary of the provisions of the Issuers By-laws regarding the
members of the administrative, management and supervisory
organs ....................................................................................... page 175
21.2.3 Description of the rights, privileges and restrictions relating to
each existing class of shares...................................................... page 177
21.2.4 Description of the manner of modification of shareholders rights,
with an indication of the cases in which the conditions are more
restrictive than the conditions provided by law ........................... page 178
21.2.5 Description of the conditions that regulate the manner of calling
annual ordinary shareholder meetings and extraordinary share-
holders meetings, including the conditions for admission .......... page 178
21.2.6 Brief description of eventual provisions of the Issuers By-laws
that could have the effect of delaying, postponing or impeding
a modification of the Issuers controlling position ....................... page 179
21.2.7 Indication of eventual provisions of the Issuers By-laws that re-
gulate the threshold of possession, which when exceeded re-
quires public notice with regard to the shareholding held .......... page 179
21.2.8 Description of the conditions provided by the articles of incor-
poration and by the By-laws for the modification of capital, in the
event that such conditions are more restrictive than the conditions
provided by law.................................................................................. page 180
22. Important contracts that are different than those executed during the course
of the normal performance of the activity ......................................................... page 181
23. Information originating from third parties, expert opinions and statements of
interests ............................................................................................................ page 182
24. Documents that are available to the public...................................................... page 183
25. Information regarding shareholdings................................................................ page 184

SECTION IV INFORMATION RELATING TO THE FINANCIAL INSTRUMENTS

1. Key Persons...................................................................................................... page 187
2. Risk factors....................................................................................................... page 188
3. Fundamental information.................................................................................. page 189
3.1 Statement issued by the Company relating to cash flows..................... page 189
3.2 Funds and indebtedness ........................................................................ page 189
3.3 Interests of individuals and legal entities participating in the issue/offer ... page 189
3.4 Reasons for the offer and use of revenue .............................................. page 190
4. Information regarding the financial instruments to be offered ......................... page 191
4.1 Description of the type and class of financial instruments offered to the
public and/or admitted to trading, including the ISIN code (International
Security Identification Number) .............................................................. page 191
4.2 Legislation in accordance with which the financial instruments were
created.................................................................................................... page 191

6
 4.3 Indicate whether the financial instruments are nominal or bearer and
whether they are in paper form or are dematerialized. In the latter case,
provide the name and address of the party entrusted with maintaining
the registers ............................................................................................ page 191
4.4 Currency in which the financial instruments were issued ...................... page 191
4.5 Description of the rights, including any limitations to them, related to
the financial instruments and the procedure to exercise such rights .... page 191
4.6 In the case of new issues, indication of the resolutions, authorizations
and approvals on the basis of which the financial instruments were
created and/or issued ............................................................................. page 192
4.7 In the case of new issues, the date forecast for the issue of the financial
instruments.................................................................................................. page 193
4.8 Description of eventual restrictions on the unrestricted transferability of
the financial instruments......................................................................... page 193
4.9 Indication of the existence of eventual mandatory norms regarding public
purchase offers and/or residual purchase and sale offers in relation to the
financial instruments ................................................................................ page 193
4.10 Indication of the public purchase offers made by third parties for the
Issuers shares during the last fiscal year and the fiscal year in course.
The price and exchange conditions of said offers and the relative result
must be indicated ................................................................................... page 194
4.11 Tax regime............................................................................................... page 194
5. Conditions of the offer...................................................................................... page 205
5.1 Conditions and amount of the offer, forecast calendar and manner of
adhering to the offer ............................................................................... page 205
5.1.1 Conditions to which the offer is subordinate ............................... page 205
5.1.2 Total amount of the offer .............................................................. page 205
5.1.3 Period of validity and manner of adhering to the Public Offer .... page 206
5.1.4 Revocation or suspension of the Global Offer............................. page 208
5.1.5 Quantities that can be purchased within the scope of the Public
Offer.............................................................................................. page 208
5.1.6 Possibility of revoking requests to adhere to the Public Offer .... page 209
5.1.7 Manner and terms for the payment and delivery of the Shares ... page 209
5.1.8 Publication of the results of the offer........................................... page 209
5.2 Distribution and allotment plan............................................................... page 209
5.2.1 Recipients of the offerj ................................................................. page 209
5.2.2 Adherence to the Global Offer by the principal shareholders and
members of the Board of Directors and Board of Internal Auditors page 210
5.2.3 Information to be communicated prior to the allotment.............. page 210
5.2.4 Purchase incentives within the scope of the Public Offer and
Private Placement ....................................................................... page 212
5.2.5 Multiple subscriptions .................................................................. page 212
5.2.6 Procedure for notice to subscribers of the allotted amount........ page 213
5.2.7 Over Allotment and Greenshoe.................................................... page 213
5.3 Setting the price...................................................................................... page 213
5.3.1 Method for determining the Offer Price ....................................... page 213
5.3.2 Procedure for the communication of the Offer Price................... page 214
5.3.3 Recent purchase operations performed by members of the Board
of Directors regarding the financial instruments that are the object
of the Global Offer......................................................................... page 214
5.4 Placement and subscription ................................................................... page 215
5.4.1 Coordinators of the Global Offer.................................................. page 215

7
 5.4.2 Organisms entrusted with the securities service ......................... page 215
5.4.3 Placement and guarantee. Commissions relative to the subscrip-
tion and placement operation ....................................................... page 215
5.4.4 Date of execution of the placement and guarantee contract for
the Public Offer ............................................................................ page 218
6. Listing and manner of trading .......................................................................... page 219
6.1 The Listing............................................................................................... page 219
6.2 Markets in which the Shares of the Company are already listed........... page 219
6.3 Brokers.................................................................................................... page 219
6.3.1 The Sponsors undertakings ........................................................ page 219
6.4 Stabilization............................................................................................. page 220
7. Selling shareholders ......................................................................................... page 221
7.1 Name and address of the individuals or legal entities who offer to sell
the financial instruments, nature of eventual positions, offices or other
significant relationships the sellers have had during the last three years
with the Issuer or with any predecessor or affiliated company.............. page 221
7.2 Number and class of the financial instruments offered by each of the
holders of the financial instruments who proceed with the sale............ page 221
7.3 Lock-up agreements............................................................................... page 221
8. Expenses related to the offer ........................................................................... page 223
9. Dilution.............................................................................................................. page 224
10. Supplemental information................................................................................. page 225
10.1 If the informative note regarding the financial instruments mentions con-
sultants tied to an issue, indicate in what capacity they have acted ........ page 225
10.2 Indication of other information set forth in the informative note regarding
the financial instruments subjected to audit or to a limited audit by the
Auditors................................................................................................... page 225
10.3 Information provided by third parties, expert opinions and statements
of interest ................................................................................................ page 225

8
DEFINITIONS

Increase of Share Capital The increase of the share capital in a divisible form against con-
sideration, for a maximum of 7,000,000 Euro, by means of the
issue, including in various tranche, of a maximum of 7,000,000
Shares having a nominal value of 1 Euro each, with the exclusion
of an option right in accordance with art. 2441(5) of the Civil Code,
approved by the Companys extraordinary shareholders meeting
on 12 September 2005 in support of the Global Offer.

Shares Euroflys 6,300,000 ordinary shares, having a nominal value of 1

Euro each, that are the object of the Global Offer.

Selling Shareholder Spinnaker Luxembourg.

Banca Profilo Banca Profilo S.p.A., having its registered office in Milan, Corso
Italia no. 49.

Borsa Italiana Borsa Italiana S.p.A., having its registered office in Milan, Piazza
Affari no. 6.

Centrobanca Centrobanca S.p.A., having its registered office in Milan, Corso

Europa no. 16.

Institutional Placement The Placement of a maximum of 4,100,000 Shares, correspond-

ing to approximately 65.1% of the number of Shares that are the
object of the Global Offer, for Professional Investors in Italy and
foreign Institutional Investors, with the exclusion of the United
States of America, Australia, Canada and Japan.

Private Placement The Private Placement of a maximum of 600,000 Shares, corre-

sponding to approximately 9.5% of the number of Shares that are
the object of the Global Offer, for the parties and in accordance
with the terms, procedures and conditions that are better speci-
fied in Section IV, Chapter 5, Paragraph 5.1.2. (C).

Investment Dealers The parties participating in the Public Offer Consortium listed in
Section IV, Chapter 5, Paragraph 5.4.3.

Company Eurofly.

CONSOB Commissione Nazionale per le Societ e la Borsa (National

Commission for Companies and the Stock Exchange), having its
registered office in Roma, Via G.B. Martini no. 3.

Institutional Placement The placement and guarantee consortium for the Institutional
Consortium Placement.

Public Offer Consortium The placement and guarantee consortium for the Public Offer.

Date of the Prospectus The date of publication of the Prospectus.

Payment Date 20 December 2005, i.e. the date on which the entire payment of
the allotted Shares will be made.

Employees Anyone who as of the date of 31 October 2005 had an employ-

ment relationship with the Company and who, as of the same

9
 date, was registered in the Companys payroll and registration
records, in accordance with outstanding Italian law.

Issuer Eurofly.

Greenshoe The option granted by the Company to the Joint Global

Coordinators, also in the name and on behalf of the Institutional
Placement Consortium, for the subscription at the Offer Price to a
maximum of 900,000 Shares, equal to approximately 14.3% of the
Shares that are part of the Global Offer, originating from the Increase
of Share Capital. Said option can be exercised, in all or in part, with-
in 30 days subsequent to the date trading is initiated on MTA.

Indicative Valorization The indicative interval of the increase of value of the Companys
Interval economic capital, which the Company, in agreement with the
Joint Global Coordinators, will determine and communicate in ac-
cordance with the procedures set forth in Section IV, Chapter 5,
Paragraph 5.3.1.

Institutional Investors Jointly, the Professional Investors and the foreign Institutional
Investors, with the exclusion of the United States of America,
Australia, Canada and Japan.

Professional Investors The qualified operators in accordance with art. 31(2), of CONSOB
Regulation 11522 (with the exception of the individuals set forth in
cited art. 31(2), the investment companies authorized to perform
asset management services on an individual basis of investment
portfolios on behalf of third parties, for parties authorized to re-
ceive and transmit orders in accordance with the conditions indi-
cated in CONSOB Regulation 11522 and for the fiduciary compa-
nies that perform portfolio management investment services,
including by means of a fiduciary, in accordance with art. 60(4) of
Legislative Decree no. 415 of 23 July 1996).

Joint Global Coordinators Banca Profilo and Centrobanca.

Minimum Lots The multiple quantities of the Minimum Lot that can be purchased
in the context of the Public Offer.

Increased Minimum Lots The multiple quantities of the Increased Minimum Lot that can be
purchased in the context of the Public Offer.

Minimum Lot The quantity of 450 Shares, which can be purchased in the con-
text of the Public Offer.

Increased Minimum Lot The quantity of 10 Minimum Lots, which can be purchased in the
context of the Public Offer.

Securities Centralized Monte Titoli S.p.A., having its registered office in Milan, Via
Administration Mantegna no. 6.

MTA Mercato Telematico Azionario, organized and managed by Borsa

Italiana S.p.A..

Global Offer The offer for the subscription to and sale of 6,300,000 Shares.

Public Offer The offer of a minimum of 1,600,000 Shares, corresponding to ap-

proximately 25.4% of the Shares offered in the context of the

10
 Global Offer, to an indistinct public in Italy, with the exclusion of
Institutional Investors.

Over Allotment The option granted by the Selling Shareholder to the Joint Global
Coordinators, also in the name and on behalf of the members of
the Institutional Placement Consortium, for the loan of a maxi-
mum of 900,000 Shares of the Company, equal to approximately
14.3% of the Shares offered in the context of the Global Offer, for
the purposes of an eventual over allotment in the context of the
Institutional Placement.

Offer Period The period of time included between [9:00 am] on 5 December
2005 and [4:00 pm] on 14 December 2005.

Offer Price The final unit price of the Shares, which will be determined and
notified in the manner indicated in Section IV, Chapter 5,
Paragraphs 5.3.1. and 5.3.2.

Maximum Price The Maximum Price for the Placement of the Shares, which will be
determined and notified to the public in the manner indicated in
Section IV, Chapter 5, Paragraph 5.3.1.

Proponents Eurofly and the Selling Shareholder.

Prospectus The present Prospectus regarding the offer and listing.

CONSOB Regulation The regulation of brokers approved by CONSOB by means of

11522 Regulation no. 11522 on 1 July 1998 and subsequent modifica-
tions and supplements.

CONSOB Regulation The regulation of issuers approved by CONSOB by means of

11971 Regulation no. 11971 on 14 May 1999 and subsequent modifica-
tions and supplements.

Stock Exchange The regulations of the markets organized and managed by the
Regulations Borsa Italiana, approved by the shareholders meeting of Borsa
Italiana on 29 April 2005 and approved by CONSOB by means
of Regulation no. 15101 on 5 July 2005.

Placement Manager Centrobanca.

Company Eurofly.

Spinnaker Holding Spinnaker Holding S.A. (previously Effe International S.A.), having
its registered office in Avenue Monterey 23, L-2086, Luxembourg.

Spinnaker Luxembourg Spinnaker Luxembourg S.A. (previously Effe Luxembourg S.A.), hav-
ing its registered office in Avenue Monterey 23, L-2086, Luxembourg.
Sponsor Centrobanca.

Consolidated Act Legislative Decree no. 58 of 24 February 1998 (Consolidated Act

of the provisions regarding financial brokerage) and subsequent
modifications and supplements.

TFR Severance pay.

Net Available TFR Severance pay, net of taxes, that the Company had available as
of the date of 31 October 2005, which had not yet been paid as
of the Date of the Prospectus.

11
GLOSSARY

Airbus Airbus S.A.S., having its registered office in Blagnac Cedex,

France.

Alitalia Alitalia Linee Aeree Italiane S.p.A., having its registered office in
Rome, V.le Alessandro Marchetti no. 111.

COA Certificato di Operatore Aereo (Aircraft Operator Certificate).

Code share or Code sharing Agreement between two carriers on the basis of which a specific
flight is performed using the aircraft of one of the two contracting
parties (the operating carrier), which is also marketed by the
other carrier (the so-called marketing carrier), and which is iden-
tified by the IATA code of both companies.

Dry lease Rental of just the aircraft.

EASA European Aviation Safety Agency.

EBIT Earnings Before Interest and Taxes.

EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization.

EBITDAR Earnings Before Interest, Taxes, Depreciation, Amortization and

aircraft Rentals (i.e. EBIT gross of the costs for the Operative
rental of the aircraft excluding wet leases and depreciation and
allocations to risk and expense funds).

ECAC European Civil Aviation Conference.

ENAC National Entity for Civil Aviation.

GATX GATX International Ltd.

GDS Global Distribution Systems, i.e. the informational systems that

permit the visualization, reservation and sale by travel agencies of
the flights made by the airline companies.

GECAS General Electric Capital Aviation Services.

GSA General Sales Agent, i.e. the general agent entrusted with the dis-
tribution and sale of the products in a specific geographical area.

Handling All of the activities performed by a Company operating in an air-

port involving ground assistance for passengers, luggage, goods
and the aircraft.

Hub Connecting airport, from which the airline companies operate

mid-long range flights.

IATA International Air Transport Association.

12
ILFC International Finance Leasing Corporation.

JAA Joint Aviation Authorities, the supranational organism that over-

sees rulemaking and technical/operative regulations relating to
the manufacture, use and maintenance of aircraft.

JAR Joint Aviation Requirements, i.e. the rules and regulations of a

technical-operative nature issued by JAA.

Lessor Within Financial Leasing and Operative Rental, the entity which
makes available an aircraft to the user for a specified period of
time and for a consideration to be paid by periodical instalments.

Finance Leasing Manner of purchasing an aircraft financed by third parties to

whom rent is paid for a specific period of time. At the end of the
lease period there is normally a right of redemption with respect
to the residual value of the specific good.

Operative rental Lease of an aircraft for a specific period of time upon the payment
of rent. At the end of the period the aircraft returns to the owners
possession.

Long range Aircraft flights having a duration that is indicatively in excess of

five hours per route.

Mid range Aircraft flights having a duration that is indicatively less than five
hours per route.

Point to point Flights structured to serve a specific direct connection that are
not aimed at permitting continuation in connection with other co-
inciding flights.

RAI Registro Aeronautico Italiano.

Slot Time band allotted to each carrier for the take-off/landing of an in-
dividual aircraft in a specific airport.

Wet lease Lease whose object is an aircraft together with the pilots and
cabin crew, maintenance services and insurance coverage.

13
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14
 SECTION I
SUMMARY NOTE

15
 [This page intentionally left blank]

16
A) WARNING

THE OPERATION DESCRIBED IN THIS PROSPECTUS PRESENTS ELEMENTS OF RISK TYPICAL OF AN

EQUITY INVESTMENT.

IN ORDER TO PROPERLY APPRECIATE THE INVESTMENT, INVESTORS ARE REQUESTED TO EVALUATE

THE INFORMATION CONTAINED IN THIS SUMMARY NOTE TOGETHER WITH THE RISK FACTORS (SEE SECTION II) AND
THE ADDITIONAL INFORMATION SET FORTH IN THE PROSPECTUS.

SPECIFICALLY:
(I) THE SUMMARY NOTE SHOULD BE READ AS AN INTRODUCTION TO THE PROSPECTUS;
(II) ANY DECISION TO INVEST IN THE SHARES MUST BE BASED THE INVESTORS REVIEW OF THE COM-
PLETE PROSPECTUS.

THE TERMS INDICATED WITH CAPITAL LETTERS HAVE THE MEANING ATTRIBUTED IN THE ABOVE
PARAGRAPH DEFINITIONS.

B) RISK FACTORS
Set forth below are the headings of the risk factors relating to the Company, the mar-
ket in which it operates, the Global Offer and the Companys financial instruments, set forth in
detail in Section II of the Prospectus.

RISKS RELATING TO THE COMPANY

INDICATION OF THE COMPANYS ECONOMIC TREND DURING THE LAST THREE YEAR PERIOD AND THE
FORSEEABLE RESULTS OF THE CURRENT AND NEXT FISCAL YEARS.
INFORMATION REGARDING THE COMPANYS NET FINANCIAL POSITION AND NET WORKING CAPITAL IN
THE FISCAL YEAR IN COURSE.
RISKS RELATED TO THE IMPORTANCE OF KEY FIGURES AND SPECIALIZED PERSONNEL.
RISKS RELATED TO DEPENDENCE ON A LIMITED NUMBER OF CLIENTS.
RISKS RELATED TO RELATIONSHIPS WITH PERSONNEL.
INITIATION OF A NEW ACTIVITY WITH ALL BUSINESS AIRCRAFT.
DISTRIBUTION OF DIVIDENDS.
RISKS RELATED TO THE STATEMENTS OF COMPETITIVE POSITION AND FORECASTS.

RISKS RELATED TO THE MARKET IN WHICH THE COMPANY OPERATES

RISKS RELATED TO THE ECONOMIC TREND.

RISKS RELATED TO THE TREND OF THE COST OF JET FUEL, EXCHANGE AND INTEREST RATES.
RISKS RELATED TO TERRORIST ATTACKS, WARS OR REVOLTS.
RISKS RELATED TO NATURAL DISASTERS OR EPIDEMICS.
RISKS RELATED TO THE SEASONAL NATURE OF THE REQUEST FOR AIR TRANSPORTATION.
RISKS RELATED TO THE COMPETITIVE FRAMEWORK.
RISKS RELATED TO THE REDUCTION OF FARES.
RISKS RELATED TO OPERATIVE LEVERAGE.
RISKSRELATED TO EVENTUAL DIFFICULTIES IN PURCHASING AIRCRAFT OR THE LACK OF PROCURE-
MENT OF THE FINANCING NECESSARY FOR THEIR PURCHASE.
RISKS RELATED TO DEPENDENCE ON THIRD PARTIES.
RISKS RELATED TO THE NORMATIVE EVOLUTION.

17
RISKS RELATIVE TO THE GLOBAL OFFER AND THE COMPANYS FINANCIAL INSTRUMENTS

RECENT OPERATIONS REGARDING THE FINANCIAL INSTRUMENTS THAT ARE THE OBJECT OF THE OFFER.
RISKS RELATED TO THE EXPIRATION OF THE LOCK UP PERIODS AND THE POSSIBLE VOLATILITY OF
THE EUROFLY SHARES.
TEMPORARY UNDERTAKINGS NOT TO TRANSFER THE EUROFLY SHARES.
APPLICATION OF NEW ACCOUNTING PRINCIPLES.
BANCA PROFILOS AND CENTROBANCAS CONFLICT OF INTEREST.

C) ISSUER, ACTIVITIES AND PRODUCTS

ISSUER

The Company was incorporated on 26 May 1989, has its registered office in via
Ettore Bugatti 15 in Milan, and has a share capital of 7,065,302 Euro represented by 7,065,302
ordinary shares having a nominal value of 1 Euro each.

The following table indicates Euroflys shareholders as of the Date of the Prospectus
and its evolution subsequent to the Global Offer.
Shareholder No. of % of No. of No. of No. of % of No. of No. of % of
Shares Share Shares Shares Shares share Shares Shares Share
prior to the capital offered for offered post capital object of post Capital
Global offer subscrip- for sale Global the Global
tion Offer Greenshoe offer and
option Greenshoe

Spinnaker Luxembourg S.A. 6,298,610 89.1% 400,000 5,898,610 45.5% 5,898,610 42.5%
Singins Consultadoria
Economica e
Marketing Lda (*) 666,692 9.4% 666,692 5.1% 666,692 4.8%
Other shareholders 100,000 1.4% 100,000 0.8% 100,000 0.7%
Eurofly 5,900,000 900,000
Market 6,300,000 48.6% 7,200,000 51.9%
Total 7,065,302 100.0% 5,900,000 400,000 12,965,302 100.0% 900,000 13,865,302 100.0%

(*) Company entirely controlled by the Managing Director Augusto Angioletti.

The following table sets forth information related to the members of the Companys
Board of Directors and Board of Internal Auditors and its most important directors (aside from
the Managing Director).
Office Name and Last Name Place and date of birth

Board of Directors
President Giuseppe Bonomi (*) Varese 08.06.1958
Vice President Ruggeromassimo Jannuzzelli Milan 08.10.1959
Managing Director Augusto Angioletti Rome 01.09.1961
Director Laura Sanvito Lecco 26.10.1970
Director Eugenio Lapenna (*) Rome 13.09.1946
Board of Internal
Acting auditor and President Guido Mongelli Bologna 09.02.1948
Acting auditor Maurizio Dattilo Milan 19.03.1963
Acting auditor Michele Saracino Taranto 15.09.1965
Alternate auditor Dario Fangaresi Milan 16.11.1955
Alternate auditor Giovanni Intrigliolo Siracusa 18.06.1965
Other Managers
Commercial Division Armando Brunini Naples 16.09.1962
Operative Division Andrea Zanetto Turin 12.01.1962

(*) Independent Directors.

18
 As of 30 June 2005, Eurofly employed a total of 626 Employees, of whom 434 were
flight personnel and 192 ground personnel (among whom 8 managers).

Euroflys balance sheets for the past three fiscal years and the six month accounting
situations as of 30 June 2004 and 2005 were audited by Deloitte & Touche S.p.A., who is the
Companys Auditor, and who was also entrusted with the accounting audit.

The audit report for the fiscal years ended 31 December 2003 and 2004 contain pos-
itive judgments. With reference to the audit report of the fiscal year ended 31 December 2002,
the audit report notes for informational purposes and thus without any qualification of the au-
ditors judgment that the Company has sustained significant losses in the fiscal year, as in prior
fiscal years, which in the past were systematically covered by the Shareholder. The Management
Report illustrates the plans and actions the Directors count on in order to achieve a substantial
reduction in 2003 of the losses sustained in 2002.. With reference instead to the six month re-
port as of 30 June 2004, a limited audit was performed in accordance with CONSOB Resolution
no. 10867 of 31 July 1997. The complete audit report regarding the six month report as of 30
June 2005 contains a positive judgment.

ACTIVITIES AND PRODUCTS

Eurofly has been operating since 1989 in the aeronautics sector, prevalently as a
charter carrier, i.e. as a flight operator to tourist locations primarily on behalf of tour operators.

Eurofly was entirely controlled by Alitalia until 2003 and, consequently, many of the op-
erative functions were performed on its behalf by its parent company. On 15 September 2003
Spinnaker Luxembourg (previously Effe Luxembour S.A.), for a total consideration (subsequent to
price adjustments agreed upon in the purchase contract) of 10.4 million Euro (corresponding to a
price per Share of 1.94 Euro), purchased an 80% shareholding of the Companys capital, which in the
same year again had a positive profitability and began to expand itself, concentrating in particular on:
the continuation of activities aimed at modernizing and expanding the fleet, acquired
prevalently by means of Operative rentals, and consisting entirely of different mod-
els of Airbus aircraft;
the emancipation from Alitalia of an entire series of services that previously had been
managed by the parent company (for example maintenance, training, treasury services);
the development of Long Range activities (indicatively in excess of 5 flight hours),
that the Company deems are less subject to competitive pressure and present less
of a seasonal nature with respect to Mid Range activities.

On 9 July 2004, subsequent to the exercise of the option right granted it by Alitalia,
Spinnaker Luxembourg (previously Effe Luxembourg S.A.) purchased the remaining part of
Euroflys share capital, becoming the sole shareholder, in exchange for consideration of approx-
imately 2.6 million Euro (corresponding to a price per Share of 1.94 Euro).

Currently, Eurofly operates with a fleet of 8 Airbus A320 for Mid Range flights, 3
Airbus A330 for Long Range flights, all in Operative rental, and it has purchased an Airbus A319
CJ/LR in Finance Leasing, which has very specific characteristics, in that it is equipped for Long
Range flights and is outfitted to transport only 48 passengers, all in business class. Eurofly in-
tends to operate with this aircraft, starting from next year, an All Business flight Milan New York.

Since the flight activity to tourist locations has a strong seasonal nature, Eurofly, in
line with the best practice in the sector, also buys or sells flight capacity, in order to adjust the
offer to market demand, by means of aircraft rentals (wet lease) to other airline companies.

Eurofly deems that its principal competitors in the sector of charter flights are the
Livingston group (Livingston and Lauda Air), Blue Panorama, Neos, Air Europe. Among these
Eurofly is the leader with a market share of 28.9%.

19
 During the last fiscal year, Eurofly transported more than 1.4 million passengers, and
its revenue derived 55% from Mid Range activities, 40% from Long Range activities, and for the
rest from scheduled activity in code share (flights in collaboration with other carriers, in particu-
lar operated utilizing three pairs of slots allotted to Eurofly at the Milan Linate airport), as can be
seen from the following chart:

INCOME MLN/Euro 2002 % 2003 % 2004 % 06.2005 %

Mid Range 75,8 55% 83,7 48% 135,1 55% 67,6 53%
Long Range 43,8 32% 74,4 43% 97,1 40% 60,3 47%
Code Share 18,7 14% 16,2 9% 13,2 5% 0,2 0%
Total Income 138,3 100% 174,4 100% 245,3 100% 128,1 100%

Among the most important destinations are: in Mid Range Egypt, Greece, Baleari and
Canary Islands; in the Long range Maldive, Mexico, Santo Domingo, Kenya and the United States.
Among the tour operators who are Euroflys clients are many of the major Italian op-
erators, among whom Teorema Tour, Alpitour, Costa Crociere, and Viaggi del Ventaglio. The first
five clients represented during the last fiscal year 46.2% of income; and the first client, Teorema
Tour, 19.8%. The first five clients represented 43.0% of Euroflys revenue during the first nine
months of 2005 and the first client, Teorema Tour, represented 21.4%.
The operations with the tour operators have some specific characteristics, among
which it is opportune to note:
aircraft capacity is principally sold in the manner empty in exchange for full, entirely
or split (various tour operators present on the same flight), so that the tour opera-
tors bear the risk of not being able to fill the reserved seats;
the price agreed with the tour operators is subject to adjustments on the basis of the
cost of jet fuel and the Euro/USD exchange rate at the time of the flight. Such agree-
ments provide Eurofly with a kind of natural coverage of the risks of fluctuations of
said factors, even though they are imperfect for application (exclusions, calculation
mechanisms) and commercial reasons;
in general the tour operators pay for the reserved seats prior to the flight, and in any
event prior to when the Company pays its debts to suppliers, permitting Eurofly to
take advance of negative working capital or very limited working capital, if positive
(see Section III, Chapter 9.1.1. and Chapter 20, Paragraph 20.9).
Over the course of the past years, the tourist demand gradually began to be orient-
ed towards a do it yourself mentality, i.e. the organization of a vacation without purchasing a
package prepared by the tour operator. In view of such evolution, in 2004 Eurofly decided to
modify its distribution strategy, passing from mono-channel sales (only to tour operators) to
multi-channel sales. Starting from 2004 in fact, Eurofly began to utilize new direct and indirect
sales channels (travel agencies, call centers, Internet sites and international distribution sys-
tems), that allow it to reach the final user in a more capillary manner.
The Companys future strategy provides, among others, that it:
continue the effort aimed at selling part of the available seats on flights directly to
final consumers by means of various commercial channels, increasing scheduled air-
line flights present in the network;
continue to manage as best as possible the seasonal nature. In Mid Range this will
occur primarily by means of the purchase of wet lease capacity at peak times,
whereas for Long Range it is aiming at stimulating demand during low periods by
means of new initiatives (for example, this year Eurofly inaugurated direct flights be-
tween Bologna, Palermo, Naples and New York during the summer period);
expand Long Range activities by means of the inclusion of new aircraft in the fleet;
develop other income (for example, Cargo transportation and revenue from duty free
sales, the sale of meals and beverages, income from royalties deriving from the sale
of services available on the Internet site).

20
RESEARCH AND DEVELOPMENT
Given the nature of its business, the Company did not perform any significant re-
search and development activity.

OPERATIONS PERFORMED WITH RELATED PARTIES

During the course of the three year period 2002-2004 and the first six months of
2005, the Company, also subsequent to the change of its shareholders that took place in 2003,
progressively acquired independence and autonomy from the Alitalia group (Euroflys majority
shareholder until 15 September 2003). Specifically, the relationships with the Alitalia group dur-
ing the above period can be summarized as follows:
Amounts in Euro/000 2002 % of total 2003 % of total 2004 % of total 30.06.2005 % of total
of relative of relative of relative of relative
item item item item

Total revenue and proceeds 22,091 14.4% 17,435 9.9% 14,511 5.9% 544 0.4%
Total costs and expenses 55,251 34.2% 32,339 18.8% 26,440 10.9% 4,680 3.5%
Commercial receivables
and treasury accounts 17,307 53.6% 2,031 8.5% 16,846 33.7% 832 2.1%
Commercial liabilities 19,544 49.0% 16,343 33.3% 19,908 31.0% 1,793 3.6%

Relationships with the Alitalia group referred primarily to the activities of Alitalias pro-
vision of maintenance services, Operative rentals, the rental of Euroflys local offices, and some
data processing services, whereas the Company provided Alitalia primarily with ticketing ser-
vices for the lines managed in code sharing. Said relationships were regulated by contracts stip-
ulated for prices and conditions that were in line with the market.
The treasury account held with Alitalia on the basis of a contract dated 1 April 2000
specified the manner of coordinating Alitalias treasury with that of the Company for the efficient
functioning of the account, not only with reference to reciprocal transactions, but also the regu-
lation of Euroflys relationships with suppliers who operate in the layovers in which the Company
and Alitalia have operative structures. The treasury account was extinguished on 15 September
2003 by means of a credit to the Company of the amount of approximately 2.5 million Euro (see
Section III, Chapter 10, Paragraph 10.2).
On 21 November 2005, Spinnaker Luxembourg gave the Company a non-interest
bearing loan in the amount of 4.5 million Lire for the duration of 24 months, repayable upon ex-
piration. The relative available funds will off-set the financial needs manifested during the month
of October 2005, prevalently related to down payments (amounting to 3.744 thousand Euro) re-
lating to contracts whose object is the entry in the fleet of new A330 and A350 aircraft.
With the exception of what is set forth above, there were no operations with related
parties that, due to their nature and scope, were significant for the Issuer during the period to
which the information contained in the Prospectus refers.

PARTIES PARTICIPATING IN THE OPERATION

The parties participating in the operation are indicated below:
Party Role

Eurofly S.p.A. Issuer

Spinnaker Luxembourg S.A. Selling Shareholder
Centrobanca S.p.A. Joint Global Coordinator, Sponsor and Placement Manager for
the Public Offer
Banca Profilo S.p.A. Joint Global Coordinator and consultant
Banca Generali S.p.A. Joint Lead Manager of the Institutional Placement
Collins Stewart Ltd. Joint Lead Manager of the Institutional Placement
Deloitte & Touche S.p.A. Auditor

21
SIGNIFICANT ACCOUNTING INFORMATION

Euroflys most significant financial data, with reference to the annual financial statements
of the past three fiscal years and the mid-year situation as of 30 June of this year, is set forth below.

Unless otherwise specified, Amounts in Euro/000 2002 2003 2004 I six months 2005

ISignificant information
Total flight hours 20,047 25,783 38,202 20,266
Passengers transported 813,793 978,825 1,474,341 625,938
Available fleet rented and in wet lease
(machine months) 84 100 133 58
Productivity Long Range fleet (in flight hours) 4,276 4,932 5,462 455
Productivity Mid Range fleet (in flight hours) 2,365 2,476 2,855 253
Summary Statement of profits and losses
Revenue from sales and services, net of code
share income (1) 119,592 158,149 232,113 127,859
Total revenue net of code share income (1) 122,575 161,111 234,391 128,413
EBITDAR (2) 12,575 27,406 24,261 9,177
Percentage impact on total revenue 10% 17% 10% 7%
EBITDA (3) (12,888) 7,777 8,100 (3,040)
Percentage impact on total revenue 11% 5% 3% 2%
EBIT (4) (14,996) 3,577 4,263 (5,141)
Percentage impact on total revenue 12% 2% 2% 4%
Fiscal year/period results (6,014) 2,722 6,835 (3,251)
Summary Statement of assets and liabilities
Total non current assets 10,606 20,098 60,818 52,816
Total current assets 43,999 61,738 62,191 61,626
Non current assets to be divested 0 0 4,302 0
Total assets 54,606 81,836 127,311 114,442
Net worth 1,667 9,389 16,224 7,973
Total non current liabilities 2,360 2,579 7,697 7,597
Total current liabilities 50,579 69,867 103,390 98,872
Total net worth and liabilities 54,606 81,836 127,311 114,442
Other financial data
Investments 9,087 11,726 48,614 25,056
Net financial position (5) 17,273 26,070 4,891 (7,982)
Net available liquidity (short term net financial
indebtedness) 17,273 26,070 (801) (21,926)
Net Worth 1,667 9,389 16,224 7,973

(1) Revenue is indicated net of revenue from code share in view of coherency with the reclassified data described in Chapter 9 (like the other
data inserted in the table). Differently from Chapter 20, in fact, in the reclassified statement of profits and losses described in Chapter 9,
revenue from code share is inserted among Other Revenue, net of the code share costs (thus the code share margin is included among
Other Revenue), whereas in Chapter 20, in compliance with the provisions of the Civil Code, which do not permit offsetting, the revenue
from code share is included among the revenue from sales and services. In view of completeness, the following table indicates the recon-
ciliation between the reclassified data and the balance sheet data:

Amounts in Euro/000 2002 2003 2004 I six months 2005

Revenue from sales and services, net of

revenue from code share 119,592 158,149 232,113 127,859
Revenue from code share 18,678 16,221 13,227 210

Total revenue from sales and services 138,270 174,370 245,340 128,069

(2) EBITDAR: Earnings Before Interest, Taxes, Depreciation, Amortization and aircraft Rentals (i.e. EBIT gross of Operative rental costs of the
aircraft - excluding wet leases - and depreciation and allocations to the risk and expense funds).
(3) EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization.
(4) EBIT: Earnings Before Interest and Taxes.
(5) With respect to net available liquidity (short term net financial indebtedness), the net financial position includes receivables for long term in-
vestments and the non current share of mortgage loans.

22
 All of Euroflys balance sheets and accounting situations were prepared in accor-
dance with Italian accounting principles.
The Company significantly increased the number of flight hours performed during
2002-2004 subsequent to the increase of the fleet as well as due to the fleets increased pro-
ductivity. Consequently, revenue increased by 94% during the same period.
In 2003 and 2004, the return to a positive operative result (EBIT) derived from vari-
ous factors: (i) the strong growth of invoiced sales and aircraft productivity; (ii) the lack of wet
leases due to extraordinary events in 2002; (iii) the reduction both in absolute terms as well as
percentage terms of Operative rentals. It should also be noted that in 2003, the EBIT benefited
from a margin of scheduled activity in code share amounting to 2,262 thousand Euro, a margin
that was reduced in 2004 to 240 thousand Euro due to the re-negotiation of the code share con-
tract at the time the Alitalia group left the Company.
The EBIT was negative as of 30 June 2005. In such regard, it has already been noted
that Euroflys business is strongly seasonal, with a peak of activity during the third quarter of the
year (more flight hours and, on average, higher income per flight hour). Further, the first months
of this year suffered from the impact of the tragedy of the tsunami, which influenced the Long
Range activity to the Maldive, one of the most important destinations, with a negative impact on
the operative result of 2.4 million Euro.
Subsequent to the date of 30 June, the Companys activity was particularly intense,
and as of 30 September 2005 there had been a total of 34,142 flight hours. The decreased ac-
tivity to Sharm El Sheikh during the month of August, subsequent to the terrorist attack of 23
July, was offset by flights to other destinations and the sale of capacity in wet lease.
The total amount of revenue from sales and services of the nine month period as of
30 September 2005 was 224,656 thousand Euro, which grew by 15.5% with respect to the same
period in 2004; the total revenue was 228,338 thousand Euro, which grew by 16.2% with respect
to the same period of 2004; the EBITDAR was 26,287 thousand Euro (11.5% of total revenue);
the EBITDA and the EBIT were respectively 4,999 thousand Euro and 2,095 thousand Euro,
whereas the net result was positive for 2,963 thousand Euro.
The Company estimates that the operative results as of 30 September 2005 suffered
an extraordinary negative impact due to the tsunami in the amount of 2.4 million Euro, and a neg-
ative impact due to the terrorist attack at Sharm El Sheikh amounting to 2.5 million Euro.
Eurofly deems overall that it can end the fiscal year with invoiced sales that are sig-
nificantly greater than those of last year, primarily due to the development of Long Range activ-
ity. EBITDA will be positive, even if with a margin with respect to revenue that is less than that
of the last year; the operative result (EBIT) will instead be negative, primarily due to the cited
events (tsunami, Sharm El Sheikh).
The net financial position as of 30 September 2005 was 124 million Euro (corre-
sponding to a ratio between net financial position and net worth of 0.87), worse with respect to
the net financial position as of 30 June 2005, which amounted to 8.0 million Euro (correspond-
ing to a ratio between net financial position and net worth of 1.00). In fact, even though the sea-
sonal effect of the third quarter, in ordinary circumstances, produces liquidity, the worsened sit-
uation as of 30 September 2005 was due to the impact of the attack at Sharm El Sheikh and the
hurricanes in the Caribbean, which led to a general extension of the payment time from tour op-
erators, to which was added a slight and generalized reduction of the time of payment to sup-
pliers. The consequent worsening of the net working capital was, further, aggravated by the pay-
ment time for receivables deriving from the contract with the Ministry of Defense, which were
deferred with respect to normal existing contractual terms with the tour operators. With refer-
ence to receivables regarding the Ministry of Defense, they were progressively assigned to the
factoring company Unicredit Factoring S.p.A. which, by means of a note dated 18 November
2005, accepted the assignment on a without recourse basis, for an amount of approximately
11,600 thousand Euro.
The Company estimates that the net financial position as of 31 October 2005 has fur-
ther increased by approximately 4 million Euro, in large part due to the down payments made

23
(amounting to 3,744 thousand Euro) relating to contracts having as their object the entry in the
fleet of new A330 and A350 aircraft.
With regard to the trend through the end of the fiscal year, even though, due to the
seasons, management normally absorbs liquidity during the period from November through the
end of December, Eurofly deems that it can end the fiscal year with a net financial position that is
significantly improved with respect to 30 September. This is due to the effect (i) of the above in-
dicated factoring without recourse, (ii) Spinnaker Luxembourgs issuance on 21 November 2005
of a non-interest bearing 24 month loan in the amount of 4.500 thousand Euro, and (iii) the grad-
ual normalization of payments by client tour operators.

D) CHARACTERISTICS OF THE OFFER AND ITS OBJECTIVES

The Proponents of the Global Offer are Eurofly and its Shareholder Spinnaker
Luxembourg, who intend to offer Eurofly Shares in order to diffuse the same so that they can be
admitted to trading on the MTA market.
Borsa Italiana has already provided on [] for the Shares to be listed, subordinating
the initiation of trading to the positive outcome of the Global Offer.
Banca Profilo and Centrobanca are the Joint Global Coordinators of the Global Offer;
the latter also acts as Sponsor and Placement Manager.

The Global Offer regards 6,300,000 Shares, and it is sub-divided as follows:

a Public Offer aimed at an indistinct public in Italy for a minimum of 1,600,000
Shares, equal to approximately 25.4% of the total Global Offer, of which a share
equal to a maximum of 300,000 Shares is reserved to the Companys Employees,
who will benefit from a discount of 15% with respect to the Offer Price;
an Institutional Placement of a maximum of 4,100,000 Shares, exclusively for
Institutional Investors;
a Private Placement of a maximum of 600,000 Shares, for parties chosen upon the
discretion of the Company, in agreement with the Joint Global Coordinators, who will
benefit from a discount of 10% with regard to the Offer Price in return for a tempo-
rary undertaking not to transfer the Shares for a period of 12 months.
The Shares will be offered by the following parties:
Eurofly: 5,900,000 newly issued Shares, resulting from the Increase of Share Capital;
Spinnaker Luxembourg: 400,000 Shares.
The Global Offer represents approximately 48.6% of Euroflys share capital in the
event that the Shares are entirely placed. Said percentage could increase to 51.9% in the case
of the complete exercise of the Greenshoe option granted by Eurofly to the Joint Global
Coordinators to subscribe, at the Offer Price, to a further maximum of 900,000 Shares, within 30
days subsequent to the initiation of trading. Said option can be exercised in the case of a total
request for Shares that exceeds the total of the Global Offer.
The Proponents, together with the Joint Global Coordinators, reserve the right not to
entirely place the Shares that are the object of the Global Offer. Such circumstance might result
in a reduction of the number of Shares placed in the context of the Global Offer. In the case of
the lack of complete placement, they will proceed by first reducing the number of Shares offered
for sale by Spinnaker Luxembourg. Notice of this will be given in the supplemental notice relat-
ing to the results of the Global Offer.
In the context of the agreements that will be stipulated for the Global Offer, the Company
will undertake with regard to the Joint Global Coordinators, including in the name and on behalf of
the members of the Public Offer Consortium and the Institutional Placement Consortium, not to pro-
mote initiatives having as their object increases of capital or the issue of bonds that are convertible
(in either purchase orders and/or subscription) to Shares of the Company, nor in any other manner,

24
without the prior written consent of the Joint Global Coordinators, which consent cannot be unrea-
sonably withheld, for a period of 365 days subsequent to the date (inclusive) of the initiation of trad-
ing of the Shares on the MTA. In the context of the above mentioned agreements, the Selling
Shareholder undertakes with regard to the Joint Global Coordinators, also in the name and on be-
half of the members of the Public Offer Consortium and the Institutional Placement Consortium, not
to take, and if taken not to vote in favor of, initiatives whose object is the increase of capital or the
issue of bonds that are convertible (in either purchase orders and/or subscription) to Shares of the
Company, nor in any other manner, without the prior written consent of the Joint Global
Coordinators, which consent cannot be unreasonably withheld, for a period of 365 days subsequent
to the date (inclusive) of the initiation of trading of the Shares on the MTA.
The Companys undertaking will not be applied to the issue of Shares to be used for
the exercise of the Greenshoe option.
Spinnaker Luxembourg and Singins Consultadoria Economica e Marketing Lda, a
company entirely controlled by Mr. Augusto Angioletti, will undertake with regard to the Joint
Global Coordinators, also in the name and on behalf of the members of the Public Offer
Consortium and the Institutional Placement Consortium, not to perform, unless with the prior
written consent of the Joint Global Coordinators, which consent cannot be unreasonably with-
held, sales or other disposals having as their object or effect the attribution or transfer to third
parties of Euroflys Shares or financial instruments that attribute the right to purchase, subscribe
to, exchange with or be converted into Eurofly Shares, for a period of 365 days subsequent to
the date (inclusive) of initiation of trading of the Shares on the MTA with reference to 20% of the
Companys Shares as respectively owned, and for a period of eighteen months with reference
to the remaining 80% of the Companys Shares as respectively owned. Contemporaneously, Mr.
Angioletti will make an analogous undertaking with regard to the Joint Global Coordinators with
regard to Mr. Angiolettis shareholding in Singins Consultadoria Economica e Marketing Lda.
In the context of the Global Offer, the parties adhering to the Private Placement will
agree to a Lock Up undertaking with regard to the Joint Global Coordinators, for a duration of
12 months starting from the Payment Date.
Further, it is noted that the agreement stipulated on 14 September 2005 between
Spinnaker Luxembourg, Mr. Augusto Angioletti (the Companys Managing Director) and Singins
Consultadoria Economica e Marketing Lda, a company entirely held by Mr. Angioletti, provides,
among others, that Singings Consultadoria Economia e Marketing Lda agrees to a Lock up un-
dertaking with respect to Spinnaker Luxembourg relating to the Companys Shares that has an
identical, or in any case equivalent, content, to Spinnaker Luxembourgs undertaking with regard
to the Joint Global Coordinators, and a Lock Up undertaking by Mr. Angioletti regarding the
shares of Singins Consultadoria Economica e Marketing Lda having a duration of 24 months
from the date of initiation of the trading of the Companys Shares on the MTA.
The principal reasons for the Global Offer and the primary intended use of the re-
sources that will be collected can be summarized as follows:
a) Asset reinforcement. Eurofly has significantly increased its activity over the course of
the past years and deems it necessary to proceed with an asset reinforcement that
allows it to obtain more favorable conditions from capital suppliers, in particular, with
regard to the Operative rental of aircraft. It is noted, further, that the scope of the
Companys asset reinforcement deriving from the Global Offer could be reduced in
the event that the Proponents, in agreement with the Joint Global Coordinators, de-
cide not to entirely place the Shares that are the object of the Global Offer, although
in such case they would first of all reduce the number of Shares offered for sale by
Spinnaker Luxembourg.
b) Development of the fleet. Eurofly deems that having a homogeneous fleet consisting of
aircraft of the latest generation and a reduced age (the current average age is only ap-
proximately 4 years) represents an important strategic factor. Operative trustworthiness,
decreased consumption of jet fuel, and flight autonomy are in fact decisive characteris-
tics to be able to compete in the market. Eurofly has in any event decided it is neces-
sary to develop its fleet by means of the purchase of new aircraft models for future

25
 years. In this regard, it is noted that on the basis of the agreements stipulated by Eurofly,
the entrance in the fleet of two aircraft A330 is forecast respectively for 2006 and 2007,
and of three A350, the new model of the Airbus family, whose delivery is expected in the
years 2013 and 2014. The development of the fleet would occur by means of purchase
and/or lease contracts, which require significant down payments. Part of the resources
collected by means of the Global Offer could be allocated for these payments.
c) Purchases. In Euroflys opinion, the Italian aeronautics sector will be subject over the
next years to a merger process of operators. From this profile, the Company intends
to attentively follow every possibility of growth by external means. The availability of
financial resources and the status of being a listed company represent two important
strength factors from this prospective.

In the event that the proceeds of the Global Offer are insufficient for the above de-
scribed initiatives, the Company deems that in any event the asset reinforcement would permit
it to obtain further sources of financing more easily. In any event, Eurofly intends to negotiate an
extension of its credit lines with credit institutes, in particular with regard to signatures, aimed at
the issuance of letters of credits (to lessors) that can substitute the down payments made in
cash, thus freeing further financial resources.

Eurofly does not intend to utilize the proceeds deriving from the Global Offer for the
advance repayment of term loans, represented exclusively by the mortgage on the real proper-
ty that it owns. Obviously, such proceeds would instead lead to a decreased use of its current
lines of credit.

The Public Offer will initiate at 9:00 am on 5 December 2005 and will end at 4:00 pm
on 14 December 2005. It is possible that the Offer Period will be extended. The Calendar for the
operation is as follows:

Publication of the notice regarding the Indicative Valorization Value Within 3 December 2005
Publication of the notice indicating the Maximum Price Within 4 December 2005
Initiation of the Public Offer 5 December 2005
Termination of the Public Offer 14 December 2005
Publication of the notice regarding the Offer Price Within 16 December 2005
Publication of the notice on the results of the Global Offer Within 16 December 2005
Payment for the Shares 20 December 2005
Forecast initiation of trading of the Shares 20 December 2005

The requests to adhere to the Public Offer must be made by filling out and signing
the request form, available care of the Investment Dealers. Each Investment Dealer, upon re-
quest, has the obligation of providing a gratuitous copy of the Prospectus.

Interested parties can also adhere to the Public Offer by means of parties authorized
to perform the individual asset management of investment portfolios on behalf of third parties,
as well as by means of parties authorized to receive and transmit orders.

The clients of on-line Investment Dealers who offer investment services by means of
electronic trading can adhere to the Public Offer through the use of electronic instruments via
Internet, in substitution of the traditional paper means, with procedures that are equivalent to the
same.

The requests are irrevocable, with the exception of what is provided by applicable
law, and they cannot be subject to any condition.

The presentation of more than one request care of the same Investment Dealer by
the same party is prohibited. In the event there is more than one request from the same party,
the latter will participate in the allotment only with the first request presented in order in time.

26
 The requests can be made for quantities equal to the Minimum Lot of 450 Shares or
for quantities equal to the Increased Minimum Lot of 4,500 Shares. 30% of the Shares destined
to the Public Offer will be allocated to requests received for Increased Minimum Lots, whereas
18.75% will be reserved to requests from the Companys Employees. The latter will benefit from
a discount of 15% of the Offer Price.

The Proponents will pay pro-quota to the Joint Global Coordinators, including in the
name and on behalf of the other members of the Public Offer Consortium and the Institutional
Placement Consortium, a total commission of 3.50% of the overall value of the Global Offer and
an eventual Greenshoe. Further, a success commission of up to 0.75% has been provided for,
which might be paid by the Proponents to the Joint Global Coordinators.

In addition to what is indicated above, Eurofly deems that other costs tied to the
Global Offer will amount to approximately 1.6 million Euro.

In the event, in the context of the Public Offer, the Institutional Placement or the
Private Placement, the requests received in each of these placements is less than the number
of Shares allocated to it, the residual Shares can converge in the portion reserved to the others.

In the event the adherence to the Public Offer instead exceeds the number of Shares
allocated to it, each requesting party will be allotted a quantity of Shares equal to the Minimum
Lot. If, subsequent to such allotment, further Shares are available, the residual Shares will be al-
lotted to the individual subscribers in proportion to their requests. In the event that subsequent
to such operation there are still residual Shares remaining, they will be allocated by drawing lots.
Lots will also be drawn in the event the requests are so numerous that not even the allotment of
a Minimum Lot to each subscriber is possible.

DOCUMENTS THAT ARE AVAILABLE TO THE PUBLIC

The following documents are available to the public at Euroflys registered office in
Milan, Via Ettore Bugatti no. 15:
Euroflys articles of incorporation and By-laws;
Euroflys fiscal year balance sheets ended 31 December 2002, 2003 and 2004, to-
gether with the management report of the directors;
auditors reports relative to Euroflys fiscal year balance sheets ended 31 December
2002, 2003 and 2004;
reports of the board of internal auditors regarding Euroflys fiscal year balance sheets
ended 31 December 2002, 2003 and 2004;
Euroflys six month reports ended 30 June 2004 and 2005;
auditors report regarding Euroflys six month reports ended 30 June 2004 and 2005.

27
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28
 SECTION II
RISK FACTORS

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30
 THE OPERATION DESCRIBED IN THE PRESENT PROSPECTUS PRESENTS RISK FACTORS TYPICAL OF
AN EQUITY INVESTMENT.

IN ORDER TO PROPERLY APPRECIATE THE INVESTMENT, INVESTORS ARE REQUESTED TO EVALUATE

THE SPECIFIC RISK FACTORS REGARDING EUROFLY, THE MARKET IN WHICH IT OPERATES, THE GLOBAL OFFER
AND THE ISSUERS FINANCIAL INSTRUMENTS. THE RISK FACTORS DESCRIBED BELOW MUST BE READ TOGETHER
WITH THE INFORMATION SET FORTH IN THE PROSPECTUS.

A) RISKS RELATING TO THE ISSUER

1. INDICATION OF THE COMPANYS ECONOMIC TREND DURING THE PAST THREE YEAR PERIOD AND
THE FORESEEABLE RESULTS OF THE CURRENT AND NEXT FISCAL YEARS

IN FISCAL YEAR 2002, THE COMPANY SUFFERED A NET LOSS EQUAL TO 6.0 MILLION EURO,
NOTWITHSTANDING NET EXTRAORDINARY PROCEEDS OF APPROXIMATELY 9.7 MILLION EURO (SEE
SECTION III, CHAPTER 9, PARAGRAPH 9.2.2.11). WITH RESPECT TO THE NEED FOR CAPITALIZATION
DETERMINED BY SUCH LOSS, THE AUDITORS REPORT RELATIVE TO FISCAL YEAR 2002 NOTED THE
INFORMATION PROVIDED BY THE DIRECTORS IN THE MANAGEMENT REPORT WITH REGARD TO THE
FACT THAT THE COMPANY HAS SUSTAINED SIGNIFICANT LOSSES DURING THE FISCAL YEAR, AS IN
THE PRIOR FISCAL YEARS, WHICH IN THE PAST WERE SYSTEMATICALLY COVERED BY THE SHARE-
HOLDER. THE MANAGEMENT REPORT INDICATES THE PLANS AND ACTIONS THAT THE DIRECTORS
ARE COUNTING ON IN ORDER TO OBTAIN A SUBSTANTIAL REDUCTION IN 2003 OF THE LOSSES SUS-
TAINED IN 2002..

IN FISCAL YEAR 2003, THE COMPANY REALIZED PROFITS OF 2.7 MILLION EURO, WITH EXTRAOR-
DINARY PROCEEDS AMOUNTING TO APPROXIMATELY 1.4 MILLION EURO, AND IN FISCAL YEAR 2004
PROFITS OF 6.8 MILLION EURO, WITH NET EXTRAORDINARY PROCEEDS OF APPROXIMATELY 2.2 MIL-
LION EURO (SEE SECTION III, CHAPTER 9, PARAGRAPH 9.2.2.11).

THE FIRST SIX MONTHS OF FISCAL YEAR 2005 PRESENT AN OPERATIVE LOSS (EBIT) OF 5.1 MIL-
LION EURO AND, NOTWITHSTANDING THE REALIZATION OF CAPITAL GAINS OF 1.6 MILLION EURO (SEE
SECTION III, CHAPTER 9, PARAGRAPH 9.2.3.), A NET LOSS OF 3.3 MILLION EURO, WHILE THE
COMPANYS ECONOMIC RESULTS AS OF 30 SEPTEMBER 2005 INDICATED A POSITIVE OPERATIVE RE-
SULT (EBIT) FOR 2.1 MILLION EURO AND A POSITIVE NET RESULT OF 3.0 MILLION EURO, WITH NET
EXTRAORDINARY PROCEEDS OF APPROXIMATELY 2.2 MILLION EURO. SAID RESULTS ARE LARGELY
DUE TO THE SEASONAL NATURE OF THE ACTIVITY PERFORMED, DUE TO WHICH A LARGE PART OF
THE OPERATIVE MARGIN IS REALIZED DURING THE COURSE OF THE THIRD QUARTER.

FURTHER, WHILE ON THE ONE HAND THE NEGATIVE RESULTS OF THE FIRST SIX MONTHS WERE IN-
FLUENCED BY THE EXTRAORDINARY EVENT REGARDING THE TSUNAMI (SEE SECTION III, CHAPTER
6, PARAGRAPH 6.3), WHICH NEGATIVELY EFFECTED LONG RANGE FLIGHTS TO THE MALDIVE DUR-
ING THE FIRST MONTHS OF THE YEAR, LEADING TO A NEGATIVE IMPACT ON OPERATIVE RESULTS OF
2.4 MILLION EURO, ON THE OTHER HAND THE RESULTS OF THE THIRD QUARTER WERE NEGATIVELY
INFLUENCED BY THE TERRORIST ATTACK OF 23 JULY IN SHARM EL SHEIKH (SEE SECTION III,
CHAPTER 6, PARAGRAPH 6.3), WHICH EFFECTED AND WILL NEGATIVELY EFFECT FLIGHTS TO SAID
DESTINATION, THE COMPANYS MOST IMPORTANT MID RANGE DESTINATION.

DUE PRIMARILY TO THESE TWO EXTRAORDINARY EVENTS AND TO THE HURRICANES THAT AFFECTED
THE CARIBBEAN DURING THE MONTHS OF SEPTEMBER AND OCTOBER 2005, EUROFLY FEELS THAT
IT WILL CLOSE THE FISCAL YEAR IN COURSE, EVEN THOUGH WITH A POSITIVE EBITDA, WITH A NEG-
ATIVE NET RESULT (SEE SECTION III, CHAPTER 12).

ON THE BASIS OF THE INFORMATION CURRENTLY IN ITS POSSESSION, THE COMPANY ESTIMATES
THAT, IN THE ABSENCE OF NEGATIVE EXTRAORDINARY EVENTS, THE EBITDA FOR FISCAL YEAR 2006
WILL REMAIN POSITIVE, WHEREAS IT IS NOT POSSIBLE TO MAKE ANY FORECASTS WITH REGARD TO
THE NET RESULTS OF SAID FISCAL YEAR.

31
2. THE COMPANYS NET FINANCIAL POSITION AND NET WORKING CAPITAL IN THE FISCAL YEAR IN
COURSE

EUROFLYS NET FINANCIAL POSITION AS OF 30 SEPTEMBER 2005 IS NEGATIVE FOR 12.4 MILLION
EURO, WHICH IS WORSE WITH RESPECT TO THE 4.4. MILLION EURO AS OF 30 JUNE 2005 AND
17.2 MILLION EURO AS OF 31 DECEMBER 2004.
AS OF THE DATE OF 30 SEPTEMBER 2005, THE COMPANY HAD UTILIZED APPROXIMATELY 87.3%
OF THE TOTAL CREDIT LINES THAT IT HAD BEEN GRANTED.

THE INCREASE OF THE NET FINANCIAL POSITION IS PRIMARILY THE RESULT OF THE INCREASE OF NET
WORKING CAPITAL WHICH, EVEN THOUGH IT REMAINED NEGATIVE, WAS REDUCED DUE TO THE FOL-
LOWING FACTORS: AN INCREASE OF ITS EXPOSURE WITH REGARD TO THE MINISTRY OF DEFENSE FOR
THE TRANSPORTATION OF TROOPS (WHICH HAS DEFERRED PAYMENT TERMS WITH RESPECT TO THE
USUAL EXISTING CONTRACTUAL CONDITIONS WITH THE TOUR OPERATORS), AND A SLOWING DOWN
OF PAYMENTS BY CLIENT TOUR OPERATORS, WHO SUFFERED FROM THE DIFFICULT SEASON FOR THE
TOURISM INDUSTRY CAUSED BY THE CITED EXTRAORDINARY EVENTS (TSUNAMI, TERRORIST ATTACK
AT SHARM EL SHEIKH AND HURRICANES IN THE CARIBBEAN). A SLIGHT AND GENERALIZED REDUC-
TION OF THE TIME FOR THE PAYMENT TO SUPPLIERS IS ADDED TO THIS.

AS OF 30 SEPTEMBER 2005, RECEIVABLES EXPIRED BY 120 DAYS AMOUNTED TO APPROXIMATE-

LY 15.8 MILLION EURO (GROSS OF THE TOTAL DEVALUATION FUND FOR RECEIVABLES OF APPROX-
IMATELY 5.5. MILLION EURO), OF WHICH APPROXIMATELY 4.5 MILLION EURO REGARDED THE
MINISTRY OF DEFENSE.
AS OF THE DATE OF THE PROSPECTUS, THE CREDIT LINES THAT WERE GRANTED WERE INCREASED TO
25,550 THOUSAND EURO. FURTHER, BOTH BANCA PROFILO AS WELL AS CENTROBANCA UNDER-
TOOK TO MAKE A STAND BY LINE OF CREDIT AVAILABLE TO THE COMPANY, EACH FOR THE AMOUNT OF
2,5000 THOUSAND EURO (AND THUS FOR A TOTAL OF 5,000 THOUSAND EURO), HAVING AN EXPI-
RATION OF 18 MONTHS MINUS ONE DAY AND REPAYABLE UPON EXPIRATION. FURTHER, ON 21
NOVEMBER 2005, SPINNAKER LUXEMBOURG GRANTED THE COMPANY A 24 MONTH NON-INTEREST
BEARING LOAN IN THE AMOUNT OF 4,500 THOUSAND EURO, REPAYABLE UPON EXPIRATION, WITH RE-
GARD TO THE FINANCIAL NEEDS THAT WERE MANIFESTED DURING THE MONTH OF OCTOBER 2005,
PRIMARILY RELATED TO THE DOWN PAYMENTS (AMOUNTING TO 3,744 THOUSAND EURO) FOR CON-
TRACTS WHO OBJECT WAS THE ENTRY IN THE FLEET OF NEW A330 AND A350 AIRCRAFT.

IN VIEW OF THE FACTORS SET FORTH IN THE ABOVE PARAGRAPH, THE PERCENTAGE OF USE OF THE
CREDIT LINES AS OF THE DATE OF THE PROSPECTUS WAS SIGNIFICANTLY REDUCED.

THE COMPANY ESTIMATES THAT THE NET FINANCIAL POSITION AS OF 31 OCTOBER 2005 HAS FUR-
THER INCREASED BY APPROXIMATELY 4 MILLION EURO, IN LARGE PART DUE TO THE DOWN PAYMENTS
MADE (AMOUNTING TO 3,744 THOUSAND EURO) RELATING TO CONTRACTS HAVING AS THEIR OBJECT
THE ENTRY IN THE FLEET OF NEW A330 AND A350 AIRCRAFT.

WITH REGARD TO THE TREND THROUGH THE END OF THE FISCAL YEAR, EVEN THOUGH, DUE TO THE
SEASONS, MANAGEMENT NORMALLY ABSORBS LIQUIDITY DURING THE PERIOD FROM OCTOBER
NOVEMBER THROUGH THE END OF THE YEAR DECEMBER, EUROFLY DEEMS THAT IT CAN END THE FIS-
CAL YEAR WITH A NET FINANCIAL POSITION THAT IS SIGNIFICANTLY IMPROVED WITH RESPECT TO 30
SEPTEMBER. THIS IS DUE TO THE EFFECT (I) OF THE ASSIGNMENT OF RECEIVABLES FROM THE
MINISTRY OF DEFENSE BY WAY OF A FACTORING AGREEMENT WITHOUT RECOURSE TO UNICREDIT
FACTORING S.P.A. FOR AN AMOUNT OF APPROXIMATELY 11,601 THOUSAND EUROOF THE ABOVE IN-
DICATED FACTORING WITH RECOURSE, (II) SPINNAKER LUXEMBOURGS ISSUANCE ON 21 NOVEMBER
2005 OF A NON-INTEREST BEARING 24 MONTH LOAN IN THE AMOUNT OF 4,500 THOUSAND EURO,
AND (III) THE GRADUAL NORMALIZATION OF PAYMENTS BY CLIENT TOUR OPERATORS.

REFERENCE IS MADE TO SECTION III, CHAPTER 12 AND TO SECTION IV, CHAPTER 3, PARAGRAPH
3.1 FOR A MORE DETAILED ANALYSIS.

3. RISKS RELATED TO THE IMPORTANCE OF KEY FIGURES AND SPECIALIZED PERSONNEL

THE COMPANY DEPENDS TO A LARGE EXTENT ON SOME KEY FIGURES, AMONG WHOM THE MANAGING
DIRECTOR, CAPTAIN AUGUSTO ANGIOLETTI, WHO HAS CONTRIBUTED OVER THE COURSE OF THE PAST
4 YEARS IN AN VERY SIGNIFICANT MANNER TO THE REVIVAL AND DEVELOPMENT OF ITS ACTIVITIES. IN

32
 THE EVENT THAT THE RELATIONSHIP BETWEEN THE COMPANY AND THE MANAGING DIRECTOR IS IN-
TERRUPTED FOR ANY REASON, THERE ARE NO GUARANTEES THAT THE COMPANY WILL BE ABLE TO
TIMELY SUBSTITUTE HIM WITH PERSONS WHO ARE CAPABLE OF ENSURING THE SAME SUPPORT IN THE
SHORT TERM, WITH THE CONSEQUENCE THAT THE COMPANY MIGHT BE NEGATIVELY IMPACTED.

IN ADDITION TO CAPTAIN AUGUSTO ANGIOLETTI, THERE ARE OTHER KEY FIGURES WITHIN THE COM-
PANY WHO CONTRIBUTE TO ITS DEVELOPMENT. WHILE THE COMPANY HOLDS THAT IT HAS AN OP-
ERATIONAL AND MANAGERIAL STRUCTURE CAPABLE OF ENSURING CONTINUITY IN THE MANAGEMENT
OF ITS AFFAIRS EVEN IN THE EVENT THAT ONE OF THESE KEY FIGURES MIGHT INTERRUPT HIS RELA-
TIONSHIP WITH IT, IT CANNOT BE EXCLUDED THAT SUCH INTERRUPTION COULD LEAD TO NEGATIVE
CONSEQUENCES, ABOVE ALL IN THE SHORT TERM.

REFERENCE IS MADE TO SECTION III, CHAPTER 14, PARAGRAPHS 14.1.1., 14.1.4 AND 14.2. FOR
A MORE DETAILED ANALYSIS.

4. RISKS RELATED TO DEPENDENCE ON A LIMITED NUMBER OF CLIENTS

AS OF TODAY, THE COMPANY PRIMARILY TURNS TO THE PRINCIPAL TOUR OPERATORS IN ORDER TO
PERFOM ITS ACTIVITY.

DURING THE COURSE OF FISCAL YEAR 2004, THE FIRST FIVE CLIENTS REPRESENTED OVERALL
46.2% OF THE COMPANYS REVENUE, WHEREAS THE MOST IMPORTANT INDIVIDUAL CLIENT, TEO-
REMA TOUR, REPRESENTED 19.8% OF THE REVENUE AND 9.4% OF THE COMPANYS RECEIVABLES
FROM CLIENTS.

OVER THE COURSE OF THE FIRST NINE MONTHS OF 2005, THE FIRST FIVE CLIENTS REPRESENTED
OVERALL 43.0% OF REVENUE AND 60.9% OF THE COMPANYS RECEIVABLES FROM CLIENTS,
WHEREAS THE MOST IMPORTANT INDIVIDUAL CLIENT, TEOREMA TOUR, REPRESENTED 21.4% OF
REVENUE AND 21.7% OF THE COMPANYS RECEIVABLES FROM CLIENTS. IT IS ALSO NOTED THAT
THE MINISTRY OF DEFENSE REPRESENTED 4.5 OF THE REVENUE OF THE FIRST 9 MONTHS AND
28.9% OF THE RECEIVABLES FROM CLIENTS.
EVEN THOUGH THE COMPANY IS IMPLEMENTING POLICIES AIMED AT REDUCING THE CONCENTRATION
OF ITS SALES VOLUME, IT CANNOT BE EXCLUDED THAT THE LACK OF COMMERCIAL RELATIONSHIPS
WITH SOME OF ITS MOST IMPORTANT CLIENTS, OR DIFFICULTIES IN RECEIVING THE PAYMENT OF RE-
CEIVABLES FROM THEM, COULD NEGATIVELY EFFECT THE COMPANYS FINANCIAL ECONOMIC RESULTS.

REFERENCE IS MADE TO SECTION III, CHAPTER 6, PARAGRAPH 6.1.1.6.1. FOR A MORE DETAILED
ANALYSIS.

5. RISKS RELATED TO RELATIONSHIPS WITH PERSONNEL

THE ACTIVITY OF AIR TRANSPORTATION CAN BE SIGNIFICANTLY AFFECTED BY ABSTENTIONS FROM

WORK OR OTHER MANIFESTATIONS OF CONFLICT THAT CAN LEAD TO INTERRUPTIONS OF SERVICES
OR INEFFICIENCY. THE SECTOR IS HISTORICALLY SUBJECT TO REPEATED PERIODS OF UNION TEN-
SIONS. ALTHOUGH IN RECENT YEARS EUROFLY HAS NOT SUFFERED FROM SIGNIFICANT STRIKES OR
OTHER FORMS OF CONFLICT, IT CANNOT BE EXCLUDED THAT IN THE FUTURE INTERRUPTIONS OF THE
COMPANYS SERVICES MIGHT OCCUR CAUSED BY UNION AGITATIONS, WITH CONSEQUENT NEGATIVE
EFFECTS ON THE OPERATIVE ACTIVITY AND THE COMPANYS ECONOMIC RESULTS, ALSO IN RELATION
TO THE RENEWAL OF COLLECTIVE BARGAINING AGREEMENTS APPLCABLE TO EUROFLY THAT WILL
EXPIRE AT THE END OF THE CURRENT YEAR.

REFERENCE IS MADE TO SECTION III, CHAPTER 17, PARAGRAPH 17.1. FOR A MORE DETAILED
ANALYSIS.

6. INITIATION OF A NEW ACTIVITY WITH AN ALL BUSINESS AIRCRAFT

THE COMPANY HAS RECENTLY PURCHASED AN AIRBUS A319 CJ/LR AIRCRAFT IN FINANCE
LEASING FROM LOCAT S.P.A. THAT IS EQUIPPED TO TRANSPORT 48 PASSENGERS ONLY IN BUSI-
NESS CLASS (FOR GREATER DETAILS, SEE SECTION III, CHAPTER 6, PARAGRAPH 6.1.1.2). SAID
CHARACTERISTICS COULD MAKE IT MORE DIFFICULT IN THE FUTURE TO SELL SAID AIRCRAFT OR
TRANSFER IT TO OTHER CARRIERS IN OPERATIVE RENTAL.

33
 BY MEANS OF SUCH AIRCRAFT, EUROFLY INTENDS TO INITIATE A CONNECTION BETWEEN MILAN AND
NEW YORK (USA) EXCLUSIVELY DEDICATED TO BUSINESS CLIENTELE. THIS KIND OF PROJECT HAS
DIFFERENT ASPECTS, PARTICULARLY WITH REGARD TO ITS COMMERCIAL ASPECTS, WITH RESPECT
TO THE CHARTER AND SCHEDULED AIR TRANSPORTATION THAT THE COMPANY HAS PERFORMED
UNTIL NOW, IN SUCH A WAY AS TO ENTAIL THE RISKS THAT ARE TYPICAL OF AN ACTIVITY IN A START-
UP PHASE; ACTIVITIES WHICH IN THE COMPANYS OPINION WILL IN ANY EVENT NEGATIVELY EFFECT
THE RESULT OF EBITDA OF FISCAL YEAR 2006.

7. DISTRIBUTION OF DIVIDENDS

WITH PARTICULAR REFERENCE TO THE LAST FISCAL YEAR ENDED (31 DECEMBER 2004), THE COMPANY
DISTRIBUTED APPROXIMATELY 73% OF THE PROFITS, PAYING A DIVIDEND OF 5 MILLION EURO.

THERE IS NO CERTAINTY THAT IN THE FUTURE THE COMPANY WILL PROCEED WITH THE DISTIRBU-
TION OF DIVIDENDS ON PROFITS OBTAINED.

8. RISKS RELATED TO STATEMENTS REGARDING COMPETITIVE POSITION AND FORECASTS

THE PROSPECTUS CONTAINS STATEMENTS OF COMPETITIVE DOMINANCE AND FORECASTS FOR

EUROFLY SUCH AS, FOR EXAMPLE, THOSE SET FORTH REGARDING ITS COMPETITIVE POSITION AND
THE SUMMARY OF THE CHARACTERISTICS OF ITS SECTOR OR ACTIVITY (SEE SECTION III, CHAPTER
6). SAID STATEMENTS AND ESTIMATES WERE MADE BY THE COMPANY ON THE BASIS OF SPECIFIC
KNOWLEDGE OF THE SECTOR TO WHICH IT BELONGS, AVAILABLE DATA AND ITS EXPERIENCE. THE
PROSPECTUS ALSO CONTAINS FORECASTS REGARDING THE RESULTS OF THE CLOSURE OF THE CUR-
RENT FISCAL YEAR (SEE SECTION III, CHAPTER 12.).

ITIS NOT POSSIBLE TO GUARANTEE THAT SAID STATEMENTS AND FORECASTS CAN BE MAINTAINED
OR CONFIRMED. THE CHARACTERISTICS OF THE SECTOR OF ACTIVITY AND THE RESULTS OF THE
CLOSURE OF THE CURRENT FISCAL YEAR COULD BE DIFFERENT THAN THOSE THEORIZED IN SAID
STATEMENTS DUE TO KNOWN OR UNKNOWN EVENTS, UNCERTAINTIES AND OTHER FACTORS INDI-
CATED, AMONG OTHERS, IN THE PRESENT SECTION.

B) RISKS RELATING TO THE MARKET IN WHICH THE COMPANY

OPERATES
1. RISKS RELATED TO THE ECONOMIC TREND

THE REQUEST FOR AIR TRANSPORTATION, TO AN EXTENT THAT IS EVEN MORE ACCENTUATED IN THE SEC-
TOR IN WHICH THE COMPANY OPERATES, IS SIGNIFICANTLY RELATED TO THE ECONOMIC TREND. IN THE
PAST, IT HAS IN FACT BEEN NOTED THAT THE RESULTS OF AIRLINE COMPANIES HAVE OFTEN BEEN IN-
FLUENCED, IN TERMS OF PASSENGERS, FLIGHT HOURS AND INCOME, BY THE TREND OF THE PRINCIPAL
ECONOMIC INDICATORS. IT THEREFORE CANNOT BE EXCLUDED THAT THE CONTINUATION OR AGGRAVA-
TION OF THE CURRENT UNFAVORABLE ECONOMIC SITUATION AT THE DOMESTIC AND/OR INTERNATIONAL
LEVEL OR, MORE IN GENERAL, A REDUCTION OF CONSUMER SPENDING CAN LEAD TO A REDUCTION OF
THE REQUEST FOR AIR TRANSPORTATION OR SLOW GROWTH, LEADING TO NEGATIVE ECONOMIC AND FI-
NANCIAL EFFECTS FOR THE COMPANY, WHICH NEGATIVE EFFECTS MIGHT ALSO BE MANIFESTED IN CON-
SIDERATION OF THE FACT THAT NORMALLY THERE IS A GENERAL SLOWDOWN OF THE PAYMENT TIME
FROM CLIENT TOUR OPERATORS DURING PERIODS OF UNFAVORABLE ECONOMIC SITUATIONS.

2. RISKS RELATED TO THE TREND OF THE COST OF JET FUEL, EXCHANGE AND INTEREST RATES

THE COST OF JET FUEL, WHICH IS TIED TO THE TREND OF THE PRICE OF PETROLIUM AND INTERNA-
TIONAL MARKET DYNAMICS, HAS EFFECTED THE COMPANYS REVENUT DURING THE FIRST SIX MONTHS
OF THE CURRENT FISCAL YEAR BY APPROXIMATELY 26% (17.5% DURING FISCAL YEAR 2002,
18.4% DURING FISCAL YEAR 2003 AND 22.1% DURING FISCAL YEAR 2004). THE CONTRACTS THAT
EUROFLY STIPULATES WITH THE TOUR OPERATORS PROVIDES FOR THE POSSIBILITY OF ADJUSTING THE
PRICES AGREED UPON IN RELATION TO THE PRICE OF JET FUEL AND THE EURO/USD EXCHANGE RATE
AT THE TIME OF THE FLIGHT. ALL IN ALL, HOWEVER, SAID CLAUSES PROVIDE AN IMPERFECT FORM OF

34
 COVERAGE. THE CONTRACTS WITH THE TOUR OPERATORS, IN FACT, ARE STIPULATED APPROXIMATELY
SIX MONTHS IN ADVANCE WITH RESPECT TO THE PERFORMANCE OF THE FLIGHTS AND PROVIDE, IN AD-
DITION TO EXCLUSIONS, FOR A MAXIMUM ADJUSTMENT OF 10% OF THE VALUE OF THE PACKAGES IN
WHICH THE FLIGHT IS INCLUDED AND TECHNCIAL CALCULATION METHODS THAT RESULT IN A TIME DIF-
FERENTIAL BETWEEN THE APPLICATION OF THE ADJUSTMENTS AND THE VARIATION OF PRICES AND/OR
EXCHANGE RATES. THE COMPANY IS THEREFORE SUBJECT TO THE RISKS DERIVING FROM THE FLUC-
TUATIONS OF SAID FACTORS FOR THE PART THAT IS NOT COVERED CONTRACTUALLY. FURTHER, IN THE
CONTEXT OF THE CONTACTUAL LIMITS INDICATED ABOVE, THE TRANSFER OF THE RISK OF AN INCREASE
OF JET FUEL AND/OR OF THE RATES ON PAYMENTS APPLIED TO CLIENT TOUR OPERATORS IS NOT DONE
AUTOMATICALLY, BUT RATHER BEARING IN MIND REASONS OF COMMERCIAL OPPORTUNITY AND THE BE-
HAVIOR OF COMPETITOR AIRLINE COMPANIES (SEE SECTION III, CHAPTER 6, PARAGRAPH 6.1.1.6.1
AND CHAPTER 9, PARAGRAPH 9.2.2.3). THROUGH TODAY, IT HAS NOT BEEN THE COMPANYS PRAC-
TICE TO PROVIDE OTHER COVERAGES FOR THE PRICE OF JET FUEL, IN PARTICULAR USING FUTURES,
AS IT DEEMS SAID RISK TO FALL WITHIN THE NORMAL DYNAMICS OF ITS ACTIVITY.

FURTHER, EUROFLY REALIZES PART OF ITS REVENUE AND SUSTAINS PART OF ITS COSTS IN CURRENCY
OTHER THAN IN EURO, PRIMARILY US DOLLARS. IT IS SUBJECT TO THE RISK OF CURRENCY FLUCTUA-
TIONS ALSO DUE TO SUCH POSITIVE AND NEGATIVE COMPONENTS OF INCOME. SPECIFICALLY, AS OF 30
JUNE 2005, THE AMOUNT OF ITS LIABILITIES AND RECEIVABLES IN CURRENCY WAS RESPECTIVELY 7%
AND 18.2% OF TOTAL LIABILITIES AND RECEIVABLES. AS OF THE DATE OF 30 JUNE 2005 THE COMPANY
HAD FORWARD FOREIGN EXCHANGE CONTRACTS WITH BANCA PROFILO FOR THE PURCHASE OF CUR-
RENCY THAT ENTIRELY COVERED ITS CURRENCY EXPOSURE AS OF SUCH DATE. AS OF THE DATE OF THE
PROSPECTUS, THE COMPANY HAD FORWARD FOREIGN EXCHANGE CONTRACTS WITH BANCA PROFILO
FOR A TOTAL COUNTER VALUE OF 10,500 THOUSAND USD TO COVER CURRENCY FLUCTURATIONS,
WHICH, HOWEVER, COULD TURN OUT TO BE INADEQUATE TO ENTIRELY COVER THE COMPANYS CUR-
RENCY EXCHANGE RISK EXPOSURE (SEE SECTION III, CHAPTER 20, PARAGRAPH 20.9).

FURTHER, SOME OF THE COMPANYS FINANCIAL LIABILITIES HAVE A VARIABLE RATE, AND THE RATE OF
REFERENCE FOR SOME OPERATIVE RENTALS AND THE FINANCE LEASING CONTRACT ARE ALSO VARIABLE:
EUROFLY IS SUBJECT TO THE RISK OF INTEREST RATE VARIATIONS WITH REGARD TO SUCH COMPONENTS.
IT THEREFORE CANNOT BE EXCLUDED THAT THE EVENTUAL INCREASE OF THE COST OF JET FUEL,
EVENTUAL FLUCTUATIONS OF THE EXCHANGE RATES OR VARIATIONS OF INTEREST RATES MIGHT NEG-
ATIVELY EFFECT THE COMPANYS ECONOMIC AND FINANCIAL RESULTS.

3. RISKS RELATED TO TERRORIST ATTACKS, WARS OR INSURRECTIONS

THE REQUEST FOR AIR TRANSPORTATION, ESPECIALLY IN THE SECTOR IN WHICH THE COMPANY OP-
ERATES, IS ALSO AFFECTED BY EVENTS AT A GEOPOLITICAL LEVEL AND, IN PARTICULAR, BY THE POS-
SIBILITY THAT TERRORIST ACTS MIGHT BE PERPETRATED, OR EVEN JUST THREATENED, WITH REGARD
TO PERSONS, THINGS OR STRUCTURS OR THAT WARS OR INSURRECTIONS OF VARIOUS KINDS COULD
OCCUR IN INDIVIDUAL COUNTRIES OR AT AN INTERNATIONAL LEVEL. IT THEREFORE CANNOT BE EX-
CLUDED THAT THE CONTINUATION OR WORSENING OF THE CURRENT POLITICAL SITUATION AT AN IN-
TERNATIONAL LEVEL MIGHT LEAD TO A CHANGE IN CONSUMERS HABITS AND, CONSEQUENTLY, LEAD
TO A REDUCTION OF THE REQUEST FOR AIR TRANSPORTATION, WITH NEGATIVE ECONOMIC AND FI-
NANCIAL EFFECTS ON THE COMPANY (SEEE SECTION III, CHAPTER 6, PARAGRAPH 6.3). WITH REF-
ERENCE TO THE ATTACK OF SHARM EEL SHEIKH IN JULY 2005, THE COMPANY ESTIMATES THAT
SUCH EVENT HAD AN EXTRAORDINARY NEGATIVE IMPACT ON OPERATIVE RESULTS AS OF 30
SEPTEMBER 2005 IN THE AMOUNT OF 2.5 MILLION EURO.

4. RISKS RELATED TO NATURAL DISASTERS OR EPIDEMICS

THE OCCURANCE OF NATURAL DISASTERS OR EPIDEMICS, ESPECIALLY IN PLACES WHICH, DUE TO THEIR
PARTICULAR TOURIST IMPORTANCE, ARE THE OBJECT OF A SIGNIFICANT REQUEST FOR AIR TRANS-
PORTATION, MIGHT LEAD, IN GENERAL IN THE SHORT-MID TERM (DEPENDING ON THE SERIOUSNESS OF
THE EVENTS) TO A SIGNIFICANT REDUCTION OF THE ABOVE REQUEST BY CONSUMERS. IT THEREFORE
CANNOT BE EXLCUDED THAT THE OCCURENCE OF SIMILAR EVENTS MIGHT LEAD, IN THE SHORT-MID
TERM, TO A REDUCTION OF THE REQUEST FOR AIR TRANSPORTATION WITH CONSEQUENT NEGATIVE ECO-
NOMIC AND FINANCIAL EFFECTS ON THE COMPANY (SEE SECTION III, CHAPTER 6, PARAGRAPH 6.3).

35
 WITH REFERENCE TO THE TRAGEDY OF THE TSUNAMI THAT OCCURRED IN DECEMBER 2004 IN THE
INDIAN OCEAN, THE COMPANY ESTIMATES THAT SUCH EVENT HAD AN EXTRAORDINARY NEGATIVE IM-
PACT ON OPERATIVE RESULTS AS OF 30 SEPTEMBER 2005 IN THE AMOUNT OF 2.4 MILLION EURO.

5. RISKS RELATED TO THE SEASONAL NATURE OF THE REQUEST FOR AIR TRANSPORTATION

THE REQUEST FOR AIR TRANSPORTATION, WITH GREATER SIGNIFICANCE IN THE SEGMENT OF INTERNA-
TIONAL VACATION FLIGHTS, IS TYPICALLY CHARACTERIZED BY PHENOMENON OF A SEASONAL NATURE
THAT LEAD TO A REDUCTION OF DEMAND DURING SOME PERIODS OF THE YEAR. IN PARTICULAR,
EUROFLY HAS A PEAK OF TRANSPORTATION ACTIVITY CONCENTRATED IN THE THIRD QUARTER OF THE
YEAR, WHEREAS THE PERIODS OF MINOR ACTIVITY ARE REPRESENTED BY THE SECOND AND FOURTH
QUARTERS. CONSEQUENTLY, THE DISTRIBUTION OF OPERATIVE COSTS AND REVENUE REFLECTS THE
ABOVE TREND, WHEREAS MARGINS ARE PREVALENTLY CONCENTRATED IN THE THIRD QUARTER, WHEN
IT BENEFITS FROM A GREATER ABSORBTION OF THE COSTS OF ITS STRUCTURE. EVEN THE FINANCIAL
POSITION IS INFLUENCED BY THE SEASONAL NATURE DUE TO THE TREND OF NET WORKING CAPITAL,
WHICH IS, IN ORDIANARY CONDITIONS, STRICTLY TIED TO THE DYNAMICS OF OPERATIVE COSTS AND REV-
ENUE. THE DETERIORATION OF THE NET FINANCIAL POSITION SUSTAINED IN THE THIRD QUARTER OF
2005 IS, INSTEAD, DUE TO THE CONTINGENT IMPACT OF THE ATTACK OF SHARM EL SHEIKH AND THE
HURRICANES IN THE CARIBBEAN, WHICH LED TO A GENERAL LENGTHING OF THE TIMES IN WHICH PAY-
MENTS ARE RECEIVED FROM TOUR OPERATORS, TO WHICH IS ADDED A SLIGHT AND GENERALIZED RE-
DUCTION OF THE PAYMENT TERMS TO SUPPLIERS WITH RESPECT TO PRIOR PERIODS. THE CONSEQUENT
WORSENING OF NEGATIVE NET WORKING CAPITAL WAS FURTHER AGGRAVATED BY THE CONTRACT WITH
THE MINISTRY OF DEFENSE, WHICH PROVIDED FOR DEFERRED PAYMENT TERMS WITH RESPECT TO THE
NORMAL CONTRACTUAL CONDITIONS IN USE WITH TOUR OPERATORS. EVEN THOUGH THE COMPANY
DEEMS THAT IT HAS ADOPTED ADEQUATE INITIATIVES TO TRY TO LIMIT THE FLUCTUATIONS DERIVING
FROM THE ABOVE SEASONAL NATURE, IT CANNOT BE EXCLUDED THAT, IN THE FUTURE, SUCH SEASON-
AL NATURE OF ITS ACTIVITY CAN LEAD TO A DECREASED USE OF THE AIRCRAFT AND, CONSEQUENTLY,
NEGATIVELY INFLUENCE THE TREND OF MARGINS AND THE NET FINANCIAL POSITION DURING SUCH PE-
RIODS (SEE SECTION III, CHAPTER 6, PARAGRAPH 6.1.1.7).

6. RISKS RELATED TO THE COMPETITIVE FRAMEWORK

THE PROGRESSIVE PROCESS OF THE LIBERALIZATION OF AIR TRANSPORTATION HAS LED TO A RE-
DUCTION OF THE BARRIERS TO ENTRY, CONTRIBUTING TO THE GROWTH OF THE COMPETITIVE
FRAMEWORK THAT THE VARIOUS AIRLINE COMPANIES MUST FACE IN TERMS OF FARES, DESTINATIONS
AND FREQUENCIES OF FLIGHTS. THE COMPETITION, IN ADDITION TO OPERATIVE COMPANIES AT A
WORLDWIDE LEVEL, CAN ALSO DERIVE FROM THE SO-CALLED LOW COST COMPANIES THAT OVER
THE PAST FEW YEARS HAVE INITIATED SERVING ROUTES AND CONNECTIONS FROM AND TO ITALY AS
WELL AS DOMESTIC ROUTES. TO THE COMPETITION AMONG AIRLINE COMPANIES MUST ALSO BE
ADDED THE COMPETITION AMONG AIRPORTS, IN TERMS OF THEIR ATTRACTIVENESS WITHIN A COM-
MON GEOGRAPHIC AREA. IT THEREFORE CANNOT BE EXCLUDED THAT IN THE FUTURE OTHER AIR-
LINE COMPANIES MIGHT SUBTRACT MARKET SHARES FROM THE COMPANY OR LIMIT ITS DEVELOP-
MENT PROGRAMS (SEE SECTION III, CHAPTER 6, PARAGRAPH 6.5).

7. RISKS RELATED TO THE REDUCTION OF FARES

THE INCREASE OF COMPETITIVE PRESSURE IN THE SECTOR OF AIR TRANSPORTATION OVER THE
COURSE OF TIME HAS FORCED THE COMPANIES TO PROGRESSIVELY REDUCE FARES, ABOVE ALL
WITH RESPECT TO TOURIST CLIENTELE, WITH THE CONSEQUENT REDUCTION OF REVENUE PER PAS-
SENGER-KILOMETER TRANSPORTED. SUCH SITUATION MEANS THAT THE AIRLINE COMPANIES NEED
TO CONSTANTLY PURSUE PROGRAMS FOR COST REDUCTION AND THE RECOVERY OF PRODUCTIVITY
IN ORDER TO MAINTAIN ADEQUATE LEVELS OF PROFITABILITY. THERE IS NO GUARANTEE THAT THE
COMPANY IS CAPABLE OF EFFICIENTLY MANAGING SAID PROGRAMS OR WILL IN ANY EVENT BE ABLE
TO DEAL WITH FURTHER GENERALIZED REDUCTIONS OF THE FARES IN THE FUTURE.

8. RISKS RELATED TO OPERATIVE LEVERAGE

A SIGNIFICANT PERCENTAGE OF THE COSTS SUSTAINED BY THE AIRLINE COMPANIES IS REPRESENT-

ED BY FIXED COSTS (SUCH AS THOSE RELATING TO PERSONNEL, RENT, MAINTENAINCE OF THE AIR-

36
 CRAFT, DEPRECIATION, INSURANCE) THAT ARE UNINFLUENCED BY THE NUMBER OF FLIGHTS, THE
USE MADE OF THE AIRCRAFT AND THE NUMBER OF PASSENGERS. EVEN THOUGH THE COMPANY IS
CONSTANTLY INVOLVED WITH COST CONTROL, IT CANNOT BE EXCLUDED THAT EVENTUAL REDUC-
TIONS OF THE FARES AND THE LEVEL OF UTILIZATION OF THE AIRCRAFT MIGHT HAVE NEGATIVE IM-
PACTS ON THE COMPANYS ECONOMIC RESULTS (SEE SECTION III, CHAPTER 9).

9. RISKS RELATED TO EVENTUAL DIFFICULTIES IN PURCHASING AIRCRAFT OR INABILITY TO PRO-

CURE THE FINANCING NECESSARY FOR THEIR PURCHASE

GIVEN THE CONCENTRATION OF THE MARKET OF MANUFACTURERS, IT CANNOT BE EXCLUDED THAT

A SCARSITY OF THE OFFER OR AN INCREASE OF THE COMPETITION FROM OTHER OPERATORS IN THE
SECTOR MIGHT LEAD TO DIFFICULTIES OR INCREASED COSTS REGARDING THE PURCHASE OF THE
AIRCRAFT NECESSARY TO SUSTAIN THE COMPANYS GROWTH (SEE SECTION III, CHAPTER 6,
PARAGRAPH 6.1.2).
THE COMPANY HAS BEEN ABLE UNTIL NOW TO FIND AN ADEQUATE NUMBER OF AIRCRAFT TO SUS-
TAIN ITS ACTIVITY AND TO MAINTAIN QUALITY STANDARDS. FURTHER, DURING THE COURSE OF
2005, THE COMPANY STIPULATED THREE LETTERS OF INTENT HAVING AS THEIR OBJECT THE
OPERATIVE RENTAL OF TWO A330 (ONE OF WHICH WILL ENTER THE FLEET STARTING FROM NO-
VEMBER 2006 AND THE SECOND FROM APRIL 2007), AND THE PURCHASE OF THREE A350 (WHOSE
DELIVERY IS FORECAST FOR 2013 AND 2014) (SEE SECTION III, CHAPTER 5, PARAGRAPH 5.2.2.).
ALL IN ALL, BECAUSE THE COMPANY CURRENTLY INTENDS TO ACQUIRE THE AVAILABILITY OF THREE
NEW A350 IN OPERATIVE RENTAL OR FINANCE LEASING AND NOT IN OWNERSHIP, THERE IS NO
GUARANTEE THAT THE COMPANY WILL BE CAPABLE OF STIPULATING THE RELATIVE LEASES IN PROX-
IMITY OF THE DATES PROVIDED FOR THE RELATIVE DELIVERY. IT THEREFORE CANNOT BE EXCLUDED
THAT THE LACK OF STIPULATION OF THE ABOVE OPERATIVE RENTAL OR FINANCE LEASING AGREE-
MENTS MIGHT NEGATIVELY INFLUENCE THE COMPANYS ECONOMIC RESULTS OR ITS DEVELOPMENT
PLANS, IN THAT THIS MIGHT MAKE IMPOSSIBLE THE ENTIRE, OR EVEN ONLY PARTIAL, RECOVERY BY
THE COMPANY OF THE PAYMENTS ALREADY MADE AS A DOWN PAYMENT AND/OR ADVANCE PAY-
MENTS OF THE PRICE (APPROXIMATELY 1 MILLION USD) AS WELL AS THOSE THAT MIGHT BE MADE
IN THE FUTURE, AND IT COULD ALSO EXPOSE THE COMPANY TO THE FURTHER RISKS DERIVING FROM
THE EVENTUAL BREACH OF THE UNDERTAKINGS REGARDING THE PURCHASE OF THE THREE A350.
THE COMPANY DEEMS, HOWEVER, THAT SUCH POSSIBILITY IS IMPROBABLE, IN THAT DUE TO THE
STRONG REQUEST FOR SUCH AIRCRAFT IN THE MARKET, IT WOULD BE POSSIBLE IN ANY EVENT FOR
THE COMPANY TO IDENTIFY THE PARTIES, IN PARTICULAR OTHER AIRLINE COMPANIES, INTERESTED
IN SUCCEEDING TO THE PURCHASE CONTRACT BETWEEN EUROFLY AND THE MANUFACTURER.

10. RISKS RELATED TO DEPENDANCE ON THIRD PARTIES

THE ACTIVITY OF AN AIRLINE COMPANY IS GENERALLY INFLUENCED BY THE FACT THAT A SERIES OF
SERVICES PROVIDED BY THIRD PARTIES, SUCH AS, FOR EXAMPLE, SERVICES OF AIR TRAFFIC CON-
TROL (ATC), MANAGEMENT COMPANIES FOR AIRPORT SERVICES AND GROUND ASSISTANCE, SUP-
PLIERS OF JET FUEL, EMERGENCY PUBLIC SERVICES, ETC., ARE PROVIDED IN AN EFFICIENT MANNER
AND WITHOUT INTERRUPTIONS. IN THE PAST, SERVICE INTERRUPTIONS OCCURRED AT SOME AIR-
PORTS (PRIMARILY DUE TO STRIKES) OR INEFFICIENCIES THAT IMPEDED OR LIMITED THE AIR TRANS-
PORTATION ACTIVITY BY AIRLINE COMPANIES. IT CANNOT BE EXCLUDED THAT, IN THE FUTURE, SAID
INTERRUPTIONS OR INEFFICIENCIES MIGHT OCCUR AGAIN, AND THEY MIGHT THEREFORE NEGATIVE-
LY INFLUENCE THE COMPANYS ECONOMIC RESULTS.

11. RISKS RELATED TO THE NORMATIVE EVOLUTION

THE COMPANY WORKS IN A SECTOR REGULATED BY A COMPLEX AND ARTICULATED REGULATORY

SYSTEM AT AN INTERNATIONAL, COMMUNITY AND NATIONAL LEVEL THAT CONDITIONS ITS ACTIVITY.
POSSIBLE MODIFICATIONS OF THE APPLICABLE NORMATIVE COULD REQUIRE THE COMPANY TO
ADOPT MORE SEVERE STANDARDS OR CONDITION ITS OPERATIONS. IT CANNOT BE EXCLUDED THAT
EVENTUAL INVESTMENTS AND COSTS THAT ARE NECESSARY FOR THE COMPANY TO ADJUST ITS SYS-
TEM TO EVENTUAL LEGAL OR REGULATORY CHANGES MIGHT HAVE NEGATIVE IMPACTS ON THE
COMPANYS ECONOMIC RESULTS (SEE SECTION III, CHAPTER 6, PARAGRAPH 6.1.1.8).

37
C) RISKS RELATED TO THE GLOBAL OFFER AND THE ISSUERS
FINANCIAL INSTRUMENTS
1. RECENT OPERATIONS REGARDING THE FINANCIAL INSTRUMENTS THAT ARE THE OBJECT OF THE
OFFER

ON 26 MAY 2005, THE COMPANYS EXTRAORDINARY SHAREHOLDERS MEETING VOTED TO AT-

TRIBUTE THE BOARD OF DIRECTORS, IN ACCORDANCE WITH ART. 2443 OF THE CIVIL CODE, WITH
THE POWER TO INCREASE THE SHARE CAPITAL, ON A GRATUITOUS BASIS, ONE OR MORE TIMES
WITHIN 31 JULY 2005, FOR A MAXIMUM NOMINAL VALUE OF 500,000 EURO, BY MEANS OF THE
ISSUE OF A MAXIMUM NUMBER OF 500,000 ORDINARY SHARES, ENJOYING REGULAR RIGHTS, TO
BE ALLOTTED TO EMPLOYEES OF THE COMPANY IN ACCORDANCE WITH ART. 2349 OF THE CIVIL
CODE AND IN ACCORDANCE WITH ARTICLE 29 OF THE COMPANYS BY-LAWS. AS PERFORMANCE
OF SAID POWER, ON 1 JULY 2005 THE BOARD OF DIRECTORS VOTED TO INCREASE THE SHARE CAP-
ITAL FROM 6,666,922.00 EURO TO 7,065,302.00 EURO, AND THUS BY 398,380.00 EURO, BY
MEANS OF THE USE, FOR A CORRESPONDING AMOUNT, OF THE SPECIAL RESERVE THAT THE ORDI-
NARY SHAREHOLDERS MEETING OF 11 MAY 005 HAD CONSTITUTED FOR SAID PURPOSE, AND TO
ALLOT ON A GRATUITOUS BASIS TO SOME EMPLOYEES, CHOSEN UPON THE DISCRETION OF THE
BOARD OF DIRECTORS ITSELF FROM AMONG THE COMPANYS TOP MANAGEMENT, 398,380 NEWLY
ISSUED SHARES HAVING A NOMINAL VALUE OF 1.00 EURO EACH, ENJOYING REGULAR RIGHTS WITH
REGARD TO FISCAL YEAR 2005, OF WHICH 298,380 SHARES WERE ALLOTTED TO THE CAPTAIN AS
WELL AS MANAGING DIRECTOR OF THE COMPANY, MR. AUGUSTO ANGIOLETTI.

REFERENCE IS MADE TO SECTION III, CHAPTER 17, PARAGRAPH 17.1. FOR A MORE DETAILED
ANALYSIS.

FURTHER, ON 15 SEPTEMBER 2005 THE COMPANYS MANAGING DIRECTOR, MR. AUGUSTO

ANGIOLETTI, PURCHASED FROM SPINNAKER LUXEMBOURG, BY MEANS OF THE COMPANY SINGINS
CONSULTADORIA ECONOMICA E MARKETING LDA, 368,312 SHARES OF THE COMPANY AT A PRICE
PER SHARE OF APPROXIMATELY 2.1 EURO, I.E. FOR A TOTAL OF 775,000 EURO. THE CONSIDER-
ATION FOR THE ABOVE TRANSFER WAS DETERMINED AFTER NEGOTIATIONS BETWEEN THE PARTIES
AND WAS NOT SUBJECT TO THIRD PARTY REVIEW.

AS OF THE DATE OF THE PROSPECTUS, IT IS NOT POSSIBLE TO FORESEE WHETHER THE OFFER
PRICE MAY SUBSTANTIALLY DIFFER FROM THE ABOVE INDICATED AMOUNT; THE COMPARISON BE-
TWEEN THE PRICE PER SHARE OF THE ABOVE DESCRIBED OPERATION AND OFFER PRICE CAN BE
MADE AFTER THE EVENTUAL PUBLICATION OF THE INDICATIVE INCREASED PRICE INTERVAL, AND IN
ANY EVENT AFTER THE PUBLICATION OF THE SUPPLEMENTAL NOTICES RESPECTIVELY REGARDING
THE MAXIMUM PRICE AND THE OFFER PRICE.

IN VIEW OF COMPLETENESS, IT IS NOTED THAT ON 15 SEPTEMBER 2003, SPINNAKER LUXEMBOURG

(PREVIOUSLY EFFE LUXEMBOURG S.A.) PURCHASED 80% OF EUROFLYS CAPITAL FROM ALITALIA,
WHEREAS THE REMAINING 20% WAS PURCHASED IN JULY 2004. THE PRICE FOR THE PURCHASE
OF 100% OF EUROFLYS SHARE CAPITAL AMOUNTED OVERALL TO 13.0 MILLION EURO (CORRE-
SPONDING TO A PRICE PER SHARE OF 1.94 EURO). SAID PRICE HAD BEEN AGREED UPON BETWEEN
THE PARTIES IN JULY 2003 AT THE TIME OF THE STIPULATION OF THE PURCHASE CONTRACT, WHEN
EUROFLYS LAST ENDED BALANCE SHEET (REFERRING TO FISCAL YEAR 2002) INDICATED A LOSS OF
6.0 MILLION EURO, NOTWITHSTANDING NET EXTRAORDINARY PROCEEDS OF APPROXIMATELY 9.7
MILLION EURO. AFTER THE SALE OF THE SHARE CAPITAL TO SPINNAKER LUXEMBOURG, EUROFLY
COMPLETED THE TOURNAROUND PROCESS, WHICH REULTED IN ITS BEING ABLE TO CLOSE WITH A
PROFIT THE BALANCE SHEETS REFERRING TO FISCAL YEARS 2003 AND 2004.

REFERENCE IS MADE TO SECTION III, CHAPTER 14, PARAGRAPH 14.2, AS WELL AS TO SECTION
IV, CHAPTER 5, PARAGRAPHS 5.3.1 AND 5.3.3. FOR A MORE DETAILED ANALYSIS.

2. RISKS RELATED TO THE EXPIRATION OF THE LOCK UP PERIODS AND THE POSSIBLE VOLATILITY
OF THE EUROFLY SHARES

SUBSEQUENT TO THE EXPIRATION OF THE LOCK UP PERIODS, THE SHAREHOLDERS BOUND BY THEM
WILL BE FREE TO DISPOSE OF ALL OF THE SHARES THAT WERE PREVIOUSLY SUBJECT TO SUCH RE-

38
 STRICTION REGARDING LACK OF TRANSFERABILITY. IT CANNOT BE EXCLUDED THAT THE SALE OF THE
ABOVE SHARES CAN HAVE A NEGATIVE EFFECT ON THE TREND OF THE SHARES IN THE MARKET OF REF-
ERENCE. FURTHER, SUBSEQUENT TO THE GLOBAL OFFER IT IS NOT POSSIBLE TO GUARANTEE A LIQ-
UID MARKET FOR THE COMPANYS SHARES WILL BE CREATED OR MAINTAINED. SUBSEQUENT TO THE
COMPLETION OF THE GLOBAL OFFER, THE PRICE OF THE COMPANYS SHARES COULD FLUCTUATE IN
A SIGNIFICANT MANNER IN RELATION TO DIVERSE FACTORS, SOME OF WHICH ARE BEYOND THE
COMPANYS CONTROL AND ARE INDEPENDENT WITH RESPECT TO ITS OPERATIVE RESULTS.

3. TEMPORARY UNDERTAKINGS NOT TO TRANSFER THE EUROFLY SHARES

IN THE CONTEXT OF THE AGREEMENTS THAT WILL BE STIPULATED FOR THE GLOBAL OFFER,
SPINNAKER LUXEMBOURG AND SINGINS CONSULTADORIA ECONOMICA E MARKETING LDA WILL
AGREE TO LOCK UP UNDERTAKINGS WITH REGARD TO THE INVESTMENT DEALERS AND MEMBERS OF
THE INSTITUTIONAL PLACEMENT CONSORTIUM.

IN THE CONTEXT OF THE GLOBAL OFFER, THE ADHERENTS TO THE PRIVATE PLACEMENT WILL
AGREE TO A LOCK UP UNDERTAKING WITH REGARD TO THE JOINT GLOBAL COORDINATORS, FOR
A PERIOD OF 12 MONTHS STARTING FROM THE PAYMENT DATE.

REFERENCE IS MADE TO SECTION IV, CHAPTER 7, PARAGRAPH 7.3 FOR A MORE DETAILED ANALYSIS.

4. APPLICATION OF NEW ACCOUNTING PRINCIPLES

AS OF THE DATE OF THE PROSPECTUS, THE COMPANY HAS NOT PREPARED A CONSOLIDATED BAL-
ANCE SHEET AND THEREFORE, IN ACCORDANCE WITH LEGISLATIVE DECREE NO. 38 OF 28 FEBRUARY
2005, IT WILL HAVE TO PREPARE THE BALANCE SHEETS ACCORDING TO THE ACCOUNTING PRINCIPLES
OF THE INTERNATIONAL FINANCIAL REPORTING STANDARD (IFRS) STARTING FROM FISCAL YEAR
2006. IT IS ALSO NOTED THAT THE COMPANY DOES NOT INTEND TO EXERCISE ITS RIGHT TO APPLY
THE IFRS TO THE PREPARATION OF ITS CIVIL LAW BALANCE SHEET, PROVIDED BY ART. 4, SECOND
PARAGRAPH, OF THE CITED LEGISLATIVE DECREE, WITH REGARD TO FISCAL YEAR 2005.

THE USE OF THE IFRS COULD LEAD TO SOME CHANGES IN THE PREPARATION OF THE BALANCE
SHEETS, WHICH MIGHT HAVE EFFECTS, INCLUDING SIGNIFICANT EFFECTS, ON THE COMPANYS ECO-
NOMIC, PATRIMONIAL AND FINANCIAL SITUATION, AND MAKE THE COMPARISON WITH THE BALANCE
SHEETS RELATING TO PRIOR FISCAL YEARS PREPARED IN ACCORDANCE WITH CURRENT OUTSTAND-
ING LAW DIFFICULT.

IN PARTICULAR, THE APPLICATION OF THE IFRS PRINCIPLES MIGHT LEAD TO CHANGES IN THE CRI-
TERIA FOR THE CLASSIFICATION AND VALUATION OF THE FOLLOWING BALANCE SHEET ITEMS:
LONG TERM INVESTMENTS AND FINANCIAL LIABILITIES FOR OPERATIONS IN FUTURES: ACCORD-
ING TO THE ACCOUNTING PRINCIPLES CURRENTLY IN EFFECT, THE USE OF FUTURES TO MANAGE
THE RISK OF FLUCTUATIONS OF THE EXCHANGE RATE ARE REPRESENTED AS ITEMS OUSIDE OF
THE BALANCE SHEET, WHEREAS ACCORDING TO THE NEW PRINCIPLES (IAS 39), THEY MUST
BE REFLECTED IN THE BALANCE SHEET AND EVALUATED AT THEIR RELATIVE FAIR VALUE, EVEN
IF THEY ARE INSTRUMENTS OF COVERAGE;
INTANGIBLE ASSETS: ON THE BASIS OF THE NEW PRINCIPLES (IAS 38), THE FOLLOWING RE-
CLASSIFICATIONS WILL BE MADE FOR INTANGIBLE ASSETS:
IMPROVEMENTS MADE TO AIRCRAFT IN OPERATIVE RENTAL WILL BE RECLASSIFIED AMONG
MATERIAL ASSETS, WITHOUT MODIFICATION OF THE CURRENT DEPRECIATION CRITERIA, HELD
TO BE ADEQUATE EVEN ON THE BASIS OF THE IFRS PRINCIPLES;
RESEARCH AND DEVELOPMENT AND ADVERTISING COSTS RELATED TO THE NEW INITIATIVES
FOR THE DEVELOPMENT OF MULTI-CHANNEL DISTRIBUTION AND THE MANDATORY TRAINING
OF PILOTS, WILL BE CLASSIFIED AS DEVELOPMENT COSTS AND DEPRECIATED IN ACCOR-
DANCE WITH OUTSTANDING DEPRECIATION PERIODS, DEEMED TO BE REPRESENTATIVE OF THE
MULTIYEAR BENEFIT MADE TO THE COMPANYS ACTIVITY;
THE COSTS RELATIVE TO THE COMPANYS LISTING PROCESS, REGISTERED AMONG SET UP
AND EXPANSION COSTS ACCORDING TO THE PREVIOUS PRINCIPLES, WILL BE CLASSIFIED AS
A REDUCTION OF NET WORTH ON THE BASIS OF THE NEW IFRS PRINCIPLES;

39
 ASSETS IN FINANCE LEASING: ON THE BASIS OF THE PROVISIONS IDENTIFIED BY THE IFRS
PRINCIPLES (IAS 17), THE A319 CJ/LR AIRCRAFT WILL BE REGISTERED AMONG ASSETS IN THE
ITEM FLEET FOR THE CURRENT VALUE OF THE RENT (INCLUSIVE OF THE INITIAL MAXIRENT
RECORDED AT THE TIME AMONG PREPAID EXPENSES IN ACCORDANCE WITH PRIOR ACCOUNT-
ING PRINCIPLES) RELATING TO THE LIABILITY FOR RENTS TO BE PAID TO THE LEASING COMPANY.
IN THE STATEMENT OF PROFITS AND LOSSES, WITH REGARD TO THE RENT REGISTERED ON AN
ACCRUAL BASIS IN ACCORDANCE WITH THE PRIOR ACCOUNTING PRINCIPLES, DEPRECIATION FOR
THE FLEET AND INTEREST DUE ON THE FINANCIAL LIABILITY WILL BE RECORDED. THE DEPRECI-
ATION OF THE AIRCRAFT WILL BE DETERMINED ON THE BASIS OF THE COMPONENT APPROACH
BY DEPRECIATING THE MOTORS IN 6 YEARS AND THE CELL COMPONENTS IN 25 ANNI;
RISK AND EXPENSE FUNDS: ON THE BASIS OF NEW IFRS PRINCIPLES (IAS 37), RISK AND EX-
PENSE FUNDS WILL BE REGISTERED AT THE CURRENT VALUE OF THE LIABILITIES WITH REGARD
TO WHICH THEY WERE ALLOCATED IN THE BALANCE SHEET, WHENEVER THE REALIZATION OF THE
LIABILITY WITH REGARD TO WHICH THEY WERE ALLOCATED IS NOT FORESEEABLE WITHIN THE
SUBSEQUENT FISCAL YEAR. IN ACCORDANCE WITH PRIOR PRINCIPLES, NO DISCOUNTING BACK
OF LIABILITIES IS REFLECTED IN THE BALANCE SHEET;
EMPLOYEE SEVERANCE PAY (TFR): ON THE BASIS OF THE IFRS PRINCIPLES (IAS 19), TFR IS
ASSIMILATED TO A DETERMINED BENEFIT PLAN, WHOSE VALUATION IS DETERMINED BY APPLYING
METODOLOGIE ACTUARIAL METHODOLOGIES RATHER THAN ON THE BASIS OF THE PROVISIONS OF
ART. 2120 OF THE CIVIL CODE.

5. BANCA PROFILOS AND CENTROBANCAS CONFLICTS OF INTEREST

BANCA PROFILO, WHICH ACTS AS THE JOINT GLOBAL COORDINATOR OF THE GLOBAL OFFER, HAS
A POTENTIAL CONFLICT OF INTEREST IN THAT IT HAS FINANCIAL RECEIVABLES WITH REGARD TO THE
COMPANY. IN PARTICULAR, THE LINE OF CREDIT GRANTED TO THE COMPANY BY BANCA PROFILO AS
OF THE DATE OF 30 SEPTEMBER 2005 AMOUNTED TO 15,000 THOUSAND EURO, INCLUSIVE OF A
CASH LINE OF CREDIT IN THE AMOUNT OF 10,000 THOUSAND EURO (REVOCABLE AT ANY TIME, AT AN
INTEREST RATE EQUAL TO EURIBOR AT 3 MONTHS INCREASED BY 1 PERCENTAGE POINT AND, ON
AMOUNTS BEYOND THE CREDIT LINE, EQUAL TO EURIBOR AT 3 MONTHS INCREASED BY 3.5 PER-
CENTAGE POINTS), WHICH IS GUARANTEED BY A PLEDGE ON AN INSURANCE POLICY AND BY A MORT-
GAGE OF 5,000 THOUSAND EURO. IT IS NOTED THAT THE CASH LINE OF CREDIT OF 10,000 THOU-
SAND EURO, AND THE MORTGAGE FOR 5,000 THOUSAND EURO DO NOT CONTAIN FINANCIAL
COVENANTS OR NEGATIVE PLEDGES. AS OF THE DATE OF 30 SEPTEMBER 2005, THE CASH LINE OF
CREDIT IN THE AMOUNT OF 10,000 THOUSAND EURO HAD BEEN UTILIZED IN THE AMOUNT OF 14,134
THOUSAND EURO. THE APPARENT EXCEEDING OF THE LIMIT OF THE LINE OF CREDIT WAS DUE TO
EUROFLYS PURCHASE OF DOLLARS ON 30 SEPTEMBER 2005, AN OPERATION THAT LED ON THE SAME
DATE ALSO TO AN ACTIVE BALANCE IN EUROFLYS USD ACCOUNT WITH BANCA PROFILO IN THE
AMOUNT OF 4,168 THOUSAND EURO. OVERALL, THEREFORE, EUROFLYS POSITION WITH RESPECT TO
BANCA PROFILO AS OF 30 SEPTEMBER 2005 AMOUNTED TO 9,966 THOUSAND EURO (WITH RE-
SPECT TO A CREDIT LINE OF 10,000 THOUSAND EURO), IN ADDITION TO THE MORTGAGE, WHOSE
RESIDUAL LIABILITY AS OF 30 SEPTEMBER 2005 AMOUNTED TO 4,761 THUSAND EURO.

IT IS ALSO NOTED THAT BANCA PROFILO UNDERTOOK TO MAKE A STAND BY LINE OF CREDIT AVAIL-
ABLE TO THE COMPANY IN THE AMOUNT OF 2,500 THOUSAND EURO FOR A DURATION OF 18
MONTHS MINUS ONE DAY, PAYABLE UPON EXPIRATION.

SIMILARLY, CENTROBANCA, WHICH ACTS AS JOINT GLOBAL COORDINATOR OF THE GLOBAL OFFER
AND PLACEMENT MANAGER, UNDERTOOK TO MAKE A STAND BY LINE OF CREDIT AVAILABLE TO THE
COMPANY IN THE AMOUNT OF 2,500 THOUSAND EURO FOR A DURATION OF 18 MONTHS MINUS
ONE DAY, PAYABLE UPON EXPIRATION.

BANCA PROFILO FURTHER IS IN A SITUATION OF ADDITIONAL POTENTIAL CONFLICT OF INTEREST IN

THAT IT IS THE PRINCIPAL SUBSCRIBER TO THE PROFILO SPINNAKER INVESTMENT FUND, HOLDING
A SHARE OF 57.9%, AS WELL AS THE FACT THAT DURING THE PERIOD PRIOR TO THE GLOBAL
OFFER, IT PERFORMED CONSULTING SERVICES ON BEHALF OF THE COMPANY FOR THE PREPARA-
TORY ACTIVITY TO THE GLOBAL OFFER.

REFERENCE IS MADE TO SECTION III, CHAPTER 10, PARAGRAPHS 10.2 AND 10.3 AND TO SECTION
IV, CHAPTER 3, PARAGRAPH 3.3. FOR A MORE DETAILED ANALYSIS.

40
 SECTION III
INFORMATION RELATED TO THE ISSUER

41
 [This page intentionally left blank]

42
1. KEY PERSONS

1.1 PARTIES RESPONSIBLE FOR THE PROSPECTUS

The following parties assume responsibility, for the parts for which they are respec-
tively competent, for the information provided in the Prospectus:

Eurofly S.p.A. Issuer Milan, Via Ettore Bugatti no. 15

Spinnaker Luxembourg S.A. Selling Shareholder Avenue Monterey 23, L-2086,
Luxembourg
Centrobanca S.p.A. Placement Manager and Sponsor Milan, Corso Europa no. 16

1.2 DECLARATION OF RESPONSIBILITY

The present Prospectus conforms to the model filed with Consob on [

].

The parties responsible for the Prospectus attest that, having used all reasonable
diligence for such purpose, the information contained in the parts for which they are respective-
ly competent conform, in as much as they are aware, to the facts and do not have omissions
that would alter their significance.

43
2. AUDITORS

2.1 THE ISSUERS AUDITORS

Euroflys fiscal year balance sheet ended 31 December 2002 was audited by
Dianthus S.p.A., previously DT S.p.A. (previously Deloitte & Touche S.p.A.), having its registered
office in Milan, Via Olona 2, whereas with reference to the balance sheets ended 31 December
2003 and 2004, the same were audited by the Auditing firm Deloitte & Touche S.p.A., having its
registered office in Milan, Via Olona 2 until 26 January 2005, and starting from such date having
its registered office in Milan, Via Tortona no. 25. DT S.p.A. (previously Deloitte & Touche S.p.A.)
and Deloitte & Touche S.p.A. respectively, was and is associated with the Associazione Italiana
Revisori Contabili (ASSIREVI) (Italian Auditors Association).

44
3. SELECTED FINANCIAL INFORMATION

3.1 SELECTED FINANCIAL INFORMATION RELATING TO THE THREE YEAR PERI-

OD 2002-2004

Selected financial information relating to the three year period 2002-2004 is set forth
below:

Unless otherwise specified, Amounts in Euro/000 2002 2003 2004

Total flight hours 20,047 25,783 38,202

Passengers transported 813,793 978,825 1,474,341
Fleet availability in rental and wet lease (machine months) 84 100 133
Productivity Long Range fleet (in flight hours) 4,276 4,932 5,462
Productivity Mid Range fleet (in flight hours) 2,365 2,476 2,855
Revenue from sales and services, net of revenue from code
share (1) 119,592 158,149 232,113
Total revenue net of revenue from code share (1) 122,575 161,111 234,391
EBITDAR 12,575 27,406 24,261
Percentage impact on total revenue 10% 17% 10%
EBITDA (12,888) 7,777 8,100
Percentage impact on total revenue 11% 5% 3%
EBIT (14,996) 3,577 4,263
Percentage impact on total revenue 12% 2% 2%
Results of fiscal year/period (6,014) 2,722 6,835
Investments 9,087 11,726 48,614
Net financial position 17,273 26,070 4,891
Liquidity/net (financial indebtedness) 17,273 26,070 (801)
Net Worth 1,667 9,389 16,22

(1) Revenue is indicated net of revenue from code share in view of coherency with the reclassified data described in Chapter 9 (like the other
data inserted in the table). Differently from Chapter 20, in fact, in the reclassified statement of profits and losses described in Chapter 9,
revenue from code share is inserted among Other Revenue, net of the costs of code share (thus the code share margin is included among
Other Revenue) whereas in Chapter 20, in compliance with the provisions of the Civil Code, which do not permit offsetting, the revenue from
code share is included among the revenue from sales and services. In view of completeness, the following table indicates the reconciliation
between the reclassified data and the balance sheet data:

Amounts in Euro/000 2002 2003 2004

Revenue from sales and services, net of revenue

from code share 119,592 158,149 232,113
Revenue from code share 18,678 16,221 13,227

Total revenue from sales and services 138,270 174,370 245,340

45
3.2 SELECTED FINANCIAL INFORMATION RELATING TO THE TWO SIX MONTH
PERIODS ENDED 30 JUNE 2004 AND 2005

Selected financial information relating to the two six month periods ended 30 June
2004 and 2005 is set forth below:

Unless otherwise specified, Amounts in Euro/000 I six months 2004 I six months 2005

Total flight hours 15,577 20,266

Passengers transported 514,322 625,938
Fleet availability in rental and wet lease (machine months) 62 58
Productivity Long Range fleet (in flight hours) 462 455
Productivity Mid Range fleet (in flight hours) 225 253
Revenue from sales and services, net of revenue from code share (1) 93,302 127,859
Total revenu, net of revenue from code share (1) 94,663 128,413
EBITDAR 11,591 9,177
Percentage impact on total revenue 12% 7%
EBITDA 3,480 (3,040)
Percentage impact on total revenue 4% 2%
EBIT 1,649 (5,141)
Percentage impact on total revenue 2% 4%
Results of fiscal year/period 686 (3,251)
Investments 13,307 25,056
Net financial position (153) (7,982)
Liquidity/net 4,847 (21,926)
Net Worth 10,075 7,973

(1) Revenue is indicated net of revenue from code share in view of coherency with the reclassified data described in Chapter 9 (like the other
data inserted in the table). Differently from Chapter 20, in fact, in the reclassified statement of profits and losses described in Chapter 9,
revenue from code share is inserted among Other Revenue, net of the costs of code share (thus the code share margin is included among
Other Revenue) whereas in Chapter 20, in compliance with the provisions of the Civil Code, which do not permit offsetting, the revenue from
code share is included among the revenue from sales and services. In view of completeness, the following table indicates the reconciliation
between the reclassified data and the balance sheet data:

Amounts in Euro/000 I six months 2004 I six months 2005

Revenue from sales and services, net of revenue from code share 93,302 127,859
Revenue from code share 7,787 210
Total revenue from sales and services 101,089 128,069

46
4. RISK FACTORS

For a description of the risk factors related to the Issuer, the market in which it op-
erates, the Global Offer and the Issuers financial instruments, reference is made to Section II
above.

47
5. INFORMATION REGARDING THE ISSUER

5.1 HISTORY AND EVOLUTION OF THE ISSUER

5.1.1 The Issuers legal and commercial name

In accordance with art. 1 of the By-laws, the Issuer is a share capital company
named Eurofly S.p.A..

The Issuers commercial name is Eurofly.

5.1.2 The Issuers place of registration and its registration number

The Company is registered in the Company Register maintained by the Chamber of

Commerce of Milan at no. 05763070017 and at the Repertorio Economico Amministrativo
(R.E.A.) of the Milan Chamber of Commerce at no. 1336505.

5.1.3 The Issuers date of incorporation and duration

The Company was incorporated on 26 May 1989 in the form of a share capital com-
pany, having the name Eurofly S.p.A., by means of an act registered by Notary Oscar Ghione
of Turin, rep. no. 84198 and file no. 25502.

The Companys duration established by its By-laws is through 31 December 2050,

and it can be extended upon a resolution of the extraordinary shareholders meeting. Art. 3 of
the By-laws provides that in the case of a resolution extending the term of the Companys du-
ration, not even those shareholders who did not approve such resolution will have a right of with-
drawal.

5.1.4 The Issuers domicile and legal form, legislation on the basis of which it oper-
ates, country where incorporated, as well as address and telephone number of
its registered office

The Companys registered and administrative office is in Milan, via E. Bugatti no. 15,
telephone number 02-826881. It also has a secondary office in New York (United States of
America), at the J.F.K. airport.

The Company was incorporated and is regulated in accordance with Italian law and
has been incorporated in the form of a share capital company.

5.1.5 Important facts regarding the evolution of the Issuers activity

Eurofly was incorporated on 26 May 1989 with a share capital of 200 million Lire by
Ing. C. Olivetti & C. S.p.A. (which held 45% of the share capital), by Alitalia (which held 45% of
the share capital) and by the merchant bank Sanpaolo Finance S.p.A. (which held 10% of the
share capital), for the purpose of initiating the activity of charter airline operator.

Eurofly began to operate in 1990 with a license that entitled it to engage in the pub-
lic transportation of passengers. The first commercial flight took place on 21 February 1990,
from Milan Malpensa to Gerona (Spain) as an incentive flight organized for a convention of Ford
Italia. During the same year, Eurofly made its first flight to the destination of the Red Sea for the
tour operator Pianeta Terra.

48
 Eurofly was therefore born as a charter carrier specialized in the sale to tour operators
of its airplane transportation capacity and was focused, in particular, on the Mid Range sector.

The economic results since its incorporation through 1998 were stable, substantial-
ly balanced; Euroflys activity is concentrated on Mid Range charter with an outfitted base at the
airport of Orio al Serio (BG) and flights largely originating from the airports of Orio al Serio and
Milan Malpensa; Euroflys administrative offices are set up in Turin, its commercial offices are in
Milan and its operative offices are at the airport of Orio al Serio.

Euroflys initial fleet consisted of 2 DC-9-51 aircraft having 139 seats made available
through Finance Leasing, which remained in the fleet until 1999. During the beginning of the
1990s, the fleet progressively grew with the introduction by means of the Operative rental of the
same kind of aircraft, but which were more modern and had greater capacities and performance
(MD-83 having 165 seats), until it arrived at 7 aircraft during the course of 1998 (2 DC-9-51 and
5 MD-83).

In 1998 the Company decided to initiate Long Range operations, an activity that has
characteristics in part heterogeneous but which are synergetic with respect to its original activ-
ity, in that it requires different aircraft (larger and having different technical and operative re-
quirements reference is made, for example, to a need for assistance 24 hours out of 24), more
numerous crews and crews having specific qualifications. The Long Range operations, howev-
er, have the advantage of being a business area with a complementary seasonal nature with re-
spect to the Mid Range activity (see Section III, Chapter 6, Paragraph 6.1.1.7.).

During the course of the same year, all of the Companys activities were grouped to-
gether in the area of Milan, the outfitted base was transferred from Orio al Serio to Milan
Malpensa, whereas the corporate structure was concentrated in the new offices in Sesto San
Giovanni, at the gates of Milan.

In order to initiate Long Range operations, in December 1998 2 Boeing 767-300 be-
came part of the fleet by means of an Operative rental from Alitalia, having a passenger config-
urations of 264 seats, followed by a third aircraft of the same kind (263 seats) in December 1999,
also in Operative rental. The initiation of Long Range operations significantly modified Euroflys
activity, leading to a strong increase both of its ground personnel (from an average of 38
Employees in 1997 to an average of 74 Employees in 1999), as well as flight personnel (from an
average of 101 Employees in 1997 to an average of 312 Employees in 1999).

Also during the course of the year 1999, it decided to sell the DC-9-51 aircraft, which
by then were obsolete and no longer capable of satisfying anti-noise laws which had entered
into effect during those years. The divestment of said aircraft, anticipated with respect to the es-
timated depreciation period, caused a noticeable capital loss and thus a significant economic
loss during fiscal year 1999, accented also by the losses related to the initiation of the Long
Range operations and by costs deriving both from the devaluation of the Lire with respect to the
US Dollar as well as by the strong increase in the cost of jet fuel.

It was necessary to recapitalize the Company subsequent to said losses, to which

only Alitalia adhered, thus becoming Euroflys sole shareholder in 2000.

In 2000, the continued strengthening of the US Dollar, the growth of the quotations
of jet fuel and a strong increase of competition, in particular in the Long Range segment, caused
further strong losses for Eurofly; in order to remedy the drop in profitability, some efficiency ac-
tions were taken, among which the substitution of the Mid Range fleet with new Airbus aircraft,
by means of the progressive divestment of 5 MD83 aircraft and the insertion of 5 new Airbus
A320 aircraft (A320) (177 seats), owned by Alitalia and leased to Eurofly starting from May
2001.

11 September 2001 provoked a grave shock to the entire airline sector: Alitalia con-
sequently came up with a plan of action that provided, among others, for the divestment of its

49
subsidiary Eurofly, and it began the selection of potential purchasers. Alitalia also decided to
take back possession of the entire fleet leased to Eurofly, which, after having analyzed the mar-
ket and equipping itself with the necessary expertise, decided to acquire new aircraft by means
of Operative rentals, managing to benefit from favorable conditions with respect to the past.
During the course of 2002, Eurofly stipulated Operative rentals directly with company leaders in
the sector for the acquisition of two A330-200 (A330) (292 seats, which became part of the
fleet during the course of 2002 in substitution of the three Boeing 767-300 utilized for Long
Range) and five new A320 (180 seats) in substitution of those leased from Alitalia (a substitution
which began in October 2002 and ended in October 2003).

The 2002 economic results were still negative, aggravated by the phase of exchange
of the fleet and the drop in traffic subsequent to 11 September 2001, whereas fiscal year 2003
signaled the return to positive economic results, due to the actions that had been taken since
2002 both with regard to costs as well as revenue and the lack of costs related to the exchange
of the fleet.

On 15 September 2003, 80% of Euroflys Shares were sold for a total consideration
(subsequent to price adjustments agreed upon in the purchase contract) of approximately 10.4
million Euro (corresponding to a price per Share of 1.94 Euro), from Alitalia to Spinnaker
Luxembourg (previously Effe Luxembourg S.A.) which, on 9 July 2004, subsequent to the exer-
cise of an option right granted to it by Alitalia, purchased the remaining part of Euroflys share
capital, becoming its 100% Shareholder, for a total consideration of approximately 2.6 million
Euro (corresponding to a price per Share of 1.94 Euro).

In 2004 the corporate reorganization process was completed, which had begun with
the substitution of the fleet, primarily by means of the internal organization of the activity that
previously had been concentrated in Alitalia. During the course of 2004 and the first months of
2005, Eurofly purchased 11 MD-80/82 aircraft from Alitalia, which were later sold to third party
operators (see Section III, Chapter 6, Paragraph 6.1.1.2.). As their substitution, between the end
of 2004 and the beginning of 2005, Eurofly obtained the availability in Operative rental of an ad-
ditional 3 A320 having 180 seats.

During the course of 2004 the Company was also involved in the analysis of Euroflys
commercial strategy, which was modified in order to broaden its sphere of activity from charter
carrier to leisure carrier, i.e. an airline operator interested in satisfying the needs of a consumer
who travels primarily for vacation, not only by means of the sale to tour operators but, from the
viewpoint of multi-channel sales, by directly reaching final consumers (see Section III, Chapter
6, Paragraph 6.1.1.6.2.).

The preparatory activities, still underway, were also initiated for the initiation of a con-
nection between Milan and New York with a service that is solely business class (All Business)
(see Section III, Chapter 6, Paragraph 6.1.2.). An A319 CJ/LR aircraft was purchased in Finance
Leasing for such purpose (see Section III, Chapter 6, Paragraph 6.1.1.2.).

At the end of 2004, the tragedy of the tsunami in the Indian Ocean (see Section III,
Chapter 9, Paragraph 9.2.3.) led to an inevitable, even though temporary, reduction of Euroflys
Long Range activity towards those markets (in particular to the Maldive), only partially compen-
sated by a reallocation of its capacity towards other destinations; the concentration of the re-
quest was offset, however, by marketing actions that bore results starting from the month of
February 2005. The development of the Long Range activities recommenced with the inclusion
in May 2005 of a third A330 aircraft having 286 seats in the fleet, by means of an Operative
rental.

The summer of 2005 was darkened by the terrorist attack of Sharm El Sheikh. Eurofly
consequently suffered a drop in the reservations to Egypt: during the summer period, a large part
of the tourist flows that had been forecast was therefore diverted to other destinations (Greece,
Italy and Spain), whereas as of the Date of the Prospectus there has been a recovery of reser-
vations for the destination Sharm El Sheikh.

50
5.2 INVESTMENTS

5.2.1 Investments in intangible and tangible fixed assets and long term investments

The following chart indicates the details of intangible and tangible fixed assets and
long term investments during the three year period 2002-2004 and during the first six months of
2005.

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004 30/06/2005

Intangible Assets
Set up costs and expansion 1,879 2,165 1,913 2,527
Research, development and advertising
costs 309 270
Concessions, licenses, trademarks and similar
rights 292 265 544 774
Assets in course 396 32
Others 1,107 1,645 1,881 2,441
Total intangible assets 3,278 4,075 5,043 6,044

Tangible Assets
Buildings 31 6,027 7,858 8,040
Installations and machinery 1,245 1,610 14,421 1,778
Industrial and commercial equipment 153 343 429 517
Other assets 385 472 1,015 1,000
Assets in course 2,122 12,019 43
Total tangible assets 1,814 10,574 35,742 11,378

Long Term Investments

Receivables 5,515 5,449 8,632 23,797
Other securities 10,452 10,452
Total long term investments 5,515 5,449 19,084 34,249

With respect to the nature of the investments and the variations that occurred dur-
ing the three year period 2002-2004 and the first six months of 2005, reference is made to
Section III, Chapter 20.

5.2.2 Investments in the course of realization

During the course of 2005, the Company stipulated three letters of intent having as
their object the Operative rental of two A330 (one of which will enter the fleet starting from
November 2006 and the second starting from April 2007) and the purchase of three A350 (whose
delivery is provided for 2013 and 2014).

As of the Date of the Prospectus, the Company has made down payments regard-
ing the three A350, for the total amount of approximately 1 million US Dollars. On the presump-
tion that the final purchase contract with Airbus is executed within 31 January 2006, it is ex-
pected that between 2006 and 2013 further down payments will be given for a total amount of
approximately 120 million US Dollars (of which approximately 16 million US Dollars, to be paid
within April 2007, will be financed with part of the proceeds of the listing operation, and the re-
maining part, to be paid starting from 2011, presumably by means of the use of Operative rentals
or Finance Leasing), whereas the payment of the balance of the purchase price of the three
A350, estimated by the Company as approximately 230 million US Dollars, will be paid upon the
delivery of the above aircraft and will presumably be financed by means of the use of Operative
rentals or Finance Leasing.

51
 As of the Date of the Prospectus the Company, with regard to the two A330, had
given leasing companies security deposits for a total of 5,472 thousand US Dollars. Prior to the
delivery of the two aircraft, it is provided that a further total amount of 600 thousand US Dollars
be paid as additional security deposits. The durations provided by the Operative rental contracts
for the two A330 are respectively 8 and 7 years and the undertaking is equal to approximately
120 million US Dollars.

Further, as described in Section III, Chapter 20, the item Receivables of Long Term
Investments includes security deposits relative to Operative rentals and Finance Leasing con-
tracts. With respect to such contracts, analyzed in Section III, Chapter 8, security deposits were
paid in the amount of 6,541 thousand Euro.

5.2.3 Future investments

There are no investments that were previously the object of a definitive undertaking
for a significant amount. Reference is made to Paragraph 5.2.2. above with regard to the in-
vestments in the course of realization.

52
6. OVERVIEW OF ACTIVITY

6.1 PRINCIPAL ACTIVITY

6.1.1 Euroflys activity

Eurofly is an airline company that is the leader in Italy in the leisure market sector (see
Section III, Chapter 6, Paragraph 6.5.3.), i.e. the sector of flights with tourist destinations where the
final target of clientele is represented by people who want to fly primarily during their free time.
As of the Date of the Prospectus, Euroflys fleet consisted of 11 aircraft, all by means
of Operative rentals, (see Section III, Chapter 6, Paragraph 6.1.1.2.).
As of 31 December 2004, sales revenue amounted to 245.3 million Euro (see Section
III, Chapter 20, Paragraph 20.1.1.6.).
The following charts indicate the Companys growth trend over time; in 2004 almost
1.5 million passengers were transported, approximately 50% more with respect to the previous
year, whereas there were more than 38,000 flight hours, approximately 48% more with respect
to the previous year (see Section III, Chapter 9, Paragraph 9.2.2.1.).
Passengers
1.600.000

1.400.000

1.200.000

1.000.000

800.000

600.000

400.000

200.000

0
1997 1998 1999 2000 2001 2002 2003 2004

Passengers 644.107 846.933 1.009.875 1.045.285 1.034.812 813.793 978.825 1.474.341

Flight hours
45.000

40.000

35.000

30.000

25.000

20.000

15.000

10.000

5.000

0
1997 1998 1999 2000 2001 2002 2003 2004

Flight hours 14.483 18.154 26.776 29.445 28.036 20.048 25.783 38.202

53
 Eurofly performs airline operator activity prevalently as a charter. As such, it sells its
capacity primarily to tour operators, who purchase it in order to make up their own tour pack-
ages (inclusive of other services, for example food and lodging) and it therefore adjusts its des-
tinations on the basis of demand, in order to maximize the use of its capacity.

In general, a charter carrier is distinguished from a scheduled carrier in that it does

not have a rigid and predefined network (i.e. the overall routes operated) or published and non-
modifiable schedules.

The manner in which charter sales are made is characterized by the fact that capac-
ity is generally sold noticeably in advance with respect to the beginning of the season (summer
and winter) and primarily with the manner empty in exchange for full (see Section III, Chapter
6, Paragraph 6.1.1.6.1.).

Since there are limits on the marketing of a charter flight, which cannot be sold di-
rectly to the public, and also in view of developing different distribution channels and specifical-
ly being able to directly reach the final client, since 2004 Eurofly has added to its existing flights
other flights operated as scheduled flights, which can instead be sold retail (see Section III,
Chapter 6, Paragraph 6.1.1.8.1.).

During the summer of 2004, Eurofly therefore opened new sales channels as an ex-
periment, in order to distribute its products even by means of travel agencies as well as direct-
ly to final consumers (via web and call center). Such initiative began the multi-channel distribu-
tion strategy that the Company intends to progressively develop (see Section III, Chapter 6,
Paragraph 6.1.1.6.2.).

Over the course of its existence, Eurofly has offered its services almost exclusively
to Italian tour operators for outgoing flows (i.e. for Italian tourists who travel abroad).

Eurofly operates point to point flights that are prevalently international, i.e. flights per-
formed in order to serve a specific direct connection, and which are not aimed at allowing con-
tinuation in relation to connecting flights; further, depending on the destination, it distinguishes
its business between:
Mid Range activities: during fiscal year 2004, these activities represented 55.1% of
the sales revenue and primarily included the following destinations: Sharm El Sheikh
(Egypt), Marsa Alam (Egypt), Rodi (Greece), Ibiza (Spain), Tel Aviv (Israel), Heraclion
(Greece), Luxor (Egypt), Palma de Maiorca (Spain), Cairo (Egypt), Hurgada (Egypt).
The Mid Range flights are operated using 8 A320 aircraft (see Section III, Chapter 6,
Paragraph 6.1.1.2.);
Long Range activity: during fiscal year 2004, these activities represented 39.6% of
the sales revenue and primarily included the following destinations: Male (Maldive),
Cancun (Mexico), La Romana (Dominican Republic), Mombassa (Kenya), Punta Cana
(Dominican Republic). Further, starting from June 2005, Eurofly initiated connections
scheduled from Naples, Bologna and Palermo to New York (see Section III, Chapter
6, Paragraph 6.1.2.). All of the Long Range flights are made using 3 A330 aircraft (see
Section III, Chapter 6, Paragraph 6.1.1.2.);
Activities in code share: during fiscal year 2004, said activities represented 5.4% of
the sales revenue and referred to flight activities performed, in collaboration with
other carriers, at the airport of Milan Linate, where Eurofly owns three pairs of slots.
The collaboration with other carriers consists of code sharing agreements stipulated
with Alitalia through March 2005, and subsequently with Air One and another carrier
(see Section III, Chapter 6, Paragraph 6.2.1).

Euroflys technical and operative base, i.e. the airport that is the principal place of the
Companys operations, is the airport of Milan Malpensa (VA). There are other secondary bases,

54
in which the aircraft and crew are located some periods of the year: Bologna, Verona, Catania
and Sharm El Sheikh.

6.1.1.1 The destinations

Eurofly, operating primarily as a charter, has the characteristic of having a flexible

network. This means that Eurofly, even though it has destinations that by now are serviced in a
stable manner, has an elevated capacity to adapt its network to the needs of demand. Since the
variability of the individual routes is very high, the activities are normally sub-divided on the basis
of the concept of a belt, i.e. the entirety of the flights that originate from Italy and have anoth-
er country as their destination and vice-versa. As an example, the Egypt belt includes all of the
flights made from every Italian airport worked from/to Egypt and vice-versa.

Mid Range activities

The Mid Range flights cover the European area and the Mediterranean basin. The fol-
lowing map illustrates the principal Mid Range belts where the Company operates.

The following table indicates the revenue from Euroflys Mid Range flights by princi-
pal belt.

Mid Range

Amounts in Euro/000 2002 % 2003 % 2004 %

Egypt 25,908 34% 36,158 43% 55,723 41%

Greece 7,913 10% 10,101 12% 17,633 13%
Baleari 8,221 11% 6,064 7% 9,159 7%
Canary Islands 7,954 10% 8,704 10% 8,887 7%
Others 25,835 34% 22,684 27% 43,658 32%
Revenue from sales and services 75,831 100% 83,710 100% 135,060 100%

The belts included in the heading Others refer primarily to flights to Israel, Russia, Italy, France, Turkey and Tunisia.

The Mid Range activity is characterized by an elevated seasonal nature, connected

with the climatic characteristics of the regions that can be reached with a Mid Range flight time,
which renders such destinations preferable during the summer season and less so in the winter
season (see Section III, Chapter 6, Paragraph 6.1.1.7.).

55
Long Range activities

The following map illustrates the principal Long Range belts that the Company operates.

The following table indicates the revenue from Euroflys Long Range flights by prin-
cipal belt.

Long range

Amounts in Euro/000 2002 % 2003 % 2004 %

Maldive 17,183 39% 25,786 35% 35,281 36%

Mexico 9,782 22% 18,880 25% 18,531 19%
Santo Domingo 3,289 8% 14,377 19% 15,243 16%
Kenya 2,641 6% 4,828 6% 5,216 5%
Others 10,866 25% 10,568 14% 22,782 23%
Revenue from sales and services 43,761 100% 74,439 100% 97,053 100%

6.1.1.2 The aircraft

6.1.1.2.1 The fleet

As of the Date of the Prospectus, Eurofly operates with a fleet of 11 Airbus aircraft,
all in Operative leasing. Further, the Company has stipulated a Finance Leasing contract relating
to an A319 CJ/LR aircraft, which has currently been transferred by means of an Operative rental
to third parties and is thus not part of the fleet (see Section III, Chapter 9, Paragraph 9.1.1.).

The manufacturer, Airbus, is one of the world leaders in the manufacture of civil air-
lines for passenger transportation. Eurofly considers the use of a homogeneous Airbus fleet to
be advantageous, in that this allows it to count on the concept of family (similarities between
airplanes of diverse dimensions and performance) and on fly by wire technology (flight para-
graphs by electronic signals) used by the manufacturer.

Eurofly feels that the homogeneity of the fleet constitutes a determining factor for the
Company, in that it permits synergies of cost both with regard to the maintenance as well as the
management of the crews. In particular, due to this homogeneity, Eurofly is the first operator in
Italy to benefit from a mixed fleet flying authorization (see Section III, Chapter 6, Paragraph
6.1.1.8.2.), due to which part of the pilots, suitably trained, can be utilized indifferently on Mid
and Long Range flights, guaranteeing greater productivity.

56
 The average age of Euroflys fleet is young: the average age of the A320 aircraft (cal-
culated with reference to the date of 31 August 2005) is 4.3 years, whereas that of the A330 air-
craft is 3.4 years. The age of the A319 CJ/LR aircraft is instead only 3 months. This means that
the Company has technologically updated aircraft available, with a high level of trustworthiness
and with reduced and foreseeable maintenance costs.
The following table describes the evolution of Euroflys fleet from 2003 through
August 2005.

Entry in

May-03

May-04

May-05
Registration

Nov-03

Nov-04
Aug-03
Sep-03

Dec-03

Aug-04
Sep-04

Dec-04

Aug-05
Feb-03

Feb-04

Feb-05
Mar-03

Mar-04

Mar-05
Jun-03

Jun-04

Jun-05
Jan-03

Oct-03

Jan-04

Oct-04

Jan-05
Type

Apr-03

Apr-04

Apr-05
Jul-03

Jul-04

Jul-05
mark the fleet

I-BIKC A320-214 May-01

I-BIKD A320-214 May-01
I-BIKF A320-214 May-01

I-DAWZ MD-82 Mar-04

I-DAWW MD-82 Mar-04
I-DAVA MD-82 Apr-04
I-DAVD MD-82 May-04
I-DAVC MD-82 Jun-04
I-DAWY MD-82 Jun-04
I-DAVF MD-82 Jul-04

I-EEZB A330-223 Aug-02

I-EEZA A330-223 Sep-02
I-EEZJ A330-223 May-05

I-EEZC A320-214 Oct-02

I-EEZD A320-214 Feb-03
I-EEZE A320-214 Mar-03
I-EEZF A320-214 Apr-03
I-EEZG A320-214 May-03
I-EEZH A320-214 Dec-04
I-EEZI A320-214 Dec-04
I-EEZK A320-214 Feb-05

The chart demonstrates how during the course of 2003, also in relation to the change
of Euroflys ownership, the last 3 A320 aircraft leased from Alitalia left the fleet (the first 2 left the
fleet during the course of 2002), to be substituted by 5 A 320 aircraft by means of the leasing
companies GATX and GECAS. The overlapping of Alitalias aircraft with those leased from inter-
national lessors permitted Eurofly to benefit from a fleet of 8 A320 aircraft during the 2003 sum-
mer peak. The Mid Range fleet was then expanded due to an additional 3 A320 aircraft (leased
through GECAS) that entered the fleet between December 2004 and January 2005 in substitu-
tion of 7 MD80/82, which in the meantime had been transferred to third parties.
The above MD-80/82 had been purchased by Eurofly by exercising options originally
granted by Alitalia to Banca Profilo on 15 September 2003 and sold in October 2003 to Eurofly for a
total price of 2,613 thousand Euro, of which 2,122 thousand Euro was paid to Banca Profilo and 491
thousand Euro to Alitalia (see Section III, Chapter 9, Paragraph 9.1.1., and Chapter 20). In this re-
gard, it is noted that, during the previous months, Banca Profilo had initiated negotiations with Alitalia
having as their object the purchase, by a party to be named, of Euroflys share capital and the grant-
ing of the above options. Upon the outcome of such negotiations, on 31 July 2003 a contract hav-
ing as its object the purchase by Spinnaker Luxembourg of 80% of Euroflys share capital (and a put
option and a call option for the remaining 20%) was stipulated between Alitalia and Spinnaker
Luxembourg, as the party named by Banca Profilo, together with an undertaking by Alitalia to grant
the above options to Spinnaker Luxembourg or to a party designated by it within the deadline for the
transfer of the shareholding. As performance of the above contract, Spinnaker Luxembourg desig-

57
nated Banca Profilo as the beneficiary of the options in question, in view of the fact that Eurofly was
not initially interested in said options in that it did not have the necessary elements to evaluate the
usefulness of the aircraft that were the object of the options, since they were machines that were
rather old and above all were not homogeneous with the rest of the fleet (it is noted that Eurofly has
an Airbus fleet). From the time of the consale to Banca Profilo through the time of the sale of said
options to Eurofly, Eurofly has developed an interest in operating a certain number of said aircraft
during the summer peak of the following year, and also notes that the purchase price of said aircraft
could be advantageous. The object of the options was the purchase from Alitalia of 13 MD 80/82,
which described in detail the technical characteristics as well as the manner and times of delivery.
The options having the first 5 aircraft as their object could have been exercised within October 2003
and those relative to the remaining 8 aircraft within March 2004. Eurofly, after having exercised the
above options, purchased the first 7 MD-80/82 aircraft between April and August 2004, and had
them enter its fleet in order to use them during the summer peak. At the end of the summer period,
Eurofly decided to return to a total homogeneity of its fleet, increasing the number of A320 aircraft
serving its Mid Range operations by 3 units and selling to third parties, at market value and with the
payment of the price upon the delivery of the aircraft, both the cited 7 MD-80/82 aircraft that entered
its fleet as well as the subsequent 4 MD 80/82 purchased from Alitalia between October 2004 and
February 2005 (the latter 4 aircraft were never operated by Eurofly and therefore they were not in-
cluded in the above chart). With regard to the remaining 2 MD 80/82, in December 2004 Eurofly sold
the right to purchase them from Alitalia to third parties. It is specified that the third party assignees
of the MD80/82 aircraft were not and are not parties that are related to Eurofly.
Overall, the investment made for the purchase of the options and the aircraft, gross
of depreciation, amounted to 21,083 thousand Euro (2,613 thousand Euro as the total cost of
the purchase of the option rights, 18,020 thousand Euro for the purchase cost of the aircraft, and
450 thousand Euro for commissions paid to Banca Profilo), whereas the consideration for the
sales of said aircraft, realized for market conditions with third party operators, was 23,605 thou-
sand Euro. TConsequently, the capital gains realized by Eurofly for the entire transaction bear-
ing in mind depreciation during fiscal year 2004 in the amount of 322 thousand Euro - was 2,844
thousand Euro (of which 1,264 thousand Euro, net of the capital losses of 67 thousand Euro
originated from the lower sale price with respect to the registration value for a MD-80 aircraft,
competence of fiscal year 2004, and 1,580 thousand Euro during the first six months of 2005,
net of the capital losses of 14 thousand Euro that originated from the exchange rate). Said cap-
ital gain derived from the difference between sales prices (amounting to 23,605 thousand Euro)
and the net investment for the purchase of the options and the aircraft (amounting to 20,761
thousand Euro, as a result of the difference between the gross investment of 21,083 thousand
Euro and the depreciation for fiscal year 2004 of 322 thousand Euro).
In the Companys opinion, the above operations permitted the development of im-
portant know how within the Company with regard to the phase in and phase out operations, i.e.
the activities related to the entry and exit of aircraft from the fleet.
The Long Range fleet instead includes 3 A330-200 aircraft, leased through ILFC, of
which 2 entered the fleet in 2002 and the last in May 2005.
Euroflys fleet as of the Date of the Prospectus includes:
8 Airbus A 320 aircraft, outfitted for 180 passenger seats in economic class and
8/10 seats for the crew. These aircraft have a cruising speed of 830 km/h, fly at a
maximum altitude of approximately 12,000 meters, have an autonomy when full of
approximately 3,500/3,700 km, and have motors manufactured by CFM International
S.A.. The above aircraft are operated on the basis of the Operative rental contracts
described in the table:
Registration mark I-EEZC I-EEZD I-EEZE I-EEZF I-EEZG I-EEZH I-EEZI I-EEZK

Age (years) (31/08/2005) 3.0 2.7 2.6 2.5 2.4 7.9 7.9 5.9
Year of construction 2002 2003 2003 2003 2003 1997 1997 1999
Initiation leasing 10/2002 02/2003 03/2003 04/2003 05/2003 12/2004 12/2004 02/2005
End leasing 10/2008 02/2009 03/2009 04/2008 05/2008 12/2009 12/2009 10/2009
Duration leasing (years) 6 6 6 5 5 5 5 4.7
Lessor (manager) GATX GATX GATX GECAS GECAS GECAS GECAS GECAS

58
 3 Airbus A 330 aircraft, outfitted with 282/286 passenger seats (of which 12/26
business class and the remaining economic class) and 15 seats for the crew. These
aircraft have a cruising speed of 870 km/h, fly at a maximum altitude of approxi-
mately 12,500 meters, have an autonomy at full load of approximately 11,500 km and
have motors manufactured by Pratt & Whitney. The above aircraft are operated on
the basis of the Operative rental contracts described in the chart:

Registration mark I-EEZA I-EEZB I-EEZJ

Age (years) (31/08/2005) 5,0 4,9 0,3

Year of construction 2000 2000 2005
Initiation leasing 09/2002 08/2002 05/2005
End leasing 04/2009 04/2009 05/2012
Duration leasing (years) 6,6 6,7 7,0
Lessor (manager) ILFC ILFC ILFC

In addition, Eurofly is a party to a Finance Leasing contract for an A319 CJ/LR aircraft
(Corporate Jetliner/Long Range), purchased in order to initiate the All Business Milan-New York
activity (see Section III, Chapter 6, Paragraph 6.1.2.). Said aircraft has been delivered by Airbus
but is not yet part of Euroflys fleet because the latter, at the same time of delivery (31 May 2005)
transferred it with an Operative rental to third parties for seven months (until 5 January 2006).
In addition, Eurofly has agreements with Airbus that permit Eurofly to order, for the same
price conditions as the first aircraft (updated on the basis of Airbus standard adjustment formula),
an additional A319 CJ/LR aircraft within the first six months of 2006, with delivery in 2007.
The Airbus A319 CJ/LR aircraft derived from the standard A319 model and shares all
of the characteristics of the Airbus A320 family. It was designed to satisfy the Long Range needs
of private parties and executive air taxi companies, offering a passenger cabin that is very spa-
cious and above all the technology and reliability of an Airbus aircraft. It is the object of great in-
terest by the airline companies due to the possibility of offering new exclusive Long Range ser-
vices. The principal differences of the A319 CJ/LR with respect to a standard A319 are the
greater maximum weight at takeoff, which allows more fuel to be boarded, the removable sup-
plementary tanks for a modular refueling capacity, and motors with greater drive. The passen-
ger cabin can be designed according to the most diverse needs: configurations for Heads of
State, VIP, corporate, first class.
The Airbus A319 CJ/LR aircraft is outfitted for 48 passenger seats in business class
and 7 seats for the crew. This aircraft has a cruising velocity of 830 km/h, flies at a maximum al-
titude of approximately 12,500 meters, has an autonomy with a full load of approximately 7,600
km and has motors manufactured by CFM International S.A.. The aircraft was built in 2005 and
as of 31 August 2005 it was 0.4 years old.
The Finance Leasing contract relative to the A319 CJ/LR aircraft was stipulated on
17 May 2005 with the Company LOCAT S.p.A.. The contract starts from 1 June 2005, has a ten
year duration, and at its expiration provides that the Company has a right of redemption with re-
gard to the asset.

6.1.1.2.2 The purchase / sale of wet lease capacity

It is the practice in the sector, which also applies to the Company, to purchase or sell
operative capacity by means of wet lease contracts, typically in the form ACMI (Aircraft, Crew,
Maintenance and Insurance). This is done both for extremely brief periods of time, in order to re-
protect fleet aircraft that are temporarily unavailable for various reasons (such as, for example,
maintenance, breakdowns, mechanical problems), as well as for longer periods in order to ad-
just operative capacity to market demand.

59
clusive of the other operative costs, among which jet fuel, handling, and catering. Vice-versa, in
the case of wet leases to the Company, Eurofly registers the usual flight revenue, the cost of the
ACMI rental and the other operative costs not included in the rental price.

It is the Companys opinion that a careful management of both kinds of wet lease ac-
tivity, which implies a broad network of relationships with other airline companies, is strategic in
order to minimize the risks deriving from a misalignment between market demand and offer.

The following table describes the wet lease relationships (exclusively those that are
long term, without considering the re-protection of the aircraft) to which the Company is a party:

May-03

May-04

May-05
Nov-03

Nov-04

Nov-05
Aug-03
Sep-03

Dec-03

Aug-04
Sep-04

Dec-04

Aug-05
Sep-05

Dec-05
Feb-03

Feb-04

Feb-05
Mar-03

Mar-04

Mar-05
Jun-03

Jun-04

Jun-05
Jan-03

Oct-03

Jan-04

Oct-04

Jan-05

Oct-05
Company Type
Apr-03

Apr-04

Apr-05
Jul-03

Jul-04

Jul-05
Made to the Company
Long range A330-300

Mid range B757-200

Mid range MD-82
Mid range MD-82

Made by the Company

Mid range A330-223
Mid range A330-223

It is noted, in particular, that two A320 were given in wet lease to another carrier dur-
ing the period September 2005 April 2006, with the right of the latter to prolong the duration
of one of the two leases for an additional month. Such consale represents, in the Companys
opinion, an efficient response to the reduction of Mid Range demand consequent to the terror-
ist attack of July in Sharm El Sheikh and will allow Eurofly to better manage its operational ca-
pacity during the months of the low season.

60
6.1.1.3. Organizational Structure

Euroflys functional organizational structure as of the Date of the Prospectus is set

forth below:

CHIEF EXECUTIVE
OFFICER
A. Angioletti

DRU AMM
HUMAN RESOURCES ACCOUNTING & FINANCIAL
DIRECTOR DIRECTOR
S. Staffa Guidi E. Locatelli

CGE
QLT
CONTROL BUDGET
QUALITY DIRECTOR
& REPORTING DIRECTOR
L. Finzi
M. Pasquali

SIV IT
SAFETY & SECURITY INFORMATION TECHNOLOGY
DIRECTOR & FACILITIES DIRECTOR
L. Di Renzo L. Piazza

LEG
LEGAL AFFAIRS
a.i. A. Angioletti

COO CCO
CHIEF OPERATIONS CHIEF COMMERCIAL
OFFICER OFFICER
A. Zanetto A. Brunini

OCC SSB
PRA
OPERATIONS CONTROL STRATEGY & BUSINESS
PLANNING MANAGER
CENTER MANAGER DEVELOPMENT MANAGER
C. Fiorillo
M. Battocchio M. Faleschini

ADD GRO MKT COM

CREW TRAINING GROUND OPERATIONS MARKETING & CUSTOMER SALES DIRECTOR
MANAGER MANAGER RELATIONS MANAGER M. Crippa
F. Naibo D. Faltracco S. Perrella

OVL MAT ANC

ALB PRC
FLIGHT OPERATIONS ENGINEERING & ANCILLARY BUSINESS
ALL BUSINESS CONTRACTS MANAGER
DIRECTOR MAINTENANCE DIRECTOR MANAGER
a.i. A. Brunini F. Limoli
D. Pisenti R. Tommasini G. Armiri

Euroflys organization consists of:

7 staff areas that perform supporting activities to the CEO (Managing Director) for the
companys management;
2 divisions, sub-divided in turn into operative areas, that manage Euroflys prod-
uct/services: the operative division (the so-called factory) and the commercial divi-
sion.

Further, there is an Operational Committee that deal with issues inherent to the co-
ordination of the operational activities, providing rapid solutions to management problems and
formulating proposals for a better use of the organization from the viewpoint of productivity, op-
erative efficiency, and quality of the service performed. The managers of the Flight Operations,
Engineering & Maintenance, Human Resources, Operations Control Center, Ground
Operations, Safety & Security, Information Technology & Facilities and Planning areas
participate in the Committee, which meets at least once each month.

6.1.1.4 Euroflys operative division

The so-called factory deals with the realization of the Eurofly product and thus con-
stitutes the Companys operative soul. Its principal operative areas are described below.

61
6.1.1.4.1 Planning

This deals with planning the operational activity for the season in course, enhancing
production capacity in terms of the availability of the fleet and flight crew (i.e. pilots and flight as-
sistants). In said sense, it assures the enhancement of the use of the fleet and the flight person-
nel on the basis of the maintenance needs for the aircraft and compliance with the standard pro-
vided by law. Further, it manages requests for fly over rights and post-sale services for client tour
operators (for example to change schedules and destinations).

6.1.1.4.2 Flight Operations

This area deals with the management of flight personnel, guaranteeing compliance
with the technical-professional standards defined by the Company. For such purpose, for ex-
ample, it manages the selection and recruitment processes of flight personnel. Further, it de-
fines the operative flight standards coherently with company policy and oversees the manage-
ment of the technical documentation and supporting cartography for flight operations. Further,
it guarantees the constant monitoring of all activities related to piloting and the evaluation of
the route.

6.1.1.4.3 Operations Control Center

The operations control center manages flight operations and in such sense it:
ensures the proper operational management of the rotation of the crew and the vari-
ations in their programming of the shifts of the flight personnel;
performs constant supervision of flight trends;
provides support to pilots in terms of the preparation of flight plans, routes, and me-
teorological maps;
inserts the data of each flight and sends the commercial documentation for the
flights to the other competent corporate entities and to all of the layovers involved;
further provides for the activation of every possible alternative in the case of opera-
tive emergencies that lead to Euroflys impossibility to operate a flight and therefore
make it necessary to rely on another carrier to guarantee service to the final user.

6.1.1.4.4 Ground Operations

For the performance of the ground operations, which consist of the preparatory flight
activity for passengers, luggage and goods in the airport, Eurofly uses an airport handling com-
pany chosen according to an attentive and codified evaluation of quality. Eurofly therefore has
an internal organization that monitors the handling company, in order to guarantee the en-
hancement of the services requested.

Such organization, based at the airport of Milan Malpensa, is responsible for:

guaranteeing the security and regularity of ground operations, by means of a system
of direct control and monitoring of all service providers in accordance with what is
set forth in the JAR-OPS rules;
providing assistance to passengers, aware that the service offered by an airline com-
pany is not limited to the activities performed during the flight, but that a key element
of the products quality consists precisely of the ground services.

The activity performed is further supported by the presence of Euroflys personnel at

the airports of Rome Fiumicino and New York J.F.K..

62
6.1.1.4.5 Engineering & Maintenance

Eurofly has its own technical organization, certified according to the European JAR
OPS and EASA Part 145 norms (see Section III, Chapter 6, Paragraph 6.1.1.8.), which is re-
sponsible for guaranteeing all of the maintenance activities in order to guarantee over time the
maintenance of the state of air navigation, as well as the efficiency, quality and technological de-
velopment of the aircraft in the fleet. Within the context of such organization, Eurofly is also ca-
pable of offering to maintenance services to third parties for the purposes set forth above. The
maintenance activity is substantially divided in scheduled maintenance (which consists of main-
taining air navigation between one base inspection and another and which is performed on site
during the pauses of flight activity) and basic maintenance (which is performed in the hangar and
primarily at predetermined expirations). The first is performed mainly by Eurofly and partially by
third party companies; the second is instead entrusted entirely to third parties.

The organization of Euroflys maintenance activity is situated near the airport of Milan
Malpensa, Euroflys operative base, and consists of engineering, planning and maintenance
areas. Further, there is a small nucleus of technical maintenance staff at the airport of Sharm El
Sheikh that support the activities at such base.

The engineering area maintains constant relationships with Airbus, United

Technologies Corporation (Pratt and Whitney), CFM International S.A. and other manufacturers
and with the Italian and European aeronautics authorities, in order to determine the kind and
scope of maintenance work and modifications during the course of the operative life of the air-
craft; further, it provides technical support for the evaluation and insertion of new aircraft in the
fleet and programs the necessary spare parts.

The programming area maintains relationships with the companies with whom Eurofly
had stipulated maintenance contracts (EADS Sogerma Services, Alitalia, SR Technics Switzerland
and others), in order to program and best utilize the pauses of the aircraft in order to perform the
forecast maintenance work. Said companies, certified according the European norms EASA Part
145, provide know how, resources, equipment, hangars and spare parts in accordance with pro-
grammed needs or according to necessity; in particular, they provide spare parts, located near
Euroflys operative base at Milan Malpensa and they provide access to their warehouses located in
strategic airports such as Paris CDG, Rome FCO, and Zurich ZRH. The programming area also
maintains all of the technical documentation that attests to the maintenance history of the aircraft.

The maintenance area provides resources, means, equipment and warehouses in

order to perform all of the maintenance scheduled at the operative base; it intervenes
24/24hours, 7/7days at the base or peripheral stopovers, in the case of maintenance activity or
problems of a technical nature in order to resolve breakdowns and maintain aircraft in service at
the maximum level of efficiency.

Technical reliability of the fleet

The following table indicates the trend of the Technical Aircraft Dispatch Reliability,
i.e. the average annual percentage of reliability of Euroflys fleet, compared to the average world-
wide value published by the manufacturer Airbus. Said value indicates the fleets technical reli-
ability, based on the number of delays in excess of 15 minutes caused by technical problems,
the number of aircraft in the fleet and the number of flights made during the year.

Data regarding Euroflys dispatch reliability (%) - Source of Worldwide data: Airbus

Fleet Worldwide Eurofly Worldwide Eurofly Worldwide Eurofly

2002 2002 2003 2003 2004 2004

A320 99.20% 98.72% 99.20% 99.18% 99.20% 99.16%

A330 98.90% 98.59% 99.00% 98.17% 99.00% 98.05%

63
6.1.1.4.6 Crew Training

This area defines programs regarding both the education and training of personnel
in the flight preparation phase, and determines periodic programs for flight crews on the basis
of the Companys operative needs.

Eurofly holds Approval Certificate no. I/TRTO/007 issued by ENAC, attesting that
Eurofly satisfies all of the JAR FCL requirements regarding the creation of a training organiza-
tion, and it is authorized to operate on the basis of such approval as a training center. Eurofly
believes that holding the above mentioned TRTO certificate is essential in order to reach and
maintain high qualitative standards.

The TRTO (training center) has multiple value within a company:

it satisfy the training needs of the company itself, making it independent from other
structures, with high standards, greater flexibility and lower costs;
it train its technical personnel, captains, pilots, flight assistants and aeronautical
technicians directly with the standards that the company itself requires;
it provide training for the growth of the technical and professional capabilities of its
own personnel.

Due to the TRTO, the Company provides training primarily to its own personnel. Training
is, however, also provided outside the Company to other companies and to private parties.

In brief, the authorized training courses are:

courses that permit Eurofly to train pilots for its own kind of aircraft and for the pas-
sage from one to another;
courses for future flight assistants, aimed above all at having them pass the profes-
sional qualification exam for flight assistant held by ENAC and therefore the insertion
of such figures among Euroflys personnel.

6.1.1.5 Staff functions

In addition to the typical support functions that are not described in detail
(Administration, Control, Personnel, Legal Office, IT & Facilities), Eurofly, as an airline company,
has two special staff areas briefly described below:
Quality: the principal function is that of overseeing the verifications and control of
existing procedures and the constant monitoring of the Companys compliance with
the prerequisites determined by the competent aeronautics authorities, with whom it
manages relationships and reporting. In addition to this it coordinates the structuring
of the Companys quality system by means of the preparation and updating of the
relative manuals, and determines the verification programs for the Companys struc-
tures and third party suppliers;
Safety & Security: this area contributes to the continuous improvement of the
Companys operative security conditions, providing support in order to reinforce the
risk prevention system on the ground and in flight. It monitors national and interna-
tional news in terms of flight security, ensuring that the necessary information is pro-
vided to the area directly affected; it contributes and collaborates in the preparation
and implementation of education and training for personnel on these issues.

6.1.1.6 The commercial division

6.1.1.6.1 Distribution to tour operators

The major part of Euroflys capacity is currently sold by means of seasonal or annual
contracts. Eurofly thus serves the vacation market with a logic that is similar to wholesale sales.

64
 The charter sales contracts with the tour operators are characterized by some idio-
syncrasies that are briefly described below:
1) The tour operators purchase either the aircrafts entire capacity, or, a phenomenon
that is increasingly common, a part of the same (split charter) as empty in ex-
change for full i.e. they buy available seats regardless of whether they are actually
filled. The split charter contract provides for various tour operators on the same
flight who divide the aircrafts capacity. It is agreed that the risk of completely filling
the aircraft in a split charter rests with Eurofly;
2) The contracts are stipulated much in advance with respect to the flights, typically
during one season in view of the other, i.e. during the summer season the winter con-
tracts are negotiated and vice-versa;
3) In order to consider the possible variations of external factors, such as the trend of
the exchange rate (Euro/USD) and the trend of the price of jet fuel, all of the contracts
are indexed to said parameters and provide, within certain maximum limits and with
exclusions, for an adjustment mechanism of the prices to the tour operators. Said
mechanism, however, does not always allow the proceeds to be adjusted to the vari-
ations of the cited factors, not only for the above indicated maximum amounts and
exclusions but also whether it is commercially opportune and because there is a time
difference between the variation of prices/rates and the application of adjustments.
In particular, the contracts that are stipulated approximately 6 months in advance
with respect to the flights provide for a maximum adjustment of 10% of the value of
the packages in which the flight is included, calculated on the basis of parameters
that are established at the time of the negotiation. Consequently, if the prices of raw
materials undergo significant increases over a short period of time, as occurred dur-
ing the year 2005, such adjustment might not be entirely applicable. Further, there is
strong competitive pressure in the air transportation sector in general which, at the
time of the negotiation and renewal of the contracts with the tour operators, might
not permit an increase of prices that would adequately compensate the above fluc-
tuations;
4) The contracts also provide penalty clauses in the case of cancellations of part or all
of the contracted program, with a scale that provides for an increase of penalties in
proximity to the date of the flight;
5) In general, the payment conditions provide that the flights are invoiced to the clients
2 weeks prior to the flight and must be paid prior to the flight, even if in some spe-
cial cases this rule is derogated from;
6) Some contracts are stipulated with so-called brokers, i.e. tour operators who pur-
chase capacity from Eurofly and then re-sell it to smaller tour operators. They are,
however, consolidators who act as if they are the final client from Euroflys view-
point.

Eurofly has relationships with the principal Italian tour operators: for example, the
Alpitour group, I Viaggi del Ventaglio, Costa Crociere, Teorema Tour and many others (see
Section III, Chapter 6, Paragraph 6.5.2.).

Euroflys primary client among the tour operators is Teorema Tour (19.8% of its 2004
revenue), a tour operator that is among the most active in the Italian market, which underwent
very significant growth over the past years and which, differently than Alpitour and Viaggi del
Ventaglio, does not have its own charter company. It is noted that Alpitour and I Viaggi del
Ventaglio, even though they have their own charter company, have in any event maintained their
commercial relationships with Eurofly, with a significant level of revenue.

In addition to tour operator clients, Eurofly has relationships with other kinds of
clients for ad hoc or incentive flights, such as, for example, flights made for soccer teams
(Eurofly is the official carrier of F.C. Internazionale and the Italian national soccer team and was
the official carrier of A.C. Milan during the course of the 2004/2005 season), for the Ferrari rac-
ing team, in addition to having been awarded an important contract in 2004 from the Italian
Ministry of Defense for the transportation of the Italian army.

65
 Its first 5 clients represent 46.2% of Euroflys revenue for fiscal year 2004, whereas
during the previous fiscal year, the first 5 clients represented 52.7% of Euroflys revenue. It is
noted that Alitalia is among the first 5 clients, obviously not in relation to tour operator activity
but principally for the invoiced sales deriving from scheduled activity in code sharing performed
with Alitalia until the beginning of 2005 (see Section III, Chapter 6, Paragraph 6.2.1.). The first 10
clients instead represent 62.8% of Euroflys revenue for fiscal year 2004, with respect to 68.6%
during the previous year.

6.1.1.6.2 Direct distribution

Euroflys sales are not limited only to the sale to tour operators or to clients for ad
hoc or incentive flights. In fact, while on the one hand this kind of sale is advantageous for
Eurofly in that the latter manages an extremely limited number of clients that purchase all or part
of an aircrafts capacity, in Euroflys opinion the needs of tourist demand should not be ignored,
which over the course of the past years gradually began to be oriented towards do it yourself
reasoning, i.e. the organization of ones own vacation without buying a package already pre-
pared by a tour operator.

In 2004 Eurofly, aligning itself with the principal tendencies of the sector throughout
Europe, thus decided to modify its distribution strategy, passing from mono-channel sales to
multi-channel sales. Starting from 2004, in fact, new direct and indirect sales channels were
added to the traditional sales channels aimed at tour operators, which permit Eurofly to reach
the final user in a more capillary manner. Eurofly thus no longer deals exclusively with tour op-
erators, but reaches the final consumer also by means of travel agencies, its own call center, its
own Internet site and international distribution systems.

Since the direct sale to the final user is not allowed on charter flights but only on
scheduled flights, in order to develop the above new distribution channels, since 2004 Eurofly
has added to its existing flights other flights operated as scheduled flights (see Section III,
Chapter 6, Paragraph 6.1.1.8.1.).

Notwithstanding the process of introducing multi-channels presents issues of partic-

ular complexity (it is sufficient to just think of the complication of the administrative procedures,
when until 2003 Eurofly managed a limited number of clients, and it had to equip itself in order to
manage a much greater number), the Company feels that it has succeeded in rapidly equipping it-
self with a system that is adequate for its needs. It is a gradual process, initiated in 2004 and which
is still in course: during the first six months of 2005 direct sales represented little more than 1% of
Euroflys sales revenue. The phenomenon is, however, in growth in that during the first six months
of 2005 Eurofly totaled an amount of direct sales greater than the total sales of the year 2004.

As service to Euroflys multi-channel system, it equipped itself with technical instru-

ments such as: a flight inventory system (i.e. a system in which all of Euroflys flights are described
and all of the seats are placed for sale), a reservation system (i.e. a system that permits anyone to
have access to the inventory system and to reserve one or more seats) and different distribution
systems (that permit reaching the final clients or intermediaries within the value chain).

The systems that Eurofly has in such regard are:

Inventory & Reservation System: Gabriel, manufactured by SITA Inc., is the system
that contains the inventory of all of Euroflys flights and it is continuously updated
(manually or automatically) in order to consider all of the flights, schedules, the kind
of aircraft utilized for each route, the classes for reservations, the seats that have
been sold and those that are still available. Said system is connected in an au-
tonomous manner with all of the GDS (Global Distribution Systems) and the Internet
Booking Engine system in order to guarantee visibility outside the system of the
seats sold and that remain to be sold for each flight;
Internet Booking Engine: ITravel Direct, manufactured by SITA Inc., is the system that
permits access to SITA Gabriel through Euroflys Internet site, in such a way that it is

66
 possible to sell the available seats for each of the Companys flights directly on the
Internet. Said system thus demonstrates available seats to Internet users, the fares,
and is capable of concluding a transaction on line, i.e. sell as seat to a client (in-
cluding the management of payments by means of credit cards).

In order to render these systems accessible to the public, in 2004 Eurofly initiated a
call center service, currently being managed by Alicos S.p.A., a company active in call center
services for the airline sector which, which coverage 6 days out of 7 and 16 hours a day, per-
mits both final clients as well as travel agencies and small tour operators (who have a dedicat-
ed line) to purchase a seat on a Eurofly flight.

In addition to the call center and in order to recognize the current tendencies of do
it yourself consumers, Eurofly set up an Internet site (www.eurofly.it), which contains the above
booking engine, which permits anyone to be able to buy a seat on a Eurofly flight by taking
just a few steps.

Further, starting from the end of 2004, Eurofly is present in the principal GDS (Global
Distribution Systems), i.e. the reservation systems available to the primary travel agencies, which
can thus directly reserve the Companys flights from their terminals without having to pass
through the call center or Euroflys Web site. Eurofly has stipulated agreements with the prima-
ry worldwide GDS, i.e. Galileo, Amadeus, Sabre, Worldspan and Apollo (the latter only for the US
market). In order to render the flights and fares visible to all travel agencies, Eurofly utilizes, as
is standard in the sector, the OAG system for the distribution of flight schedules and the ATPCO
system for the distribution of fares.

Final User

CALL CENTRE
Web Site TOUR OPERATORS
TRAVEL AGENTS

Internet
Booking
Engine

GDS

ATPCO
OAG

CRS HOST
(Gabriel) (Gabriel)

In order to promote its own products with regard to the sector of travel agencies,
Eurofly has also appointed some GSA (General Sales Agent) who, in specific geographic areas,
promote Eurofly at a local level by means of visits to the principal travel agencies, in order to sup-
port them with the reservation procedures and to increase brand awareness. Currently, Eurofly has
stipulated agreements with 4 GSA: Trawel (for the entire Italian market with the exception of Sicily),
Coretur (for Sicily), e-flight (for the United States) and Villa Travel (for the Maldive).

67
6.1.1.6.3 Organization of the commercial division
The commercial area deals with the planning and sale of the Eurofly product. The
principal areas are described below:
Strategy & Business Development: ensures the constant monitoring of the market and
the competition; makes proposals to the Board of Directors for the preparation of the mid
and long term industrial plan; is responsible for the determination of the mid /long term
network (starting from the season subsequent to the one in course); it also collaborates
in determining business development initiatives, pricing policies and the determination
of the product in terms of routes, frequencies and services; it is also responsible for re-
lationships with the authorities for the management of slot requests and traffic rights;
Marketing & Customer Relations: proposes and manages initiatives aimed at reinforc-
ing the Companys image; it ensures the relationships with external entities and with the
media and analysis aimed at understanding the trend of demand for air transportation
by users; it ensures good management (also with the use of external firms) of relation-
ships with passengers (lost & found luggage, claims management, and VIP services);
Sales: manages the sales activity prevalently with personnel dedicated to commer-
cial relationships with the tour operators. It also oversees sales by means of other
channels: travel agencies (the activity of sales promotion is performed directly by the
GSA with Euroflys supervision), call center and Web site; it manages the price poli-
cies coherently with corporate objectives, and the operative management of distrib-
ution channels and internal ticketing;
All Business: this deals with the All Business flights project that will connect Milan
to New York;
Ancillary Business: this deals with the development of revenue not strictly tied to
the flights such as sales of accessory services on the Web site, sales of products on
board, the sale of advertising space and initiatives on board the fleet, on its Web site
and on the magazines on board; it manages commercial and partnership relation-
ships with third party providers of accessory services; and also manages the com-
mercial part of the Companys cargo activity;
Contracts: ensures the purchasing of jet fuel and the handling services necessary to
the Company at the stopovers and the purchasing of catering; it guarantees the nec-
essary contacts for the logistical placement of personnel (hotels); and oversees the
constant monitoring of suppliers.

6.1.1.7 Phenomenon of a seasonal nature that characterize the principal sectors of ac-
tivity
The following chart illustrates the number of passengers on international flights that
originated from Italy in the year 2004.
16,000

14,000
PASSENGERS (000)

12,000

10,000

8,000

6,000

4,000

2,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: Assaeroporti 2004

68
 In the segment of international flights, demand is characterized by a clear seasonal
nature, with peaks concentrated in the summer months. This trend is determined in particular by
the segment of vacation flights, and, more specifically, by Mid Range destinations, where sum-
mer demand is estimated as being even 4 times greater with respect to winter demand. The
Long Range vacation flights market instead has less accentuated peaks, with peaks during the
winter season.

Turning to an analysis of Euroflys activity, it is characterized by a strong seasonal na-

ture present in all of its business areas. The following chart indicates the distribution of the flight
hours per month per aircraft, divided among Mid and Long Range.
Flight hours month year 2004

600,00

500,00
Long
Range
Flight hours per aircraft

400,00

300,00

Mid
Range
200,00

100,00

0,00
January February March April May June July August September October November Dicember

The seasonal nature of Mid Range flights, similar to that of the market in general, is
concentrated in the summer period, which represents a true peak of the activity, with the flight
hours being double in August with respect to the periods of the low season (from October
through March). The principal reason is tied to climatic conditions: Euroflys Mediterranean des-
tinations, in fact, are very appealing during the summer period (Spain and Greece above all,
whereas during the low season the flights are concentrated on Egypt and the Canary Islands,
the only Mid Range destinations that have an annual request.

Long Range is instead characterized by a peak in the winter season (from December
through April) as well as a summer peak (July and August). Even here, the reason for this evident
seasonal nature is tied to climatic factors: in the low season (May and June) it is the rainy sea-
son in Euroflys principal destinations (Maldive and Kenya), and consequently flight demand is
significantly reduced.

In order to alleviate these phenomenon, Eurofly has initiated two important projects:
for Mid Range it decided to base some aircraft at Sharm El Sheikh, in order to bet-
ter exploit the diminished seasonal nature of this destination, initiating connections
not only to the principal Italian airports but also to secondary airports (the so-called
reverse charter). Further, Eurofly is evaluating whether incoming projects in
Southern Italy are opportune, whose seasonal nature is expected to be less than the
typical nature of the Italian outgoing market;
for Long Range, instead, summer connections (the low season for the principal des-
tinations) were initiated to destinations characterized by an inverse seasonal nature

69
 (i.e. those where the period of greatest tourist flow is represented by the summer
season, from May through October), such as, for example, destinations in North
America.

6.1.1.8 The normative framework and Euroflys authorizations

6.1.1.8.1 Air traffic

a) Air traffic within the European Union

In accordance with EC Regulation no. 2408/1992, Member States allow Community

air carriers to have traffic rights on routes within the European Union by means of scheduled or
charter flights. In particular, said normative regulates the access of European Union airline com-
panies to intra-Community routes, allowing any airline company having a Community airline car-
rier license to operate any route within the Community air space, including the domestic routes
(domestic flights) of each Member State.

As a consequence of such liberalization, within the European Union the distinction

between a scheduled and a charter flight is less evident than with respect to extra-Community
flights and obtaining a scheduled right for a destination does not present particular regulatory
difficulties, except for the availability of the necessary slots (see subsequent letter c).

Even though selling a prevalent part of its capacity as a charter carrier, Eurofly oper-
ates towards some destinations with scheduled rights. Euroflys tendency to acquire scheduled
rights became accentuated starting in 2004, when the multi-channel concept was introduced. In
particular, Eurofly increased its efforts aimed at acquiring scheduled rights for some destina-
tions, in order to be able to insert the flight in its reservation system and thus make a direct sale
to the final user.

Eurofly operates as a scheduled carrier on the following domestic and intra-

Community routes (single/return):

Italy and the United Kingdom Greece Canary Islands Baleari

Milan Linate Milan Malpensa and Rome Milan Malpensa Milan Malpensa and Bologna
Rome Fiumicino (*) Fiumicino Mikonos Fuerteventura Ibiza
Milan Linate Milan Malpensa and Rome Milan Malpensa Tenerife
Naples (*) Fiumicino Heraclion
Milan Linate Milan Malpensa and Rome
London Heathrow (*) Fiumicino Rodi
Milan Malpensa and
Rome Fiumicino Santorini

(*) Route operated in code sharing, which can be purchased from travel agencies by means of GDS and Euroflys call center.

b) Air traffic towards extra-Community destinations

Scheduled Flights

The possibility of making scheduled flights is regulated by Bilateral Traffic

Agreements between Italy and the State of destination. Usually such agreements regulate the
manner in which air traffic can be performed and, among others, the number of airline operators
who can be designated to perform the air route and the flight frequencies allowed. Said des-
ignations are made by ENAC, in accordance with art. 785 of the Navigation Code, as substitut-
ed by Legislative Decree no. 96 of 9 May 2005, on the basis of criteria established previously
and made public and by means of transparent and non discriminatory procedures. The desig-
nations are then communicated to the foreign State that has signed the bilateral agreement,

70
which as a rule does not object to the choice of the operator chosen by the other contracting
party.

The designation obtained from ENAC is non-transferable and does not expire, but it
can be revoked (without any expenses to be borne by the airline operator) in the case of a lack
of use or specific breaches of the rules set forth in the relative bilateral agreement.

It is noted that in the specific case of the United States, the air traffic regime provid-
ed in the bilateral agreements is the so-called open sky regime, i.e. each Italian or US com-
pany can operate on the route, upon prior specific authorization by the competent authorities.

Similar to what was noted in clause a) above with reference to the intra-Community
routes, also in the case of extra-Community destinations, even though selling a prevalent part of
its capacity as a charter carrier, Eurofly operates to some destinations with scheduled rights, for
the same reasons set forth above. Specifically, outside of the European Union, Eurofly operates
scheduled flights for which it has been designated and authorized by the competent authorities,
to the following destinations:
Maldive;
Sri Lanka;
Kenya;
United States;
Dominican Republic.

Charter flights

Charter flights can be made, at low season, upon the mere request of the operator
to the State of destination. There are no particular problems of saturation regarding the requests,
but the operator is required to comply with specific regulations that vary from Country to
Country. Eurofly makes charter flights essentially to Mexico and Tanzania (Zanzibar), Egypt,
Israel, Greece, and Spain.

c) Slot allocation

The role of the so-called slot allocation is particularly significant, and constitutes a
conditioning element of the freedom of access to intra-Community routes provided by EC
Regulation no. 2408/1992.

In accordance with EC Regulation no. 95/1993, as modified by EC Regulation no.

793/2004, slot means the permission to utilize the entire range of airport infrastructures nec-
essary to operate an airline service in a coordinated airport (i.e. in un airport where the air traffic
must be regulated due to particular congestion, authors note) on a specific date and time allot-
ted by a coordinator, appointed by the Member State responsible for the airport (and thus not
simply by the airport authorities as occurs for uncoordinated airports).

In accordance with art. 6 of the cited Regulations, in a coordinated airport the com-
petent Member State guarantees the definition of the parameters for the allotment of the time
band twice each year, bearing in mind in the meantime all of the pertinent technical, operative
and environmental restrictions as well as eventual changes related to them.

In particular, with regard to the manner in which the allocation is made, art. 8 of the
cited Regulation provides that:
a series of time bands entitles the air carrier ... to obtain the same series of time
bands in the following corresponding traffic season (so-called Grandfather right),
on the condition that:

71
 a series of time bands was utilized by an air carrier to perform scheduled airline ser-
vices and programmed and charter airline services and
said air carrier can duly prove to the coordinator that the series of time bands in ques-
tion was used, in conformity with the coordinators initial authorization, by said air
carrier at least 80% of the time during the course of the traffic season for which it was
allotted.

Art. 8 bis provides that the time bands can:

a) be moved by an air carrier from one route or kind of service to another route or kind
of service operated by the same air carrier;
b) be transferred:
(i) between a parent and affiliated company and between affiliated companies of the
same parent company;
(ii) as part of a total or partial acquisition;
(iii) when the time bands are directly connected to the air carrier that has been ac-
quired;
c) be traded, one for another, among air carriers.

The transfers or exchanges must be notified to the coordinator and are not effective
prior to the coordinators explicit confirmation.

Further, in accordance with art. 10, the time bands allotted to an air carrier can be
utilized by another or other participating air carriers in a common activity, as long as the code of
the air carrier to whom the time bands were allotted continues to indicate that the flight is shared
for purposes of coordination and control.

Art. 10 also provides that the coordinator shall create a pool that contains all of the
time bands that have not been allotted on the basis of art. 8 ... The time bands grouped in the
pool shall be distributed among the carriers who have requested them. 50% of said time bands
shall be distributed above all to new competitors, unless their requests are less than 50%. The
coordinator shall treat the requests of new competitors and the other carriers in a fair manner, in
conformity with the coordination periods of each day of programming.

The slots cannot be sold for consideration.

In Italy, the coordinated airports are: the airport systems of Milan and Rome, Turin,
Genoa, Venice, Bologna, Florence, Pisa, Catania, Palermo, Naples, Bari, Cagliari, Lampedusa
and Pantelleria.

With regard to extra-Community airport systems, there is no problem of airport con-

gestion analogous to that of the European Union and, therefore, there is no particular conges-
tion in the airports of destination currently of interest to Eurofly. The slots (which, in fact, are rel-
atively easy to obtain upon the simple request of the operator) are allotted on the basis of the
procedures provided by the International Air Transport Association (IATA) by means of the
worldwide scheduling guidelines updated through 1 July 2004 and which, further, have con-
stituted a model for the adoption of EC Regulation no. 95/1993.

Euroflys slots

As the traffic capacity of European airports is limited, the slots represent a significant
resource for an airline company. Among others, Eurofly currently has three pairs of slot (for sin-
gle and return flights) at the Milan Linate airport (currently operated in code-sharing with AirOne
and another carrier).

72
 In any case, Eurofly has all of the slots necessary to operate the flights that have
been programmed at present for the next IATA season (winter), which starts from 30 October
2005.

d) The flyover right

The flyover right is guaranteed by the Chicago Convention of 7 December 1944, to

which the greater part of the Countries in the world have adhered, among which Italy. A flyover
generally implies the payment of royalties, whose amount varies from Country to Country.

e) Air transportation and the carriers liability

This topic is regulated by the Montreal Convention of 28 May 1999, by Community

law (EC Regulation no. 2027/1997, as modified by EC Regulation no. 889/2002 and EC
Regulation no. 261/2004), as well as by the Navigation Code, in a residual manner.

6.1.1.8.2 The authorization regime for the performance of the activity

a) The license for air transportation

The performance of air transportation is subordinate to the issuance of the relative li-
cense in accordance with the provisions of EC Regulation no. 2407/1992, recently implemented
in the Navigation Code due to the effect of Legislative Decree no. 96 of 9 May 2005. The is-
suance and maintenance of the license, on the basis of the provisions of such Regulation, are
subordinate to the existence of numerous prerequisites relating to both economic-financial as-
pects, as well as technical-operative aspects.

Above all, in accordance with art. 4 of the cited Regulation, the license is based on
the prerequisites that the airline operator:
(i) has a principal center of activity and, if it exists, its registered office in a Member
State, and
(ii) its principal activity consists of air transportation, exclusively or in combination with
any other commercial use of aircraft, or the repair and maintenance of aircraft.

Further, the operator must be and must remain owned, directly or by means of a ma-
jority shareholding, by the Member States and/or citizens of the Member States, and the effec-
tive control of the company must be exercised by these States or by these citizens.

With regard to the most strictly economic-financial prerequisites, art. 5 of the same
Regulation provides that the license can be issued on the condition that the operator demon-
strates that it can:
(i) comply at any time with its actual and potential undertakings established on the
basis of realistic presumptions for a period of twenty-four months starting from the
initiation of the operations;
(ii) that it is capable of facing fixed and operative costs related to the operations, ac-
cording to its economic plans and determined on the basis of realistic presumptions
for a period of three months from the initiation of the operations, and without con-
sidering the revenue deriving from said operations.

The authorities that issue the license can at any time, and in any event whenever it
clearly appears that an air carrier that they authorized is in financial difficulty, evaluate its ser-
vices from a financial point of view and suspend or revoke the license when it reaches the con-

73
clusion that said carrier is no longer capable of complying with its actual and potential obliga-
tions for a period of twelve months.

With regard to the Companys technical-operative requisites, as provided by art. 9 of

the cited Regulation, it must have a Air Operator Certificate (COA), which attests that the op-
erator has the professional and organizational capacity required to ensure the use of its aircraft
in conditions of safety (see subsequent clause b).

With regard to the issuance and maintenance of the license, there are some restric-
tions regarding liability in the case of accidents and availability due to ownership or a contract
for the use of the aircraft.

With regard to the duration of the license, the Regulation cited on various occasions
provides that the license remains valid as long as the air carrier satisfies the provisions of the
Regulation, however the Member States (as is the case of Italy) can provide that the license is
subject to review one year after it is issued and subsequently every five years.

Euroflys license

By means of Decree no. 40/EEC on 8 August 1994, the General Management of the
Civil Aviation issued Eurofly a license to act as an air carrier, subordinating the validity of the
same on the maintenance of the prerequisites required for its issuance, to be verified by ENAC
every five years.

b) The COA (air operator certificate)

The JAA (Joint Aviation Authorities) have prepared regulation JAR-OPS 1 which de-
fines the common principles relative to the technical-operative pre-requisites for the activity of
air operator that has become mandatory starting from 1 January 2002 in accordance with a spe-
cial ENAC regulation. ENAC, by means of a Regulation on 28 July 2005, ordered that in order to
obtain and maintain the COA, a carrier must demonstrate that it has the pre-requisites set forth
in JAR-OPS 1 Amendment 7 of 1 September 2004, with some variations and specifications set
forth in the Regulation itself.

The compliance of the carriers organization and manner of operating with the above
technical-operative regulations is attested by the COA (Airplane Operator Certificate).

The controls that are made for it to be issued and subsequent control are directed to
personnel (possession of competence and professional qualifications), the procedures (efficien-
cy and compliance with regulatory provisions), the means (flight suitability and suitability for the
type of operation) and finally an on site verification.

The principal areas that are the object of ENACs control for the issuance and main-
tenance of the COA are primarily the following:
flight suitability of each individual aircraft used: verifications such as ground and
flight inspections and documentary inspections of the aircrafts and operators regis-
trations (compliance with expirations for maintenance programs, compliance with
requirements for mandatory modifications, performance of modifications, mainte-
nance and repairs in conformity with law, eventual maintenance performed by other
certified firms);
existence of prerequisites for the crew: possession of pilots licenses, qualification for
the type of aircraft, currently valid medical certificates, passing periodic controls of
professionalism, performance of basic and recurrent theoretical and practical train-
ing on flight simulators;

74
 regularity of the operative and safety procedures: preventive control programs, ade-
quacy of the procedures for the management of acts of illicit interference, manner of
performing refueling jet fuel, anti-icing treatment, planning the flight on the basis of
the route, emergency procedures that permit managing all possible problems and
emergency situations, both in flight as well as on the ground;
presence of the required equipment: installation on board the aircraft and maintain-
ing the efficiency of the instrumentation necessary to conduct the flight and naviga-
tion, communications equipment, emergency and survival equipment (extinguishers,
oxygen system, small life rafts and safety jackets).

The COA is issued by the aeronautics authority of the State where the operator has
its legal office (ENAC in the case of Italy) and it is renewed one year after its issue and, subse-
quently every two years. It contains the list of all of the aircraft in the fleet with their characteris-
tics, which must comply with the JAR-OPS 1 regulations. Each addition or removal of an aircraft
to/from the fleet requires updating the COA, which must be requested according to the proce-
dures set forth in JAR-OPS 1 and according to what is provided by ENAC by means of the al-
ready cited Regulation of 28 July 2005.

Euroflys COA

On 30 December 2002, ENAC issued Eurofly COA no. I-038 with the relative
Operations Specification (with regard to which a further revision was made on 7 June 2005),
which expires on 30 December 2005. The renewal can be requested starting from 60 days prior
to such expiration and the renewal procedures by the Authority are, due to practice, in any event
performed in such a way as to be completed within the expiration of the certificate.

The Operations Specification indicates, among others, that Eurofly is qualified to

transport passengers and goods as well as the territorial context in which the Company is au-
thorized to operate, specifically:
the A330 fleet can operate throughout the world with the exception of the Pacific
areas, the North Pole and the South Pole;
the A320 fleet can operate in the areas of Europe, the Middle East and North Africa.

Euroflys Operations Specification also contains some Special Authorizations/Approvals

that give particular value to its certification:
landing and take-off in low visibility (CAT IIIA, CAT IIIB and LVTO), i.e. authorizations
that permit operating with regularity in adverse meteorological conditions;
180 minute ETOPS authorization, limited to the A330 aircraft, i.e. the possibility to
perform Long Range operations with these bimotor aircraft that involve routes, as in
the case of oceanic routes, that bring the aircraft to a distance of up to 180 flight min-
utes from the nearest suitable airport (in the lack of an ETOPS authorization the max-
imum distance is 60 minutes);
Mixed Fleet Flying, i.e. the possibility of using, under specific conditions, part of its
pilots on both fleets (Mid and Long Range), thus reducing the seasonal phenomenon
and increasing the operative flexibility and efficiency in the use of the crews.

c) The authorization to operate in the United States

Eurofly has an OST-2001-10310 authorization issued by the U.S. Department of

Transportation which allows it to operate in the United States with its Long Range fleet. Said cer-
tification, having unlimited validity, initially obtained to operate flights on behalf of Alitalia and
subsequently to operate charter flights on its own, was recently updated to permit the sched-
uled connections that Eurofly operates between some Italian airports and New York.

75
d) Personnel training

Eurofly holds approval certificate no. I/TRTO/007, issued by ENAC on 2 July 2002
and subject to annual renewal (which was obtained subsequent to the favorable outcome of the
controls made by ENAC in order to verify maintenance of the quality standards). Said certificate,
currently valid through 1 July 2006, attests that Eurofly satisfies all of the requisites of the JAR
FCL normative regarding the creation of a training organization, and it is authorized to operate
on the basis of such approval as a training center for specific courses indicated in the annex to
the approval certificate, among which that for flight assistants and qualification for
A319/320/321/330 aircraft (see Section III, Chapter 6, Paragraph 6.1.1.4.6).

e) Regulation of flight and service times

ENAC, by means of a special Regulation on 23 March 2005, placed new limits on

flight and service times as well as prerequisites for rest time for flight personnel, with the objec-
tive of increasing the safety conditions of flights. In general, said Regulation provides that it must
be entirely implemented within 26 March 2006, establishing, however, that starting from 1 July
2005, the specific provisions that permitted a prolonged use of the so-called reinforced crew
are no longer effective.

Eurofly deems that such Regulation can be criticized, in particular due to the partic-
ular restriction of the time within which it must be implemented, and, together with other airline
companies, it initiated an appeal in front of the TAR Lazio requesting that it be annulled, upon its
temporary suspension.

TAR, by means of an injunction on 23 June 2005, accepted the request for precau-
tionary relief, ordering that such restriction of time, even though aimed at achieving the broad-
est levels of security, should suggest to the enjoined that it again reflect, upon appropriate re-
view, on the issue of the time for the above adjustment.

On the basis of such order, on 14 July 2005 ENAC deferred the Regulation in ques-
tion, postponing the original term of 1 July 2005 to 30 October 2005.

A hearing has been set for 26 January 2006 for the discussion of the cited adminis-
trative judgment on the merits.

6.1.1.8.3 The ownership and management of the aircraft

a) Ownership/lease and rental contracts

An airline operator can be the owner of the aircraft of its fleet or utilize them by
means of leasing or rental contracts, regulated by the Navigation Code, which must be autho-
rized by the competent authorities in accordance with the procedures and criteria established
by circular no. 19 of 8 November 1996 of the Italian Aeronautics Registry (RAI), whose re-
sponsibilities were subsequently transferred to ENAC.

In particular, according to what is literally indicated in the above circular, the con-
tracts can be defined as follows:

i) lease (dry lease)

This is the case of the lessee companys use of an aircraft that it does not own, but
which it utilizes in the context of its own operating license; in this case, the contract of use has
as its object a good which is the aircraft;

76
ii) lease (wet lease)

This is the case of the lessee companys use of an aircraft that it does not own, but
which it utilizes in the context of the lessor companys operating license; in this case, the con-
tract of use has as its object a service represented by one or more trips made with the aircraft.
The object of such contract is thus the aircraft, together with the crew and maintenance services,
as well as insurance (so-called ACMI - aircraft, crew, maintenance, insurance) and is usually uti-
lized by operators to cover temporary peaks in market demand.

b) Maintenance of the aircraft

The European airline operators must obtain a special certificate of approval in con-
formity with Regulation EC no. 2042/2003 in order to perform maintenance on the aircraft.

As provided by ENACs circular no. 70 of 22 July 2005, which substitutes prior cir-
cular no. 53 of 30 April 1998, the operator must ensure the following activities using its own
structures, at least at the principal base of operations and at secondary stable bases:
servicing;
transit and ETOPS inspections, in the event provided, as well as daily inspections;
inspections of calendars and high frequency schedules;
basic functional testing;
research and the elimination of problems that would limit or not permit the use of the
aircraft.

With regard to the remaining maintenance scheduled and the further maintenance
provided in the maintenance program for each individual aircraft, the operator must obtain the
certification required by the above norms and in particular that provided by EASA Part 145 (i.e.
in Annex 2 to the cited EC Regulation no. 2042/2003) or grant such activities to parties who have
been authorized for said purpose.

In the case of rented aircraft (wet lease), ENAC issues the authorization only if exist,
in general in the country of origin as well as in the specific object of the rental safety conditions
that are equivalent to national conditions. This is verified, if necessary, also by means of an on
site visit by a technical-operative team of the Italian operator or by ENAC, that ascertains the ex-
istence of such conditions with the authority of the foreign country and care of the specific op-
erator of the aircraft that is rented.

Euroflys certification

Eurofly holds certification IT 145.0285, issued by ENAC on 23 November 2004 in

conformity with EC Regulation no. 2042/2003, as the party qualified to perform the scheduled
maintenance on site at the Milan Malpensa airport. Said act was integrated on 23 March 2005
in order to permit the same activity in the airport of Sharm El Sheikh (Egypt). Said approval cer-
tificate is limited to what is specified in the list of authorized operations set forth in the manual
of the maintenance company approved in accordance with EASA Part 145, and is subordinate
to compliance with the procedures of EASA Part 145. The certification is valid until 19 November
2005; after such date, subsequent to the favorable outcome of the controls performed by ENAC,
aimed at verifying maintenance of the prescribed pre-requisites, it will have unlimited validity.

Said certification is particularly significant for Eurofly, in that it permits it to perform

on its own a substantial part of the scheduled maintenance, whether or not programmed, for all
of its fleet at their respective bases, in addition to allowing it the possibility of providing said ser-
vices to third parties at the Milan Malpensa base (see Section III, Chapter 6, Paragraph
6.1.1.4.5).

77
c) The administrative documentation for the aircraft
Title V of the Navigation Code, and Royal Decree no. 356 of 11 January 1925, pri-
marily regulate the administrative regime of the aircraft and thus the documents necessary for
their use. They are principally:
A. registration certificate: document that certifies the registration of the aircraft in the
National Aeronautics Registry in accordance with art. 750 of the Navigation Code,
which lists, in accordance with art. 755 of the same Code, the name of the owner
and the operator and the eventual annotation of changes of ownership, real rights,
executions or injunctive relief related to the aircraft;
B. navigation certificate: document provided by art. 764 of the Navigation Code, which
attests to flight suitability and the category of the aircraft. Said certificate is accom-
panied by the Certificate of Review of Air Navigation which expires every 3 years;
C. acoustical certificate: this is a document that certifies compliance with specific norms,
both European as well as American, and in particular with Chapter 36 (Aircraft noise);
D. authorization of use: authorization issued by ENAC for the use of the aircraft, with an
indication of the relative expiration;
E. declaration of transfer to the operator: communication provided by art. 874 of the
Navigation Code to ENAC (and countersigned by it and referred to in the registration
certificate), with the legal title for the use of the aircraft and the relative expiration an-
nexed thereto;
F. insurance policy: insurance provided by articles 965 and 1010 of the Navigation
Code, which is convalidated by ENAC, for civil liability to third parties on the ground;
G. radio station license: document required by art. 179 of Royal Decree no. 356 of 11
January 1925 for the use of radiotelegraphic and radiotelephonic stations for the air-
craft, issued by the Ministry of Communications.

6.1.2 New products and strategies

Euroflys vision is to be the private airline company that is the leader in the segment
of vacation flights (see Paragraph 6.5.3.2. in this Chapter), focused prevalently on extra-
European international connections, oriented towards innovation and rapid in responding to new
market opportunities.
In said sense, the Company will continue its strategy of evolving from a charter car-
rier to a leisure company, by means of giving a further impulse to the multi-channel distribu-
tion model, which was recently initiated and which is aimed at selling capacity not only to tour
operators but also to the growing segment of do it yourself tourists.
In terms of the products offered, Euroflys portfolio is characterized by:
a progressively increased Long Range activity, which is a sector with a minor competi-
tive presence, less seasonal and with greater entry barriers than with respect to Mid
Range activity. For such purpose, Eurofly foresees expanding its offer capability over the
short term by means of the entry of new A330 and, over the long term, by means of the
entry of new A350 (see Section III, Chapter 5, Paragraph 5.2.2.). The Company holds
that the Long Range strategy will be based on maintenance of the current destinations
and the development of new routes characterized by an inverse seasonal nature, in
order to maintain the levels of productivity achieved. It is Euroflys intention to utilize the
new aircraft that will enter the fleet for traditional destinations during the winter and
prevalently in the North Atlantic area during the summer period. This is also due to the
positive experience of the summer of 2005 with scheduled flights (and thus sold to a
large extent by means of sales channels that were alternative to tour operators) between
some Italian cities (Naples, Bologna and Palermo) and New York;
a consolidation of the volumes reached in the Mid Range segment, together with ad-
ditional efforts aimed at improving the management of seasonality (by means of the

78
 acquisition of additional capacity from third parties only during the summer) and the
development of an offer dedicated to stimulating incoming traffic to Italy;
the initiation, presumably at the beginning of 2006, of a new area of activity with the
launch of the All Business flight from Milan to New York (see Section II). The prod-
uct will be strongly distinctive with respect to traditional scheduled flights because it
will utilize an aircraft (A319 CJ/LR) having only 48 superior business class seats,
with a high level of personalization and excellence of service, both on the ground as
well as in flight;
further efforts to reinforce the cargo area and the ancillary services, among which
duty free, the sale of food and beverages, and revenue from royalties deriving from
the sale of services available on the Internet site (hotels, rent-a-car, insurance, etc.).
The possibility is being studied of incorporating a subsidiary company for tour oper-
ating, similarly to what has been done by other airline companies, in order to provide for further
leverage for commercial orientation. Such initiative does not constitute an operation of diversifi-
cation of business, but only a further instrument, in the context of the multi-channel distribution
system, to facilitate the commercialization of Euroflys flights.
It is noted that on 18 November 2005, subsequent to the publication of the notice of
the sale of the company unit of the Volare Group, Eurofly and Meridiana S.p.A. jointly pre-
sented a non-binding manifestation of interest in purchasing the company unit held by Volare
Group S.p.A., Volare Airlines S.p.A. and Air Europe S.p.A., which companies are all in extraordi-
nary administration in accordance with the Marzano Law. Euroflys above manifestation of in-
terest is motivated by the fact that the principal charter destinations served by Eurofly with re-
gard to Long Range are in part complementary with those served by the Volare Group. The
manifestation of interest in question, as it was non-binding, has not led at present to any finan-
cial undertaking by the Company.
The Company intends to finance its future programs and its strategy, as well as even-
tual financial undertakings that might be assumed in relation to the purchase of the company unit
of the Volare Group, by utilizing, in all or in part, both the revenue deriving from the Increase of
Share Capital as well as its own means, with the exception of investments necessary for the pay-
ments of the balance of the purchase price for the three A350 expected for 2013 and 2014, which
presumably will be financed by means of the use of Operative rentals or Finance Leasing (see
Section III, Chapter 5, Paragraph 5.2.2.). Reference is made, however, to Section IV, Chapter 3,
Paragraph 3.4, for a description of the use of the revenue deriving from its listing.

6.2 PRINCIPAL MARKETS

6.2.1 Division of sales volume according to primary sectors of activity

Amounts in Euro/000 2002 2003 2004

Mid range 75,831 54.8% 83,710 48.0% 135,060 55.1%

Long range 43,761 31.6% 74,439 42.7% 97,053 39.6%
Revenue scheduled flights in code share 18,678 13.5% 16,221 9.3% 13,227 5.4%
Total revenue from sales and services 138,270 100.0% 174,370 100.0% 245,340 100.0%

Amounts in Euro/000 June 2004 June 2005

Mid range 46,975 46.4% 67,558 52.8%

Long range 46,327 45.8% 60,301 47.0%
Revenue scheduled flights in code share 7,787 7.8% 210 0.2%
Total revenue from sales and services 101,089 100.0% 128,069 100.0%

79
 The tables include, in addition to the Mid and Long Range business areas, revenue
related to scheduled activity performed in code sharing, i.e. flight activities aimed at utilizing, in
collaboration with other carriers, three pairs of slots at the Linate airport which Eurofly holds.
Code sharing agreements were stipulated with Alitalia until March 2005 and, subsequently, with
Air One. From 29 October 2005 one of said pairs of slots will be utilized with another operator.

In a typical code sharing agreement, two companies divide their flight codes and
sales capacity. The carrier that operates the flight is defined as the operating carrier, whereas the
party that only has sales functions is defined as the marketing carrier. The division of revenue
and costs can vary in the context of the contracts, but usually the operating carrier receives all
of the flight revenue and sustains all of the costs, whereas the marketing carrier is only remu-
nerated with a percentage of its sales.

Until October 2004, Eurofly acted as an operating carrier, and it subsequently be-
came a marketing carrier. This change of role thus explains the reduction of revenue deriving
from this activity, which is noted in particular during the first six months of 2005: until October
2004, the Company recorded both revenue as well as the costs relative to the flights, whereas
subsequently it began registering only its own percentage, and thus the margin.

6.2.2 Division of sales volume according to principal geographic markets

The tables set forth below classify revenue on the basis of the nationality of the clients:

Amounts in Euro/000 2002 2003 2004

National 135,015 97.6% 173,695 99.6% 243,360 99.2%

International 3,256 2.4% 675 0.4% 1,980 0.8%
Total revenue from sales and services 138,270 100.0% 174,370 100.0% 245,340 100.0%

Amounts in Euro/000 June 2004 June 2005

National 95,687 94.7% 126,397 98.7%

International 5,402 5.3% 1,672 1.3%
Total revenue from sales and services 101,089 100.0% 128,069 100.0%

6.3 EXCEPTIONAL FACTORS

At the end of 2004, the occurrence of the tragedy of the tsunami in the Indian Ocean
(see Section III, Chapter 9, Paragraph 9.2.3.) led to an inevitable, although temporary, reduction
of Long Range activity towards those markets (in particular to the Maldive).

The reduction of the demand was offset by a reallocation of capacity to other desti-
nations and marketing actions regarding the Maldive destination that bore results starting from
the month of February 2005.

The summer of 2005 was darkened by the terrorist attack at Sharm El Sheikh. Eurofly
consequently suffered a decline in its activity to Egypt (see Section III, Chapter 12): a large part of
the forecast tourist flows were thus deviated towards other destinations (Greece, Italy and Spain).

6.4 ISSUERS DEPENDENCE ON PATENTS OR LICENSES, INDUSTRIAL, COMMER-

CIAL OR FINANCIAL CONTRACTS, OR NEW MANUFACTURING PROCESSES

The performance of the air carriers activity is subordinate to obtaining a license and
relative authorizations and certificates (see Section III, Chapter 6, Paragraph 6.1.1.8.).

80
 Because Euroflys fleet consists exclusively of aircraft acquired by Operative rentals,
the relative contracts are of significant importance to the Company (see Section III, Chapter 6,
Paragraph 6.1.1.2.).

6.5 DESCRIPTION OF THE MARKETS IN WHICH EUROFLY OPERATES AND COM-

PETITIVE POSITION

6.5.1 The demand

italian
carriers
63%
10.000
foreign
9.000
carriers
8.000 37%
PASSENGERS

7.000
6.000 5,808
(000)

5,509 5,608
5.000 5,125
4.000 italian
3.000 carriers
2.000 9%
2,980 3,087 foreign
2,722 2,944
1.000 carriers
0 91%
2001 2002 2003 2004

Incoming traffic Outgoing traffic

Source: Enac traffic data 2003 and 2004

The historical component of the traffic to which Euroflys offer is aimed is that con-
sisting of point to point charter traffic from and to Italy. In fact, as all of the Italian charter carri-
ers, Eurofly has historically concentrated its activity on international outgoing traffic, a market
that is worth approximately 5.8 million passengers, equal to approximately 65% of the total
charter traffic (data 2004 Source: ENAC). The remaining 35% of the charter traffic instead con-
sists of incoming passengers; of these, less than 10% are intercepted by Italian carriers.

Subsequent to Euroflys transition from charter carrier to leisure carrier, the perime-
ter of the market of reference tended to broaden itself.

In fact, by means of the multi-channel sales system, Eurofly enters the markets whose
demand gains access to the product also by means of distribution mechanisms that differ from tour
operators (travel agencies or direct purchases). Thus the demand (in terms of passengers) relative
to the scheduled segments scheduled, both outgoing as well as incoming, in the areas where it op-
erates must be added to Euroflys market of reference. On the basis of such re-formulation, it ap-
pears that Euroflys overall demand of reference amounts to almost 8.7 million passengers (Source:
MktConsulting S.r.l. processing of ENAC 2004 and BSP Internazionale 2004 traffic data).

6.5.2 Tour operators

At a European level, the strong market expansion of organized vacations experi-

enced during the 1970s/1980s coincided with the evolution of generalist tour operators (which
were created to package trips with a high level of personalization) in more structured industrial
organizations, capable of exploiting the factors of scale in order to offer more standardized and
economic products, capable of satisfying a demand in strong expansion. The development of
tour operating was accompanied by the strong growth of charter carriers, which corresponded,
better than scheduled carriers, to the requirements of organized tourism.

81
 The subsequent phase of this process was the reorganization and concentration that
led to the growth of the large European tourism giants (first above all Tui, Thomas Cook and
Rewe in Germany, and My Travel Group and First Choice in Great Britain).

In Italy the tour operating sector developed in a particular manner during the course
of the 1990s (in relation to the strong development of charter carriers such as Air Europe and
Eurofly), but it did not succeed in managing the transition to a more evolved industrial phase, re-
maining a very fragmented sector and often with a family kind of organization. The following
table indicates the dimensions in terms of sales of the principal Italian tour operators.

Classification Operator Invoiced Sales 2003 Var. %

(/000.000) 2003/2002

1 GRUPPO ALPITOUR 810.0 15.0%

2 COSTA CROCIERE 786.0
3 VIAGGI DEL VENTAGLIO 693.3 18.0%
4 TEOREMA TOUR 242.0 15.3%
5 HOTELPLAN & TURISANDA 232.0 10.0%
6 EUROTRAVEL 145.0 8.0%
7 VERATOUR 121.0 21.0%
8 EDEN VIAGGI 108.0 10.0%
9 KUONI GASTALDI TOURS 100.0 10.0%
10 I GRANDI VIAGGI 88.3 9.0%
ALTRI TOUR OPERATOR 2,674.4
Total invoiced organized trips 2003 6,000.0

Source: Market investigation performed in 2004 by the sectors weekly Trend.

The Italian tour operators can usefully be divided into three groups:
LARGE TOUR OPERATORS, which consists of three tour operators: Alpitour, I Viaggi
del Ventaglio and Costa Crociere. The first two have initiated over the years a strat-
egy of vertical integration which has led them to acquire or develop their own char-
ter carriers (Neos and Livingston). The third, even though it has a similar dimension,
is the leader in the cruise sector;
MEDIUM TOUR OPERATORS, a characteristic of the Italian market where numerous
operators exist on a small scale, but not in niche positions and with a broad cata-
logue per number of destinations served. This includes 13 tour operators with in-
voiced sales ranging between 50 and 250 million Euro;
SMALL TOUR OPERATORS, which consists of a very numerous overall number of
operators with invoiced sales below 50 million Euro and a general niche or special-
ized position with regard to some destinations.

6.5.3 Competitive position

6.5.3.1 The structure of the competition

Euroflys repositioning from charter carrier to leisure carrier is progressively modify-

ing the profile of the competition with which the Company must compare itself in the interna-
tional flights market.

Mid Range

With regard to Mid Range, the historical component of the competition is represented
by Italian charter companies (Livingston, Neos, Blue Panorama and the newborn Air Italy and ItAli),
by other carriers of Italian lines who, above all during the summer peak, dedicate part of their ca-

82
pacity to charter activity, and by foreign charter companies. The latter, even though individually they
do not have elevated market shares considering both outgoing traffic as well as incoming traffic, rep-
resent approximately 60% of the total international charter traffic in Italy (Source: ENAC 2004).

The introduction of Euroflys multi-channel system in perspective will result in the

Companys increased competition with other scheduled carriers, and in particular with compa-
nies originating from countries of the flight destination.

Special mention must be made with regard to the low cost carriers, which still cur-
rently represent a marginal component of the competition, but this segment might in the future
attack market spaces occupied by Eurofly.

Long Range

There is an expansion of competitive position even with regard to Long Range ac-
tivity. With the introduction of multi-channels, the Italian charter companies (Lauda Air, Blue
Panorama, Air Europe, Neos and Air Italy) are flanked by foreign carriers from the countries of
destination (Emirates, Qatar) and major European carriers who are specialized with regard to
particular traffic segments (for example, KLM and Swiss with regard to Kenya), which enter into
competition with Eurofly even though they do not operate direct flights to such destinations.

The North America area should be mentioned on its own, which is characterized by
a significant component of incoming traffic (estimated as 72% of the total Source: Euroflys
processing of airport data); with regard to such market Eurofly, even though it currently serves
different Italian airports, can be compared to the large companies that operate direct flights be-
tween Italy and New York (Alitalia, American Airlines, Delta, Continental) and the major European
carriers, which attract Italian passengers who reach their final destination by non direct flights,
which pass through European hubs.

6.5.3.2 Market share

The following table indicates the number of passengers transported on international

routes in 2004 by the principal leisure carriers, as well as the relative market shares.

Carrier International Market share

Passengers
2004 (000) International Charter
Market market

Eurofly 1,275 2.2% 28.9%

Livingston + Lauda Air 1,009 1.7% 22.9%
Volare + Air Europe 857 1.5% 19.4%
Blue Panorama 655 1.1% 14.8%
Neos 618 1.1% 14.0%
Total leisure traffic carriers 4,414 100.0%
Alitalia 11,433 19.7%
Other carriers 42,104 72.7%
Total international traffic 57,951 100.0%

Source: Eurofly processing of ENAC data and balance sheets of the carriers considered. The source of the total international traffic for 2004 is
Assaeroporti.

Eurofly still has a limited share (2.2%) with regard to the overall market of interna-
tional flights from and to Italy (including both leisure traffic as well as business traffic). More sig-
nificant instead is the comparison with the principal Italian leisure carriers (Blue Panorama,
Lauda Air and Livingston, Neos) similar to Eurofly due to their position, which indicates a lead-
ership position, with a share equal to 29% of the traffic.

83
 This strong position is confirmed by the analysis of the principal area in which Eurofly
operates on the Long and Mid Range, for the latter with particular reference to the markets in
which the Company is investing in order to implement a de-seasoning strategy, aimed at im-
proving the productivity of the aircraft (Red Sea and Canary Islands).

MID RANGE passengers 2004

Area Total traffic Eurofly Quota eurofly

RED SEA 1,485,797 379,903 25.6%

GREECE 1,730,184 137,578 8.0%
BALEARI 605,173 83,324 13.8%
CANARY ISLANDS 295,146 68,728 23.3%
ISRAEL 473,647 49,561 10.5%

Source: Euroflys processing of ENAC data.

LONG RANGE passengers 2004

Area Total traffic Eurofly Quota eurofly

MALDIVE 229,045 115,492 50.4%

MEXICO 238,301 48,688 20.4%
SANTO DOMINGO 196,466 42,606 21.7%
KENYA 102,377 26,894 26.3%

Source: Euroflys processing of ENAC data 2003 and 2004.

84
7. ORGANIZATIONAL STRUCTURE

7.1 IF THE ISSUER IS PART OF A GROUP, BRIEF DESCRIPTION OF THE GROUP

AND THE POSITION THAT IT OCCUPIES

Eurofly is not part of any group.

7.2 LIST OF THE ISSUERS MOST IMPORTANT SUBSIDIARIES

Eurofly does not control any company in accordance with art. 93 of the Consolidated
Act.

85
8. REAL PROPERTY, INSTALLATIONS AND MACHINERY

8.1 INFORMATION RELATING TO EXISTING OR FORECAST TANGIBLE ASSETS, IN-

CLUDING LEASED PROPERTY, WITH AN INDICATION OF EVENTUAL RE-
STRICTIONS ON THE SAME

The Company owns the entire building located in Milan, Via Ettore Bugatti, no. 15,
consisting of nine floors above ground, as well as a roof and two underground levels, for a total
surface area of approximately 7,600 square meters, which hosts the Company registered office
and its administrative offices.

The above indicated real property was sold to Eurofly by Immobiliare Missaglia S.r.l.,
a company indirectly controlled by Banca Profilo, on 29 December 2003, for the agreed upon
price of 6,000,000 Euro plus VAT. The purchase of the real property was partially financed by
Banca Profilo by means of granting Eurofly a loan for the amount of 5,000,000 Euro, having a
ten year duration. The repayment plan provides for the payment of 20 six monthly deferred in-
stallments for capital; until the expiration of the second installment, a 1% annual nominal fixed
interest rate was agreed upon, whereas a variable rate was provided for the subsequent install-
ments, determined on the basis of the EURIBOR quotation at 6 months, increased by 1.30 per-
centage points per year. The loan in question is guaranteed by a first grade mortgage guarantee
on the real property acquired, which was recorded in favor of the party granting the mortgage,
for the total amount of 10,000,000 Euro, inclusive of capital, interest and expenses.

The nature of the other existing tangible fixed assets is described in Section III,
Chapter 5 and Chapter 20.

In August 2005, the Company stipulated 2 letters of intent having as their object 2
Operative rental contracts relative to two A330 aircraft, with delivery expected for the months of
November 2006 and April 2007. With regard to said contracts, the Company has made the down
payments indicated in Section III, Chapter 5, Paragraph 5.2. The duration of the 2 Operative
rental contracts is equal respectively to 8 and 7 years, and the total amount of the rents due
amount to 129,780 thousand US dollars.

In October 2005, the Company also signed a letter of intent having as its object the
purchase of 3 A350 aircraft, whose delivery is expected for 2013 and 2014, and in relation to
which the Company, as of the Date of the Prospectus, had made the down payments indicated
in Section III, Chapter 5, Paragraph 5.2.

As of 30 June 2005, the Company also had 11 Operative rentals, three of which ex-
pire in 2008, 7 in 2009 and, finally, 1 of which will expire in 2012. The amount of the future rents
is set forth in the following annexed table.

Amount in USD/000 Within 2005 2006 2007 2008 Beyond Total

Operative rentals 177,468 20,315 40,630 40,630 36,298 39,595 177,468

Amount in Euro/000 Within 2005 2006 2007 2008 Beyond Total

Financial leasing 31,560 1,578 3,156 3,156 3,156 20,514 31,560

In view of completeness, it is noted that with regard to the 3 A320 aircraft in

Operative rental there is a first grade mortgage borne by the owner of the aircraft. It is also noted
that the Operative rental contracts do not contain financial covenants and/or negative pledges.

During the first six months of 2005, the Company paid rent relative to 2 floors of its
prior registered office in Sesto S. Giovanni for a total amount of 53 thousand Euro. Said costs

86
can be traced to the fact that the negotiations for the termination of the contract with the real
estate company that owns said building, while waiting to identify a sub-entering lessee, have not
yet been concluded. As of 30 June 2005, the maximum undertaking for future rents to be paid
to the above real estate company amounted to 266 thousand Euro.

In addition, the Company has the availability of real property such as offices, ware-
houses and parking lots near the airports of Milan Malpensa, Rome Fiumicino and New York
J.F.K., in accordance with commercial leases having an overall annual cost of approximately 655
thousand Euro.

8.2 DESCRIPTION OF EVENTUAL ENVIRONMENTAL PROBLEMS THAT COULD IN-

FLUENCE THE ISSUERS USE OF THE TANGIBLE ASSETS

There do not appear to be any particular environmental problems that could influ-
ence the Issuers use of the existing tangible assets.

With respect to problems regarding noise pollution, the aircraft of Euroflys fleet have
the required noise certificate (see Section III, Chapter 6, Paragraph 6.1.1.8.3.).

87
9. SUMMARY OF THE MANAGEMENT AND FINANCIAL SITUATION

9.1 FINANCIAL SITUATION

9.1.1 Reclassified statement of assets and liabilities as of 31 December 2002, 2003,

2004 and as of 30 June 2005

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004 30/06/2005

Tangible fixed assets 1,814 10,575 35,742 11,378

Other intangibles 3,278 4,075 5,043 6,044
Other long term investments 5,515 5,448 19,084 34,249
Advance tax payments 0 0 950 1,145
Total non current assets 10,607 20,098 60,818 52,816
Stock 884 1,007 1,781 2,151
Commercial and other receivables 38,390 33,947 55,059 42,205
Other assets 1,776 14,816 3,328 15,924
Available liquidity 2,949 11,968 2,023 1,346
Total current assets 43,999 61,738 62,191 61,626
Non current assets to be divested 0 0 4,302 0
Total assets 54,606 81,836 127,311 114,442
Share capital 7,678 6,667 6,667 6,667
Reserves 4 0 2,722 4,557
Accumulated profits (losses) (6,014) 2,722 6,835 (3,251)
Total net worth 1,668 9,389 16,224 7,973
Long term loans 0 0 4,770 4,518
Deferred taxes 0 0 0 0
Long term funds 2,360 2,579 2,927 3,079
Total non current liabilities 2,360 2,579 7,697 7,597
Commercial and other liabilities 49,646 67,973 93,886 72,819
Short term loans 0 0 6,886 22,790
Current share of long term loans 0 0 230 482
Current funds 932 1,895 2,387 2,781
Total current liabilities 50,578 69,868 103,390 98,872
Total assets and liabilities 54,606 81,836 127,311 114,442

For the detailed comment of the asset variations in the periods considered, reference
is made to Section III, Chapter 20 as well as, with regard to the components of the net financial
position, to Section III, Chapter 10.

With regard to the principal events that led to variations in the Companys asset and
financial structure during the three year period 2002-2004, as well as during the first six months
of 2005, the following are noted:
the investments, classified among intangible and financial assets, that were made
during the three year period with the objective of homogenizing the fleet of the
A320/A330 models. Said investments consist of the purchase and capitalization
of modifications relating to said aircraft in Operative rental, security deposits
guaranteeing the relative contracts, as well as the training of the pilots of the air-
craft;
the investment, made between the end of 2003 and the beginning of 2005, relative
to the MD 80/82 fleet, consisting of the acquisition from the Banca Profilo of pur-

88
 chase options for 13 MD 80/82 aircraft owned by Alitalia. Said options were originally
granted to Banca Profilo by Alitalia itself. The Company, after having acquired the op-
tions in October 2003, exercised them with regard to Alitalia during the course of
2003 and 2004. Between April 2004 and February 2005 it purchased 11 aircraft from
Alitalia, of which 3 were sold to third parties in 2004 and the remaining 8 in 2005.
With respect to the other 2 aircraft, still owned by Alitalia, the Company sold the right
to purchase such aircraft to third parties. A total net capital gains (including the con-
sideration of 450 thousand Euro received by Banca Profilo for the consulting services
performed for the sale of the above MD80/82) of 1,264 thousand Euro in 2004 and
1,580 thousand in 2005 was obtained from such sales (see Section III, Chapter 6,
Paragraph 6.1.1.2.1);
the investment made in 2004 and during the first months of 2005 in order to have an
A319 CJ/LR available in Finance Leasing, consisting of the payment of the initial
maxi rent and the making of modifications to the aircraft on behalf of the manufac-
turer, subsequently reimbursed by the same prior to the stipulation of the Finance
Leasing contract; Banca Profilo received a consideration of 567 thousand Euro for
the consulting services performed with regard to determining the financial structure
of the operation and the negotiation of the conditions with lenders;
the real estate investment in Via E. Bugatti 15 in Milan, the Companys registered of-
fice, made during the course of 2003 and financed by means of a mortgage with
Banca Profilo;
the investments in software made between 2003 and 2004 in order to permit the
Company to acquire management and accounting autonomy from Alitalia and to de-
velop the multi-channel sales project;
the financial investment of the temporary excess liquidity in two capitalization con-
tracts with a sole premium stipulated at the end of 2003 with La Venezia
Assicurazioni, one of which was purchased from Profilo Holding S.p.A. and subse-
quently sold in February 2005;
the use in 2004 and as of 30 June 2005 of credit lines by means of bank account
overdraft facilities to finance the absorption of liquidity primarily determined by the
investments;
the offsetting, in April 2005, of the residual credit and liability positions as of that date
with the Alitalia group subsequent to the conclusion of scheduled activities in code
share with said group;
the trend of net working capital can be analyzed as follows:

31.12.2002 31.12.2003 31.12.2004 30.06.2005

Total current liabilities (50,578) (69,868) (103,390) (98,872)

(Short term loans and current share of
long term loans) 0 0 7,116 23,272
Total current assets 43,999 61,738 62,191 61,626
(Short term securities) 0 (14,102) 0 0
(Available liquidity) (2,949) (11,968) (2,023) (1,346)
(Treasury account with Alitalia) (14,324) 0 0 0
Net Working Capital (23,852) (34,200) (36,106) (15,320)

The Companys net working capital is negative in that the receipt of receivables
from tour operators is usually made in advance with respect to the flight, and in
any event prior to the payment of liabilities to suppliers. The increase of the nega-
tive net working capital over the three year period is related to the increased ac-
tivity developed. The diminution of net working capital (which remained negative)
during the first six months of 2005 is related to the effect of the seasonal nature of
the activity, as well as the deferment of the receipt of receivables from the Ministry
of the Defense.

89
9.2 THE COMPANYS OPERATIVE MANAGEMENT

9.2.1 Significant events of the three year period 2002-2004 and the first six months of
2005

Reference is made to Paragraphs 9.1, 9.2.2 and 9.2.3 of this Chapter with respect to
the events that were particularly significant with regard to the financial and operative situation
during the three year period 2002-2004 and during the first six months of 2005.

9.2.2 The Companys management trend during the three year period 2002 2004

The Companys economic results during the three year period in exam are summa-
rized below:

STATEMENT OF PROFITS AND LOSSES 2002 % revenue 2003 % revenue 2004 % revenue
Amounts in Euro/000

Revenue from sales and services 19,592 97.6% 158,149 98.2% 232,113 99.0%
Other revenue 2,983 2.4% 2,962 1.8% 2,278 1.0%
Total revenue 122,575 100.0% 161,111 100.0% 234,391 100.0%
Direct commercial costs (51) 0.0% (968) 0.6% (1,090) 0.5%
Revenue net of direct
commercial costs 122,524 100.0% 160,144 99.4% 233,300 99.5%
Jet fuel (21,483) 17.5% (29,635) 18.4% (51,814) 22.1%
Cost of personnel (17,769) 14.5% (22,589) 14.0% (35,195) 15.0%
Maintenance materials and
services (18,887) 15.4% (25,679) 15.9% (34,592) 14.8%
Other operative costs and
wet leases (46,261) 37.7% (47,006) 29.2% (75,009) 32.0%
Other commercial and
structural costs (5,550) 4.5% (7,829) 4.9% (12,429) 5.3%
Subtotal of costs (109,949) 89.7% (132,737) 82.4% (209,040) 89.2%
EBITDAR 12,575 10.3% 27,406 17.0% 24,261 10.4%
Operative rentals (25,462) 20.8% (19,630) 12.2% (16,160) 6.9%
EBITDA (12,888) 10.5% 7,777 4.8% 8,100 3.5%
Depreciation (1,222) 1.0% (1,740) 1.1% (2,368) 1.0%
Other adjusted depreciation (467) 0.4% (1,360) 0.8% (164) 0.1%
Allocations to risk and expense
funds (419) 0.3% (1,099) 0.7% (1,305) 0.6%
Subtotal of costs (2,108) 1.7% (4,200) 2.6% (3,837) 1.6%
EBIT (14,996) 12.2% 3,577 2.2% 4,263 1.8%
Financial proceeds (costs) (145) 0.1% (816) 0.5% 371 0.2%
Results from divestment activity 0 0.0% 2 0.0% 1,034 0.4%
Net extraordinary proceeds 9,702 7.9% 1,352 0.8% 2,235 1.0%
Results prior to taxes (5,439) 4.4% 4,115 2.6% 7,904 3.4%
Fiscal year taxes (575) 0.4% (1,393) 0.8% (1,069) 0.4%
Fiscal year results (6,014) 3.9% 2,722 1.5% 6,835 2.7%

During the three year period 2002-2004, the Company significantly increased the
number of flight hours performed (from 20,047 hours in 2002 to 38,202 hours in 2004), subse-
quent both to the expansion of the fleet as well as the improved productivity of the same (aver-
age hours flown per aircraft). Consequently, revenue increased from 119,592 thousand Euro in
2002 to 232,113 thousand Euro in 2004.

90
 In terms of profitability, EBITDAR, as a percentage of total revenue, improved be-
tween 2002 and 2003 by 7%, primarily due to the significant reduction of the costs of wet leas-
es, which in 2002 suffered from unexpected rentals from third party operators caused both by
the delayed delivery of the first new A330 as well as by an accident that occurred to an aircraft
during the month of August 2002 in the airport of Treviso. In 2004, on the other hand, the impact
of EBITDAR on revenue was further diminished due to the effect of the increase of the cost of
jet fuel and the costs of wet leases in order to comply with the contract stipulated with the
Ministry of Defense and to substitute the MD 80/82 fleet at the time of some mechanical prob-
lems that occurred during the summer season.

The impact of Operative rentals (excluding the wet leases) on total revenue suffered
a significant reduction between 2002 and 2004 due to the combined effect of the growth of the
aircrafts productivity, the availability of a more numerous Mid Range fleet during the high sea-
son, as well as the outcome of the negotiations of Operative rental contracts and the benefit ob-
tained from the trend of the Euro/USD exchange rate.

In 2003 and in 2004 the return to a positive EBIT derives from some factors: (i) the
strong growth of invoiced sales and the productivity of the aircraft; (ii) the lack of wet leases
caused by extraordinary events in 2002; (iii) the reduction both in absolute as well as percent-
age terms of operative rentals, due to the combined effect of the described factors.

Moreover, in the event EBIT is analyzed net of the margin of scheduled activity in
code share (which was reduced from 2,262 thousand Euro in 2003 to 240 thousand Euro in 2004
due to the renegotiation of the code share contract at the time it left the Alitalia group), it can be
noted that the effective growth between 2003 and 2004 amounted to 2,708 thousand Euro.

The result after taxes not significantly affected during the three year period by the
results of the financial management was instead influenced by the result of the divestment of
assets (which in 2004 benefited prevalently from the capital gains deriving from the sale of 3 MD
80/82) and from extraordinary net revenue. In 2002 said proceeds included an indemnity in the
amount of 5,761 thousand Euro received from Alitalia for burden suffered by the Company due
to Alitalias early withdrawal of the B767 fleet, whereas the residual amount, having a nature sim-
ilar to that of 2003 and 2004, is attributable to revisions of cost estimates to be sustained or al-
locations made in fiscal years prior to 2002 that turned out to be excessive with respect to ac-
tual need.

The dynamics of variation of the result after taxes during the three year period is con-
firmed even at the level of fiscal year results.

9.2.2.1 Trend of revenue from sales and services

Revenue from sales and services can be analyzed as follows due to its nature and
amount:

Amounts in Euro/000 2002 2003 2004

Mid Range 75,831 83,710 135,060

Long Range 43,761 74,439 97,053
Revenue from sales and services 119,592 158,149 232,113

(The classification utilized for these purposes differs from that adopted for the prepa-
ration of the fiscal year balance sheet set forth in Section III, Chapter 20, in that in the present
Chapter the code share activity was reported only in terms of margin among Other revenue).

Revenue deriving from leisure activity is inclusive of accessory revenue (taxes, cater-
ing, cargo and duty-free).

91
 The significant increase in the three year period can be traced in part to the expan-
sion of the Mid Range fleet and in part to the increase in productivity. For a better understand-
ing of the variables that have affected the evolution of revenue, it is therefore opportune to re-
view the trend of flight hours and the average revenue per flight hour.

Trend of flight hours

Flight hours (own fleet and wet lease) Mid Range Long Range Total hours

2002 13,835 6,212 20,047

2003 15,649 10,134 25,783
2004 26,258 11,944 38,202

The fleets productivity (average annual hours flown per aircraft) is represented
below:

Productivity of its own fleet Mid Range Long Range

2002 2,365 4,276

2003 2,476 4,932
2004 2,855 5,462

In 2003 the flight hours increased from 20,047 to 25,783 (28.6%) primarily due to the
expansion of the fleet utilized, as well as the improved use of the aircraft.

In 2004 the overall flight hours increased from 25,783 to 38,202 (48.2%). The Mid
Range activity benefited from in increase of 67.8% with respect to the previous year, subsequent
to an increase of productivity and an increase of the fleet. In particular, the configuration of the
Mid Range fleet passed from the 5 A320 aircraft present in December 2003 to a maximum of 12
aircraft during the peak of the summer season (5 A320 and 7 MD80/82). With regard to Long
Range, as substantial parity of the available fleet, the Company saw an increase of flight activi-
ty of 17.9%, passing from 10,134 hours to 11,944 hours, principally due to the improvement of
productivity.

Revenue per flight hour

The evolution of revenue per flight hour (net of accessory revenue) is set forth below:

Revenue per flight hour (Euro) Mid Range Long Range Total

2002 5,505 7,046 5,982

2003 5,713 7,396 6,374
2004 5,218 8,173 6,142

In 2003 the proceeds obtained per flight hour improved with respect to 2002, pass-
ing from 5,982 Euro to 6,374 Euro. In particular, with regard to Mid Range activity, the increase
of revenue is due to increased summer operations by means of the use of A320 aircraft, where-
as for the Long Range activity the revenue per flight hour increased overall due to the Company
undertaking to adjust prices at the time of the renewal of the seasonal contracts with tour oper-
ators, as well as due to an adjustment tied to the increased offer capacity the A330 aircraft with
respect to the B767.

The revenue trend per flight hour in 2004 demonstrates a decrease with respect to
that obtained during the previous year. With reference to Mid Range the decrease is related to a
price reduction with regard to the fleets increased productivity, the need to sustain the market
after the tragic events of Taba in October 2004, the launch of multi-channel sales and the re-

92
duction of average revenue tied to the lesser number of seats offered by the MD80/82 fleet (from
164 to 180). With regard to Long Range, the significant increase of revenue per flight hour de-
rives from the Companys improved competitive position in this market segment, after the re-
duction of activity by the principal competitor (Air Europe), as well as by a more decisive com-
mercial policy that allowed it to improve its profitability in this area.

9.2.2.2 Trend of Other Revenue

The components of Other Revenue and their impact on total revenue is as follows:

Amounts in Euro/000 2002 % revenue 2003 % revenue 2004 % revenue

Margin of scheduled activity in

code share 1,101 2,262 240
Other revenue 1,882 700 2,038
Total 2,983 2% 2,962 2% 2,278 1%

The margin from scheduled code share activity, performed with Alitalia until March
2005, is defined on the basis of the contracts stipulated annually with the opposing party. The
total amount of the revenue that generated the above reported margin was 18,678 thousand
Euro in 2002, 16,221 thousand Euro in 2003 and 13,227 thousand Euro in 2004. The margin of
the scheduled code share activity was reduced from 2,262 thousand Euro in 2003 to 240 thou-
sand Euro in 2004 due to the renegotiation of the code share contract at the time the Alitalia
group left the Company.

Other revenue principally relates to penalties for the late communication of the can-
cellations of flight reservations or modifications of the number of seats occupied.

9.2.2.3 Trend of operative costs

Jet fuel

The trend of the cost of jet fuel and its impact on the total revenue is as follows:

Amounts in Euro/000 2002 % revenue 2003 % revenue 2004 % revenue

Jet fuel (21,483) 18% (29,635) 18% (51,814) 22%

93
 The cost of jet fuel depends on the price of jet fuel and the Euro/USD exchange rate.
The following table demonstrates the average trend of the two during the three year period:

350,0
Trend of the price of jet fuel and Euro/USD exchange (2/01/02-12/07/05, base 100)

300,0

250,0

200,0

150,0

100,0

50,0
Rotterdam (ARA) Kerosene-Type Jet Fuel Spot Price
Change Euro/USD
Rotterdam (ARA) Kerosene-Type Jet Fuel Spot Price Euro
0,0

May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04

Dec-04
Feb-02
Mar-02
Apr-02
May-02
Jun-02
Jul-02
Aug-02
Sep-02
Oct-02

Dec-02

Jun-03
Jul-03
Aug-03
Sep-03
Oct-03

Dec-03

Mar-04
Nov-02

Feb-03
Mar-03
Apr-03
May-03

Nov-03

Feb-04

Apr-04

Nov-04

Feb-05
Mar-05
Apr-05
May-05
Jun-05
Jul-05
Jan-02

Jan-03

Jan-04

Jan-05
Source: U.S. Department of Energy - Reuters

In absolute terms the cost of jet fuel increased primarily in relation to the increase of
activity over the course of the three years.

The contracts with tour operators generally contain clauses providing for the adjust-
ment of the consideration initially agreed upon on the basis of the variation of the price of jet fuel
and the Euro/USD exchange rate. Said clauses thus allow a form, even though imperfect, of risk
management of fluctuations of such variability. For such reasons, the Company has not provid-
ed during the three year period 2002-2004 for other kinds of coverage, in particular by means
of futures.

The increase of the price of jet fuel and the trend of the Euro/USD exchange rate pro-
voked an increase of the impact of the cost of jet fuel on total revenue (which increased from
18% in 2002 and 2003 to 22% in 2004). It is noted that even in the event the increase of rev-
enue (denominator of the ratio) due to the effect of the contractual adjustments described above
was substantially equivalent in absolute terms to that of the jet fuel (numerator of the ratio), their
ratio. Moreover, the historical adjustment was less with respect to the contractually applicable
adjustment.

Personnel costs

The cost of personnel over the course of the three year period remained substantially
stable in terms of the impact on total revenue, even though it reflected an increase of the aver-
age annual available workforce from 361 Employees in 2002 to 423 and 531 Employees, re-
spectively in 2003 and in 2004.

In 2004, the Company completed its course of autonomy and independence with re-
spect to Alitalia which had managed, ever since June 2003, directly or indirectly, a series of services
that are today completely covered directly or by means of third party suppliers. Said passage led
to a considerable undertaking and a radical modification of the Companys organization, which was

94
integrated and completed; it must be added to this that the launch of new products required the
hiring of new professional figures that previously had not been required within the Companys or-
ganization: in particular, its management of aircraft maintenance and the initiation of the multi-chan-
nel sales activity made the addition of new resources necessary in the maintenance, commercial
and administrative areas. Consequently, the ground personnel increased in a significant manner
(annual average workforce increased from 85 Employees in 2002 to 157 Employees in 2004).

An analogous trend connected to the progressive expansion of the fleet during the
course of the three years 2002- 2004 was seen with regard to the data of the average annual
force relating to flight personnel (which increased from 276 Employees in 2002 to 374
Employees in 2004). The general crisis in the sector, which led to the reduction of personnel or
indeed to the termination of activities of other companies in Italy, facilitated the procurement of
qualified resources in the market.

The use of contractual hiring for a specific period of time and part-time, which al-
lowed increasing the number of pilots and flight assistants necessary to satisfy the expansion of
the fleet in a logic of enhancement, with the consequent increase of productivity, contributed to
the substantial stability of the impact of the cost of personnel on total revenue.

Further, it should be noted that between 2004 and 2005, the renewal of all of the
Companys employment contracts was completed. The logic maintained by the Company in the
contractual renewals was that of flanking normal income raises that were concentrated more on
the variable part than the fixed part, with elements of flexibility aimed at recovering productivity.

Materials and maintenance services

The impact of maintenance materials and services on the total revenue remained
substantially unvaried (15% in 2002 and 2004 and 16% in 2003). Said costs are reported net of
recoveries from the lessor respectively of 715 thousand Euro in 2002, 1,378 thousand Euro in
2003 and 4,843 thousand Euro in 2004. The increase of the overall cost can be traced in part to
the increase in flight hours and in part to the increase of the average age of the fleet and the in-
creased maintenance cost of the MD80/82 fleet. These negative effects are counterbalanced by
the beneficial effect obtained from the trend of the Euro/USD exchange rate.

It should be noted that the cost for materials and maintenance services relative to
the year 2002 is reported net of an insurance recovery of 2,422 thousand Euro related to the
damage at the airport of Treviso to the I-BIKG aircraft which remained blocked for repairs for the
greater part of the month of August 2002. This event reduced the Mid Range fleet to 4 units, re-
sulting in significant repercussions on the operative activity. The estimate of increased costs re-
lated to the event, which were only compensated in part by the above mentioned insurance re-
imbursement (referring only to maintenance costs) amounted to approximately 4.5 million Euro
and relates to the increased costs of protection for passengers, aircraft rentals, and reimburse-
ments to customers.

Other operative costs and wet leases

For a better understanding of the trend in absolute value and in terms of impact on
total revenue of other operative costs, it is necessary to consider that they can be analyzed as
follows:

Amounts in Euro/000 2002 % revenue 2003 % revenue 2004 % revenue

Wet leases 8,028 1,659 7,907

Other operative costs 38,233 31% 45,347 28% 67,102 28%
Total 46,261 38% 47,006 29% 75,009 32%

95
 The variations in absolute terms of the costs of wet leases derive in 2002 from the
lease of aircraft due to the delay in the delivery of the first A330 aircraft. With reference to fiscal
year 2004, the increase is attributable to the rental of a fleet utilized to comply with the contract
stipulated with the Ministry of Defense and to substitute the MD 80/82 fleet during the periods
in which it remained blocked due to maintenance activity.

The impact on total revenue of other operative costs is, instead, substantially unvar-
ied, influenced in absolute terms by a significant increase connected to the corresponding in-
crease in traffic volumes. The substantial stability of the cost, even though in the presence of a
reference scenario in which the price of the services acquired increased, is due to the incisive
activity of the renegotiation of contracts with the principal suppliers, on the same conditions as
the service offered, to the different mix of destinations served during the year, as well as to the
positive effect of the exchange rate.

Other commercial and structural costs

The impact on total revenue of said item remains unvaried. The increase, in absolute
value, is attributable in 2004 to costs for consulting services relating to the reorganization that
followed Alitalias sale its controlling interest in the Company, as well as to advertising and dis-
tribution costs for the multi-channel system.

9.2.2.4 Trend of EBITDAR

EBITDAR in terms of impact on total revenue improved between 2002 and 2003 by
7% due to the noticeable reduction of the Other operative costs and wet leasing. In 2004, on
the other hand, the impact of EBITDAR on revenue was again aligned to that of 2002 due to the
effect of the increase of the cost of jet fuel and the costs of wet leases, realigned to those of
2002.

It should also be noted that the EBITDAR benefited during the course of the three
year period from the margin of the scheduled code share activity (recorded in the item Other
revenue), for a value of 1,101 thousand Euro in 2002, 2,262 thousand Euro in 2003 and 240
thousand Euro in 2004.

9.2.2.5 Operative rentals

This item classifies the costs relative to rentals deriving from multi-year Operative
rental contracts, which represent a means for the continuous acquisition of aircraft; the costs of
short term rentals of capacity destined to the peak seasons (wet leases) are, instead, classi-
fied under the item Other operative costs and wet leases.

During fiscal year 2003 the impact of the cost on total revenue was 12% (with re-
spect to the corresponding data of 21% in 2002). Such significant improvement is related to the
availability of a more numerous Mid Range fleet during the summer peak, which presents greater
productivity.

The 2002 data is penalized by unforeseeable costs for Operative rentals totaling ap-
proximately 2.7 million Euro caused by a delay in the delivery of the first A330, which led to the
unavailability of an aircraft capable of dealing with contractual undertakings that had already
been assumed, forcing the Company to the elevated and unforeseen recourse to rentals of air-
craft from third party operators.

During fiscal year 2004, the impact of the cost on total revenue diminishes by a fur-
ther 7% due to the effect both of the continuation of flexibility of availability of the Mid Range
fleet with respect to the traffic flow, as well as the trend of the Euro/USD exchange rate.

96
9.2.2.6 Trend of EBITDA

The impact of EBITDA on the total revenue improved by -11% in 2002 to 3% in 2004
(with the corresponding 2003 data of 5%). The improvement is due to the trend of the extent of
the Operative rentals described above.

9.2.2.7 Depreciation, other allocations and allocations to the risk and expense funds

In 2003 this item increased by 2,092 thousand Euro; the principal reason for said in-
crease was the increased direct amortization rates applied to intangible assets (261 thousand
Euro) relating to the investments made for the passage to the new Airbus fleet, the increased de-
preciation applied to tangible assets (257 thousand Euro), the investments made for rolling aero-
nautics components, as well as the devaluation of receivables (893 thousand Euro) on positions
considered to be at risk and in allocations to risk funds for Extra Maintenance.

The decrease in the year 2004, amounting to 363 thousand Euro, can be traced, on
the one hand, to an increase of the amortization/depreciation rate of intangible and tangible as-
sets due to the heavy investments made during the course of the year and on the other hand,
to the diminution of the devaluation of receivables due to the effect of the improvement of the
activity of credit management.

9.2.2.8 Trend of the EBIT

The impact of EBIT on total revenue improves from 12% in 2002 to 2% in 2003 and
2004. The trend is aligned to that of the EBITDA.

9.2.2.9 Proceeds and costs and financial

The impact of the result of financial management on total revenue is substantially

stable. The worsening of the negative balance of the financial management of fiscal year 2003
with respect to the same data of 2002 is tied, principally, to the appreciation of the Euro with re-
spect to the Dollar, the generalized reduction of interest rates that reduced profitability of the
uses of liquidity, as well as termination of the treasury relationship with Alitalia.

The net proceeds of 2004, is related to the positive trend of the exchange rate and
the yield of long term investments (capitalization contracts with a sole premium), partially offset
by increased passive interest to the banks, due to the bank account overdraft facility and by the
loan for the purchase of the real property in Via Bugatti 15 in Milan.

9.2.2.10 Results of divestment activity

The result of the divestment of assets relative to fiscal year 2004 refers to the net
capital gains of 1,264 thousand Euro realized by the sale of 3 MD80/82 aircraft and by the
transfer to third parties of the right to purchase two 2 MD80/82 aircraft from Alitalia as well as
the devaluation of 227 thousand Euro relative to the training costs of pilots on the same kind of
aircraft. Specifically, the investment made in 2004 for the purchase of the options and the air-
craft amounted to 6,049 thousand Euro (relative to 240 thousand Euro as the overall purchase
cost for the options, 5,705 thousand Euro for the purchase cost of the aircraft and 104 thousand
Euro for commissions paid to Banca Profilo), whereas the consideration for the sale of said air-
craft and the transfer to third parties of the right to purchase 2 MD80/82 aircraft from Alitalia,
done for market conditions with third party operators, amounted to 7,313 thousand Euro. The
capital loss deriving from the above sales of 67 thousand Euro, originated from the lower sale
price with respect to the recorded value for one of the two MD-80 aircraft (see Section III,
Chapter 6, Paragraph 6.1.1.2.1.).

97
9.2.2.11 Net extraordinary proceeds

Such item includes non current net proceeds whose impact on revenue during the
course of the three year period ranged from 8% in 2002 to 1% respectively in 2003 and 2004.

The net proceeds of 2002, equal to 9,702 thousand Euro, relate to extraordinary pro-
ceeds that can be analyzed as follows:
an indemnity paid to the Company by Alitalia for Alitalias early withdrawal of the
B767 aircraft (see Section III, Chapter 20) in the amount of 5,761 thousand Euro;
the release of allocations from prior fiscal years that turned out to be in excess of ac-
tual needs for the restructuring of the Long Range fleet (2,613 thousand Euro), main-
tenance costs (855 thousand Euro) and the devaluation of receivables (1,138 thou-
sand Euro);
contingent assets for invoices to be received, estimated in prior fiscal years in ex-
cess of the invoices actually received, in the amount of 537 thousand Euro.

With regard to such extraordinary proceeds, extraordinary costs for the amount of
1,000 thousand Euro were consuntivati for a settlement with a tour operator of threatened liti-
gation, as well as the cost for participating in the amnesty in accordance with Law 289/2002 for
202 thousand Euro.

The extraordinary proceeds of 2003, amounting to 1,352 thousand Euro, refer to

contingent assets on invoices to be received, estimated in excess during fiscal years prior to
2002 with respect to the actual cost.

The net proceeds of 2004, equal to 2,235 thousand Euro, refer to contingent assets
for invoices to be received, estimated in excess during fiscal years prior to 2002 in the amount
of 3,303 thousand Euro, net of the cost sustained to redeem the fiscal losses carried forward in
the amount of 1,068 thousand Euro.

9.2.2.12 Fiscal year taxes

During the two year period 2002 2003, income taxes consisted exclusively of IRAP.

During fiscal year 2004, the cost for taxes in the amount of 1,069 thousand Euro con-
sists of the cost for IRAP, recorded net of the proceeds as recognition of advance tax payments
in the amount of 950 thousand Euro relative to the temporary differences between taxable
amount and the fiscal year result, as well as the increase in value of the benefit of residual fiscal
losses carried forward (amounting to 224 thousand Euro) after use, which took place during the
year 2004, due to neutralization of the IRES taxable income. Said fiscal losses, going back to tax
year 2002, can be calculated in diminution of future income within 31 December 2007.

98
9.2.3 Euroflys management trend during the first six months of 2004 and 2005

STATEMENT OF PROFITS AND LOSSES I Six months 2004 % revenue I Six months 2005 % revenue
Amounts in Euro/000

Revenue from sales and services 93,302 98.6% 127,859 99.4%

Other Revenue 1,361 1.4% 764 0.6%
Total revenue 94,663 100.0% 128,623 100.0%
Direct commercial costs (443) 0.5% (1,444) 1.1%
Revenue net of direct commercial costs 94,220 99.5% 127,179 98.9%
Jet fuel (19,175) 20.3% (32,967) 25.6%
Cost of personnel (15,249) 16.1% (19,319) 15.0%
Maintenance materials and services (16,441) 17.4% (16,393) 12.7%
Other operative costs and wet leases (27,158) 28.7% (42,994) 33.4%
Other commercial and structural costs (4,606) 4.9% (6,329) 4.9%
Subtotal of costs (82,629) 87.3% (118,002) 91.7%
EBITDAR 11,591 12.2% 9,177 7.1%
Operative rentals (8,111) 8.6% (12,217) 9.5%
EBITDA 3,480 3.7% (3,040) 2.4%
Depreciation (1,069) 1.1% (1,020) 0.8%
Other adjusted depreciation (77) 0.1% (322) 0.3%
Allocations to risk and expense funds (685) 0.7% (758) 0.6%
Subtotal of costs (1,831) 1.9% (2,100) 1.6%
EBIT 1,649 1.7% (5,140) 4.0%
Financial proceeds (costs) (74) 0.1% 404 0.3%
Results from divestment activity 0 0.0% 1,580 1.2%
Net extraordinary proceeds (110) 0.1% 579 0.5%
Results prior to taxes 1,465 1.5% (2,577) 2.0%
Fiscal year taxes (779) 0.8% (673) 0.5%
Fiscal year results 686 0.7% (3,250) 2.5%

Revenue from sales and services can be analyzed due to kind and amount as fol-
lows:

Amount in Euro/000 2004 2005

Mid Range 46,975 67,558

Long Range 46,327 60,301
Revenue from sales and services 93,302 127,859

The revenue from sales and services increased by 37% due to the effect of a 30%
increase of flight hours (from 15,577 during the first six months of 2004 to 20,266 during the first
six months of 2005) and for the residual amount due to an increase of average revenue per flight
hour (from 5,900 Euro/h to 6,137 Euro/h).

In particular, the flight hours can be analyzed as follows:

Flight hours (own fleet and wet lease) Mid Range Long Range Total hours

I six months 2004 9,857 5,700 15,577

I six months 2005 13,126 7,140 20,266
Increase 3,269 1,440 4,709

99
 The variation of flight hours is related to the availability of the fleet and productivity
per aircraft. The variation of the productivity of the fleet (in terms of average monthly flight hours
per aircraft during the six month period) can be analyzed as follows:

Productivity of own fleet Mid Range Long Range

I six months 2004 225 462

I six months 2005 253 455
Variation % 12.7% 1.5%

In Mid Range the increase of flight hours is related both to an increase of the avail-
ability of the fleet as well as to increased productivity.

In Long Range the flight hours increased by 1,440 hours (i.e. by 25.3%) even though
the availability of Euroflys fleet only increased by 1 machine month and with diminished pro-
ductivity of 1.5% due to the effect of the tsunami. The increase of flight hours depends pri-
marily on the rental of 1 aircraft in wet lease for the contracts already stipulated with the Ministry
of the Defense and other tour operators for destinations other than the Maldive.

The trend of revenue per flight hour can be analyzed as follows:

Revenue per flight hour (Euro) Mid Range Long Range Total

I six months 2004 4,780 7,836 5,900

I six months 2005 5,040 8,153 6,137
Trend % 5.4% 4% 4%

The increase of the average revenue of the Mid Range fleet of 5.4% is due to the in-
crease of market prices, mostly consequent to the increase of the cost of jet fuel, whereas the
average revenue of the Long Range fleet indicates an increase of 4% deriving from the com-
bined effect of a high level of revenue per flight hour of the aircraft in wet lease, partially offset
by the reduction of consideration due to the effect of the tsunami.

Jet fuel

The results of the period were also strongly influenced by the trend of the cost of jet
fuel, whose trend depended on the price of jet fuel and the Euro/USD exchange rate.

The cost of jet fuel in absolute values increased by 71.9% (amounting to 13,792
thousand Euro) as well as to the trends of the price of jet fuel and the exchange rate, due to in-
creased activity.

The increase of the impact of the cost of jet fuel on total revenue passed from 20%
during the first six months of 2004 to 26% during the first six months of 2005. It is noted that
even in the event an increase of revenue (denominator of the ratio) due to the effect of contrac-
tual adjustments was substantially equivalent in absolute terms to that of the jet fuel (numerator
of the ratio), their ratio would increase. Moreover, the adjustment historically made was less with
respect to that contractually applied; in particular, compared to the increase of the cost of jet fuel
of approximately 7,800 thousand Euro, recovery by means of adjustment of the sales price was
approximately 5,320 thousand Euro.

Personnel

Personnel costs remained substantially stable in terms of impact on total revenue,

reflecting an increase of the average available workforce from 490 Employees during the first six

100
months of 2004 to 595 during the first six months of 2005. The average pro capita cost remained
substantially unvaried during the two six month periods examined.

Maintenance costs

Maintenance costs appear to be substantially unvaried during the two six month pe-
riods in terms of absolute value. The variation in diminution of the impact of said costs on total
revenue can be attributed to the different time intervals for the maintenance work on the Airbus
fleet tied to the updating of the manufacturers maintenance programs (lengthening the mainte-
nance intervals), to the performance on its own maintenance work during the first six months of
2005, which during the first six months of 2004 was performed by third parties, and to the dif-
ferent mix of the fleet (specifically the minor presence of MD 80/82, which have an average main-
tenance cost greater than that of the Airbus fleet).

Other operative costs and wet leases

In view of a better understanding of the trend of other operating costs in terms of ab-
solute value and impact on total revenue, it is necessary to consider that they have been ana-
lyzed as follows:

Amounts in Euro/000 I six months 2004 % revenue I six months 2005 % revenue

Wet rentals 1,278 8,005

Other operative costs 25,880 27% 34,989 27%
Total 27,158 29% 42,994 34%

The increase depends exclusively on the variation of the costs of the wet leases,
which during the first six months of 2005 underwent a significant increase due to the rental of
Long Range capacity in order to comply with contracts with the Ministry of Defense and with
tour operators for destinations other than the Maldive, and Mid Range capacity at the beginning
of the summer season.

Operative rentals

During the first six months of 2005 the impact of the cost on total revenue was 10%,
substantially unvaried with respect to the corresponding data of the first six months of 2004
(9%). It should be noted that in absolute terms the first six months of 2005 were penalized by
rental costs in the amount of 2,885 thousand Euro, corresponding to the availability of the fleet,
which in 2004 was guaranteed by the use of MD 80/82 owned by the Company, leading to sig-
nificant savings of operative costs.

Trend of EBITDA

The impact of EBITDA on total revenue worsened by 4% of the first semester 2004
to 3% in 2005. The deterioration was due to the trend of the scope of the above. In particular,
the tsunami event had an impact in terms of minor marginality of approximately 2,959 thou-
sand Euro, which was partially recovered by repositioning on other European destinations in the
amount of 517 thousand Euro.

Depreciation, other allocations and allocations to risk and expense funds

The impact of said costs on total revenue during the two six month periods has re-
mained substantially unvaried.

101
Trend of EBIT

The impact of EBIT on total revenue worsened by 2% during the first six months of
2004 to 5% during the first six months of 2005. The trend is aligned with that of the EBITDA.

Financial costs and proceeds

The net proceeds of the first six months of 2005 are primarily related to profits on ex-
change rates.

Results of divestment activity

The results of divestment activity relative to the first six months of 2005 refers to the
net capital gains of 1,580 thousand Euro realized from the sale of 8 MD80/82.

Extraordinary net proceeds

Extraordinary net proceeds prevalently refer to the release of allocations for invoices
to be received prior to 2003, which turned out to be excessive with respect to need.

Fiscal year taxes

During the two six month periods, income taxes consisted exclusively of IRAP.

102
10. FINANCIAL RESOURCES

10.1 NET FINANCIAL POSITION OF THE THREE YEAR PERIOD 2002-2004 AND THE
FIRST SIX MONTHS OF 2005 AND CASH FLOWS

The net financial position of the three year period 2002-2004 and the first six months
of 2005 is set forth below:

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004 30/06/2005

Audited Audited Audited Audited

Financial receivables included in long

term investments 0 0 10,452 18,462
Financial receivables included in
financial assets 0 14,102 4,302 0
Available liquidity 17,273 11,968 2,023 1,346
Liabilities to banks 0 0 (6,886) (22,790)
Liabilities to other lenders 0 0 (5,000) (5,000)
Net financial position 17,273 26,070 4,891 (7,982)

The variations of the net financial position as of 31 December 2003, 2004 and as of
30 June 2005 consist of an increase for fiscal year 2003 of 8,797 thousand Euro, and a decrease
for fiscal years 2004 and the first six months of 2005 respectively equal to 21,179 thousand Euro
and to 12,873 thousand Euro.

The improvement of the net financial position that occurred in fiscal year 2003 is en-
tirely attributable to cash flow generated by the increase of net liquidity, as discussed below.

The worsening of the net financial position that occurred in fiscal year 2004 is attrib-
utable in the amount of 26,871 Euro to the absorption of liquidity generated by the variation of
net liquidity (commented on below), in the amount of 4,760 thousand Euro for indebtedness rel-
ative to the portion of the loan for the purchase of the real property in Via Ettore Bugatti 15 in
Milan expiring after the fiscal year, partially offset by the positive effect generated in the amount
of 10,452 thousand Euro of the investment in a capitalization contract having a sole premium,
classified among Financial receivables included in long term investments in that they were
pledged as collateral for a line of credit.

The further deterioration of the net financial position that occurred during the first six
months 2005 is attributable in the amount of 21,125 Euro to the absorption of liquidity generat-
ed by the variation of net financial indebtedness (commented on below), to the further increase
of financial receivables included in long term investments in the amount of 8,009 thousand Euro
relative to the pledge of a bank deposit for the issuance of a bank guarantee for a Finance
Leasing contract, which was partially offset by the positive effect generated in the amount of 242
thousand Euro by the reduction of indebtedness relative to the portion of the loan for the pur-
chase of the real property in Via Ettore Bugatti 15 in Milan expiring after the fiscal year.

103
 Set forth below is the reconciliation between the Companys net financial position
and net liquidity or net short term financial indebtedness from the financial statements reported
in Section III, Chapter 20.

Amount in Euro/000 31/12/2002 31/12/2003 31/12/2004 30/06/2005

Audited Audited Audited Audited

Net financial position 17,273 26,070 4,891 (7,982)

Financial receivables included in long term
investments 0 0 (10,452) (18,462)
Liabilities to other lenders
Non current portion 0 0 4,760 4,518
Net liquidity (net financial indebtedness) 17,273 26,070 (801) (21,926)

Net financial position 8,464 17,417 13,522 6,975

The net liquidity or net financial indebtedness underwent variations represented by

net cash flows in 2003 totaling 8,797 thousand Euro and from net absorptions of liquidity equal
respectively to 26,871 thousand Euro in 2002 and 21,125 thousand Euro during the first six
months of 2005.

In fiscal year 2003, the overall total cash flow of 8,797 thousand Euro can be attrib-
uted in the amount of 15,028 thousand Euro to flows from the fiscal year activity, in the amount
of 5,000 thousand Euro to an increase of share capital made by Alitalia, partially offset by the
absorption of liquidity from investment activity in the amount of 11,231 thousand Euro primarily
relating to the purchase of real property in Via Ettore Bugatti 15 in Milan, to the purchase of 7
purchase options for MD80/82 aircraft, to costs for including new A320 in the fleet and to the
relative costs of training personnel.

During fiscal year 2004, the overall absorption of liquidity in the amount of 26,871
thousand Euro is attributable in the amount of 41,102 thousand Euro to investment activity (rel-
ative to the purchase of 10 MD80/82 aircraft, to the payment to Alitalia of the consideration for
6 purchase options for six MD80/82 aircraft as well as advance payments made for the purchase
of a A319 CJ/LR aircraft and some components related to it, net of the divestment of 3 MD80/82
aircraft) offset by the cash flows generated by the fiscal year activity in the amount of 9,470 thou-
sand Euro and the loan in the amount of 4,761 thousand Euro (relating to obtaining the loan to
purchase the real property in Via Ettore Bugatti no. 15).

During the first six months of 2005, the further absorption of liquidity for the total
amount of 21,125 thousand Euro is attributable to the absorptions of liquidity generated from
fiscal year activity in the amount of 15,125 thousand Euro, a loan for 5,000 thousand Euro (rela-
tive to the payment of dividends) and investment for 1,000 thousand Euro (relative to the sale of
8 MD80/82 aircraft net of the purchase of a MD80/82 aircraft and a time account bank deposit
with a credit institute). The absorption of liquidity generated by the fiscal year activity is influ-
enced by the loss during the six months of 3,250 thousand, in addition to dynamics of variation
of the fiscal years capital (negative in the amount of 11,466 Euro).

In particular, the losses of the six month period were impacted by the decreased pro-
ductivity of the long range fleet related to the effect of the tsunami, the increase in the cost of
jet fuel, which was only partially offset by the contractual adjustment of revenue with the tour op-
erators, the increase of wet lease costs due to the need for capacity both of Mid as well as Long
Range, net of extraordinary proceeds from capital gains deriving from the sale of the MD 80/82
aircraft, and the releases of allocations for invoices to be received prior to 2002, which turned
out to be excessive with respect to need; the negative dynamics of the variation of fiscal year
capital is instead due to the seasonal nature of the first six months of the year, in which the ab-
sorptions of liquidity for the payment of liabilities related to the costs of the structure is not off-
set by adequate margins of the operative activity, which developed volumes of hours during the
first six months of the year that were inferior to those of the second six months.

104
 Reference is made to Section III, Chapter 20, Paragraph 20.1.1.7 for further analyti-
cal details of the mentioned absorptions or cash flows.

10.2 ANALYSIS OF FINANCIAL RECEIVABLES INCLUDED IN LONG TERM INVEST-

MENTS, IN ASSETS THAT ARE NOT FIXED ASSETS AND AVAILABLE LIQUIDITY

Financial receivables included in long term investments

As of 31 December 2004, the receivables included in long term investments,

amounting to 10,452 thousand Euro (inclusive of interest), consisted of a capitalization contract
with a sole premium having as its object an insurance policy (number 1.280.611) of La Venezia
Assicurazioni of the Generali Group (see also Section III, Chapter 20, Paragraph 20.1.1.6). The
contract entered into effect on 22 December 2003, whereas the relative expiration is 22
December 2008. Upon the expiration of the contract, the Company is guaranteed the payment
of the initial insured capital, increased each year by revaluation consequent to an attributed min-
imum yield of 2.25%. As of 31 December 2004 and during the first six months of 2005, said cap-
italization contract had an effective yield equal, respectively, to approximately 4.5% and 1.9%.

The Company stipulated said capitalization contract on 22 December 2003 in order

to invest temporary excess liquidity, and for this reason as of 31 December 2003 the contract
was classified as a non fixed financial asset). The contract was later classified among fixed as-
sets in that it constituted a pledge in favor of Banca Profilo in January 2004 for the consale of a
credit line of 14,000 thousand Euro (extinguished without ever being utilized) and, subsequent-
ly, starting from July 2004, for the issuance by Banca Profilo of a bank guarantee for a maximum
of 14,000 thousand Euro as guarantee of Euroflys compliance with obligations related to the
Finance Leasing of the A319, which bank guarantee was later extinguished subsequent to the
issuance of a new bank guarantee by Unicredit. Starting from April 2005, said policy was
pledged in favor of Banca Profilo for the consale of a credit line for 10,000 thousand Euro.

As of 30 June 2005, the financial receivables included in long term investments,

amounting to 18,462 thousand Euro, included, in addition to the capitalization contract previ-
ously described, a fixed-term deposit with Unicredit in the amount of 8,000 thousand Euro,
opened utilizing the above mentioned credit line granted by Banca Profilo and contemporane-
ously given as a pledge for the issuance by Unicredit of the bank guarantee used as a guaran-
tee of the Finance Leasing contract stipulated in May 2005 with Locat S.p.A. for the purchase of
the above A319 CJ/LR. Said bank guarantee remains in duration until the thirtieth day subse-
quent to the expiration of the cited Finance Leasing contract, which has a ten year duration.

In brief, therefore, the capitalization contract was classified among long term invest-
ments starting from January 2004, as from such date it was restricted as a guarantee of bank
overdraft facilities and bank guarantees granted by Banca Profilo.

Financial receivables included in financial assets that are not long term investments

As of 31 December 2003, the receivables included in financial assets that were not
long term investments, amounting to 14,102 thousand Euro (inclusive of interest), consisted of
2 capitalization contracts having a sole premium, having as their object two insurance policies
of La Venezia Assicurazioni of the Generali Group: number 1.280.611 for 10,000 thousand
Euro, previously described, and policy number 1.259.750, also for 10,000 thousand Euro, of
which the Company purchased a share of 40%, i.e. equal to 4,000 thousand Euro. Said share,
purchased as an investment for temporary excess liquidity on 22 December 2003 from Profilo
Holding S.p.A. for an amount of 4,102 thousand Euro, expires on 13 June 2008 and has an at-
tributed minimum yield of 2%. As of 31 December 2004, the effective yield of said capitalization
contract was approximately 4.8%. This policy was also pledged in favor of Banca Profilo in
January 2004 for the consale of the credit line in the amount of 14,000 thousand Euro described
above and, subsequently, starting from July 2004, for the issuance by Banca Profilo of the bank

105
guarantee for a maximum of 14,000 thousand Euro as guarantee of Euroflys compliance with its
obligations related to the Finance Leasing of the A319.

Eurofly sold its 40% share of policy no. 1.259.750 during the month of February 2005
for a value aligned with the value of when it was recorded on 31 December 2004; therefore, as
of 31 December 2004 it maintained its classification in the item Financial assets that do not
constitute long term investments in that the sale had already occurred as of the date of the
preparation of the balance sheet.

Availability liquidity

The availability liquidity of the three year period in review and as of 30 June 2005,
consists of balances of active bank accounts.

As of 31 December 2002, available liquidity included the active balance (14,324

thousand Euro) of the treasury account held with Alitalia in accordance with a contract that en-
tered into effect 1 April 2000 that defined the manner of coordination between Alitalias treasury
and that of the Company, in view of the efficient functioning of the account, not only with refer-
ence to the reciprocal transactions, but also the regulation of the relationships of the Company
with suppliers who operate in the layovers in which the Company and Alitalia have operative
structures. Said contract also determined the yield to be applied to the positive and negative po-
sitions, the calculation method and payment of interest and the manner of daily drawing on it for
the needs and surpluses deriving from the management of the account. The treasury account
was closed on 15 September 2003 by means of a credit to the Company of an amount of ap-
proximately 2.5 million Euro.

As of 31 December 2003, there was a fixed-term deposit for a specific period of time
of 5,500 thousand Euro set up at the Banca Profilo on 22 December 2003 and having a termi-
nation date of 5 January 2004, bearing interest at 5.75%.

10.3 ANALYSIS OF LIABILITIES TO CREDIT INSTITUTES, LIABILITIES TO OTHER

LENDERS AND TO LEASING COMPANIES

The contractual relationships underlying the liabilities to credit institutes, to other

lenders and to leasing companies set forth in detail below do not contain financial covenants
and/or negative pledges.

Liabilities to credit institutes

As of 31 December 2004 and 30 June 2005, liabilities to banks consisted of bank

overdrafts and advance payments on outstanding invoices. As of 30 June 2005 the total credit
lines granted amounted to 41,130 thousand Euro (of which 24,880 thousand Euro granted by
Unicredit and 10,000 thousand Euro by Banca Profilo); said credit lines were utilized for bank
overdrafts in the amount of 20,120 thousand Euro (of which 10,121 thousand Euro issued by
Unicredit and 9,998 thousand Euro issued by Banca Profilo) and for advance payments against
invoices in the amount of 2,670 thousand Euro.

Liabilities to other lenders

As of 31 December 2004 and as of 30 June 2005, liabilities to other lenders consist-

ed of a loan for a total of 5,000 thousand Euro, with collateral consisting of a mortgage for a total
of 10,000 thousand Euro and granted to the Company by Banca Profilo for the purchase of the
real property located in Via E. Bugatti 15 in Milan. The relative repayment plan in constant rates,

106
starting from 22 January 2004, has a total duration of 10 years and provides for the deferred pay-
ment of 20 rates paid every six months. The interest rate applied through the expiration of the
second rate is a fixed annual nominal 1% rate. Subsequently, the interest rate is equal to Euribor
at 6 months calculated for currency the first business day of each rate period. Said variable
rate will be increased by 1.30 percentage points each year.

Liabilities to leasing companies

On 17 May 2005 the Company stipulated a Finance Leasing contract with Locat
S.p.A. having as its object an Airbus A319 CJ/LR aircraft, which entered into effect starting from
June 2005. The total base cost of the operation amounts to 38,285 thousand Euro, whereas the
total consideration amounts to 40,823 thousand Euro. The rent paid upon the execution of the
contract amounted to 9,512 thousand Euro, whereas a further 119 consecutive variable rates are
foreseen, due monthly, equal to 263 thousand Euro each. The rents are variable on the basis of
the trend of Euribor at 3 months. The leasing rate is 5.333% and the price of the eventual re-
demption is 7,657 thousand Euro.

The Finance Leasing operation is recorded in the balance sheet as of 30 June 2005
according to Italian practice, which provides for the debit entry of rents to the statement of prof-
its and losses. If as of 30 June 2005 the financial methodology had been applied, resulting in the
registration of the financial liability and the immobilization, the financial liability would have
amounted to 38,700 thousand Euro.

10.3.1 Other information regarding financial resources

During the month of July 2005, the Company assigned receivables with recourse due
from the Ministry of Defense in the amount of 2,199 thousand Euro.

10.4 LIMITATION OF THE USE OF LONG TERM INVESTMENTS

Limitations on the use of long tem investments consist of the pledge on the capital-
ization contract and the fixed-term accounts described in Paragraph 10.2. above. The Company
deems that said limitations did not and will not have any significant repercussions, either direct-
ly or indirectly, on its assets, with the exception of the impact on the economic account of the
financial costs of the amounts of the credit lines utilized for operative necessities.

10.5 PROGRAMMED INVESTMENT ACTIVITY

Investment programs are financed by the Companys indebtedness.

107
11. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES

Given the nature of its business, the Company does not perform any significant re-
search and development activity.

Since 1989 through 4 November 2005, the Company has utilized the name Eurofly
(both as its name as well as its distinctive mark to identify its products and/or services of air
transportation), on the basis of a gratuitous, perpetual and non exclusive license granted by
Eurofly Service S.p.A., which is not in any manner connected or related to Eurofly.

In a parallel and contemporaneous manner, Eurofly Service S.p.A. has also contin-
ued to utilize the name Eurofly, both as its corporate name as well as a distinctive mark to
identify its products and/or air transportation services, even though with regard to a different ref-
erence target and area of use (air taxi service).

By means of an agreement signed on 4 November 2005, the Company purchased

from Eurofly Service S.A., with immediate effect, the Eurofly trademark (registered in Italy
with no. 561940 on 12 July 1989 and renewed with number 882314 on 15 June 1999), as well
as the request for the registration of the trademark Eurofly Service S.p.A. (filed only in the
United States of America on 16 August 2004, with request number 78/467758, currently in
course. In return for the above assignment, agreed upon consideration was paid to Eurofly
Service S.p.A. in total amount of 500,000 Euro. At the same time, the parties also amicably
terminated the gratuitous license agreement set forth above, which had been stipulated in
1989. Without any prejudice to the effectiveness of the purchase contract for the above trade-
marks, it is noted that as of the Date of the Prospectus, the activities relating to the change of
registration to Eurofly.

The following table indicates the data relative to the trademark and trademark regis-
tration request that are the object of the above assignment executed on 4 November 2005:

Trademark Type Request no./ Classes First filing Expiration

Registration no.

Eurofly national Italian 561940 39 12 July 15 June

denominative and figurative 1989 2009
Eurofly Service S.p.A. USA denominative 78/467758 39 16 August 16 August
and figurative 2004 2004

At the same time as the purchase of the trademarks as set forth above, the Company
undertook to grant a license to Eurofly Service S.p.A. for the trademarks acquired on 4
November 2005 by the Company and to execute the relative license agreement with Eurofly
Service S.p.A. within 15 December 2005. Said contract will provide, in brief, for a non-exclusive
license to be granted to Eurofly Service S.p.A. for the above marks until 31 December 2015, in
exchange for a total consideration of 1,000 Euro for 2005 and a total of 2,500 Euro for each sub-
sequent year of duration of the license. The license agreement will provide, for its entire dura-
tion, for Eurofly Service S.p.A.s undertaking and/or that of its successors or assignees, not to
utilize the trademarks that are the object of the license with reference to activities that compete
with those of the Company. Further, the agreement in question will provide for Eurofly Service
S.p.A.s undertaking, starting from 1 January 2016, not to utilize, not even indirectly, any dis-
tinctive mark that is the same or similar to the trademarks that are the object of the license, an
undertaking to adopt and utilize distinctive marks that are totally different or in any even which
cannot be confused with the Companys distinctive marks, as well as Eufoly Service S.p.A.s un-
dertaking to change its corporate name.

In addition to the above, the Currently holds three trademark registration requests,
one Italian and two Community, in relation to which it has already made the relative filings.

108
 These requests are still pending, since the registrations have not yet been granted.
The data relative to the above registration applications for the trademark are set forth in the fol-
lowing table:

Trademark Type No. application/ Classes First filing Expiration

E-fly National Italian MI2003C012942 39 31 December 31 December

denominative normal 2003 2013
printing
Eurofly Community Figurative 004589008 37 39 43 11 August 11 August
2005 2015
Eurofly LE VACANZE Community 004546883 37 39 43 18 July 18 July
DECOLLANO figurative 2005 2015
white and black

In addition, Eurofly is the owner of the web site www.eurofly.it, which is registered
with the Italian Registration Authority.

109
12. INFORMATION REGARDING FORECAST TRENDS

The Companys activity was particularly intense subsequent to 30 June 2005, and
the total number of flight hours amounted to 34,142 as of 30 September 2005. The decreased
activity to Sharm El Sheikh during the month of August, subsequent to the terrorist attack of 23
July, was compensated by flights to other destinations and by the sale of part of its capacity in
wet lease to third parties (see Section III, Chapter 6., Paragraph 6.1.1.2.2).

On the basis of the mid-year asset and liability and profit and loss statements as of
30 September 2005 approved by Euroflys Board of Directors on 2 November 2005 the total
amount of revenue from sales and services during the nine month period ended 30 September
2005 amounted to 224,656 thousand Euro, an increase of 15.5% with respect to the same pe-
riod in 2004; total revenue amounted to 228,338 thousand Euro, an increase of 16.2% with re-
spect to the same period in 2004, EBITDAR amounted to 26,287 thousand Euro (11.5% of total
revenue), whereas EBITDA and EBIT respectively amounted to 4,999 thousand Euro and 2,095
thousand Euro.

The Company estimates that the operative results as of 30 September 2005 suffered
an extraordinary negative impact due to the tsunami amounting to 2.4 million Euro and a nega-
tive impact due to the terrorist attack of Sharm El Sheikh amounting to approximately 2.5 mil-
lion Euro.

The net financial position as of 30 September 2005 can be analyzed as follows:

Amount in Euro/000 30/09/2005 30/06/2005 31/12/2004

Financial receivables included in long term investments 18,489 18,462 10,452

Financial receivables included among
Non immobilized long term investments 0 0 4,302
Available liquidity 5,386 1,346 2,023
Liabilities to banks (25,605) (22,790) (6,886)
Liabilities to factoring companies (5,860) 0 0
Liabilities to other lenders (4,761) (5,000) (5,000)
Net financial position (12,351) (26,444) (5,561)

Euroflys net financial position as of 30 September 2005 was negative for 12,351
thousand Euro, worse with respect to 4,369 thousand Euro as of 30 June 2005 and 17,242 thou-
sand Euro with respect to 31 December 2004. As of the date of 30 September 2005, the
Company had utilized approximately 87.3% of the total credit line that it had been granted
(amounting to 24,550 thousand Euro). In view of completeness, it is noted that the residual fi-
nancial liability as of 30 September 2005 relative to the Finance lease contract for the A319
CJ/LR Airbus amounted to 37,911 thousand Euro.

The increase of the net financial position as of 30 September 2005 was primarily the
result of the increase of net working capital which, even though it remained negative, was re-
duced due to the following factors: an increase of its exposure with regard to the Ministry of the
Defense for troop transportation (which has deferred payment times with respect to the usual
contractual conditions existing with the tour operators), and a slowdown of payments by client
tour operators, who were effected by the difficult season of the tourism industry caused by the
cited extraordinary events (tsunami, attack at Sharm El Sheikh and hurricanes in the Caribbean).
Added to this is a slight and generalized reduction of the payment times for suppliers.

As of the date of the Prospectus, the credit lines that were granted were increased
to 25,550 thousand Euro (with respect to 24,550 thousand Euro as of 30 September 2005).
Further, both Banca Profilo as well as Centrobanca undertook to make a stand by line of credit

110
available to the Company, each for the amount of 2,5000 thousand Euro (and thus for a total of
5,000 thousand Euro), having an expiration of 18 months minus one day and repayable upon ex-
piration. Further, on 21 November 2005, Spinnaker Luxembourg granted the Company a 24
month non-interest bearing loan in the amount of 4,500 thousand Euro, repayable upon expira-
tion, with regard to the financial needs that were manifested during the month of October 2005,
primarily related to the down payments (amounting to 3,744 thousand Euro) for contracts who
object was the entry in the fleet of new A330 and A350 aircraft.

In view of the factors set forth in the above paragraph, the percentage of use of the
credit lines as of the Date of the Prospectus was significantly reduced.

With reference to receivables regarding the Ministry of Defense, they were progres-
sively assigned to a the factoring company UniCredit Factoring S.p.A. which, by means of a note
dated 18 November 2005, accepted the assignment on a without recourse basis, for an amount
of approximately 11,600 thousand Euro.

The Company estimates that the net financial position as of 31 October 2005 has fur-
ther increased by approximately 4 million Euro, in large part due to the down payments made
(amounting to 3,744 thousand Euro) relating to contracts having as their object the entry in the
fleet of new A330 and A350 aircraft.

With regard to the trend through the end of the fiscal year, even though, due to the
seasons, management during the period from November through the end of December usually
absorbs liquidity, Eurofly deems that it will be able to conclude the fiscal year with a financial po-
sition that is significantly improved with respect to 30 September. This is due to the effect (i) of
the assignment in factoring without recourse of approximately 11,601 thousand Euro of receiv-
ables from the Ministry of Defense; (ii) the issuance of the cited non-interest bearing loan by
Spinnaker Luxembourg, and (iii) the gradual normalization of payments by client tour operators.

Due to the usual seasonal nature of its activity, over the next months through the end
of the fiscal year, a minor number of monthly flight hours is forecast.

Overall, Eurofly believes that it will be able to end the fiscal year with invoiced sales
that are significantly in excess of those of last year, primarily due to the development of Long
Range activity.

Among operative costs, jet fuel is the cost that continues to maintain a particularly
high volatility and represents, together with the Euro/USD exchange rate, the primary uncertain-
ty for the fiscal year in course. This is also in consideration of the fact that the adjustment mech-
anism for prices aimed at transferring eventual increases to the client tour operators has a limit
beyond certain thresholds (see Section III, Chapter 6, Paragraph 6.1.1.6.1).

Eurofly estimates, however, that it will close the fiscal year in course with a positive
EBITDA, even if with a lower margin on revenue than that registered in 2004.

With regard to EBIT, instead, the fiscal year will end with a loss, primarily due to the
exceptional events described in Section III, Chapter 5, Paragraph 5.1., and the effects of the hur-
ricanes that affected the Caribbean during the months of September and October.

Further, the financial and extraordinary components of the fiscal year should remain
positive, just as the amount of the net loss, notwithstanding the impact of taxes (exclusively
IRAP), could be lower than the operative loss.

On the basis of the information that it currently has available, the Company estimates
that, in the absence of extraordinary negative events, the EBITDA of the fiscal year 2006 will re-
main positive, whereas it is not possible to make any forecasts with regard to the net results said
fiscal year.

111
13. PROFIT FORECASTS OR ESTIMATES
There are no forecasts or estimates of profits.

112
14. ADMINISTRATIVE, MANAGEMENT OR SUPERVISORY ORGANS
AND HIGH LEVEL MANAGERS

14.1. NAME, ADDRESS AND FUNCTIONS CARE OF THE ISSUER OF THE FOLLOW-
ING PERSONS, WITH AN INDICATION OF THE PRINCIPAL ACTIVITY THAT
THEY PERFORM OUTSIDE OF THE ISSUER, AS LONG AS SIGNIFICANT WITH
RESPECT TO THE ISSUER:

14.1.1. Members of the administrative, management and supervisory organs

Board of Directors

In accordance with art. 14 of the By-laws, the Company is managed by a Board of

Directors consisting of from 5 to 9 members.

The Companys Board of Directors in office as of the Date of the Prospectus, ap-
pointed by means of a resolution of the ordinary shareholders meeting of 15 September 2003,
with the exception of Mr. Eugenio Lapenna and Mr. Ruggeromassimo Jannuzzelli, who were ap-
pointed by means of a resolution of the ordinary shareholders meeting of 12 September 2005,
was made up as follows:

Office Name and last name Place and date of birth Residence

President Giuseppe Bonomi (*) Varese 08.06.1958 Varese, via Carbonin 47

Vice-president Ruggeromassimo Jannuzzelli Milan 08.10.1959 Montesegale (PV), via Castello 1
Managing Director Augusto Angioletti1 Rome 01.09.1961 Rome, vicolo dei Modelli 61
Director Laura Sanvito Lecco 26.10.1970 Lecco, corso Matteotti 8/D
Director Eugenio Lapenna (*) Rome 13.09.1946 Rome, via In Lucina 17
(*) Independent directors.
(1) The Managing Director, Mr. Augusto Angioletti, is also an employee of the Company, with the title of first captain.

The Board of Directors, by means of a resolution of 15 September 2003, appointed

Mr. Giuseppe Bonomi as President of the Companys Board of Directors. In accordance with art.
25 of the By-laws, it is up to the President of the Board of Directors to represent the Company
with regard to third parties and at law as well as sign on its behalf.

Again by means of a resolution on 15 September 2003, the Board of Directors ap-

pointed Mr. Augusto Angioletti as the Companys Managing Director, granting him the power to
perform all of the acts of ordinary administration and management for the Company, both in Italy
as well as abroad, with the exception of those reserved by law or by the By-laws to the Board
of Directors, as well as with the exclusion of the following:
(i) approval of the forecast economic plans (Budget), as well as of the Companys
forecast industrial and strategic plans;
(ii) choice of the Companys legal, fiscal and/or financial consultants;
(iii) decisions with regard to the Companys strategies, general orientation and organiza-
tion, as well as its business plans, arrangements and programs;
(iv) stipulation, modification and termination of contracts and agreements regarding the
Companys object for values in excess of 2,600,000 Euro per individual act;
(v) execution of contracts with the specialized technical consultants necessary for the
performance of activity defined in the Budget and in the Companys forecast indus-
trial and strategic plans, having a duration in excess of one year and for an amount
in excess of 52,000 Euro;
(vi) management and disciplinary control with regard to eventual employment relation-
ships between the Company and Mr. Augusto Angioletti.

113
 Among the powers attributed as above to the Managing Director are, as an example
but not limited to the same, the following:
1) implement the resolutions of the Board of Directors, advising the Board itself, each
month, with respect to the activity performed during the fiscal year of the powers
granted, as well as in accordance with the following paragraphs, and the operations
of greatest economic, financial and patrimonial significance performed;
2) propose to the Board of Directors all of the initiatives held to be useful that are in
the Companys interests and, in particular, prepare proposals with regard to the
Companys strategies, general orientation and organization, as well as its busi-
ness plans, arrangements and programs and subject them to the approval of the
Board;
3) decide the Companys structure within the framework of the organizational lines and
arrangements formally approved by the Board of Directors;
4) promote and coordinate policies for the Companys image, in Italy and abroad;
5) constitute, modify, suspend and terminate employment relationships with the
Companys employees, both ground as well as flight, inclusive of the appointment
and revocation of aircraft pilots, with the exception of the eventual employment re-
lationship between the Company and Mr. Angioletti;
6) stipulate, modify and terminate, with every clause, including an arbitration clause,
contracts and agreements relating to the Companys object, with the power, further,
to settle any eventual controversy, and to appoint and revoke arbitrators; all within
the limit of a value of 2,600,000 Euro per individual act;
7) initiate, in the Companys interests, relationships with the specialized technical con-
sultants necessary for the performance, by the Companys competent organs, of the
activity defined in the Budget and in the Companys industrial and strategic plans, it
remaining agreed that the relative contracts will have a duration that does not exceed
one year or an amount not greater than 52,000 Euro;
8) perform all of the acts necessary to represent the Company, both in Italy as well as
abroad, and, in such framework, in particular:
in legal proceedings, whether as plaintiff or defendant, with regard to the ordi-
nary, administrative, tributary or special Judicial Authority, for all controversies of
any nature and at any state and level;
in all administrative acts and procedures, with no exclusions or exceptions, with
the power to file claims or appeals of any kind with regard to the competent
Public Administrations, to present applications to participate in public bidding in-
herent to the activity of its corporate object, to file petitions regarding rates and
to sign statements of the transfer of aircraft to the operator;
in front of public or private entities, perform acts and operations care of
Ministries, Local Entities, the Offices of Public Debt, Public Savings, Tax offices,
Municipal and Provincial Treasuries, the Bank of Italy and other credit institutes,
as well as care of the postal, telegraphic, customs, railway offices and offices of
air and maritime companies and, in general, care of every public or private of-
fice;
9) perform all acts of administrative-financial management, as well as all of the finan-
cial operations, as borrower or lender, that are short term (meaning by this those with
a duration of up to twelve months), including the opening of credit, discounts and re-
purchase agreements;
10) request bank, credit and insurance institutes to issue bank guarantees and other
guarantees of any kind and nature in view of compliance with the Companys oblig-
ations;
11) appoint special agents for individual acts, within the context of the powers set forth
in the above clauses, granting and revoking the opportune powers.

114
 In addition to the powers set forth above, on 15 September 2003 the Board of
Directors granted the above Managing Director, Mr. Augusto Angioletti:
A) all of the powers necessary for the proper and timely realization of all of the pre-
scribed compliances to be borne by the Company by outstanding law with partic-
ular reference to those related to the position of Accountable Manager in accordance
with the JAR OPS provisions all with the broadest organizational and decisional
powers and powers to act, including in derogation of the value limits indicated above
and with powers of sub-delegation;
B) the powers for the Companys extraordinary management, which the Managing
Director can exercise exclusively in order to perform the activity expressly provided
for in the Budget and in the Companys industrial and strategic plans, as approved
from time to time by the Board of Directors and as delegated by the Board from time
to time to the Managing Director.

In accordance with art. 25 of the By-laws, the Managing Director represents the
Company within the limits of the powers delegated to him.

On 12/15 September 2005, the Board of Directors voted to appoint Mr.

Ruggeromassimo Jannuzzelli Vice President of the Board. In accordance with art. 25 of the By-
laws, in the case of the absence or unavailability of the President, the legal representation of the
Company rests with the Vice President of the Board of Directors.

There was no executive committee as of the Date of the Prospectus.

Some brief information relative to the members of the Board of Directors is set forth
below, with an indication of the primary activities performed by them outside of the Company
that are significant with regard to the Company, together with all the share capital companies or
partnerships of which they have been members of the administrative, management or supervi-
sory organs or have been shareholders at any time during the past five years:

Giuseppe Bonomi

President

Degree in Law from the State University of Milan, acts as an attorney, dealing pri-
marily with questions of administrative and civil law. He has participated on various occasions
as a speaker at conferences regarding the reform of local autonomies, territorial layout, trans-
portation, public works and zoning regulations. He has acted as a member of the Board of
Directors (1994-1996) and President (1997-1999) of SEA S.p.A., Vice President of Societ per
laeroporto Civile di Bergamo Orio al Serio S.p.A. (1996-1997) and Vice President of
Assaeroporti (1998-1999). He was President of Alitalias Board of Directors from May 2003
through May 2004. From 1999 he has been a member of the Commissione Tecnica Regionale
Malpensa (Malpensa Technical Regional Commission) competent with regard to the imple-
mentation of the Malpensa area Plan. Currently he is the President of the Board of Directors
of the Fondazione Comunitaria del Varesotto (since 2001) and is a member of the board of di-
rectors of ANAS S.p.A. (since 2002). He has been Euroflys President since 15 September
2003.

Ruggeromassimo Jannuzzelli

Vice-president

Degree in Law, Master in Marketing and Communications. Currently he is the Vice-

president and Managing Director of Camuzzi International S.p.A. and also holds numerous other
positions on the boards of directors of companies belonging to the Camuzzi International group.

115
He is a member of the Board of Directors of Profilo Management Company SA, management
company of the fund Profilo Spinnaker Investment Fund (see Section II, Chapter 18, Paragraph
18.3.). He has been Euroflys Vice-president since 12/15 September 2005.

More in detail, in addition to what is set forth above, Mr. Ruggeromassimo

Jannuzzelli currently acts as Vice-president and Managing Director of Camuzzi Editoriale S.p.A.,
Gaja Editore S.r.l., Colonia Limito S.p.A., Camuzzi Gruppo Nautica S.p.A., Cantieri Navali
Baglietto S.p.A., Marine Wave S.r.l., Camuzzi Immobiliare S.r.l., Company Generale di Sicurezza
S.r.l., H&C S.p.A. and Agorarte S.r.l.. He is the President of Trader S.p.A. and is managing di-
rector of Mill Hill Investments N.V., and acts as director of Oltrep Terme Resort S.r.l., Piacenza
Football Club S.p.A., Camuzzi Argentina S.A., Mercurio Marine International (of which he is a
shareholder), Medinvest International, Cassa di Risparmio di Milano e della Lombardia S.p.A.,
Kiwi.Com Servicos de Consultoria S.A., Verona Grandi Clienti S.r.l., Centro Europeo di allena-
mento e cura del Cavallo S.r.l. and Voghera Calcio S.r.l..

Mr. Ruggeromassimo Jannuzzelli has also acted as the Managing Director (2000-
2002) and Vice-president (2001-2002) of Camuzzi Gazometri S.p.A., director of Astor Finanziaria
Mobiliare S.r.l. (1987-2000) and SO.IM.FI. (1987-2000), as well as President of Traterni S.r.l.
(1997-2000) and President and Managing Director of I.F.C.C. S.r.l. (1995-2003).

Augusto Angioletti

Managing Director

Achieved level of officer and military pilots license at the Accademia Aeronautica of
Pozzuoli, then obtained qualification as a flight instructor for the Aeronautica Militare. Civil air-
line pilot for Alitalia starting from 1985, captain since 1994, he has held different positions at a
national and international level in Anpac (Associazione Nazionale Piloti Aviazione Civile) (National
Association of Civil Aviation Pilots) up until accepting the position of President in February 1996.
In June 1997 he became a member of Alitalias Board of Directors as representative of share-
holder employees, actively collaborating in Alitalias restructuring plan, the launch of the Alitalia
team carrier and the project of the merger with KLM. He became a member of Alitalias execu-
tive committee in March 2001. During the course of his activity he dealt with the industrial strat-
egy of air navigation companies and the development of the air transportation system, with par-
ticular regard to restructuring and recovery policies. He has spoken numerous times at
conferences and seminars in the context of the air sector and transportation systems more in
general, and is the representative of Assaereo (Associazione Nazionale Carriers e Operatori del
Trasporto Aereo) with respect to Confindustria. He has been acting as Euroflys managing direc-
tor since 7 September 2001.

Laura Sanvito

Director

Degree from the University L. Bocconi of Milan and had her first work experiences in
the capital markets area of international banks. She was trained as a financial analyst with the
Dutch group Abn Amro, between 1998 and 2000 she dealt with corporate finance at Banca
Leonardo, coordinating some listing projects at the Milan Stock Exchange. Subsequently she
collaborated with the creation of Banca Profilos investment banking team, of which she is cur-
rently a senior member. She is also a member of the advisory board of the fund Profilo Spinnaker
Investment Fund (see Section III, Chapter 18, Paragraph 18.3). She has been a member of
Euroflys board of directors since 2003.

116
Eugenio Lapenna

Director

Degree in Law, from 1972 through 1990 he was responsible for the international re-
lations service, manager of the New York office and co-manager of the international finance sec-
tor of the Banco di Santo Spirito. From 1990 through 2000 he worked for the Cassa di Risparmio
of Verona, as director of the London office and member of the Board of Directors of Cariverona
Banca Ireland in Dublin. In 2001 he was director of the London office of Cardine Banca and sub-
sequently, until May 2004, he acted as general vice manager of ICCREA Banca. He has been a
member of Euroflys Board of Directors since 12 September 2005.

Board of Internal Auditors

In accordance with art. 27 of the By-laws, the Companys Board of Internal Auditors
is composed of 3 acting auditors and 2 alternatives.

As of the Date of the Prospectus, the Companys Board of Internal Auditors, ap-
pointed by the shareholders meeting on 15 September 2003, with the exception of Mr. Dario
Fangaresi and Mr. Giovanni Intrigliolo, appointed by means of a resolution of the ordinary share-
holders meeting of 29 July 2004, was made up as follows:

Position Name and last name Place and date of birth Residence

Acting auditor and President
Acting auditor
Acting auditor
Alternate auditor
Alternate auditor
Guido Mongelli Bologna 09.02.1948 Milan, via Petrarca 22
Maurizio Dattilo Milan 19.03.1963 Milan, via Corridoni 45
Michele Saracino Taranto 15.09.1965 Milan, via Boni 32
Dario Fangaresi Milan 16.11.1955 Milan, via G. da Procida 7
Giovanni Intrigliolo Siracusa 18.06.1965 Milan, via Vassallo 15

Some brief information regarding the members of the Board of Internal Auditors is
set forth below, with an indication of the principal activities performed by them outside of the
Company that are significant with respect to the Company, and all of the share capital compa-
nies and partnerships of which they have been members of the administrative, management or
supervisory organs or shareholders at any time during the past five years:

Guido Mongelli

President of the Board of Internal Auditors

Degree in Economics and Trade from the University L. Bocconi of Milan and regis-
tered with the List of Accountants of Milan since 1975 and the Registry of Auditors since 1995.
He first work experiences were with the auditing firm Deloitte & Touche, and he then opened a
professional office in Milan, an office that offers corporate and fiscal consulting to numerous
businesses, among which pharmaceutical, financial, industrial and commercial companies. He
is currently a member of the board of directors and board of internal auditors of numerous com-
panies and, in particular, is the President of the board of internal auditors of Banca Profilo S.p.A.,
Profilo Merchant S.p.A. and Profilo Merchant Co S.p.A. as well as acting internal auditor of
Profilo Hedge S.G.R. S.p.A. and Profilo Real Estate Sgr S.p.A.. He has been the President of
Euroflys Board of Internal Auditors since 15 September 2003.

More in detail, in addition to the above mentioned offices, currently Mr. Guido
Mongelli is a member of the board of directors of Astra S.r.l., Corporate Finance Ponti S.p.A.,
Olsa S.p.A., Stilmas S.p.A., he is President of the board of internal auditors of C.E.L. Company

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Elettrotecnica Lombarda S.p.A., R.K.G. S.r.l. and Errekappa Euroterapici S.p.A. as well as acting
internal auditor of Editoriale Vita S.p.A., Eurovalve S.r.l., Geta S.p.A., Hotel Paradiso S.p.A. and
Manifattura Testori S.p.A., and alternate internal auditor of Collina S.r.l.. He is the liquidator of
Newton 14 S.r.l. in liquidation and Vipia Varese S.r.l. in liquidation. He is currently a shareholder
of Astra S.r.l., CEL Company Elettrotecnica Lombarda S.p.A., 3MC S.r.l., IDD Innovazione
Design e Diffusione S.r.l. in liquidation, Adige Tredici S.r.l. and DTM Studi Medici S.a.s. di D.
Mirabile & C..

Mr. Guido Mongelli has acted as President of the board of directors of Alba S.p.A.
(until July 2000), member of the board of directors of Brandolini Raffaello Metalli S.r.l. (until April
2001), IDD S.r.l. (until February 2002), IM.CO 2 (until March 2001) and was liquidator of C.F.A.
S.r.l. in liquidation (until December 2004). He has acted as President of the board of internal au-
ditors of C.C. PartecipShares Immobiliari e Industriali S.p.A., APC S.p.A. (until December 2000),
Deloitte & Touche S.p.A. (until December 2002), Delfin S.p.A. (until July 2005), Mongozio S.r.l.
(until April 2000), Stilmas S.p.A. (until December 2003) and was acting internal auditor of
Allevamento Nosate S.p.A. (until January 2000), Battistero Parma S.p.A. (until February 2001),
CIAC S.p.A. (until June 2003), Compendia S.p.A. (until December 2004), Immobiliare Fonti
Nuove S.p.A. (until January 2000), Immobiliare Finanz. Baveno S.p.A. (until January 2000), and
R.K.G. S.r.l. (until December 2001). He was an alternate internal auditor of CECI S.p.A. in liqui-
dation (until February 2001) and of Immobiliare Nord Varesina (until January 2004). During the
course of the past 5 years he was a shareholder of Isonzo 22 S.r.l., Corporate Finance Ponti S.r.l.
and Cfa Company Finanziaria Aziendale S.r.l..

Maurizio Dattilo

Acting Auditor

Degree in Economics and Trade from the University L. Bocconi of Milan and regis-
tered with the List of Accountants of Milan since 1990 and the Registry of Auditors since 1995.
He is a partner of Studio Dattilo Commercialisti Associati of Milan, which offers tax consulting
to, among others, banking institutes. He has been one of Euroflys acting auditors since 15
September 2003.

Currently Mr. Maurizio Dattilo is shareholder and Sole Director of Cento 2/5 S.r.l.,
Centodieci 2/5 S.r.l., Centoventi 2/5 S.r.l. and Novanta S.r.l.. He is a shareholder of Gestifin
S.p.A.. He is the Sole Director of Airis S.r.l., GIF S.r.l., Giglio S.r.l., Immobiliare Lostampatore 13/3
S.r.l., immobiliare Quest S.r.l., Immobiliare Tibertina S.r.l., IRIS S.r.l., Ottanta S.r.l., 70Finance
S.r.l., Sessanta Finance S.r.l.. He is the President of the board of directors of Immobiliare Laco
S.r.l., Quarzo Lease S.r.l. and Quarzo S.r.l.. He is a member of the board of directors of Editrice
Skipper S.r.l.. He has acted as President of the board of internal auditors of Cosed S.p.A. and
Portobello S.p.A., He is an acting auditor of Advil S.p.A., BG Fiduciaria SIM S.p.A., BG SGR
S.p.A., Camuzzi Gruppo Nautica S.p.A., Cantieri Navali Baglietto S.p.A., Dynet
Telecommunications S.r.l., Fipdighi, GIM S.p.A., ICR S.p.A., Landro S.p.A., Metropol Access
Italia S.p.A., Nuova Palmontan S.a.p.a., Ortea S.r.l., Pollini Retail S.r.l., Progetto Bicocca La
Piazza, RCS Produzioni S.p.A., San Lorenzo, Selma Nuova S.p.A., Seven 2000 S.r.l., Sopaf
S.p.A.. He is an alternate auditor of RCS Investimenti S.p.A..

Mr. Maurizio Dattilo has acted as member of the board of directors of Spinnaker
Luxembourg (until February 2005) and Sole Director of Cartiere Burgo S.p.A. (2000-2001). He
has acted as acting auditor of Capitolium S.r.l. (until June 2005), Cogifer S.p.A. (until December
2001), Diffusione New Lab Europe S.p.A. (until December 2004), Epsilon Associati SIM S.p.A.,
Gemina S.p.A., I Grandi Viaggi (2001-2003), IMHolding S.r.l. (until June 2002), Immobiliare
Andronica S.p.A. (until June 2002), Immobiliare Molgora (until April 2000), Italholding S.r.l. (until
June 2004), LArca S.r.l., Marine Service Loano S.p.A. in liquidation (until December 2004),
Premafin S.p.A., Prime S.p.A. (until December 2001), Primegest S.p.A. (until December 2004),
Prime Inv. Man. SIM S.p.A. (until December 2001), Profilo Asset Management SGR S.p.A. (until
February 2005), Pridentia Fiduciaria S.p.A. (until June 2004), R & S S.p.A. (until June 2004), Sade

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Finanziaria S.p.A. (until June 2004), Sahz S.p.A. (until December 2004), Santander Investment
S.p.A. (until December 2004), Seteci S.p.A. (until June 2004), Syremont, Taro e Technostart
S.p.A. (until June 2004). He was alternate auditor of Cofactor S.p.A. (until June 2004), Compass
S.p.A. (until June 2004), Creditech S.p.A. (until June 2004), Filaholding S.p.A. (until December
2003), Micos Banca S.p.A. (until June 2004), Montedison S.p.A. (until December 2001), Palladio
leasing S.p.A. (until June 2004), Profilo Hedge SGR S.p.A. (until February 2005), Profilo Academy
S.p.A. (until February 2005), Profilo SGR S.p.A. (until February 2005), Prominvest S.p.A., and
Snia S.p.A..

Michele Saracino

Acting auditor

Degree in Business Economy from the University L. Bocconi of Milan and is regis-
tered with the List of Accountants of Milan since 1994 and the Registry of Auditors since 1999.
He performs his professional activity at his office in Milan, providing assistance and corporate
and tax consulting to numerous companies. He has held positions such as the technical expert
for one of the parties in civil litigation regarding banking and accounting issues. He is currently
a member of the board of internal auditors of numerous companies and, in particular, is an al-
ternate auditor for Banca Profilo S.p.A., Profilo Merchant Co S.p.A., Profilo Hedge S.G.R. S.p.A.
and Profilo Real Estate Sgr S.p.A.. Appointed alternate auditor of Eurofly in September 2003, he
was appointed acting auditor in July 2004, subsequent to the resignations of the auditor Mr.
Giovanni Meo.

More in detail, in addition to the above mentioned positions, Mr. Michele Saracino
currently acts as President of the board of internal auditors of Bonaudo S.p.A., C.C.
Partecipazioni Immobiliari e Industriali S.p.A., Stilmas S.p.A., Olsa S.p.A., Collina S.r.l., Astra
S.r.l. and is an acting auditor of Keryos S.p.A. and R.K.G. S.r.l..

Mr. Michele Saracino has also acted as the managing director of Delfin S.p.A. (until
September 2002), President of the internal board of auditors and, subsequently, acting auditor
of UNIEURO S.p.A. (until November 2002), President of the board of internal auditors of Trony
Trezzano S.r.l., Bartoli Elettrodomestici S.p.A., Unieuro Genova S.r.l. and Unieuro Aosta S.r.l.
until December 2000, acting auditor of Battistero Parma S.p.A. (until February 2001),
ExpoIngros S.r.l. (until December 2000), APC S.p.A. (until December 2000) and Mongozio S.r.l.
(until April 2000).

Dario Fangaresi

Alternate auditor

Degree in Corporate Economy from the University L. Bocconi of Milan, he has been
registered in the List of Accountants of Milan since 1984 and with the Registry of Auditors since
1995. Since 1984 he provides assistance and corporate and tax consulting to small and mid-
sized companies, as well as consulting in contractual matters and extraordinary business oper-
ations. From 1985 through 2002 he acted as an examiner for the students of the University L.
Bocconi for the course of Bankruptcy Law. He has been acting as Euroflys alternate auditor
since July 2004.

Mr. Dario Fangaresi also acts as an acting auditor of RKG S.r.l., Cavenaghi S.p.A.,
Carni Nobili S.r.l., Errekappa Euroterapici S.p.A., CEL Company Elettrotecnica Lombarda S.p.A.
and is also the alternate auditor of Astra S.r.l., Collina S.r.l., RAD Stampaggio Metalli non Ferrosi
S.r.l., Dott. G. Cavenaghi S.p.A., Eurovalve S.r.l., Olsa S.p.A., Bonaudo S.p.A., CC
PartecipShares Immobiliari e Industriali S.p.A. and Sogeva S.p.A. in liquidazione. He is also the
general partner of Immobiliare Darbar di Dario Fangaresi & C. s.a.s..

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 Mr. Dario Fangaresi has acted as the acting auditor of Nord Varesina S.p.A. (until
November 2000), Uni-Euro Aosta S.r.l. (until December 2001), Uni-Euro Genova S.r.l. (until
December 2001), Trony Trezzano S.r.l. (until December 2001), Bartoli Elettrodomestici S.p.A.
(until December 2001), Unimax S.r.l. (until December 2002), Brandolini Raffaello Metalli S.r.l. (until
December 2003), as well as an alternate auditor of CIAC S.p.A. (until June 2003) and Delfin
S.p.A. (until July 2005).

Giovanni Intrigliolo

Acting auditor

Degree in Economics and Commerce from the University of Pavia, Master in Tax Law
and Practice. Registered with the List of Accountants since 1995 and the Registry of Auditors
since 1999. He collaborated until June 2004 with Studio Legale Tributario in association with
Ernst & Young in Milan, maturing significant experience regarding corporate and fiscal consult-
ing in a national and international context. Since July 2004 he has been collaborating with Studio
Dattilo Commercialisti Associati of Milan. Currently he acts as acting auditor of Mediobanca
Finstrutture Intersomer S.p.A., Four Pollini S.r.l., SIM S.p.A., Seteci S.p.A. and Eco-Bat S.p.A..
He was appointed as an alternate auditor for Eurofly on 29 July 2004.

14.1.2. General partners

Not applicable.

14.1.3. Founding shareholders, if the company has been incorporated for less than five
years

Not applicable.

14.1.4 The Companys key managers

As of the Date of the Prospectus the Companys key managers were:

Name and Last Name Areas of responsibility Place and date of birth Residence

Augusto Angioletti Managing Director Rome 01.09.1961 Rome, vicolo dei Modelli 61
and First Captain
Armando Brunini Commercial Division Naples 16.09.1962 Rome, via Fortunato 77
Andrea Zanetto Operative Division Turin 12.01.1962 Meina (NO), via Castagnara 3

As of the Date of the Prospectus the Company did not have any general directors.

Some brief information relating to the above listed key managers is set forth below,
with an indication of the principal activities that they perform outside of the Company that is sig-
nificant with regard to the Company itself, and all share capital companies or partnerships of
which they were members of the administrative, management and supervisory organs or share-
holder at any time during the past five years:

Augusto Angioletti

Managing Director and First Captain

Reference is made to Chapter 14, Paragraph 14.1.1. for a profile of Mr. Augusto
Angioletti.

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Armando Brunini

Chief Commercial Officer

Degree in Economy and Commerce, from 1998 to 2001 he acted as the International
Business and Strategies Manager for the company Aeroporti di Roma. Member of the European
core team Travel & Transportation Practice of A.T. Kearney starting from 2001 and until 2003, he
began working at Eurofly in December 2003, as manager of the commercial division. In such role
he deals with the constant monitoring of the market and competition, determines initiatives for
business development and new services aimed at improving the portfolio of products offered by
the Company, proposes initiatives aimed at reinforcing the Companys image and consolidating
the Companys trademark, manages the sales activity of services to tour operators as well as di-
rectly to final clients, oversees the project of the All Business flights.

Andrea Zanetto

Chief Operations Officer

Degree in Aeronautical Engineering at Politecnico of Turin, he initiated his career as

the aeronautics designer of Embraer in Brazil. He has been working in Eurofly since its incorpo-
ration in 1989. Within the Company he has acted as Technical Director for almost 14 years and,
since February 2005, he has been the Operations Manager, responsible for the area dealing with
flight and ground activity, training and the management of the pilots, the planning and coordi-
nation of purchase operations for the aircraft and their maintenance, in compliance with the
standard provided by European aeronautics law.

There are no kinship relationships among the persons cited in this Paragraph 14.1.
The persons cited have not been subject to any convictions in relation to crimes of fraud during
the past five years and, during the same period, they have not been associated with any bank-
ruptcy, temporary receivership or liquidation procedure (except, with reference to companies in
liquidation, to what was indicated in the curricula vitae set forth above). The cited persons have
not been subject to any official incriminations and/or sanctions by public or regulatory authori-
ties (including delegated professional associations) nor interdiction by a court with regard to
members of the administrative, management or supervisory organs of the Company or from the
performance of any administrative or management activity for any Issuer over the course of the
past five years.

14.2. CONFLICTS OF INTEREST OF THE ADMINISTRATIVE, MANAGEMENT AND SU-

PERVISORY ORGANS AND HIGH LEVEL MANAGERS

On 14 September 2005 Spinnaker Luxembourg, Mr. Augusto Angioletti (the

Companys Managing Director) (Mr. Angioletti) and Singins Consultadoria Economica e
Marketing Lda (Singins), a company of Madeira entirely controlled by Mr. Angioletti, in view of
Euroflys listing, stipulated an agreement aimed at regulating their reciprocal relationships and
containing some relevant provisions in accordance with art. 122 of the Consolidated Act.

In performance of the above Singins agreement, on 15 September 2005 he pur-

chased 368,312 Shares of the Company from Spinnaker Luxembourg for a total price of 775,000
Euro.

The contract also provides for some agreements that can be summarized as follows:
(i) Spinnaker Luxembourgs undertaking to vote at the Companys shareholder meet-
ings so that Mr. Angioletti is appointed director of the Companys board of directors
for a further term of three years and thus, until approval of the Companys balance
sheet relative to fiscal year 2008;

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 (ii) Spinnaker Luxembourgs undertaking to use its best capabilities and potential so
that the Companys Board of Directors appoints Mr. Angioletti as the Companys
Managing Director and attributes him with management and representation powers
that are not less that the powers currently attributed to him, as long as the above
powers continue to be in line with corporate law and regulations applicable to listed
companies, as well as an annual compensation consisting of a fixed amount
(amounting to 200,000 Euro gross) and a variable amount equal to 6% of the EBIT
resulting from the Companys last balance sheet approved by the shareholders
meeting, to be paid only in the event said balance sheet indicates a positive net ac-
counting profit;
(iii) Mr. Angiolettis undertaking to accept, maintain and act as a Board member and
Managing Director of the Company until the approval, by the Companys competent
social organs, of the six month report as 30 June 2007, and in any even for not less
than 24 months from the date of the initiation of the trading of the Companys Shares
on the MTA (the Stability Period);
(iv) Singins lock up undertaking regarding the Companys shares that it owned which
would remain in duration until the stipulation by Spinnaker Luxembourg with the
Joint Global Coordinators of the lock up undertakings in the context of the Global
Offer (see Section IV, Chapter 7, Paragraph 7.3). The agreement provides that
Singins, subsequent to the execution of the above lock up undertakings by
Spinnaker Luxembourg, stipulates with the latter (and with every other party indicat-
ed by Spinnaker Luxembourg) new lock up undertakings with respect to the
Companys Shares that are owned by Singins having identical or in any event equiv-
alent contents to those undertaken by Spinnaker Luxembourg with regard to the
Joint Global Coordinators;
(v) Mr. Angiolettis lock up undertaking on the shareholding that he holds in Singins. The
above undertaking shall remain in duration until the end of the Stability Period;
(vi) the consale in favor of Singins of a put option on the Companys Shares that it owns.
Said option, except for what is set forth below, can be exercised by Singins with re-
gard to Spinnaker Luxembourg on the condition that Eurofly is listed within 31 March
2006. The option can be exercised, on the pain of forfeiture, on the day subsequent
to each of the expirations provided for by the lock up undertakings set forth in clause
(iv) above for the number of Shares no longer subject to the lock up restriction. The
price of the option will be equal to a unit price corresponding to the Offer Price (see
Section IV, Chapter 5, Paragraph 5.3.1), without prejudice to Spinnaker
Luxembourgs right to pay for the above put option by means of a cash settlement
(i.e. to pay an amount in cash per share equal to the difference between the price
agreed upon in the case of the exercise of the put option and the official stock mar-
ket price of Euroflys Shares on the day in which the put option is exercised). The put
option in question will automatically be forfeited ,and thus cannot be exercised by
Singins, in the event that during the course of the Stability Period Mr. Angioletti re-
signs from his position as director, or forfeits the above position for one of the rea-
sons set forth in art. 2382 of the Civil Code or is revoked for just cause, or breaches
the lock up undertakings set forth in clause (v) above;
(vii) the consale in favor of Spinnaker Luxembourg of a call option on the Companys
Shares owned by Singins. Said option can be exercised by Spinnaker Luxembourg
only in the event that Mr. Angioletti is revoked for just cause from his position as one
of Euroflys Board members. In the case of the exercise of the above option, the pur-
chase by Spinnaker Luxembourg will take place for the total price of 1,000 (one thou-
sand) Euro;
(viii) Spinnaker Luxembourgs undertaking, upon its achieving certain levels of investment
return (Internal Rate of Return), to pay Singins a variable amount depending on the
above levels. Said amount will be paid, if due, to Singins only in the event that Mr.
Angioletti does not breach the stability undertakings set forth in clause (iii) above, ex-
cept that in the event that upon the expiration of the Stability Period Spinnaker
Luxembourg has not sold its entire shareholding in the Company, the Internal Rate

122
 of Return will be determined on the basis of the stock market trend of Euroflys
Shares. Analogously to what is provided with regard to the put option, Singins will
lose the right to receive the above payments not only in the case in which Mr.
Angioletti resigns during the course of the Stability Period but also in the event that
during the above period he might forfeit the above position for one of the reasons
contemplated by art. 2382 of the Civil Code or be revoked for just cause, or breach
the lock up undertakings set forth in clause (v) above.

It is noted that the undertakings described in clauses (i), (ii) and (iii) above shall be
terminated and shall lack effect in the event that the Companys Shares are not listed on the MTA
within 31 March 2006.

The agreement will remain in effect until the expiration of the third anniversary sub-
sequent to the date in which the trading of the Companys Shares on the MTA has officially ini-
tiated or, in the case of the lack of listing or delisting of the Company, until the expiration of the
fifth anniversary subsequent to its execution.

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15. REMUNERATION AND BENEFITS

15.1. IN RELATION TO THE LAST FISCAL YEAR THAT HAS ENDED, THE AMOUNT OF
REMUNERATION (INCLUDING ANY EVENTUAL OR DEFERRED COMPENSA-
TION) AND BENEFITS IN KIND PAID TO THE PERSONS SET FORTH IN
CHAPTER 14, PARAGRAPH 14.1, BY THE ISSUER AND ITS SUBSIDIARIES FOR
THE SERVICES PERFORMED IN ANY MANNER ON BEHALF OF THE ISSUER
AND ITS SUBSIDIARIES

Board of Directors
With regard to the fiscal year ended 31 December 2004 (*), the gross compensation
paid by the Company to the members of the Board of Directors in office as of the Date of the
Prospectus was as follows:

Name and last name Position Gross compensation in euro

Giuseppe Bonomi President 40,000

Augusto Angioletti (1) Managing Director
Laura Sanvito Director 151,000
(1) The Managing Director Mr. Augusto Angioletti is also an employee of the Company, with the qualification of first captain, and as such in
2004 he received gross annual remuneration of 413,000 Euro as well as a gross bonus of 469,000 Euro.

Board of Internal Auditors

The following table indicates the gross remuneration paid by the Company to the
members of the Board of Internal Auditors in office as of the Date of the Prospectus in relation
to the fiscal year ended 31 December 2004:

Name and last name Position Gross compensation in euro

Guido Mongelli President 8,594

Maurizio Dattilo Acting Auditor 6,231
Michele Saracino (1) Acting Auditor 4,190
Dario Fangaresi Alternate auditor
Giovanni Intrigliolo Alternate auditor
(1) Mr. Michele Saracino, appointed as alternate auditor of the Company by the ordinary shareholders meeting of 15 September 2003, was ap-
pointed acting auditor by the ordinary shareholders meeting of 29 July 2004, subsequent to the resignation of the auditor Mr. Giovanni Meo.

Key figures
The following table lists the gross amount of the total remuneration paid by the
Company to Mr. Augusto Angioletti, Mr. Armando Brunini and Mr. Andrea Zanetto in relation to
the fiscal year ended 31 December 2004:

Items that make up the remuneration Total gross amount in euro

Ordinary remuneration 673,597

13 and 14 month remuneration 26,331
Restaurant tickets 3,156
a one time amount 40,041
missions/daily 27,583
bonus 489,198

(*) It is noted that with reference to fiscal year 2004 the Company, in addition to what is indicated in the table, paid gross fees amount-
ing to a total of 281,000 Euro to directors who left office during the course of fiscal year 2005.

124
15.2. TOTAL THE AMOUNTS SET ASIDE OR ACCUMULATED BY THE ISSUER OR BY
ITS SUBSIDIARIES FOR THE PAYMENT OF PENSIONS, SEVERANCE PAY OR
ANALOGOUS BENEFITS

Again with reference to Mr. Augusto Angioletti, Mr. Armando Brunini and Mr. Andrea
Zanetto, the following table indicates the overall data relative to severance pay with reference to
the fiscal year ended 31 December 2004:

Items related to TFR (severance pay) Total amount in euro

TFR matured (1) 18,879

TFR paid to social security funds 17,279
TFR paid 65,000
TFR allocated in the balance sheet 19,221
(1) The relative amount is indicated net of the amounts paid in 2004 to the pension funds.

Further, with regard to the Shares issued on behalf of some Employees of the
Company in accordance with art. 2349 Civil Code, reference is made to Section III, Chapter 17,
Paragraph 17.2.

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16. PRACTICE OF THE BOARD OF DIRECTORS

16.1. EXPIRATION DATE OF THE CURRENT POSITION, IF SUCH IS THE CASE, AND
THE PERIOD DURING WHICH THE PERSON HELD SUCH POSITION

Board of Directors

The Companys Board of Directors currently in office (see Chapter 14, Paragraph
14.1.1) was appointed by means of a resolution of the ordinary shareholders meeting of 15
September 2003, with the exception of Mr. Eugenio Lapenna and Mr. Ruggeromassimo
Jannuzzelli, who were appointed by means of a resolution of the ordinary shareholders meeting
of 12 September 2005. The current Board of Directors shall remain in office until the approval of
the balance sheet ended 31 December 2005.

Board of Internal Auditors

The Companys Board of Internal Auditors currently in office (see Section III, Chapter
14, Paragraph 14.1.1) was appointed by the shareholders meeting of 15 September 2003, with
the exception of Mr. Dario Fangaresi and Mr. Giovanni Intrigliolo, appointed by means of a res-
olution of the ordinary shareholders meeting of 29 July 2004. The current Board of Internal
Auditors shall remain in office until the approval of the balance sheet ended 31 December 2005.

16.2. INFORMATION ON THE EMPLOYMENT CONTRACTS STIPULATED BY MEM-

BERS OF THE ISSUERS, OR ITS SUBSIDIARIES, ADMINISTRATIVE, MANAGE-
MENT OR SUPERVISORY ORGANS THAT PROVIDE FOR SEVERANCE PAY

The Managing Director, Mr. Augusto Angioletti, has been an employee of the
Company since 16 September 2003, with the qualification of 1 captain. The relative contract,
which refers to the Companys collective bargaining agreement for flight personnel, provides that
for the purposes of determining remuneration, the captain has been granted an agreed-upon se-
niority of 18 years.

No other member of the Board of Directors or the Board of Internal Auditors is an

employee of the Company.

16.3. INFORMATION REGARDING THE INTERNAL CONTROL COMMITTEE AND THE

COMMITTEE FOR THE REMUNERATION PAID BY ISSUER

In relation to the internal control committee and the remuneration committee, refer-
ence is made to Paragraph 16.4. below.

16.4. A STATEMENT THAT ATTESTS THE ISSUERS COMPLIANCE WITH THE OUT-
STANDING NORMS ON CORPORATE GOVERNANCE IN THE COUNTRY WHERE
INCORPORATED

In order to adjust the Companys corporate governance system to the provisions of

the Code of Self Regulation for Listed Companies prepared by the Corporate Governance
Commission for Listed Companies, most recently approved in July 2002 and promoted by the
Italian Stock Market, Euroflys Board of Directors, also in view of the requests made by Borsa
Italiana over the course of the inquiry relating to the listing, voted to:
(a) create, effective as of the date in which the Companys Shares begin to be traded
on the MTA, an Internal Control Committee having the functions set forth in art. 10

126
 of the Code of Self Regulation for Listed Companies, providing that will be made up
of the directors Giuseppe Bonomi and Eugenio Lapenna and also providing that the
functions of President of the above Committee be attributed to Mr. Giuseppe
Bonomi, as non executive and independent directors. Said Committee, having con-
sulting and proposal functions, is responsible for (i) assisting the Board of Directors
with the activity of orientation, verification and control of the internal control system;
(ii) evaluating the work plan prepared by those attributed with the internal control
and reviewing their periodic reports; (iii) evaluating, together with the Companys di-
rectors and auditors, the adequacy of the accounting principles utilized and, in the
event a group exists, their homogeneity in view of the preparation of the consoli-
dated balance sheet; (iv) evaluating the proposals made by the auditor in order to
be entrusted with the relative position, as well as the work plan prepared for the
audit and the results indicated in the report and in the letter of suggestions; (v) ad-
vising the Board of Directors, at least every six months, at the time of the approval
of the balance sheet and the six month report, as to the activity performed and the
adequacy of the internal control system; (vi) performing the further tasks attributed
to the Committee by the Board of Directors. In the latter regard it is noted that the
Board of Directors approved entrusting the Internal Control Committee with the task
of preparing a non-binding opinion prior to the Companys conclusion of transac-
tions with companies of the Banca Profilo Group or with its directors, as long as
Spinnaker Luxembourg remains the Companys majority shareholder. The above
opinion must necessarily be requested by the Board of Directors or by the acting
Managing Director with regard to transactions that are within the powers delegated
to the latter;
(b) create, effective as of the date in which the Companys Shares begin to be traded on
the MTA, a Remuneration Committee having the functions set forth in art. 8, clause
1, of the Code of Self Regulation for Listed Companies, providing that the same be
made up of the directors Ruggeromassimo Jannuzzelli, Eugenio Lapenna and Laura
Sanvito, and further providing that the functions of President of the above Committee
be attributed to Mr. Ruggeromassimo Jannuzzelli, as directors who for the most part
are not executive directors. Said Committee shall be responsible for examining the
remuneration criteria for top management, make proposals to the Board of Directors
with regard to incentive mechanisms (stock option plan), as well as make proposals
to the Board with regard to the remuneration of managing directors and those who
cover special positions;
(c) adopt, effective as of the date in which the Companys Shares begin to be traded on
the MTA, a behavioral code (the so-called internal dealing) set forth in art. 2.6.3 of
the Stock Exchange Regulations, which regulate, in particular, operations performed
regarding the Companys financial instruments by those parties who, due to the po-
sition held, have access to information regarding facts that could result in significant
variations of the Companys economic prospects and which are capable, if rendered
public, of significantly influencing the price of the relative listed financial instruments
issued by the Company. Said parties have the obligation of notifying the party re-
sponsible for receiving the communications, within the fifth day of the open stock
market subsequent to the termination of each solar calendar quarter, a list of the op-
erations performed during the quarter on the Companys financial instruments whose
total value is at least 50,000 Euro, including operations made in the context of the
exercise of stock options or option rights. In the event that during the course of a
quarter the limit of 250,000 Euro of countervalue is cumulatively exceeded starting
from the beginning of the quarter, or in the case of prior notice starting from the
operations not included in the prior notice, the notice must be made without delay
within the first day of open stock market subsequent to that of the conclusion of the
operation that resulted in exceeding the limit;
(d) adopt, effective as of the date in which the Companys Shares begin to be traded on
the MTA, the procedures set forth in art. 6.1 of the Code of Self Regulation for Listed
Companies for the processing and management of confidential documents and in-
formation regarding the Company and for the communication outside of the

127
 Company of the above documents and information, with particular reference to the
price sensitive information price set forth in art. 114, clause 1, of the Consolidated
Act;
(e) adopt, effective as of the date in which the Companys Shares begin to be traded on
the MTA, the procedures for the performance of operations with related parties set
forth in art. 11 of the Code of Self Regulation for Listed Companies, in order to guar-
antee compliance with criteria of substantive and procedural propriety for the review
and approval of operations with related parties.

Currently the Companys Board of Directors does not feel it is necessary to create an
internal nominations committee for the position of director, holding that the structure of the
Companys shareholders, also in view of the upcoming listing, does not have the features of dif-
fusion that justify the creation of such a committee, without prejudice to the fact that eventual
proposals in this regard might in any event be made by the Board of Directors in its entirely due
to its limited dimensions.

At present the Company has not adopted any regulation for shareholders meetings.
It is, however, willing to evaluate, including on the basis of the results of the first shareholders
meetings subsequent to the listing, whether it is opportune to adopt a shareholders meeting
regulation that implements the recommendation contained in art. 13.4 of the Code of Self
Regulation for Listed Companies.

In addition to what is set forth above, the Company has undertaken with regard to
Borsa Italiana to provide the market, in the context of its annual balance sheet and six month re-
port, with adequate information regarding operations with companies of the Banca Profilo Group
or with its directors, as long as Spinnaker Luxembourg remains the Companys majority share-
holder.

As of the Date of the Prospectus, the Company did not have any additional opera-
tions in course with Banca Profilo or with companies of the Banca Profilo Group with respect to
those indicated in the Prospectus. It is also noted that as of the Date of the Prospectus, the
Company did not have any operations with Banca Profilos directors or directors of companies
of the Banca Profilo Group.

128
17. EMPLOYEES

17.1. NUMBER OF EMPLOYEES

Euroflys employees are divided into two main groups: ground personnel and flight
personnel. The first includes everyone who, directly or indirectly, makes flight activity possible,
from the functions of staff to commercial functions to those having largely technical responsibil-
ities. The second consists of the persons who perform their duties on board the aircraft: pilots
(the so-called technical flight personnel or navigating flight personnel) and flight assistants
(the so-called cabin flight personnel).

The following table indicates the number of Euroflys Employees as of the reference
date indicated therein:

31/12/2002 30/06/2003 31/12/2003 30/06/2004 31/12/2004 30/06/2005 31/10/2005

Managers 4 4 5 5 8 8 8
Employees 91 113 119 155 188 184 187
Total ground personnel 95 117 124 160 196 192 195
Technical flight personnel 90 93 97 130 124 131 125
Cabin flight personnel 247 224 247 265 328 303 277
Total flight personnel 337 317 344 395 452 434 402
EUROFLYs TOTAL 432 434 468 555 648 626 597

The reduction of flight personnel as of 31 October 2005 with respect to 30 June 2005
is primarily due to the fact that, at the end of the Companys peak season of activity, the term
contracts stipulated by the Company with its flight personnel expire.

The following table indicates the average number of Euroflys Employees during the
past three fiscal years and through the date of 31 October 2005:

2002 Jan - June 2003 Jan - June 2004 Jan - June Jan-Oct
2003 2004 2005 2005

Managers 4 4 4 5 7 8 8
Employees 81 106 109 136 150 190 188
Total ground personnel 85 110 113 141 157 198 196
Technical flight personnel 87 93 93 109 120 128 129
Cabin flight personnel 189 217 216 240 254 268 273
Total flight personnel 276 310 310 349 374 397 402
EUROFLYs TOTAL 361 420 423 490 531 595 598

As can be seen from the tables, over the past years Eurofly has registered a signifi-
cant increase in both categories of personnel; the ground personnel has practically doubled
since 2002, whereas flight personnel increased by approximately 1/3. Said increases are due to
the expansion of the fleet, the strong increase of the Companys activity and the internalization
of the services made available by Alitalia as head of the group.

During the course of fiscal year 2004, the Company employed an average of 163
Employees working for a specific period of time.

The contractual part relative to Euroflys personnel is, as for all of the other airlines,
rather complex. Eurofly has four employment contracts: one for the pilots, one for the flight

129
assistants, one for ground personnel, and one for managers. Eurofly has recently renewed
corporate employment contracts. A common objective of said renewals was that of allowing
the Company to have a normative system that permitted it to perform its activity as best it
can and for such purpose, in addition to normal increases of salaries (concentrated more on
the variable part than on the fixed part) and recoveries of productivity, a series of norms
aimed at seeking the maximum flexibility possible were added, regarding both operations as
well as planning. The economic and normative part of the employment contract for the pilots
and the economic part of the employment contract for ground personnel expire on 31
December 2005.

During the course of the year 2004, the Companys Employees adhered to a strike
that led to the suspension of the work activity for 4 hours on 30 November 2004. With regard to
the year in course, it is noted that ANPAC - Associazione Nazionale Piloti Aviazione Commerciale
- and FIT-CISL Piloti called a strike for 4 hours for 25 September 2005. The adherence to such
strike by the Companys Employees was more or less minimum.

17.2. SHAREHOLDINGS AND STOCK OPTIONS FOR EACH PERSON INDICATED IN

CHAPTER 14, PARAGRAPH 14.1

Art. 29 of the By-laws provides that the extraordinary shareholders meeting can ap-
prove the allocation of profits or reserves consisting of profits to the Employees of the Company
or its subsidiaries by means of the issuance, until an amount that corresponds to the profits, of
Shares without any restrictions, or special categories of Shares, to be awarded individually to
Employees in accordance with Art. 2349 of the Civil Code.

On 26 May 2005, the Companys extraordinary shareholders meeting voted to at-

tribute to the Board of Directors, in accordance with art. 2443 of the Civil Code, the power to in-
crease the share capital one or more times, on a gratuitous basis, within 31 July 2005, for a max-
imum nominal value of 500,000 Euro, by means of the issue of a maximum number of 500,000
ordinary Shares, with regular rights, to be awarded to the Companys Employees in accordance
with Art. 2349 of the Civil Code and in accordance with Article 29 of the By-laws.

As performance of such delegation of power, on 1 July 2005 the Board of Directors

voted to increase the share capital from 6,666,922.00 Euro to 7,065,302.00 Euro, and thus by
398,380.00 Euro by means of the use, for a corresponding amount, of the special reserve that
the ordinary shareholders meeting of 11 May 2005 had created for said purpose, and to assign
on a gratuitous basis to some Employees, identified discretionally by the Board of Directors from
among the Companys top management, 398,380 newly issued Shares having a nominal value
of 1.00 Euro each, with regular enjoyment of rights relative to fiscal year 2005, of which 298,380
Shares were allotted to the Captain as well as Managing Director of the Company Augusto
Angioletti.

Due to the gratuitous award set forth above and the purchase made by Mr.
Augusto Angioletti by means of Singins Consultadoria Economica e Marketing Lda on 15
September 2005 (see Section III, Chapter 14, Paragraph 14.2.), as of the Date of the
Prospectus the persons indicated in Chapter 14, Paragraph 14.1 hold the following share-
holdings in the Company:

Name and last name Position or title Number of Shares % of share capital

Augusto Angioletti (1) Managing Director e

First Captain 666,692 9.44
Armando Brunini Chief Commercial Officer 36,559 0.52
Andrea Zanetto Chief Operations Officer 29,033 0.41

(1) Indirectly by means of the entirely controlled company Singins Consultadoria Economica e Marketing Lda.

130
 With the exception of what is indicated in Paragraph 14.2. above, there are no op-
tion rights having as their object the Shares of the Company attributed to the persons indicated
in Chapter 14, Paragraph 14.1.

17.3. DESCRIPTION OF EVENTUAL SHAREHOLDERS AGREEMENTS OF

EMPLOYEES WITH REGARD TO THE ISSUERS CAPITAL

There are no shareholders agreements of the Employees regarding the Issuers cap-
ital.

131
18. PRINCIPAL SHAREHOLDERS

18.1. INDICATION OF THE NAME OF THE PERSONS, OTHER THAN MEMBERS OF

THE ADMINISTRATIVE, MANAGEMENT OR SUPERVISORY ORGANS, IF
KNOWN TO THE ISSUER, WHO DIRECTLY OR INDIRECTLY HOLD A SHARE-
HOLDING OR VOTING RIGHTS IN THE ISSUER SUBJECT TO NOTIFICATION IN
ACCORDANCE WITH OUTSTANDING LAW IN THE ISSUERS COUNTRY OF IN-
CORPORATION, AS WELL AS AN INDICATION OF THE AMOUNT OF THE
SHAREHOLDING HELD BY EACH OF THE PERSONS IN QUESTION. IN THE AB-
SENCE OF SAID PERSONS, ISSUE A SUITABLE NEGATIVE STATEMENT

As of the Date of the Prospectus the following parties directly held Shares with vot-
ing rights in an amount in excess of 2% of the Companys capital:

Shareholder No. Shares % share

capital

Spinnaker Luxembourg S.A. 6,298,610 89.15

Singins Consultadoria Economica e Marketing Lda (1) 666,692 9.44
(1) Singins Consultadoria Economica e Marketing Lda is entirely controlled by the Managing Director Augusto Angioletti.

18.2. INDICATE WHETHER THE ISSUERS PRINCIPAL SHAREHOLDERS HAVE DI-

VERSE VOTING RIGHTS OR PROVIDE A SUITABLE NEGATIVE STATEMENT

Each Share of the Issuer attributes an equal voting right.

18.3. STATE WHETHER, TO THE ISSUERS KNOWLEDGE, THE ISSUER IS DIRECTLY

OR INDIRECTLY HELD OR CONTROLLED BY ANOTHER PARTY, SPECIFY THE
NAME AND DESCRIBE THE NATURE OF SAID CONTROL AND THE MEASURES
TAKEN TO AVOID ABUSES OF THE SAME

The Company is controlled exclusively, in an indirect manner, by Profilo Spinnaker

Investment Fund, a closed investment fund organized under Luxembourg law (fonds commun
de placement), managed by the company Profilo Management Company S.A., having its regis-
tered office in Rue Aldrigen 11, L-1118, Luxembourg.

Profilo Spinnaker Investment Fund is in fact the owner of a shareholding of 99.68%

of the share capital of Spinnaker Holding S.A., in turn owner of a shareholding of 99.68% of the
share capital of Spinnaker Luxembourg S.A. which, in turn, owns 89.15% of the Companys
share capital.

132
 The following table indicates Euroflys shareholders as of the Date of the Prospectus
and the evolution subsequent to the Global Offer.

Shareholder No. % of No. No. of No. of % of No. of N. Azioni % of

of shares share of Shares Shares Shares share shares Post- share
prior to capital offered for offered for post capital object Offerta capital
the Global sub- sale Global of the Globale ed
offer scription Offer Greenshoe esercizio
option dellopzione
Greenshoe

Spinnaker
Luxembourg
S.A. 6,298,610 89.1% 400,000 5,898,610 45.5% 5,898,610 42.5%
Singins
Consultadoria
Economica
e Marketing Lda (*) 666,692 9.4% 666,692 5.1% 666,692 4.8%
Other shareholders 100,000 1.4% 100,000 0.8% 100,000 0.7%
Eurofly 5,900,000 900,000
Market 6,300,000 48.6% 7,200,000 51.9%
Total 7,065,302 100.0% 5,900,000 400,000 12,965,302 100.0% 900,000 13,865,302 100.0%

(*) Company entirely controlled by the Managing Director Augusto Angioletti.

The presence on the Board of Directors of two independent directors, together with
the internal committees, permits an autonomous and unconditioned judgment with regard to the
resolutions proposed by the directors; further, they permit the Board to use independent judg-
ment in order to ascertain the cases of potential conflict of interest between the Companys in-
terests and those of the controlling Shareholders.

18.4. DESCRIPTION OF EVENTUAL AGREEMENTS, KNOWN TO THE ISSUER,

WHOSE IMPLEMENTATION CAN LEAD TO A VARIATION OF THE CONTROL OF
THE ISSUER AT A SUBSEQUENT DATE

The Issuer is unaware of agreements whose implementation can result in a variation

of the control of the Issuer.

In view of completeness, reference is made to the Section III, Chapter 14, Paragraph
14.2 in relation to the agreement stipulated by Spinnaker Luxembourg, Singins Consultadoria
Economica e Marketing Lda and Mr. Angioletti.

133
19. OPERATIONS WITH RELATED PARTIES
During the course of the three year period 2002-2004 and the first six months of
2005, the Company, also subsequent to the change of the shareholdings that took place during
2003, progressively acquired independence and autonomy from the Alitalia group (Euroflys ma-
jority shareholder until 15 September 2003). In particular, the relationships with the Alitalia group
during the above period can be summarized as follows:

Amounts in Euro/000 2002 % of total 2003 % of total 2004 % of total 30 June 2005 % of total
of the of the of the of the
relative item relative item relative item relative item

Total revenue and proceeds 22,091 14.4% 17,435 9.9% 14,511 5.9% 544 0.4%
Total costs and expenses 55,251 34.2% 32,339 18.8% 26,440 10.9% 4,680 3.5%
Commercial receivables
and treasury accounts 17,307 53.6% 2,031 8.5% 16,846 33.7% 832 2.1%
Commercial liabilities 19,544 49.0% 16,343 33.3% 19,908 31.0% 1,793 3.6%

The relationships with the Alitalia group primarily referred to the provision by the lat-
ter of maintenance services, handling, Operative rentals, the rental of Euroflys local offices, and
some informatics services, whereas the Company provided Alitalia principally with the ticketing
service on the lines managed in code sharing. Such relationships were regulated by contracts
that were stipulated for prices and conditions in line with the market.

The treasury account with Alitalia in accordance with a contract dated 1 April 2000
determined the manner of coordination between Alitalias treasury and that of the Company for
the efficient functioning of the account, not only with reference to the reciprocal transactions, but
also the regulation of Euroflys relationships with suppliers operating at the layovers where the
Company and Alitalia have operative structures. The treasury account was closed on 15
September 2003 by means of a credit to the Company of the amount of approximately 2.5 mil-
lion Euro.

On 21 November 2005, Spinnaker Luxembourg granted the Company a 24 month

non-interest bearing loan in the amount of 4.5 million Euro, repayable upon expiration. The rel-
ative available funds will off-set the financial needs manifested during the month of October
2005, prevalently related to the down payments (for 3,744 thousand Euro) for contracts having
as their object the entry in the fleet of new A330 and A350 aircraft.

With the exception of what is set forth above, with reference to the period to which
the financial information set forth in the Prospectus refers, there were no transactions with re-
lated parties which, due to their nature and scope, where significant for the Issuer.

134
20. FINANCIAL INFORMATION REGARDING THE ISSUERS ASSETS
AND LIABILITIES, THE FINANICAL SITUATION, AND PROFITS
AND LOSSES

20.1 FINANCIAL INFORMATION REGARDING PAST FISCAL YEARS

20.1.1 Balance sheets of the past three fiscal years

The balance sheets of the three year period 2002-2004 approved by the
Shareholders Meeting respectively on 11 April 2003, 21 June 2004 and 11 May 2005 are set
forth below. The balance sheets for 2002 and 2003 have been reclassified in order to permit
them to be compared in the event that, in each of the subsequent fiscal years, the classifications
of the previous fiscal year were modified. Such reclassifications do not result, however, in mod-
ifications to the previous net worth or the fiscal year result approved by the Shareholders
Meetings. The reclassifications made to the statements of assets and liabilities for the fiscal
years ended 31 December 2002 and 2003 led to modifications of the financial statements in
order to coherently reflect the variations regarding liquidity/indebtedness.

20.1.1.1. Comparative statements of assets and liabilities

Amounts in Euro/000 31/12/2002 Audited 31/12/2003 Audited 31/12/2004 Audited 30/06/2005 Audited

A) RECEIVABLES FROM SHAREHOLDERS

FOR PAYMENTS STILL DUE
Total receivables from shareholders
for payments still due
B) FIXED ASSETS
I. Intangible fixed assets 3,278 4,075 5,043 6,044
II. Tangible fixed assets 1,814 10,574 35,742 11,378
III. Long term investments 5,515 5,449 19,084 34,249
Total fixed assets 10,607 20,098 59,869 51,671
C) WORKING CAPITAL
I. Stock 884 1,007 1,781 2,151
II. Receivables 38,390 33,949 56,009 43,351
III. Finanical assets that are not long term
investments 14,102 4,302
IV. Available liquidity 2,949 11,968 2,023 1,346
Total working capital 42,223 61,026 64,115 46,848
D) ACCRUALS AND PAYABLES 1,776 713 3,328 15,925
Total accruals and payables 1,776 713 3,328 15,925
TOTAL ASSETS 54,606 81,837 127,312 114,444
A) NET WORTH 1,667 9,389 16,224 7,973
Total net worth 1,667 9,389 16,224 7,973
B) RISK AND EXPENSE FUNDS 932 1,895 2,387 2,781
Total risk and expense funds 932 1,895 2,387 2,781
C) EMPLOYEE SEVERANCE PAY 2,360 2,579 2,927 3,079
Total severance pay 2,360 2,579 2,927 3,079
D) LIABILITIES 42,370 53,096 85,111 85,976
Total liabilities 42,370 53,096 85,111 85,976
E) ACCRUALS AND PAYABLES 7,277 14,878 20,663 14,635
Total accruals and payables 7,277 14,878 20,663 14,635
TOTAL LIABILITIES 54,606 81,837 127,312 114,444
MEMORANDUM ACCOUNTS 120,275 71,442 94,975 216,874

135
20.1.1.2. Comparative statement of profits and losses

Amounts in Euro/000 2002 Audited 2003 Audited 2004 Audited

A) PRODUCTION VALUE 152,119 175,725 247,378

Total production value 152,119 175,725 247,378
B) PRODUCTION COSTS 159,824 172,006 243,342
Total production costs 159,824 172,006 243,342
Difference between production value and costs (7,705) 3,719 4,036
C) FINANCIAL PROCEEDS AND EXPENSES (145) (816) 371
Total financial proceeds and expenses (145) (816) 371
E) EXTRAORDINARY PROCEEDS AND EXPENSES 2,411 1,211 3,497
Total extraordinary items 2,411 1,211 3,497
Results prior to taxes (5,439) 4,114 7,904
FISCAL YEAR TAXES (575) (1,392) (1,069)
Fiscal year profits (losses) (6,014) 2,722 6,835

20.1.1.3. Table of movements of net worth

Amounts in Euro/000 Share Shareholder Legal Statutory Year Total

capital payments to Reserves reserves profits/losses
capital account

Balances as of 31 December 2001 3,715 11,340 (7,377) 7,678

Coverage of losses (7,377) 3 7,377 3
Shareholder contributions 3,963 (3,963)
Fiscal year losses (6,014) (6,014)
Balances as of 31 December 2002 7,678 3 (6,014) 1,667
Coverage of losses (6,011) (3) 6,014
Shareholder contributions 5,000 5,000
Increase of capital 5,000 (5,000)
Fiscal year profits 2,722 2,722
Balances as of 31 December 2003 6,667 2,722 9,389
Destination of 2003 fiscal year results 136 2,586 (2,722)
Fiscal year profits 6,835 6,835
Balances as of 31 December 2004 6,667 136 2,586 6,835 16,224

136
20.1.1.4. Financial Statements

Amounts in Euro/000 31/12/2002 Audited 31/12/2003 Audited 31/12/2004 Audited 30/06/2005 Audited

A. INITIAL LIQUIDITY 24,286 17,273 26,070 (801)

B. CASH FLOWS FROM ACTIVITY
Fiscal year profits (losses) (6,014) 2,722 6,835 (3,251)
Depreciation 1,221 1,739 2,370 1,020
Net capital gains from fixed assets (1,264) (1,580)
Devaluation of fixed assets 227
Variations of fiscal year capital 4,955 10,348 954 (11,466)
Net variations of severance pay 297 219 348 152
459 15,028 9,470 (15,125)
C. CASH FLOWS FROM INVESTMENTS
IN FIXED ASSETS
Investments in fixed assets
Intangibles (3,746) (2,034) (2,723) (1,643)
Tangible (1,680) (9,274) (31,887) (7,979)
Long term investments (3,661) (418) (14,004) (15,434)
Value of sale of fixed assets 1,615 495 7,512 24,056
(7,472) (11,231) (41,102) (1,000)
D. CASH FLOWS FROM LOAN ACTIVITY
Shareholder contributions 5,000
Dividends (5,000)
Long term loan 4,761
5,000 4,761 (5,000)
E. CASH FLOWS DURING THE PERIOD
(B+C+D) (7,013) 8,797 (26,871) (21,125)
F. FINAL NET AVAILABLE LIQUIDITY
(A+E) 17,273 26,070 (801) (21,926)

20.1.1.5. Accounting principles

The accounting principles used for the preparation of the fiscal year balance sheet
ended 31 December 2002, 2003 and 2004 unvaried over the course of the three year period
with the exception of the criteria for recognition of profits on exchange rates, modified by the re-
form of Company Law were as follows:

Intangible fixed assets

Intangible fixed assets represent costs and expenses that have a multiyear utility and
which are registered upon the consent of the Board of Auditors where provided at cost, which
were not subject to monetary revaluation required by law or voluntary, inclusive of accessory
costs directly chargeable to them.

Said costs are indicated among the balance sheet assets net of amortization accu-
mulated during prior fiscal years, starting from the time in which they were available for use. The
relative amortization periods were determined in relation to their residual possibility of use. In
particular:
the set up and expansion costs are amortized over a five year period;
research costs are amortized for a period of three years, whereas those of advertis-
ing capitalized limited to those costs relative to the phases of the launch of new

137
 products/services from which future economic benefits are expected are amortized
for a period of five years;
the granting of licenses, trademarks and similar rights are amortized for a period of
five years;
the other intangible fixed assets are amortized as follows:
the costs relative to the preparation of Euroflys web site are amortized in five
years;
the modifications and standardizations performed on the fleet aircraft are amortized
on the basis of the duration of the lease contract.

In the event in which, independently of the amortization already recorded, there is a

lasting loss of value, the fixed asset is correspondingly devalued; if in subsequent fiscal years
the reasons for the devaluation no longer exist, the original value is restored, adjusted only with
regard to the amortization.

Tangible fixed assets

Tangible fixed assets are recorded at purchase or manufacturing cost, inclusive of

eventual accessory expenses. Said assets are indicated in the balance sheet assets net of the
adjustment funds related to them. The cost was not subject to monetary revaluation required by
law or voluntary.

Maintenance costs and repairs of a conservatory nature are charged to the state-
ment of profits and losses in the fiscal year in which they are sustained. Those of an incremen-
tal nature, in that they prolong the useful life of the tangible fixed asset or result in a significant
increase of capacity, are registered as an increase of the same.

In the event that, independently of the depreciation already recorded, there is a last-
ing loss of value, the fixed asset is correspondingly devalued; if in subsequent fiscal years the
reasons for the devaluation no longer exist, the original value is restored, adjusted only for de-
preciation.

Depreciation of homogeneous classes of tangible fixed assets have been calculated

at constant rates, starting from the fiscal year in which they are available for use - on the basis
of the residual possibility of use of the fixed assets to which they refer. In particular, the rates
provided by tax law, reduced by one half for fiscal year investments in consideration of their
more limited use, are reasonably representative of economic technical depreciation.

Consequently, the following depreciation rates were applied in 2004 to the different
categories of fixed assets:
buildings 33 years 3%
light constructions 10 years 10%
installations 10 years 10%
equipment 7 years 14%
rolling components 12 years 8.33%
MD80/82 aircraft 8.3 years 12%
machinery for data processing 5 years 20%
office furniture and machinery 8.3 years 12%
means of internal transportation 5 years 20%
motor vehicles 4 years 25%
communications systems 5 years 20%

138
 The depreciation rates for fixed assets have not been modified during the three year pe-
riod with the exception of a modification made during fiscal year 2004 to the depreciation rate
of the rolling components redefined as 8.33%, equal to a period of 12 years, rather than on the basis
of the rental contracts for the aircraft, for 5 years, in that it was noted that the useful life of the rolling
components is greater than the contractual duration for the rentals of the aircraft themselves.

The MD80/82 aircraft in the fleet as of the closure of fiscal year 2004, were depreci-
ated pro rata temporis on the basis of the flight hours in relationship to the days of possession,
applying a rate of 12% per year.

It is noted that the real property in Via Ettore Bugatti 15, in Milan registered at the
end of 2003 at the item Fixed Assets in course and down payments and whose delivery took
place mid December 2004, was also depreciated using the criteria pro rata temporis on a daily
basis with respect to the annual rate, in view of bearing in mind the period of actual availability
of the above real property, amounting to the last 15 days of 2004.

Other depreciation in addition to economic-technical depreciation was not calculated.

Financial fixed assets

The capitalization contract with a sole premium is valued at nominal value and in-
creased by matured interest; such value is not inferior to the value represented by the initial in-
sured capital, increased by the guaranteed minimum yield.

Receivables for security deposits for utilities are valued at their nominal value, coin-
ciding with that of presumed use.

Receivables for deposits regarding contractual undertakings with third parties are
registered at nominal value and eventually adjusted in view of adjusting the amount paid to the
value of its presumed salvage value.

Stock

Stock, consisting of inventories of technical materials, catering materials and tickets

scheduled are registered at the specific purchase cost, or the presumable salvage value that can
be inferred from the market trend, if less. Such lesser value is not maintained in subsequent bal-
ance sheets if the reasons therefore are lacking, and the restoration of value is made, if the pre-
requisites exist, within the limits of the original purchase cost.

Receivables

Receivables are recorded at their presumed sale value, adjusting the nominal value
of the special devaluation fund determined on the basis of an estimate of risk of bad debts.

Financial assets that are not long term investments

Receivables included in the financial assets that do are not long term investments,
represented by a capitalization contract having a sole premium, are registered for a value that is
not less than the initial insured capital, increased by the guaranteed minimum yield.

Availability liquidity

This is recorded at its nominal value.

139
Receivables and Payables (accounts receivable and pre-paid expenses/accrued liability
and deferred income )

This item includes the share of proceeds and costs, common to two or more fiscal
years, required in order to comply with the principle of an accrual basis.

Risk and expense funds

The risk and expense funds include charges and costs of a specific nature, of cer-
tain or probable existence, of which all in all, as of the date of closure of the fiscal year, the exact
amount or date of occurrence could not be determined.

The appropriations reflect the best possible estimate on the basis of available ele-
ments. Risks for which the possibility of a liability is only potential are indicated in the comments
regarding the funds, without making an allocation to a risk and expense fund. Risks of a remote
nature are not taken into account.

Items in currency different from the Euro

Receivables and liabilities originally expressed in foreign currency of Countries not

belonging to the area of the Euro have been converted into Euro at the average exchange rate
of the month prior to that in which the transaction occurred, until August 2004, subsequent to
the exchange rates in effect as of the date of the relative exchange rate operation in existence
as of the date of the relative operations. The exchange rate differences realized at the time of re-
ceiving the payment of receivables and the payment of liabilities in foreign currency are regis-
tered in the statement of profits and losses.

Assets and liabilities that were originally in foreign currency of Countries not belong-
ing to the area of the Euro still in existence at the end of the fiscal year, except for the fixed as-
sets, are aligned starting from the 2004 balance sheet at the spot cash exchange as of the
date of closure of the fiscal year and the relative profits and losses on the exchange rates are
registered in the statement of profits and losses and the eventual net profit is destined to a spe-
cial reserve that cannot be distributed until realization. In the balance sheets ended as of 31
December 2002 and 2003, the eventual differences of positive exchange rate originating from
the conversion or receivables and liabilities in currency are differed.

Fund for Severance Pay

The liability for employee severance pay is adequate with respect to the amount ma-
tured at the end of the fiscal year according to the provisions of law and contracts in effect, net
of advance payments made to Employees. Said liabilities are subject to revaluation by means of
indexes.

Liabilities

These are recorded at their nominal value. Said item includes liabilities that are cer-
tain and specific both with regard to their amount as well as the date of their occurrence.

Costs and revenue

These are recorded in the balance sheet in compliance with principles of prudence
and competence, net of the relative discounts and allowances.

Revenue is recognized at the time of the service which coincides with the time in
which the service is performed, which normally coincides with the transportation of passengers.

140
 The commissions paid to the agencies for the sale of airline tickets are charged to
the statement of profits and losses at the time of payment of the relative revenue.

Income tax

The current fiscal year taxes are determined on the basis of a realistic forecast of the
costs to be paid, in accordance with outstanding tax law, and are recorded in the statement of
assets and liabilities, net of any advance payments made and the withholdings to which it was
subject.

Further, advance tax payments have been allocated for the difference between the
fiscal year results and the fiscal taxable amount. In particular, as application of accounting prin-
ciple no. 25 of Accountants and Bookkeepers, the taxes paid in advance with regard to fiscal
losses that are carried forward and the temporary deductible differences are considered until
they match the eventual deferred taxes and, for the amount in excess, they are registered with-
in the limits in which the prerequisite exists of the reasonable certainty that they can be recov-
ered.

Memorandum accounts

These indicate the amount of guarantees, undertakings and risks at their nominal
value or for the value of the obligations undertaken, existing at the end of the fiscal year.

They have been valued as follows:

undertakings relating to assets utilized in Operative rental are registered on the basis
of the contracts existing at the end of the fiscal year for the amount of the residual
rents as of the date of the balance sheet;
undertakings relative to assets available in Finance Leasing are registered for an
amount equal to the nominal amount of the leasing to be paid increased by the re-
demption value for the good;
assets owned by third companies that are at the Company are registered at their cur-
rent value;
guarantees are registered at the nominal value of the guarantees issued to third par-
ties.

Forward foreign exchange contracts for the purchase of currency as a generic cov-
erage of exchange rate risks are noted at the time of their stipulation at the contracts nominal
value. The costs and proceeds deriving from the valuation at current value are recorded in the
statement of profits and losses, in that such instruments are not considered, for valuation pur-
poses, as coverage.

141
20.1.1.6. Comments to the comparative statements of assets and liabilities and com-
parative statements of profits and losses

Intangible fixed assets

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004

Set up and expansion costs

1 January 135 1,879 2,165
Investments during the year 2,260 928 728
Amortization (516) (642) (753)
Devaluations (227)
31 December 1,879 2,165 1,913

Costs for research, development and advertising

1 January
Investments during the year 387
Amortization (78)
31 December 309

Concessions, licenses, trademarks and similar rights

1 January 138 292 265
Investments during the year 247 53 440
Amortization (93) (80) (161)
31 December 292 265 544

Fixed assets in course

1 January
Investments during the year 396
31 December 396

Other
1 January 1,117 1,107 1,645
Investments during the year 1,239 1,053 772
Amortization (366) (515) (536)
Decreases (883)
31 December 1,107 1,645 1,881

Total intangible fixed assets

1 January 1,390 3,278 4,075
Investments during the year 3,746 2,034 2,723
Amortization (975) (1,237) (1,528)
Devaluations 0 0 (227)
Decreases (883) 0 0
31 December 3,278 4,075 5,043

Set up and expansion costs

The increase of the historical cost, as of 31 December 2002, amounting to 2,260

thousand Euro, primarily consists of the capitalization of the costs of personnel training for
Airbus A320 and A330 aircraft sustained in 2002 (2,177 thousand Euro) and costs for furnishing
the offices at the Milan Malpensa airport (83 thousand Euro).

The increase of the historical cost as of 31 December 2003 of the Set up and ex-
pansion costs, amounting to 928 thousand Euro, is due in the amount of 617 thousand Euro for
the further capitalization of training costs for pilots, 227 thousand Euro for the training costs of
the pilots of the MD 80/82 fleet and 84 thousand Euro for the costs of furnishing the offices lo-
cated at the Malpensa Airport.

142
 The decrease of net accounting value as of 31 December 2004, amounting to 252
thousand Euro, is due to increases amounting to 728 thousand Euro that can be traced princi-
pally to the training costs of the flight personnel (349 thousand Euro), the costs relative to pro-
ject management consulting and the distribution area for the multi-channel project (246 thou-
sand Euro), net of fiscal year amortization and the devaluation of the costs of the pilots of the
MD 80/82 aircraft, amounting to 227 thousand Euro. Said devaluation was done coherently with
the decision of the Company to proceed with the total divestment of the MD 80/82 fleet (see
Section III, Chapter 9).

Research, development and advertising costs

The net value as of 31 December 2004, amounting to 309 thousand Euro, primarily
regarded the advertising costs sustained and capitalized for the multi-channel project.

Concessions, licenses, trademarks and other rights

The increase of the net accounting value as of 31 December 2004 of Concessions,

licenses, trademarks and similar rights, amounting to 279 thousand Euro, is due to the capital-
ization gross of amortization - of the costs sustained amounting to 440 thousand Euro for the
purchase of software programs for accounting management and software to manage the distri-
bution of the multi-channel sales.

Fixed assets in course and down payments

The accounting value as of 31 December 2004, amounting to 396 thousand Euro,

refers to the capitalization of start up costs of the operative base of Sharm El Sheik and the
launch of the connection scheduled between Milan and New York (see Section III Chapter 6).

Other intangible fixed assets

The accounting net value, as of 31 December 2002, amounting to 1,106 thousand

Euro, consists primarily of purchase costs and modifications of the Airbus fleet.

The accounting net value as of 31 December 2003 of Other intangible fixed assets,
amounting to 538 thousand Euro, refers to the modifications made to the A330 aircraft (749
thousand Euro) and A320 aircraft (67 thousand Euro), as well as costs sustained for the inser-
tion of new A320 aircraft (237 thousand Euro), gross of amortizations.

143
Tangible fixed assets

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004

Buildings
1 January 35 31 6,027
Investments during the year 6,000 1,869
Depreciation (4) (4) (38)
31 December 31 6,027 7,858

Installations and machinery

1 January 769 1,245 1,610
Investments during the year 1,295 670 16,837
Reclassifications 2,122
Divestments during the year (732) (5,596)
Depreciation (87) (305) (552)
31 December 1,245 1,610 14,421

Industrial and commercial equipment

1 January 22 153 343
Investments during the year 165 229 151
Divestments during the year
Depreciation (34) (39) (65)
31 December 153 343 429

Other assets
1 January 286 385 472
Investments during the year 220 252 766
Divestments during the year (11) (36)
Depreciation (121) (154) (187)
31 December 385 472 1,015

Tangible fixed assets in course

1 January 2,122
Investments during the year 2,122 12,265
Divestments during the year (246)
Reclassifications (2,122)
31 December 2,122 12,019

Total tangible fixed assets

1 January 1,112 1,814 10,574
Investments during the year 1,680 9,273 31,888
Divestments during the year (732) (11) (5,878)
Reclassifications
Depreciation (246) (502) (842)
31 December 1,814 10,574 35,742

Buildings

The increase of the historical cost as of 31 December 2003, amounting to 6,000

thousand euro, refers to the purchase of the building for residential use, which became the
Companys registered office starting from the end of 2004 (see Section III, Chapter 9).

The subsequent increase of 2004, amounting to 1,869 thousand Euro, refers to the
improvements made to said building.

144
Installations and machinery
During the year 2002, the Company purchased and capitalized new rolling compo-
nents in the amount of 1,295 thousand Euro for the Airbus A330 fleet; with regard to said capi-
talization, during the course of 2002 Alitalia reimbursed the net residual value of the rolling aero-
nautical components of the Boeing B767 fleet in the amount of 732 thousand Euro, subsequent
to their substitution with Airbus A330 aircraft.
The increase as of 31 December 2004, amounting to 18,958 thousand Euro, refers to
the purchase of 10 MD 80/82 aircraft for 18,685 thousand Euro (inclusive of the accessory cost of
450 thousand Euro for Banca Profilos consulting in relation to the purchase) and rolling compo-
nents in the amount of 273 thousand Euro. The Company sold 3 MD 80/82 aircraft during 2004 for
a sale value of 6,056 thousand Euro; said sale generated net capital gains of 460 thousand Euro.

Other assets
The increase of the historical cost as of 31 December 2004, amounting to 766 thou-
sand Euro, refers to the capitalization of the purchase costs of office furniture for 461 thousand
Euro, and computers for 305 thousand Euro.

Fixed Assets in course

As of 31 December 2003, the Fixed assets in course, amounting to 2,122 thousand
Euro, referred to 13 purchase options for a corresponding number of MD80/82 aircraft. All of the
above options were acquired in October 2003 by Banca Profilo and could have been exercised
with respect to Alitalia.
The net increase of accounting value as of 31 December 2004, amounting to 9,897
thousand Euro, refers to 11,773 thousand Euro for the down payment paid to Airbus for the pur-
chase of an A319 CJ/LR aircraft and to components of said aircraft purchased on behalf of the
manufacturer, to the payment to Alitalia of 491 thousand Euro in the context of the purchase
transaction regarding the above mentioned options, net of the sale to third parties of the right to
purchase 2 MD 80/82 aircraft from Alitalia for 246 thousand Euro, with the realization of net cap-
ital gains of 804 thousand Euro, as well as the reclassification of 7 options having a total value
of 2,122 thousand Euro among Installations and machinery.

Long term investments

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004

Receivables
1 January 1,854 5,515 5,449
Increases 3,661 418 3,552
Decreases (484) (369)
31 December 5,515 5,449 8,632

Financial receivables
1 January
Increases 10,452
Decreases
31 December 10,452

Total long term investments

1 January 1,854 5,515 5,449
Increases 3,661 418 14,004
Decreases (484) (369)
31 December 5,515 5,449 19,084

145
Receivables
As of 31 December 2002, the item referred to security deposits for utilities amount-
ing to 8 thousand Euro and to security deposits with third parties amounting to 5,507 thousand
Euro (primarily with regard to Operative rental contracts).
The increase of the accounting value as of 31 December 2004, equal to 3,183 thou-
sand Euro, can be attributed to security deposits paid by the Company primarily to lessors for
wet leases of Long Range aircraft and to the airport management company in relation to in-
creased operative activity.

Financial receivables
As of 31 December 2004, the balance of the item Financial Receivables, amount-
ing to 10,452 thousand Euro inclusive of matured interest refers to a capitalization contract
having a sole premium contained in an insurance policy. With regard to the characteristics of the
investment and the reason for its classification among long term investments, reference is made
to Section III, Chapter 10.

Working capital

Stock
As of 31 December 2002, this item, amounting to 884 thousand Euro, indicated a net
increase of 656 thousand Euro with respect to the value as of 31 December 2001. Said increase
is due to the described operations of substituting the Long Range fleet.
The increase as of 31 December 2004, amounting to 774 thousand Euro, refers to an
increase of the inventory of aeronautics consumables (593 thousand Euro), as well as to inven-
tory created during the year, relating to catering and printed tickets, respectively amounting to
157 thousand Euro and 24 thousand Euro. Until the end of the 2003 fiscal year, the Company
benefited from Alitalias spare parts and catering warehouse. The inventory of printed tickets, in-
stead, regard scheduled activity developed since 2004.

Receivables

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004

Receivables from clients 14,989 23,923 49,933

Receivables from related companies
Receivables from parent companies 17,307
Tax receivables 564 1,467 2,117
Receivables for advance tax payments 1,030
Receivables from others 5,530 8,559 2,929
Total receivables 38,390 33,949 56,009

The decrease as of 31 December 2003 of the item Receivables, amounting to

4,441 thousand Euro, is due to the following factors:
writing off the item Receivables from subsidiaries (17,307 thousand Euro as of 31
December 2002 relative to the balance of the credit and treasury position with regard
to Alitalia) and its reclassification in the items Receivables from clients for 2,983
thousand Euro and Bank and postal deposits for 14,324 thousand Euro;
increase of the item Receivables from clients, in the amount of 8,934 thousand
Euro, referable in the amount of 5,951 thousand Euro, due to increased charter ac-
tivity performed with respect to the prior year and, for the residual amount, to the re-
classification of the receivables from Alitalia commented on above;

146
 increase of the item Receivables from others, in the amount of 3,029 thousand Euro,
originating primarily from an increase of Advances to suppliers (1,585 thousand Euro)
for the increased activity performed and by an increase of Other receivables (1,607
thousand Euro) originating subsequent to the regulation of prior items with Alitalia;
increase of the item Tax receivables, amounting to 903 thousand Euro, was pri-
marily due to an increase of the VAT credit in the amount of 1,207 thousand Euro re-
lated to the purchase of the building in Via Bugatti 15, and the use of the credit due
to the advance payment of Irap in the amount of 365 thousand Euro.

The increase as of 31 December 2004 of the item Receivables, amounting to

22,060 thousand Euro, can primarily be attributed to:
increase of the item Receivables from clients, equal to 26,010 thousand Euro, due
to the increased flight activity for which the new fiscal year is competent(14,999
thousand Euro), which is typically invoiced in advance with respect to the perfor-
mance of the flight, and whose variation dynamic is related to that of the item
Deferred liabilities, the invoicing to Alitalia for the code sharing activity, whose con-
tract expired in March 2005 and, further, to new transportation contracts with the
Italian Armed Forces (8,697 thousand Euro), in relation to which the Directors fore-
cast times for receipt of payment in excess of 6 months;
decrease of the item Receivables from others, amounting to 5,630 thousand Euro, pri-
marily due to the receipt of receivables from insurance indemnities, relating to the claim
that occurred during 2002 to an A320 aircraft, in the amount of 2,822 thousand Euro;
net increase of the item Tax receivables and Receivables for advance tax pay-
ments, amounting to 1,680 thousand Euro, primarily relating to the registration of
advance tax payments in the amount of 1,030 thousand Euro and to the credit for
the advance payment of Irap amounting to 1,428 Euro, net of the decrease of the Vat
credit in the amount of 774 thousand Euro.

The balance sheet result as of 31 December 2002 of the item Receivables from oth-
ers, primarily consists of receivables for insurance indemnities in the amount of 2,973 thousand
Euro, relative to the damage to an A320 that took place during the course of 2002 (see Section
III, Chapter 9).

Financial assets that are not long term investments

Other assets-financial receivables

The balance as of 31 December 2003, of 14,102 thousand Euro, refers to 2 capital-

ization contracts having a sole premium deriving from two insurance policies (see Section III,
Chapter 10), as investments of the temporary surplus of liquidity.

The characteristics of said contracts and their use and management during the
course of fiscal year 2004 which led to the reclassification of one of the policies among fixed
assets - are analyzed in Section III, Chapter 10).

Availability liquidity

The increase in 2003 of the item Bank and postal deposits, amounting to 9,019 thou-
sand Euro net of cash utilizations, can primarily be traced to the reclassification, in the amount of
14,324 thousand Euro, of the balance resulting from the treasury account with Alitalia. The char-
acteristics of the centralized treasury contract with Alitalia are analyzed in Section III Chapter 10.

With regard to the total balance of Available liquidity as of 31 December 2003,

5,500 thousand Euro were used for the stipulation of a Time Deposit contract whose character-
istics are analyzed in Section III Chapter 10.

147
Accounts receivable and pre-paid expenses

The balance sheet result as of 31 December 2002, amounting to 1,776 thousand

Euro, primarily consists of insurance premiums paid in advance (518 thousand Euro), as well as
advance payments of rent for the lease of the A320 aircraft (1,151 thousand Euro).

The decrease as 31 December 2003 (1,063 thousand Euro) of pre-paid expenses can
be attributed to different times for the payment of rents.

The increase as of 31 December 2004, amounting to 2,615 thousand Euro, can also
be primarily be traced to the advance payment of rent (1,328 thousand Euro).

Net worth

The movements of net worth during the three year period 2002-2004 is set forth in
Paragraph 20.1.1.3 of the present Chapter, to which reference is made.

With regard to the losses of 2001, the ordinary shareholders meeting of 12 April
2002 voted to cover the losses resulting as of 31 December 2001, amounting to 7,377 thousand
Euro, by means of the partial use of the item of net worth consisting of Shareholder contribu-
tions to the capital account.

Reference is made to Section III, Chapter 21 for a detailed analysis of the operations
regarding share capital that took place over the course of the three year period.

With regard to the fiscal year profits of 2003, the ordinary shareholders meeting of
21 June 2004, approved allocating profits, which amounted to 2,722 thousand Euro, to the legal
reserve for 136 thousand Euro and the residual 2,586 thousand Euro to a special available re-
serve of the net worth.

Further, the shareholders meeting of 11 May 2005, at the time of the approval of the
fiscal year balance sheet ended 31 December 2004, voted to allocate the fiscal year profits of
6,835 thousand Euro to the legal reserve for 342 thousand Euro, to a dividend to be distributed
within June 2005 in the amount of 5,000 thousand Euro, and the residual amount of 1,493 thou-
sand Euro to a special available reserve of net worth.

Risk and Expense funds

Amount in Euro/000 31/12/2002 31/12/2003 31/12/2004

Fund for periodic maintenance

1 January 1,947 659 1,758
Increases 419 1,099 1,304
Decreases (1,707) (1,094)
31 December 659 1,758 1,968

Other funds
1 January 3,132 273 137
Increases 282
Decreases (2,859) (136)
31 December 273 137 419

Total risk funds

1 January 5,079 932 1,895
Increases 419 1,099 1,586
Decreases (4,566) (136) (1,094)
31 December 932 1,895 2,387

148
 The balance as of 31 December 2002 of the Risk and expense funds, amounting to
932 thousand Euro, indicates a decrease with respect to the prior fiscal year of 4,146 thousand Euro,
gross of the years allocations. Said decrease can primarily be attribute to the following factors:
during the course of 2002, subsequent to the restitution of two A320 aircraft to
Alitalia, the conditions existed for the release of the surplus part (855 thousand Euro)
of the maintenance fund set aside during the previous fiscal years for maintenance
costs not covered by the Operative rental contracts (Extra Maintenance fund); such
fund was utilized during the year in the amount of 852 thousand Euro for the costs
sustained for basic maintenance that was performed;
further, again during the course of 2002, the directors released the fund, amounting
to 2,614 thousand Euro, allocated on 31 December 2000, for costs that might have
emerged from the eventual divestment of Long Range assets. The remaining part of
the release refers to the use of the fund for exchange rate fluctuations in the amount
of 245 thousand Euro.
The increase as of 31 December 2003, in the amount of 963 thousand Euro, primar-
ily refers, on the one hand, to the total allocation, amounting to 500 thousand Euro, of the costs
that foreseeably would have been sustained for the reconditioning of the aircraft at the time of
redelivery to the lessor (Phase Out fund); and on the other, to the allocation due to competence
to the Extra Maintenance fund relating to the A330 aircraft (599 thousand Euro). Said movements
are gross of the relative uses.
The increase as of 31 December 2004, amounting to 492 thousand Euro, refers pri-
marily to the allocation, in the amount of 567 thousand Euro, to the Phase Out fund, to the allo-
cation, in the amount of 737 thousand Euro, to the Extra Maintenance fund, as well as to the al-
location, in the amount of 282 thousand Euro, with regard to probable reimbursements for flights
that were not made. With regard to said allocations, during the course of 2004 the Company re-
leased 1,094 thousand Euro from the Extra Maintenance fund, for costs relating to a motor dock
for the repairs and costs sustained during the fiscal year.

Severance pay

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004

Severance pay
1 January 2,208 2,360 2,579
Increases 842 914 1,244
Decreases (690) (695) (896)
31 December 2,360 2,579 2,927

The variations of the Severance Pay fund are related to the dynamics of the
Companys personnel.

Liabilities

Amount in Euro/000 31/12/2002 31/12/2003 31/12/2004

Liabilities to banks 6,886

Liabilities to other lenders 5,000
Down payments 56 171 2,277
Liabilities to suppliers 20,359 49,147 64,200
Liabilities to related companies 1,114
Liabilities to parent companies 18,430
Tax liabilities 452 1,383 2,566
Liabilities to pension and social security institutes 635 675 1,041
Other liabilities 1,324 1,720 3,141
Total liabilities 42,370 53,096 85,111

149
 The increase of liabilities, as of 31 December 2003 and 2004 respectively in the
amounts of 10,726 thousand Euro and 32,015 thousand Euro, originated as follows:

Liabilities to banks
The balance of the liabilities to banks as of 31 December 2004, in the amount of
6,886 thousand Euro, represents the Companys bank account overdraft originating in relation
to the cash flows of fiscal year 2004 commented on in Paragraph 20.1.1.7. below. The charac-
teristics of the technical forms of the loan utilized are commented on in Section III, Chapter 10.

Liabilities to other lenders

The balance of liabilities to other lenders as of 31 December 2004, in the amount of
5,000 thousand Euro, is related to the loan obtained by the Company for the purchase of the real
property located in Via E. Bugatti, 15 in Milan. The characteristics of the loan are commented on
in Section III, Chapter 10.

Advance payments
The increase of the liability for advance payments as of 31 December 2004, in the
amount of 2,106 thousand Euro, is primarily related to the security deposits received at the time
of the stipulation of the preliminary sale contracts of the MD 80/82 aircraft.

Liabilities to suppliers
The increase as of 31 December 2003 of liabilities to suppliers, in the amount of
28,788 thousand Euro, is primarily due, on the one hand, to the reclassification in Liabilities to
suppliers of the liability with regard to Alitalia and Alitalia Airport S.p.A. (19,544 thousand Euro
as of 31 December 2003) and on the other hand to the liability of 6,000 thousand Euro relative
to the purchase of the real property that is currently the Companys registered office (see Section
III, Chapter 8).
The further increase as of 31 December 2004, in the amount of 15,053 thousand
Euro, is primarily due to the expansion of the Companys activity and the consequent growth of
the volumes of supplies of goods and services.

Liabilities to related and parent companies

With regard to the write-off, as of 31 December 2003, of the balance of the liabilities
to related companies (Alitalia Airport S.p.A.), amounting to 1,114 thousand Euro, and of the lia-
bility to parent companies (Alitalia), amounting to 18,430 thousand Euro, reference is made to
what has been discussed with regard to the item Suppliers.

Tax Liabilities
As of 31 December 2002 the tax liabilities included the liability for the global amnesty
in the amount of 95 thousand Euro paid during the course of 2003.
The increase of tax liabilities as of 31 December 2003, in the amount of 931 thou-
sand Euro, can primarily be attributed to the Irap liability for the fiscal year (944 thousand Euro),
as well as Irpef tax withholdings (332 thousand Euro).
The increase of tax liabilities as of 31 December 2004, in the amount of 1,183 thou-
sand Euro, is primarily attributable to the Irap allocation (2,018 thousand Euro) and the Irpef tax
withholdings (538 thousand Euro), gross of use during the period.

150
Other liabilities
The increase of other liabilities as of 31 December 2004, in the amount of 1,421 thou-
sand Euro, is primarily due to liabilities to some Directors for fees relative to the year 2004, ap-
proved during the month of April 2005 and amounting to 400 thousand Euro, to the liability to
Employees for the annual bonus (200 thousand Euro), and liabilities to Employees for matured but
not yet taken vacation days, inclusive of the relative contributions (314 thousand Euro), as well as
the allocation for the fourteenth month payment and relative contributions (126 thousand Euro).

Accounts payable and deferred income

The balance as of 31 December 2002 of the item accounts payable and deferred in-
come, in the amount of 7,277 thousand Euro, refer, for the amount of 5,645 thousand Euro, to
the deferral of the invoicing performed during the month of December commented on below.
Said item, during the three year period in review, is inclusive of contributions received
from the lessors for the inclusion in the fleet of the new Long Range Airbus amounting to 180
thousand Euro, 480 thousand Euro, and 480 thousand Euro, respectively as of 31 December
2002, 2003 and 2004.
During the three year period in review, the item accounts payable and deferred in-
come is also inclusive of the deferral of the invoicing done during the month of December for
flights that were the competence of the month of January of the following year amounting to
5,645 thousand Euro, 12,957 thousand Euro and 14,999 thousand Euro respectively as of 31
December 2002, 2003 and 2004.
The increase of deferred income as of 31 December 2004 is attributable, for 3,969
thousand Euro, to the invoices issued in advance by the Company for the sale of 2 MD 80/82,
whose transfer of ownership took place during the course of the year 2005.

Memorandum accounts

Amounts in Euro/000 31/12/2002 31/12/2003 31/12/2004

Uses:
Operative rentals 116,078 68,634 77,325
Third party property 3,053 1,779 2,641
Guarantees received 160 113 627
Total uses 119,291 70,526 80,593
Bank guarantees guarantees issued by third parties
Airports 588 536 713
Jet fuel 172 160 147
Other 224 220 13,522
Total bank guarantees 984 916 14,382
Total 120,275 71,442 94,975

Production value
The production value is made up as follows:

Amounts in Euro/000 2002 2003 2004

Production value
Revenue from sales and services 138,270 174,370 245,340
Creases of fixed assets due to internal work 1,254 498
Other revenue and proceeds 12,595 857 2,038
Total production value 152,119 175,725 247,378

151
Revenue from sales and services

This can be analyzed as follows:

Amounts in Euro/000 2002 2003 2004

Mid Range 75,831 83,710 135,060

Long Range 43,761 74,439 97,053
Revenue for scheduled flights in code share 18,678 16,221 13,227
Revenue from sales and services 138,270 174,370 245,340

Reference is made to Section III, Chapter 9, for an analysis of the trend of revenue,
flight hours and revenue per flight hour during the three year period 2002-2004.

Increases of fixed assets due to internal work

During fiscal years 2002 and 2003, the Company indicated in this item respectively
1,254 thousand Euro and 498 thousand Euro for costs (capitalized among intangible fixed as-
sets) relative to the pilots who were trained for the standardization of the Airbus fleet for a total
of 1,703 thousand Euro, and for the MD 80/82 fleet for the amount of 49 thousand Euro.

Other revenue and proceeds

In 2002 this item, amounting to 12,595 thousand Euro, primarily referred to insurance
indemnities with respect to claims (2,422 thousand Euro), the release of allocations to the cred-
it devaluation fund (1,139 thousand Euro) and to the Extra Maintenance fund (855 thousand
Euro) that turned out to be in excess of actual need, as well as the indemnity paid by Alitalia
(5,761 thousand Euro) for the early termination of the rental contract for 2 B 767 aircraft (see
Section III, Chapter 9).
In 2003 the item, amounting to 857 thousand Euro, primarily referred to various kinds
of revenue, such as revenue from insurance indemnities and pilot training.
In 2004 the item, amounting to 2,038 thousand Euro, primarily referred to net revenue
for charges to clients of penalties for the late notice to the Company, with respect to the con-
tractual terms, of cancellations of flight reservations or modifications to the number of seats oc-
cupied by the tour operators (433 thousand Euro), insurance indemnities (297 thousand Euro),
and revenue from pilot training in the amount of 255 thousand Euro, net of premiums paid to
clients in the amount of 381 thousand Euro.

Production costs
The production costs consist of the following:

Amounts in Euro/000 2002 2003 2004

PRODUCTION COSTS
For raw materials, subsidiary materials, consumables and finished products 28,974 36,914 61,579
For services 61,500 74,434 105,311
For enjoyment of third party goods 47,432 32,539 36,557
For personnel 19,024 23,088 35,195
Depreciation and devaluation 1,689 3,100 2,760
Variations of stocks of raw materials, subsidiary materials, consumables and
finished products (656) (124) (774)
Other allocations 419 1,099 1,305
Other management expenses 1,442 956 1,409
Total production costs 159,824 172,006 243,342

152
Costs for raw materials, subsidiary materials, consumables and finished products

Amounts in Euro/000 2002 2003 2004

Raw materials, subsidiary materials, consumables and finished products

Technical materials 1,707 468 1,115
Catering 5,538 6,612 8,249
Various materials 246 200 401
Fuel and oils 21,483 29,634 51,814
Total costs for raw materials, subsidiary materials, consumables and
finished products 28,974 36,914 61,579

Reference is made to Section III, Chapter 9, for an analysis of the trend of the cost
of jet fuel, operative costs and costs for maintenance materials during the three year period
2002-2004.

Costs for services

Amounts in Euro/000 2002 2003 2004

Costs for services

Expenses for traffic and stopovers 33,066 41,787 61,840
Maintenance and review of the fleet 14,884 18,471 25,538
Consulting 1,334 3,267 4,353
Sale expenses 3,830 2,988 2,812
Transportation and lodging for flight personnel 2,394 2,951 5,287
Insurance 3,125 2,819 1,754
Postal and Telephone expenses 312 733 1,201
Other costs for services 386 353 279
Selection and training of flight crew 647 1,065 2,247
Pilots in other locations 1,522
Total costs for services 61,500 74,434 105,311

Reference is made to Section III Chapter 9 for an analysis of the trend of operative
costs, maintenance service costs, and other commercial costs and costs of the structure during
the three year period 2002-2004.

Costs for the enjoyment of third party goods

Amounts in Euro/000 2002 2003 2004

Costs for the enjoyment of third party goods

Rentals A330 2,533 8,423 7,449
Rentals A320 18,895 11,207 8,625
Other Aircraft 25,335 11,959 19,061
Other rents and leases 669 950 1,422
Total costs for the enjoyment of third party goods 47,432 32,539 36,557

Reference is made to Section III Chapter 9 for an analysis of the trend of the
Operative rental costs of the aircraft during the three year period 2002-2004.

153
Personnel costs

Amounts in Euro/000 2002 2003 2004

Personnel costs
Gross remuneration 14,780 18,426 28,018
Social security contributions 2,938 3,512 5,549
Severance pay 782 914 1,244
Other personnel costs 524 236 384
Total personnel costs 19,024 23,088 35,195

Reference is made to Section III Chapter 9 for an analysis of the trend of the per-
sonnel cost during the three year period 2002-2004.

Depreciation and devaluations

Amounts in Euro/000 2002 2003 2004

Depreciation
Intangible fixed assets 975 1,237 1,528
Tangible fixed assets 246 502 842
Total depreciation 1,221 1,739 2,370
Devaluations
Devaluation of commercial receivables 468 1,361 163
Devaluation of intangible fixed assets 227
Total devaluations 468 1,361 390
Total depreciation and devaluations 1,689 3,100 2,760

Reference is made to Section III, Chapter 9 for an analysis of the trend of depre-
ciation and devaluation of receivables and fixed assets during the three year period 2002-
2004.

Other allocations

Reference is made to the comment to the item Risk and expense funds for an
analysis of the nature of said allocations.

Costs other than management costs

These can be analyzed as follows:

Amounts in Euro/000 2002 2003 2004

Other management costs

Technical manuals on board 492 851
Association fees 34 44 45
Printed materials and other manuals 68 151
Stamp duty 26 35 43
Settlements and claims 1,000
Other 382 317 319
Total other management costs 1,442 956 1,409

154
Financial proceeds and costs

Proceeds

These can be analyzed as follows:

Amounts in Euro/000 2002 2003 2004

Interest on treasury account with Alitalia 635 201

Interest on financial receivables 652
Bank Interest 344 231 107
Profits on exchange rates 510 351 1,570
Others 107 39 1
Financial proceeds 1,596 822 2,330

Costs

These can be analyzed as follows:

Amounts in Euro/000 2002 2003 2004

Commissions to Alitalia 121

Interest paid to banks 26
Interest paid for mortgage 3
Losses on exchange rates 1,438 1,492 1,839
Other 182 146 91
Financial costs 1,741 1,638 1,959

Reference is made to Section III, Chapter 9, Paragraph 9.2., for an analysis of the
trend of financial management during the three year period 2002-2004.

Extraordinary proceeds and costs

The extraordinary net proceeds of 2002 refer to the release, due to its becoming sur-
plus, of a restoration fund in the amount of 2,613 thousand Euro allocated in prior fiscal years,
net of the cost for the amnesty pursuant to Law 289/2002 in the amount of 202 thousand Euro.

The extraordinary net proceeds of 2003 primarily refer to the release of invoices to
be received allocated during the year 1998 for which it was decided that the reasons no longer
existed for their being verified in the balance sheet (345 thousand Euro), as well as proceeds for
the conclusion with Alitalia of some items relative to the area of flight personnel and maintenance
of the aircraft (777 thousand Euro).

The extraordinary net proceeds of 2004 primarily refer to capital gains deriving from
the sale of 3 MD 80/82 aircraft and the sale to third parties of the right to purchase from 2 MD
80/82 aircraft from Alitalia (1,264 thousand Euro), to contingent assets (3,304 thousand Euro),
referable to invoices to be received for which it was held that the reasons no longer existed to
include this in the balance sheet, net of extraordinary costs of 1,068 thousand Euro sustained
for the redemption of fiscal losses that were carried forward.

Fiscal year taxes

Taxes for 2002 and 2003, respectively amounting to 575 thousand Euro and to 1,392
thousand Euro, refer exclusively to IRAP.

155
 Taxes for 2004, amounting to 1,069 thousand Euro, are recorded net of advance tax
payments (amounting to 950 thousand Euro, of which 881 thousand Euro refer to IRES and 69
thousand Euro to IRAP).

20.1.1.7. Comments to the financial statements

During the three year period 20022004 and during the first six months of 2005, there
were net absorptions of liquidity amounting respectively to 7,013 thousand Euro, 26,871 thou-
sand Euro and 21,125 thousand Euro, as well as a net flow of liquidity in 2003 amounting to
8,797 thousand Euro.

For a more articulated and detailed discussion of the variations of fiscal year capital,
and of intangible and tangible fixed assets and long term investments that gave origin to the
flows commented on below, reference is made to what is set forth in Paragraph 20.1.1.6 and
20.1.6.1 as a comment on the variations of net worth as of 31 December 2002, 2003 and 2004
and as of 30 June 2005.

Cash flows from fiscal year activity

In 2002 said cash flow was positive in the amount of 459 thousand Euro subsequent
to the substantial offsetting with other variations of liquidity for the fiscal year losses. The 2002
fiscal year loss (6,004 thousand Euro), even though it benefited from extraordinary proceeds due
to the indemnities paid by Alitalia, as well as from releases of allocations of prior fiscal years that
turned out to be unnecessary and contingent assets from the overestimation of invoices to be
received from fiscal years prior to 2002, was the result of the significant impact of the costs of
the wet leases caused both by the late delivery of the first new A330 as well as by the accident
that involved an aircraft during the month of August 2002 in the airport of Treviso, and a gener-
al inadequate margin of activity, due both to the productivity of the aircraft as well as the un-
profitable level of fares.

In 2003 said flow was positive for 15,028 thousand Euro, benefiting from the profit
as well as the positive variation of the fiscal year capital, essentially due to the effect of the pat-
rimonial dynamics of receivables from clients and receivables to suppliers. In particular, the fis-
cal year profits of 2003 (2,722 thousand Euro), which benefits from extraordinary proceeds from
contingent assets due to overestimates of invoices to be received from fiscal years prior to 2002,
also benefiting from recoveries of the margin of the activity resulting from the increased produc-
tivity of the fleet and an increase of revenue due to the renegotiation of the fares, as well as the
reduction of rental costs due to the combined effect of the increased productivity of the aircraft,
the availability of a more numerous Mid Range fleet during the high season, as well as the result
of the renegotiation of Operative rental contracts and the benefit obtained from the trend of the
Euro/USD exchange rate.

In 2004 said monetary flow was positive for 9,470 thousand Euro, primarily due to
the use of the fiscal year profits; said profits (6,835 thousand Euro) were influenced by the pos-
itive impact of capital gains from the sale of the MD 80/82 aircraft, from extraordinary proceeds
from contingent assets due to overestimation of the invoices to be received during fiscal years
prior to 2002, as well as to the continuous recovery of marginality connected with the further in-
crease of productivity of the fleet.

During the first six months of 2005 said flow was negative for 15,125 thousand Euro
primarily because of the effect of the dynamics of the variation of fiscal year capital due to sea-
sonality, as well as the loss of the period. In particular, with regard to the loss of the six months,
it was influenced by the decreased productivity of the Long Rate fleet related to the effect of the
tsunami, the increase of the cost of jet fuel, which was only partially offset by the contractual
adjustment of proceeds from the tour operators, the increase of the costs of wet leases due to
the need of both Mid as well as Long Range capacity, net of the extraordinary proceeds from

156
capital gains deriving from the sale of MD 80/82 aircraft and releases of allocations for invoices
to be received prior to 2002, which turned out to be excessive with respect to need; the nega-
tive dynamics of the variation of fiscal year capital is instead due to the seasonal nature of the
first six months of the year, in which the absorptions of liquidity for the payment of liabilities re-
lated to the costs of the structure, which were not offset by an adequate margin of the operative
activity that had decreased volumes of flight hours during the first six months of the year with
respect to those of the second six months.

Cash flows due to investment activity

The absorption of liquidity due to investment activity in 2002 amounted to 7,472

thousand Euro and primarily refers to investments aimed at the homogenization of the fleet
(Airbus aircraft). Costs were therefore capitalized relating to the purchase of aircraft and rolling
components for the aircraft, costs for pilot training and, further, security deposits were created
and paid as a guarantee for the new leases. Coherently, the divestments principally regard the
specific components of the Boeing B767 and the release of a security deposit related to one of
the B767.

In 2003 the absorption of liquidity amounted to 11,231 thousand Euro, primarily sub-
sequent to further capitalizations of training costs for the pilots of the Airbus fleet, costs for mod-
ifications to A320 and A330 aircraft and costs for the inclusion of new A320 in the fleet. The in-
vestments in tangible fixed assets primarily regarded the purchase of real property of Via E.
Bugatti, 15 in Milan, as well as the purchase of 7 purchase options for MD 80/82 aircraft. Further,
the purchase is noted of 2 capitalization contracts having a sole premium, which, as they were
investments of temporary surplus liquidity, were classified as of 31 December 2003 among fi-
nancial assets that do not constitute long term investments. In 2004 one of the two capitaliza-
tion contracts was reclassified among long term investments because it had been used as a
pledge. The other, even though not pledged, continued to be included among financial assets
that do not constitute long term investments, both in 2003 as well as 2004, in that they were sold
to third parties in February 2005.

The absorption of liquidity for investment activity in 2004 amounted to 41,102 thou-
sand Euro and is primarily characterized by the purchase of 10 MD 80/82 aircraft, by the pay-
ment to Alitalia of the consideration relative to 6 options for the purchase of six MD 80/82 air-
craft, as well as the down payments paid for the purchase of an A319 CJ/LR aircraft and some
specific components for the configuration of the aircraft. The divestments of the year principal-
ly regarded the sale of 3 of the MD-80/82 aircraft purchased during the course of 2004.

During the first six months of 2005, the cash flow of 1,000 thousand Euro was pri-
marily the result of the sale of 8 MD 80/82 for a net accounting value of 18,065 thousand Euro,
and investments consisting of the purchase of an MD 80/82, a security deposit paid by the
Company to a lessor (for the use in wet lease of an A330 aircraft) and an airport management
company for services performed by it.

Further, during the course of the first six months of 2005, a time bank deposit was
created at a credit institute in the amount of 8,000 thousand Euro, relating to the release of a
bank guarantee as a guarantee of the Finance Leasing contract for the A319 CJ/LR aircraft, the
technical form of a loan chosen in the meantime by the Company in order to be able to use the
aircraft with regard to which the down payment to the manufacturer was paid in 2003.

Cash flows from loans

In 2003, as a result of the losses that originated in 2002 and the consequent manner
of coverage approved by the shareholders meeting of 11 April 2003, an increase of share cap-
ital was approved in the amount of 5,000 thousand Euro, entirely subscribed to and paid by the
shareholder Alitalia Linee Aeree Italiane S.p.A..

157
 The obtainment of a long term mortgage loan is noted, for a total amount of 5,000
thousand Euro as of 31 December 2004, and amounting to 4,761 thousand Euro for the share
over a medium-long term; said mortgage relates to the purchase previously discussed of the
real property of via E.Bugatti, 15 in Milan.

With regard to the first six months of 2005, it is noted that on 29 June 2005 the
Company paid 5,000 thousand Euro as dividends to the shareholders of Spinnaker
Luxembourg.

20.2 PRO-FORMA FINANCIAL INFORMATION

As there were no extraordinary or recurrent operations during the course of the three
year period that is the object of comparison, it was held that it was unnecessary to prepare pro-
forma information.

20.3 BALANCE SHEETS

Reference is made to Paragraph 20.1. above.

20.4 AUDIT OF THE ANNUAL FINANCIAL INFORMATION RELATING TO PAST FIS-

CAL YEARS

20.4.1 Audit reports

The audit reports prepared on the basis of established auditing principles by the
independent auditor Dianthus S.p.A., previously DT S.p.A. (previously Deloitte & Touche S.p.A.)
for the fiscal year ended 31 December 2002 and by Deloitte & Touche S.p.A. for the fiscal years
ended 31 December 2003 and 2004, contain positive judgments. With reference to the audit re-
port of the fiscal year ended 31 December 2002, the audit report notes for informational pur-
poses and thus without any qualification as being an audit judgment that the Company has
sustained significant losses during the fiscal year, as in previous years, that in the past were sys-
tematically covered by the Shareholders. The Management Report discusses the plans and ac-
tions that the Directors are counting on in order to obtain a significant reduction in 2003 of the
losses sustained in 2002.. With reference, instead, to the six month report as of 30 June 2004,
a limited audit was performed in accordance with Consob Resolution no. 10867 of 31 July 1997.
The report of the complete audit on the six month report as of 30 June 2005 contains a positive
judgment.

20.4.2. Other financial information

The tables of the comparative reclassified statements of profits and losses included
in Paragraph 20.1.2 were not subject to audit and derive from the managerial reprocessing of
data appearing from the general accounting records.

20.5 DATE OF THE MOST RECENT FINANCIAL INFORMATION

The last annual balance sheet subject to audit is that relating to the fiscal year ended
31 December 2004. The Issuer subjected the balance sheet of the six months ended 30 June
2005 to a complete audit.

158
20.6 MID-YEAR FINANCIAL INFORMATION AND OTHER FINANCIAL INFORMATION

The mid-year balance sheets as of 30 June 2004 and 2005 are presented below. The
balance sheet as of 30 June 2004 was reclassified in order to permit comparability in the event,
in the balance sheet as of 30 June 2005, the classifications used in the preparation of the above
prior comparative mid-year balance sheets were modified. Said reclassification have not led,
moreover, to modifications of net worth and of the result of the prior six months. The reclassifi-
cations made to the six month statements of assets and liabilities ended 30 June 2004 led to
modifications to the relative financial statement in order to coherently reflect the variations of liq-
uidity/indebtedness.

20.6.1 Six month balance sheet as of 30 June 2005

20.6.1.1. Statement of assets and liabilities as of 30 June 2005

Amounts in Euro/000 31/12/2004 30/06/2005

Audited Audited

A) RECEIVABLES FROM SHAREHOLDERS FOR PAYMENTS STILL DUE

Total receivables from shareholders for payments still due
B) FIXED ASSETS
I. INTANGIBLE FIXED ASSETS 5,043 6,044
II. TANGIBLE FIXED ASSETS 35,742 11,378
III. LONG TERM INVESTMENTS 19,084 34,249
Total fixed assets 59,869 51,671
C) WORKING CAPITAL
I. STOCK 1,781 2,151
II. RECEIVABLES 56,009 43,351
III. FINANICAL ASSETS THAT ARE NOT LONG TERM INVESTMENTS 4,302
IV. AVAILABLE LIQUIDITY 2,023 1,346
Total working capital 64,115 46,848
D) ACCRUALS AND PAYABLES 3,328 15,925
Total accruals and payables 3,328 15,925
TOTAL ASSETS 127,312 114,444
A) NET WORTH 16,224 7,973
Total net worth 16,224 7,973
B) RISK AND EXPENSE FUNDS 2,387 2,781
Total risk and expense funds 2,387 2,781
C) EMPLOYEE SEVERANCE PAY 2,927 3,079
Total severance pay 2,927 3,079
D) LIABILITIES 85,111 85,976
Total liabilities 85,111 85,976
E) ACCRUALS AND PAYABLES 20,663 14,635
Total accruals and payables 20,663 14,635
TOTAL LIABILITIES 127,312 114,444
MEMORANDUM ACCOUNTS 94,975 216,874

159
20.6.1.2. Statement of profits and losses relative to the first six months of 2004 and 2005

Amounts in Euro/000 I six months 2004 I six months 2005

Audited Audited

A) PRODUCTION VALUE 102,690 128,623

Total production value 102,690 128,623
B) PRODUCTION COSTS 100,916 133,764
Total production costs 100,916 133,764
Difference between production value and costs 1,774 (5,141)
C) FINANCIAL PROCEEDS AND EXPENSES (199) 404
Total financial proceeds and expenses (199) 404
E) EXTRAORDINARY PROCEEDS AND EXPENSES (110) 2,159
Total extraordinary items (110) 2,159
Results prior to taxes 1,465 (2,578)
FISCAL YEAR TAXES (779) (673)
26. Fiscal year profits (losses) 686 (3,251)

20.6.1.3. Table of the movements of net worth

Amounts in Euro/000 Share Legal Statutory Reserve/ Losses of Total

capital Reserve reserves increase of the period
share capital

Balances as of 31 December 2004 6,667 136 2,586 6,835 16,224

Allocation of 2004 result 342 993 500 (1,835)
Distribution of dividends (5,000) (5,000)
Losses from the period (3,251) (3,251)
Balances as of 30 June 2005 6,667 478 3,579 500 (3,251) 7,973

160
20.6.1.4. Financial statement as of 30 June 2005

Amounts in Euro/000 31/12/2004 30/06/2005

Audited Audited

A. INITIAL LIQUIDITY 26,070 (801)

B. CASH FLOWS FROM ACTIVITY

Fiscal year profits (losses) 6,835 (3,251)

Depreciation 2,369 1,020
Net capital gains from fixed assets (1,264) (1,580)
Devaluation of fixed assets 227
Variations of fiscal year capital 955 (11,466)
Net variations of severance pay 348 152

9,470 (15,125)

C. CASH FLOWS FROM INVESTMENTS IN FIXED ASSETS

Investments in fixed assets
Intangibles (2,723) (1,643)
Tangible (31,887) (7,979)
Long term investments (14,004) (15,434)
Value of sale of fixed assets 7,512 24,056

(41,102) (1,000)

D. CASH FLOWS FROM LOAN ACTIVITY

Shareholder contributions
Dividends (5,000)
Long term loan 4,761

4,761 (5,000)

E. CASH FLOWS DURING THE PERIOD (B + C + D) (26,871) (21,125)

F. FINAL NET AVAILABLE LIQUIDITY (A + E) (801) (21,926)

20.6.1.5. Accounting principles

The accounting principles used for the preparation of the balance sheet as of 30 June
2005 (unvaried with respect to those used for the preparation of the mid-year balance sheet
ended 30 June 2004), are those used for the preparation of the annual balance sheets described
in Paragraph 20.1.1.5. With reference to the specific accounting problems connected to the
preparation of mid-year balance sheets, in application of Document no. 30 of the National Council
of Accountants and Bookkeepers, the Issuer has adopted the specific valuation criteria in the
case of the preparation of an mid-year balance sheet with regard to the manner of charging pe-
riod maintenance costs, research and development costs, end year bonuses, depreciation of
fixed assets, valuation of stock as well as income taxes to the statement of profits and losses.

Furthermore, over the course of the first six months 2005 a change of estimate was
made with regard to the useful life of the real property of Via E. Bugatti, 15. With regard to said
real property, it was deemed congruous to not subject to depreciation the portion attributable to
land, depreciate for a useful life of 50 years the supporting structure and 10 years for the instal-
lations. Due to the effect of such valuation modification, the depreciation of the first six months
2005 turned out to be less by 19 thousand Euro with respect to those determined using the prior
depreciation rate.

161
20.6.1.6 Comments to the patrimonial variations of the first six months 2005

Intangible fixed assets

Amounts in Euro/000 31/12/2004 30/06/2005

Set up and expansion costs

1 January 2,165 1,913
Investments during the year 728 515
Reclassifications 536
Amortization (753) (437)
Devaluations (227)
30 June 1,913 2,527
Costs for research, development and advertising
1 January 309
Investments during the year 387
Amortization (78) (39)
30 June 309 270
Concessioni, licenze, marchi e diritti simili
1 January 265 544
Investments during the year 440 325
Amortization (161) (95)
30 June 544 774
Fixed assets in course
1 January 396
Investments during the year 396 265
Reclassifications (629)
30 June 396 32
Other
1 January 1,645 1,881
Investments during the year 772 538
Reclassifications 93
Amortization (536) (71)
30 June 1,881 2,441
Total intangible fixed assets
1 January 4,075 5,043
Investments during the year 2,723 1,643
Reclassifications
Amortization (1,528) (642)
Devaluations (227)
30 June 5,043 6,044

Set up and expansion costs

The increase of accounting net value as of 30 June 2005 amounting to 614 thousand
Euro, can be attributed primarily to investments during the six months of 170 thousand Euro and
to the reclassification of an amount of 536 thousand Euro of the item Fixed assets in course
and down payments of the Companys capitalized start up costs in relation to the two opera-
tive bases of Sharm El Sheikh and New York, as well as the increase of training costs for pilots
of the A320 and A330 (310 thousand Euro), gross of amortization.

162
Concessions, licenses, trademarks and similar rights

The increase of net accounting value as of 30 June 2005 of Concessions, licenses,

trademarks and similar rights, amounting to 230 thousand Euro, primarily refers to the capital-
ization gross of amortization of the costs (325 thousand Euro) sustained for the purchase of
software programs for the management of the accounting (25 thousand Euro), the software pro-
gram Amos for the management of the warehouse (130 thousand Euro), the software program
Internet booking engine (109 thousand Euro) for the management of booking on line and soft-
ware for the management of the attendance of personnel (23 thousand Euro).

Fixed assets in course and down payments

The decrease of accounting value as of 30 June 2005, amounting to 364 thousand

Euro, is primarily related to the reclassification previously discussed - of 536 thousand Euro
among Set up and expansion costs.

Other intangible fixed assets

The increase of the accounting net value as of 30 June 2005 of the item Other in-
tangible fixed assets, amounting to 560 thousand Euro, is primarily related to the modifications
made to the A330 aircraft (337 thousand Euro), as well as to the costs sustained for their inclu-
sion in the fleet (245 thousand Euro of which 93 thousand Euro reclassified by the item Fixed
assets in course and down payments), gross of amortization.

163
Tangible fixed assets

Amounts in Euro/000 31/12/2004 30/06/2005

Buildings
1 January 6,027 7,858
Investments during the year 1,869 300
Reclassifications 0 0
Depreciation (38) (118)
30 June 7,858 8,040
Installations and machinery
1 January 1,610 14,421
Investments during the year 16,837 5,273
Reclassifications 2,122 246
Divestments during the year (5,596) (18,064)
Depreciation (552) (98)
30 June 14,421 1,778
Industrial and commercial equipment
1 January 343 429
Investments during the year 151 131
Depreciation (65) (43)
30 June 429 517
Other assets
1 January 472 1,015
Investments during the year 766 111
Divestments during the year (36) (7)
Depreciation (187) (119)
30 June 1,015 1,000
Fixed assets in course
1 January 2,122 12,019
Investments during the year 12,265 2,164
Reclassifications (2,122) (10,004)
Divestments during the year (246) (4,136)
30 June 12,019 43
Total tangible fixed assets
1 January 10,574 35,742
Investments during the year 31,888 7,979
Reclassifications 0 (9,758)
Divestments during the year (5,878) (22,207)
Depreciation (842) (378)
30 June 35,742 11,378

Buildings

The increase of accounting net value as of 30 June 2005, amounting to 182 thou-
sand Euro, refers to investments in light constructions and installations, net of depreciation.

Installations and machinery

The decrease of accounting net value as of 30 June 2005, amounting to 12,643 thou-
sand Euro, is primarily due to the sale of 8 MD 80/82 aircraft for a sale value of 14,088 thousand
Euro; said sale operation generated net patrimonial capital gains of 1,580 thousand Euro.

164
Fixed assets in course and down payments
The net decrease of the item Fixed assets in course and down payments, as of 30 June
2005 is primarily due to the reclassification of the down payment paid to Airbus (amounting to 9,717
thousand Euro) from Fixed assets in course to Accounts receivable and pre-paid expenses sub-
sequent to the stipulation of the Finance Leasing contract and the delivery of the A319 CJ/LR dur-
ing the month of May 2005, as well as the sale to the manufacturer prior to the stipulation of the
above mentioned lease contract of the modifications made to it for 4,136 thousand Euro.

Long term investments

Amounts in Euro/000 31/12/2004 30/06/2005

Receivables
1 January 5,449 8,632
Increases 3,552 15,434
Decreases (369) (269)
30 June 8,632 23,797
Other securities
1 January 10,452
Increases 10,452
Decreases
30 June 10,452 10,452
Total long term investments
1 January 5,449 19,084
Increases 14,004 15,434
Decreases (369) (269)
30 June 19,084 34,249

Receivables
The increase of accounting value as of 30 June 2005, amounting to 15,165 Euro, is due
to security deposits (2,529 thousand Euro) paid by the Company primarily to lessors for the use in
wet lease of an A330 aircraft and to the airport management company, to the time account at
Unicredit of 8,000 thousand Euro net of matured interest given as a pledge for the issuance of a
bank guarantee related to the stipulation of the Finance Leasing contract for the A319 CJ/LR aircraft
(see Section III, Chapter 10), as well as to the other time accounts with credit institutes amounting
to 4,897 thousand Euro, already released on 4 July for the amount of 3,693 thousand Euro.

Working capital
Stock
The increase as of 30 June 2005, amounting to 370 thousand Euro, relates to an in-
crease of the stock of aeronautical consumables (337 thousand Euro), to an increase of the stock
of uniforms for flight personnel in the amount of 8 thousand Euro, as well as a reduction of stock
relating to catering and printed tickets, respectively amounting to 49 thousand Euro and 2 thou-
sand Euro, and down payments in the amount of 76 thousand Euro.

Amounts in Euro/000 31/12/2004 30/06/2005

from clients 49,933 40,398

Tax Receivables 2,117 340
Receivables for the advance payment of taxes 1,030 1,145
Receivables from others 2,929 1,468
Total receivables 56,009 43,351

165
Receivables
The decrease of the item Receivables as of 30 June 2005, amounting to 12,658
thousand Euro, is primarily due to the following factors:
decrease of the item Receivables from clients, amounting to 9,535 thousand Euro,
primarily due to offsetting the balance of the credit regarding Alitalia with the corre-
sponding liability, as well as due to receipts of the six months;
decrease of the item Tax receivables, amounting to 1,777 thousand Euro, primari-
ly is the result of the reduction of the advance payment of IRAP due to the lower tax-
able base utilized in the calculation of the advance payment itself;
increase of the advance payment of taxes in the amount of 115 thousand Euro on
the temporary differences between fiscal taxable income and the fiscal year results,
as well as due to the increased value of carried forward fiscal loses from prior fiscal
year carried forward;
decrease of the item Receivables to others, amounting to 1,461 thousand Euro,
primarily due to the receipt of payment of receivables for reimbursements by lessors
for maintenance to the motors.

Financial activity that does not constitute long term investments

Financial receivables
The decrease of the item Financial receivables as of 30 June 2005, amounting to
4,302 thousand Euro, is due to the sale of the capitalization contract with a sole premium in the
month of March 2005. Such sale took place at values aligned with the registration values.

Availability liquidity
The balance of Availability liquidity as of 30 June 2005, in the amount of 1,346 thou-
sand Euro, is essentially due, in addition to the mentioned divestments of tangible fixed assets
and long term investments, to receivables cashed by the Company during the first six months.

Accounts receivable and pre-paid expenses

The increase of Accounts receivable and pre-paid expenses as of 30 June 2005,
amounting to 12,597 thousand Euro, is primarily due to the reclassification of the down payment
of the maxi rent paid at the time the Finance Leasing contract was opened for the A319 CJ/LR,
discussed at the item Tangible fixed assets.

Net worth
With reference to the movements of net worth, the payment is noted of 5,000 thou-
sand Euro on 29 June 2005 for dividends to the Shareholder Spinnaker Luxembourg.
Reference is made to Section III, Chapter 17, regarding capital operations approved
by the shareholders meeting of 11 and 26 May 2005 and realized on 1 July 2005.

Risk and expense funds

The increase of the item Risk and expense funds as of 30 June 2005, amounting
to 394 thousand Euro, is due to allocations during the period of 758 thousand Euro, the Phase
Out fund and the Extra Maintenance fund, respectively in the amounts of 358 thousand Euro and
400 thousand Euro, net of uses amounting to 364 thousand Euro for losses of margins on flights
the end of 2004 in the zone of the Maldive and for costs related to controversies.

166
Severance pay

The variations of the Severance Pay Fund are related to the dynamics of the
Companys personnel.

Liabilities

Amount in Euro/000 31/12/2004 30/06/2005

Liabilities to banks 6,886 22,790

Liabilities to other lenders 5,000 5,000
Down payments 2,277 1,840
Liabilities to suppliers 64,200 50,402
Tax liabilities 2,566 1,730
Liabilities to pension and social security institutes 1,041 1,006
Other liabilities 3,141 3,208
Total liabilities 85,111 85,976

Liabilities to banks

The balance of the liabilities to banks as of 30 June 2005, amounting to 22,790 thou-
sand Euro, represents the Companys bank overdraft facility. The technical form of the loan is
discussed in Section III, Chapter 10, whereas in the previous Paragraph 20.1.1.7. the variation
of net financial indebtedness during the six months is discussed.

Liabilities to other lenders

The balance of the liability to other lenders as of 30 June 2005, amounting to 5,000
thousand Euro (also inclusive of the short term portion), refers to the mortgage loan taken out by
the Company for the purchase of the real property located in Via E. Bugatti, 15 in Milan. The
characteristics of the loan are discussed in Section III, Chapter 10.

Down payments

The decrease of the liability for down payments as of 30 June 2005, amounting to
437 thousand Euro, is primarily due to the reimbursement of collateral received, in the amount
of 1,610 thousand Euro, subsequent to the sale of the MD 80/82 aircraft (Section III, Chapter 9),
as well as the receipt, amounting to 1,149 thousand Euro, of collateral paid by third parties with
regard to wet lease contracts.

Liabilities to suppliers

The decrease of Liabilities to Suppliers as of 30 June 2005, amounting to 13,798

thousand Euro, is primarily due to offsetting the balance of liabilities with regard to Alitalia, with
the corresponding credit balance, as well as to the payment of liabilities to suppliers during the
first six months of 2005.

Tax liabilities

The decrease of tax liabilities as of 30 June 2005, in the amount of 836 thousand
Euro, is primarily attributable to the payment of the Irap liability (960 thousand Euro) and to the
increase of Irpef tax withholdings (55 thousand Euro).

167
Accounts payable and deferred income

The decrease of Accounts payable and deferred income as of 30 June 2005, in the
amount of 6,028 thousand Euro, is essentially due to the invoicing done during the month of
June for flights that were the competence of the month of July (9,328 thousand Euro), revenue
from ticketing sales for scheduled flights utilizable within a year, as well as the deferred credit of
invoices issued during 2004 in advance for the sale of 2 MD 80/82.

Memorandum account

Amounts in Euro/000 31/12/2004 30/06/2005

Uses:
Operative charters 77,325 137,111
Finance Leasing (net of the value of redemption) 31,560
Third party assets 2,641 85
Forward exchange rate contracts 9,924
Collateral received 627 568
Total uses 80,593 179,248
Bank guarantees- guarantees given to third parties:
Airports 713 920
Jet fuel 147 786
Other 13,522 28,263
Total bank guarantees 14,382 29,969
Total 94,975 209,217

Forward exchange rate contracts as of 30 June 2005 refer to operations with Banca
Profilo to cover the risk of fluctuations of the USD exchange rate.

20.6.1.7. Comments to economic variations of the first six months of 2004 and 2005

Production value

The production value is made up as follows:

Amounts in Euro/000 I Six months 2004 I Six months 2005

A) PRODUCTION VALUE
Revenue from sales and services 101,089 128,069
Increases of fixed assets due to internal work 361
Other revenue and proceeds 1,240 554
Total production value 102,690 128,623

Revenue from sales and services

These can be analyzed as follows:

Amounts in Euro/000 I Six months 2004 I Six months 2005

Mid Range 46,975 67,558

Long Range 46,327 60,301
Revenue from scheduled activities in code share 7,787 210
Revenue from sales and services 101,089 128,069

168
 Reference is made to Section III, Chapter 9.2., for an analysis of the trend of revenue,
light hours and revenue per flight hour during the first six months of 2004 and 2005.

Increases of fixed assets for internal work

During the first six months of 2004, the Company recorded in this item 361 thousand
Euro for costs (capitalized during the first six months of 2004 among intangible fixed assets) rel-
ative to pilots interested in training for the standardization of the MD 80/82 fleet, subsequently
devalued during the course of the second six months of 2004.

Other revenue and proceeds

During the first six months of 2004 the item, amounting to 1,240 thousand Euro, re-
ferred to revenue for insurance indemnities (765 thousand Euro), as well as to other lesser rev-
enue and proceeds amounting overall to 475 thousand Euro.
During the first six months of 2005 this item, amounting to 554 thousand Euro, is pri-
marily due to net revenue for penalty charges to clients for the late notice to the Company, with
respect to the contractual terms, of cancellations of flight reservations or modifications of the
number of seats occupied by the tour operators (221 thousand Euro) and to revenue from pilot
training programs in the amount of 249 thousand Euro.

Production costs
Production costs are made up as follows:

Amounts in Euro/000 I Six Months 2004 I Six Months 2005

Production Costs
For raw materials, subsidiary materials, consumables and finished products 23,711 38,344
For services 43,502 52,640
For enjoyment of third party goods 16,140 21,308
For personnel 15,609 19,319
Depreciation and devaluation 1,147 1,342
Variations of stocks of raw materials, subsidiary materials, consumables and
finished products (294)
Other allocations 685 758
Other management expenses 122 347
Total production costs 100,916 133,764

Costs for raw materials, subsidiary materials, consumables and finished products:

Amounts in Euro/000 I Six Months 2004 I Six Months 2005

Raw materials, subsidiary materials, consumables and finished products

Technical materials 391 374
Catering 3,668 4,541
Various materials 489 462
Fuel and oils 19,163 32,967
Total costs for raw materials, subsidiary materials, consumables and finished
products 23,711 38,344

Reference is made to Section III, Chapter 9 for an analysis of the trend of the cost of
jet fuel, operative costs and costs for maintenance materials during the first six months of 2004
and 2005.

169
Costs for services

Amounts in Euro/000 I Six months 2004 I Six months 2005

Costs for services

Expenses for traffic and stopovers 24,260 32,292
Maintenance and review of the fleet 12,096 11,605
Consulting 1,786 1,182
Sale expenses 1,339 2,485
Transportation and lodging for flight personnel 1,665 2,321
Insurance 934 999
Postal and Telephone expenses 364 642
Other costs for services 348 179
Selection and training of flight crew 606 848
Pilots in other locations 104 87
Total costs for services 43,502 52,640

Reference is made to Section III, Chapter 9 for an analysis of the trend of operative
costs, costs for maintenance services and other commercial costs and costs of the structure
during the first six months of 2004 and 2005.

Costs for the enjoyment of third party goods

Amounts in Euro/000 I Six months 2004 I Six months 2005

Costs for the enjoyment of third party goods

Rentals A330 3,988 3,993
Rentals A320 4,123 7,877
Other aircraft 7,481 8,005
Finance Leasing A319 347
Other rents and leasing 548 1,086
Total costs for the enjoyment of third party goods 16,140 21,308

Reference is made to Section III, Chapter 9 for an analysis of the trend of the costs
of Operative rentals of aircraft during the first six months of 2004 and 2005.

Personnel Cost

Amounts in Euro I Six months 2004 I Six months 2005

Personnel costs
Gross remuneration 12,108 15,152
Social security contributions 2,481 3,013
Severance pay 536 711
Other personnel costs 485 443
Total personnel costs 15,610 19,319

Reference is made to Section III, Chapter 9 for an analysis of the cost of personnel
during the first six months of 2004 and 2005.

170
Depreciation and devaluation

Amounts in Euro/000 I Six months 2004 I Six months 2005

Depreciation
Intangible fixed assets 694 642
Tangible fixed assets 376 378
Total depreciation 1,070 1,020
Devaluations
Devaluation of commercial receivables 77 322
Total devaluations 77 322
Total depreciation and devaluations 1,147 1,342

Reference is made to Section III, Chapter 9 for an analysis of the trend of deprecia-
tion and devaluation of receivables and fixed assets during the first six months of 2004 and 2005.

Other allocations

Reference is made to the comment to the item Risk and Expense Funds for an
analysis of the nature of said allocations.

Diverse management costs

These can be analyzed as follows:

Amounts in Euro/000 I Six months 2004 I Six months 2005

Other management costs

Association fees 26 23
Printed materials and other manuals 56
Stamp duty 16 24
Ici 30
Deductible Vat 41
Other 80 173
Total other management costs 122 347

Financial proceeds and costs

Proceeds

These can be analyzed as follows:

Amounts in Euro/000 I Six months 2004 I Six months 2005

Bank interest 59 27
Profits on exchange rates 424 2,195
Other earned interest 213 244
Financial proceeds 696 2,466

171
Costs

These can be analyzed as follows:

Amounts in Euro/000 I Six months 2004 I Six months 2005

Interest paid on loans 22 94

Interest paid on loans 263
Losses on exchange rates 733 1,434
Other financial costs 139 271
Financial Costs 894 2,062

Reference is made to Section III, Chapter 9 for an analysis of the trend of financial
management during the first six months of 2004 and 2005.

Extraordinary proceeds and costs

During the course of the first six months of 2004, extraordinary costs were recorded
amounting to 110 thousand Euro, referring to taxes paid for the amnesty relating to prior fiscal
years.

During the course of the first six months of 2005, the extraordinary proceeds and
costs, amounting to 2,158 thousand Euro, were primarily due to capital gains deriving from the
sale of 8 MD 80/82 aircraft and to the release of invoices to be received with regard to which it
was held that there was no longer any reason to record them in the balance sheet.

Fiscal year taxes

The current taxes as of 30 June 2004 and as of 30 June 2005, respectively amount-
ing to 779 thousand Euro and to 673 thousand Euro, refer exclusively to the allocation for Irap
(788 thousand Euro) and to taxes paid in advance (115 thousand Euro).

20.6.1.8 Comments to the financial statement as of 30 June 2005

Reference is made to the comments set forth in Paragraph 20.1.1.7.

20.7. DIVIDEND POLICIES

With reference to fiscal years 2002, 2003 and 2004, the Company distributed divi-
dends on a sole occasion, i.e. as performance of the resolution of the shareholders meeting of
11 May 2005, for a total amount of 5,000 thousand Euro, amounting to 0.75 Euro per share. On
the basis of the number of Shares in circulation as of the Date of the Prospectus, the above div-
idend per share would have amounted to approximately 0.71 Euro.

At present there are no anticipated policies regarding the distribution of future divi-
dends.

20.8. LEGAL PROCEEDINGS AND ARBITRATION

As of the Date of the Prospectus there are normal activities for dispute management
(both defensive and as plaintiff). Among the most significant disputes from the profile of the
amount of the claims made, is a writ of summons and complaint that was served on the

172
Company in August 2005 by a tour operator for the payment of the amount of approximately 1.1
million Euro for alleged breaches and violations by the Company.

Notwithstanding the fact that the Company deems that the reasons adopted by the
above tour operator are groundless, a negative outcome of the lawsuit initiated by it could have
a significant negative impact on the Issuers financial situation. No allocation to a risk and ex-
pense fund was made because the probability of losing is considered to be remote.

It is noted that as of the Date of the Prospectus, no inspection or verification by the

fiscal authorities is in course with regard to Eurofly, nor are there any tax disputes pending in
front of the Tax Commissions in relation to Eurofly.

20.9. SIGNIFICANT CHANGES IN THE ISSUERS FINANCIAL OR COMMERCIAL

SITUATION

During the period between 30 June 2005 and 30 September 2005, the Company op-
erated, as usual, during the quarter of major fiscal year activity (see Section III, Chapter 12). The
net financial position as of 30 September 2005 was also influenced by the unexpected impact
of the attack at Sharm el Sheikh and the hurricanes in the Caribbean, which led to a general
lengthening of the times for receipt of payments from tour operators, to which was added a
slight reduction of the payment time for suppliers with respect to previous periods. The conse-
quent deterioration of net working capital was aggravated by the contract with the Ministry of
Defense, which provided for deferred payment terms with respect to the usual contractual con-
ditions in effect with the tour operators.

With reference to said receivables from the Ministry of Defense, they were progres-
sively assigned to a factoring company which, by means of a note dated 18 November 2005,
accepted the assignment on a without recourse basis, for an amount of approximately 11,600
thousand Euro.

Further, on 21 November 2005, Spinnaker Luxembourg granted the Company a 24

month non-interest bearing loan in the amount of 4,500 thousand Euro, payable upon expiration,
in view of financial needs that arose in the month of October 2005, prevalently tied to down pay-
ments (amounting to 3,744 thousand Euro) relative to contracts having as their object the entry
in the fleet of new A330 and A350 aircraft.

It is also noted that during the period 1 July 2005 30 September 2005, the
Company purchased forward exchange rate contracts from Banca Profilo to cover the risk of ex-
change rate fluctuations, for a total countervalue of 18,500 thousand USD, of which 3,000 thou-
sand USD already expired as of 30 September 2005. In view of completeness, it is also noted
that as of the Date of the Prospectus, the Company had forward exchange rate contracts with
Banca Profilo for a total counter-value of 10,500 thousand Euro, again to cover the risk of ex-
change rate fluctuations.

With reference to the fleet, it is noted that in September 2005 Eurofly agreed to the
consale in wet lease of two A320 aircraft to a third carrier until the Spring of 2006 (see Section
III, Chapter 6, Paragraph 6.1.1.2.2). Further, during the course of the month of October 2005, the
Company signed a letter of intent with Airbus for the purchase of three A350 aircraft, making
adown payment of approximately 1 million USD (see Section III, Chapter 5, Paragraph 5.2.2).

With the exception of the above, from the date of closure of the mid-year balance
sheet as of 30 June 2005, no events were verified that would have led to significant changes in
the Issuers financial and commercial situation.

173
21. SUPPLEMENTARY INFORMATION

21.1. SHARE CAPITAL

21.1.1. Capital issued

As of the Date of the Prospectus, the Euroflys share capital subscribed to and en-
tirely paid was 7,065,302 Euro, represented by 7,065,302 ordinary Shares having a nominal value
of 1.00 Euro each.

The Shares are ordinary, nominal and indivisible and each Share attributes the right to
one vote at all of the Companys ordinary and extraordinary shareholders meetings, as well as all
of the other patrimonial and administrative rights according to the applicable laws and By-laws.

As of the Date of the Prospectus there were no other categories of Shares nor other
financial instruments issued by the Company.

Both as of the date of 1 January 2004 as well as the date of 31 December 2004,
Euroflys share capital subscribed to and entirely paid in amounted to 6,666,922 Euro, repre-
sented by 6,666,922 ordinary Shares having a nominal value of 1.00 Euro each.

21.1.2. Shares not representative of the capital

There are no Shares that are not representative of the share capital.

21.1.3. Its own Shares

The Issuer does not hold its own Shares in its portfolio, either directly or indirectly.

21.1.4. Amount of convertible or exchangeable bonds or bonds with warrants

The Issuer has not issued convertible or exchangeable bonds or bonds with warrants.

21.1.5. Indication of eventual rights and/or purchase obligations regarding authorized

capital that has not been issued or an undertaking to increase the capital

There are no rights and/or purchase obligations regarding approved capital, nor un-
dertakings to increase the capital.

21.1.6. Information regarding the share capital of eventual members of the group of-
fered in option

Not applicable.

21.1.7. Description of the evolution of the share capital

On 12 April 2002 the Companys extraordinary shareholders meeting approved a

gratuitous increase of the share capital from 3,715,200 Euro to 7,678,080 Euro, by means of the
issue of 768,000 ordinary Shares having a nominal value of 5.16 Euro each, to be released by
means of the use of the fund contributions to the capital account registered at the balance
sheet ended 31 December 2001.

174
 On 11 April 2003 the Companys extraordinary shareholders meeting voted (i) to
cover the losses appearing from the balance sheet as of 31 December 2002, amounting to
6,011,111 Euro net of the legal reserve, by reducing the share capital from 7,678,080 Euro to
1,666,560 Euro by means of the reduction of the nominal value of 1,488,000 Shares in circula-
tion from 5.16 Euro to 1.12 Euro, allocating the amount of 409 Euro - calculated exclusively for
the purpose of rounding off - to a legal reserve; (ii) to reduce the nominal value of the 1,488,000
Shares from 1.12 Euro to 1.00 Euro, with the contemporaneous issue of 178,560 new Shares
having a nominal value of 1.00 Euro each, to be allotted gratuitously to the sole Shareholder
Alitalia; (iii) to increase the share capital against consideration from 1,666,560 Euro to 6,666,922
Euro by means of the issue for the same conditions of 5,000,362 new ordinary Shares having a
nominal value of 1.00 Euro per share, to be offered in option to the Shareholders. The sole share-
holder Alitalia subscribed to the entire Increase of Share Capital in the amount of 5,000,362 Euro
by means of the use of contributions to the capital account for said amount.
On 26 May 2005, the Companys extraordinary shareholders meeting granted the
Board of Directors, in accordance with article 2443 of the Civil Code, the right to increase the
share capital one or more times, on a gratuitous basis, within 31 July 2005, for a nominal maxi-
mum value of 500,000 Euro, by means of the issue of a maximum number of 500,000 ordinary
Shares, enjoying regular rights, to be allotted to the Companys Employees in accordance with
article 2349 of the Civil Code and in accordance with article 29 of the By-laws.
In performance of said delegation of power, on 1 July 2005 the Board of Directors
voted to increase the share capital from 6,666,922.00 Euro to 7,065,302.00 Euro and thus by
398,380.00 Euro by means of the use, for a corresponding amount, of the special reserve that
the ordinary shareholders meeting of 11 May 2005 had created for such purpose, and to gratu-
itously allot to some Employees, chosen upon the discretion of the Board of Directors from
among the Companys top management, 398,380 newly issued Shares having a nominal value
of 1.00 Euro each, with the regular enjoyment of rights relative to fiscal year 2005 (see Section
III, Chapter 17, Paragraph 17.2).
With respect, instead, to the Increase of Share Capital to facilitate the Global Offer,
reference is made to Section IV, Chapter 4, Paragraph 4.6.

21.2. ARTICLES OF INCORPORATION AND BY-LAWS

21.2.1. The Issuers object and objectives

The object is indicated in article 4 of the By-laws, which provides as follows:
The Companys principal object is the performance of air transportation in combi-
nation with any other commercial activity that involves the use, repair or maintenance of aircraft,
directly or by means of subsidiaries.
The Company can perform all of the industrial, commercial, personal property, real
property and financial transactions that are held to be useful by the administrative organ for the
achievement of its object and can have shareholdings in companies or businesses that perform
activities that fall within its object or are in any regard related, complementary or analogous to it,
with particular even though not exclusive reference to those performed in the tourism sector.
All financial activity with regard to the public is excluded..

21.2.2. Summary of the provisions of the Issuers By-laws regarding the members of
the administrative, management and supervisory organs

Board of Directors
The Company is managed by a Board of Directors consisting of from five to nine
members. The directors remain in office of the term established by the shareholders meeting at

175
the time of the appointment, which cannot exceed three fiscal years, and which expires the date
of the shareholders meeting called to approve the balance sheet relating to the last fiscal year
of their term of office. The directors can be re-elected.
In the event that due to resignations or other reasons the majority of the directors ap-
pointed by the shareholders meeting are missing, the entire board will be considered as having
forfeited office with effect from the date of its subsequent reconstitution of said organ, and an
urgent shareholders meeting must be called by the directors remaining in office for the ap-
pointment of a new Board of Directors.
The Board of Directors shall elect a President from among its members, in the event
the shareholders meeting has not already done so; it can also elect one or more Vice Presidents.
The Board of Directors shall be convened at the registered office or elsewhere, in
Italy, each time that the President or, in the case of his absence or inability, the Managing
Director, holds it necessary, or it is requested by at least three directors.
The presence of a majority of the directors in office is required in order for the reso-
lutions of the Board to be valid. The resolutions are approved by a majority of those voting; ab-
staining directors shall be excluded from said calculation.
On the basis of article 19 of the By-laws, the Board of Directors has the broadest of
powers for the Companys management, and for such purpose it can deliberate or perform all of
the acts that it deems necessary or useful for the implementation of the Companys object, with
the exception of what is reserved by law and by the By-laws to the shareholders meeting. The
Board of Directors is also competent to approve resolutions concerning simplified mergers or
splits in accordance with articles 2505, 2505 bis and 2506 ter, last paragraph, of the Civil Code,
the opening and closing of secondary offices, the transfer of the registered office within the na-
tional territory, the indication of which directors legally represent the Company, the reduction of
capital subsequent to withdrawal and adjustments of the By-laws to normative provisions, with-
out prejudice to the fact that said deliberations might in any event also be approved by the ex-
traordinary shareholders meeting.
The Board of Directors can appoint an executive committee previously determin-
ing the duration and number of its members and one or more managing directors, to whom it
can delegate, within the limits of law and the By-laws, its powers and functions. In addition, the
Board of Directors can also create one or more committees with consulting, proposal or control
functions, in conformity with applicable legislative and regulatory provisions. The Board of
Directors has the right to appoint one or more general managers.
In accordance with article 25 of the By-laws, the representation of the Company with
regard to third parties and at law as well as the Companys signature, shall rest with the
President and, in the case of his absence or inability, even temporary, with the Vice President,
as well as with the Managing Director or the managing directors, if appointed, within the limits
of their delegated powers.
In accordance with article 20 of the By-laws, the directors have the right to be reim-
bursed for expenses incurred for the performance of their functions. The shareholders meeting
shall decide the annual compensation of the Board of Directors, which shall will remain unvar-
ied until a different resolution of the of the shareholders meeting. The manner of allocating the
compensation of the Board of Directors, in the event that the shareholders meeting has not so
provided, shall be determined by means of a resolution of the Board itself. The Board of
Directors has the right, having heard the opinion of the Board of Internal Auditors, to determine,
in addition to the total amount approved by the shareholders meeting, remuneration for direc-
tors holding particular positions, in accordance with article 2389, third paragraph, of the Civil
Code. As an alternative, the shareholders meeting can determine a total amount for the remu-
neration of all of the directors, including those holding particular positions, whose distribution is
determined by the Board of Directors, having heard the opinion of the Board of Internal Auditors
for the attributions to directors holding particular positions, in accordance with article 2389, third
paragraph of the Civil Code.

176
Board of Internal Auditors

In accordance with art. 26 of the By-laws, the Board of Internal Auditors consists of
three acting auditors and two alternatives, who remain in office for three fiscal years, and expire
at the date of the shareholders meeting convened to approve the balance sheet relative to the
last fiscal year of their term of office, and they can be re-elected.

The members of the Board of Internal Auditors are elected by the shareholders
meeting by means of a voting list system, in order to ensure that one of the acting auditors and
one of the alternates are appointed by the meeting upon the designation of the minority. Only
the Shareholders who, alone or with others, own a total number of Shares with voting rights rep-
resenting at least 3% of the share capital with voting rights have the right to present lists at the
ordinary shareholders meeting.

The lists must be filed with the Companys registered office at least 5 days prior to
that set for the first calling of the shareholders meeting, and this must be mentioned in the no-
tice calling the meeting. Together with each list, within the term indicated above, the statements
must be filed by means of which the individual candidates accept the candidacy and attest,
under their own responsibility, the non-existence of reasons for which they would be ineligible
or incompatible, as well as attesting that they have the pre-requisites required by law and the
By-laws for their respective offices, together with their relative curriculum.

Each Shareholder who presents or assists with the presentation of the lists must en-
sure that the Company receives, at least two business days prior to the first calling of the share-
holders meeting, the notice of the intermediary maintaining the relative accounts in accordance
with art. 2370, second paragraph, of the Civil Code.

In the event that the Companys shares are admitted to trading on an Italian stock ex-
change, the list cannot include candidates who already hold the position of auditor in 5 other listed
companies, with the exception of subsidiaries as well as parent companies and their subsidiaries.

21.2.3. Description of the rights, privileges and restrictions related to each class of ex-
isting Shares

There are no categories of Shares of the Issuer other than ordinary ones.

The Shares are ordinary, nominal, indivisible and attribute the quality of shareholder
in accordance with provisions of law and the By-laws.

Each of the Shares attributes the right to one vote at the ordinary and extraordinary
shareholders meetings of the Company, as well as the other patrimonial and administrative
rights, according to applicable law, regulations and the By-laws.

The Shares can be freely transferred by an act among living parties or by succession
due to death and are subject to the circulation regime provided for Shares issued by listed Italian
companies.

Shareholders shall have a right of withdrawal only in the mandatory cases provided
by law. In accordance with articles 3 and 5 of the By-laws, a right of withdrawal is excluded in
any event for resolutions regarding the extension of the Companys duration and the introduc-
tion or removal of restrictions on the transfers of its shares.

In particular, article 29 of the By-laws contains the following provision with regard to
the division of profits:

Ascertained net profits, appearing from the balance sheet, after deducting the por-
tion to be allocated to a legal reserve until the limit required by law, are allocated according to

177
what is approved by the shareholders meeting. In particular, the shareholders meeting, upon a
proposal of the Board of Directors, can approve the creation and increase of other reserves.

The ordinary shareholders meeting can approve the allocation of profits or reserves
consisting of profits to the Companys Employees or to Employees of its subsidiaries by means
of the issue, until the corresponding amount of the profits, of ordinary Shares without any re-
striction or special categories of Shares to be allotted individually to employees, in accordance
with art. 2349 of the Civil Code.

Dividends that are not cashed within the fifth year from the date on which they be-
came payable will revert to the Company.

In the event that the Company is liquidated, the Shares entitle their holder to partic-
ipate in the distribution of the residual assets in accordance with law.

21.2.4. Description of the manner in which shareholder rights can be modified, with an
indication of the cases in which the conditions are more restrictive than the
conditions provided by law

Article 2437 of the Civil Code provides that shareholders shall have a right of with-
drawal, with regard to all or part of their Shares, if they have not approved resolutions regarding:
the modification of the clause of the Companys object, when it permits a significant
change of the Companys activity;
the transformation of the Company;
the transfer of the registered office abroad;
the revocation of the state of liquidation;
the elimination of one or more reasons for withdrawal provided by article 2437, sec-
ond paragraph, or by the By-laws;
the modification of the criteria to determine the value of the shares in the case of
withdrawal;
modifications to the By-laws regarding voting rights and the right of participation.

Any agreement aimed at excluding or rending more difficult the exercise of the right
of withdrawal in the above cases is null.

In accordance with article 2437, second paragraph, the Company can exclude, by
means of a special provision of the By-laws in such sense, the right of withdrawal for share-
holders who have not approved resolutions regarding:
the extension of the Companys duration;
the creation or removal of restrictions regarding the circulation of the Shares.

Euroflys By-laws provide, in articles 3 and 5, that in the case of the approval of an
extension of the Companys duration and in the case of resolutions creating or removing re-
strictions on the transferability of the Shares, even shareholders who have not approved such
resolution will not have a right of withdrawal.

In accordance with art. 2437 quinquies of the Civil Code, shareholders who have not
approved resolutions that result in an exclusion from listing shall have a right of withdrawal.

21.2.5. Description of the conditions that regulate the manner of calling annual gener-
al shareholders meetings and extraordinary shareholders meetings, including
the conditions for admission

In accordance with article 6 of the By-laws, the shareholders meetings can be ordi-
nary or extraordinary in accordance with law, and they shall be held at the Companys registered

178
office or in another location that is indicated in the notice of calling, as long as within the national
territory. Ordinary shareholders meeting for the approval of the balance sheet must be called
within 120 days from the end of the fiscal year, or, in the cases provided by article 2364, second
clause of the Civil Code, within 180 days from the close of the fiscal year.

Shareholders meetings, ordinary as well as extraordinary, are called by the directors,

in the terms provided by outstanding law, by means of a notice published in the Official Gazette
of the Republic of Italy or in the newspaper Il Sole 24 Ore or the daily newspaper M.F. Mercati
Finanziari / Milano Finanza containing an indication of the day, time and place of the first and
eventually second or third calling, as well as an agenda of the matters to be discussed, without
prejudice to compliance with every other requirement provided by outstanding law.

In accordance with article 2367 of the Civil Code, the directors must convene share-
holders meetings without delay upon the request of shareholders representing at least one-
tenth of the share capital, and if the request indicates the issues to be discussed.

In accordance with article 2406, second paragraph of the Civil Code, shareholders
meetings can also be convened by the Board of Internal Auditors, upon notice to the president
of the Board of Directors, in the event that the Board of Internal Auditors, in performance of its
office, discovers critical facts of significant gravity and there is an urgent need to deal with them.
Further, in accordance with article 151 of the Consolidated Act, shareholders meetings can be
called by the Board of Internal Auditors or by at least two of the auditors.

In accordance with article 8 of the By-laws, shareholders who have voting rights can
participate at shareholders meetings. In the event that the Companys Shares are admitted to
trading in an Italian stock exchange, those Shareholders from whom the Company has received,
at least two business days prior to the first calling of the shareholders meeting, notice of the in-
termediary holding the relative accounts, in accordance with article 2370, second paragraph of
the Civil Code, shall have the right to participate at shareholders meetings.

Article 9 of the By-laws provides that shareholders who have the right to participate
at shareholders meetings, directly or representing other shareholders, can give a written proxy
for the participation and vote at the shareholders meeting in accordance with law.

21.2.6. Brief description of eventual provisions of the Issuers By-laws that might have
the effect of delaying, postponing or impeding a modification of the controlling
position in the Issuer

The Issuers By-laws do not contain any provisions that might have the effect of de-
laying, postponing or impeding a modification of the Issuers controlling shareholder.

21.2.7. Indication of eventual provisions of the Issuers By-laws that regulate the limit
of shareholdings, beyond which there is an obligation to notify the public of the
shareholding held

The Issuers By-laws do not contain any provisions that regulate the level of posses-
sion beyond which there is an obligation to provide notice regarding the shareholding held. With
reference to companies with listed Shares, this issue is regulated by the Consolidated Act and
relative implementing measures.

In particular, CONSOB Regulation 11971 provides, among others, that any holder of
shares having voting rights of a listed company must notify the company and CONSOB, in the
manner provided by the same regulation in the event:
a) the percentage limits of 2, 5, 7.5, 10 and subsequent multiples of 5 are exceeded;

179
 b) the shareholding is reduced within the limits indicated in clause a) above.

With regard to the notice obligations set forth above, are considered to be share-
holdings both the shares that a party owns, even if the voting right rests with or is attributed to
third parties, as well as those shares in relation to which a voting right exists or has been attrib-
uted. For the same reason, both shares held through third parties, fiduciaries, or subsidiaries as
well as those in relation to which the voting right rests with or has been attributed to said par-
ties, are calculated. Shares in the name of or endorsed to fiduciaries and those for which the vot-
ing right is attributed to an intermediary, in the context of managed assets, are not calculated by
the parties controlling the fiduciary or intermediary.

For the purposes of the notice obligations related to the thresholds of 5%, 10%,
25%, 50% and 75%, the Shares issued and subscribed to that a party can purchase or sell on
its own initiative, directly or by means of fiduciaries or subsidiaries, are also calculated. The
Shares that can be purchased by means of the exercise of conversion rights or warrants are cal-
culated for the above purposes, only if the purchase takes place within sixty days.

In accordance with article 120 of the Consolidated Act, voting rights relating to list-
ed shares or financial instruments for which the above notices were omitted cannot be exer-
cised.

21.2.8. Description of the conditions provided by the articles of incorporation or by the

By-laws for the modification of the share capital, in the event that such condi-
tions are more restrictive than the conditions provided by law

Euroflys articles of incorporation and By-laws do not provide for any conditions that
are more restrictive than provisions of law with regard to the modification of its share capital.

180
22. IMPORTANT CONTRACTS THAT ARE DIFFERENT THAN THOSE
EXECUTED DURING THE COURSE OF THE NORMAL PERFOR-
MANCE OF THE ACTIVITY

With regard to the purchase of the real property located in Milan, via Ettore Bugatti
15, which hosts the Companys registered office and its administrative offices, reference is made
to Section III, Chapter 8, Paragraph 8.1. With regard to said real property, during the course of
2004 a contract for a significant amount was executed with specialized companies having as its
object requalification activities.

On 22 December 2003 the Company, in view of investing temporary surplus liquidi-

ty, became the assignee from Profilo Holding S.p.A. of the rights and obligations deriving from
an insurance policy - policy no. 1.259.750 issued by La Venezia Assicurazioni for a quota
amounting to 40% of the initial amount of 10,000,000 Euro, i.e. for approximately 4,000,000.
Said policy, originally stipulated with Banca Profilo on 13 June 2003, expired on 13 June 2008
and provided for a minimum attributed yield of 2%.

During the course of 2004 Eurofly pledged in favor of Banca Profilo both the quota
of 40% of insurance policy no. 1.259.750 described above, as well as insurance policy no.
1.280.611, also issued by La Venezia Assicurazioni and stipulated by Eurofly on 22 December
2003 for approximately 10,000,000 Euro. The latter insurance policy provides for an attributed
minimum yield of 2.25% and expires on 22 December 2008. The two mentioned policies were
pledged in favor of Banca Profilo first in January 2004 for the consale by Banca Profilo to the
Company of a line of credit for 14,000,000 Euro and, subsequently, in July 2004, for the issue by
Banca Profilo of a bank guarantee for a maximum of 14,000,000 Euro as a guarantee of perfor-
mance of the Companys obligations in relation to a Finance Leasing contract stipulated with
Locat S.p.A..

In February 2005 the Company sold its 40% share of policy no. 1.259.750. In April
2005, policy no. 1.280.611 was pledged by Eurofly to Banca Profilo for the consale by Banca
Profilo of a credit line in the amount of 10 million Euro.

181
23. INFORMATION PROVIDED BY THIRD PARTIES, EXPERT OPIN-
IONS AND STATEMENTS OF INTERESTS

Where indicated, the information set forth in the Prospectus was provided by third
party sources. The Company confirms that such information was faithfully reported and that, to
the extent it is aware, also on the basis of the information published by the third parties in ques-
tion, facts that might make the reported information inaccurate or deceitful were not omitted.

182
24. DOCUMENTS AVAILABLE TO THE PUBBLIC

Copies of the following documentation is available to the public, at Euroflys regis-

tered office in Milan, Via Ettore Bugatti no. 15:
Euroflys articles of incorporation and By-laws;
Euroflys fiscal year balance sheets ended 31 December 2002, 2003 and 2004, to-
gether with the management reports of the directors;
Auditors report relative to Euroflys fiscal year balance sheets ended 31 December
2002, 2003 and 2004;
report of the Board of Internal Auditors relative to Euroflys fiscal year balance sheets
ended 31 December 2002, 2003 and 2004;
Euroflys six month reports ended 30 June 2004 and 2005;
Auditors report relative to Euroflys six month reports ended 30 June 2004 and 2005.

183
25. INFORMATION REGARDING SHAREHOLDINGS

Eurofly does not have shareholdings in other companies.

184
 SECTION IV
INFORMATION RELATING TO THE FINANCIAL INSTRUMENTS

185
 [This page intentionally left blank]

186
1. KEY PERSONS

See Section III, Chapter 1.

187
2. RISK FACTORS

See Section II.

188
3. FUNDAMENTAL INFORMATION

3.1. THE COMPANYS STATEMENT REGARDING CASH FLOWS

Euroflys net financial position as of 30 September 2005 is negative in the amount of

12.4 million Euro, worse with respect to 30 June 2005 in the amount of 4.4 million Euro, and 17.2
million Euro as of 31 December 2004. As of 30 September2005, the Company had utilized ap-
proximately 87.3% of the total credit lines that it had been granted. Subsequent to the non-in-
terest bearing loan from its shareholder Spinnaker Luxembourg and the recent increase of its
lines of credit, the percentage of use of the cash credit lines as of the Date of the Prospectus
were significantly reduced. The Company further deems that within the end of the fiscal year
there will be a significant improvement of its net financial position (see Section III, Chapter 12).

The Company deems that the cash flows generated by its activity, together with the
resources deriving from the non-interest bearing loan granted by its shareholder Spinnaker
Luxembourg and the recent increase of its credit lines, are sufficient for the continuation of its
current business for the next 12 months. As indicated in Paragraph 3.4 below, the resources
gathered due to the listing will be dedicated to the asset reinforcement necessary for the devel-
opment of the activity and investments, including the prepayments relative to the purchase of
the A350 (see Section III, Chapter 5, Paragraph 5.2.2). Reference is made to Section III, Chapters
9 and 10, for information regarding the Issuers financial resources.

3.2. FUNDS AND INDEBTEDNESS

As of 30 September 2005 the Companys net financial position is negative in the

amount of 12,351 thousand Euro, of which 4,761 thousand Euro is guaranteed by a mortgage
on real property owned by the Company.

3.3. INTERESTS OF PHYSICAL AND LEGAL PERSONS PARTICIPATING IN THE

ISSUE/OFFER

Banca Profilo, which acts as Joint Global Coordinator of the Global Offer, is in a sit-
uation of potential conflict of interest in that it has receivables of a financial nature with regard
to the Company. In particular, the line of credit granted to the Company by Banca Profilo as of
the date of 30 June 2005 amounted to 15,000 thousand Euro, inclusive of a bank overdraft fa-
cility for 10,000 thousand Euro and a mortgage in the amount of 5,000 thousand Euro. As of 30
September 2005, the bank overdraft facility for 10,000 thousand Euro had been utilized for
14,134 thousand Euro. The apparent outlay overrun of the credit line was caused by an opera-
tion for the purchase of Dollars made by Eurofly on 30 September 2005, which operation led on
the same date also to a positive bank balance on Euroflys USD account with Banca Profilo equal
to 4,168 thousand Euro. Overall, therefore, Euroflys position with regard to Banca Profilo as of
30 September 2005 was 9,966 thousand Euro (compared with a bank overdraft facility of 10,000
thousand Euro), in addition to the mortgage whose residual liability as of 30 September 2005
amounted to 4,761 thousand Euro.

It is further noted that Banca Profilo undertook to make a stand by line of credit avail-
able to the Company, in the amount of 2,500 thousand Euro and for the duration of 18 months
minus one day, repayable upon expiration.

Banca Profilo is also in a situation of further potential conflict of interest in that it is

the principal subscriber to the fund Profilo Spinnaker Investment Fund with a quota of 57.9%,
as well as due to the fact that during the period prior to the Global Offer it had performed con-
sulting activity on behalf of the Company for the preliminary activity regarding the Global Offer,
in relation to which it received compensation amounting to 300,000 Euro, plus the accessory
amounts required by law.

189
3.4. REASONS FOR THE OFFER AND THE USE OF PROCEEDS

The principal reasons for making the Global Offer from Euroflys viewpoint can be
summarized as follows:
a) Asset reinforcement. Eurofly has significantly increased its activity over the course of
the past years and deems it necessary to proceed with an asset reinforcement that
will allow it to obtain more favorable conditions both from lenders and in particular,
with regard to the Operative rental of the aircraft. It is further noted that the extent of
the Companys asset reinforcement deriving from the Global Offer could be reduced
in the event that the Proponents, together with the Joint Global Coordinators, decide
not to entirely place the Shares that are the object of the Global Offer, although in
said case it would proceed by first of all reducing the number of Shares offered for
sale by Spinnaker Luxembourg (see Section IV, Chapter 5, Paragraph 5.1.2);
b) Development of the fleet. Eurofly deems that it has a homogeneous fleet consisting
of the most recent generation of aircraft that represents an important strategic fac-
tor. Operative reliability, minor consumption of jet fuel, and flight autonomy are in fact
decisive characteristics in order to compete in the market. Eurofly has, however,
deemed it necessary to develop its own fleet by means of the purchase of new air-
craft models for future years. In this regard, it is noted that on the basis of the agree-
ments stipulated by Eurofly, the inclusion in the fleet of two A330 aircraft is expect-
ed, respectively in 2006 and 2007, and of three A350, the new model of the Airbus
family, whose delivery is expected during the years 2013 and 2014. The development
of the fleet would occur by means of the purchase and/or rental contracts, which
would require significant down payments. Part of the resources deriving from the
Global Offer might be allocated to these payments;
c) Purchases. In Euroflys opinion, the Italian aeronautics sector will be subject over the
next years to a merger process with regard to operators. From such viewpoint, it in-
tends to attentively follow every possibility of growth by external means. The avail-
ability of financial resources and the status as a listed Company represent two im-
portant elements from this viewpoint.

In the event that the proceeds of the Global Offer are insufficient with regard to the
above indicated initiatives, the Company holds that the asset reinforcement would in any event
allow it to accede more easily to further sources of financing. In any event, Eurofly intends to ne-
gotiate an expansion of its credit lines with the credit institutes, in particular with regard to sig-
nature, aimed at the issuance of letters of credit (on behalf of lessors) which could substitute the
down payments made in cash, thus freeing additional financial resources.

Eurofly does not intend to utilize the proceeds deriving from the Global Offer for the
advance redemption of existing term loans, represented exclusively by the mortgage on the
property that it owns. Obviously, such proceeds will instead lead to a minor use of outstanding
lines of credit.

190
4. INFORMATION REGARDING THE FINANCIAL INSTRUMENTS
BEING OFFERED

4.1. DESCRIPTION OF THE TYPE AND CLASS OF THE FINANCIAL INSTRUMENTS

OFFERED TO THE PUBLIC AND/OR ADMITTED TO TRADING, INCLUDING THE
ISIN (INTERNATIONAL SECURITY IDENTIFICATION NUMBER) CODE

The object of the Global Offer are 6,300,000 Shares, having a nominal value of 1 Euro
each, amounting to 48.6% of Euroflys share capital, as will result from the complete subscription
to the Increase of Share Capital intended to facilitate the Global Offer approved by the extraordi-
nary shareholders meeting of 12 September 2005 (see Section IV, Chapter 4, Paragraph 4.6).

In the case of the complete exercise for the Greenshoe option (see Section IV,
Chapter 5, Paragraph 5.2.7.), the Shares offered will represent a total of 51.9% of Euroflys share
capital.

The object of the Public Offer is a minimum of 1,600,000 Shares amounting to 25.4%
of the Shares offered in the context of the Global Offer.

Shares other than those reserved to Employees have ISIN code IT0003918635.

4.2. LEGISLATION IN ACCORDANCE WITH WHICH THE FINANCIAL INSTRUMENTS

WERE CREATED

The Shares were issued in accordance with Italian law.

4.3. INDICATE WHETHER THE FINANCIAL INSTRUMENTS ARE NOMINAL OR

BEARER AND WHETHER THEY ARE PAPER OR DEMATERIALIZED. IN THE
LATTER CASE, PROVIDE THE NAME AND ADDRESS OF THE PARTY EN-
TRUSTED WITH MAINTAINING THE REGISTERS

The Shares are nominal and will be included in the management system concentrat-
ed in Monte Titoli S.p.A. (having its registered office in Milan, Via Mantegna no. 6) in regime of
dematerialization.

4.4. CURRENCY IN WHICH THE FINANCIAL INSTRUMENTS WERE ISSUED

The Shares were issued in Euro.

4.5. DESCRIPTION OF THE RIGHTS, INCLUDING ANY LIMIT ON THEM, RELATED

TO THE FINANCIAL INSTRUMENTS AND PROCEDURE FOR THE EXERCISE OF
THE SAME

The Shares have the same characteristics and rights as the other ordinary Shares of
Eurofly (see Section III, Chapter 21, Paragraph 21.2.3).

Right to receive dividends

The Shares enjoy regular rights, and thus that are equal to that of Euroflys other or-
dinary Shares in circulation as of the date of their issue. Dividends that are not cashed within the
fifth year from the date on which they became payable shall revert to the Company.

191
Voting rights

Each of the Shares attributes the right to one vote at the Companys ordinary and ex-
traordinary shareholder meetings, as well as the other patrimonial and administrative rights, ac-
cording to applicable law, regulations and the By-laws.

Option right

In the case of an Increase of Share Capital, the shareholders shall have an option
right with regard to newly issued shares, unless there is a different resolution of the sharehold-
ers meeting, in conformity with what is provided by article 2441 of the Civil Code.

Right to receive the Issuers profits

Article 29 of the By-laws provides that:

Net profits ascertained, resulting from the balance sheet, deducting the quota to be
allocated to the legal reserve until reaching the limit required by law, shall be allocated in accor-
dance with what is decided by the shareholders meeting. In particular, the shareholders meet-
ing, upon the proposal of the Board of Directors, can decide on the creation and increase of
other reserves.

Ordinary shareholders meetings can vote on the allocation of profits or reserves cre-
ated by profits to Employees of the Company or its subsidiaries by means of the issue, until
matching the corresponding amount of the profits themselves, of ordinary Shares without any
restriction or special categories of Shares to be allotted individually to employees, in accordance
with art. 2349 of the Civil Code.

Right to receive eventual residual amount in the case of liquidation

In the case of the dissolution of the Company for any reason, the shareholders
meeting will determine, in accordance with law, the manner of the liquidation and will appoint
one or more liquidators, determining their powers. In accordance with article 2492 of the Civil
Code, once the liquidation has been performed, the liquidators must prepare a final balance
sheet, indicating the part to which each shareholder is entitled or share of the division of re-
maining assets. The final liquidation balance sheet must be filed with the Company Registry and,
within ninety days subsequent to the registration of the filing that has been made, each share-
holder can file a claim in court contesting the liquidators; in the lack of claims, the final liquida-
tion balance sheet is understood as having been approved.

4.6. IN THE CASE OF NEW ISSUES, INDICATION OF THE RESOLUTIONS, AUTHO-

RIZATIONS AND APPROVALS ON THE BASIS OF WHICH THE FINANCIAL IN-
STRUMENTS WERE OR WILL BE CREATED AND/OR ISSUED

On 12 September 2005, the Companys ordinary shareholders meeting voted to (i)

increase the share capital upon the payment, divisible, for maximum nominal amounts of
7,000,000 Euro, by means of the issue of a maximum of 7,000,000 Shares having a nominal
value of 1.00 Euro each, having the regular enjoyment of rights, with the exclusion of the option
right set forth in art. 2441, fifth paragraph of the Civil Code, for an issue price determined in an
amount not less than the amount of the nominal value, all in order to facilitate the Global Offer
aimed at listing the Companys Shares with MTA; (ii) to authorize the Board of Directors pro tem-
pore in office, with the right to sub-delegate within the limits allowed by law, to carry out the
above Increase of Share Capital upon payment in the most opportune times, including in vari-
ous tranches, with the power in particular: a) to determine, together with the Joint Global

192
Coordinators, in proximity to the Placement, autonomously and as best they can, the price of
the Shares on the basis, among others: of the results reached by the Company and its growth
prospects, the domestic and international stock market conditions, the quantity and quality of
the manifestations of interest received from Professional Investors in Italy and foreign institu-
tional investors, and the quantity of the adhesions received with regard to the Public Offer; b)
identify eventual categories of parties or parties, even on the basis of eventual time undertak-
ings by the same not to transfer the Shares, to whom one or more tranches are allotted, includ-
ing for different prices and/or conditions (in particular, but not exclusively, in the case of an offer
to Employees), with the exception of the minimum price set forth above, of said Increase of
Share Capital, as well as the broadest of powers to make all of the decisions connected to the
Global Offer, with the provision as well that in conformity with practice, a maximum of 1,000,000
Shares that are the object of the Increase of Share Capital in question will be offered in option
to the Joint Global Coordinators, for the eventual fiscal year of the so-called Greenshoe option,
i.e. of that option typically utilized in similar operations by Joint Global Coordinators to subscribe
to new Shares aimed at satisfying a demand in excess of the number of Shares offered on the
market and thus perform, in compliance with applicable law, a stabilization activity regarding the
securities during the period subsequent to the initiation of trading.

4.7. IN THE CASE OF NEW ISSUES, THE DATE FORECAST FOR THE ISSUE OF THE
FINANCIAL INSTRUMENTS
As of the Payment Date, the Shares allotted in the context of the Public Offer will be
made available to the entitled parties, in a dematerialized form, by means of accounting at Monte
Titoli in the deposit accounts held with the same by the Investment Dealers.

4.8. DESCRIPTION OF EVENTUAL RESTRICTIONS ON THE UNRESTRICTED

TRANSFERABILITY OF THE FINANCIAL INSTRUMENTS
With the exception of restrictions of transfers detailed in Chapter 5, Paragraph 5.2.4
and Chapter 7, Paragraph 7.3, the Shares will be freely transferable by means of an act among
living parties or by succession due to death, and will be subject to the circulation regime pro-
vided for shares issued by an Italian listed company.

4.9. INDICATION OF THE EXISTENCE OF EVENTUAL NORMS REGARDING THE

OBLIGATION TO PUBLIC PURCHASE OFFERS AND/OR RESIDUAL PURCHASE
OFFERS OR SALES IN RELATION TO THE FINANCIAL INSTRUMENTS
The regulation of public purchase and exchange offers is set forth in Chapter II of
Title II, Part IV of the Consolidated Act and in the relative implementing provisions set forth in
CONSOB Regulation 11971.
A brief summary is set forth below of the principal provisions regarding the regula-
tion of public purchase and exchange offers, without prejudice to the fact that for a complete re-
view of said provisions, reference is made to the relevant law.
Art. 106 of the Consolidated Act provides that anyone who, subsequent to the pur-
chase of shares in exchange for consideration, has a shareholding in excess of the level of 30%
of the capital represented by the Shares that attribute voting rights at shareholders meetings re-
garding the appointment or revocation or responsibilities of the directors or the supervisory com-
mittee of an Italian company listed in an Italian stock exchange, must promote a public offer for
the purchase of all of the ordinary shares.
In accordance with CONSOB Regulation 11971, the same obligation is also applica-
ble to anyone already holding a shareholding that exceeds the limit of 30% cited above, without
having the majority of voting rights at ordinary shareholders meetings, and who purchases, even
indirectly, more than 3% of the capital represented by the shares having voting rights regarding

193
resolutions of the shareholders meetings for the appointment or revocation of responsibilities of
the directors or supervisory committee of an Italian company listed in an Italian stock exchange,
by means of the purchase in exchange for consideration over twelve months, or due to sub-
scriptions or conversions during the fiscal year of the rights traded during the same period.
The offer must be made within thirty days from the date in which the limit was ex-
ceeded, for a price not less than the arithmetical average of: (i) the average weighted market
price of the past twelve months; and (ii) the more elevated price agreed upon during the same
period by the offeror for the purchase of Shares of the same category. In the event no purchas-
es are made, the offer must be promoted for the average weighted market price of the past
twelve months or the minor period available.
Upon the occurrence of specific circumstances, even if the number of Shares ac-
quired exceeds the specific threshold, the Consolidated Act and the Regulation of Issuers es-
tablish some exemptions from the launch of the public offer.
Art. 108 of the Consolidated Act also provides that anyone who holds a sharehold-
ing in excess of 90% of the ordinary Shares having voting rights in the resolutions of sharehold-
ers meetings regarding the appointment or revocation or liability of directors or the supervisory
committee of an Italian company listed in an Italian stock exchange, must promote a public offer
for the residual purchase of all of the shares having voting rights at the price set by CONSOB,
unless there is a restoration within 120 days of sufficient floating stock on the market to ensure
the regular trend of trading.
Art. 109 of the Consolidated Act provides that the following shareholders are jointly
held to the obligations provided by articles 106 and 108 of the Consolidated Act, when they hold,
subsequent to purchases in exchange for consideration, even if only by one them, an overall
shareholding that exceeds the percentages indicated in the above articles: a) parties to the
agreement, even null, set forth in article 122 of the Consolidated Act; b) a party and the compa-
ny controlled by it; c) companies subject to common control; d) a company and its directors or
general managers. The public offer obligation exists for the parties indicated in clause a) above,
even when the purchases are made during the twelve months prior to the stipulation of the
agreement or together with the same.
Further, anyone who subsequent to a public offer having as its object all of the Shares
with voting rights, holds more than 98% of the ordinary shares having voting rights for resolutions
of shareholders meetings regarding the appointment or revocations or responsibilities of direc-
tors or supervisory board of an Italian company listed on an Italian stock exchange, has the right
to purchase the residual Shares within four months from the conclusion of the offer, if it declared
in the offer document the intention to utilize said right. The purchase price is determined by an
expert appointed by the President of the Court of the place where the issuer company has its reg-
istered office, bearing in mind also the offer price and the market price of the last six months.

4.10. INDICATION OF THE PUBLIC PURCHASE OFFERS MADE BY THIRD PARTIES

REGARDING THE ISSUERS SHARES OVER THE COURSE OF THE PAST FISCAL
YEAR AND THE FISCAL YEAR IN COURSE. THE PRICE AND TRADING CONDI-
TIONS OF SAID OFFERS AND THE RELATIVE RESULTS MUST BE INDICATED
During the course of the past fiscal year and the fiscal year in course no public of-
fers for the purchase or exchange of the Companys Shares were made by third parties.

4.11. TAX REGIME

The information provided below summarizes the tax regime for the purchase, hold-
ing and sale of the shares, included in the system of Monte Titoli, of listed companies that are
residents in Italy (such as the Company) in accordance with outstanding Italian legislation, also
subsequent to the modifications made by Legislative Decree no. 344 of 12 December 2003
(hereinafter Legislative Decree) and on the basis of the interpretation provided by the financial
administration as of the Date of the Prospectus.

194
 What is set forth below contains an analysis indicating the tax consequences deriv-
ing from the purchase, holding and sale of the Shares by residents and non-residents, and it is
therefore advisable that investors consult their consultants in any event with regard to such is-
sues.

Qualified and non qualified shareholdings: definition

In view of a better understanding, it is useful to note that with regard to some cate-
gories of taxpayers, the tax regime applicable to the dividends distributed by a company, as well
as the capital gains (and/or capital losses) realized at the time of the sale of its shares, can vary
depending on whether the shareholdings are considered to be qualified or non qualified for tax
purposes.

Qualified shareholdings are those consisting of the holding of shares (other than
savings shares), rights or shares, by means of which the above shareholdings can be acquired,
which represent overall a percentage of voting rights that can be exercised at the ordinary share-
holders meeting in excess of 2% or 20% or a holding of the capital or assets that exceeds 5%
or 25%, depending on whether they are shares traded on stock exchanges or consist of other
kinds of shares. For the present purposes, the percentage of voting rights and shareholding is
calculated bearing in mind all of the sales made during the course of twelve months, even if with
regard to different parties. Non qualified shareholdings are all of the other shareholdings that
do not exceed the above indicated percentages.

Tax regime for capital gains

Capital gains realized beyond the fiscal year by resident individuals

A Qualified shareholdings

Whenever the capital gains derive from the sale of qualified shareholdings, they com-
bine to make up the sellers total income within the limits of 40% of their amount, to be sub-
jected to taxation (IRE) in accordance with ordinary rules.

The above capital gains as well as the relative capital losses realized during the
course of the year must be indicated separately, for each operation, at the time of the income
tax return. Capital losses not offset in the year of realization can be deducted from capital gains
(and even from other income, if they are capital gains relative to non qualified shareholdings) dur-
ing the four subsequent tax years.

B - Non qualified Shareholdings

Capital gains deriving from the sale of non qualified shareholdings realized by resi-
dent individuals beyond the fiscal year are subject to substitute tax of income tax at a rate of
12.50%. Limited to non qualified shareholdings, in addition to the ordinary regime consisting of
the indication of the capital gains in the income tax return, two alternative regimes are provided,
which can be applied upon the choice of the taxpayer: administered assets and asset manage-
ment.

B.1. Ordinary regime

The taxpayer must indicate in his income tax return capital gains realized during the
course of the fiscal year. In view of the application of substitute tax at the tax rate of 12.50%,
the capital gains are algebraically added to the relative capital losses. If the total amount of the

195
capital losses exceeds that of the capital gains, the surplus, calculated for each category of cap-
ital loss, can be deducted from, until it matches, the capital gains realized in subsequent tax
years, not beyond the fourth year, on the condition that the excess amount is indicated in the
tax returns relative to the tax period in which the capital losses were realized.

The substitute tax must be paid within the terms and in the manner provided for the
payment of income taxes due as a balance on the basis of the tax return.

B.2. Administered assets

The taxpayer has the right to choose the application of the substitute tax in the
amount of 12.50%, for each capital gains realized, on the condition that the Shares held are kept
in custody or are administered care of qualified brokers (banks and SIM). The option is exercised
by the taxpayer by means of a communication signed at the same time as the conferment of the
assignment and opening of the deposit or account or, due to existing relationships, prior to the
initiation of the tax period; it remains in effect for the entire tax period and can be revoked with-
in the expiration of each solar year, with effect for the subsequent tax period. Capital losses re-
alized are deductible from, until they match, the capital gains realized during subsequent oper-
ations within the context of the same relationship, in the same tax period and in subsequent tax
periods, but not beyond the fourth period. The substitute tax is paid directly by the intermediary
who intervenes in the transaction, withholding the amount of all income realized or by receiving
proceeds from the taxpayer, within the fifteenth day of the second month subsequent to that in
which said tax is applied. The taxpayer consequently is not obligated to include the above cap-
ital gains and/or losses in its income tax return.

B.3. Managed assets

The taxpayer who has entrusted a qualified party in accordance with Legislative
Decree no. 415 of 23 July 1996, (currently Legislative Decree no. 58 of 24 February 1998) to
manage assets consisting of sums of money, Shares and other assets not relating to the com-
pany, can opt for the application of the substitute tax, at a rate of 12.50%, on the results of the
individual asset management of the entrusted portfolio. The option can be exercised by the tax-
payer by means of a signed notice, given to the fund manager at the time of the stipulation of
the contract or, with regard to existing relationships, prior to the beginning of the tax period, has
effect for the entire tax period and can be revoked within the expiration of each solar year, with
effect for the subsequent tax period. In the case of the exercise of the above option, the income
that makes up the management result is not subject to income taxes nor to substitute tax set
forth in point B above. Consequently, the taxpayer does not have to include such income in its
annual income tax return.

The management result consists of the difference between the value of the managed
assets at the end of each solar year and the value of the assets at the beginning of the year. In
particular, the value of managed assets at the end of each solar year is calculated gross of sub-
stitute tax, increased by withdrawals and diminished by contributions made during the year, as
well as income matured during the period that is subject to tax withholding, income that makes
up the taxpayers total income, exempt income or in any event not subject to taxes matured dur-
ing the period, proceeds deriving from shares of investment funds subject to substitute tax, and
from shares of real estate investment funds. The result is calculated net of costs and commis-
sions relative to the managed assets. The negative management result that might be achieved
in one year is calculated reducing the management result of subsequent tax periods, but not be-
yond the fourth, for the entire amount for which there is a corresponding amount of positive re-
sults in each period.

The substitute tax is withdrawn by the fund manager, who pays it to the competent
tax collector, within 16 February of the year subsequent to the one in which the relative liability

196
matured, or within the sixteenth day of the month following that in which the management man-
date was revoked.

Capital gains realized by non commercial resident entities in the fiscal year of the institutional ac-
tivity

A Qualified shareholdings

In the event the capital gains derive from the sale of qualified shareholdings, they
combine to form the non commercial entitys total income within the limits of 40% of their
amount on the basis of art. 58 of Presidential Decree no. 917 of 22 December 1986, (hereinafter
TUIR), and are subject to taxation (IRES) according to ordinary rules.

B Non qualified shareholdings

The capital gains deriving from the sale of non qualified shareholdings realized by
resident non commercial entities are subject to substitute tax of income tax at the tax rate of
12.50%, and the same considerations made in clauses B.1, B.2 and B.3 apply.

Capital gains realized during the fiscal year

The capital gains deriving from the sale of shareholdings relating to the activity do
not constitute taxable income to the extent of 95% of their amount, in that they are exempt for
resident taxpayers subject to IRES, or non commercial entities whose exclusive or primary ob-
ject is commercial activity, and for non-resident companies with stable organizations in Italy, to
whom the shareholdings are effectively related in accordance with art. 87 TUIR, or which make
up the income limited to 40% of their amount for individuals and general and limited partner-
ships and parties that are their equivalent in accordance with art. 58, second paragraph, TUIR,
in the event the following conditions are complied with:
(a) uninterrupted possession from the first day of the eighteenth month prior to that of
the sale;
(b) classification of the shareholding among long term assets in the first balance sheet
ended during the period of possession;
(c) the physical residence of the subsidiary in a State or territory different from that of a
fiscal paradise;
(d) the performance by the subsidiary of a commercial activity. The latter pre-requisite is
presumed to always exist with reference to companies whose shares are traded on
a stock exchange. Further, the existence of such pre-requisite is not required in the
case of capital gains realized by means of public offers.

The pre-requisites set forth in the last two clauses above must exist uninterrupted,
at the time of the realization of the capital gains, at least from the beginning of the third tax pe-
riod prior to said realization.

In the event that one of the above pre-requisites does not exist, the capital gains
shall be considered part of the taxable income in its entirety in the fiscal year in which they were
realized or, at the taxpayers choice, in constant rates during the fiscal year itself and in the four
subsequent years in the event the shareholdings have been registered as long term assets in the
last three balance sheets.

For some kinds of companies and on certain conditions, the sale of the above secu-
rities will lead to income which, as such, will combine to form the net value of production, sub-
ject to regional taxation on productive activities (IRAP).

197
 In the presence of the pre-requisites set forth in clauses (b), (c) and (d) above, the de-
duction from income of capital losses that have been realized is subordinate to uninterrupted pos-
session from the first day of the eighteenth month prior to that of the sale, considering as having
been sold first the shares purchased on the most recent date. Therefore, the capital losses real-
ized on shares held for more than twelve months and having the pre-requisites set forth in claus-
es (b), (c) and(d) will not be deductible from income with regard to IRES, whereas they will be de-
ductible only to the extent of 40% of their amount for individuals, as well as general and limited
partnerships and their equivalents in accordance with art. 58, second paragraph, TUIR.

It should be noted that on 4 October 2005, Law Decree no. 203 of 30 September
2005, published in the Official Gazette no. 230 of 3 October 2005, entered into effect, which pro-
vides, among others, for modifications of the tax treatment of capital gains and losses realized
during the fiscal year. In particular, the percentage of exemption from taxation for parties subject
to IRES of 95%, the minimum period of possession of eighteen months, and also the tax regime
of capital losses set forth above, were subject to modification by article 5 of Law Decree no. 203
of 30 September 2005.

Considering the nature of the measure adopted by the Italian Government, which will
become ineffective from its beginning unless within sixty days of its publication it is not con-
verted into Law in accordance with article 77 of the Constitution, and on the basis of the fact
that as of the Date of the Prospectus the same measure has not yet been converted into law, it
cannot be excluded that there may be further modifications of the tax treatment of capital gains
and losses described in the present Paragraph.

Capital gains realized by investment Funds

In accordance with article 6 of Law Decree no. 351 of 25 September 2001, as mod-
ified by article 41-bis of Law Decree no. 269 of 30 September 2003, the capital gains realized by
Italian investment funds created in accordance with art. 37 of Legislative Decree no. 58 of 24
February 1998, and by art. 14-bis of Law no. 86 of 25 January 1994, are not subject to any with-
holding or substitute tax.

Capital gains realized by pension Funds in accordance with Legislative Decree no. 124 of 21
April 1993

The capital gains realized by Italian pension funds are not subject to any withhold-
ings or substitute tax, but they combine to make the annual result of the fund. Such result is sub-
ject to substitute tax at the rate of 11%.

Capital gains realized by investment funds (OICVM) and by SICAV in accordance with art. 8 (1)
through (4) of Legislative Decree no. 461 of 21 November 1997

The capital gains realized by OICVM subject to the regulation set forth in art. 8, claus-
es 1 through 4, of Legislative Decree no. 461/1997 (investment funds and SICAV) are not sub-
ject to any withholding or substitute tax, but combine to form the annual management result.
Such result is subject to substitute tax at the rate of 12.50%.

With reference to resident investment funds or SICAV with less than 100 participants
(with the exception of the case in which the quotas or shares of the above organisms held by
qualified investors, who are not individuals, exceed 50%), the substitute tax of 12.5% is applied
to the part of the management result that refers to non qualified shareholdings; whereas, with re-
gard to the part of the management results referable to qualified shareholdings, substitute tax is
applied at the rate of 27%. For such purposes, holdings of share capital or assets with voting
rights of companies traded on stock markets that exceed 10% are considered to be qualified.

The above is without prejudice to specific tax laws.

198
Non-residents who do not have a stable organization in Italy

With regard to non-residents who do not have stable organizations in Italy to which
the shareholdings are effectively related, the capital gains deriving from the sale for consider-
ation of non qualified shareholdings in companies traded on stock exchanges are not taxable
in Italy, even if the shareholdings are held here. In view of benefiting from this exemption
regime, non-resident shareholders are required to provide a self-certification attesting for tax
purposes that they are non-residents in Italy, whenever an administered asset regime, or asset
management regime set forth in articles 6 and 7 of Legislative Decree no. 461/97, is applied
to them.

In the event the capital gains derive from the share of qualified shareholdings in res-
ident companies (whether traded or not), they combine to form part of the sellers total income
within the limits of 40% of their amount, to be subjected to taxation according to ordinary rules.
The above is, however, without prejudice to the application of international conventions against
double taxation stipulated by Italy, if more favorable, and thus, where provided and applicable,
the above capital gains are excluded from taxation in Italy.

Tax regime of dividends

Resident individuals

A Non qualified shareholdings

In general, a withholding is made at the rate of 12.50% for tax on dividends paid to
resident individuals in relation to shares held beyond the fiscal year that do not constitute qual-
ified shareholdings.

If the profits of the company derive from shares included in the central deposit sys-
tem managed by Monte Titoli, instead of the above withholding a substitute tax of income tax is
paid at the same rate and on the same conditions in accordance with art. 27-ter of Presidential
Decree 600/73. The substitute tax is applied by residents care of whom the shares are deposit-
ed adhering to the centralized deposit system managed by Monte Titoli, as well as, by means of
a tax representative appointed in Italy (in particular, banks, SIM, or brokers who reside in Italy, or
a stable organization in Italy of non-resident banks or investment companies), by non-residents
who adhere to the Monte Titoli system or to foreign centralized deposit systems adhering to the
Monte Titoli system (Euroclear, Clearstream).

If, however, the shareholders opt for the asset management regime, the dividends
relating to non qualified shareholdings entrusted in individual management to qualified interme-
diaries combine to form the total annual management result, which is subject to substitute tax
at the rate of 12.50%.

B Qualified shareholdings or which are held by individuals in a business regime

The 12.50% withholding, as well as the substitute tax of 12.50%, is not applicable in
the event that the resident individual declares, at the time of payment, that the dividends re-
ceived relate to business activity or to a qualified shareholding. In both cases, the dividends
combine to form the total taxable income of the recipient, limited to 40% of their amount, to be
subjected to taxation (IRE) in accordance with ordinary rules.

General partnerships, limited partnerships and equivalent parties

Dividends paid to general partnerships, limited partnerships and their equivalents

combine to make up the income of said parties, limited to 40% of their amount.

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Non-commercial resident entities
In general, dividends paid to non-commercial resident entities combine to form the
income of the entities limited to 40% of their amount. All in all, due to the effect of a provision
of a transitory nature (art. 4, paragraph 1, clause q) of Legislative Decree no. 344/2003), until the
non-commercial entity is not included among the parties subject to the future income tax (IRE),
the profits received, even during the fiscal year, by the same entities shall not combine to form
the taxable income to the extent of 95% of their amount; a withholding at the rate of 12.5% as
an advance payment is applied to the taxable amount of the profits.

Resident companies and commercial entities and non-residents with stable organizations in Italy
The dividends paid to resident taxpayers subject to IRES and to non-resident parties
having stable organizations in Italy to whom the shareholdings are effectively related, do not
combine to form the income of the receiver to the extent of 95% of their amount. The remaining
5% is subject to the ordinary tax regime for the purposes of IRES (at the rate of 33%).

Parties who are exempt from IRES

The dividends paid to residents who are exempt from IRES are subject to withhold-
ing tax at the rate of 27%.
With regard to profits deriving from shares included in the centralized deposit sys-
tem managed by Monte Titoli S.p.A., instead of the above withholding a substitute tax with re-
spect to income tax is applied with the same rate and the same conditions. The substitute tax
is applied by the residents care of whom the securities are deposited who adhere to the cen-
tralized management system managed by the Monte Titoli, as well as by means of a tax repre-
sentative appointed in Italy (in particular, banks, SIM, and brokers who are residents in Italy or
stable organizations of non-resident banks or investment companies), by non-residents who ad-
here to the Monte Titoli system or to foreign systems of centralized deposit that adhere to the
Monte Titoli system (Euroclear, Clearstream).

Pension funds in accordance with Legislative Decree no. 124 of 21 April 1993, and investment
companies (OICVM) in accordance with art. 8 from (1) through (4) of Legislative Decree no. 461
of 21 November 1997
The dividends received by the above parties are not subject to substitute tax and com-
bine in their entirety in forming the total annual management result matured, subject to substitute
tax of income tax at the rate of 11% in the case of pension funds and 12.50% in the case of
OICVM. The rate in discussion is reduced to 5% in the case of OICVM that invest at least 2/3 (two
thirds) of the managed assets in small and mid sized companies whose shares are traded in stock
exchanges of the European Union in accordance with art. 12 of Legislative Decree no. 269 of 30
September 2003, converted with modifications in Law no. 326 of 24 November 2003. In this re-
gard, however, it is noted that on 7 May 2004, the European Commission initiated a procedure in
accordance with art. 88, Paragraph 2, of the EC Treaty, aimed at ascertaining whether such tax in-
centives (i.e., the reduction of the tax rate from 12.5 to 5%) could be qualified or not as state aid
in accordance with art. 87, Paragraph 1, of the EC Treaty. Therefore, in the event that the European
Commission determines that such incentive constitutes state aid which is incompatible with the
sole market, the OICVM that have invested in mid and small sized companies and that might sub-
scribe to the Shares of the Company, might not be able to benefit from this reduced rate.

Real estate investment funds

The dividends received from real estate investment funds are not subject to substi-
tute tax nor any withholding.

200
Non-residents who do not have stable organizations in Italy

With regard to dividends paid to non-residents who do not have stable organizations
in Italy to whom the shareholdings are effectively related, a withholding tax is applied at the rate
of 27% or 12.50% for profits paid to shareholders of savings shares. Non-residents, other than
shareholders of savings shares, have the right to the reimbursement of the tax, until reaching
four ninths of the withholding, who can demonstrate that they paid taxes abroad on the same
profits by means of certification issued by the competent tax office of the foreign State.

The above is without prejudice, in alternative and always in the event that adequate
documentation is timely produced, to the eventual direct application of the above withholding to
the reduced rates provided by the applicable international convention against double taxation.
For such purpose the parties care of whom the shares are deposited, adhering to the central-
ized deposit system managed by the Monte Titoli S.p.A., must obtain:
a statement of the non-resident party who is the effective beneficiary of the profits,
indicating the identifying details of the party, the existence of all of the conditions to
which the application of the treaty regime is subordinate and the eventual elements
required to determine the amount of the tax rate that is applicable in accordance with
the treaty;
a certificate of the competent tax authority of the State where the effective benefi-
ciary of the profits resides, which demonstrates residency in said State in accor-
dance with the treaty.

In accordance with Directive no. 90/435/EEC of the Council of 23 July 1990 (the so-
called Mother-Daughter directive), in the event that the dividends are received by a company (i)
that is a tax resident in a Member State of the European Union, (ii) which has one of the forms
provided in the annex to said Directive no. 435/90/CEE, (iii) that is subject in the State of residence
to one of the taxes indicated in the annex to the above Directive and (iv) that holds, for at least
one year, a direct shareholding in the company of not less than 25 per cent of the share capital
(which on the basis of Directive 2003/123/EC is destined to be gradually reduced from 25% to
20%, and subsequently to 15% and further to 10%,starting from the first of January 2009), said
company has the right to request the reimbursement of the withholding to which it was subject-
ed. For such purpose, the company must produce (i) a certificate, issued by the competent tax
authorities of the foreign State, that attests that the non-resident company satisfies the above
requisites as well as (ii) the documentation attesting the existence of the above indicated condi-
tions. Further, upon the verification of the above conditions, the non-resident company can re-
quest that the withholding not be applied by providing the intermediary depository of the shares
the above indicated documentation. The above right of reimbursement or exemption is applied in
relation to non-resident companies that are directly or indirectly controlled by parties who do not
reside in States of the European Union, on the condition that they demonstrate that they were not
formed for the exclusive or principal purpose of benefiting from such regime.

Distribution of reserves in accordance with art. 47, paragraph 5, of TUIR

The information provided in this Paragraph summarizing the tax regime applicable to
the distribution by the company at a time other than the case of the reduction of excess cap-
ital, withdrawal, exclusion, redemption or liquidation of the capital reserves set forth in art 47,
paragraph 5, of TUIR, or, among others, the reserves or other funds created with the surcharge
on issues, with adjustment interest paid by subscribers, with unsecured payments made by
shareholders or paid in the capital account, and with balances of currency revaluation that are
tax exempt (hereinafter also capital reserves).

(a) Individuals who are tax residents:

Independently of shareholders resolution, the amounts received by individuals who

are tax residents in Italy as the distribution of capital reserves constitute profits for the recipients

201
within the limits and to the extent that there are fiscal year profits and profit reserves (with the
exception of the portion of them set aside in suspension of taxation), and which are to be paid
by the distributing company. The amounts qualified as profits are subject, depending on whether
or not they are non qualified shareholdings and/or are not related to the business, to the same
regime set forth above. The amounts are received as distribution of capital reserves, net, on the
basis of what has been indicated herein, of the amount that could eventually be qualified as prof-
its, reducing the amount of the cost that is fiscally recognized of the shareholding. Consequently,
at the time of a subsequent sale, the taxable capital gains is calculated on the difference be-
tween the sale price and the fiscally recognized cost of the shareholding, reduced by the
amounts received as the distribution of capital reserves (net of the amount that is eventually
qualified as profits). According to the interpretation adopted by the Tax Administration, the
amounts received as distributions of capital reserves constitute profits for the part that is in ex-
cess of the tax cost of the shareholding.

(b) General partnerships, limited partnerships or their equivalent in accordance with ar-
ticle 5 of TUIR, Partnerships, companies and entities set forth in art. 73, paragraph 1,
clauses a) and b) of TUIR, that are tax residents in Italy:
General partnerships, limited partnerships and their equivalent (with the exclusion of
simple companies) in accordance with article 5 of TUIR, as well as the companies and entities
set forth in art. 73, paragraph 1, clauses a) and b), of TUIR that are tax residents in Italy, and
amounts received as the distribution of capital reserves constitute profits within the limits and to
the extent that fiscal year profits and profit reserves exist (with the exception of the portion of
them that have been set aside in suspension of taxation). The amounts qualified as profits must
be subjected to the same regime described above. The amounts received as the distribution of
capital reserves, net of the amount that eventually can be qualified as profits, reduces the fis-
cally recognized cost of the shareholding by a corresponding amount. The amounts received as
distributions of capital reserves, for the part in excess of the fiscal cost of the shareholding, con-
stitute capital gains and as such are subject to the regime set forth in the previous Paragraph
Tax regime of capital gains.

(c) Italian pension funds and OICVM (investment funds, SICAV):

On the basis of a systematic interpretation of the norms, the amounts received by
OICVM (investment funds, SICAV) and Italian pension funds as the distribution of capital re-
serves, must combine to form the net management results matured with regard to the tax peri-
od in which the distribution was made, subject to a substitute tax of 12.50% (11% in the case
of pension funds). Even the value of the shareholdings for the purposes of the same tax period
must be included in the calculation of the annual management result.

(d) Parties that are not tax residents in Italy:

With regard to parties who are not tax residents in Italy (whether they are physical
persons or share capital companies), who lack a stable organization in Italy, the fiscal nature of
the amounts received as the distribution of capital reserves is the same as that indicated for
physical persons and for share capital companies that are tax residents in Italy. On the basis of
an initial interpretation of the new norms, the amounts qualified as profits are subject to the same
regime indicated above.
The same as what was indicated for physical persons and share capital companies
who are tax residents in Italy, the amounts received as a distribution of capital reserves, net of
the amount that can eventually be qualified as profits, reduce the fiscally recognized cost of the
shareholding by a corresponding amount.
With regard to the parties who are not tax residents in Italy who have shareholdings
by means of a stable organization in Italy, said amounts combine to form the income of the sta-

202
ble organization according to the regime provided by clause (b) for the companies and entities
set forth in art. 73, paragraph 1, clauses a) and b).

Taxes on stock exchange contracts

In accordance with art. 1 of Royal Decree no. 3278/1923, as supplemented and
modified by Legislative Decree no. 435/1997, contracts having shares as their object are taxed
on the stock exchange contracts at the following rates:
(a) 0.072 Euro for each 51.65 Euro or fraction of 51.65 of the price of the shares, for con-
tracts executed directly between the contracting parties or with the intervention of
parties other than those set forth in clause (c);
(b) 0.0258 Euro for every 51.65 Euro or fraction of 51.65 of the price of the shares, for
contracts executed among private parties and the parties set forth in clause (c) or
between private parties with the intervention of the above parties;
(c) 0.0062 Euro for every 51.65 Euro or fraction of 51.65 of the price of the shares, for con-
tracts between banks and parties qualified to perform professional investment services
for the public in accordance with Legislative Decree no. 58/98 or stockbrokers.
Contracts having as their object shares, quotas and shareholdings of companies of
any kind concluded on stock exchanges are exempt from the tax on stock exchange contracts.
Those contracts are also exempt from the tax on stock exchange contracts whose object are
securities, quotas and shareholdings in any kind of company listed on a stock exchange, and
concluded outside of it, stipulated between:
(i) Banks, parties qualified to perform professional investment services with regard to
the public in accordance with the Consolidated Act or stockbrokers;
(ii) Brokers set forth in clause (i) on the one hand and non-residents on the other;
(iii) The parties, including non-residents, set forth in clause (i) on the one hand and in-
vestment funds on the other.
Further, contracts relating to public offers aimed at a stock exchange listing or hav-
ing as their object financial instruments already listed on stock exchanges are also exempt from
the tax on stick exchange contracts.
Those contracts regarding transfers of shares performed between parties, compa-
nies or entities among whom there is a controlling relationship in accordance with art. 2359,
paragraph 1, clauses 1) and 2), of the Civil Code, or between companies controlled, directly or
indirectly, by the same party in accordance with the above provisions, are also exempt from the
tax on stock exchange contracts.

Estate and gift tax

Estate and gift tax was abolished by means of art. 13, paragraph 1, of Law no.
383/2001, with effect starting from the successions that were opened and the gifts made sub-
sequent to 25 October 2001.
The transfer of shares mortis causa are not subject to taxation.
The transfers of shares due to gifts or other donations among living parties are not
subject to taxation if performed on behalf of a spouse, relatives in a direct lines and other rela-
tives until the fourth degree.
The transfers of shares due to gifts or other donations among living parties, made to
parties other than those listed above, are also not subject to taxation if the value of the good
gifted to the individual beneficiary does not exceed the amount of 180,759.91 Euro. Otherwise,
the excess amount is subject to transfer tax that is ordinarily applicable to corresponding oper-
ations for consideration.

203
 Law no. 383/2001 provides for the application of a specific tax evasion norm whenev-
er the beneficiary of a donation having as its object specific personal property, among which
shares, transfers the same within five years subsequent to the donation. In particular, the benefi-
ciary of a donation or other gift among living parties performed within the Italian territory having as
its object shares, in the event the shares are transferred within the following five years, will have to
pay substitute tax on the capital gain, which is applied according to the above discussed provi-
sions, as if the donation had not been made (thus assuming the tax value of the shares belonging
to the donor, with the right to deduct the taxes eventually paid at the time of the donation).

Tax treatment of the Employee discount

Due to the lack of correspondence between tax law in accordance with art. 51, par.
2, clause g) of TUIR (which regulates the income of employees) and the discount given to
Employees in the context of the Public Offer (see Section IV, Chapter 5, Paragraph 5.2.4), it is
noted that said facilitation granted to Employees constitutes a fringe benefit to all effects, and is
therefore taxed as the Employees income, for which the Employee is responsible at the time of
the delivery of the Shares.

204
5. CONDITIONS OF THE OFFER

5.1. CONDITIONS AND AMOUNT OF THE OFFER, FORECAST CALENDAR AND

MANNER OF ADHERING TO THE OFFER

5.1.1. Conditions to which the offer is subordinated

The Global Offer is not subordinate to any condition, with the exception of the provi-
sion regarding the initiation of trading on Borsa Italiana (see Section IV, Chapter 6, Paragraph 6.1.).

5.1.2. Total amount of the offer

The operation consists of an offer for the subscription and sale (hereinafter, the
Global Offer) to 6,300,000 Shares of Eurofly of which:
(A) 5,900,000 Shares originating from an Increase of the Companys Share Capital, with
the exclusion of option rights in accordance with art. 2441, paragraph 5, of the Civil
Code, approved by the ordinary shareholders meeting of 12 September 2005 (here-
inafter, the Increase of Share Capital) and
(B) the sale of 400,000 Shares by Spinnaker Luxembourg (hereinafter Selling
Shareholder and, jointly with the Company, the Proponents).
The Global Offer, coordinated and managed by Banca Profilo and Centrobanca
(hereinafter the Combined Global Coordinators) consists of:
(A) a Public Offer for a minimum of 1,600,000 Shares, corresponding to approximately
25.4% of the number of Shares object of the Global Offer (hereinafter, the Public
Offer), aimed at an indistinct public in Italy. Professional Investors (as defined in
Paragraph 5.2.1 below of the present Chapter) and foreign Institutional Investors
cannot adhere to the Public Offer; they can exclusively adhere to the Institutional
Placement set forth in point (B) below;
(B) at the same time, an Institutional Placement of a maximum of 4,100,000 Shares, cor-
responding to approximately 65.1% of the number of Shares that are the object of
the Global Offer (hereinafter, the Institutional Placement), aimed at Professional
Investors in Italy and foreign Institutional Investors (hereinafter, together with the
Professional Investors in Italy, the Institutional Investors), with the exception of the
United States of America, Australia, Canada and Japan;
(C) a Private Placement for a maximum of 600,000 Shares, corresponding to approxi-
mately 9.5% of the number of Shares that are the object of the Global Offer (here-
inafter, the Private Placement), aimed at a maximum number of 25 investors who
would purchase the Shares for a total counter value equal to or in excess of 250,000
Euro. The above investors will be selected at the Companys discretion in agreement
with the Joint Global Coordinators from among the persons who have held, hold or
who could have in the future commercial relations with the Company and/or from
among those parties who do not fall within the definition of Institutional Investors
and/or from among those parties who even though they fall within this definition have
manifested their availability to assume the Lock Up undertakings set forth in
Paragraph 5.2.4. clause B below. The results of the Private Placement and the names
of the relative recipients shall be made known in the notice of the results of the
Global Offer, which will be published on the Companys web site (www.eurofly.it) and
the Placement Managers web site (www.centrobanca.it) within two business days
from the termination of the Offer Period. The Company reserves the right to also pub-
lish the above notice in at least one daily newspaper distributed on a national level.
The Public Offer includes:
(A) an offer to an indistinct public in Italy. With regard to the Shares that will actually be
allotted to the public, a share of not more than 30% is destined to satisfy adhesions

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 coming from the indistinct public for quantities amounting to the Increased Minimum
Lot or its multiples (as defined in Paragraph 5.1.5 of the present Chapter);
(B) an offer reserved to Employees (as defined in Paragraph 5.2.1 below the present
Chapter) of a maximum of 300,000 Shares, corresponding to approximately 18.75%
of the number of Shares that are the object of the Public Offer.
The Proponents reserve the right, in agreement with the Joint Global Coordinators,
to not entirely place the Shares that are the object of the Global Offer. Said factor could lead to
a reduction of the number of Shares placed in the context of the Global Offer. In the case of the
lack of an entire Placement, they will proceed by first reducing all of the number of Shares of-
fered for sale by Spinnaker Luxembourg. Notice will be given in the supplemental notice relative
to the results of the Global Offer.

5.1.3. Period of validity and manner of adhering to the Public Offer

The Public Offer will initiate at 9:00 am on 5 December 2005 and will end at 4:00 pm
of 14 December 2005 (the Offer Period).
The Joint Global Coordinators, upon hearing the Company and the Selling
Shareholder, reserve the right to extend the Offer Period, giving timely notice to CONSOB and
to the public by means of a notice that will be published on the Companys Internet site
(www.eurofly.it) as well as on the Internet site of the Placement Manager (www.centrobanca.it),
within the last day of the Offer Period. The Company reserves the right to also publish the above
notice in at least one daily newspaper distributed on a national level.
The requests to adhere to the Public Offer must be made by means of signing the
special request for adherence duly completed and signed by the requesting party or by its spe-
cial representative.
The request forms are not annexed to the Prospectus, but will be available with the
Investment Dealers (as defined below in Paragraph 5.4.1 of the present Chapter), on the
Companys Internet site (www.eurofly.it), as well as on the Internet site of the Placement
Manager (www.centrobanca.it). Each Placer, if requested, has the obligation of providing a gra-
tuitous copy of the Prospectus to the requesting party prior to the signing of the request form.
The requesting party who does not have any relationship as a client with the
Investment Dealer where the request is presented can ask to open an account in which can be
paid an amount that is at least equal to the counter value of the Shares requested, calculated on
the basis of the Maximum Price (as defined in Paragraph 5.3.1 below of the present Chapter)
and, eventually, a securities deposit account. In the case of the lack or partial allotment of the
Shares, the total of the amounts paid in temporary deposit, or the eventual difference with re-
spect to the countervalue of the allotted Shares, will be paid to the requesting party within the
Payment Date set forth in Paragraph 5.1.7 below of the present Chapter.
Requests received by the Investment Dealers prior to the beginning of the Offer
Period and thus between 9:00 am on 5 December 2005 and after 4:00 pm on 14 December 2005
cannot be accepted and cannot be considered valid. Centrobanca, as the Placement Manager
for the Public Offer, will verify, within two months from the date set for the publication of the no-
tice of the results of the Global Offer, the regularity of the Placement operations and the even-
tual distribution and undertakes to notify CONSOB of the existence of said verification, in con-
formity with the provision of art. 13, paragraph 8, of CONSOB Regulation 11971. Centrobanca
further undertakes to publish, within two business days from the termination of the Offer Period,
the results of the Public Offer and the summary results of the Global Offer, in conformity with the
provision of art. 13, paragraph 7, of CONSOB Regulation 11971.
The Investment Dealers who, within their respective spheres of competence, intend
to offer the Shares outside of their offices - in accordance with art. 30 of the Consolidated Act
shall proceed with the Placement of the Shares by means of gathering requests and utilizing fi-
nancial promoters in accordance with art. 31 of the Consolidated Act.

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Indistinct Public
The requests to adhere to the Public Offer by the indistinct public must be present-
ed to the Investment Dealers for quantities amounting to the Minimum Lot (as defined in
Paragraph 5.1.5 of this Chapter) or its multiples or for quantities amounting to the Increased
Minimum Lot (as defined in Paragraph 5.1.5 of the Chapter) or its multiples, and made by means
of signing the request form, duly filled out and signed by the requesting party or by his special
representative.
The request for quantities amounting to the Minimum Lot or its multiples does not
exclude requests for quantities amounting to Increased Minimum Lot or their multiples as well
as requests for its multiples, and requests for quantities that are Increased Minimum Lots or their
multiples do not exclude requests for quantities that amount to Minimum Lots or their multiples,
including by means of the same request.
The clients of online Investment Dealers, who offer electronic trading services, can
adhere to the Public Offer by means of the use of electronic instruments via Internet, in substi-
tution of the traditional paper method, but in a manner that is equivalent to the same, in accor-
dance with art. 13, paragraph 4, of CONSOB Regulation 11971.
Such request can be made by means of access, through the use of an individual/di
rapporto password to an area reserved for placements, located with the area reserved to clients
of the online Investment Dealers if, again using telematic means and upon the use of an individ-
ual/di rapporto password, the requesting parties can provide all of the personal and financial
data required for the request in paper format without any differentiation. Once the insertion of
such data has been confirmed, a summary of the same will be visualized on the clients monitor,
who will have to again confirm their accuracy. Only at the time of this second confirmation will
such data assume the value of a request for adherence.
It is specified, moreover, that such manner of adhesion does not modify nor alter in
any manner the relationship between the online Investment Dealers and Centrobanca, as the
Placement Manager, with respect to the relationships between Centrobanca and the other
Investment Dealers. The online Investment Dealers will guarantee Centrobanca that their infor-
matics procedures are adequate in view of the telematic requests of their clients. Further, the
same Investment Dealers will undertake to make the notices provided by the provisions applic-
able to brokers who operate online.
The Investment Dealers who utilize the online Placement system shall make the
Prospectus available on their web Internet site so that it can be consulted and printed.
Interested parties can also adhere to the Public Offer by means of parties authorized
to perform individual asset management of third party investment portfolios, in accordance with
the Consolidated Act and relative implementing provisions, as long as they sign the special form
in the name and on behalf of the client investor, or by means of parties authorized, in accordance
with said Consolidated Act, and the relative implementing provisions, to receive and transmit the
orders, in accordance with the conditions indicated in CONSOB Regulation 11522.
The fiduciary companies authorized to perform asset management of investment
portfolios by means of a fiduciary registration can exclusively adhere to the Public Offer, on be-
half of their clients, by identifying their client on the request form, as the requesting party, by just
its fiscal code (therefore omitting other identification details), and indicating the fiduciary com-
pany itself as the registered holder of the allotted Shares (with an indication of the fiduciary com-
panys name, registered office and fiscal code).

Employees

The requests made by Employees for the portion of the Public Offer reserved to them
shall be made in the same manner indicated above. Each Employee can present a sole request
to the Investment Dealers that will apply to the tranches reserved to Employees for quantities

207
amounting to the Minimum Lot or its multiples. In the case of the presentation of more than one
request by the same Employee, he will participate in the allotment of the Shares only with the
first request presented in order of time.
Employees can also adhere to the portion of the Public Offer reserved to the indis-
tinct public on the same conditions provided for the same.

5.1.4. Revocation or suspension of the Global Offer

In the event that between the Date of the Prospectus and the day prior to the initia-
tion of the Public Offer extraordinary circumstances might occur, as provided in international
practice, such as among others changes of the political, financial, economic, legal, currency, na-
tional or international market situation, or significant events that negatively effect or can effect
the financial, asset, income or managerial situation or the Companys prospects, or in any event
events that, in the reasonable judgment of the Joint Global Coordinators, could prejudice the
positive outcome of the Global Offer or render it unadvisable, or in the event that the Placement
and guarantee contract relative to the Public Offer set forth in Paragraph 5.4.3 below is not stip-
ulated, the Joint Global Coordinators can decide not to initiate the Global Offer and the same
must be deemed to have been annulled. Such decision will be timely notified to the public and
to CONSOB within the date of the initiation o the Public Offer, by means of a notice to be pub-
lished on the Companys Internet site (www.eurofly.it) as well as on the Internet site of the
Placement Manager (www.centrobanca.it). The Company reserves the right to also publish the
above notice in at least one daily newspaper distributed on a national level.
The Proponents and the Joint Global Coordinators, in agreement among themselves,
reserve the right to withdraw the Global Offer in all or in part, upon notice to CONSOB and ad-
vising the public by means of a notice published on the Companys Internet site (www.eurofly.it),
as well as on the Internet site of the Placement Manager (www.centrobanca.it), within two busi-
ness days after the termination of the Offer Period. The Company reserves the right to also pub-
lish the above notice in at least one daily newspaper distributed on a national level.
The Public Offer can also be subject to withdrawal, upon notice to CONSOB and ad-
vising the public by means of a notice that will be published on the Companys Internet site
(www.eurofly.it), as well as on the Internet site of the Placement Manager (www.centrobanca.it)(i),
within two business days of the termination of the Offer Period in the event that the Institutional
Placement does not take place due to the lack of stipulation of the Placement and guarantee
contract relative to the same (see Paragraph 5.4.3 of the present Chapter); or (ii) within the
Payment Date (as defined in Paragraph 5.1.7 below of the present Chapter) and, in any event,
prior to the initiation of trading, in the event that the guarantee undertaking relative to the
Institutional Placement is breached. The Company reserves the right to also publish the above
notice in at least one daily newspaper distributed on a national level.
The Public Offer will in any event be withdrawn in the event that Borsa Italiana does
not decide to initiate trading or revokes the measure of admission to the listing in accordance
with art. 2.4.3 of the Stock Exchange Regulations within the Payment Date, upon communica-
tion to CONSOB and subsequently to the public by means of a notice that will be published on
the Companys Internet site (www.eurofly.it) as well as on the Internet site of the Placement
Manager (www.centrobanca.it), within the day subsequent to the receipt of the relative notice
from Borsa Italiana. The Company reserves the right to also publish the above notice in at least
one daily newspaper distributed on a national level.
The Global Offer cannot be revoked subsequent to the initiation of trading.

5.1.5. Quantities that can be acquired in the context of the Public Offer
The requests to adhere to the Public Offer must be presented exclusively with the
Investment Dealers for quantities amounting to 450 Shares (hereinafter, the Minimum Lot) or
multiples of the Minimum Lot (hereinafter, the Minimum Lots), except for the distribution crite-

208
ria set forth in Paragraph 5.2.3, clause A1 below or for quantities amounting to 10 Minimum Lots
(hereinafter, the Increased Minimum Lot), or its multiples (hereinafter, the Increased Minimum
Lots), with the exception of the distribution criteria set forth in Paragraph 5.2.3, clause A1
below. The requests to adhere to the Public Offer reserved to Employees (as defined in
Paragraph 5.2.1 below of the present Chapter) must be presented exclusively with the
Investment Dealers for quantities amounting to the Minimum Lot or its multiples, without preju-
dice to the distribution criteria set forth in Paragraph 5.2.3, clause B below.

5.1.6. Possibility to revoke the requests to adhere to the Public Offer

The requests to adhere to the Public Offer are irrevocable, except for those cases al-
lowed by law.

5.1.7. Manner and terms for the payment and delivery of the Shares

The payment of the Offer Price (as defined in Paragraph 5.3.1 below) for the allotted
Shares must be made on 20 December 2005 (hereinafter, the Payment Date) care of the
Investment Dealer that has received the adhesion, without the addition of commissions or ex-
penses to be borne by the requesting party.

Contemporaneously with the payment, the Shares allotted in the context of the Public
Offer will be made available in a dematerialized form to the entitled parties by means of an ac-
counting record with Monte Titoli on deposit accounts held with it by the Investment Dealers.

5.1.8. Publication of the results of the offer

The results of the Global Offer will be made available by Centrobanca, in accordance
with applicable outstanding regulations, by means of a notice that will be published on the
Companys Internet site (www.eurofly.it) as well as on the Placement Managers Internet site
(www.centrobanca.it) within two business days from the termination of the Offer Period. A copy
of such notice will be transmitted contemporaneously to CONSOB and to Borsa Italiana. The
Company reserves the right to also publish the above notice in at least one daily newspaper dis-
tributed on a national level.

Within two months from the publication of the above notice, Centrobanca will notify
CONSOB of the outcome of the verifications of the regularity of the Placement operations and
the eventual distribution, as well as the summary results of the Global Offer in accordance with
article 13, paragraph 8, of CONSOB Regulation 11971.

5.2. DISTRIBUTION AND ALLOTMENT PLAN

5.2.1. Recipients of the offer

The Public Offer is subdivided into two portions:

one destined exclusively to the indistinct public in Italy;
one reserved to Employees who, as of the date of 31 October 2005 were employed
by the Company and, as of the same date, were registered on the Companys pay-
roll records and books, in accordance with outstanding Italian law (the Employees).

The qualified operators set forth in art. 31, paragraph 2, of CONSOB Regulation
11522 cannot adhere to the Public Offer (with the exception for the individuals set forth in the
above mentioned art. 31, paragraph 2, for the savings management companies authorized to
perform management service on an individual basis of investment portfolios for third parties, for
the parties authorized to provide the service of the receipt and transmission of orders on the

209
conditions indicated in CONSOB Regulation 11522 and for the fiduciary companies who perform
portfolio management and investment services, including by means of fiduciary registration, in
accordance with art. 60, paragraph 4, of Legislative Decree no. 415 of 23 July 1996), (hereinafter
Professional Investors), who can instead adhere to the Institutional Placement.

In any event persons who, at the time of adhesion, even though they are residents in
Italy, can be considered, in accordance with US Securities Laws and other local US norms or
norms of other countries that are applicable, residents of the Unites States of America or in any
other Country in which the offer of financial instruments is not allowed in the absence of autho-
rizations by the competent authorities (hereinafter, the Other Countries), cannot adhere to the
Public Offer. No financial instrument can be offered or negotiated in the United States of America
or in the Other Countries in the absence of a specific authorization in conformity with the provi-
sions of law applicable in each of said Countries, or derogations with respect to the same pro-
visions. The Shares were not nor will they be registered in accordance with the Securities Act,
or in accordance with the corresponding laws in effect in the Other Countries. They therefore
cannot be offered, or in any event delivered, directly or indirectly, in the United States of America
or in the Other Countries.

The Shares that are the object of the Institutional Placement will be placed with
Professional Investors and Institutional Investors abroad, with the exception of the United States
of America, Canada and Japan, by means of the Institutional Placement Consortium.

For the purposes of the Institutional Placement it is possible for the Prospectus to be
translated into English.

The Shares that are the object of the Private Placement will be reserved to investors
chosen at the discretion of the Company in agreement with the Joint Global Coordinators on the
basis of the criteria described in Paragraph 5.1.2. clause (C) above.

5.2.2. Adherence to the Global Offer by the principal Shareholders and by members
of the Board of Directors and the Board of Internal Auditors

As far as the Company is aware, none of the principal Shareholders, or members of the
Companys administrative, management or supervisory organs intend to adhere to the Public Offer.
The Company is unaware of the existence of any party intentioned to adhere to the Offer for an
amount that is equal to or greater than 5% of the Shares that are the object of the Global Offer.

5.2.3. Information to be communicated prior to the allotment

A minimum quota of 1,600,000 Shares, amounting to approximately 25.4% of the

total amount of the Shares that are the object of the Global Offer, will be reserved to the adher-
ences to the Public Offer. The remaining part of the Shares, amounting to a maximum of
4,700,000 Shares, will be destined, with regard to a maximum of 600,000 Shares, to the Private
Placement, and with regard to a maximum of 4,100,000 Shares, will be distributed by the Joint
Global Coordinators between the Institutional Placement Consortium and the Public Offer
Consortium, bearing in mind the quality and quantity of the adherences received by the Public
Offer Consortium.

In the event that the adherences received for the Public Offer are less than the min-
imum number of Shares destined to the same, the Joint Global Coordinators can have the re-
maining Share converge in the portion that has been allocated to the Institutional Placement, and
vice versa.

In the event that the adherences received from Employees are less than the number
of Shares reserved to them, the remaining Shares can converge in the portion of the Public Offer
that has been allocated to the indistinct public.

210
 In the event that the adherences received in the context of the Private Placement are
less than the number of Shares reserved to it, the remaining Shares can converge in the portion
of the Global Offer allocated to the Institutional Placement and/or the Public Offer.

Centrobanca, as the Placement Manager, will directly perform the distribution in ac-
cordance with art. 13, paragraph 6, of CONSOB Regulation 11971, applying the distribution crite-
ria indicated below, in order to ensure parity of treatment among those adhering to the Public Offer.

A. Adherences coming from the indistinct public

A.1 Adherences for quantities amounting to a Minimum Lot or its multiples

In the event that the adherences received by the Investment Dealers from the indis-
tinct public for quantities amounting to the Minimum Lot or its multiples exceed the portion re-
served to them in the context of the Public Offer, each requesting party will be allotted a quan-
tity of Shares amounting to the Minimum Lot.

In the event that subsequent to said allotment there are residual Shares, they will be
distributed according to the following criteria:
(a) the Placement Manager will proceed with the distribution to the individual sub-
scribers of the residual Shares in a proportional amount with respect to the number
of Shares requested by each of them and that is unsatisfied, as long as for quanti-
ties amounting to the Minimum Lot or its multiples. Said proportional distribution will
be rounded off to the lowest Minimum Lot;
(b) in the event that, due to the effect of the rounding off made subsequent to the dis-
tribution set forth in clause (a) above further Minimum Lots remain, they will be dis-
tributed by the Placement Manager to the requesting parties who have participated
in the proportional distribution set forth in clause (a), by means of drawing lots. The
lots will be drawn in a manner that allows the verification of the procedures utilized
and their compliance with criteria of fairness and parity of treatment.

In the event that the quantity offered is insufficient for the allotment of a Minimum Lot
to each requesting party, the Minimum Lots will be attributed by the Placement Manager by
means of drawing lots, to be done in a manner that allows the verification of the procedures uti-
lized and their compliance with criteria of fairness and parity of treatment.

A.2 Adherences for quantities amounting to an Increased Minimum Lot or its multiples

In the event the acceptances received by the Investment Dealers from the indistinct
public for quantities amounting to the Increased Minimum Lot or its multiples exceed the quota
allocated to them in the context of the Public Offer, each requesting party will be allotted a quan-
tity of Shares amounting to an Increased Minimum Lot.

In the event that subsequent to such allotment there are residual Shares, these will
be distributed according to the following criteria:
(a) the Placement Manager will proceed with the allotment to the individual subscribers
of the residual Shares in a manner that is proportional to the number of Shares re-
quested by each of them and that remains unsatisfied. Such proportional allotment
will be rounded off to the lowest Increased Minimum Lot;
(b) in the event, due to the effect of the rounding off performed subsequent to the dis-
tribution set forth in clause (a) above there are further Increased Minimum Lots, they
will be distributed by the Placement Manager to the requesting parties who partici-
pated in the proportional distribution set forth in clause (a) above, by means of draw-
ing lots. The lots will be drawn in a way that permits verification of the procedures
utilized and their compliance with criteria of fairness and parity of treatment.

211
 In the event the quantity offered is insufficient for the allotment of an Increased
Minimum Lot to each requesting party, the Increased Minimum Lots will be distributed by the
Placement Manager by means of drawing lots, to be performed in a way that permits verification
of the procedures utilized and their compliance with criteria of fairness and parity of treatment.

B. Adherences from Employees

Each Employee is guaranteed the allotment of a quantity of Shares amounting to a
Minimum Lot.
In the event that upon the allotment of the Minimum Lots there are residual Shares,
they will be allotted, in the context of the offer reserved to Employees, in accordance with the
following criteria:
(a) the Placement Manager, having deducted the Minimum Lots already allotted, will as-
sign them to the individual subscribers of the Shares, in a proportional amount with
regard to the number of unsatisfied lots requested by each requesting party. Said
proportional allotment will be rounded off to the lowest Minimum Lot;
(b) in the event that further Minimum Lots remain, they will be allotted by the Placement
Manager to the requesting parties who have participated in the proportional distrib-
ution set forth in clause (a) above, by means of drawing lots. The drawing lots will be
done in a manner that permits verification of the procedures utilized and their com-
pliance with criteria of fairness and parity of treatment.

5.2.4. Purchase incentives in the context of the Public Offer and the Private
Placement

A. Incentives for Employees in the context of the Public Offer

The Company will apply a discount of 15% for the purchase of Shares to Employees
who adhere to the portion reserved to them. With reference to the tax treatment of the discount
granted to Employees, reference is made to what is discussed in the paragraph regarding tax
rules (see Section IV, Chapter 4, Paragraph 4.11, sub Tax treatment of the Employee discount.
Further, the Company shall give Employees who adhere to the quota reserved to
them 1 guaranteed Minimum Lot. The Employees can purchase the Shares, in the context of the
quota reserved to them, also by means of an advance on severance pay (hereinafter, TFR), net
of taxes, available to the employer as of the date of 31 October 2005 and not yet paid as of the
Date of the Prospectus (hereinafter, Net Available TFR), until 70% of the countervalue of the
Net Available TFR.

B. Incentives in the context of the Private Placement

The Company will grant a discount of 10% for the purchase of the Shares reserved
to the Private Placement. Said Shares will be allotted on the condition that the individual sub-
scribers to the Private Placement have signed a Lock Up undertaking with regard to the Joint
Global Coordinators having a duration of 12 months starting from the Payment Date. Said
Shares will remain deposited for the entire period in a restricted management account at Banca
Profilo or at another institute adhering to the Monte Titoli.

5.2.5. Multiple subscriptions

Multiple adherences to the Public Offer for the indistinct public and Employees is al-
lowed by means of the presentation of more than one request form care of more than one
Investment Dealer. The presentation of more than one request form care of the same Investment
Dealer is instead not allowed.

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5.2.6. Procedure for notice to subscribers of the allotted amount
Each Investment Dealer will notify the requesting parties of the quantities allotted to
them immediately after the notice of the distribution by Centrobanca and in any event within the
Payment Date set forth in Paragraph 5.1.7 above.

5.2.7. Over Allotment and Greenshoe

The Joint Global Coordinators, also in the name and on behalf of the members of the
Institutional Placement Consortium, can request on loan from the Selling Shareholder a maxi-
mum of 900,000 Shares of the Company, amounting to approximately 14.3% of the Shares of-
fered as part of the Global Offer, in view of an eventual over allotment (Over Allotment) in the
context of the Institutional Placement and for the stabilization activity. In the event of an Over
Allotment, the Joint Global Coordinators can exercise said option in all or in part and place the
Shares with Institutional Investors at the Offer Price. Said loan will be regulated, within 30 days
from the initiation of trading, by means of (i) Shares acquired with the fiscal year of the
Greenshoe, as defined hereinafter, and/or (ii) the restitution of Shares eventually acquired in the
market in the context of the stabilization activity set forth in Paragraph 6.5.
The Greenshoe consists in the consale by the Company to the Joint Global
Coordinators, also in the name and on behalf of the Institutional Placement Consortium, of an
option for the subscription at the Offer Price to a maximum of 900,000 Shares, amounting to
14.3% of the Shares offered in the context of the Global Offer, deriving from the Increase of
Share Capital. Said option can be exercised, in all or in part, within 30 days subsequent to the
date of the initiation of trading on the MTA.

5.3. DETERMINATION OF THE PRICE

5.3.1. Method of determining the Offer Price

The determination of the Offer Price will take place according to the so-called open
price mechanism.
The Company, in agreement with the Joint Global Coordinators:
(A) will determine and communicate, within two days prior to the Offer Period, an in-
dicative valorization interval of the Companys economic capital (hereinafter, the
Indicative Valorization Interval), for the exclusive purpose of allowing the collection
of manifestations of interest from Institutional Investors in the context of the
Institutional Placement. The above Indicative Valorization Interval will be calculated
considering the results achieved by the Company and the prospects for develop-
ment during the fiscal year in course and during subsequent fiscal years, bearing in
mind the market conditions and applying the valuation methodologies most com-
monly recognized by scholarship and professional practice at an international level,
in the case at hand principally the financial method of valuating Euroflys cash flows
(Discounted Cash Flow), and bearing in mind the results of the pre-marketing activi-
ty performed with regard to Institutional Investors.
The Indicative Valorization Interval will be made known by means of a special sup-
plementary notice published on the Companys internet site (www.eurofly.it). as well
as on the Placement Managers Internet site (www.centrobanca.it), together with the
capitalization and financial indicators regarding the Company calculated on the basis
of minimum and maximum values of the above Indicative Valorization Interval, and
will be communicated contemporaneously to CONSOB. The Company reserves the
right to also publish the above notice in at least one daily newspaper distributed on
a national level.
The Indicative Valorization Interval will not be binding in any way for the purposes of
the determination of the Maximum Price and the Offer Price (as defined below), which
therefore can also be calculated beyond the above Indicative Valorization Interval;

213
 (B) will determine and communicate, within the day prior to the initiation of the Public
Offer, the Maximum Placement Price for the Shares (hereinafter, the Maximum
Price). The Maximum Price will be determined bearing in mind, among others, the
criteria utilized for the purposes of the calculation of the Indicative Valorization
Interval set forth in clause (A) above, as well as the trend of the national and interna-
tional financial markets in proximity to the Placement.
The Maximum Price and the relative countervalue of the Minimum Lot and the
Increased Minimum Lot will be communicated to the public by means of a special
supplemental notice on the Companys Internet site (www.eurofly.it), as well as on
the Placement Managers Internet site (www.centrobanca.it), and will be communi-
cated contemporaneously to CONSOB. The Company reserves the right to also pub-
lish the above notice in at least one daily newspaper distributed on a national level.
The multipliers of the price of the Company, the data relative to the Companys cap-
italization, as well as the estimate of the proceeds from the Increase of Share Capital,
determined on the basis of the Maximum Price, will be communicated to the public
by means of the notice in which the Maximum Price will be published;
(C) will determine and will communicate, within two business days from the termination of
the Offer Period, the definitive unit price of the Shares (hereinafter, the Offer Price).
The Offer Price, the same for the Public Offer and the Institutional Placement, will be
determined considering, among others, the results achieved by the Company and the prospects
for its development, the domestic and international securities market conditions, the quantity
and quality of the manifestations of interest obtained in the Institutional Placement, as well as
the quantity of the requests received in the context of the Public Offer. The Offer Price will be the
same for the Public Offer and the Institutional Placement, except but for the price for Employees,
which will correspond to a 15% discount on the Offer Price. The price for the subscribers to the
Private Placement will correspond to a 10% discount on the Offer Price (see Paragraph 5.2.4).
No additional cost or expense is provided to be borne by the patties adhering to the
Public Offer.

5.3.2. Procedure for the communication of the Offer Price

The Offer Price will be made known to the public, together with the Companys cap-
italization and the counter value of the Minimum Lot and the Increased Minimum Lot calculated
on the basis of the Offer Price, by means of a special supplemental notice published on the
Companys Internet site (www.eurofly.it) as well as on the Placement Managers Internet site
(www.centrobanca.it) within two business days from the termination of the Offer Period, and will
be communicated to CONSOB at the same time. The Company reserves the right to also pub-
lish the above notice in at least one daily newspaper distributed on a national level.

5.3.3. Recent purchases made by members of the Board of Directors regarding the fi-
nancial instruments that are the object of the Global Offer
On 15 September 2005, the Companys Managing Director, Mr. Angioletti, purchased
from Spinnaker Luxembourg, by means of the Company Singins Consultadoria Economica e
Marketing Lda, 368,312 Shares of the Company for a total price of 775,000 Euro, and therefore
at the unit purchase price of approximately 2.10 Euro. The consideration for the above transfer
was determined upon the outcome of negotiations between the parties and was not the object
of third party review.
In the context of the agreement stipulated between Spinnaker Luxembourg, Singins
Consultadoria Economica e Marketing Lda and Mr. Angioletti, the parties reciprocally acknowl-
edged that the above price was determined on the basis of the strategic role that the Managing
Director performs in the context of the operation aimed at listing the Companys Shares on the
MTA, and the fact that Mr. Angioletti, by means of the stipulation of the agreement, assumed the
stability and lock up undertakings contemplated therein (see Section III, Chapter 14, Paragraph
14.2).

214
 As of the Date of the Prospectus, it was not possible to forecast whether the Offer Price
could substantially differ from the amount indicated above; the comparison between the price per
share of the operation described above and the Offer Price can be made subsequent to the pub-
lication of the Indicative Valorization Interval and, in any event, subsequent to the publication of the
supplemental notices respectively concerning the Maximum Price and the Offer Price.
In view of completeness, it is also noted that Mr. Angioletti is among the beneficia-
ries of the increase discussed in Section III, Chapter 17, Paragraph 17.2.

5.4. PLACEMENT AND SUBSCRIPTION

5.4.1. The Global Offer Coordinators

The Global Offer will be coordinated and managed by Banca Profilo, having its reg-
istered office in Corso Italia, 49, 20122 Milan and by Centrobanca, having its legal office in Corso
Europa, 16, 20122 Milan, as Joint Global Coordinators.
The Public Offer will take place in Italy and will be performed by means of a
Placement and Guarantee Consortium (hereinafter, the Public Offer Consortium), managed
and coordinated by Centrobanca, which will act as the Placement Manager for the Public Offer
(hereinafter, the Placement Manager), in which the banks and brokers (hereinafter, the
Investment Dealers) listed in Paragraph 5.4.3 below will participate. The Institutional
Placement will be promoted by the Institutional Placement Consortium managed and coordi-
nated by Banca Profilo and Centrobanca, and to which Banca Generali S.p.A. and Collins
Stewart Ltd. will also belong.
The Private Placement will be promoted by the Joint Global Coordinators.

5.4.2. Organisms entrusted with the securities service

The securities service relative to the Shares will be performed by Spafid S.p.A. on
behalf of the Issuer.

5.4.3. Placement and guarantee. Commissions related to the Public Offer

The Shares that are the object of the Public Offer will be placed in Italy by means of
the Public Offer Consortium, which will also guarantee the entire Placement of the minimum
quantity of Shares offered in the context of the Public Offer.
The Placement and guarantee contract relative to the Public Offer (which will be stip-
ulated prior to the initiation of the Public Offer between the Company, the Selling Shareholder
and the Public Offer Consortium) will provide, among others, for the case in which the Public
Offer Consortium does not have to comply with the guarantee obligations, or that said obliga-
tions can be revoked upon the occurrence of some extraordinary events, as provided in inter-
national practice, such as, among others: (i) changes (or developments that lead to potential fu-
ture changes) in the political, financial, economic, currency or national or international market
situation (including due to normative or regulatory changes), that would prejudice or render un-
advisable, in the judgment of the Joint Global Coordinators, the initiation or the positive outcome
of the Global Offer; (ii) the absence, in the judgment of the Joint Global Coordinators, of events
capable of prejudicing the financial, asset, economic and income situation as well as the
prospects of the Company; (iii) the initiation or intensification of conflicts and/or acts of terror-
ism which, in the judgment of the Joint Global Coordinators and the Company, could prejudice
the positive outcome of the Global Offer; (iv) the Company and/or Selling Shareholders breach
of the obligations set forth in the Placement and guarantee contract for the Public Offer; (v) the
lack of stipulation, termination or cessation of effectiveness of the guarantee agreement for the
Institutional Placement; (vi) material breach of the statements and guarantees made by the
Company and/or the Selling Shareholder in the Placement and guarantee contract for the Public

215
Offer; (vii) the revocation by Borsa Italiana of the measure listing the Shares on MTA or the lack
of issuance of the measure permitting the initiation of the trading of the Shares on MTA.

The portion of the Global Offer that is not guaranteed by the Public Offer Consortium
will be guaranteed by the Institutional Placement Consortium by means of the stipulation of a spe-
cial Placement and guarantee contract. Said contract which will be stipulated subsequent to the
close of the Public Offer between the Company, Selling Shareholder and the Joint Global
Coordinators, also in the name and on behalf of the members of the Institutional Placement
Consortium will provide, among others, for the case in which the Institutional Placement
Consortium does not have to comply with the guarantee obligations upon the verification, within
the Payment Date, of some extraordinary events, as provided by international practice, such as,
among others: (i) changes (or developments that lead to potential future changes) of the political,
financial, economic, currency or national or international market situation (including caused by
legal or regulatory changes), that could prejudice or render the Global Offer unadvisable, in the
judgment of the Joint Global Coordinators; (ii) events capable of prejudicing, in the judgment of
the Joint Global Coordinators, the Companys financial, asset, economic and income situation as
well as its prospects; (iii) the initiation or intensification of conflicts and/or acts of terrorism which,
in the judgment of the Joint Global Coordinators and the Company, are capable of prejudicing the
positive outcome of the Global Offer; (iv) the Companys and/or the Selling Shareholders breach
of the obligations set forth in the Placement and guarantee contract for the Institutional Offer; (v)
the termination or cessation of effectiveness of the Guarantee contract for the Public Offer; (vi)
material breach of the statements and guarantees made by the Company and/or by the Selling
Shareholder in the Placement and guarantee contract for the Institutional Offer; (vii) the revoca-
tion by Borsa Italiana of the measure authorizing the Shares to be listed on MTA, or the lack of
issue of the measure authorizing the initiation of trading of the Shares on MTA.

The Selling Shareholder, the Company and the Joint Global Coordinators can decide
not to stipulate the Placement and guarantee contract for the Institutional Placement in the event
an adequate level of adherences to the Institutional Placement or to the Public Offer is not
reached from the viewpoint of the quantity and quality of the request, or if an agreement is not
reached regarding the Offer Price.

The Proponents will pay the Joint Global Coordinators, also on behalf of the
Investment Dealers and the members of the Institutional Placement Consortium, a total global
commission amounting to 3.5% of the countervalue of the Global Offer, inclusive of the
Greenshoe option that is effectively exercised. The commissions relative to the Public Offer will
indicatively be divided as follows: 0.50% for management commissions; approximately 0.75%
for guarantee commissions; 2.25% for placement commissions.

In addition, the Proponents can grant the Joint Global Coordinators a success fee up
until 0.75% of the countervalue of the Global Offer.

The payment of all of the commissions set forth above will be made pro quota by the
Company and by the Selling Shareholder in proportion to the Shares, which will be respectively
issued and sold by them.

The Shares that are the object of the Public Offer will be placed with the public by
means of the Public Offer Consortium, coordinated and managed by Centrobanca, in which the
following banks and brokerage companies will participate:

Investment Dealers and Guarantors

CENTROBANCA S.p.A. BANCHE POPOLARI UNITE GROUP
Investment Dealer also by means of:
Banca Popolare di Bergamo S.p.A.
Banca Popolare Commercio e Industria S.p.A.

216
 Banca Carime S.p.A.
Banca Popolare di Ancona S.p.A.
Banca Popolare di Todi S.p.A.
IW Bank S.p.A. (on-line Investment Dealer by means of the website www.iwbank.it)

BANCAPERTA S.p.A. Credito Valtellinese bank group

Investment Dealers also by means of:
Credito Valtellinese S.C.a R.L.
Credito Artigiano S.p.A.
Credito Siciliano S.p.A.
Banca dellArtigianato e dellIndustria S.p.A.

BANCA ALETTI & C. S.p.a. Banco Popolare di Verona e Novara Group

Investment Dealers also by means of:
Banco Popolare di Verona e Novara S.c.r.l.
Credito Bergamasco S.p.A.
Banca Popolare di Novara S.p.A.

BANCA ANTONVENETA S.p.A.

BANCA LOMBARDA E PIEMONTESE GROUP

Investment Dealers also by mans of:
Banco di Brescia S.p.A.
Banca Regionale Europea S.p.A.
Banco di San Giorgio S.p.A.
Banca di Valle Camonica S.p.A.
Banca Cassa di Risparmio di Tortona S.p.A.
Banca Lombarda Private Investment S.p.A.

BANCA FINNAT EURAMERICA S.p.A.

BANCA GENERALI S.p.A.

Banca Popolare di Sondrio S.C. a R.L.

Banca Profilo S.p.A.

CENTROSIM S.p.A.
Investment Dealer also by means of:
Banca Carige S.p.A., Investment Dealer also by means of its subsidiaries the Cassa
di Risparmio di Savona S.p.A., Banca del Monte di Lucca S.p.A., Cassa di Risparmio
di Carrara S.p.A. e Banca Cesare Ponti S.p.A.
Banca di Credito Popolare Torre del Greco
Banca di Sassari S.p.A.

217
 BANCA POPOLARE DELLEMILIA ROMAGNA cooperative
BANCA POPOLARE DI CORTONA share capital cooperative
BANCA POPOLARE DI FONDI
BANCA POPOLARE PROVINCIALE LECCHESE S.C.P.A.
BANCA POPOLARE PUGLIESE s.c.p.a.
BANCA POPOLARE VALCONICA S.C.A.R.L.
BANCO DI CREDITO P. AZZOAGLIO S.p.A.
Banco di Sardegna S.p.A.
Cassa Centrale delle Casse Rurali Trentine BBC Nord Est S.p.A.
Cassa Centrale Raiffeisen dellAlto Adige S.p.A.
GRUPPO BANCARIO CASSA DI RISPARMIO DI FERRARA S.p.A. (also by means of
BANCA POPOLARE DI ROMA S.p.A., BANCA DI TREVISO S.p.A., CREDITO
VERONESE S.p.A., BANCA MODENSE S.p.A.)

Axabank S.p.A.

MCC S.p.A. Capitalia Gruppo Bancario

Investment Dealer also by means of:
FINECOBANK S.p.A. (also an on-line Investment Dealer through FINECO THE NEW
BANK)

Investment Dealers without the assumption of guarantees:

BANCA MEDIOLANUM S.p.A.

Banca Popolare di Vicenza S.c.p.a.

ICCREA BANCA S.p.A.

RASFIN SIM S.p.A.

5.4.4. Date of the stipulation of the Placement and guarantee contract relating to the
Public Offer

The Placement and guarantee contract relating to the Public Offer will be stipulated
prior to the initiation of the Public Offer.

218
6. THE LISTING AND MANNER OF TRADING

6.1. THE LISTING

The Company filed a request with Borsa Italiana for its ordinary Shares to be listed
with Mercato Telematico Azionario Ordinary Exchange Segment.

Borsa Italiana, by means of measure no. [] of [], provided for the listing of the
Companys shares on the Mercato Telematico Azionario Ordinary Exchange Segment.

The date for the initiation of trading will be determined by Borsa Italiana, in accor-
dance with article 2.4.3, sixth paragraph, of the Stock Exchange Regulations, upon verification
of the adequate diffusion of Euroflys ordinary Shares subsequent to the Global Offer.

6.2. EXCHANGES ON WHICH THE COMPANYS SHARES ARE ALREADY LISTED

As of the Date of the Prospectus, the Companys Shares were not listed on other
Italian or foreign stock exchanges or equivalent.

6.3. BROKERS

6.3.1. Undertakings of the Sponsor

The Company has entrusted the role of Sponsor to Centrobanca, in accordance with
article 2.3.1 of the Stock Exchange Regulations.

The Sponsor, which has collaborated with the Company with the listing procedure for
the Companys ordinary Shares in view of an orderly performance of the same, provided Borsa
Italiana with the statements set forth in article 2.3.4, second paragraph, of the Stock Exchange
Regulations.

In accordance with art. 2.3.4, third paragraph, of the Stock Exchange Regulations,
the Sponsor also undertook, for the entire duration of its assignment and starting from the date
of the initiation of trading:
(i) to produce or have produced in its own name at least two financial analysis each
year regarding Eurofly, to be prepared timely and in accordance with the best stan-
dards at the time of the publication of the fiscal year results and the six month data
or, in alternative, at the time of the publication of the quarterly data relative to the
fourth and second quarters, as long as an equivalent level of completeness of analy-
sis is ensured. The financial analysis must be disseminated to the public in accor-
dance with the procedures and timeframe established in the Instructions;
(ii) to organize a meeting at least twice each year between Euroflys management and
the Professional Investors, presiding at such meetings.

The position shall have a duration of one year from the date of initiation of trading of
the Companys Shares.

219
6.4. STABILIZATION

Centrobanca, also in the name and on behalf of the Public Offer Consortium and the
Institutional Placement Consortium, reserves the right to perform, within thirty days subsequent
to the initiation of trading, an activity of stabilization in relation to the Shares that are placed, in
compliance with applicable outstanding norms. Within one week from the end of the period of
stabilization, Centrobanca will notify the public of the total data of the stabilization operations
eventually performed. The notice is to be sent contemporaneously to Borsa Italiana, which will
make it available to the public and to at least two press agencies. A copy of the notice will also
be transmitted to CONSOB.

There are no guarantees that such stabilization activity will be effectively performed.
Further, when performed, said activity can be interrupted at any time.

The stabilization operations can lead to a higher market price than the price that
would otherwise be obtained.

220
7. SELLING SHAREHOLDERS

7.1. NAME AND ADDRESS OF THE INDIVIDUALS OR LEGAL ENTITIES WHO OFFER
THEIR FINANCIAL INSTRUMENTS FOR SALE, NATURE OF EVENTUAL POSI-
TIONS, ASSIGNMENTS OR OTHER SIGNIFICANT RELATIONSHIPS THAT THE
SELLERS HAVE HAD OVER THE PAST THREE YEARS WITH THE ISSUER OR
WITH ANY OF ITS PREDECESSORS OR AFFILIATED COMPANIES

Within the context of the Global Offer, Spinnaker Luxembourg S.A., having its regis-
tered office in Avenue Monterey 23, L-2086 Citt del Lussemburgo, registered with the local
Trade Registry (R.C.S. Luxembourg) having number 94.690, offers to sell the Shares indicated in
Paragraph 7.2. below.

Spinnaker Luxembourgs Board of Directors is made up of the following members:

Arnaldo Grimaldi, born in Naples on 15 February 1962, Vincenzo Polidoro, born in Chieti on 24
January 1974, Jean-Robert Bartolini, born in Differdange (Lussemburgo) on 10 November 1962.

Arnaldo Grimaldi, currently a member of the Board of Directors of Spinnaker

Luxembourg (Board of Directors), acted as one of Euroflys directors from 15 September 2003
through 12 September 2005.

Except for what is set forth above, over the past three years Spinnaker Luxembourg
did not directly hold offices, positions or have other significant relationships with Eurofly, or with
any of its predecessors or affiliated companies.

7.2. NUMBER AND CLASS OF THE FINANCIAL INSTRUMENTS OFFERED BY EACH

OF THE HOLDERS OF THE FINANCIAL INSTRUMENTS WHO ARE SELLING

In the context of the Global Offer, 400,000 Shares have been placed for sale by the
Shareholder Spinnaker Luxembourg.

7.3. LOCK-UP AGREEMENTS

In the context of the agreements that will be stipulated for the Global Offer, the
Company will undertake with regard to the Joint Global Coordinators, also in the name and on
behalf of the members of the Public Offer Consortium and the Institutional Placement
Consortium, not to promote any initiatives having as their object increases of capital or issues
of bonds that are convertible in (either purchase orders for and/or the subscription to) Shares of
the Company, nor in any other manner, unless with the prior written consent of the Joint Global
Coordinators, which cannot be unreasonably withheld, for a period of 365 days subsequent to
the date (inclusive) of the initiation of the trading of the Shares on MTA. Again within the context
of the above agreements, the Selling Shareholder will undertake with regard to the Joint Global
Coordinators, also in the name and on behalf of the members of the Public Offer Consortium and
the Institutional Placement Consortium, not to take, and if taken not to vote in favor of, initiatives
having as their object increases of capital or issues of bonds convertible in (either purchase or-
ders for and/or subscription to) Shares of the Company, nor in any other manner, unless with the
Joint Global Coordinators prior written consent, which cannot be unreasonably withheld, for a
period of 365 days subsequent to the date (inclusive) of the initiation of the trading of the Shares
on MTA.

221
 The Companys undertaking will not be applied to the issue of Shares destined to the
exercise of the Greenshoe Option.

Spinnaker Luxembourg and Singins Consultadoria Economica e Marketing Lda, a

company entirely controlled by Mr. Augusto Angioletti, will undertake with regard to the Joint
Global Coordinators, including in the name and on behalf of the members of the Public Offer
Consortium and the Institutional Placement Consortium, not to perform, without the prior writ-
ten consent of the Joint Global Coordinators, which consent will not be unreasonably denied,
sales or in any event transfers whose object or effect is the attribution or transfer to third parties
of Euroflys Shares or financial instruments that attribute the right to purchase, subscribe to, ex-
change with or convert into, Eurofly Shares, for a period of 365 days subsequent to the date (in-
clusive) of the initiation of trading of the Shares on MTA with reference to 20% of the Shares of
the Company that are respectively held, and for a period of eighteen months with reference to
the remaining 80% of the Companys Shares that are respectively held. At the same time, Mr.
Angioletti will make an analogous undertaking with regard to the Joint Global Coordinators re-
garding the shareholding held by Mr. Angioletti in Singins Consultadoria Economica e Marketing
Lda.

With regard to the undertakings that will be made by the parties adhering to the
Private Placement, reference is made to Section IV, Chapter 5, Paragraph 5.2.4.

With regard to the undertakings that will be made by Singins Consultadoria

Economica e Marketing Lda and by Mr. Angioletti with regard to Spinnaker Luxembourg, refer-
ence is made to Section III, Chapter 14, Paragraph 14.2.

222
8. EXPENSES RELATED TO THE OFFER

It is estimated that the expenses related to the listing process for the Company, net
of the commissions paid to the Joint Global Coordinators, also with regard to the Investment
Dealers and members of the Institutional Placement Consortium, could amount to a total of ap-
proximately 1.6 million Euro, and will be sustained by the Issuer.

223
9. DILUITION

The following table indicates the current composition of Euroflys share capital and
the resulting composition in the case of an entire Placement of the 6,300,000 Shares that are the
object of the Global Offer and the further 900,000 Shares that are the object of the Greenshoe
option.

Shareholder No. of shares % of No. of No. of No. of % of No. of No. of % of

prior to the share Shares Shares Shares share shares Shares share
Global offer capital offered for offered for post capital object post capital
subscription sale Global of the Global
Offer Greenshoe Offer and
option exercise of
the
Greenshoe
option

Spinnaker
Luxembourg S.A. 6,298,610 89.1% 400,000 5,898,610 45.5% 5,898,610 42.5%
Singins Consultadoria
Economica e
Marketing Lda (*) 666,692 9.4% 666,692 5.1% 666,692 4.8%
Other shareholders 100,000 1.4% 100,000 0.8% 100,000 0.7%
Eurofly 5,900,000 900,000
Market 6,300,000 48.6% 7,200,000 51.9%
Total 7,065,302 100.0% 5,900,000 400,000 12,965,302 100.0% 900,000 13,865,302 100.0%

(*) Company entirely controlled by the Managing Director Mr. Augusto Angioletti.

224
10. SUPPLEMENTAL INFORMATION

10.1. IF THE INFORMATIONAL NOTE TO THE FINANCIAL INSTRUMENTS MENTIONS

CONSULTANTS RELATED TO AN ISSUE, INDICATE IN WHAT ROLE THEY HAVE
ACTED

The consultants mentioned in the present Section IV are set forth below:

Party Role

Centrobanca S.p.A. Joint Global Coordinator, Sponsor and Placement Management for the
Public Offer
Banca Profilo S.p.A. Joint Global Coordinator and consultant

10.2. INDICATION OF OTHER INFORMATION CONTAINED IN THE INFORMATIONAL

NOTE ON THE FINANCIAL INSTRUMENTS SUBJECT TO AUDIT OR TO LIMIT-
ED AUDIT BY THE AUDITOR

In the present Section IV there is no information subject to audit or limited audit by

the auditors.

10.3. INFORMATION PROVIDED BY THIRD PARTIES, EXPERT OPINIONS AND

STATEMENTS OF INTERESTS

No expert opinions or reports nor information provided by third parties are included
in the present Section IV.

225
 Eurofly S.p.A.

(The President of the Board of Directors) (The President of the Board of

Internal Auditors)

Selling Shareholder

(Spinnaker Luxembourg S.A.)

Placement Manager

__________________________________________

(Centrobanca S.p.A.)

226