For personal use only use personal For 2014 Half Year Results Holdings Limited 28 February 2014 Half year in review

• Australian aviation market continues to face challenging conditions, ongoing subdued consumer sentiment and economic uncertainty

• Effect of strong market capacity growth from FY13 and aggressive pricing also impacted trading and competitive environment

• Cost of the carbon tax unrecovered across the aviation industry

• Australian aviation industry profitability in H1 FY14 lowest in 20 years 1 For personal use only use personal For

2 Note: 1 Statement based on industry 2014 Half Year EBIT compared to the annual 1992 to 2013 industry Financial Year EBIT contributions. Australian aviation industry profitability

Australian aviation industry EBIT 1 (FY92 – H1 FY14) Millions of dollars 1,500

1,200

900

600

300

0

(300) FY92 FY94 FY96 FY98 FY00 FY02 FY04 FY06 FY08 FY10 FY12 H1 FY14

2

For personal use only use personal For Australian aviation industry profitability in H1 FY14 lowest in over 20 years

Note: ‘Australian aviation industry’ means mainline Regular Public Transport (RPT) carriers only. 1 Australian aviation industry EBIT from FY92 to FY13 and H1 FY14 includes Virgin Australia, Group, Australia and Ansett. 2 Statement based on industry 2014 Half Year EBIT compared to the annual 1992 to 2013 industry Financial Year EBIT contributions. 3 Source: Company filings and reports. Financial summary

• Pre-tax loss (excluding impact of Tigerair Australia 1 and business transformation and other expenses 2) of $49.7m – in line with expectations

• Statutory loss after tax of $83.7m, including impact of equity accounted investments

• Total revenue and income over $2.2b for the first time in a half year

• Comparable Unit Cost 3 growth of 4.5% (including fuel, forex and impact of Skywest 4)

• Positive operating cash flow of $47.6m

• Total cash position of $896.4m, with unrestricted cash of $665.4m

• Continued to outperform main competitor on growth in Total Group Revenue, Domestic and International Yield growth and Group Revenue Load factor 5

For personal use only use personal For Note: 1 Refers to Tiger Airways Australia Pty Limited. Acquisition of 60% was completed on 8 July 2013. 2 Pre-tax (loss) / profit excluding one- off items and Tigerair loss is a non-statutory measure and is defined on page 27. 3 Comparable Unit Cost is a non-statutory measure and is defined on page 27. 4 Skywest Pte Ltd has been rebranded Virgin Australia Regional Airlines. The costs from the acquired Skywest operations have been included in the calculations for the first time. 5 Virgin Australia Group Revenue includes Skywest. Domestic and international yield growth and Group revenue load factors exclude charter operations. Yield comparison is to Qantas Domestic and Qantas 4 International Segments. Group profit or loss summary

H1 FY14 H1 FY13 $m $m

Revenue and income 2,242.1 2,107.4

Statutory (loss) / profit after tax (83.7) 23.0

Addback Income tax (benefit) / expense (34.3) 5.2

Statutory (loss) / profit before tax (118.0) 28.2

Addback Business transformation and other expenses 1 49.9 36.0

Share of Tigerair Australia losses 18.4 -

Pre-tax (loss) / profit excluding one-off items and Tigerair loss 2 (49.7) 64.2 For personal use only use personal For

Note: 1 Business transformation and other expenses is a non-statutory measure and is defined on page 27. 2 Pre-tax (loss) / profit excluding one- off items and Tigerair loss is a non-statutory measure and is defined on page 27. The H1 FY14 result is in line with expectations confirmed on 6 5 February 2014. Group profit or loss summary

H1 FY14 H1 FY13 $m $m

Pre-tax (loss) / profit excluding one-off items and Tigerair loss 1 (49.7) 64.2

Addback Gains on unrealised ineffectiveness on cash flow hedges and (33.3) (3.2) non designated derivatives 2 Losses on interest rate swap terminations associated with 8.4 - capital restructure 2 Losses / gains on time value movement on cash flow hedges 2 15.3 (10.8)

Underlying (loss) / profit before tax excluding impact of selected (59.3) 50.2

financial instruments 3 For personal use only use personal For

Note: 1 Pre-tax (loss) / profit excluding one-off items and Tigerair loss is a non-statutory measure and is defined on page 27. The H1 FY14 result is in line with expectations confirmed on 6 February 2014. 2 These items are non-statutory measures outlined in Note 6 of the Virgin Australia Interim Financial Report for the Half Year ended 31 December 2013. 3 Underlying (loss) / profit before tax , excluding impact of selected financial instruments, is a non-statutory measure used by Management and Virgin Australia’s board as a measure to assess the financial performance of 6 Virgin Australia and is defined on page 27. Segment revenue and EBIT summary

Domestic International

H1 FY14 H1 FY13 H1 FY14 H1 FY13 $m $m $m $m

Segment revenue 1,694.1 1,532.2 589.7 595.4

Segment EBIT 1 25.7 57.4 (29.5) 26.6

ASKs (m) 13,568 13,055 7,972 8,148 For personal use only use personal For

Note: 1 Domestic / International Segment Earnings Before Interest and Tax (EBIT) is a non-statutory measure used by Management and Virgin Australia’s board as a measure to assess financial performance of Virgin Australia and individual segments is defined on page 27. 7 Corporate overheads are allocated to Segment EBIT. Cash flow summary

H1 FY14 H1 FY13 $m $m Cash flow from operations (excluding business and capital 108.7 82.8 restructure costs and net finance costs) Business and capital restructure costs (36.4) (18.1) Net finance costs (24.7) (22.1) Net cash flow from operating activities 47.6 42.6 Net cash used in investing activities (265.8) (312.9) Net cash from financing activities 527.7 151.7 Net cash inflow / (outflow) 309.5 (118.6) Total Cash Balance at start of period 580.5 802.6 FX adjustments on cash balances 6.4 1.1

Total Cash Balance at end of period 896.4 685.1 For personal use only use personal For Unrestricted Cash Balance at end of period 665.4 429.8

8 Balance sheet summary

As at 31-Dec-13 30-Jun-13 $m $m

Cash and cash equivalents 896.4 580.5

Property, plant and equipment and intangible assets 3,269.3 3,334.8

Other assets 712.0 510.7

Total assets 4,877.7 4,426.0

Interest bearing liabilities 2,150.6 1,889.9

Unearned revenue 720.7 736.1

Other liabilities 752.8 759.9

Total liabilities 3,624.1 3,385.9 For personal use only use personal For Total equity 1,253.6 1,040.1

9 Hedging policy

• AUD designated hedging policy introduced in 2011 provides a large degree of short term certainty and longer term participation and protection

• Hedging policy delivering positive results – fuel costs increased 1.4% 1 against Group ASK growth of 1.6% 2 and a fuel price rise of 10.4%

• Non-fuel currency 96% hedged for remainder of FY14 at an average rate of AUD:USD 0.9727 against a current market rate of 0.8968

Hedging summary Brent Remainder of FY14 3 Operating requirements hedged 85% Participation in favourable price movements 69%

Worst case hedged rate (inclusive of option premium) AUD 111 / bbl 4 For personal use only use personal For

Note: 1 Excluding the impact of carbon tax and charter operations. 2 Group Available Seat Kilometres (ASK) growth excludes charter operations. 3 Figures as at 27 February 2014. 4 Current spot Brent price is AUD 122 / bbl (unhedged physical basis). 10 Source: Bloomberg, 27 February 2014 Fleet profile – transparent and consistent

Announced Aug 2011 Jun 2013 Dec 2013 relating to Jun 2013F 1 Actual Actual Virgin Australia B737-800 & 700 71 73 74 3 E190 18 18 18 ATR-72 8 11 13 A330-200 6 6 7 B777-300ER 5 5 5 Mainline fleet 108 113 117 Mainline average fleet age 4.2 4.4

Charter operations and other services F100 10 10 F50 8 8 A320 2 2 4

For personal use only use personal For Tigerair Australia 11 12 Total Group fleet 144 149

Note: 1 Disclosed 25 August 2011 per 2011 Full Year results presentation. 2 Fleet forecast for 30 June 2016 includes firm deliveries only and excludes additional options and purchase rights. 3 Includes one B737-800 aircraft utilised for charter operations. 4 Tigerair Australia total fleet 11 numbers are not adjusted for Virgin Australia’s 60% equity ownership. Australian domestic aviation market dynamics

Domestic market capacity additions – Seats (FY13) Millions of seats

3.5 3.0 3.0 2.5 2.0 1.5 0.9 1.0 0.5 0.0 Virgin Australia 1 Qantas Group 2

For personal use only use personal For Qantas Group added over 3 seats for every Virgin Australia seat in FY13

Note: 1 Virgin Australia excludes Skywest acquisition completed on 11 April 2013 and Tigerair Australia 60% acquisition completed on 8 July 2013. Seat additions by Tigerair Australia during FY13 was a recovery from restricted flying. 2 Includes Qantas, QantasLink and 12 Source: Diio Mi, Company filings and internal estimates. Focused on adding new routes – bringing competition

Domestic market capacity additions – By route and carrier (H1 FY13 – H1 FY14) Millions of seats 40.5

0.52 0.05 40.22

40.0

0.01 0.20 0.05 39.5 39.38

39.0

H1 FY13 New routes Existing routes Others H1 FY14 For personal use only use personal For Virgin Australia Group 1 Qantas Group 2 Other

Note: 1 Includes Virgin Australia, Skywest and Tigerair Australia; 2 Includes Qantas, QantasLink and Jetstar 13 Source: Diio Mi and Company filings. Australian domestic market share by segment

Domestic market capacity share – Premium Domestic market capacity share – Budget (Dec 10 – Dec 13e) (Dec 10 – Dec 13e) Percent of ASKs Percent of ASKs 100% 100%

78% 80% 80% 81%

61% 60% 58% 60%

39% 42% 40% 40%

22% 20% 20% 19%

0% 0% Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13e Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13e

For personal use only use personal For Virgin Australia (Branded) 1 Qantas (Branded) 2 Tigerair Australia Jetstar

Note: 1 Includes Skywest from May 2013. 2 Includes Qantas and QantasLink domestic. 14 Source: ASX Company filings. Game Change Strategy – the past four years 1

• Formulating of five-year strategy Formulation 2010 • Convincing the market of strategy and future direction

• Launch of Virgin Australia, including product and service upgrades Launch 2011 • Re-launch of

• Completion of key Game Change building blocks and goals Rollout 2012 • Roll-out of Game On initiatives

• Transformation of the and restructure of the Group Structure 2013 • Strengthening of balance sheet

• Consolidation of benefits from Game Change and Game On For personal use only use personal For Optimise 2014 • Business optimisation for consistent and sustainable performance

15 Note: 1 Date references based on calendar years. Revenue growth

Corporate and government share of domestic segment revenue Percent

H1 FY10 H1 FY14

$1,167 $1,694

million million For personal use only use personal For

Corporate & government Other 16 Superior customer experience and service excellence

Industry leading • Innovative wireless in-flight entertainment technology on board • Premium wide-body Airbus A330 experience for TCP services experience • Enhanced flight catering model introduced

• New lounge opened in Cairns and regional lounge in Perth Best • Major expansions to Sydney and lounges in premium • Introduction of Melbourne Valet and expansion to Sydney Premium Entry services • Priority check-in, boarding and baggage rolled out across major regional ports

• Major terminal move to modern Tom Bradley International Premium Terminal in Los Angeles terminal • Seamless connections to regional, FIFO flights from new

facilities lounge located in Terminal 2 at Perth Airport For personal use only use personal For • New premium retail experience at Sydney Domestic Airport

17

Recognition of successful re-positioning For personal use only use personal For

18 Velocity Frequent Flyer is a key value driver

Billings Points redeemed (H1 FY10-H1 FY14) (H1 FY10-H1 FY14) Millions of dollars Millions of points • 4m membership milestone 1

• Over 70 new retailers to the program • Widest retail offering of any loyalty program in Australia H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 FY10 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14

CAGR: 34% CAGR: 31%

Best-in-class loyalty For personal use only use personal For program

19 Note: 1 As at February 2014. Regional operations update

• Integrating Skywest into Virgin Australia Virgin Australia Regional Operations – Group Total Charter Revenue (normalised) 1 (H1 FY13 vs H1 FY14) Millions of dollars – Brand alignment

– Network alignment

– Systems / process integration +45%

– Revenue and cost synergies

• Investment in skills to build platform

• Strong platform to aggressively grow

presence in regional and charter markets H1 FY13 H1 FY14 For personal use only use personal For

20 Note: 1 Total Charter Revenue (normalised) includes amounts contributed by Skywest prior to the acquisition on 19 April 2013. Tigerair Australia – re-entering the budget market

• Completed 60% acquisition on 8 July 2013 Tigerair Australia – Revenue Load Factors

(H1 FY13 vs H1 FY14) 88.0% • Operating performance improved Percent +4.7ppts – 12.7% increase in aircraft utilisation 83.3% – Progressive OTP improvements • New Brisbane base and increased QLD services H1 FY13 H1 FY14 3 • Improvements focussed on: Tigerair Australia vs Jetstar OTP (December 2013) 1 – Increasing RASK Percent 80.4% – Maintaining CASK 2 +4.3ppts 76.1% – Consistency in service levels – Securing synergies from both shareholders Jetstar

For personal use only use personal For Building a strong, cost-efficient and flexible low cost competitor

Note: 1 ‘RASK’ means Revenue per Available Seat Kilometre. 2 ‘CASK’ means Cost per Available Seat Kilometre. 3 OTP for Tigerair Australia and Jetstar for domestic operations only. ‘OTP’ measured by on time departures. 21 Source: Bureau of Infrastructure, Transport and Regional Economics (BITRE) Our people – a core differentiator in the market

Recent Awards

Randstad – Most Attractive Employer Brands , 2013, #1 in aviation sector

AFR – Most Respected Companies , 2013, #1 in sector and #3 in Australia

Roy Morgan – Domestic Business Travel Airline of the Year, 2013

CSIA – National Customer Service Team of the Year , 2013

Skytrax – Best Airline Staff Service,

Asia Pacific, 2013 For personal use only use personal For

22 On track to deliver on a consistent strategy

“Game On” phase % completed

Implement business efficiency project

Build a transformational loyalty business

Increase access to global markets

Further enhance guest experience through innovation inflight and on-the-ground

Continue to develop our people and service excellence – our key differentiator For personal use only use personal For FY13 FY14 FY15

23 Virgin Australia Group: building a sustainable business

• Accelerating efficiency and productivity initiatives across the Virgin Australia Group

• Leveraging alliance partners to drive cost benefits

• Fast-tracking penetration into higher yielding market segments

• Continuing to lead the Australian industry in customer experience

• Creating value through customer loyalty For personal use only use personal For

24 Outlook

Given the uncertain economic environment we are unable to provide

guidance for the 2014 Financial Year at this time. For personal use only use personal For

25 For personal use only Disclaimer, definitions and ASIC guidance

Disclaimer The following non-IFRS information has not been audited or reviewed by KPMG: Pre-tax (loss) / profit excluding one-off items and Tigerair loss, Underlying (loss)/profit before tax excluding impact of selected financial instruments, Segment EBIT, Comparable Unit Cost, and Business transformation and other expenses. This presentation has not been audited or reviewed by KPMG; however, IFRS data has been derived from the condensed consolidated interim financial statements that have been reviewed by KPMG. Definitions Pre-tax (loss) / profit excluding one-off items and Tigerair loss: Pre-tax (loss) / profit excluding one-off items and Tigerair loss is a pre-tax non-statutory measure that represents statutory (loss) / profit before tax excluding the impact of business transformation and other expenses (as defined below) and Tigerair loss. This is a non-statutory measure used by management and VAH’s board as a measure of assessing financial performance. Underlying (loss) / profit before tax excluding impact of selected financial instruments: Underlying (loss)/profit before tax excluding impact of selected financial instruments represents pre-tax (loss) / profit excluding one off items and Tigerair loss (as defined above) and excludes the impact of unrealised ineffectiveness on cash flow hedges and non- designated derivatives, interest rate terminations associated with capital restructure and time value movement on cash flow hedges. This is a non-statutory measure used by Management and VAH’s board as a measure to assess financial performance of VAH and individual segments. For H1 FY14, this measure excludes time value movements on cash flow hedges and unrealised hedging ineffectiveness on cash flow hedges and non designated derivatives. This approach represents a change from the H1 FY13 where only unrealised hedging ineffectiveness was excluded. The H1 FY13 comparatives in this presentation have been restated for this change in methodology. Segment EBIT: Earnings before interest and tax (EBIT) is a non-statutory measure per note 6 of the Virgin Australia Holdings Limited condensed consolidated interim financial statements for the half-year ended 31 December 2013. It is used by Management and VAH’s board as a measure to assess financial performance. Comparable unit cost: Comparable Unit Cost is a non-statutory measure which comprises total revenue less underlying (loss)/profit before tax excluding impact of selected financial instruments and selected revenue relating to non-ticket or nil margin activities (this revenue is not included in the definition of yield). Comparable Unit Costs is calculated using flown ASKs and does not include charter operation costs as there are no Available Seat Kilometres available with Charter Business transformation and other expenses: Business transformation and other expenses is a non-statutory measure that includes the following items outlined in Note 6 of the Virgin Australia Holdings Limited condensed consolidated interim financial statements: Business and capital restructure costs ($36.7m), Accelerated amortisation resulting from capital restructure ($12.3m) and Accelerated depreciation due to changes in useful life of assets and net gain/(loss) on sale of assets($0.9m). For H1 FY 13, this item included Business and capital restructure costs ($28.5m) and Accelerated depreciation due to changes in useful life of assets and net gain/(loss) on sale of assets($7.5m). ASIC guidance In December 2011 ASIC issued Regulatory Guide 230. In order to comply with this Guide, Virgin Australia is required to make a clear statement about whether information disclosed in documents other than the interim financial report has been audited or reviewed in accordance with Australian Auditing Standards. The following non-IFRS information has not been For personal use only use personal For audited or reviewed by KPMG: Pre-tax (loss) / profit excluding one-off items and Tigerair loss, Underlying (loss)/profit before tax excluding impact of selected financial instruments, Segment EBIT, Comparable Unit Cost, and Business transformation and other expenses. This presentation has not been audited or reviewed by KPMG; however, IFRS data has been derived from the condensed consolidated interim financial statements that have been reviewed by KPMG.

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