Annual Report 2016

p Annual Report 2016 Table of contents Group overview History in the making ................................................................................................. 2 Consolidated statement of changes in shareholders’ equity .................................. 19 West Atlantic at a glance ........................................................................................... 3 Consolidated statement of cash flows .................................................................... 19 CEO’s comments ........................................................................................................4 Group notes ............................................................................................................ 20 Service offering.......................................................................................................... 5 Parent company report ............................................................................................ 31 Mission ....................................................................................................................... 5 Statement of income and other comprehensive income ........................................ 31 Strategy and long term vision .................................................................................. 6 Statement of financial position................................................................................ 31 Market overview ....................................................................................................... 6 Statement of changes in equity ............................................................................... 32 Sustainability & Human capital ................................................................................. 8 Statement of cash flows .......................................................................................... 32 Environmental information .......................................................................................9 Parent company notes ............................................................................................. 33 Scheduled destinations ........................................................................................... 10 Corporate governance ............................................................................................. 37 Aircraft fleet.............................................................................................................. 11 Board of Directors ................................................................................................... 38 Group Management 2016 ....................................................................................... 39 Formal Annual and consolidated accounts Board assurance...................................................................................................... 40 Board of Directors’ report fiscal year 2016 .............................................................. 12 Auditor’s report ....................................................................................................... 41 Consolidated statement of income and other comprehensive income .................. 17 Definitions ............................................................................................................... 43 Consolidated statement of financial position.......................................................... 18 History in the making Since its inception, Atlantic Airlines has been a significant con- The West Atlantic Group emerged in 2011 through the merger tributor to the UK regional air cargo industry, capitalising on its of two of Europe’s most established independent regional heritage of cargo and airmail operations across Europe since cargo airlines; the West Air Group based in Sweden and Atlan- the first Royal Mail contract was awarded to Air Atlantique in tic Airlines based in the United Kingdom. Headquartered in 1975. Gothenburg, the merged entity constitutes one of Europe’s largest and most experienced providers of unique, integrated During 2013, West Atlantic formed a strategic partnership ground-to-air logistics for the mail and express industries using with US based Air Transport Services Group, Inc. (NASDAQ: a customised fleet of BAe ATP, Bombardier CRJ200, Boeing 737 ATSG), in which ATSG acquired a 25 percent shareholding in the and B767 freighters. West Atlantic Group. The partnership marks the introduction of Boeing 767 to West Atlantic’s service offering. The partners’ West Atlantic Sweden, the heart of the former West Air Group skillsets are very well aligned to support the market demand was established in 1962 under the name ABAL Air, which was given their respective established and complimentary capabili- changed in 1992 to West Air Sweden and in 2015 to West Atlan- ties in the global marketplace. tic Sweden. Following the increased demand for airmail services from the Swedish Post, West Atlantic Sweden increased During 2013, West Atlantic also issued its first corporate bond its mail operations throughout 1995 to 1998. In 1995 the cur- loan listed on NASDAQ, Stockholm in 2014. The loan enabled rent major shareholders acquired the company. the Group to acquire the main part of the operating fleet. Following the current owners' purchase of West Atlantic Swe- den, the organisation was converted into a dedicated mail and cargo airline in May 1997 after discontinuing scheduled passen- ger services between Gothenburg and Sundsvall in Sweden. During 2006 West Atlantic Sweden was awarded the entire Norwegian Postal network, which increased West Atlantic Sweden’s capacity by approximately 50 percent. Pioneering the technical competence necessary to move existing mail trolleys directly from trucks to on board the aircraft – the roll-on/ roll-off concept has been a key factor in improving efficiency and service quality where employed in Scandinavia. Atlantic Airlines was incorporated in 1994 within the Air Atlan- tique Group, which was originally established on Jersey, UK in 1969. Originally operating an aircraft fleet of seven Lockheed 188 Electra aircraft, Atlantic Airlines was specialised in the sup- ply of contract and ad-hoc air cargo services which included transatlantic capability. Following a full management buy-out of the assets of the business in May 2004, Atlantic Airlines Ltd. was established as an independent commercial operator and shifted complete focus to intra-European operations. West Atlantic Group - Annual Report 2016 2 of 44 West Atlantic at a glance West Atlantic in brief West Atlantic is a dedicated cargo airline specialised in integrated mail and express freight solutions. De- veloping from many years’ experience the Group can offer its customers customised efficient solutions for airfreight services, aircraft maintenance, airworthiness services and aircraft leasing. West Atlantic’s pri- mary market is to provide scheduled airlift capacity to National Mail Organisations and Global Integrators in Europe. In 2016 West Atlantic performed over 23,000 flights while serving approximately 50 scheduled destinations. Revenue and EBITDA Revenue EBITDA 1 500 200 20% 150 15% 1 000 100 10% 500 50 5% 0 0 0% 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 EBITDA Margin Please note that the Group performed a Swedish GAAP to IFRS transition as per January 1, 2013 whereby previous financial information are according to previous policies and practises. Operating performance Key operating indicators 2016 2015 Jan - Dec Jan - Dec 99.0 % Performed flights 23,200 26,790 Regularity (target >99%) 99.0% 99.1% Flight dispatch regularity Number of hours flown 25,125 28,490 Long term target > 99 % Key performance indicators for the Group 2016 2015 2016-12-31 2015-12-31 Financial Metrics* Revenue 1,320.4 1,409.9 Net interest bearing debt/EBITDA** 5.1 3.4 Revenue growth -6.3% 13.3% Interest coverage ratio** 2.1 2.9 Underlying revenue growth -2.8% 8.6% Equity / Asset ratio 8.2% 13.3% EBITDA 127.5 177.9 Total Assets 1,276.8 1,412.1 EBITDA margin (%) 9.7% 12.6% Net income -81.8 -49.6 * Definitions of key performance indicators can be found at the end of this report. Cash and cash equivalents incl. unused ** Defined by the corporate bond loan WEST002 terms and conditions. See note 24 for more overdraft facility 160.2 316.8 information. Cash flow from operating activities 240.1 216.7 Earnings per share before dilution (SEK) -3.03 -1.84 Operating metrics* Fleet dispatch regularity 99.0% 99.1% Performed flights 23 200 26 790 Aircraft in service (incl. Wet leases) 40 48 Average employees 477 508 All figures in this report are presented in Swedish Krona millions (MSEK) unless otherwise stated. West Atlantic Group - Annual Report 2016 3 of 44 CEO’s comments “2016 was a year with lots of difficult changes, a terrible aircraft accident, cost reductions and new contracts. We have come a long way from where the year started, but we did not reach all our objectives. We have entered 2017 with a solid plan in hand for how to complete the Group turnaround and ensure we remain competitive and can deliver on our financial and operational promises going forward.” Commercial development We enjoyed strong growth in the B767/B737 payload classes During the year, we developed our service offering for our while the under eight tonnes market more than offset this in- B737 / B767 fleets significantly by placing several aircraft with crease. new and existing customers. After a challenging first quarter with delivery delays of the additional aircraft, we

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