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IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE U.S. IMPORTANT: You must read the following before continuing. The following applies to the offering memorandum following this page (the “Offering Memorandum”), and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Memorandum. In accessing the Offering Memorandum, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY PERSON IN THE UNITED STATES. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE U.S. SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your Representation: In order to be eligible to view this Offering Memorandum or make an investment decision with respect to the Securities, investors must be outside the United States. This Offering Memorandum is being sent at your request and by accepting the e-mail and accessing this Offering Memorandum, you shall be deemed to have represented to us that you are outside the United States and that you consent to delivery of such Offering Memorandum by electronic transmission. You are reminded that this Offering Memorandum has been delivered to you on the basis that you are a person into whose possession this Offering Memorandum may lawfully be delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorized to, deliver this Offering Memorandum to any other person. The materials relating to the offering do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Company in such jurisdiction. This Offering Memorandum has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither Credit Suisse (Singapore) Limited, CIMB Bank (L) Limited nor any person who controls it, nor any director, officer, employee nor agent of it, or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Memorandum distributed to you in electronic format and the hard copy version available to you on request from Credit Suisse (Singapore) Limited or CIMB Bank (L) Limited. OFFERING MEMORANDUM

(registered in the Kingdom of Thailand as a public company with limited liability) 1,940,000,000 Ordinary Shares (par value Baht 0.10 per share) This is the initial public offering of our ordinary shares of par value Baht 0.10 each (the “Shares”). This offering memorandum (the “Offering Memorandum”) has been prepared by us in connection with the offering of 1,940,000,000 Shares (the “Offering Shares”), consisting of (a) a primary offering (the “Primary Offering”) of 1,212,500,000 Shares (the “Primary Shares”) (consisting of 750,000,000 Shares to be issued by us (the “New Shares”) and 462,500,000 Shares (the “Vendor Tranche A Shares”) to be offered by Mr. Tassapon Bijleveld, Mr. Pornanan Gerdprasert, Mr. Tanapat Ngamplang, Mr. Preechaya Rasametanin, M. L. Bovornovadep Devakula and Mr. Santisuk Klongchaiya (collectively, the “Selling Shareholders”)), and (b) a secondary offering in Thailand (the “Secondary Offering”) of 727,500,000 Shares (the “Vendor Tranche B Shares” or the “Secondary Shares” and, together with the Vendor Tranche A Shares, the “Vendor Shares”) by the Selling Shareholders. The Primary Shares being offered consist of (i) 400,000,000 New Shares (the “International Shares”) being offered to investors outside the United States and Thailand (the “International Offer”) in reliance on Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), through Credit Suisse (Singapore) Limited and CIMB Bank (L) Limited (the “International Managers”) and (ii) 812,500,000 Shares (the “Domestic Shares”) to investors in Thailand (the “Domestic Offer”) through CIMB Securities (Thailand) Co., Ltd. and Thanachart Securities Public Company Limited (the “Joint Thai Lead Underwriters”) in a concurrent domestic public offering. The Domestic Offer comprises an offer of 412,500,000 Domestic Shares in a public retail offer and 400,000,000 Domestic Shares to institutional investors in Thailand. Completion of the International Offer and completion of the Domestic Offer are each conditional on the completion of the other. The New Shares offered in the Combined Offering may be reallocated between the International Offer and the Domestic Offer. The Vendor Tranche B Shares are being offered on a private placement basis through the big lot board of the Stock Exchange of Thailand (“SET”) on the first day on which our Shares are listed on the SET, as described in this Offering Memorandum. Completion of the Secondary Offering is conditional on the completion of the Primary Offering and the listing of our Shares on the SET. The Primary Offering and the Secondary Offering are referred to as the “Combined Offering”. This Offering Memorandum relates to the International Offer only. The Domestic Offer is being made pursuant to a separate prospectus in the Thai language. For information on the methods of sale, see “Plan of Distribution”. The transfer of our shares to non-Thai persons is subject to certain foreign ownership restrictions under the laws of Thailand and our Articles of Association. As a result, investors purchasing the International Shares in the International Offer will be required to purchase and receive Non-Voting Depositary Receipts (“NVDRs” and, together with the Shares, the “Securities”) in lieu of the International Shares. NVDRs are a separate security issued by Thai NVDR Company Limited (the “NVDR Issuer”), a wholly-owned subsidiary of the SET. The terms and conditions of the NVDRs and other information relating to the NVDRs are set out in “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”. In addition, you should also read the section “Special Note Regarding NVDRs”, “Risk Factors — Risks Relating to the NVDRs”, “Plan of Distribution” and “Transfer Restrictions” for further information relating to the NVDRs. There is currently no public market for our Securities. We have applied to have our Shares, including the Shares offered in the Combined Offering, approved for listing and trading on the SET. For a description of the SET, see “The Thai Securities Market”. Investing in our Securities involves certain risks. See “Risk Factors” beginning on page 18.

Offer Price: Baht 3.70 per Share or per NVDR.

In addition to the Offer Price, international investors will be required to pay a brokerage fee in connection with their purchase of Securities purchased in the International Offer. For a description of this brokerage fee, see “Plan of Distribution”. THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT AND, SUBJECT TO CERTAIN EXCEPTIONS, MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES. THE SECURITIES ARE BEING OFFERED AND SOLD IN OFFSHORE TRANSACTIONS SOLELY OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S. OUR SHARES ARE NOT TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE RESTRICTIONS DESCRIBED UNDER “TRANSFER RESTRICTIONS”. The International Managers are offering the International Shares subject to receipt and acceptance of orders by them and subject to their right to reject any order in whole or in part. Payment for the International Shares is expected to be made on or about May 29, 2012, in immediately available funds, and we expect that delivery of the International Shares will be made to the NVDR Issuer approximately five business days after payment and that our Shares will be approved for listing on the SET no later than seven days after delivery of the Primary Shares.

Joint Global Coordinators and Bookrunners Credit Suisse CIMB Thanachart Securities Plc.

The date of this Offering Memorandum is May 22, 2012.

TABLE OF CONTENTS

Page Page Summary ...... 1 Principal and Selling Shareholders ...... 136 Risk Factors ...... 18 Description of Shares ...... 137 Use of Proceeds ...... 36 Description of the NVDR Issuer and the Dividend Policy ...... 37 NVDRs ...... 140 Exchange Rate Information ...... 38 The Thai Securities Market ...... 141 Capitalization and Indebtedness ...... 39 Taxation ...... 148 Dilution ...... 40 Thai Foreign Exchange Regulations ...... 150 Selected Consolidated Financial and Operating Plan of Distribution ...... 152 Data ...... 41 Transfer Restrictions ...... 158 History and Corporate Structure ...... 47 Legal Matters ...... 159 Management’s Discussion and Analysis of Independent Accountants ...... 159 Financial Condition and Results of Summary of Significant Differences between Operations ...... 49 Thai GAAP and IFRS ...... 160 Industry ...... 77 Annex A — Issuance of Non-Voting Business ...... 84 Depositary Receipts Prospectus ...... A-1 Related Party Transactions ...... 112 Annex B — Report of the Aviation Regulation of the Airline Industry in Consultant: Thai AirAsia Co., Ltd. Dated Thailand ...... 125 January 16, 2012 ...... B-1 Management and Corporate Governance ..... 130 Index to Financial Statements ...... F-1

You should rely only on the information contained in this Offering Memorandum in making an investment decision with respect to the Securities. Neither we, the Selling Shareholders nor the International Managers have authorized anyone to provide you with any additional or different information. This Offering Memorandum may only be used where it is legal to offer and sell the Securities. The information in this Offering Memorandum may only be accurate as of the date of this Offering Memorandum. You should be aware that since the date of this Offering Memorandum there may have been changes in our business, financial condition, results of operations, prospects or otherwise that could affect the accuracy or completeness of the information set out in this Offering Memorandum. We are furnishing this Offering Memorandum on a confidential basis in connection with an offering exempt from registration under the U.S. Securities Act and applicable state securities laws solely for the purpose of enabling prospective investors to consider the purchase of the Securities. We are not authorizing the use of this Offering Memorandum for any other purpose. The information contained in this Offering Memorandum has been provided by us and other sources identified in this Offering Memorandum. No representation or warranty, express or implied, is made by the International Managers as to the accuracy or completeness of such information, and nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise or representation by the International Managers. Any reproduction or distribution of this Offering Memorandum, in whole or in part, and any disclosure of its contents or use of any information herein is prohibited, except to the extent such information is otherwise publicly available. The Securities are subject to restrictions on transferability and resale; the Securities may not be transferred or resold in the United States, except as permitted under the U.S. Securities Act and applicable state securities laws pursuant to registration or an exemption from registration under the U.S. Securities Act. You should be aware that you may be required to bear the risk of an investment in the Securities for an indefinite period of time. See “Transfer Restrictions” for more information on these restrictions. The distribution of this Offering Memorandum and the offer and sale of the Securities offered hereby are restricted by law in certain jurisdictions. You should inform yourselves about and comply with all applicable laws and regulations in force in any jurisdiction in connection with the distribution of this Offering Memorandum and the offer and sale of the Securities. None of us, the Selling Shareholders, the International Managers, the Joint Thai Lead Underwriters nor any of our or their respective affiliates, directors, officers, employees, agents or advisors are making any representation or undertaking to any investor regarding the legality of an investment in the Securities.

i In making an investment decision, you should rely on your own examination of the Company and the terms of the International Offer including the merits and risks involved. You should not construe the contents of this Offering Memorandum or its appendices as legal, business, financial or tax advice. You should consult your own attorney, business advisor, tax advisor or other professional advisor. We are entitled to withdraw the Primary Offering at any time before closing, subject to compliance with certain conditions set out in the purchase agreement relating to the International Offer, the underwriting agreement relating to the Domestic Offer. We are making the Primary Offering subject to the terms described in this Offering Memorandum, the purchase agreement and the underwriting agreement relating to our Shares described in “Plan of Distribution”. This Offering Memorandum is not a prospectus within the meaning of the Securities and Exchange Act B.E. 2535 of Thailand, as amended (the “SEC Act”). In connection with the Thai offering, a prospectus, written in the Thai language, was filed with the office of the Securities and Exchange Commission of Thailand (the “Thai SEC”) on February 27, 2012 and became effective on May 22, 2012. Thai law requires the distribution of a prospectus that has become effective under the SEC Act in connection with any public offering of shares in Thailand. This Offering Memorandum may not be used in lieu of a prospectus in connection with any public offering of our Securities in Thailand. The Securities which we are offering have not been approved or disapproved by the United States Securities and Exchange Commission or any state or foreign securities commission or regulatory authority. The foregoing authorities have not confirmed the accuracy or determined the adequacy of this Offering Memorandum, nor have they passed upon or endorsed the merits of the Combined Offering. Any representation to the contrary is a criminal offense in the United States. We, the Selling Shareholders and the International Managers are not offering to sell the Securities in any jurisdiction where the offer or sale is not permitted. This Offering Memorandum does not constitute an offer of, or an invitation to purchase, any of the Securities in any jurisdiction in which such offer or invitation would be unlawful. In this Offering Memorandum, all references to: • the “Company” or “Asia Aviation” refers to Asia Aviation Public Company Limited, a public company with limited liability registered in the Kingdom of Thailand; • “Thai AirAsia” refers to Thai AirAsia Company Limited; • “we”, “our”, “ourselves” and “us” refers to the Company and/or, where the context requires, Thai AirAsia; • the “Group” refers to the Company, Thai AirAsia and their respective subsidiaries, joint ventures and associate companies taken as a whole; • the “AirAsia Group” refers to AirAsia Berhad, its subsidiaries, joint ventures and associate companies taken as a whole; • “Indonesia AirAsia” refers to PT Indonesia AirAsia; • “AirAsia Investment” refers to AirAsia Investment Ltd.; • “you” or “your” refers to potential investors or purchasers of our ordinary shares; • “LCC” refers to a low cost carrier; • “Baht” or “Bt” refers to the legal currency of Thailand, “U.S. Dollar” or “US$” refer to the legal currency of the United States of America, “Ringgit” or “RM” refer to the legal currency of Malaysia; • “PLCA” refers to the Public Limited Company Act of Thailand B.E. 2535 (1992), as amended; • “Shares” refer to our ordinary shares of par value Baht 0.10 each; • “Thailand” or “Thai” refers to the Kingdom of Thailand, “Government” refers to the Government of Thailand and “Cabinet” refer to the Thai cabinet; • “DCA” refers to the Thai Department of Civil Aviation; • “Non-Voting Depositary Receipts” or “NVDRs” refer to separate securities issued by the NVDR Issuer and sold by the NVDR Issuer to investors against the deposit of underlying shares with the TSD for the account of the NVDR Issuer; and • “NVDR Issuer” refers to Thai NVDR Company Limited, a private company with limited liability registered in the Kingdom of Thailand.

ii ENFORCEABILITY OF CIVIL LIABILITIES We are incorporated in Thailand. A substantial majority of our Selling Shareholders, directors and executive officers and the experts named in this Offering Memorandum are residents of Thailand. Also, substantially all the assets of our Selling Shareholders, directors and executive officers are located in Thailand. As a result, you may not be able to: • effect service of process upon us or these other persons outside Thailand; or • enforce against us in Thai courts judgments obtained in courts outside of Thailand, including judgments based on the securities laws of other countries. Thai courts will not enforce any judgment or order obtained outside Thailand, but a judgment or order from a foreign court may, in the discretion of a court in Thailand, be admitted as evidence of an obligation in a new proceeding instituted in that court, which would consider the issue on the evidence before it. Thus, to the extent investors are entitled to bring legal action against the Company or these persons, investors may be limited in their remedies and any recovery in any Thai proceedings may be limited at the relevant court’s discretion. See “Risk Factors — Risks Relating to Thailand”.

iii SPECIAL NOTE REGARDING NVDRS The sale of the Shares to non-Thai persons is subject to certain foreign ownership restrictions under the laws of Thailand. See “Risk Factors — Risks Relating to the NVDRs — You may not be able to register the ownership of the Shares underlying the NVDRs if you exchange your NVDRs for the Shares”. For purposes of the International Offer, non-Thai investors will be required to purchase and receive NVDRs issued in respect of Shares, rather than Shares. NVDRs are separate securities issued by the NVDR Issuer, a wholly-owned subsidiary of the SET which is not in any way related the Company, and are sold by the NVDR Issuer to investors against the issue of underlying Shares by us to the NVDR Issuer. An investment in NVDRs involves special risks that are described in “Risk Factors — Risks Relating to the NVDRs” and “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”. Each investor that purchases and receives NVDRs, by its acceptance thereof, will be deemed to have acknowledged, represented to and agreed with us, the International Managers and the NVDR Issuer that: (i) it is acquiring the NVDRs outside the United States in an offshore transaction meeting the requirements of Regulation S under the U.S. Securities Act; (ii) it agrees to comply with the terms and conditions of the NVDRs set forth in “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”, as the same may be revised from time to time by the NVDR Issuer in accordance with the procedures set forth therein; (iii) it acknowledges that the issuance of the NVDRs is conditional upon the issuance of underlying Shares to the NVDR Issuer; (iv) it acknowledges that the subscription of the NVDRs will be void if the NVDR subscription letter is not submitted to the NVDR Issuer; (v) it agrees that, to the extent that the NVDR Issuer is not able to hold the underlying Shares for any reason whatsoever, it will return the NVDRs to the NVDR Issuer for cancellation (upon confirmation that the NVDR Issuer has sold the underlying Shares and arranged for the payment to the investor for the underlying Shares sold); and (vi) it agrees not to make any claim against the NVDR Issuer for any damages that may have been incurred by the investor in connection with the subscription of the NVDRs by the investor. We have been informed by the NVDR Issuer that the terms and conditions of the NVDRs are set forth in “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”, a document prepared and made available by the NVDR Issuer to prospective purchasers of NVDRs. We have been informed by the NVDR Issuer that this document contains the terms and conditions that are currently in effect, but that the terms and conditions and other information set forth therein are subject to further alteration or modification from time to time in accordance with the provisions thereof. For the convenience of prospective purchasers of NVDRs, we have attached as Annex A to this Offering Memorandum a copy of this document. We have neither prepared this document nor independently confirmed the statements set forth therein, and we take no responsibility for its contents. Prospective investors are urged to carefully read the “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus” in its entirety and to consult with their own financial, legal, accounting and tax advisors with regard to any proposed investment in NVDRs. In addition, see “Risk Factors — Risks Relating to the NVDRs”.

iv PRESENTATION OF FINANCIAL AND STATISTICAL DATA This Offering Memorandum contains the audited proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 of the Company and the audited financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012 of Thai AirAsia, each of which has been prepared and presented in accordance with generally accepted accounting principles in Thailand (“Thai GAAP”). The audited proportionate consolidated and company financial statements of the Company as of and for the years ended December 31, 2009, 2010 and 2011 and the audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011, have been audited by PricewaterhouseCoopers ABAS Ltd. (“PwC Thailand”), a member firm of PricewaterhouseCoopers International Limited. The unaudited proportionate consolidated and company interim financial information of the Company as of and for the three months ended March 31, 2011 and 2012 and the unaudited interim financial information of Thai AirAsia as of and for the three months ended March 31, 2011 and 2012, have been reviewed by PwC Thailand, who did not express an audit opinion on this financial information. The audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011 contain an explanatory paragraph that states that, as of December 31, 2009, 2010 and 2011, Thai AirAsia’s total current liabilities exceeded its total current assets by Baht 5,220.7 million, Baht 3,310.0 million and Baht 1,394.3 million, respectively, but that the financial statements have been prepared on a going concern basis as the financial information of Thai AirAsia for the year ended December 31, 2011 revealed a significant improvement in operating results. Thai GAAP differs in certain material respects from International Financial Reporting Standards (“IFRS”). For a description of significant accounting differences between Thai GAAP and IFRS that are relevant to the Company’s proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 as well as Thai AirAsia’s financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012, see “Summary of Significant Differences Between Thai GAAP and IFRS”. Solely for the convenience of the reader, unless otherwise indicated, certain Baht amounts in this Offering Memorandum have been translated to U.S. Dollars, and certain U.S. Dollar amounts have been translated to Baht, in each case based on the average buying (telex transfer) and selling exchange rate of commercial banks in Bangkok announced by The Bank of Thailand (the “BOT”) as of December 31, 2011, which was Baht 31.69 = US$1.00. On May 9, 2012, such rate was Baht 31.03 = US$1.00. No representation is made that the Baht or U.S. Dollar amounts referred to in this Offering Memorandum could have been or could be converted into U.S. Dollars or Baht, as the case may be, at any particular rate or at all. See “Exchange Rates and Exchange Controls” for certain historical information on the reference rate between the Baht and the U.S. Dollar. Any discrepancies in the tables included in this Offering Memorandum between the amounts listed and the totals are due to rounding.

INDUSTRY AND MARKET DATA This Offering Memorandum includes market share and industry data and forecasts that we have obtained from industry publications and surveys, including an industry report entitled “Report of the Aviation Consultant: Thai AirAsia Co., Ltd.” dated January 16, 2012 that we have commissioned from Strategic Airport Planning Ltd (“S-A-P”) regarding Thai AirAsia and air travel in Southeast Asia, which is summarized in the section entitled “Industry” and reproduced in Annex B hereto. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. While we have taken reasonable actions to ensure that the information is extracted accurately and in its proper context, neither we, our Selling Shareholders, the International Managers, the Thai Lead Underwriters nor our or their affiliates, have independently verified any of the data from third party sources or ascertained the underlying economic assumptions relied upon therein. As a result, you are cautioned against undue reliance on such information.

v FORWARD-LOOKING STATEMENTS This Offering Memorandum contains “forward-looking” statements that relate to future events, which are, by their nature, subject to significant risks and uncertainties. All statements, other than statements of historical fact contained in this Offering Memorandum, including, without limitation, those regarding our future financial position and results of operations, strategy, plans, objectives, goals and targets, future developments in the markets where we participate or are seeking to participate and any statements preceded by, followed by or that include the words “believe”, “expect”, “plan”, “aim”, “intend”, “will”, “may”, “project”, “estimate”, “forecast”, “anticipate”, “predict”, “seek”, “should” or similar words or expressions, are forward-looking statements. These forward-looking statements include, without limitation, statements relating to: • our overall future business development and economic performance; • the estimated financial information regarding, and the future development and economic performance of, our business; • our future earnings and cash flow; • our business strategy; • our expected expansion plans; • regulatory changes; and • future Government policy relating to the transportation and aviation industries in Thailand. The future events referred to in these forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control, which may cause the actual results, performance or achievements, or industry results to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These forward-looking statements are based on numerous assumptions regarding our present and future business strategies and the environment in which we will operate in the future and are not a guarantee of future performance. Important factors that could cause the actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, the following: • our competitive environment, including new market entrants; • changes in the price of aviation fuel and crude oil; • changes in Government regulation of the Thai transportation and aviation industries, including the Air Navigation Act B.E. 2497 (1954), as amended and the Announcement of the National Executive Council No. 58; • the outcome of legal and regulatory proceedings in which we are involved or may become involved; • changes in the value of the Baht against other currencies, including the U.S. Dollar; • war or political unrest in the Middle East or elsewhere, or acts of international or domestic terrorism; • changes in interest rates; • the availability and terms of external funding to finance our investments and expansion plans; • fluctuations in our operating costs, in particular those that are beyond our control; • changes in general economic, business, political and regulatory conditions in Thailand; • changes in the laws, regulations, taxation, accounting standards or practices, or policies of the Government which apply to us; • labor unrest or other similar situations; • the availability to obtain and retain skilled personnel; • the availability of insurance coverage at commercially acceptable premiums; • accidents, public disorder, natural disasters, severe weather or outbreaks of infectious diseases such as the Influenza A (H1N1) virus; and • our success at managing the risks of the above factors.

vi This list of important factors is not exhaustive. Additional factors that could cause the actual results, performance or achievements to differ materially include, but are not limited to, those discussed under “Risk Factors”. When relying on forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which we operate. Such forward-looking statements speak only as of the date on which they are made. Accordingly, we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. We do not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. Accordingly, you should not place undue reliance on any forward-looking statements. Our ability to maintain and grow our revenues, net income and cash flows depends upon continued capital expenditure, whether by us or our joint venture. In addition, our capital expenditure and investment plans are subject to a number of risks, contingencies and other factors, including those listed above, some of which are beyond our control. We adjust our capital expenditure and investment budgets periodically, based on factors deemed relevant by us. Our ability to obtain adequate financing to satisfy our capital expenditure and investment budget and debt service requirements may be limited by our financial condition, results of operations, legal and regulatory issues and the liquidity of the international and domestic financial markets. We may make additional capital expenditures and investments as opportunities or needs arise. We may increase, reduce or suspend our planned capital expenditures or investments or change the timing and use of our capital expenditures from what is currently planned in response to market conditions, production trends or for other reasons. For the foregoing reasons, our actual future capital expenditures and investments are likely to be different from our current budgeted capital expenditure and investment amounts, and those differences may be significant.

vii [THIS PAGE INTENTIONALLY LEFT BLANK] SUMMARY This summary may not contain all the information that may be important to you in deciding to invest in the Shares. You should read the entire Offering Memorandum, including the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements and related notes contained elsewhere in this Offering Memorandum and the section entitled “Risk Factors” beginning on page 18 of this Offering Memorandum, before making an investment decision.

Overview We are the leading Thai LCC in terms of passengers carried at AOT airports, with a market share of 12.7% for the year ended September 30, 2010, according to S-A-P. Our vision is to be the lowest cost airline in every market we serve without compromising our level of service. We focus on providing high-frequency services on short-haul, point-to-point international and domestic routes. We operate from three hubs in Thailand, namely Bangkok, Phuket and Chiang Mai, and plan to open a fourth hub in Hatyai by 2013 and a fifth hub in Udon Thani by 2014. We target markets within a four-hour flight time from our various hubs, which gives us access to a population of approximately 3,153 million people in Southeast Asia, India and China as of the end of 2010. We believe that the growing population in Thailand (approximately 64 million people as of the end of 2010) provides an attractive market in which we can stimulate air travel among a population that previously could not afford to travel by air or who live in areas not serviced by other airlines. Our business model is based on that of AirAsia Berhad, which will own 45.0% of Thai AirAsia after the completion of the Combined Offering and after the Company completes the subscription of new shares in the Thai AirAsia rights offering, and with whom we have a strategic partnership. We believe our simple single-class, single type fleet configuration, point-to-point operations, high aircraft utilization, scale, distribution channels and extensive route network provide us with a cost advantage over other Thai airlines and one that compares favorably with other LCCs around the world. Our cost competitiveness is evidenced by Thai AirAsia’s cost per available seat kilometer (“ASK”) of Baht 1.39 (4.61 U.S. cents at an exchange rate of US$1.00 = Baht 30.15) in 2010 and Baht 1.58 (4.99 U.S. cents at an exchange rate of US$1.00 = Baht 31.69) in 2011. Our low costs, low fares, strong brand and marketing and reliable service have enabled us to significantly expand our operations since we started operations in 2004. We have achieved strong growth in revenue from passenger seat sales since we started operations in 2004. Thai AirAsia’s passenger revenue increased from Baht 7,582.3 million in 2009 to Baht 10,260.3 million in 2010 and to Baht 13,007.5 million (US$410.5 million) in 2011, which represents a compounded annual growth rate (“CAGR”) of 31.0% from 2009 to 2011. Similarly, our fleet size grew from 20 aircraft as of December 31, 2009 to 22 aircraft (including one spare) as of December 31, 2011. We took delivery of two additional aircraft in January and February 2012 and we intend to expand our fleet to 48 Airbus A320 aircraft by 2016. Thai AirAsia also achieved a strong EBITDAR margin of 31.0% in 2011. Thai AirAsia’s domestic passenger services comprised 44.1% of its passenger revenue and 57.9% of its total passengers in 2011. Thai AirAsia’s international passenger services comprised 55.9% of its passenger revenue and 42.1% of its total passengers in 2011. We have been able to achieve our success despite an extraordinarily difficult period for the airline industry caused by, among other factors, the adverse effects of the global economic crisis which started in 2007, terrorist attacks, and rising fuel prices and insurance premiums. Our success is also notable given that, since we started operations in 2004, we have competed against strong incumbent operators, some of whom have significantly greater financial resources.

1 2010 to 2030, along with South Asia and China. Air passenger activity at commercial airports in Thailand alone grew by 4.4% per annum from 2005 to 2010. Air travel in Thailand is supported by a number of factors including the country’s GDP growth, per capita income growth, tourist arrivals, topography and liberalizing air travel market. Historically, air traffic growth is correlated with GDP growth and Thailand’s GDP is expected to continue to grow. Thailand’s GDP grew at a CAGR of 7.3% from 2005 to 2010 and is expected to grow at a CAGR of 6.6% from 2010 to 2015, according to S-A-P. Per capita income also has an effect on air travel and suggests potential for growth in Thailand. In 2010, Thailand’s total RPK per capita stood at 895, while Singapore had much higher RPK per capita of 16,975. Furthermore, we expect the significant LCC penetration in Thailand (51.8% of domestic penetration from October 1 to October 7, 2010) will continue to stimulate demand. S-A-P expects international passengers to grow as they have in the past with a CAGR of 4.1% from 2005 to 2010, showing resilience despite extraneous shocks such as SARS in 2002, a tsunami in 2004 and political unrest and the financial crisis in 2008. Finally, given Thailand’s expansive topography lacks an effective road and rail system between many destinations and separation from most international destinations by sea, air transport is expected to capture increased travel demand.

We are the leading low cost carrier in Thailand Thai AirAsia has the largest market share in Thailand amongst LCCs, serving 63.8% of total LCC domestic and international passengers at AOT airports, and second amongst all carriers, serving 12.7% of total domestic and international passengers at AOT airports for the year ended September 30, 2010, according to S-A-P. Thai AirAsia has the most comprehensive network among LCCs in Thailand, covering 11 destinations (including three hubs) in Thailand and 14 destinations in eight countries outside of Thailand. In addition, the combined network of AirAsia Berhad, Indonesia AirAsia and Thai AirAsia covers 68 destinations in 15 countries. It is the only airline with hubs outside Bangkok, enabling it to operate flights within Thailand that bypass Bangkok, and it is the only LCC operating domestic and international flights from Suvarnabhumi Airport.

We have a successful track record of growth Thai AirAsia has successfully demonstrated a track record of growth in passengers and revenues by expanding its network and re-fleeting and increasing its capacity while maintaining high load factors. In August 2010, Thai AirAsia completed its re-fleeting and expansion from a mix of eight aging 148-seat Boeing 737-300 aircraft and 12 180-seat Airbus A320 aircraft at the end of 2009 to a single type fleet of 22 Airbus A320 aircraft with an average age of two years and four months as of December 31, 2011. We took delivery of two additional Airbus A320 aircraft in January and February 2012. Despite capacity expansion at a CAGR of 18.9% based on ASKs during the period from January 1, 2009 to December 31, 2011, Thai AirAsia maintained its load factors at 76% in 2009, 78% in 2010 and 80% in 2011. As a result, Thai AirAsia has been able to serve a continually growing number of passengers from 5.0 million in 2009 to 5.7 million in 2010 and to 6.9 million in 2011, while generating revenues of Baht 9,281.2 million in 2009, Baht 12,098.7 million in 2010 and Baht 16,157.6 million (US$509.9 million) in 2011.

2 • High aircraft utilization and efficient operations. Thai AirAsia’s aircraft were operated at an average of 11.5 block hours a day and its average turnaround time was approximately 30 minutes in 2011. Thai AirAsia optimizes aircraft utilization with simple point-to-point operations, a single fleet type and fast turnaround times. Thai AirAsia also provides incentives for pilots to conserve fuel and operate aircraft more efficiently. In addition, Thai AirAsia has improved margins by optimizing high margin ancillary income. Thai AirAsia can operate profitably with low base fares because of high load factors that drive passenger volume, which on average generated Baht 383 of ancillary income per passenger in 2011. Thai AirAsia generates ancillary income from a number of sources, including baggage fees, convenience fees, seat selection fees, in-flight meals, and merchandise. Ancillary income has very little incremental cost and as a result generates higher margins than passenger revenues.

We have a strong partnership with, and unique ability to leverage upon, our relationship with the AirAsia Group The AirAsia Group is one of the largest LCCs in the world and is expected to continue growing as it recently ordered 200 Airbus A320 New Engine Option (“A320neo”) aircraft in a deal valued at approximately US$18.2 billion, based on the list price. The AirAsia Group is also a pioneer of the joint venture business model. As a result, Thai AirAsia, along with other companies in the AirAsia Group, benefit from the broader AirAsia Group network, including increased bargaining power and cross-selling opportunities. For example, Thai AirAsia’s partnerships with AirAsia Berhad and Indonesia AirAsia allow its customers to connect to 68 destinations in 15 countries in their combined route network. AirAsia is also one of the most recognized brands in the aviation industry. It has won numerous awards, including Skytrax’s World’S Best Low Cost Airline in 2009, 2010 and 2011, and TTG Travel Awards 2009 Best Asian Low-Cost Carrier, and AirAsia Berhad’s CEO won the Malaysia Business Leadership Masterclass Global CEO of the Year in 2010. It advertises actively in major sporting events, such as Formula 1 racing, English Premier League football, and the ASEAN Basketball League. AirAsia also actively promotes itself in social media networks, such as Facebook and Twitter. Thai AirAsia believes that its strong partnership with, and ability to leverage upon its relationship with, the AirAsia Group has given it access to unique, profitable opportunities. In addition, AirAsia’s strong brand equity has allowed Thai AirAsia to capture market share in existing routes and attract passengers in new routes.

We have a capital structure that gives us flexibility to generate strong free cash flows in the future Following the Combined Offering and Thai AirAsia’s rights offering, Thai AirAsia believes that its strengthened capital structure will enable it to continue to take advantage of growth opportunities, effectively compete, and provide a certain extent of financial protection against any temporary deterioration in business conditions. In addition, Thai AirAsia has total debt with financial institutions (which includes finance leases) of Baht 513.2 million (US$16.2 million) as of December 31, 2011 and could increase borrowings, if desired, to own rather than lease aircraft. In addition, Thai AirAsia has generated strong operating cashflows as evidenced by EBITDA of Baht 2,275.3 million (US$71.8 million) in 2011.

We have an experienced management team with a proven track record Thai AirAsia’s key management team, led by Mr. Tassapon Bijleveld, has extensive managerial experience and technical knowledge, particularly in Thailand’s aviation market. Thai AirAsia’s key management team comprises six officers who have an average experience of approximately seven years in Thai AirAsia. A majority of the key management team members have been with Thai AirAsia since commencement of operations in 2004. Thai AirAsia believes that its management team have, over the years, demonstrated their ability to expand the business, establish brand identity, nurture customer loyalty, achieve cost efficiencies, turn around negative earnings and steadily navigate through various political, economic, health and environmental shocks.

Our Strategy Our goal is to establish ourselves as a leading low-cost carrier in every market that we serve by offering passengers a safe, reliable and enjoyable flying experience at an affordable price.

3 The principal components of our strategy are as follows:

Continue to grow the LCC business

To continue growing the LCC business in Thailand, Thai AirAsia plans to:

• Stimulate growth in Thailand’s air travel market. Thai AirAsia intends to continue stimulating growth in Thailand’s air travel market by tapping into Thailand’s growing population, strong tourism dynamics, and geographic configuration. Thai AirAsia intends to continually offer fares that are, on average, substantially lower than the published fares of its full-service competitors, and competitively priced relative to the published fares of its low-cost competitors and alternate modes of transport. Thai AirAsia also intends to offer tickets at promotional prices to generate interest in new or immature markets.

• Expand route network. Thai AirAsia intends to expand its route network by using its hubs in Thailand as platforms to operate high-volume, short-haul routes to cities within a four-hour flight time. Opening hubs closer to the north and south of Thailand allows Thai AirAsia to tap into potential markets in Southern China and Eastern India, respectively. Thai AirAsia also focuses on routes that are under-served or not served by other airlines, including routes that bypass Bangkok. Thai AirAsia continually assesses potential routes based on a clear set of criteria that include, amongst others, airport and runway infrastructure, minimum accessible population and existing competition.

• Increase flight frequencies. Thai AirAsia intends to increase flight frequencies in established markets as well as markets with expected high growth potential. Thai AirAsia continuously monitors its existing route network and an increase in-flight frequency is generally considered for routes where the load factor is consistently higher than 80% for a certain period of time.

• Increase aircraft fleet and open new hubs. To support the growing demand for LCC business, Thai AirAsia plans to procure 24 additional aircraft over the next five years and open additional hubs to create new routes to support passenger demand.

Maximize profitability

To maximize profitability, Thai AirAsia plans to:

• Maximize route profitability. Thai AirAsia intends to develop and optimize revenue streams by focusing on route profitability through the use of a revenue management system. Thai AirAsia maximizes route profitability by developing a portfolio of routes which have the potential to deliver consistently high passenger load factors at attractive yields. Thai AirAsia continually reevaluates its route network to increase frequencies in profitable routes and eliminate unprofitable ones. In addition, Thai AirAsia employs a revenue management system that allows Thai AirAsia to maximize its revenue from passenger seat sales while still offering fares that are, on average, lower than those of its competitors on the same routes.

• Maximize existing and introduce new streams of ancillary income. Thai AirAsia currently generates ancillary income through fees including, but not limited to, baggage handling fees, excess baggage fees, seat selection fees, and in-flight sales of meals and beverages. In 2011, ancillary services revenue per passenger increased 29.5% to Baht 383 compared to Baht 296 in 2010. Thai AirAsia intends to expand its ancillary revenue base by restructuring fees relating to existing ancillary services, such as baggage handling fee rates which were revised in 2009.

• Improve operating efficiency. Thai AirAsia intends to continue improving operating efficiency to minimize operating costs. Measures include maintaining a relatively young average fleet age which translates into higher fuel efficiency, maximizing aircraft utilization by decreasing aircraft turnaround time and maximizing on-time performance. This results in reduction of cost per ASK (non-fuel). Furthermore, Thai AirAsia has a policy that pilots are to save fuel on flights by cruising at optimal speeds to consume the least amount of fuel for a given distance. Finally, Thai AirAsia also minimizes operating costs by offering its lowest fares through the Internet to encourage travelers to make Internet bookings, by employing a full ticketless system, which saves administrative costs and related expenses, and by using the bargaining power of the AirAsia Group to negotiate for lower charges, including charges relating to aircraft lease, fuel, fuel hedging and maintenance services.

4 Continue to strengthen the AirAsia brand To continue strengthening AirAsia’s brand equity, Thai AirAsia plans to: • Invest in and enhance AirAsia’s brand. Thai AirAsia intends to generate publicity and conduct marketing and public relations activities to maintain a high level of brand awareness. Thai AirAsia also intends to continue developing the AirAsia brand and brand awareness in the country, as well as the new markets it intends to serve, by using its traditional marketing channels and social media and digital networks on a more frequent basis. Finally, Thai AirAsia intends to continue developing a strong relationship with the other members of the AirAsia Group for business partnership and brand management. • Focus on customer service. Thai AirAsia intends to emphasize high-quality, friendly and personal service, despite charging low fares and employing an LCC model. As part of its efforts to attract business passengers, Thai AirAsia introduced a “hot seat” service, where passengers may choose seats at emergency exit rows (which have more legroom) or at the first five rows of the aircraft. In order to provide quality services, Thai AirAsia also selects and trains employees to provide services consistent with Thai AirAsia’s goals. Lastly, Thai AirAsia is also committed to improving the quality of its services through initiatives to speed up reservations and check-in through the introduction of new technology, improving baggage handling services and providing rapid and effective responses to guest feedback. • Maintain high safety standards. Thai AirAsia complies with the highest international aviation safety standards and practices and keeps its operations simple and transparent. Thai AirAsia maintains high safety standards to enable it to procure favorable rates on insurance policies. It is also Thai AirAsia’s policy to maintain a low average fleet age to minimize the possibility of mechanical malfunctions.

Corporate Information Our registered office is at 60/1 Monririn Building B, 3rd Floor, Soi Sailom, Phahol Yothin Road, Samsen Nai, Phayathai, Bangkok, Thailand. Our telephone number is +66 (2) 315 9800.

Corporate Structure The following chart shows our shareholding structure before the Combined Offering.

Pre-Combined Offering Structure

AirAsia Selling Berhad Shareholders

100% 100%

AirAsia The Company Investment

49% 51%

Thai AirAsia

We intend to use substantially all of the net proceeds to us of the Combined Offering to subscribe for new shares in Thai AirAsia pursuant to Thai AirAsia’s rights offering to its existing shareholders scheduled to take place immediately after, but on the same day as, the Primary Offering. AirAsia Investment and the other seven shareholders holding one share each in Thai AirAsia have each agreed that it will not subscribe to its rights entitlement in the rights offering. As a result, we expect to increase our shareholding in Thai AirAsia to 55.0% after the completion of Thai AirAsia’s rights offering, which we expect to occur on the same day as the Primary Offering.

5 The following chart shows our expected shareholding structure after the Combined Offering and Thai AirAsia’s rights offering.

Post-Combined Offering Structure

AirAsia Selling Public Berhad Shareholders

100% 60% 40%

AirAsia The Company Investment

45% 55%

Thai AirAsia

6 THE OFFERING Company ...... Asia Aviation Public Company Limited. Selling Shareholders ...... Mr.Tassapon Bijleveld, Mr. Pornanan Gerdprasert, Mr. Tanapat Ngamplang, Mr. Preechaya Rasametanin, M. L. Bovornovadep Devakula and Mr. Santisuk Klongchaiya. Combined Offering ...... Weareoffering 750,000,000 New Shares and the Selling Shareholders are offering 1,190,000,000 Vendor Shares (in aggregate representing 40.0% of our total issued and outstanding Shares after the Combined Offering) in the Company in a Combined Offering comprising the Primary Offering and the Secondary Offering. Completion of the Secondary Offering is conditional on the completion of the Primary Offering and the listing of our Shares on the SET. Primary Offering ...... Weareoffering 750,000,000 New Shares and the Selling Shareholders are offering 462,500,000 Vendor Tranche A Shares (in aggregate representing 25.0% of our total issued and outstanding Shares after the Combined Offering) in the Company in a Primary Offering comprising the International Offer and the Domestic Offer. Completion of the International Offer and the Domestic Offer are each conditional on the completion of the other. Secondary Offering ...... TheSelling Shareholders are offering 727,500,000 Vendor Tranche B Shares (in aggregate representing 15.0% of our total issued and outstanding Shares after the Combined Offering) in the Company in a Secondary Offering on a private placement basis through the big lot board of the SET on the first day on which our Shares are listed on the SET. International Offer ...... Weareoffering 400,000,000 International Shares (in aggregate representing 8.2% of our total issued and outstanding Shares after the Combined Offering) outside the United States and Thailand in reliance on Regulation S under the U.S. Securities Act and other applicable laws, concurrently with the Domestic Offer. NVDRs ...... Thetransfer of our Shares to non-Thai persons is subject to certain foreign ownership restrictions under the laws of Thailand and our Articles of Association. As a result, investors purchasing the International Shares in the International Offer will be required to purchase and receive NVDRs in lieu of the International Shares. The International Shares will be issued to the NVDR Issuer to enable the issuance of NVDRs to the purchasers of the International Shares. Domestic Offer ...... Weareoffering 350,000,000 Domestic Shares and the Selling Shareholders are offering 462,500,000 Domestic Shares (in aggregate representing 16.8% of our total issued and outstanding Shares after the Combined Offering) in a public offering in Thailand concurrently with the International Offer. The Domestic Offer comprises an offer of 412,500,000 Domestic Shares in a public retail offer and 400,000,000 Domestic Shares to institutional investors in Thailand. The offering price for the Domestic Offer will be the same as the offering price for the International Offer. The Domestic Offer is being made pursuant to a prospectus filed with the Thai SEC. Reallocation ...... Intheevent the Domestic Offer is over-subscribed and there is a corresponding under-subscription in the International Offer, New Shares may be clawed back from the International Offer and reallocated to the Domestic Offer. In the event that the International Offer is over-subscribed and there is a corresponding under-

7 subscription in the Domestic Offer, New Shares may be clawed back from the Domestic Offer and reallocated to the International Offer. There shall be no reallocation in the event the Domestic Offer and the International Offer are both over-subscribed. Any such reallocation is subject to the agreement of certain parties to the Thai Underwriting Agreement and the Purchase Agreement, in each case as defined herein, as applicable. Offering price per Share in the Combined Offering ...... Baht 3.70 per Share or per NVDR, excluding a brokerage fee amounting to 1.0% of the offering price which shall be payable by purchasers of Securities in the International Offer. Use of proceeds ...... Weestimate the net proceeds to us of the Combined Offering from the sale of New Shares to be Baht 2,746.3 million (US$86.7 million), after deducting underwriting commissions and applicable value added taxes in connection with the Combined Offering. We intend to use the net proceeds to us of the Combined Offering as follows: • Baht 2,663.1 million (US$84.0 million) to subscribe for new shares in Thai AirAsia, which we expect will increase our shareholding in Thai AirAsia to 55.0%; and • the remainder for general corporate purposes. Thai AirAsia intends to use proceeds of the subscription by us in its shares as follows: • approximately Baht 1,500 million (US$47.3 million) for the expansion of Thai AirAsia’s fleet between 2012 and 2014; and • the remainder for working capital and general corporate purposes. See “Use of Proceeds”. We will not receive any of the proceeds from the sale of the Vendor Shares by the Selling Shareholders. The Selling Shareholders have notified us that they intend to use a portion of the proceeds of the Vendor Shares received by each of them to prepay in full all outstanding amounts owed by each of them under the Credit Suisse Loan Agreement. The Selling Shareholders expect such prepayment to be made in two installments, reflecting the timing of receipt of the proceeds from the sale of the Vendor Tranche A Shares and the Vendor Tranche B Shares, respectively. Dividends ...... Registered owners of our Securities will be entitled to receive any dividends declared from time to time. The Company’s and Thai AirAsia’s board of directors intend to adopt a dividend policy which will take into account the profitability of the business and underlying growth in earnings, as well as each entity’s respective capital requirements and cash flows, while maintaining an appropriate level of dividend cover. The terms and conditions of the NVDRs provide that the NVDR Issuer is to make payments to holders of NVDRs equal to the amount of dividends that the NVDR Issuer receives as the registered holder of our Shares in proportion to each NVDR holder’s holdings in the NVDRs. See “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”, “Special Note Regarding NVDRs”, and “Risk Factors — Risks Relating to the NVDRs” for further information concerning the NVDRs. Share capital ...... Wehave an authorized share capital of Baht 485.0 million, consisting of 4,850,000,000 Shares of par value Baht 0.10 each, of which

8 4,100,000,000 Shares were issued and outstanding as of the date of the Offering Memorandum. Market for our Shares; Listing ...... Wehave applied to have our Shares approved for listing and trading on the SET promptly after the increase of paid-up capital represented by the New Shares we are offering has been registered with the Thai Ministry of Commerce (the “MOC”). We expect the registration to occur approximately five business days after the day we receive payment for the New Shares. The SET granted an approval in principle of our listing application on May 22, 2012, and we expect the listing date to occur on or about May 31, 2012. The SET is entitled to consider a listing application for up to seven days following the receipt of a complete listing application. As a result, our Shares may not be listed on the SET until June 6, 2012. Unless and until the SET gives final listing approval, none of our Shares sold in the Combined Offering may be traded on the SET, but buyers and sellers may be matched in off-exchange transactions. For a description of risks relating to the trading and delivery of our Shares, see “Risk Factors — Risks Relating to Our Shares — There are risks associated with the trading and delivery of our Shares on the Stock Exchange of Thailand”. Settlement and delivery of our Primary Shares and the related NVDRs ...... Weexpect payment for the International Shares and the NVDRs to be delivered in connection with the International Offer and for the Primary Shares offered in the Domestic Offer to be made on or about May 29, 2012, which will be prior to the date on which delivery of the Primary Shares and the NVDRs will be made. We expect that delivery of the Primary Shares and the NVDRs offered in the Primary Offering will be made through the SET’s depositary facilities with the TSD approximately five business days after payment. Under Thai law, the status of purchasers of New Shares sold by us in the period between payment for such New Shares and registration of the increase in paid-up capital with the MOC is uncertain. During this period, investors may not be shareholders and instead would likely be considered unsecured creditors. We expect registration of the New Shares to occur no later than five business days after the day payment for the New Shares is made. See “Risk Factors — Risks Relating to Our Shares — There are risks associated with the trading and delivery of our Shares on the Stock Exchange of Thailand” for a summary of certain delivery and listing-related risks relating to the ownership of our Shares. For a description of the status of the purchasers of NVDRs in the period between payment for NVDRs and delivery of NVDRs, see “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”. Settlement and delivery of our Secondary Shares ...... Thecompletion of the Secondary Offering is conditional upon the closing of the Primary Offering and the listing of our Shares on the SET. Assuming these conditions are satisfied, the Selling Shareholders expect the placing agents to pay for the Secondary Shares on or about June 1, 2012, which will be the second day on which our Shares are listed on the SET, and delivery of the Secondary Shares will be made against payment therefor through the SET’s depositary facilities with the TSD on the same date such payment is made. Voting rights ...... Owners of our Shares will be entitled to full voting rights, as described in the “Description of Shares — Voting Rights”.

9 Owners of the NVDRs representing our Shares do not have any voting rights except as described in “Description of NVDRs and the NVDR Issuer”. See “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”, “Special Note Regarding NVDRs”, and “Risk Factors — Risks Relating to the NVDRs” for further information concerning the NVDRs. Foreign share ownership and transfer restrictions ...... OurArticles of Association provide for a 0.1% limit on foreign ownership of the issued and outstanding Shares of the Company. Further, our core asset, Thai AirAsia, is subject to nationality restrictions under the Foreign Business Act B.E. 2542 (1999), the Air Navigation Act B.E. 2497 (1954), as amended, and the Announcement of the National Executive Council No. 58 requiring the shares of air service operators and aircraft registrants to be at least 51% held by any one or any combination of the following persons: (a) natural persons who hold Thai nationality; (b) ministries, sub-ministries, departments of the Thai Government; and/or (c) limited companies or public limited companies in which not less than 51% of the shares are held by a Thai Government entity or Thai natural persons. In addition, the TSD, as our registrar, may refuse to register transfers of Shares to a non-Thai person, or divestment may otherwise be required, if as a result of such transfer the percentage of issued and outstanding Shares registered in the name of non-Thai persons would exceed the then applicable limit on foreign ownership of the Shares. Ownership of Shares by non-Thai persons as such is not otherwise restricted by Thai law. SET trading symbol for our Shares ..... AAV Timing of the Combined Offering ..... Thefollowing is a tentative timetable of various events in the Combined Offering (Bangkok time): Pricing of the Primary Offering ...... May22,2012 Final allocation of Shares under the Primary Offering ...... May22,2012 Closing of the Primary Offering ...... May29,2012 Delivery of Primary Shares and NVDRs through the No later than TSD...... May 30, 2012 Closing of the Secondary Offering ...... June 1, 2012 Delivery of Secondary Shares from Secondary Offering through the TSD ...... June 1, 2012 The foregoing schedule may change as a result of, among other things, changes in market conditions or the cancellation of the Combined Offering. Transfer restrictions ...... TheSecurities offered in the Combined Offering have not been, and will not be, registered under the U.S. Securities Act. Therefore, resales by purchasers of all Securities offered in the Combined Offering will be subject to certain restrictions described in “Transfer Restrictions”. Shares available for future sale ...... Under rules issued by the SET, Shares comprising an aggregate of 55% of the post-offering Share capital of the Company cannot be sold for a period of one year (the “SET Lock-Up”) following the date of commencement of trading of our Shares on the SET subject to the following: up to 25% of these Shares may be sold after the period of the first six months after trading commences on the SET and the

10 remaining 75% of these Shares may be sold after the period of the first 12 months after trading commences on the SET. Lock up arrangements ...... WeandtheSelling Shareholders have each agreed with the International Managers that from the date of this Offering Memorandum until the date that is 180 days after the closing date of the Primary Offering, we will not, without the respective written consent of the International Managers, offer, sell or otherwise dispose of any securities of the same class as the Shares offered in the Combined Offering or any securities convertible into or exchangeable for our Securities of the same class as the Shares offered in the Combined Offering. See “Plan of Distribution”. In addition, each of the Selling Shareholders has agreed with the other Selling Shareholders that, for so long as Thai AirAsia is subject to nationality restrictions under applicable Thai laws and regulations, each such Selling Shareholder will not dispose of any of the Shares that he owns to any person other than a Thai individual approved by all of the Selling Shareholders. Each Selling Shareholder has also agreed to deposit with the TSD, as custodian, a specified number of Shares that he owns, which, when aggregated with the number of Shares deposited by the other Selling Shareholders, comprise 51.0% of our total issued and outstanding Shares after the Combined Offering. See “Related Party Transactions — Future Related Party Transactions — Asia Aviation Shareholders’ Agreement” for further details. Risk factors ...... Investing in the Securities involves certain risks which are described in “Risk Factors” beginning on page 18.

11 SUMMARY FINANCIAL INFORMATION You should read the summary financial information presented below in conjunction with the audited proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 of the Company and the audited financial statements as of and for the years ended December 31, 2009, 2010 and 2011 of Thai AirAsia and the unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 of the Company and the unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012 of Thai AirAsia, in each case contained elsewhere in this Offering Memorandum. You should also see the section of this Offering Memorandum entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The Company and Thai AirAsia have derived the summary Thai GAAP financial data from the audited proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 of the Company, and the audited financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012 of Thai AirAsia, prepared and presented in accordance with Thai GAAP and reporting practices in Thailand, as required under Thai law. The audited proportionate consolidated and company financial statements of the Company as of and for the years ended December 31, 2009, 2010 and 2011 and the audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011, have been audited by PwC Thailand. The unaudited proportionate consolidated and company interim financial information of the Company as of and for the three months ended March 31, 2011 and 2012 and the unaudited interim financial information of Thai AirAsia as of and for the three months ended March 31, 2011 and 2012, have been reviewed by PwC Thailand, who did not express an audit opinion on this financial information. In preparing the proportionate consolidated and company financial statements of the Company, we have treated our interest in Thai AirAsia as interest in a joint venture, rather than a subsidiary, to reflect the nature of the joint control. Accordingly, we have accounted for Thai AirAsia on a proportionate consolidation basis by taking 50.0%, as of and for the years ended December 31, 2009 and 2010 and as of and for the three months ended March 31, 2011, and 51.0%, as of and for the year ended December 31, 2011 and as of and for the three months ended March 31, 2012, corresponding to the percentage of equity that we own or jointly control at each period end date, of each of the assets, liabilities, revenues and expenses of Thai AirAsia and combining these with the assets, liabilities, revenues and expenses of the Company on a line-by-line basis after elimination of intra-group transactions. In November 2011, we purchased 1.0% of the equity shares of Thai AirAsia from our Chief Executive Officer, Mr. Tassapon Bijleveld, increasing our equity interest in Thai AirAsia to 51.0%. Effective from May 4, 2012, we treated Thai AirAsia as a subsidiary instead of a joint venture, and we began consolidating Thai AirAsia’s financial statements on a fully consolidated basis (with a deduction for non- controlling interest). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of Accounting — Accounting for Investment in Joint Venture” and Note 16 of the notes to the Company’s interim financial information as of and for the three months ended March 31, 2011 and 2012 for further details. After the Company completes the subscription of new shares in Thai AirAsia following completion of the Combined Offering, we expect that the Company will own 55.0% of Thai AirAsia’s shares. See “Corporate Structure — Post-Combined Offering Structure”. The audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011 contain an explanatory paragraph that states that, as of December 31, 2009, 2010 and 2011, Thai AirAsia’s total current liabilities exceeded its total current assets by Baht 5,220.7 million, Baht 3,310.0 million and Baht 1,394.3 million, respectively, but that the financial statements have been prepared on a going concern basis. The audited financial statements of the Company contain a similar explanatory paragraph. Our and Thai AirAsia’s results for the three months ended March 31, 2012 should not be considered indicative of the actual results we or Thai AirAsia may achieve for the year ending December 31, 2012. Thai GAAP differs in certain material respects from IFRS. For a discussion of significant accounting differences between Thai GAAP and IFRS that are relevant to the Company’s proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 as well as Thai AirAsia’s financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited interim financial information as of and for the three months

12 ended March 31, 2011 and 2012, you should read the section entitled “Summary of Significant Differences Between Thai GAAP and IFRS”.

The Company Proportionate Consolidated Statements of Comprehensive Income

Year Ended December 31, Three Months Ended March 31, Proportionate Consolidated Statements of Comprehensive Income: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Revenues ...... 4,640.6 6,049.4 8,123.2 256.3 2,080.1 2,482.7 78.3 Operating costs ...... (4,658.0) (4,982.6) (6,915.3) (218.2) (1,607.9) (2,055.7) (64.9) Gross profit (loss) ...... (17.4) 1,066.8 1,207.9 38.1 472.2 427.0 13.5 Net gain on exchange rates ...... 64.8 178.4 78.0 2.5 18.0 1.7 0.1 Other income ...... 109.0 181.5 226.0 7.1 79.2 49.2 1.5 Profit before expenses ...... 156.4 1,426.7 1,511.9 47.7 569.4 477.8 15.1 Selling expenses ...... (121.6) (178.9) (223.9) (7.1) (46.5) (100.6) (3.2) Administrative expenses ...... (120.5) (121.3) (181.9) (5.7) (39.7) (57.7) (1.8) Profit (loss) before finance costs and income tax ...... (85.7) 1,126.5 1,106.0 34.9 483.2 319.5 10.1 Finance costs ...... (0.2) (121.6) (91.9) (2.9) (37.6) (3.1) (0.1) Profit (loss) before income tax ...... (85.9) 1,004.9 1,014.1 32.0 445.6 316.5 10.0 Income tax ...... ————— —— Net profit (loss) for the year/period . . . (85.9) 1,004.9 1,014.1 32.0 445.6 316.5 10.0 Total comprehensive income (expense) for the year/period ...... (85.9) 1,004.9 1,014.1 32.0 445.6 316.5 10.0

Condensed Proportionate Consolidated Statements of Financial Position

As of December 31, As of March 31, Condensed Proportionate Consolidated Statements of Financial Position: 2009 2010 2011 2011 2012 2012 Bt Bt Bt US$ Bt US$ (unaudited) (in millions) Cash and cash equivalents ...... 333.6 260.4 694.4 21.9 1,233.1 38.9 Total current assets ...... 685.4 2,035.4 1,451.0 45.8 1,798.0 56.7 Total non-current assets ...... 640.9 690.4 772.5 24.4 778.3 24.6 Total assets ...... 1,326.3 2,725.8 2,223.5 70.2 2,576.3 81.3 Total debt(1) ...... 2.0 101.3 261.7 8.3 6.6 0.2 Net debt(2) ...... (331.6) (159.1) (432.7) (13.7) (1,226.5) (38.7) Total current liabilities ...... 3,289.4 3,684.5 2,162.2 68.2 2,202.6 69.5 Total liabilities ...... 3,290.6 3,685.2 2,215.9 69.9 2,252.2 71.1 Total shareholders’ equity ...... (1,964.3) (959.4) 7.7 0.2 324.1 10.2 Total liabilities and shareholders’ equity ...... 1,326.3 2,725.8 2,223.5 70.2 2,576.3 81.3

13 Condensed Proportionate Consolidated Statements of Cash Flows Year Ended December 31, Three Months Ended March 31, Condensed Proportionate Consolidated Statements of Cash Flows: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Net cash generated from (used in) operating activities ...... 86.4 (156.9) 262.4 8.3 97.2 816.2 25.8 Net cash generated from (used in) investing activities ...... (144.9) (16.6) 23.8 0.8 (19.9) (31.1) (1.0) Net cash generated from (used in) financing activities ...... (0.7) 99.3 126.5 4.0 (50.4) (258.2) (8.1) Cash and cash equivalents at end of year/period ...... 333.6 260.4 694.4 21.9 293.7 1,233.1 38.9 Thai AirAsia Statements of Comprehensive Income Year Ended December 31, Three Months Ended March 31, Statements of Comprehensive Income: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Revenues ...... 9,281.2 12,098.7 16,157.6 509.9 4,160.2 4,868.1 153.6 Operating costs ...... (9,315.9) (9,965.2) (13,757.6) (434.1) (3,215.8) (4,030.7) (127.2) Gross profit (loss) ...... (34.7) 2,133.5 2,400.0 75.7 944.4 837.4 26.4 Net gain on exchange rates ...... 129.5 356.8 155.3 4.9 36.0 3.3 0.1 Other income ...... 217.9 363.0 451.1 14.2 158.4 96.3 3.0 Profit before expenses ...... 312.7 2,853.3 3,006.4 94.9 1,138.8 937.0 29.6 Selling expenses ...... (243.0) (357.9) (444.7) (14.0) (92.9) (197.3) (6.2) Administrative expenses ...... (239.8) (241.3) (357.9) (11.3) (79.2) (112.1) (3.5) Profit (loss) before finance costs and income tax ...... (170.1) 2,254.1 2,203.8 69.5 966.7 627.6 19.8 Finance costs ...... (0.4) (243.1) (183.7) (5.8) (75.1) (6.0) (0.2) Profit (loss) before income tax ..... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6 Income tax ...... — — — — — — — Net profit (loss) for the year/period ...... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6 Total comprehensive income (expense) for the year/period .... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6

Condensed Statements of Financial Position As of December 31, As of March 31, Condensed Statements of Financial Position: 2009 2010 2011 2011 2012 2012 Bt Bt Bt US$ Bt US$ (unaudited) (in millions) Cash and cash equivalents ...... 654.1 507.8 1,359.7 42.9 2,407.2 76.0 Total current assets ...... 1,357.9 4,058.3 2,836.3 89.5 3,508.7 110.7 Total non-current assets ...... 709.3 808.5 953.5 30.1 964.9 30.4 Total assets ...... 2,067.1 4,866.8 3,789.8 119.6 4,473.6 141.2 Total debt(1) ...... 4.0 202.5 513.2 16.2 12.9 0.4 Net debt(2) ...... (650.1) (305.3) (846.5) (26.7) (2,394.3) (75.6) Total current liabilities ...... 6,578.6 7,368.4 4,230.7 133.5 4,300.7 135.7 Total liabilities ...... 6,581.1 7,369.7 4,335.8 136.8 4,397.9 138.8 Total shareholders’ equity ...... (4,514.0) (2,503.0) (546.0) (17.2) 75.7 2.4 Total liabilities and shareholders’ equity ...... 2,067.1 4,866.8 3,789.8 119.6 4,473.6 141.2

14 Condensed Statements of Cash Flows

Year Ended December 31, Three Months Ended March 31, Condensed Statements of Cash Flows: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Net cash generated from (used in) operating activities ...... 173.8 (313.6) 521.4 16.5 194.5 1,591.7 50.2 Net cash generated from (used in) investing activities ...... (289.9) (33.2) 30.6 1.0 (39.8) (61.1) (1.9) Net cash generated from (used in) financing activities ...... (1.4) 198.5 258.1 8.1 (100.7) (506.2) (16.0) Cash and cash equivalents at end of year/period ...... 654.1 507.8 1,359.7 42.9 574.5 2,407.2 76.0

Non-GAAP Financial Measures

Year Ended December 31, Three Months Ended March 31, 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (in millions, except for percentages) EBITDAR(1)(5) ...... 1,674.2 4,577.9 5,003.0 157.9 1,640.3 1,398.4 44.1 EBITDAR margin(4)(5) ...... 18.0% 37.8% 31.0% 31.0% 39.4% 28.7% 28.7% EBITDA(2)(5) ...... (38.2) 2,377.3 2,275.3 71.8 985.1 645.3 20.4 EBITDA margin(4)(5) ...... (0.4)% 19.6 % 14.1% 14.1% 23.7% 13.3% 13.3% EBIT(3)(5) ...... (170.1) 2,254.1 2,203.7 69.5 966.7 627.6 19.8 EBIT margin(4)(5) ...... (1.8)% 18.6% 13.6% 13.6% 23.2% 12.9% 12.9%

(1) Represents earnings before interest and taxation after adding depreciation and amortization and operating lease expenses. Because there are various EBITDAR calculation methods, our presentation of EBITDAR may not be comparable to similarly titled measures used by other companies. (2) Represents earnings before interest and taxation after adding depreciation and amortization. Because there are various EBITDA calculation methods, our presentation of EBITDA may not be comparable to similarly titled measures used by other companies. (3) Represents earnings before interest and taxation. Because there are various EBIT calculation methods, our presentation of EBIT may not be comparable to similarly titled measures used by other companies. (4) Represents EBIT, EBITDA or EBITDAR, as the case may be, divided by revenues. (5) EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR or EBITDAR margins are not standard measures, nor measurements of financial performance or liquidity, under Thai GAAP or IFRS, and should not be considered alternatives to net profit (loss), profit (loss) before finance costs and income tax or any other performance measure derived in accordance with Thai GAAP or IFRS, or as an alternative to cash flow from operating activities. EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR and EBITDAR margins are supplemental measures of Thai AirAsia’s performance that are not required by, or presented in accordance with, Thai GAAP or IFRS. See ‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Non-GAAP Financial Measures” for a reconciliation of Thai AirAsia’s net profit (loss) to its definition of EBIT, EBIT margin, EBITDA, EBITDA margin, EBITDAR and EBITDAR margin.

15 Operating Data The following table presents Thai AirAsia’s operating information for the periods indicated.

Three Months Ended Year Ended December 31, March 31, 2009 2010 2011 2011 2012 Capacity (million seats) ...... 6.6 7.3 8.6 2.2 2.5 Passengers carried (million) ...... 5.0 5.7 6.9 1.8 2.1 International (million) ...... 2.1 2.4 2.9 0.8 0.8 Domestic (million) ...... 2.9 3.3 4.0 1.1 1.3 Seat load factor (%)(1) ...... 76 78 80 84 87 International (%) ...... 73 77 79 84 83 Domestic (%) ...... 78 79 81 85 89 ASK (million)(2) ...... 6,511 7,605 9,199 2,261 2,540 International (million) ...... 4,040 4,680 5,696 1,372 1,501 Domestic (million) ...... 2,470 2,925 3,502 889 1,040 RPK (million)(3) ...... 4,921 5,923 7,389 1,906 2,174 International (million) ...... 2,974 3,600 4,539 1,144 1,238 Domestic (million) ...... 1,947 2,323 2,851 763 936 Average fare(4) (Baht) ...... 1,520 1,791 1,849 1,850 1,778 Revenue per ASK(5) (RASK): (Baht) ...... 1.43 1.59 1.76 1.84 1.92 (US cent)(8) ...... 4.27 5.28 5.54 5.68 6.21 Cost per ASK(6) (CASK): (Baht) ...... 1.51 1.39 1.58 1.50 1.71 (US cent)(8) ...... 4.51 4.61 4.99 4.63 5.54 Cost per ASK (non-fuel)(7): (Baht) ...... 0.99 0.87 0.89 0.86 0.97 (US cent)(8) ...... 2.96 2.87 2.80 2.66 3.16 Number of aircraft at period end ...... 20 19 22 20 24 Boeing 737-300 ...... 80000 Airbus A320 ...... 12 19 22 20 24 Average number of operating aircraft(9) ...... 15.6 18.0 19.4 19.0 22.7 Number of stages flown ...... 39,388 41,823 47,579 11,971 13,662 International ...... 16,612 17,577 20,251 4,989 5,440 Domestic ...... 22,776 24,246 27,328 6,982 8,222 Average stage length (kilometers)(10) ...... 979 1,032 1,074 1,049 1,033 Aircraft utilization (block hours per day)(11) ...... 9.4 9.9 11.5 11.7 11.5 Ancillary services revenue(12) (Baht in millions) ..... 893.0 1,686.7 2,627.2 660.8 753.6 Ancillary services revenue per passenger (Baht) ..... 179 296 383 364 354 Fuel consumed (barrels) ...... 1,217,727 1,346,476 1,600,942 399,816 457,426 Average fuel price(13) (US$ per barrel) ...... 68.0 88.3 124.0 111.2 127.3 On time performance (%)(14) ...... 89 88 84 76 72

16 (8) Based on an exchange rate of US$1.00 = Baht 33.37 in 2009, US$1.00 = Baht 30.15 in 2010, US$1.00 = Baht 31.69 in 2011, US$1.00 = Baht 32.37 in the three months ended March 31, 2011 and US$1.00 = Baht 30.84 in the three months ended March 31, 2012. (9) Month-end average for the period. (10) Represents the average number of kilometers flown per flight. (11) Represents the average block hours per day per aircraft during the relevant period. Block hours is calculated by measuring the duration between the time of departure of an aircraft and the time of arrival at its destination. (12) Comprises revenues relating to baggage handling fees, excess baggage fees, seat selection fees, in-flight sales of meals and beverages, convenience fees, freight, in-flight sales of merchandise and cancellation and documentation fees. (13) Calculated as average fuel price of Jet kerosene for the period (MOPS price). (14) A flight is deemed “on time” if the actual departure time is no more than 15 minutes of the scheduled departure time.

17 RISK FACTORS Before investing in the Securities, prospective investors should pay particular attention to the fact that we, and to a large extent our activities, are governed by the legal, regulatory and business environment in Thailand and other countries in Asia, which differs from that which prevails in other countries. Our business is subject to a number of factors, many of which are outside our control. Prior to making an investment decision, prospective investors should carefully consider, along with the other matters set forth in this Offering Memorandum, the risks and investment considerations set forth below. The risks and investment considerations set forth below are not an exhaustive list of the challenges which we currently face or that may develop in the future. Additional risks, whether known or unknown, may in the future have a material adverse effect on us or on the value of the Securities.

Risks Relating to the Company and Thai AirAsia Our business, financial condition, results of operation and prospects are materially and adversely affected by the cost or unavailability of sufficient quantities of fuel. Jet fuel costs represent the largest component of our total operating expenses, comprising 39.9% and 46.6% of our total operating costs in 2010 and 2011, respectively. As a result, our operating results are significantly affected by changes in the cost and availability of jet fuel and our fuel hedging program may be insufficient to protect us against increases in the price of fuel. We are also exposed to potential losses from our hedging activities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk — Fuel Price Risk” and “Related Party Transactions — Past and Ongoing Related Party Transactions — Fuel Hedging Arrangements” for a summary of our fuel hedging arrangements. We cannot assure you that we will be able to secure new jet fuel derivative contracts on commercially reasonable terms or at all. Both the cost and availability of fuel are subject to many economic and political factors and events occurring throughout the world. Since late 2009, fuel prices have risen sharply. Such increases have forced a number of airlines operating in the Asia Pacific region, including Thai AirAsia, to levy fuel surcharges on its passengers. The DCA does not allow fuel surcharges or other fees to be imposed separately from the air fare for scheduled domestic passenger services, and our fuel surcharges for our flights do not fully compensate us for such increased fuel costs. In addition, we rely mainly on PTT Public Company Limited (“PTT”) and the Shell Company of Thailand Ltd. (“Shell Thailand”) for our jet fuel requirements. In 2011, 70.2% of our aircraft fuel expenses were the result of purchases of jet fuel from PTT and 15.1% were from Shell Thailand. Any decline in the availability of adequate supplies of fuel and/or any increase in the cost of fuel would have a material adverse effect on our costs and on our business, financial condition, results of operation and prospects. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk — Fuel Price Risk”, “Business — Our Operations — Fuel” and “Business — Major Suppliers” for further details.

Increased competition in the airline industry along with competition from other forms of transportation and communication could materially and adversely affect our business, financial condition, results of operation and prospects. The airline industry is highly competitive. Our competition can be categorized as follows: • full-service operators; • other low-cost carriers in Thailand, Southeast Asia, China and India; and • other forms of transportation. We operate out of three hubs in Thailand, namely Bangkok, Phuket and Chiang Mai. Our main competitors for our domestic routes are Thai Airways, Nok Air, Bangkok Airways and Orient Thai Airways and for our international routes are Thai Airways, Singapore Airlines, Malaysian Airlines, Air Macau, Vietnam Airlines, Cathay Pacific Airways, Tiger Airways and Jetstar Asia Airways, as well as potential new entrants, such as the Thai Smile airline expected to be launched by Thai Airways in 2012. See “Business — Competition”. The primary competitive factors include price, schedule, route networks, service levels and type and age of aircraft. Full-service legacy carriers generally have the advantage of being larger and typically state-owned, with significantly greater financial and other resources than us. As a result, they may be in a better position to withstand losses on some of their routes for a longer period of time than we are. Since we began operations in 2004, full-service carriers reduced their fares on certain routes to compete with fares charged by us. If full- service carriers were to reduce and maintain for an extended period their fares to levels at which we could not match while sustaining profitable operations, and were to maintain such reduced fares for an extended period, we cannot assure you that we would be able to maintain such reduced fares for an equivalent period of time.

18 We also face competition from regional low-cost carriers which may have greater financial resources than us. Subject to airport capacity and slot availability, low-cost carrier competitors could rapidly enter markets served by us and quickly and heavily discount their fares, which could materially and adversely affect our business, financial condition, results of operation and prospects. The airline industry is particularly susceptible to price discounting because airlines incur only small marginal variable costs to provide service to passengers occupying otherwise unsold seats. In addition to fare competition, an increase in the number of airlines operating at our various hubs may result in an increase in congestion and delays at those airports, adverse effects on our operations as well as future capacity growth, which could have a material adverse effect on our business, financial condition, results of operation and prospects. In addition, there have been recent changes to the competitive conditions in the local and regional airline markets, including as a result of the ASEAN “Open Skies” policies. See “Regulation of the Airline Industry in Thailand”. We cannot assure you that the current policies will not change, and any policy change in the future could significantly increase competition and may have a material adverse effect on our business, financial condition, results of operation and prospects. Moreover, we face competition from ground and sea transportation alternatives, which are other traditional means of transportation used by a substantial majority of the population in Thailand, including for reasons of price and convenience and such competition could have a material adverse effect on our business, financial condition, results of operation and prospects.

We may not be successful in implementing our growth strategy. Our growth strategy involves increasing the number of our aircraft, increasing the frequency of our flights to destinations that we currently serve, expanding the number of destinations that we serve and stimulating growth in the markets that we serve. Achieving our growth strategy is critical in order for our overall business to achieve economies of scale and increase profitability. Increasing the number of destinations that we serve depends on our ability to access suitable airports located in our targeted markets in a manner that is consistent with our cost strategy. We need to obtain air traffic rights and airport landing slots before we can commence services to new destinations. In addition, we require the prior approval of the DCA to add any new domestic routes. We cannot assure you that such air traffic rights, airport landing slots or approvals will be granted to us in a timely manner, or at all. The failure to obtain these traffic rights, airport landing slots or approvals may have a material adverse effect on our business, financial condition, results of operation and prospects. We expect that many of the future destinations we intend to serve will be in foreign countries. The operation of our business in these countries may present operating, financial and legal challenges which are different from those that we currently encounter in Thailand. Adding service to new destinations may require us to commit a substantial amount of financial and other resources, even before the new service commences, and we may initially experience low load factors and be required to offer promotional fares to new destinations, which will adversely affect the profitability of these new destinations. In addition, we plan to take delivery of additional Airbus A320 aircraft to increase our fleet size to 48 by December 31, 2016. If we are unable to successfully implement our growth strategy, we may have to delay or cancel the scheduled deliveries of these aircraft, which may harm our business, financial condition, results of operation and prospects. Other factors that may have an impact on our growth strategy include: • the general condition of the Thai, Asian and global economies and the global capital markets, including the continuing impact of the debt crisis within the euro zone; • demand for regional air transportation; • low barriers to entry into the Thai aviation market; • our ability to operate and manage a larger operation cost-effectively; • our ability to hire, train and retain sufficient numbers of pilots, cabin crew and engineers for our aircraft; • our ability to secure a sufficient number of aircraft on favorable lease or purchase terms; • our ability to source and take delivery of aircraft on a timely basis; and • our ability to obtain the financing necessary to pay for expansion at cost-effective rates. Many of these factors are beyond our control. In addition, difficult conditions in the global capital markets and the economy generally in 2011, including the debt crisis in the euro zone, have affected and may continue to

19 affect our business, financial condition, results of operation and prospects. We cannot assure you that we will be able to successfully expand within our existing markets or establish new markets, and any failure to successfully implement our growth strategy may have a material adverse effect on our business, financial condition, results of operation and prospects. There are limitations on the foreign ownership of the Company and of our core asset, Thai AirAsia, and any breach of such limitations could result in a revocation of our air service operator license and our right to fly our routes. Foreign ownership of our Shares is limited by our Articles of Association, which provide a 0.1% limit on foreign ownership of the total issued and outstanding Shares of the Company. Further, the Company’s core asset, Thai AirAsia, is subject to nationality restrictions under the Foreign Business Act B.E. 2542 (1999), the Air Navigation Act B.E. 2497 (1954), as amended, and the Announcement of the National Executive Council No. 58 requiring the shares of air service operators and aircraft registrants to be at least 51% held by any one or any combination of the following persons: (a) natural persons who hold Thai nationality; (b) ministries, sub-ministries, departments of the Thai Government; and/or (c) limited companies or public limited companies in which not less than 51% of the shares are held by a Thai Government entity or Thai natural persons. See “Regulation of the Airline Industry in Thailand — Domestic Regulatory Framework” and “Description of Shares — Limitation on Foreign Ownership of Shares” for details. The Company holds 51% of Thai AirAsia (55% after the Company completes the subscription of new shares in Thai AirAsia after the completion of the Combined Offering). After completion of the Combined Offering, public shareholders will own 40% of the Shares of the Company, with the remaining 60% of the Shares to be held by Thai AirAsia’s management, all Thai nationals. It is not possible to determine whether a subsequent sale of Shares from a Thai shareholder is made to a Thai or non-Thai purchaser, or whether a person taking delivery of Shares upon exchange of NVDRs is a Thai or non-Thai person, until such purchaser or person requests to register the transfer of such Shares to the registrar or until a books closure date occurs. A purchaser or a person exchanging NVDRs for Shares is not obligated to make a request to register the transfer of such Shares after the purchase or exchange occurs, and if such purchaser or person does not do so, the register will not reflect such purchaser’s or person’s name and nationality until a subsequent books closure date occurs, which may be some time after the purchase or exchange occurs. The TSD, as our registrar, may refuse to register transfers of Shares to a non-Thai person, or divestment may otherwise be required, if as a result of such transfer the percentage of issued and outstanding Shares registered in the name of non-Thai persons would exceed the then applicable limit on foreign ownership of the Shares. While Thai law does not recognize the concept of “beneficial ownership” we cannot assure you that the relevant Thai regulator or a Thai court will not interpret such holdings in a manner that could be deemed to be in breach of Thai legislation, which could result in a revocation of our air service operator license, which would materially and adversely affect our business, financial condition, results of operation and prospects. Once the foreign ownership limit is reached, Thai shareholders may be restricted from transferring Shares to foreign buyers, which may adversely affect the liquidity and market price of the Shares. As discussed in the paragraph above, it may not be possible for us, our shareholders or potential investors to determine whether the foreign ownership limit has been reached. In such a situation, we cannot assure you that you will not be forced to divest your Shares at short notice or that such divestiture will be completed at the prevailing market price. Moreover, if the foreign ownership limit has been reached, we will need to rely solely on domestic investors and/or the sale of Thai NVDRs for any additional equity raising. This may affect our ability to obtain the funding necessary to expand our business, which in turn may adversely affect our business, financial condition, results of operations and prospects. In addition, as a general principle, to operate international air services, it is necessary for us to remain substantially owned and effectively controlled by Thai nationals. See “Regulation of the Airline Industry in Thailand” for further details. The governments with whom Thailand has signed bilateral agreements may recognize the concept of “beneficial ownership” and there is a risk that the “substantially owned and effectively controlled” test may not be met and the measures that we have adopted to address this issue may be insufficient to maintain the required level of national ownership and control. Failure to comply with these requirements could result in Thai AirAsia not being a Thai-designated airline and, consequently, the revocation of our rights to fly on international routes. The Company and our core asset, Thai AirAsia, have in our recent history experienced gross and net losses, negative cash flows from operating activities, total current liabilities exceeding total current assets and negative shareholders’ equity. As a result of the financial condition and results of operations of Thai AirAsia, our core asset, we recorded proportionate consolidated gross losses of Baht 17.4 million in 2009, proportionate consolidated net losses of

20 Baht 85.9 million in 2009, proportionate consolidated negative cash flows from operating activities of Baht 156.9 million in 2010, proportionate consolidated total current liabilities exceeding proportionate consolidated total current assets by Baht 2,604.0 million as of December 31, 2009, Baht 1,649.1 million as of December 31, 2010, and Baht 711.2 million (US$22.4 million) as of December 31, 2011, and proportionate consolidated negative shareholders’ equity of Baht 1,964.3 million as of December 31, 2009 and Baht 959.4 million as of December 31, 2010 and proportionate consolidated positive shareholders’ equity of Baht 7.7 million (US$0.2 million) as of December 31, 2011. As a result, our historical financial statements contained in this Offering Memorandum may not be indicative of our future financial condition and results of operations. In addition, the Company’s and Thai AirAsia’s management prepared the 2009, 2010 and 2011 financial statements on a going concern basis as described in Note 2 to the Company’s audited proportionate consolidated and company financial statements and Note 2 to Thai AirAsia’s audited financial statements included elsewhere in this Offering Memorandum. We cannot assure you that the Company or Thai AirAsia will not revert to a net liability position or that the Company or Thai AirAsia can continue to rely on the continued existence of the circumstances justifying the preparation of the financial statements on a going concern basis in the future. If any of these circumstances changes, our business, financial condition, results of operation and prospects will be materially and adversely affected.

The Company is a holding company and is dependent on the receipt of dividends from its only investment to make dividend payments on our Securities. As a holding company, the Company is dependent on the receipt of dividends from Thai AirAsia, a company in which the Company holds a 51.0% interest (55.0% after the Company completes the subscription of new shares in Thai AirAsia after the completion of the Combined Offering). Our ability to pay dividends to our shareholders, and the ability of Thai AirAsia to pay dividends to its shareholders, including the Company, is subject to applicable law. Under Thai corporate law, neither the Company nor Thai AirAsia may make any distribution of dividends otherwise than out of its net profit and neither the Company nor Thai AirAsia can pay dividends if its standalone retained earnings are not positive (or if there is a deficit), even if it records a net profit for that year. As of December 31, 2011, the Company had a proportionate consolidated deficit of Baht 386.8 million (US$12.2 million) and Thai AirAsia had a deficit of Baht 947.2 million (US$29.9 million). The payment of dividends from Thai AirAsia will depend on its future financial performance, which in turn depends on Thai AirAsia successfully implementing its strategies and on financial, competitive, regulatory, technical and other factors, general economic conditions, demand and selling prices for its flights, many of which are beyond its control. In addition, under the PLCA, dividend payments may only be paid based on the net profit of the Company derived from its standalone financial statements and not from its proportionate consolidated financial statements. Therefore, the Company is not able to pay any dividend with respect to its net profit derived from its proportionate consolidated financial statements that is attributable to the net profit of Thai AirAsia. The Company’s ability to make dividend payments is dependent on the receipt of dividend income from Thai AirAsia because such dividend payments constitute substantially all of the Company’s income.

Our business is heavily dependent on the Thai and regional markets and a reduction in demand for air travel in these markets may have a material adverse effect on our business, financial condition, results of operation and prospects. Our growth has focused and will continue to focus on adding domestic and international flights to and from our operations at our hubs in Bangkok, Phuket and Chiang Mai. We are also considering developing more hubs in Thailand. Our business, financial condition, results of operation and prospects would be materially and adversely affected by any circumstances causing a reduction in demand for air transportation in Thailand, including adverse changes in local economic conditions, declining interests in Thailand as a tourist destination, or significant price increases as a result of increases in airport access costs and fees imposed on passengers. We believe that a substantial majority of our passenger traffic comprises tourists attracted by Thailand’s appeal as a tourist destination. Accordingly, we rely on the health of the Thai tourism industry. We have experienced a significant decline in international passenger traffic as a result of the 2009 Influenza A H1N1 (“H1N1”) pandemic that affected the number of passengers traveling in and out of countries with H1N1 outbreaks. In addition, the protest-related closure of Suvarnabhumi International Airport and Phuket International Airport in November 2008 and the violent protests in central Bangkok in April 2009 and from March to May 2010 have adversely affected Thailand’s image abroad and visitor arrivals. The widespread floods affecting Thailand between September and December 2011 also adversely affected our passenger volumes. Our business is adversely affected by any circumstances causing a deterioration in Thailand’s appeal as a tourist destination, such

21 as continued internal political instability, adverse changes in international economic conditions, a substantial increase in the value of the Baht relative to other currencies, negative international perceptions of Thailand, significant increases in airport costs and fees imposed on passengers, terrorist attacks, floods or any further outbreaks of H1N1 or similar occurrences in the region.

Our business is influenced by and dependent on our relationship with AirAsia Berhad. Prior to the Combined Offering, AirAsia Berhad indirectly owns 49.0% of Thai AirAsia and will own 45.0% of Thai AirAsia after the completion of the Combined Offering and after the Company completes the subscription of new shares in the Thai AirAsia rights offering. Therefore, we expect AirAsia Berhad to continue to have the ability to influence the business and operations of Thai AirAsia. The Company entered into an amended and restated shareholders’ agreement with AirAsia Investment (previously known as AA International Ltd.), a wholly owned subsidiary of AirAsia Berhad, AirAsia Berhad and Thai AirAsia dated February 14, 2012 (as amended and restated, the “Thai AirAsia Shareholders’ Agreement”), pursuant to which the parties set out their respective rights and obligations with respect to Thai AirAsia. For example, under the Thai AirAsia Shareholders’ Agreement, the Company has the right to nominate not more than three directors to Thai AirAsia’s board and AirAsia Investment has the right to nominate not more than two directors. The Thai AirAsia Shareholders’ Agreement has a significant influence on our relationship with AirAsia Berhad. See “Related Party Transactions — Future Related Party Transactions — Thai AirAsia Shareholders’ Agreement”. We also depend upon and benefit from the support of AirAsia Berhad in various ways. Our business depends upon Thai AirAsia’s brand license agreement with AirAsia Berhad dated January 1, 2012 (the “AirAsia Brand License Agreement”), pursuant to which AirAsia Berhad provides us with exclusive access to the AirAsia brand name in Thailand for the purposes of Thai AirAsia’s business operations and AirAsia Berhad’s expertise regarding marketing, business operations and customer service. An increase in the license fee, as well as other changes to the agreement, could affect Thai AirAsia’s results of operations. See “Related Party Transactions — Future Related Party Transactions — AirAsia Brand License Agreement”. We currently lease all of our aircraft from a subsidiary of AirAsia Berhad, with leases that expire between 2019 and 2024. Our ability to renew such leases on similar terms will be dependent on market conditions at that time. Typically, the longer the tenor of the lease, the more favorable the terms of the lease will be. We cannot assure you that such leases will be renewed on commercially acceptable or similar terms, or at all. We rely on various information technology used by the wider AirAsia Group. Our key operating software systems (centralized in Kuala Lumpur, Malaysia) include NewSkies 3.2 by Navitaire which we use for inventory and sales management/reservations, Microsoft’s Axapta Financial Management (Axapta) which we use for our financial operations, the Geneva Optimum Airline Performance (“OAP”) software which we use for flight scheduling and crew rostering, Navtech software which we use for flight planning and Swiss Aviation Software Ltd.’s AMOS operating system (“AMOS”), which we use for the management of aircraft maintenance engineering and logistics. In addition, we have access to various aircraft spare parts kept by AirAsia Berhad and benefit from airport handling services provided by other members of the AirAsia Group at certain airports in Malaysia and Indonesia. We also provide services to and obtain services from other members of the AirAsia Group. See “Related Party Transactions” for a summary of these services. In addition, members of the AirAsia Group have from time to time received or made payments on behalf of Thai AirAsia for various operating purposes. In 2009, 2010 and 2011, the amounts due to related parties amounted to Baht 4,218.4 million, Baht 4,161.7 million and Baht 361.1 million (US$11.4 million), respectively. AirAsia Berhad also enters into fuel hedging agreements on behalf of the various airlines within the AirAsia Group, including Thai AirAsia, with such hedging dependent on AirAsia’s Berhad’s credit-worthiness. See “Related Party Transactions — Fuel Hedging Arrangements” for more details. If (i) we are unable to leverage on the brand name, business network, expertise and relationship of AirAsia Berhad in any material respect for any reason, (ii) there is a material change in business strategy or key management of AirAsia Berhad or (iii) AirAsia Berhad’s actions adversely affect the AirAsia brand name, our business, financial condition, results of operation and prospects will be materially and adversely affected. We cannot assure you that AirAsia Berhad will not reduce its shareholding in Thai AirAsia in the future, that AirAsia Berhad’s actions will not adversely affect our business, that any agreements Thai AirAsia enters into in the future will not contain terms that impose a shareholding requirement in Thai AirAsia on AirAsia Berhad, or that we will be able to ensure that such terms, if any, will not be breached. If any such events occur, our ability to borrow and our business, financial condition, results of operation and prospects may be materially and adversely affected.

22 Our maintenance costs will increase as our fleet ages. The average age of our aircraft was two years and four months as of December 31, 2011. Our fleet will require more maintenance as it ages and our maintenance and overhaul expenses will increase on an absolute basis, on an available seat kilometer basis and as a percentage of our operating expenses. Any significant increase in maintenance and overhaul expenses could have a material adverse effect on our business, financial condition, results of operation and prospects. We currently incur low maintenance and overhaul expenses because we benefit from AirAsia Berhad’s negotiated rates under their contracts with third parties for aircraft used by the AirAsia Group and we perform our own line and light maintenance. However, we cannot assure you that AirAsia Berhad’s existing maintenance agreements will be renewed at similar prices or that the DCA will not revoke its approval to allow us to perform our own line and light maintenance.

Substantially all of our aircraft leases are subordinated to the rights and interests of the lessor under various headleases or subleases, or of the beneficiaries under AirAsia Berhad’s installment sale agreements and related financing documents. All of the aircraft sub-leased to us by AirAsia (Mauritius) Limited (“AirAsia Mauritius”), a subsidiary of AirAsia Berhad, were leased or purchased by AirAsia Berhad under headlease agreements or installment sale agreements, respectively, and sub-leased to AirAsia Mauritius under intermediate sub-leases. Our aircraft leases for such aircraft, and all of our rights and interests thereunder, are subordinated to the rights and interests of the relevant lessors of the head-leases and intermediate sub-leases, the security trustee under the relevant aircraft mortgage, or the beneficiaries of the installment sale agreements and related financing documents, as the case may be. If any headlease, intermediate sub-lease, installment sale agreement or related financing document were to terminate at any time, or if the security trustee forecloses upon the aircraft mortgage, we will be required to redeliver the aircraft in accordance with the terms of the relevant agreement, which would have a material adverse effect on our business, financial condition, results of operation and prospects.

We may incur a significant amount of debt in the future to finance the acquisition of aircraft, capital expenditure or expansion plans. We have historically leased all of our aircraft pursuant to operating lease arrangements with AirAsia Mauritius, a subsidiary of AirAsia Berhad. However, we are considering purchasing a portion of our aircraft requirements in the future. If we purchase our own aircraft, we are likely to require financing and incur significant amounts of debt to fund such acquisition of additional aircraft. We may also obtain debt financing to finance our operations, other anticipated capital expenditures, working capital requirements and expansion. We cannot assure you that we will be able to raise such financing on favorable terms or at all, in particular if there is a general deterioration in the credit and capital markets, which could have a material adverse effect on our business, financial condition, results of operation and prospects. If we are unable to obtain financing for new aircraft on acceptable terms, this may increase the cost of financing, affect our profitability and delay our fleet expansion plans. Moreover, our future credit facilities may contain covenants that limit our operating and financing activities and require the creation of security interests over our assets. Our ability to meet our payment obligations and to fund planned capital expenditures will depend on the success of our business strategy and our ability to generate sufficient revenues to satisfy our obligations, which are subject to many uncertainties and contingencies beyond our control.

We rely on third parties to provide our customers with facilities and services that are integral to our business, including airport facilities. Any inability to lease, acquire or access airport facilities on reasonable terms to support our growth or to maintain our current operations would have a material adverse effect on our business, financial condition, results of operation and prospects. The availability and cost of terminal space, slots and aircraft parking are critical to our operations and expansion plans. Ground and maintenance facilities, including hangars and support equipment, will be required to operate additional aircraft in line with our expansion plans. These and other required facilities and equipment may be unavailable in a timely or economic manner. Our inability to lease, acquire or access airport facilities on reasonable terms or at preferred times to support our growth or to maintain our current operations would have a material adverse effect on our business, financial condition, results of operation and prospects. We have entered into agreements with third party operators to provide certain facilities and services required for our operations in international airports in which we operate, including ground handling, maintenance, refueling and airport facilities such as aerobridges. We are likely to enter into similar agreements in new markets we decide to enter. The loss or expiration of these contracts or any inability to find suitable alternate providers or renew or negotiate contracts with those providers at comparable or favorable rates could have a material adverse effect on our business, financial condition, results of operation and prospects.

23 We rely on a high daily aircraft utilization rate to optimize our revenues, making us especially vulnerable to delays. One of the key elements of our business strategy is to target a high daily aircraft utilization rate of above 12 hours per day. High daily aircraft utilization allows us to generate more revenue from our aircraft and is achieved in part by reducing turnaround times at airports and maintaining on-time performance. However, we cannot assure you that we will achieve this target. Aircraft utilization is reduced by delays caused by various factors, many of which are beyond our control, including, among others, adverse weather conditions, security and safety, other air traffic control related requirements and unscheduled maintenance. The expansion of our business to include new destinations and more frequent flights on current routes could increase the risk of delays to our scheduled flights. Such delays may reduce our daily aircraft utilization and harm our reputation. High aircraft utilization also increases the risk that, in the event that an aircraft falls behind schedule during the day, it could remain behind schedule during the remainder of that day, which can disrupt timely operations and lead to customer dissatisfaction which could in turn have an adverse effect on our business, financial condition, results of operation and prospects.

We rely on automated systems and the Internet to operate our business and any failure or security breaches of these systems may have a material adverse effect on our business, financial condition, results of operation and prospects. We depend on automated systems to operate our business, including our website and online reservation and telecommunication systems. Our website and online reservation system must be able to accommodate a high volume of traffic and deliver important flight information. We cannot assure you that system failures or security breaches will not occur in the future. While we have disaster recovery and business continuity plans in place, any disruption in these systems could result in the loss of important data, increase our expenses and harm our reputation and ticket sales which could in turn have a material adverse effect on our business, financial condition, results of operation and prospects. See “Business — Our Operations — Information Technology”. We rely heavily on the Internet for bookings. Approximately 69% and 75% of our flight reservations in 2010 and 2011, respectively, were made by our passengers directly via our website. Any compromise of Internet security could deter people from using the Internet or from using it to conduct transactions that involve transmitting confidential information. We may incur significant costs to protect against the threat of security breaches, particularly if the perceived risks of terrorist activity and/or third party misappropriation of information lead to government-imposed increases in Internet security and greater restrictions on ticket purchases made remotely. Further, alleviating these problems may cause interruptions, delays or cessations in service to our customers, which could cause them to stop using our service or to make claims against us. We retain personal information received from customers and have put in place security measures to protect against unauthorized access to such information. Personal information held both offline and online is highly sensitive and, if third parties were to access such information without the customers’ prior consent or if third parties were to misappropriate that information, our reputation could be adversely affected and customers could possibly bring legal claims against us, any of which could adversely affect our business, financial condition, results of operation and prospects. In addition, we may be liable to credit card companies should any credit card information be accessed and misused as a result of our failure to implement sufficient security systems.

Our business, financial condition, results of operation and prospects could be materially and adversely affected in the event of an emergency, accident or incident involving any of our aircraft or any of the aircraft of any AirAsia Group company. We are exposed to potential significant losses in the event that any of our aircraft or any of the aircraft of any AirAsia Group company is lost or subject to an emergency, accident, terrorist incident or other disaster and we incur significant costs related to passenger claims, repairs or replacement of a damaged aircraft and its temporary or permanent loss from service. For instance, in October 2008, one of our aircraft experienced a hard landing at Phuket International Airport, and in September 2009, one of our aircraft was hit by a tow truck while being towed to a parking bay at Kuala Lumpur Low Cost Carrier Terminal. In June 2011, one of our aircraft landed on a closed runway in Delhi, India. While there were no injuries as a result of these incidents, we cannot assure you that we will not be involved in any similar or other more serious events, including one where injuries or death occur, in the future. We cannot assure you that the amount of our insurance coverage will be adequate to cover the losses or damages from any future accidents or incidents and any such event could cause a substantial increase in our insurance premiums. In addition, any future aircraft accidents or incidents, including those involving aircraft of any AirAsia Group company, irrespective of whether they are covered by our insurance, may create a public perception that we are less safe than other airlines, even in the absence of any injuries or

24 deaths. Any negative impact on the public perception of our airline could have a material adverse effect on our business, financial condition, results of operation and prospects.

Any real or perceived problem with the Airbus A320 aircraft or the CFM56-5 type engine, including their unavailability, or any decision to operate a new aircraft type or engine type, could have a material adverse effect on our business, financial condition, results of operation and prospects. As of December 31, 2011, we operated 22 Airbus A320 aircraft (including one spare) which use the CFM56-5 type engine. Our reliance on a single aircraft type, namely the Airbus A320 aircraft and the CFM56-5 type engine, makes us particularly vulnerable to any problems that might be associated with the aircraft and the engine. We would be adversely affected if a design defect or mechanical problem with the Airbus A320 aircraft or the CFM56-5 type engine were discovered, causing our aircraft to be grounded while any such defect or problem is corrected, assuming it could be corrected at all. Any such defect or problem may also result in aviation authorities in Thailand implementing certain airworthiness directives which may require substantial compliance costs. Our business, financial condition, results of operation and prospects could be materially and adversely affected if the public avoids flying our aircraft as a result of an adverse perception of the Airbus A320 aircraft or the CFM56-5 type engine due to real or perceived safety concerns or other problems. In addition, if our lessors or vendors are unable to perform their contractual obligations to lease or sell aircraft and supply engines to us, we may have to find alternative suppliers of the aircraft and engines. In such an event, we cannot assure you that we would be able to lease or purchase aircraft and engines within the time frame currently expected or at comparable prices. This would require us to obtain and use another type of aircraft and engine. We cannot assure you that any replacement aircraft would have the same operating advantages as the Airbus A320. We also may incur substantial transition costs, including higher costs associated with retaining or hiring pilots, cabin crew and engineers to operate and maintain a different type of aircraft or engine, and may also have to compensate passengers affected by delays or cancellations of our flights.

We depend on our personnel, especially our executive officers and key management, and any difficulties in attracting or retaining such personnel or failure to maintain our corporate culture may have a material adverse effect on our business, financial condition, results of operation and prospects. Our success depends to a significant extent upon the continued services of our executive officers and other key management personnel, and in particular on Mr. Tassapon Bijleveld, our Chief Executive Officer. The loss of any of our executive officers and other key management personnel or failure to recruit suitable or comparable replacements could have a material adverse effect on our business, financial condition, results of operation and prospects. Our business model requires us to have highly-skilled, dedicated and efficient pilots, engineers and other personnel. Our growth plans will require us to hire, train and retain a significant number of new employees in the future, including an additional 222 pilots by 2016. From time to time, the airline industry has experienced a shortage of skilled personnel, especially pilots and engineers. We compete against full service and other low-cost airlines for these highly-skilled personnel. These full service and other low-cost airlines may offer wage and benefit packages that exceed those offered by us. We may have to increase wages and benefits to attract and retain qualified personnel or risk considerable employee turnover. If we are unable to hire, train and retain qualified employees at a reasonable cost, we may be unable to execute our growth strategy, which would have a material adverse effect on our business, financial condition, results of operation and prospects. In addition, we may find it increasingly challenging to maintain our corporate culture as we hire more personnel. We believe that one of our competitive strengths is our service-oriented corporate culture that emphasizes friendly, helpful, team-oriented and customer-focused employees who strive to increase our productivity to help keep our costs low. If we were unable to identify, hire or retain employees who meet these criteria, our corporate culture and reputation would be adversely affected.

We may be subject to unionization, work stoppages, slowdowns or increased labor costs. We have a non-unionized workforce. If our employees unionize, it could result in demands that may increase our operating expenses and adversely affect our profitability. Each of our different employee groups could unionize at any time and require separate collective bargaining agreements. If any group of our employees were to unionize and we were unable to reach agreement on the terms of their collective bargaining agreement or we were to experience widespread employee dissatisfaction, we could be subject to work slowdowns or stoppages. In addition, we may be subject to disruptions by organized labor groups protesting our non-union status. Any of these events would be disruptive to our operations and could harm our business, financial condition, results of operation and prospects.

25 If we are unable to obtain regulatory approvals in the future, we will not be able to operate a scheduled flight. Our business relies on our maintaining the requisite licenses, permits and approvals necessary to operate our portfolio of routes. The airline industry is subject to extensive regulation and we have no control over the regulations that apply to us. Changes in the interpretation of current regulations or the introduction of new laws or regulations may have a material adverse effect on our business, financial condition, results of operation and prospects. We are required to hold an air operator certificate (an “AOC”) which is granted, and is subject to conditions imposed, by the Department of Civil Aviation of Thailand (“DCA”). Our AOC is valid for a prescribed period following which an application for renewal has to be made. Our current AOC was issued on December 26, 2008 and amended on October 28, 2010, and is subject to renewal upon expiry on November 5, 2013. To operate either scheduled or non-scheduled air transport services in Thailand, we are required to obtain an air service license (“ASL”) from the Minister of Transport. Our current ASL was issued on November 6, 2008, and is subject to renewal upon expiry on November 5, 2013. There can be no assurance that a new AOC and ASL will be granted to us upon the expiry of each current AOC and ASL, without which we will not be able to operate air services. For each route we operate, we are required to hold the requisite licenses, permits and approvals from the countries to and over which we fly. The validity of each license, permit or approval varies by country. If any license, permit or approval is revoked or not renewed upon its expiry or if such renewal is on less favorable terms, we may not be able to operate on the affected route or may have to operate at a reduced frequency. In addition, the actions of Thai authorities responsible for overseeing Thai airlines and other third parties that we have no control over may adversely affect us. See “Regulation of the Airline Industry in Thailand” for further details of the regulations that apply to us.

We and/or AirAsia Berhad may be unable to adequately protect the intellectual property rights over the AirAsia brand or may face intellectual property rights claims that may be costly to resolve or limit the ability to exploit the intellectual property rights in the future. We rely on trademarks and domain name registrations to establish and protect the AirAsia brand, tagline, logos and Internet domain name (the “Marks”) in various countries. Pursuant to the terms of the AirAsia Brand License Agreement, AirAsia Berhad has licensed the right to the AirAsia trademarks and logo to us. See “Related Party Transactions — Future Related Party Transactions — AirAsia Brand License Agreement” for details. The success of our business depends, in part, on our continued ability to use the Marks in order to increase brand awareness. Although AirAsia Berhad has registered or is in the process of registering each of the Marks, we cannot assure you that the steps taken by AirAsia Berhad in this regard will adequately protect the Marks and third parties may challenge the AirAsia Group’s, including the Company’s and Thai AirAsia’s, exclusive right to use the Marks. Our success will also depend on AirAsia Berhad’s awareness and ability to prevent third parties from using the Marks without its consent. Issues relating to intellectual property rights can be complicated and we cannot assure you that disputes will not arise or that any disputes in relation to our intellectual property will be resolved in AirAsia Berhad’s favor. In addition, we cannot assure you that AirAsia Berhad will not withdraw some or all of its Marks, whether as a result of any breach of the AirAsia Brand License Agreement or otherwise, which will prevent us from benefiting from the brand recognition associated with the Marks. In such case, we will be required to invest significant resources in developing a new brand. Any of these events may have a material adverse effect on our business, financial condition, results of operation and prospects.

Our ability to set fares on certain segments of our business is constrained by fare ceilings set by the Government. As an airline company, we are regulated by the Government through, among others, the DCA. The DCA is the regulatory authority responsible for regulating the Thai aviation sector. The DCA issues operating licenses required for our flight operations, sets price caps for airfares on domestic passenger services sold in Thailand, regulates fuel surcharges for scheduled domestic passenger and cargo services and agrees international bilateral air service agreements with other countries. Our domestic fares are subject to fare ceilings prescribed by the DCA. Thai AirAsia’s revenue from domestic passenger services accounted for 47.5%, 46.6% and 44.1% of its revenues from airline services in 2009, 2010 and 2011, respectively. Any adverse changes in these policies, in addition to other regulations and policies governing airline operations, could have a material adverse effect on our business, financial condition, results of operation and prospects.

26 Our passenger load factors are subject to seasonality. Our revenues and load factors are highest in the first and fourth quarters of each calendar year, reflecting Thailand’s peak tourist season, and lowest during the third quarter. Any prolonged disruption in our operations during such peak periods could materially affect our business, financial condition, results of operation and prospects. In addition, comparisons of our interim results of operations may therefore not be accurate indicators of our future performance. The market price of our Securities may fluctuate or decline significantly due to fluctuations in our interim results of operations.

Fluctuations in currency exchange rates may have an adverse impact on our business, financial condition, results of operation and prospects. Due to the geographic diversity of our business, we receive revenue and incur expenses in a variety of currencies, in particular the Thai Baht, Indonesian Rupiah, Singapore Dollar, U.S. Dollar, Malaysian Ringgit, Indian Rupee and Chinese Renminbi. However, most of our maintenance, aircraft leasing, jet fuel supply, insurance contracts and substantially all of our purchase contracts with respect to aircraft spares are denominated in U.S. Dollars. A number of currencies, including the U.S. Dollar and certain Asian currencies, have experienced significant volatility, appreciation and depreciation, which could be detrimental depending on Thai AirAsia’s foreign exchange position. We have not entered into hedging contracts with various banks to hedge against fluctuations in exchange rates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risks — Foreign Currency Exchange Rate Risk”. We may, in the future, enter into derivative contracts to hedge our foreign exchange exposure. However, we cannot assure you that such hedges will be available or commercially viable or effective to hedge our exposure to foreign currency risks. Significant volatility between the U.S. Dollar and our other operating currencies, particularly the Thai Baht, may have an adverse impact on our results of operations. Since the Asian financial crisis of 1997, the value of the Baht against the U.S. Dollar has fluctuated from time to time, from a high of Baht 22.20 on June 18, 1997 to a low of Baht 56.45 on January 13, 1998, according to Bloomberg. The average buying (telex transfer) and selling exchange rate of commercial banks in Bangkok announced by the BOT on May 9, 2012 was Baht 31.03 per U.S. Dollar. We cannot assure you that the value of the Baht will not continue to fluctuate significantly against the U.S. Dollar or other currencies in the future. We have various commitments denominated in foreign currencies, principally in U.S. Dollars. As of December 31, 2011, we had outstanding foreign currency commitments under lease and insurance agreements equivalent to Baht 8,047.6 million (US$253.9 million). In addition, we may increase our U.S. Dollar borrowings in the future, including in relation to future purchases of aircraft. Therefore, any depreciation in the Baht against these foreign currencies would increase our obligations. There can be no assurance that we would be able to generate revenue increases sufficient to offset such increased obligations. As a result, fluctuations in the value of the Baht against other foreign currencies may adversely affect our business, financial condition, results of operations and prospects.

We may be exposed to interest rate fluctuations. We may incur a significant amount of debt in the future to finance the acquisition of aircraft, capital expenditure or expansion plans. A significant portion or substantially all of our future indebtedness may be floating rate obligations. In recent years, interest rates have been at historically low levels. In addition, we may not be able to hedge our interest rate exposure at appropriate costs or at all. Any increase in prevailing interest rates could substantially increase our future borrowing costs with respect to any new loans, which could adversely affect our business, financial condition, results of operations and prospects.

Certain countries in Asia are subject to significant geological risk and the risk of other man-made or natural disasters which may affect demand for flights to these destinations. Certain countries in Asia are located in the convergence zone of tectonic plates, and are therefore subject to seismic activity that can lead to destructive earthquakes and tsunamis, or tidal waves. For example, on December 26, 2004, an underwater earthquake off the coast of Sumatra triggered a tsunami that devastated coastal communities in Thailand, Indonesia and Sri Lanka. Certain countries in Asia are also subject to other man-made or natural disasters such as forest fires and haze. In addition, Thailand is subject to severe flooding. The widespread flooding between September and December 2011 has adversely affected the number of passengers that we carry, and thus, our results of operations, in the fourth quarter of 2011. Any future geological or meteorological occurrences or other man-made or natural disasters in the markets that we serve, may weaken demand for our flights to these destinations and this decrease in demand may materially and adversely affect our business, financial condition, results of operation and prospects.

27 We are subject to the risks associated with doing business in Asia. As our current operations are conducted in Asia, we are subject to special considerations and significant risks typical for these regions. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Our results may be adversely affected by changes in the political and social conditions in Asia, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. In particular, volatility in social and political conditions in certain countries in Asia may interrupt, limit or otherwise affect our operations and may result in the closure of airports. In recent years, certain Asian countries and territories have implemented various measures in order to affect economic or political reforms and changes. Some of these measures have led to increased incidents or higher risks of political instability and social unrest. Government-imposed wage and price controls, higher unemployment rates, mandated industry restructuring and trade barriers, such as high tariffs and customs duties that negatively affect domestic industry are some examples of events causing increased volatility in social and political conditions in Asia. We have no control over these matters and we do not carry political risk or other insurance with respect to losses caused by these matters.

Risks Relating to the Aviation Industry The airline industry tends to experience adverse financial performance during general economic downturns. We conduct all of our operations, and generate all of our revenue in Asia. We expect to continue focusing our airline business in Asia for the foreseeable future. As a result, our business depends substantially on the general economic conditions in Asia. Since a substantial portion of airline travel, for both business and leisure, is discretionary, the airline industry tends to experience adverse financial performance during general economic downturns. Yields could also decline as airlines offer promotional fare sales in certain markets to stimulate demand or to fill otherwise empty seats. It is difficult to predict the effects of a global economic downturn. As the airline industry is generally characterized by high fixed costs, primarily related to aircraft operating leases, financing commitments, jet fuel costs and staff costs, a shortfall in expected revenue levels as a result of slower economic cycles could have an adverse impact on financial performance. If there is a global economic downturn and demand for business and leisure travel decreases in our markets, our business, financial condition, results of operation and prospects may be adversely affected.

Limitations of Bangkok’s airports and other Thai airports may inhibit our ability to increase our aircraft utilization rates, improve our on-time performance and provide safe and efficient air transportation. Although Thailand’s commercial aviation infrastructure has improved substantially in recent years with the opening of Suvarnabhumi International Airport in September 2006 and the re-opening of Don Muang International Airport to domestic flights in March 2007, the resources of many segments of the commercial airline industry, including airport facilities and air traffic control systems, have been strained by the rapid increase in air traffic volume. Our ability to increase utilization rates, improve our on-time performance and provide safe and efficient air transportation in the future depends in part on factors beyond our control, including: • capacity of landing slots, passenger capacity at terminals and air traffic congestion in major hub airports that we serve, particularly our hubs at Suvarnabhumi International Airport in Bangkok and Phuket International Airport in Phuket; • the quality of the management of Thai airports by the relevant operator; • the quality of national air traffic control; • the quality of navigational systems and ground control operations at Thai airports; • limitations on runway length and/or strength which restrict our aircraft payload; • the quality of infrastructure at regional airports that we serve; and • any increased security measures. If any of these factors is inadequate, our ability to expand our route network or to increase the frequency of flights on our existing routes, improve our on-time performance and to provide safe air transportation will be compromised, and our business, financial condition, results of operation and prospects may be materially and adversely affected.

28 We are exposed to certain risks against which we do not insure, and may have difficulty obtaining insurance on commercially acceptable terms or at all. Insurance is fundamental to airline operations. As a result of terrorist attacks or other world events, certain aviation insurance could become unavailable or available only for reduced amounts of coverage that are insufficient to comply with the levels of coverage required by our aircraft lessors or applicable government regulations. Any inability to obtain insurance, on commercially acceptable terms or at all, for our general operations or specific assets would have a material adverse effect on our business, financial condition, results of operation and prospects. We cannot assure you that our coverage will cover actual losses incurred. To the extent that actual losses incurred by us exceed the amount insured, we could have to bear substantial losses which may have a material adverse effect on our business, financial condition, results of operation and prospects. In line with industry practice, we leave some business risks uninsured including business interruptions, loss of profit or revenue and mechanical breakdown. To the extent that uninsured risks materialize, our business, financial condition, results of operation and prospects could be materially and adversely affected. Following the terrorist attacks of September 11, 2001, aviation insurers have increased premiums, applied insurance surcharges for each passenger, and significantly reduced coverage for war and allied perils liability to third parties. In the event of additional terrorist attacks, hijackings, airlines crashes or other events adversely affecting the airline industry, there is a risk that aviation insurers will further increase their premiums or reduce the availability of insurance coverage. Significant increases in insurance premiums or reductions in coverage may have a material adverse effect on our business, financial condition, results of operation and prospects. See “Business — Our Operations — Insurance”.

The airline industry is exposed to extraneous events such as terrorist attacks, outbreak of contagious diseases and extreme weather conditions. Terrorist attacks, such as those on September 11, 2001, and their aftermath had a negative impact on the airline industry. The primary effects experienced by the airline industry include increased security and insurance costs, increased concerns about future terrorist attacks, airport shutdowns, flight cancellations and delays due to security breaches and perceived safety threats, and significantly reduced passenger traffic and yields due to the subsequent dramatic drop in demand for air travel globally. Terrorist attacks, or the fear of such attacks, or other world events could result in decreased passenger load factors and yields and could also result in increased costs, such as increased jet fuel costs or insurance costs, for the airline industry, including us. If any similar events or circumstances occur in the future, our business financial condition, results of operation and prospects could be adversely affected. An outbreak of Severe Acute Respiratory Syndrome (SARS), the Influenza A H1N1 virus, avian flu, or another contagious disease with the potential to become a pandemic or the measures taken by the governments of affected countries against such potential outbreaks could also seriously disrupt our operations, which could have an adverse effect on our business. The perception that an outbreak of another pandemic may occur can also have an adverse effect on the economic conditions of countries in Asia which may also negatively impact our business, financial condition, results of operation and prospects. During the typhoon season or periods of other adverse weather conditions, flights may be cancelled or significantly delayed. Thailand has experienced a number of major natural catastrophes over the years, including tsunamis and floods. See “— Risks Relating to the Company and Thai AirAsia — Certain countries in Asia are subject to significant geological risk and the risk of other man-made or natural disasters which may affect demand for flights to these destinations”. If we delay or cancel flights for extreme weather conditions, our revenues and profits will be reduced and, notwithstanding that these events are beyond our control, passengers may blame us for such delays and cancellations. We could suffer a loss to our reputation, which could result in a loss of customers and materially and adversely affect our business, financial condition, results of operation and prospects.

Risks Relating to Thailand The floods experienced in 2011 are likely to have a significant adverse impact on the Thai economy. The floods that began in September 2011 are expected to have a significant adverse impact on the Thai economy as a whole. The full impact of the floods remains uncertain; however, in early December 2011, the Bank of Thailand reduced its GDP growth forecast for Thailand for 2011 from 4.1% projected prior to the floods to 1.8%. The impact of the floods on the growth of the Thai economy in 2012 and beyond depends on a number of factors, including the rate at which homes, businesses and infrastructure are repaired or replaced, industrial

29 parks and factories are reopened and whether manufacturing levels return to levels experienced prior to the flooding. In addition, the rate at which tourism and other key sectors of the Thai economy return to levels experienced prior to the flooding will be a key factor affecting the future growth of the Thai economy. The Government has stated its intention to improve flood protection infrastructure in an effort to prevent future flooding similar to that experienced in 2011. Government officials have announced plans for the construction of floodways, the repair of sluice gates damaged during the recent flooding and the purchase of additional pumps to remove future floodwater. The Government has also announced that it is preparing a master flood management plan. There can be no assurance, however, that these plans will be implemented before significant flooding occurs in Thailand again or at all. No assurance can be given that the Government’s flood prevention measures will be adequate to protect low-lying areas and other parts of Thailand from flooding in the future.

Political conditions and continued violence in Thailand may have a direct impact on our business and the market price of the Securities. We are subject to a political environment in Thailand that differs in certain significant respects from that prevailing in countries with more developed economies. Our business, financial condition, results of operations and prospects may be influenced in part by the political situation in Thailand, which has been unstable from time to time. In 2006, there was a military coup against the country’s civilian political leadership. The coup leaders declared martial law and abrogated the 1997 Constitution. In 2007, the new Constitution came into force and a general election was subsequently held. Two new coalition governments took office in February and September 2008, respectively. There were a series of anti-government protests in 2008, including an occupation by protestors of the Government House and the seizure of Thailand’s two key airports. In December 2008, the Thai Constitutional Court issued a verdict that disbanded certain government political parties, which dissolved the then existing coalition government and removed the Prime Minister from office. The leader of the Democrat-led coalition was voted in as the new Prime Minister by the Thai Parliament in December 2008. There have been a series of protests and demonstrations, including an attack by protesters that caused the cancellation of the ASEAN Summit in Pattaya and riots in Bangkok in April 2009, evidencing resistance to the current coalition government. In March 2010, anti-Government protestors (being supporters of the former Prime Minister Thaksin Shinawatra, who was ousted in a military coup in 2006) launched new protests aimed at removing the coalition Government and holding new elections. The protesters first occupied areas around the Ratchadamnoen area and moved to an encampment in Bangkok’s city centre. Over the course of two months, the demonstrations turned violent, causing the Government to declare a state of emergency in Bangkok on April 7, 2010 and later in 23 other provinces in central, northern and north-eastern Thailand. In an effort to clear the protest sites, the Government imposed curfews and restricted numbers at gatherings. A number of buildings, including a major shopping centre, Government buildings and the stock exchange, were set on fire by certain demonstrators, causing serious damage. A number of people were also killed and injured. Following the lifting of the state of emergency in December 2010, in January 2011, close to 30,000 opposition supporters descended in the same area as the earlier protestors to demand the investigation of the deadly governmental crackdown in May and the release of protest leaders who had been held in jail on terrorism charges. The events in early 2011 were largely peaceful. In July 2011, the Puea Thai Party won a decisive victory in the elections, making Prime Minister Yingluck Shinawatra the first female Prime Minister of Thailand. Ms. Yingluck is the sister of former Prime Minister Thaksin Shinawatra. There can be no assurances that any reforms made by the Government will promote growth and stability within Thailand. Moreover, Thaksin Shinawatra may seek to return to Thailand, and it is unclear what effect such a return would have or whether further political instability might result. We cannot predict what effects these recent events will have on Thailand’s political and economic conditions, or whether the new Government may seek changes to Thailand’s legal and regulatory environment. Any failure on the part of Ms. Yingluck, or the Puea Thai Party, to bring back potential stability in Thailand could have a material adverse effect on economic and legal conditions in Thailand, which in turn could have a material adverse effect on our business, financial condition, results of operations and prospects.

Substantially all of our assets and operations are located in Thailand and we are subject to economic, legal and regulatory uncertainties in Thailand. Substantially all of our assets and operations, including our headquarters, are located in Thailand. Consequently, we are subject to economic, legal and regulatory conditions in Thailand that differ in certain significant respects from those prevailing in other countries with more developed economies. There is no

30 assurance that the Thai economy will meet current projections or improve in the future. Any instability and economic downturn in the Thai economy could have a material adverse effect on our business, financial condition, results of operations and prospects and the market price of the Securities. Furthermore, prior Governments have, in the past, intervened in the Thai economy and occasionally made significant changes in policy including, among other things, foreign exchange control, policies concerning wage and price controls, capital controls and limits on imports, at times partially reversing such policies soon after the new policies were announced. In particular, any changes in, delays to, or a cancellation of, the Government’s infrastructure policies or investment plans could materially and adversely affect our business, financial condition, results of operations and prospects. Our businesses and operations in Thailand are subject to the changing economic conditions prevailing from time to time in Thailand. From 1996 to 1998, Thailand’s GDP growth slowed significantly in relation to historical levels and the country entered a recession. Since 1999, Thailand’s economy has been recovering, recording positive GDP growth each year until the global economy began to worsen in 2008 and took effect in 2009. According to Thailand’s Office of the National Economic and Social Development Board and Fiscal Policy Office, Thailand’s GDP grew by 5.0% in 2007 and 2.5% in 2008, declined by 2.3% in 2009 and grew by 7.8% in 2010. From 1996 to 1998, international credit rating agencies, including Moody’s and S&P, lowered Thailand’s sovereign rating as well as various Thai corporate debt ratings. With the improved performance of the Thai economy in 1999 through 2003, there was corresponding improvement in these credit ratings. Political unrest in late 2008 and early 2009 again put downward pressure on Thailand’s sovereign ratings. Thailand’s sovereign foreign currency long term ratings are currently rated “Baa1” with a negative outlook by Moody’s and “BBB+” with a negative outlook by S&P. Future lowering of the credit ratings for Thai sovereign debt may make it more expensive for us to obtain additional debt financing for our working capital and capital expenditures, which could have an adverse effect on our business, financial condition, results of operations and prospects. Policy changes made by the Government and the BOT have included the imposition (and subsequent reversal) of a one-year 30% unremunerated reserve requirement on foreign exchange inflows, under which any foreigner buying stock in Thailand had to place an extra non-interest bearing deposit. There is no assurance that the Government will not in the future re-impose restrictive foreign exchange controls that may affect the outward remittance of funds, including dividends payable on the Shares. Our business, financial condition, results of operations and prospects and the market price of the Securities may be adversely affected by future changes in Government policies.

Continued violence in southern Thailand, terrorist attacks and international and regional instability could adversely affect our business, financial condition, results of operations and prospects. In 2004, the Government declared martial law in certain southern provinces. The region has recently experienced increasingly serious and frequent incidents of violence, including bombings of power stations, which caused blackouts in the provinces. On July 19, 2005, the Government invoked an emergency decree to declare a state of emergency in the three southernmost provinces of Yala, Narathiwat and Pattani. The state of emergency imposed further controls in those provinces and allows the authorities to detain suspects without charge, ban public protests and censor the news media. Since January 2004, there have been a large number of casualties and injuries arising from violence in the region, including, most recently, bombings of commercial banks in Yala province. On December 31, 2006, several bombs exploded in Bangkok, killing three people, and in February 2007 a coordinated series of explosions in Southern Thailand, including in schools, killed at least eight people. A number of countries, including the United States, the United Kingdom, Australia and Canada have issued travel advisories relating to travel to Thailand in recent years. Continued violence could lead to widespread unrest in Thailand or a major terrorist incident in Thailand similar to those in other parts of Southeast Asia. If the security condition deteriorates and violence worsens, our business, financial condition, results of operations and prospects may be materially and adversely affected.

Non-enforceability of non-Thai judgments may limit your ability to recover damages from the Company. Under Thai law, judgments entered by a non-Thai court, including actions under the civil liability provisions of the securities laws of foreign jurisdictions, are not enforceable in Thailand. An investor would have to bring a separate action or claim in Thailand. Although a non-Thai judgment could be introduced as evidence in a court proceeding in Thailand, a Thai court would be free to examine de novo issues arising in the case. Thus, to the extent investors are entitled to bring a legal action against us, they may be limited in their remedies and any recovery and any Thai proceeding may be limited depending on the relevant court’s discretion.

31 The Company’s and Thai AirAsia’s financial statements are prepared in accordance with Thai GAAP, which differs from IFRS in certain material respects. We are subject to financial reporting requirements of publicly listed companies in Thailand that differ in significant respects from those applicable to companies in certain other countries, including the United States and the United Kingdom. The Company’s and Thai AirAsia’s financial statements are prepared in accordance with Thai GAAP, which differs in certain material respects from IFRS. See “Summary of Significant Differences Between Thai GAAP and IFRS”. In accordance with generally accepted accounting practices in Thailand, neither the Company nor Thai AirAsia has (i) performed a reconciliation of the financial statements included in this Offering Memorandum to IFRS or (ii) quantified the differences between Thai GAAP and IFRS with respect to such financial statements. If such a reconciliation or quantification had been performed, other material differences might have been identified and disclosed in the section of the Offering Memorandum entitled “Summary of Significant Differences Between Thai GAAP and IFRS”. Accordingly, there is no assurance that the identified differences in the section of the Offering Memorandum entitled “Summary of Significant Differences Between Thai GAAP and IFRS” represent all material differences related to the Company or Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011 or as of and for the three months ended March 31, 2011 and 2012.

Risks Relating to the Securities We expect that the price of our Securities will fluctuate significantly and you may not be able to resell our Securities at or above the offering price. The trading price of our Securities is likely to be volatile and subject to wide price fluctuations in response to various factors, including: • market conditions in the broader stock market generally or in the Thai or international aviation industry in particular; • actual or anticipated fluctuations in our quarterly operating results; • the issue of new or changed securities analysts’ reports or recommendations; • additions or departures of key personnel; • legal and regulatory developments and changes; • foreign exchange rate fluctuations; • litigation and governmental investigations; and • economic and political conditions or events. These and other factors may cause the market price and demand for our Securities to fluctuate substantially, which may limit or prevent you from readily selling our Securities and may otherwise negatively affect the liquidity of our Securities. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of the shareholders were to bring a lawsuit against the Company, we could incur substantial costs defending the lawsuit or if the lawsuit is ultimately resolved against the Company, we could incur substantial costs in damages. Such a lawsuit could also divert the time and attention of our management from our business.

Future sales of our Shares by our Selling Shareholders, and the availability of large amounts of our Shares for sale by our Selling Shareholders, could adversely affect the trading price of the Securities. Upon completion of the Combined Offering, Thai AirAsia’s management (including the Selling Shareholders) will own an aggregate of 60% of the issued and outstanding shares of the Company. The Selling Shareholders have each agreed with the International Managers that from the date of this Offering Memorandum until the date that is 180 days after the closing date of the Primary Offering, each of the Selling Shareholders will not, without the respective written consent of the International Managers, offer, sell or otherwise dispose of any securities of the same class as the Shares offered in the Combined Offering or any securities convertible into or exchangeable for our Securities of the same class as the Shares offered in the Combined Offering. Subject to the SET provisions described below and the New Asia Aviation Shareholders’ Agreement (as defined and summarized in “Related Party Transactions — Future Related Party Transactions — Asia Aviation Shareholders’ Agreement), under the lock-up provisions agreed with the International Managers, each Selling Shareholder will be free to sell the Shares he controls any time after November 25, 2012. In addition, under rules issued by the SET, Shares comprising an aggregate of 55% of the post-offering share capital of the Company cannot be sold for a period of one year following the date of commencement of

32 trading of our Shares on the SET subject to the following: up to 25% of these Shares may be sold after the period of the first six months after trading commences on the SET and the remaining 75% of these Shares may be sold after the period of the first 12 months after trading commences on the SET. Significant sales of our Shares by the Selling Shareholders, including the sale of the Secondary Shares in the Secondary Offering, or the perception that significant sales may occur, could adversely affect the trading price of the Securities. We cannot predict the effect, if any, that future sales, or the availability of Shares for future sale, will have on the market price of the Securities prevailing from time to time. Sales of substantial amounts of Shares in the public market following the Combined Offering, or the perception that such sales may occur, could adversely affect the market price of the Securities on the SET. These sales may also make it more difficult for us to raise capital through the issue of equity securities at a time and at a price we deem appropriate.

The interests of our controlling shareholders may differ from or conflict with our interests. After the completion of the Combined Offering, Thai AirAsia’s management (including the Selling Shareholders) will own an aggregate of 60% of the issued and outstanding shares of the Company, with substantial control over the Company and our affairs and business, including the election of directors, the timing and payment of dividends and the approval of most other actions requiring the approval of our shareholders. The interests of our controlling shareholders may differ from and conflict with the interests of the Company and our other shareholders and our controlling shareholders are free to exercise their votes according to their interests.

We are subject to corporate disclosure and accounting requirements that differ from those in other countries. We are subject to reporting and corporate governance requirements in Thailand that differ, in significant respects, from those applicable to companies in certain other countries. We are required to publish annual audited and quarterly unaudited financial statements. The SET’s rules and regulations are evolving. The amount of information made publicly available by issuers in Thailand is significantly less than that made publicly available by comparable companies in certain more developed countries, and certain statistical and financial information of a type typically published by companies in certain more developed countries may not be available. As a result, shareholders may not have access to the same level and type of disclosure as that available in other countries, and comparisons with other companies in other countries may not be possible in all respects. In addition, shareholder protection afforded by, and enforcement of, the rules and regulations of the SET, by the PLCA and other Thai laws may not be as extensive as in other countries.

There are risks associated with the trading and delivery of our Securities on the Stock Exchange of Thailand. Prior to the Combined Offering there has been no public market for our Securities. The initial offering price for our Securities was the result of negotiations between us, the International Managers and the Joint Thai Lead Underwriters and may differ significantly from the market price for the Securities following the Combined Offering. Foreign investors may be required to own NVDRs instead of Shares. We cannot assure you that a more liquid public market for our Securities will develop or, if a liquid trading market develops, that it will be sustained. In addition, there may not be any market makers for the NVDRs relating to our Shares, and any person that makes a market for the NVDRs relating to our Shares does not have any obligation to continue doing so and may discontinue making a market at any time. We are required to register both the increase of paid-up capital represented by the New Shares offered in the Primary Offering and the list of our shareholders with the MOC prior to delivery of the Primary Shares. We expect this registration to occur, and delivery of the Primary Shares to be made approximately five business days after we receive payment for the Primary Shares in the Primary Offering. Under Thai law, the status of investors in our Shares in the period between the time investors pay for Shares and the time the increase in our paid-up capital and list of our shareholders are registered with the MOC is uncertain. During this period, investors may not be shareholders and instead would likely be considered unsecured creditors. We have made an application to list our Shares on the SET and have applied for a waiver of the listing qualifications in relation to the minimum shareholding of 75% of the voting shares that listing applicants are required to hold in a core company, in our case, Thai AirAsia (in which we expect to hold 55% of the Shares after the Combined Offering and Thai AirAsia’s rights offering). We cannot assure you that the SET will grant such a waiver or that it will approve of our application to list our Shares. The SET is entitled to consider a listing application for up to seven days after we submit a completed application, including the MOC registrations referred to above, to the SET. As a result, our Shares may not be listed on the SET until June 6, 2012, if at all. Unless and until listing approval is given for our Shares, none of our Shares sold in the Combined Offering may

33 be traded on the SET and holders of our Shares may only be able to sell them, if at all, in matching off-exchange transactions. See “The Thai Securities Market” for a summary of the listing and trading procedures of the SET.

The Thai securities market is relatively small and may cause the market price of the Securities to be more volatile. The SET is relatively small and may be more volatile than stock exchanges in the United States and certain other countries. As of December 31, 2011, there were 472 companies listed and quoted on the SET and the aggregate market capitalization of listed equity securities of these companies listed on the SET was Baht 8,407.7 billion. The relatively small market capitalization of, and trading volume on, the SET, compared to certain other global stock exchanges, may cause the market price of securities listed on the SET, including the Securities, to fluctuate more than those listed on larger global stock exchanges. The market price of the Securities may be adversely affected by the lack of liquidity on the SET. In addition, the September 2006 coup and Government policies promulgated after the coup (including the institution by the BOT of the 30% capital reserve requirement on foreign currency inflows on December 18, 2006 and its subsequent reversals) have adversely affected the Thai securities market, which has been characterized by increased volatility since 1997. These market characteristics may limit your ability to sell the Securities and may also affect the market price of the Securities.

The net asset value of the New Shares issued in the Combined Offering is significantly less than the Offering Price, and you will incur immediate and substantial dilution in the net asset value per Share. The Offering Price is substantially higher than our adjusted net asset value per Share after adjusting for the estimated net proceeds from the issue of the New Shares and based on our issued share capital after the Combined Offering. Therefore, you will experience immediate and substantial dilution and our existing shareholders will experience a material increase in the net asset value per Share they own. See “Dilution” for a further description of the extent to which subscribers and/or purchasers of our Securities will experience dilution.

Fluctuations in the exchange rate of the Baht with respect to the U.S. Dollar or other currencies will affect the foreign currency equivalent of the value of the Securities and any dividends. Fluctuations in the exchange rates between the Baht and other currencies will affect the foreign currency equivalent of the Baht price of the Securities. Such fluctuations will also affect the amount that holders of the Securities will receive in foreign currency upon conversion of any cash dividends or other distributions paid in Baht by us on the Securities, and any proceeds paid in Baht from any sale of the Securities in the secondary trading market.

Your ability to participate in future rights offerings may be limited. Although Thai public companies are not required to offer pre-emptive rights to existing shareholders when issuing new securities, Thai public companies have from time to time issued new securities through rights offerings. Compliance with securities laws or other regulatory provisions in some jurisdictions may prevent certain investors from participating in any future rights issuances and thereby result in dilution of their existing shareholdings. We do not have, and do not currently foresee having, any obligation to register our securities in any jurisdiction outside Thailand to permit foreign investors to participate in any future rights offerings we may undertake.

Risks Relating to the NVDRs As an NVDR holder, you are not a legal or beneficial owner of, and you will have limited rights in relation to, the Shares underlying the NVDRs. NVDRs are issued by the NVDR Issuer, a wholly owned subsidiary of the SET. Under the terms and conditions of the NVDRs, the NVDRs constitute a direct, general, unconditional and unsecured obligation of the NVDR Issuer that ranks equally among all NVDRs issued by the NVDR Issuer, including NVDRs relating to shares of other companies. The NVDRs do not convey to the NVDR holder any rights or obligations in relation to the shares (including our Shares) underlying the NVDRs (including the right to attend, and vote at, shareholder meetings), and the NVDR Issuer is the registered holder and legal owner of the shares underlying the NVDRs (including our Shares). As a result, you will not be the legal owner of the Shares underlying the NVDRs. Any rights that you will have in relation to the Shares underlying the NVDRs are limited to, among others: • receiving an amount equivalent to the amount of dividends or other distributions paid or made to, and actually received by, the NVDR Issuer in relation to the Shares underlying the NVDRs; and

34 • being able to direct the manner in which the NVDR Issuer votes the Shares underlying the NVDRs solely in relation to any proposal to de-list the shares from the SET. In addition, you should note that the NVDR Issuer will not exercise any voting rights that it has as legal owner of the underlying shares (including our Shares) except for any proposal for the de-listing of such shares from the SET. The NVDR is a security separate from the Shares and we cannot give you any assurances as to the relationship of its future trading price or liquidity to that of the Shares.

You may not be able to register the ownership of the Shares underlying the NVDRs if you exchange your NVDRs for the Shares. Although the terms of the NVDRs provide holders with the right to exchange an NVDR for a share (including our Shares) underlying the NVDR, non-Thai holders may not be able to register the ownership of the shares (including our Shares) if the foreign shareholding limit has been reached at the time of the registration. See “— Risks Relating to the Company and Thai AirAsia — There are limitations on the foreign ownership of the Company and of our core asset, Thai AirAsia, and any breach of such limitations could result in a revocation of our air service operator license and our right to fly our routes” for a discussion of the foreign shareholding limits applicable to you. If the Shares are not registered in your name, you will not be entitled to vote, or to any dividend or other distributions on the Shares (any dividends or distributions would only be in relation to the Thai NVDRs), or be entitled to any rights that our shareholders would have under Thai law. In addition, you may be required to sell or otherwise dispose of such Shares, and we cannot assure you that any such sales will be at prevailing market price.

If the NVDR Issuer becomes insolvent, you will not be entitled to receive the Shares underlying the NVDRs. Unlike a typical depository receipt (e.g. a GDR or ADR), which evidences an interest in specific segregated securities of an issuer, NVDRs do not represent an interest in or other specific claim on the Shares deposited with the NVDR Issuer. NVDRs are instead direct, general, unconditional and unsecured obligations of the NVDR Issuer, and if the NVDR Issuer is declared bankrupt or is liquidated, Thai law does not give NVDR holders special protections or a lien over the shares (including our Shares) underlying the NVDRs. Therefore, as a holder of NVDRs, you will not be entitled to receive the Shares underlying the NVDR, which will be considered part of the assets of the NVDR Issuer, but would be considered a general, unsecured creditor of the NVDR Issuer. Based on the NVDR Prospectus, the NVDR Issuer undertakes to not create any liabilities or indebtedness other than those relating to the issuance of the NVDRs and the operation of the NVDR Issuer. In addition, the NVDR Issuer undertakes to neither pledge nor create any lien or encumbrance over the securities underlying the NVDRs. However, we cannot assure you that the Shares underlying the NVDRs, or dividends or other cash, securities, or other property received or receivable by the NVDR Issuer in respect of such Shares, will not be subject to claims against the assets of the NVDR Issuer in an insolvency or similar proceedings or otherwise, including secured claims or claims otherwise senior in priority to those of the NVDR holders.

As an NVDR holder, any recourse which you may have, which is limited, is against the NVDR Issuer. Under the terms and conditions of the NVDRs, as a holder of NVDRs, you do not have any right in Thailand to take any action, legal or otherwise, against the NVDR Issuer arising from or in connection with your holding of NVDRs unless the NVDR Issuer engages in willful misconduct with respect to the distribution of the financial benefits relating to the NVDRs and you suffer damage as a result. Because you will not be a registered holder or legal owner of the Shares underlying the NVDRs, you may not have any course of action in Thailand against the NVDR Issuer in relation to the NVDRs.

There is limited publicly available information on the NVDR Issuer. The NVDRs are issued and offered by the NVDR Issuer by means of the NVDR Prospectus attached as “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”. Although the relevant Thai securities regulations require the NVDR Issuer to file with the Thai SEC a document that contains information relating to the shares underlying the NVDRs it offers, the NVDR Prospectus does not include such information. The Thai SEC has not required the NVDR Issuer to submit anything further other than the balance sheet of the NVDR Issuer to the Thai SEC and amendments to the NVDR Prospectus. In addition, the NVDR Prospectus does not contain any financial statements or other information in relation to the NVDR Issuer. The NVDR Issuer does not publicly release its annual financial statements or annual report on its website, and you may not be able to obtain any financial or other information in relation to the NVDR Issuer to determine its solvency.

35 USE OF PROCEEDS We estimate the net proceeds to us of the Combined Offering from the sale of New Shares to be Baht 2,746.3 million (US$86.7) million), based on an offering price of Baht 3.70 per Share, after deducting underwriting commissions and applicable value added taxes in connection with the Combined Offering (which are estimated to be Baht 28.7 million (US$0.9 million)). We intend to use the net proceeds to us of the Combined Offering as follows: • Baht 2,663.1 million (US$84.0 million) to subscribe for new shares in Thai AirAsia, which we expect will increase our shareholding in Thai AirAsia to 55.0%; and • the remainder for general corporate purposes. Thai AirAsia intends to use the net proceeds of the subscription by us in its shares as follows: • approximately Baht 1,500 million (US$47.3 million) for the expansion of Thai AirAsia’s fleet between 2012 and 2014; and • the remainder for working capital and general corporate purposes. The foregoing discussion represents our best estimate of the Company’s and Thai AirAsia’s allocation of the net proceeds of the Combined Offering based upon the Company’s and Thai AirAsia’s current plans and estimates regarding our anticipated expenditures. The Company’s and Thai AirAsia’s management, however, will have flexibility and discretion as to how we apply the net proceeds as described above. Actual expenditures may vary from these estimates and the Company and Thai AirAsia may find it necessary or advisable to reallocate the net proceeds within the categories described above or to use portions of our net proceeds for other purposes. Pending the application of the net proceeds as described above, we intend to invest the net proceeds in money market instruments, certificates of deposit, time deposits or other short-term investments. We will not receive any proceeds from the sale of the Vendor Shares by the Selling Shareholders. The Selling Shareholders have notified us that they intend to use a portion of the proceeds of the Vendor Shares received by each of them to prepay in full all outstanding amounts owed by each of them under the Credit Suisse Loan Agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Bank Loans — Credit Suisse Term Loan” for a summary of the Credit Suisse Loan Agreement. The Selling Shareholders expect such prepayment to be made in two installments, reflecting the timing of receipt of the proceeds from the sale of the Vendor Tranche A Shares and the Vendor Tranche B Shares.

36 DIVIDEND POLICY Neither the Company nor Thai AirAsia has paid any dividends since incorporation. The respective boards of directors of the Company and Thai AirAsia may recommend annual dividends subject to the approval of the Company’s and Thai AirAsia’s shareholders at their respective annual general meetings. From time to time, the Company’s and Thai AirAsia’s boards of directors may declare interim dividends. The Company’s and Thai AirAsia’s respective board of directors intend to adopt a dividend policy which will take into account the profitability of the business and underlying growth in earnings, as well as each entity’s respective capital requirements and cash flows, while maintaining an appropriate level of dividend cover. The board of directors of the Company and Thai AirAsia will take the following factors into account when considering dividend payments to the shareholders: • the Company’s and Thai AirAsia’s performance, liquidity, current cash flow and financial status; • provisions and conditions regarding dividend payment as provided in the loan agreements, debentures, any contracts which create the Company’s and Thai AirAsia’s liabilities, including agreements or contracts that the Company and Thai AirAsia are obliged to comply with; • future business plans and investment capital requirements; and • other factors as deemed appropriate by the respective board of directors. In addition, under the PLCA, dividend payments may only be paid based on the net profit of the Company derived from its standalone financial statements and not from its proportionate consolidated financial statements. Therefore, the Company is not able to pay any dividend with respect to its net profit derived from its proportionate consolidated financial statements that is attributable to the net profit of Thai AirAsia. The Company’s ability to make dividend payments is dependent on the receipt of dividend income from Thai AirAsia because such dividend payments constitute substantially all of the Company’s income. Moreover, the Company must comply with the PLCA, which states that the Company cannot pay dividends if the Company has an accumulated deficit, even though the Company has a net profit in that particular year. As of March 31, 2012, the Company and Thai AirAsia had an accumulated deficit (each on a standalone basis) of Baht 6.6 million (US$0.2 million) and Baht 325.6 million (US$10.3 million), respectively. Additionally, the PLCA and the Company’s Articles of Association state that a public company limited is required to reserve an amount equal to 5% of the annual net profit after deduction of the accumulated loss (if any) as legal reserve fund until such legal reserve fund is equal to not less than 10% of the registered capital. As of March 31, 2012, the Company’s legal reserve was 0% of its registered capital. In addition to the legal reserve fund, the board of directors may consider making other types of reserve fund as deemed appropriate. Under the Civil and Commercial Code and Thai AirAsia’s articles of association, each time Thai AirAsia distributes dividends, Thai AirAsia must appropriate at least one-twentieth of the profits to a reserve fund until the reserve fund reaches one-tenth of the capital of Thai AirAsia. Dividends in respect of shares are generally subject to Thai income tax withholding at a rate of 10% when paid to either non-resident corporate investors or to non-resident individual investors. See “Taxation — Thai Taxation — Taxation of Dividends” for a description of Thai taxation on dividends. Cash dividends on our Shares and the NVDRs will be paid in Baht. As a result, the equivalent of any dividends in U.S. Dollar or other foreign currencies will be affected by changes in the exchange rate between Baht and the U.S. Dollar or such other foreign currencies. The terms and conditions of the NVDRs provide that the NVDR Issuer is to make payments to holders of NVDRs equal to the amount of dividends that the NVDR Issuer receives as the registered holder of our shares in proportion to each holder’s holdings in the NVDRs. See “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus” for further details.

37 EXCHANGE RATE INFORMATION The following table sets forth, for the periods indicated, certain information concerning the average buying (telex transfer) and selling exchange rate of commercial banks in Bangkok announced by the BOT. We are providing this information solely for your convenience. These are not necessarily the rates that we used in the preparation of the Company’s or Thai AirAsia’s financial statements. We do not represent that the Baht or U.S dollar amounts set forth herein and referred to elsewhere in this Offering Memorandum could have been, or could be, converted into U.S. Dollars or Baht, as the case may be, at the reference rates indicated, at any particular rates, or at all.

At Period End Average(1) Low High 2006 ...... 36.09 37.94 40.95 35.19 2007 ...... 33.77 34.57 36.10 33.27 2008 ...... 34.94 33.38 35.73 31.16 2009 ...... 33.37 34.32 36.21 33.12 2010 ...... 30.15 31.70 33.30 29.56 2011 ...... 31.69 30.50 31.69 29.70 2011: July ...... 29.75 30.08 30.48 29.70 August ...... 30.02 29.88 30.02 29.73 September ...... 31.17 30.42 31.18 29.92 October ...... 30.67 30.89 31.28 30.51 November ...... 31.22 30.95 31.34 30.66 December ...... 31.69 31.21 31.69 30.77 2012: January ...... 31.04 31.58 31.91 31.04 February ...... 30.25 30.73 31.03 30.25 March ...... 30.84 30.69 30.84 30.48 April ...... 30.73 30.89 31.01 30.73 May (through May 9, 2012) ...... 31.03 30.92 31.03 30.77

(1) Averages are based on daily average buying (telex transfer) and selling exchange rate of commercial banks in Bangkok announced by the BOT. Source: BOT On May 9, 2012, the average buying (telex transfer) and selling exchange rate of commercial banks in Bangkok announced by the BOT was Baht 31.03 = US$1.00.

38 CAPITALIZATION AND INDEBTEDNESS The following table shows our capitalization and indebtedness as of March 31, 2012, which has been prepared in accordance with Thai GAAP, on an actual and as adjusted basis. The “As Adjusted” data set forth below gives effect to the issue of the Shares at an offering price of Baht 3.70 per Share, and the application of such proceeds in the manner described in “Use of Proceeds” after deducting underwriting commissions and applicable value added taxes in relation to the offering amounting to approximately Baht 28.7 million (US$0.9 million). We derived this table from our proportionate consolidated and company financial statements contained in this Offering Memorandum. You should read this information in conjunction with our proportionate consolidated and company financial statements and the related notes included elsewhere in this Offering Memorandum.

As of March 31, 2012 Actual As Adjusted Bt US$ Bt US$ (in millions) Cash and cash equivalents ...... 1,233.1 38.9 3,979.4 125.6 Indebtedness: Amounts due to related parties ...... 190.7 6.0 190.7 6.0 Current portion of long-term borrowing from a financial institution ...... — — — — Current portion of finance lease liabilities ...... 2.1 0.1 2.1 0.1 Long-term borrowing from a financial institution ...... — — — — Finance lease liabilities ...... 4.5 0.1 4.5 0.1 Total indebtedness(1) ...... 197.3 6.2 197.3 6.2 Shareholders’ equity: Share capital(2): Issued and fully paid — 4,100,000,000 shares (actual) and 4,850,000,000 (as adjusted) ...... 410.0 12.9 485.0 15.3 Reserves: Share premium ...... — — 2,671.3 84.3 Retained earnings: Appropriated — statutory reserve ...... — — — — Effect on additional proportion of investment in a joint venture ...... (15.5) (0.5) (15.5) (0.5) Deficit ...... (70.3) (2.2) (70.3) (2.2) Total shareholders’ equity ...... 324.1 10.2 3,070.5 96.9 Total shareholders’ equity and indebtedness ...... 521.4 16.4 3,267.8 103.1

(1) All such indebtedness is unguaranteed and unsecured. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Indebtedness” for a description of our long-term debt. (2) Actual registered share capital was Baht 485.0 million (US$15.3 million) comprising 4,850,000,000 Shares of par value Baht 0.10 per Share. Except with respect to the foregoing, and other than as disclosed in this Offering Memorandum, there have been no material adverse change in the capitalization and indebtedness of the Company since March 31, 2012.

39 DILUTION Dilution created by the Combined Offering represents the amount by which the offering price paid by the purchasers of Securities in the Combined Offering exceeds the book value of net assets per Share after the Combined Offering. We have determined book value of net assets per Share by subtracting our total liabilities from the total book value of our assets and dividing the difference by the number of Shares outstanding as of March 31, 2012. As of March 31, 2012, our book value of net assets per Share was Baht 0.08 (0.25 US cents) (based on the 4,100,000,000 Shares of par value Baht 0.10 issued and outstanding as of that date). After giving effect to the sale of the 750,000,000 New Shares offered in the Combined Offering at the offering price of Baht 3.70 per Share, and after payment of underwriting commissions and applicable value added taxes of the Combined Offering resulting in net proceeds to us of approximately Baht 2,746.3 million (US$86.7 million), but without taking into account any other changes in book value of net assets after March 31, 2012, the book value of net assets per Share would increase to Baht 0.63 per Share. This represents an immediate increase in book value of net assets of Baht 0.55 per Share, and an immediate dilution of Baht 3.07 per Share (or 82.9%) to new investors purchasing Shares at the price of Baht 3.70 per Share. The following table illustrates the per Share dilution (based on the offering price of Baht 3.70 per Share) described above:

Offering price per Share in the Combined Offering ...... Baht 3.70 Book value of net assets per Share as of March 31, 2012 ...... Baht 0.08 Increase per Share attributable to the sale of New Shares in the Combined Offering ...... Baht 0.55 Pro forma book value of net assets per Share after the Combined Offering (4,850,000,000 Shares outstanding as adjusted) ...... Baht 0.63 Dilution per Share to new investors of Shares in the Combined Offering ...... Baht 3.07 Percentage dilution to new investors ...... 82.9%

40 SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA You should read the selected financial information presented below in conjunction with the audited proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 of the Company and the audited financial statements as of and for the years ended December 31, 2009, 2010 and 2011 of Thai AirAsia and the unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 of the Company and the unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012 of Thai AirAsia, in each case contained elsewhere in this Offering Memorandum. You should also see the section of this Offering Memorandum entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The Company and Thai AirAsia have derived the selected Thai GAAP financial data from the audited proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 of the Company, and the audited financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012 of Thai AirAsia, prepared and presented in accordance with Thai GAAP and reporting practices in Thailand, as required under Thai law. The audited proportionate consolidated and company financial statements of the Company as of and for the years ended December 31, 2009, 2010 and 2011 and the audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011, have been audited by PwC Thailand. The unaudited proportionate consolidated and company interim financial information of the Company as of and for the three months ended March 31, 2011 and 2012 and the unaudited interim financial information of Thai AirAsia as of and for the three months ended March 31, 2011 and 2012, have been reviewed by PwC Thailand, who did not express an audit opinion on this financial information. In preparing the proportionate consolidated and company financial statements of the Company, we have treated our interest in Thai AirAsia as interest in a joint venture, rather than a subsidiary, to reflect the nature of the joint control. Accordingly, we have accounted for Thai AirAsia on a proportionate consolidation basis by taking 50.0%, as of and for the years ended December 31, 2009 and 2010 and as of and for the three months ended March 31, 2011, and 51.0%, as of and for the year ended December 31, 2011 and as of and for the three months ended March 31, 2012, corresponding to the percentage of equity that we own or jointly control at each period end date, of each of the assets, liabilities, revenues and expenses of Thai AirAsia and combining these with the assets, liabilities, revenues and expenses of the Company on a line-by-line basis after elimination of intra-group transactions. In November 2011, we purchased 1.0% of the equity shares of Thai AirAsia from our Chief Executive Officer, Mr. Tassapon Bijleveld, increasing our equity interest in Thai AirAsia to 51.0%. Effective from May 4, 2012, we treated Thai AirAsia as a subsidiary instead of a joint venture, and we began consolidating Thai AirAsia’s financial statements on a fully consolidated basis (with a deduction for non- controlling interest). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of Accounting — Accounting for Investment in Joint Venture” and Note 16 of the notes to the Company’s interim financial information as of and for the three months ended March 31, 2011 and 2012 for further details. After the Company completes the subscription of new shares in Thai AirAsia following completion of the Combined Offering, we expect that the Company will own 55.0% of Thai AirAsia’s shares. See “Corporate Structure — Post-Combined Offering Structure”. The audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011 contain an explanatory paragraph that states that, as of December 31, 2009, 2010 and 2011, Thai AirAsia’s total current liabilities exceeded its total current assets by Baht 5,220.7 million, Baht 3,310.0 million and Baht 1,394.3 million, respectively, but that the financial statements have been prepared on a going concern basis. The audited financial statements of the Company contain a similar paragraph. Our and Thai AirAsia’s results for the three months ended March 31, 2012 should not be considered indicative of the actual results we or Thai AirAsia may achieve for the year ending December 31, 2012. Thai GAAP differs in certain material respects from IFRS. For a discussion of significant accounting differences between Thai GAAP and IFRS that are relevant to the Company’s proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 as well as Thai AirAsia’s financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012, you should read the section entitled “Summary of Significant Differences Between Thai GAAP and IFRS”.

41 The Company Proportionate Consolidated Statements of Comprehensive Income Year Ended December 31, Three Months Ended March 31, Proportionate Consolidated Statements of Comprehensive Income: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Revenues ...... 4,640.6 6,049.4 8,123.2 256.3 2,080.1 2,482.7 78.3 Operating costs ...... (4,658.0) (4,982.6) (6,915.3) (218.2) (1,607.9) (2,055.7) (64.9) Gross profit (loss) ...... (17.4) 1,066.8 1,207.9 38.1 472.2 427.0 13.5 Net gain on exchange rates ...... 64.8 178.4 78.0 2.5 18.0 1.7 0.1 Other income ...... 109.0 181.5 226.0 7.1 79.2 49.2 1.5 Profit before expenses ...... 156.4 1,426.7 1,511.9 47.7 569.4 477.8 15.1 Selling expenses ...... (121.6) (178.9) (223.9) (7.1) (46.5) (100.6) (3.2) Administrative expenses ...... (120.5) (121.3) (181.9) (5.7) (39.7) (57.7) (1.8) Profit (loss) before finance costs and income tax ...... (85.7) 1,126.5 1,106.0 34.9 483.2 319.5 10.1 Finance costs ...... (0.2) (121.6) (91.9) (2.9) (37.6) (3.1) (0.1) Profit (loss) before income tax ...... (85.9) 1,004.9 1,014.1 32.0 445.6 316.5 10.0 Income tax ...... ————— —— Net profit (loss) for the year/period . . . (85.9) 1,004.9 1,014.1 32.0 445.6 316.5 10.0 Total comprehensive income (expense) for the year/period ...... (85.9) 1,004.9 1,014.1 32.0 445.6 316.5 10.0

Condensed Proportionate Consolidated Statements of Financial Position As of December 31, As of March 31, Condensed Proportionate Consolidated Statements of Financial Position: 2009 2010 2011 2011 2012 2012 Bt Bt Bt US$ Bt US$ (unaudited) (in millions) Cash and cash equivalents ...... 333.6 260.4 694.4 21.9 1,233.1 38.9 Total current assets ...... 685.4 2,035.4 1,451.0 45.8 1,798.0 56.7 Total non-current assets ...... 640.9 690.4 772.5 24.4 778.3 24.6 Total assets ...... 1,326.3 2,725.8 2,223.5 70.2 2,576.3 81.3 Total debt(1) ...... 2.0 101.3 261.7 8.3 6.6 0.2 Net debt(2) ...... (331.6) (159.1) (432.7) (13.7) (1,226.5) (38.7) Total current liabilities ...... 3,289.4 3,684.5 2,162.2 68.2 2,202.6 69.5 Total liabilities ...... 3,290.6 3,685.2 2,215.9 69.9 2,252.2 71.1 Total shareholders’ equity ...... (1,964.3) (959.4) 7.7 0.2 324.1 10.2 Total liabilities and shareholders’ equity ...... 1,326.3 2,725.8 2,223.5 70.2 2,576.3 81.3

(1) Comprises short-term borrowings from a financial institution, current portion of long-term borrowing from a financial institution, current portion of finance lease liabilities, non-current portion of long-term borrowing from a financial institution and non-current portion of finance lease liabilities. (2) Comprises total debt net of cash and cash equivalents. Condensed Proportionate Consolidated Statements of Cash Flows Year Ended December 31, Three Months Ended March 31, Condensed Proportionate Consolidated Statements of Cash Flows: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Net cash generated from (used in) operating activities ...... 86.4 (156.9) 262.4 8.3 97.2 816.2 25.8 Net cash generated from (used in) investing activities ...... (144.9) (16.6) 23.8 0.8 (19.9) (31.1) (1.0) Net cash generated from (used in) financing activities ...... (0.7) 99.3 126.5 4.0 (50.4) (258.2) (8.1) Cash and cash equivalents at end of year/period ...... 333.6 260.4 694.4 21.9 293.7 1,233.1 38.9

42 Thai AirAsia Statements of Comprehensive Income Year Ended December 31, Three Months Ended March 31, Statements of Comprehensive Income: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Revenues ...... 9,281.2 12,098.7 16,157.6 509.9 4,160.2 4,868.1 153.6 Operating costs ...... (9,315.9) (9,965.2) (13,757.6) (434.1) (3,215.8) (4,030.7) (127.2) Gross profit (loss) ...... (34.7) 2,133.5 2,400.0 75.7 944.4 837.4 26.4 Net gain on exchange rates ...... 129.5 356.8 155.3 4.9 36.0 3.3 0.1 Other income ...... 217.9 363.0 451.1 14.2 158.4 96.3 3.0 Profit before expenses ...... 312.7 2,853.3 3,006.4 94.9 1,138.8 937.0 29.6 Selling expenses ...... (243.0) (357.9) (444.7) (14.0) (92.9) (197.3) (6.2) Administrative expenses ...... (239.8) (241.3) (357.9) (11.3) (79.2) (112.1) (3.5) Profit (loss) before finance costs and income tax ...... (170.1) 2,254.1 2,203.8 69.5 966.7 627.6 19.8 Finance costs ...... (0.4) (243.1) (183.7) (5.8) (75.1) (6.0) (0.2) Profit (loss) before income tax ..... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6 Income tax ...... — — — — — — — Net profit (loss) for the year/period ...... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6 Total comprehensive income (expense) for the year/period .... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6

(1) Comprises short-term borrowings from a financial institution, current portion of long-term borrowing from a financial institution, current portion of finance lease liabilities, non-current portion of long-term borrowing from a financial institution and non-current portion of finance lease liabilities. (2) Comprises total debt net of cash and cash equivalents. Condensed Statements of Cash Flows Year Ended December 31, Three Months Ended March 31, Condensed Statements of Cash Flows: 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (unaudited) (unaudited) (in millions) Net cash generated from (used in) operating activities ...... 173.8 (313.6) 521.4 16.5 194.5 1,591.7 50.2 Net cash generated from (used in) investing activities ...... (289.9) (33.2) 30.6 1.0 (39.8) (61.1) (1.9) Net cash generated from (used in) financing activities ...... (1.4) 198.5 258.1 8.1 (100.7) (506.2) (16.0) Cash and cash equivalents at end of year/period ...... 654.1 507.8 1,359.7 42.9 574.5 2,407.2 76.0

43 Non-GAAP Financial Measures

Year Ended December 31, Three Months Ended March 31, 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (in millions, except for percentages) EBITDAR(1)(5) ...... 1,674.2 4,577.9 5,003.0 157.9 1,640.3 1,398.4 44.1 EBITDAR margin(4)(5) ...... 18.0 % 37.8 % 31.0 % 31.0% 39.4% 28.7% 28.7% EBITDA(2)(5) ...... (38.2) 2,377.3 2,275.3 71.8 985.1 645.3 20.4 EBITDA margin(4)(5) ...... (0.4)% 19.6 % 14.1 % 14.1% 23.7% 13.3% 13.3% EBIT(3)(5) ...... (170.1) 2,254.1 2,203.7 69.5 966.7 627.6 19.8 EBIT margin(4)(5) ...... (1.8)% 18.6 % 13.6 % 13.6% 23.2% 12.9% 12.9%

44 Operating Data The following table presents Thai AirAsia’s operating information for the periods indicated.

(1) Represents the number of passengers carried as a proportion to capacity, which is the number of seats available for passengers (180 seats available for our Airbus A320 aircraft and 148 seats available for our Boeing 737-300 aircraft). Thai AirAsia began switching to Airbus A320 aircraft in October 2007. (2) Available seat kilometers, which is the total number of seats available on scheduled flights multiplied by the number of kilometers these seats were flown. (3) Revenue passenger kilometers, which is the number of paying passengers carried on scheduled flights multiplied by the number of kilometers those seats were flown. (4) Calculated as total passenger revenues divided by total number of passenger carried. (5) Calculated as revenues divided by ASK. (6) Calculated as the sum of Thai AirAsia’s operating costs, selling expenses, administrative expenses and management remuneration (but excluding finance costs) divided by ASK. (7) Calculated as the sum of Thai AirAsia’s operating costs, selling expenses, administrative expenses and management remuneration (but excluding finance costs) less fuel costs divided by ASK. (8) Based on an exchange rate of US$1.00 = Baht 33.37 in 2009, US$1.00 = Baht 30.15 in 2010 and US$1.00 = Baht 31.69 in 2011, US$1.00 = Baht 32.37 in the three months ended March 31, 2011 and US$1.00 = Baht 30.84 in the three months ended March 31, 2012. (9) Month-end average for the period.

45 (10) Represents the average number of kilometers flown per flight. (11) Represents the average block hours per day per aircraft during the relevant period. Block hours is calculated by measuring the duration between the time of departure of an aircraft and the time of arrival at its destination. (12) Comprises revenues relating to baggage handling fees, excess baggage fees, seat selection fees, in-flight sales of meals and beverages, convenience fees, freight, in-flight sales of merchandise and cancellation and documentation fees. (13) Calculated as average fuel price of Jet kerosene for the period (MOPS price). (14) A flight is deemed “on time” if the actual departure time is no more than 15 minutes of the scheduled departure time.

46 HISTORY AND CORPORATE STRUCTURE

History and Development The Company was incorporated as Asia Aviation Co., Ltd. on February 14, 2006 by Shin Corporation Public Company Limited (“Shin Corporation”) and a Thai investor as part of a joint venture with AirAsia Investment, a wholly owned subsidiary of AirAsia Berhad, to operate Thai AirAsia. As part of the joint venture, Asia Aviation Co., Ltd. purchased, on February 14, 2006, 50.0% of the shares in Thai AirAsia that were originally held by Shin Corporation, and purchased an additional 1.0% from Mr. Tassapon Bijleveld in November 2011, while AirAsia Investment continued to hold 49.0%. On June 21, 2007, Shin Corporation and the Thai investor sold and transferred all of their shares held in Asia Aviation Co., Ltd. to the Selling Shareholders. Asia Aviation Co., Ltd. became a public company and changed its name to Asia Aviation Public Company Limited on December 26, 2011. Under the stewardship and vision of our management, the major milestones in our and Thai AirAsia’s corporate history since 2004 include the following:

February 2004 ...... Thai AirAsia began operating domestic air services under the Thai AirAsia brand from Bangkok’s Don Muang Airport to Hat Yai District, Songkla, Phuket and Chiang Mai with two Boeing 737 aircraft. Thai AirAsia also began operating our first international flight from Bangkok to Singapore. July 2004 ...... Thai AirAsia commenced flights to Macau. February 2006 ...... Wewere incorporated and purchased 50.0% of the shares of Thai AirAsia. July 2007 ...... Wecommenced flights to Shenzhen. September 2007 ...... Wemoved our Bangkok hub from Don Muang International Airport to Suvarnabhumi International Airport. October 2007 ...... Ourfirst Airbus A320 aircraft was delivered. November 2009 ...... Welaunched our second hub in Phuket. August 2010 ...... Weceased operating the Boeing 737 aircraft and our fleet comprised a single aircraft type, the Airbus A320. December 2010 ...... Wecommenced flights to two destinations in India, Kolkata and New Delhi. We also launched the Phuket to Bali route. January 2011 ...... Welaunched our third hub in Chiang Mai. We also launched the Chiang Mai to Singapore route. December 2011 ...... Weoperated 22 aircraft with 504 flights per week to 25 destinations.

47 Corporate Structure The following chart shows our shareholding structure before the Combined Offering.

Pre-Combined Offering Structure

AirAsia Selling Berhad Shareholders

100% 100%

AirAsia The Company Investment

49% 51%

Thai AirAsia

Post-Combined Offering Structure

AirAsia Selling Public Berhad Shareholders

100% 60% 40%

AirAsia The Company Investment

45% 55%

Thai AirAsia

48 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In the following section we discuss the Company’s and Thai AirAsia’s historical results for 2009, 2010 and 2011 and the three months ended March 31, 2011 and 2012. You should read the following discussion together with the audited proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited proportionate consolidated and company financial statements as of and for the three months ended March 31, 2011 and 2012 of the Company, and the audited financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and the unaudited financial statements as of and for the three months ended March 31, 2011 and 2012 of Thai AirAsia. The Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements have been prepared in accordance with Thai GAAP. Thai GAAP differs in certain material respects from IFRS. For a summary of certain significant accounting differences between Thai GAAP and IFRS that are relevant to the Company’s proportionate consolidated and company financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited proportionate consolidated and company interim financial information as of and for the three months ended March 31, 2011 and 2012 as well as Thai AirAsia’s financial statements as of and for the years ended December 31, 2009, 2010 and 2011 and unaudited interim financial information as of and for the three months ended March 31, 2011 and 2012, see “Summary of Significant Differences Between Thai GAAP and IFRS”.

Overview We are the leading Thai LCC in terms of passengers carried at AOT airports, with a market share of 12.7% for the year ended September 30, 2010, according to S-A-P. Our vision is to be the lowest cost airline in every market we serve without compromising our level of service. We focus on providing high-frequency services on short-haul, point-to-point international and domestic routes. We operate from three hubs in Thailand, namely Bangkok, Phuket and Chiang Mai, and plan to open a fourth hub in Hatyai by 2013 and a fifth hub in Udon Thani by 2014. We target markets within a four-hour flight time from our various hubs, which gives us access to a population of approximately 3,153 million people in Southeast Asia, India and China as of the end of 2010. We believe that the growing population in Thailand (approximately 64 million people as of the end of 2010) provides an attractive market in which we can stimulate air travel among a population that previously could not afford to travel by air or who live in areas not serviced by other airlines. Our business model is based on that of AirAsia Berhad, which will own 45.0% of Thai AirAsia after the completion of the Combined Offering and after the Company completes the subscription of new shares in the Thai AirAsia rights offering, and with whom we have a strategic partnership. We believe our simple single-class, single type fleet configuration, point-to-point operations, high aircraft utilization, scale, distribution channels and extensive route network provide us with a cost advantage over other Thai airlines and one that compares favorably with other LCCs around the world. Our cost competitiveness is evidenced by Thai AirAsia’s cost per ASK of Baht 1.39 (4.61 U.S. cents at an exchange rate of US$1.00 = Baht 30.15) in 2010 and Baht 1.58 (4.99 U.S. cents at an exchange rate of US$1.00 = Baht 31.69) in 2011. Our low costs, low fares, strong brand and marketing and reliable service have enabled us to significantly expand our operations since we started operations in 2004. We have achieved strong growth in revenue from passenger seat sales since we started operations in 2004. Thai AirAsia’s passenger revenue increased from Baht 7,582.3 million in 2009 to Baht 10,260.3 million in 2010 and to Baht 13,007.5 million (US$410.5 million) in 2011, which represents a compounded annual growth rate (“CAGR”) of 31.0% from 2009 to 2011. Similarly, our fleet size grew from 20 aircraft as of December 31, 2009 to 22 aircraft (including one spare) as of December 31, 2011. We took delivery of two additional aircraft in January and February 2012 and we intend to expand our fleet to 48 Airbus A320 aircraft by 2016. Thai AirAsia also achieved a strong EBITDAR margin of 31.0% in 2011. Thai AirAsia’s domestic passenger services comprised 44.1% of its passenger revenue and 57.9% of its total passengers in 2011. Thai AirAsia’s international passenger services comprised 55.9% of its passenger revenue and 42.1% of its total passengers in 2011. We have been able to achieve our success despite an extraordinarily difficult period for the airline industry caused by, among other factors, the adverse effects of the global economic crisis which started in 2007, terrorist attacks, and rising fuel prices and insurance premiums. Our success is also notable given that, since we started operations in 2004, we have competed against strong incumbent operators, some of whom have significantly greater financial resources.

49 Basis of Presentation Accounting for Investment in Joint Venture Thai AirAsia, which accounted for 100.0% of our total revenue in 2009, 2010 and 2011, is an incorporated joint venture in which we owned 50.0% of the equity shares in 2009, 2010 and up to November 8, 2011, after which we owned 51% of the equity shares. In preparing the proportionate consolidated financial statements of the Company, we have treated our interest in Thai AirAsia as interest in a joint venture, rather than a subsidiary, to reflect the nature of joint control. For purposes of the proportionate consolidated financial statements of the Company, a joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Accordingly, in the proportionate consolidated financial statements of the Company, we have accounted for Thai AirAsia on a proportionate consolidation basis by taking 50.0% or 51.0%, as appropriate, corresponding to the percentage of equity that we own or control at the relevant time, of each of the assets, liabilities, revenues and expenses of Thai AirAsia and combining these with the assets, liabilities, revenues and expenses of the Company on a line-by-line basis after elimination of intra-group transactions. See Note 3.3 to the audited proportionate consolidated financial statements of the Company. In November 2011, we purchased 399,993 shares, representing 1.0% of the equity shares, of Thai AirAsia from our Chief Executive Officer Mr. Tassapon Bijleveld at a purchase price of Baht 10 per share, thereby increasing our shareholding in Thai AirAsia to 51.0%. In addition, immediately after the consummation of the Combined Offering, we plan to use substantially all of the net proceeds to us of the Combined Offering to subscribe for new shares in Thai AirAsia pursuant to Thai AirAsia’s rights offering to its existing shareholders. AirAsia Investment and the other minority shareholders have each agreed not to subscribe for its entitlement to the new Thai AirAsia shares. Therefore, after the consummation of Thai AirAsia’s rights offering, we expect our equity interest in Thai AirAsia to increase from 51.0% to 55.0% and AirAsia Investment’s equity interest in Thai AirAsia to be diluted to 45.0%. Effective from May 4, 2012 (the “Effective Date”), we treated Thai AirAsia as a subsidiary instead of a joint venture, and we consolidated Thai AirAsia’s financial statements on a fully consolidated basis (with a deduction for non-controlling interest to reflect AirAsia Investment’s 49.0% interest in Thai AirAsia) instead of on a proportionate consolidation basis. In our consolidated financial statements, we will recognize a gain or loss in our consolidated statement of comprehensive income for the difference between the value of the equity interests held under proportionate consolidation and the fair value on the Effective Date. We will also record any excess of the aggregate of the amount of the non-controlling interests and the fair value of our 51.0% equity interest above the fair value of the identifiable net assets of Thai AirAsia as goodwill. In addition, if additional intangible assets are identified as part of the identifiable net assets of Thai AirAsia, we may have to amortize finite life intangible assets according to their remaining useful lives in our financial statements and recognize an impairment loss on both finite and infinite life intangible assets, if such intangible assets are subsequently impaired. As a result, our consolidated financial statements following the Effective Date in 2012 will not be comparable to our proportionate consolidated financial statements prior to the Effective Date. For the purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operations, we discuss the financial condition and results of operations of Thai AirAsia instead of the 50.0% or 51.0%, as the case may be, of the assets, liabilities, revenues and expenses attributable to our ownership of 50.0% or 51.0%, as the case may be, equity interest in Thai AirAsia.

Going Concern Assumptions As of December 31, 2009, 2010 and 2011, Thai AirAsia’s total current liabilities exceeded its total current assets by Baht 5,220.7 million, Baht 3,310.0 million and Baht 1,394.3 million (US$44.0million), respectively. In addition, in 2009, 2010 and 2011, Thai AirAsia had negative shareholders’ equity of Baht 4,514.0 million, Baht 2,503.0 million and Baht 546.0 million (US$17.2 million), respectively, a net loss of Baht 170.5 million in 2009 and net profit of Baht 2,011.0 million and Baht 2,020.1 million (US$63.7 million) in 2010 and 2011, respectively. The negative shareholders’ equity of Baht 4,514.0 million as of December 31, 2009 primarily resulted from historic losses from prior years, including the loss resulting from the early termination of fuel hedging arrangements in 2008. See “— Factors Affecting Results of Operations — Fuel Prices” for further details. In addition, AirAsia Berhad had entered into various interest rate hedging arrangements with third parties on our behalf. Due to the a significant decrease in interest rates, these interest rate hedging arrangements were “out of the money”, resulting in margin calls. As a result, AirAsia Berhad terminated these interest rate hedging arrangements prior to their respective maturities, resulting in Thai AirAsia recording a loss and making a provision for the early termination of such hedging arrangements in 2008 amounting to Baht 853.5 million. The audited financial statements of Thai AirAsia include a note (Note 2) stating that despite these conditions, the audited financial statements of Thai AirAsia have been prepared on a going concern basis. In

50 2011, the major balances in current liabilities were deferred fare revenues and revenues increased by Baht 4,058.9 million. In addition, Thai AirAsia’s net profit amounted to Baht 2,011.0 million in 2010 and Baht 2,020.1 million in 2011. See Note 2 to the audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011. The audited proportionate consolidated and company financial statements of the Company contain a similar paragraph on the preparation of such financial statements on a going concern basis. See Note 2 to the audited proportionate consolidated and company financial statements of the Company as of and for the years ended December 31, 2009, 2010 and 2011. The increase in Thai AirAsia’s net profit in 2010 and 2011 described in the paragraph above resulted principally from an increase in passenger revenues, which increased 35.3% from Baht 7,582.3 million in 2009 to Baht 10,260.3 million in 2010, which further increased 26.8% to Baht 13,007.5 million (US$410.5 million) in 2011, as well as a decrease in maintenance costs in 2010 resulting from the gradual change of Thai AirAsia’s fleet from the Boeing 737-300 aircraft to the Airbus A320 aircraft. As a result, Thai AirAsia’s negative shareholders’ equity decreased as of December 31, 2010 and 2011 to Baht 2,503.0 million and Baht 546.0 million (US$17.2 million), respectively.

Factors Affecting Results of Operations Fuel Prices The largest component of Thai AirAsia’s total operating costs is jet fuel costs, which include payments for jet fuel and related taxes, and profits or losses under fuel hedging contracts, and comprised 36.0%, 39.9% and 46.6% of our total operating costs in 2009, 2010 and 2011, respectively. Thai AirAsia’s fuel costs fluctuate significantly in line with changes in global oil prices, which have historically been, and will in the future continue to be, subject to price volatility and fluctuations in supply and demand. Thai AirAsia’s average fuel price increased from US$68.0 per barrel in 2009 to US$88.3 per barrel in 2010 and US$124.0 per barrel in 2011. Thai AirAsia procures a substantial majority of its jet fuel required for its flights pursuant to agreements with PTT and Shell. Prior to 2011, in Kuala Lumpur, Penang and Macau, AirAsia Berhad entered into supply agreements on Thai AirAsia’s behalf, for which it reimburses AirAsia Berhad at its actual cost in U.S. Dollars, so that it benefits from economies of scale. From 2011 onwards, Thai AirAsia purchases its fuel requirements in Kuala Lumpur and Penang directly, and AirAsia Berhad continues to purchase fuel on Thai AirAsia’s behalf in Macau. Thai AirAsia typically enters into 24-month supply agreements with its Thai fuel suppliers and 12- to 20-month supply agreements with its international jet fuel suppliers. Thai AirAsia’s domestic jet fuel supply agreements are priced in U.S. Dollars but provide for payment in Baht at the average exchange rate of the month before the invoice date. Thai AirAsia’s international jet fuel supply agreements are priced, and generally provide for payment, in U.S. Dollars. Thai AirAsia’s jet fuel prices under its jet fuel supply agreements are generally set at the mean price of oil traded through Singapore, as published by Platts under Mean of Platts Singapore (“MOPS”) or Average Arab Gulf. Thai AirAsia hedges, through AirAsia Berhad, its fuel prices from time to time primarily to stabilize its jet fuel costs, but such hedging may not necessarily decrease Thai AirAsia’s jet fuel expenses. Thai AirAsia has agreed with AirAsia Berhad that any gains or losses on such hedges are to be allocated to Thai AirAsia on a monthly basis based on the volume of fuel that it budgets to use during each such month as a proportion to the budgeted amount of fuel to be used by the AirAsia Group. Because of the nature of these fuel price swap agreements and fuel price option agreements, these agreements constitute financial assets that are required to be marked to market, with the relevant gain or loss recorded in Thai AirAsia’s financial statements as income or expense. Thai AirAsia also passes a portion of its fuel price increases to its passengers on international flights in the form of fuel surcharges. However, Thai AirAsia’s fuel surcharges for its international flights do not fully compensate it for fuel price increases. The DCA does not allow fuel surcharges to be imposed separately from the air fare for scheduled domestic passenger services. In 2008 and 2009, AirAsia Berhad entered into various fuel price hedging arrangements with third parties on our behalf. Due to the large volumes of fuel hedged and degree of volatility in fuel prices, these fuel price hedging arrangements were “out of the money”, resulting in margin calls. As a result, AirAsia Berhad terminated these hedging arrangements prior to their respective maturities, resulting in penalty charges becoming payable in 2008 and 2009. In 2008, Thai AirAsia recorded fuel swap transaction expenses of Baht 1,741.8 million, comprising a loss on the unwinding of a fuel swap contract of Baht 1,765.8 million, partially offset by a gain on settlement of swap contracts upon their maturity of Baht 24.0 million. In 2009, Thai AirAsia recorded fuel swap transaction expenses of Baht 275.6 million, comprising losses upon maturity of Baht 253.0 million and a loss on unwind of fuel swap contract of Baht 22.6 million. In 2010, Thai AirAsia recorded fuel swap transaction income of Baht 76.3 million relating to gains on its hedging arrangements during 2010. There were no outstanding fuel hedging agreements as of December 31,

51 2010. In 2011, Thai AirAsia’s policy was to hedge (through AirAsia Berhad) its fuel requirements monthly to match Thai AirAsia’s forward bookings, and Thai AirAsia intends to continue these hedging arrangements in 2012. In 2011, Thai AirAsia recorded fuel swap transaction income of Baht 13.2 million (US$0.4 million), reflecting gains upon maturity as a result of actual fuel prices exceeding the swap contract fuel prices.

Capacity and Route Mix Our business, financial condition, results of operations and prospects are affected by Thai AirAsia’s capacity and route mix. These are in turn affected by Thai AirAsia’s fleet profile, route mix strategy and traffic rights for any particular destination.

Fleet Profile Thai AirAsia measures its passenger capacity in two ways, first by the number of seats that are available to Thai AirAsia for sale during the relevant period, and secondly by ASKs, which is the number of seats available on scheduled flights multiplied by flown kilometers during the relevant period. Thai AirAsia began operations in 2004 using the Boeing 737-300 aircraft containing 148 seats, but began switching to the Airbus A320 aircraft containing 180 seats beginning in October 2007. Thai AirAsia’s operational fleet comprised eight Boeing 737-300 aircraft and 12 Airbus A320 aircraft as of December 31, 2009, 19 Airbus A320 aircraft as of December 31, 2010 and 22 Airbus A320 aircraft as of December 31, 2011. Therefore, our capacity has increased significantly since the beginning of 2009.

Route Mix Strategy Thai AirAsia aims to maximize profitability by developing a route mix strategy that focuses on high load factors at satisfactory yields. Thai AirAsia assesses its route mix on at least a quarterly basis using a variety of tools, including Navitaire’s NewSkies software, to maximize revenues, yield, utilization and capacity. Route mix is primarily driven by supply and demand factors, while Thai AirAsia’s assessment of load factors varies from route to route and during different time periods. Thai AirAsia continuously assesses and adjusts its route mix after reviewing the total capacity allocated to particular routes, the competition on specific routes, passengers flown and average pricing, as well as costs and possible cost escalation. While other Thai airlines operate on a strategy of a hub-and-spoke system using Bangkok as a hub, Thai AirAsia’s strategy is to operate on a combination of the hub-and-spoke system using multiple hubs and also on connecting hub-to-hub. We believe this strategy allows Thai AirAsia to attract passengers who wish to travel from one part of Thailand to another part of Thailand to bypass Bangkok, allowing them to save on travel time and cost.

Traffic Rights and Slot Availability Thai AirAsia’s capacity and route mix are affected by allocated traffic rights and the availability of landing and departure slots, as each country, the relevant airport operator and/or its relevant aviation or transportation authority grants certain rights in relation to volume and frequency of flights. Time slots correspond to the capacity of an airport’s facilities and the ability of a carrier to land at, or take off from, an airport at a specified time and date. In addition, there may also be mandated caps on the number of total seats on aircraft that an airline company is allowed to fly into a particular destination. See “Regulation of the Airline Industry in Thailand” for further details. Thailand has not exhausted its traffic rights under its bilateral agreements with countries to which Thai AirAsia flies other than to Delhi in India. However, the availability of landing and departure slots (particularly in China) and caps on total seats may affect Thai AirAsia’s ability to adjust its route mix, as certain restrictions may prevent it from increasing flight capacity to more profitable or higher demand destinations. Consequently, Thai AirAsia’s ability to increase its ASKs may be constrained by its inability to adjust its route mix.

Fares The fares that Thai AirAsia charges have a direct impact on our revenue and profitability, and are affected by the following factors.

Pricing Strategy and Yield Management Thai AirAsia has a multiple fare structure comprising up to 12 tiers of fares, or “fare buckets” per route. In determining how many seats to allocate to each fare bucket for each flight and each departure date, Thai AirAsia considers factors including market demand, competition, historical performance and forecasts. Generally, our policy is not to lower our fares once they have been published, and as there are a limited number of seats in the lower fare buckets, the earlier a passenger books a seat, the more likely it is that the passenger will be able to purchase a seat at the lowest published fare. Thai AirAsia seeks to maximize its revenues by responding to

52 periods of higher demand by decreasing the number of seats available in lower fare buckets and increasing the number of seats available in higher fare buckets. Thai AirAsia typically sells only the highest fare bucket close to the day of travel, when time sensitivity outweighs price sensitivity. Such seats would typically be sold at an average discount of approximately 10% of the published domestic fares offered by full-service airlines. Revenues from these “last minute” fares help maintain Thai AirAsia’s revenue from passenger seat sales. Thai AirAsia uses the same revenue management system that is used by AirAsia Berhad, using software provided by Navitaire’s NewSkies, an inventory and sales system which is used by most of the leading LCCs. The system facilitates daily monitoring and inventory allocation decisions by making recommendations on pricing adjustments to be made on the basis of the lowest price consistent with demand and profitable operations. In addition, we hold bi-weekly meetings to analyze booking trends, address routes that require adjustments and discuss promotions. While we seek to maximize our revenue, our low-cost structure enables us to offer fares that are on average lower than our competitors on the same routes. Moreover, we periodically offer promotional fares that are more discounted than our already low fares to promote less popular routes. Our pricing strategy for domestic fares is subject to a Government-mandated fare ceiling of Baht 30 per kilometer per seat. Because we are an LCC, we do not expect the fare ceiling to prevent us from pricing our domestic fares at a level we believe to be appropriate.

Competition Thai AirAsia faces intense competition on its domestic routes in Thailand and on its international routes, both from other low-cost carriers and from full-service carriers. Thai Airways has recently announced their intention to establish a new carrier which may compete with us in the future. In addition, Thai AirAsia’s other existing competitors and new entrants into the market may undercut its fares in the future, increase capacity on their routes in an effort to increase their market share or attempt to conduct low-fare or low-cost airline operations of their own, any of which could reduce Thai AirAsia’s fares, load factors and market share and may cause Thai AirAsia to revise its cost structure and fares. The airline industry is particularly susceptible to price discounting because airlines incur only nominal variable costs to provide service to passengers occupying otherwise unsold seats. Any changes in competition conditions in the Thai and regional airline markets, including as a result of ASEAN “Open Skies” policies, could significantly affect our business, financial condition, results of operation and prospects.

Foreign Exchange Implications Thai AirAsia generates revenue in many currencies. Ticket prices denominated in foreign currencies do not fluctuate although the exchange rates of those foreign currencies against the Baht may do so. Thus, a depreciation of the Baht tends to increase yields on routes for which tickets are sold in foreign currencies. Decreases in yields tied to an appreciation of the Baht are, to varying degrees, offset by decreases in expenses denominated in foreign currencies, and vice versa.

Expenses The airline industry is generally characterized by low profit margins and high cost obligations, primarily for aircraft leases, engineering and maintenance charges, jet fuel, staff costs and landing charges. Thai AirAsia’s ability to maintain low operating costs is critical to its business model. The cost of operating an aircraft does not vary significantly with the number of passengers an airline carries in a given period. As a result of Thai AirAsia’s high fixed cost obligations, a relatively small change in the number of passengers and its pricing can have a significant effect on our business, financial condition, results of operation and prospects. In addition, higher aircraft utilization rates result in lower unit costs, given the higher number of passengers carried. Certain of Thai AirAsia’s other operating costs, including Thai AirAsia’s maintenance and overhaul costs, are expected to increase over time, on an absolute basis and on a unit cost basis, as Thai AirAsia’s fleet ages and the manufacturer warranties on Thai AirAsia’s aircraft expire. The average age of Thai AirAsia’s fleet as of December 31, 2011 was two years and four months. Some of these other costs, including those related to our jet fuel costs and labor costs for pilots, cabin crew and ground personnel, vary based on the number of flights operated. Therefore, minor changes in yields or load factors could have a material effect on our results of operations. Thai AirAsia seeks to manage costs by maximizing aircraft utilization rates. However, when load factors are low, Thai AirAsia may make adjustments to flight frequencies or routes to manage its costs and avoid net losses. This “breakeven” load factor differs from route to route and from time to time, depending on prevailing fares and costs. Thai AirAsia aims to reach a high daily aircraft utilization of 12.0 block hours per day, as compared to the 8.0 block hours per day typical of full-service airlines. High utilization can be achieved in part by reducing

53 turnaround time at airports so that Thai AirAsia can fly more hours each day. Aircraft utilization can be influenced by a number of factors, some of which are outside Thai AirAsia’s control, including air traffic and airport congestion (particularly at our hubs at the Suvarnabhumi International Airport in Bangkok and Phuket International Airport in Phuket), adverse weather conditions, security requirements, mechanical problems with our aircraft and delays of third party contractors for services such as ground handling and refueling. As Thai AirAsia expands its fleet, Thai AirAsia intends to increase its expenditures for recruitment and training of pilots and flight attendants in order to support high utilization of its aircraft. Thai AirAsia’s cost management measures focus on route management, fuel management and hedging (through AirAsia Berhad), negotiation of navigation and other flight operation fees, headcount control and suspension of salary increases, review of management benefits and overtime and control of cabin crew expenses. As part of Thai AirAsia’s cost management measures, its policy is not to schedule flights that result in Thai AirAsia’s aircraft being parked at airports (other than our hub airports) overnight. This enables Thai AirAsia to save on costs because it does not need to base engineering staff (or contract with a service provider) at these airports to perform overnight maintenance checks or keep spare parts outside our hub airports, and Thai AirAsia does not have to pay extra allowances or accommodation costs for the pilots and cabin crew to stay overnight at a non-hub destination.

Passenger Volume and General Economic and Political Conditions Thai AirAsia’s revenues derived from the transportation of passengers, which includes seat sales, ancillary revenues, fuel surcharges and fees and commissions, accounts for substantially all of Thai AirAsia’s revenues. High passenger volumes are essential for Thai AirAsia to maintain and increase its revenues from passenger seat sales and ancillary revenue. Thai AirAsia’s passengers carried have increased from 5.0 million in 2009 to 5.7 million in 2010 and to 6.9 million in 2011. The number of passengers Thai AirAsia carries primarily depends on domestic and international tourism and, to a lesser extent, business travel, to Thailand, which is in turn affected by, among other things, fluctuations in foreign exchange rates relating to the Baht, the levels of global and Thai economic activity, Thai domestic unrest, natural disasters and seasonal and other changes in traffic patterns. Strong economic performance in Thailand stimulates consumer disposable income and may increase passenger demand and allow us flexibility to increase our fares and/or volumes. Conversely, poor economic performance in Thailand is likely to reduce passenger volumes and/or require Thai AirAsia to provide promotional fares or sell more seats in lower fare buckets.

Recent Significant Events Since the beginning of 2007, certain significant events have had a material adverse effect on the travel industry generally, and our business and results of operations. Specifically, the global financial crisis beginning in 2008 and the economic recession reduced global air travel and demand, and adversely affected the growth of our results of operations. In addition, difficult conditions in the global capital markets and the economy generally in 2011, including the debt crisis in the euro zone, have affected and may continue to affect our business, financial condition, results of operation and prospects. Between September and December 2011, Thailand experienced widespread flooding that affected travel to and within Thailand. These events disrupted domestic and international travel and affected the Thai tourism industry, which had a material adverse effect on Thai AirAsia’s business, financial condition, results of operation and prospects in the fourth quarter of 2011. There have also been several incidents of political and civil unrest in Thailand. At the end of 2008, protests against the Government resulted in the closure of Suvarnabhumi International Airport and Phuket International Airport from the end of November 2008 to early December 2008. The outbreak of H1N1, which further affected global air travel demand and the travel industry in the second quarter of 2009, also adversely affected the growth of our results of operations. A riot during the Songkran Festival in April 2009 also affected travel to and within Thailand. In 2010, additional developments also adversely affected air travel in Thailand, including the intense civil and political strife, which culminated in April to May 2010 in widespread protests that prompted a Government response and resulted in civilian and military fatalities. Extraordinary events beyond our control such as terrorist attacks and outbreaks of contagious diseases have adversely affected the airline industry, the Thai economy and economic activity in the region, resulting in depressed demand for flights and ancillary services, lower airfares, higher insurance premiums and increased security costs. These extraordinary events may take place in the future and may have short-term or long-term impact on the airline industry and on our business, financial condition, results of operation and prospects. However, we anticipate that the demand for travel on LCCs such as Thai AirAsia will be less sensitive to economic growth fluctuations when compared to full-service carriers which charge more of a premium. This is

54 supported by the increase in Thai AirAsia’s RPK from 4,921 million passenger kilometers in 2009 to 7,389 million passenger kilometers in 2011, despite the financial crisis and the debt crisis in the euro zone, as compared to the decrease or small increase in demand for full-service carriers during the same period.

Seasonality Our revenues and profitability are affected by the seasonality of the Thai airline industry. Seasonality may affect Thai AirAsia’s passenger services revenues and profitability from quarter to quarter. Thai AirAsia generally records higher revenue in the first and fourth quarters during Thailand’s peak tourist season. Accordingly, Thai AirAsia’s revenue, operating profit and cash flow is relatively lower in the second and third quarters due to decreased travel during those months.

Currency Exposure Our reporting currency is the Baht. However, most of Thai AirAsia’s jet fuel supply, insurance contracts and all of Thai AirAsia’s aircraft leases are denominated in U.S. Dollars or priced in U.S. Dollars but invoiced in Baht at the prevailing exchange rate. Approximately 79% of Thai AirAsia’s operating costs in 2011 was denominated in U.S. Dollars, and the remainder in a variety of other currencies, principally Baht. In addition, approximately 72% of Thai AirAsia’s revenues in 2011 was denominated in Baht, and the remainder in a variety of other currencies, including the Macau Pataca, Malaysian Ringgit, Singapore Dollar, Hong Kong Dollar and U.S. Dollar. Approximately 33% of our assets and 10% of our liabilities in 2011 were denominated in currencies other than Baht. Thai AirAsia adjusts airfare pricing each quarter, but is not able to adjust fuel costs and miscellaneous operating expenses that are denominated in foreign currencies to adjust for the fluctuation of the Baht. Accordingly, any depreciation in the value of the Baht against Thai AirAsia’s core foreign currencies may have a positive effect on operating revenues but may result in a detrimental effect on Thai AirAsia’s operating costs. Conversely, an appreciation in the value of the Baht against Thai AirAsia’s core foreign currencies may result in a detrimental effect on Thai AirAsia’s operating revenues but may result in a positive effect on Thai AirAsia’s operating costs. In addition, because Thai AirAsia’s expenses in U.S. Dollars are greater than its revenues generated in U.S. Dollars, foreign exchange transactions from other currencies into U.S. Dollars are required to cover Thai AirAsia’s U.S. Dollar-denominated obligations and trade payables. Thai AirAsia has not entered into any hedging contracts to hedge against fluctuations in exchange rates. To cover the difference between its expenses and revenues in U.S. Dollars, Thai AirAsia’s policy has been to manage its U.S. Dollar-denominated exposure by monthly conversion of its non-U.S. Dollar-denominated foreign currency revenues into U.S. Dollars at the spot rate available at the time of conversion. Thai AirAsia also calculates its U.S. Dollar-denominated monthly commitments and matches its commitments with its U.S. Dollar revenues and the conversion of its non-U.S. Dollar denominated foreign currency revenues. If Thai AirAsia’s U.S. Dollar revenues and converted foreign currency revenues are insufficient to match its U.S. Dollar- denominated obligations in any particular period, Thai AirAsia further converts part of its Baht revenues to U.S. Dollars to cover such shortfall.

Interest Rate Exposure Thai AirAsia’s outstanding indebtedness is subject to fixed and variable interest rates. As of December 31, 2011, Thai AirAsia’s outstanding indebtedness amounted to Baht 513.2 million (US$16.2 million), including Baht 499.2 million (US$15.8 million) under a facility with CIMB Thai which is subject to a floating rate of interest of the Minimum Lending Rate minus 1% per annum. Thai AirAsia does not hedge its interest rate exposure and, as a result, Thai AirAsia is subject to interest rate fluctuations.

Brand License Fee AirAsia Berhad and Thai AirAsia have entered into the AirAsia Brand License Agreement. Under the terms of the agreement, AirAsia Berhad granted Thai AirAsia a non-exclusive and non-assignable license to reproduce and use the AirAsia brand, except that AirAsia Berhad undertakes that Thai AirAsia’s license to the AirAsia brand in Thailand is on an exclusive basis for the purposes of Thai AirAsia’s business operations under the permitted name of “AirAsia” (including the adoption of such name as part of Thai AirAsia’s corporate name for the duration of the AirAsia Brand License Agreement). Under the AirAsia Brand License Agreement, Thai AirAsia is required to pay a license fee in U.S. dollars of 1% of its total revenue per annum on a quarterly basis. As a result, we expect our expenses to increase from 2012 onwards.

55 Critical Accounting Policies The proportionate consolidated and company financial statements of the Company and the financial statements of Thai AirAsia are prepared in accordance with Thai GAAP. In preparing the proportionate consolidated and company financial statements of the Company and the financial statements of Thai AirAsia, our respective management makes judgments, estimates and assumptions regarding uncertainties that affect the reported amounts of certain line items in our assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements, and in the reported amounts of revenues and expenses during the reporting period. These judgments, estimates and assumptions are, of necessity, subjective in nature. The ability to effectively and accurately establish, monitor and adjust these policies may have a material impact on the accuracy and quality of the financial information we report. The judgments, estimates and assumptions of the Company and Thai AirAsia are based on historical experiences, including changes in the business environment. However, actual results may differ from judgments, estimates and assumptions under different conditions, sometimes materially. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and that require the management’s most subjective judgments, estimates or assumptions. The critical accounting policies of the Company and Thai AirAsia are described below.

Aircraft Maintenance Costs Under Operating Leases Aircraft operating lease agreements require Thai AirAsia to maintain the leased aircraft and contain conditions regarding the return of the leased aircraft. Such conditions stipulate that the relevant aircraft is to be restored prior to the return of the aircraft at the end of the contractual period. The costs incurred in relation to such conditions are accrued based on an internal estimate which includes estimates of future costs of certain major airframe and engine maintenance checks and one-off redelivery costs at the end of the relevant aircraft operating lease. These costs are recognized as part of the income statement calculated by reference to the number of flight hours during the year.

Principal Components of Statement of Comprehensive Income The discussion below relates to the financial statements of Thai AirAsia and not the proportionate consolidated and company financial statements of the Company.

Revenues The following table shows the breakdown of Thai AirAsia’s revenues for the periods specified.

Year Ended December 31, 2009 2010 2011 (Baht in (Baht in (Baht in (US$ in millions) % millions) % millions) millions) % Passenger revenues(1) ...... 7,582.3 81.7 10,260.3 84.8 13,007.5 410.5 80.5 Baggage handling and other service fees ..... 1,492.5 16.1 1,538.9 12.7 2,805.3 88.5 17.4 In-flight revenues ...... 107.6 1.1 135.3 1.1 185.5 5.9 1.1 Freight revenue ...... 98.8 1.1 164.2 1.4 159.4 5.0 1.0 Total ...... 9,281.2 100.0 12,098.7 100.0 16,157.6 509.9 100.0

(1) Net of refunds, and excludes value-added taxes and airport taxes.

Passenger Revenues Passenger revenues comprise revenues from the sale of tickets for Thai AirAsia’s scheduled flights (net of deductions for refunds and excluding value-added taxes and airport taxes) as well as revenues from the provision of chartered flights. The primary drivers of passenger revenues are passenger volume and the prices at which Thai AirAsia sells each seat.

Baggage Handling and Other Service Fees Revenues from baggage handling and other service fees include fuel surcharges and revenues generated through baggage handling fees, excess baggage fees, seat selection fees (beginning in 2009), booking amendment and documentation fees that Thai AirAsia charges passengers for cancellation of flights, convenience fees for paying by credit card (beginning in 2009), administrative fees it collects from passengers (terminated in June 2009), insurance surcharges (terminated in June 2009) and booking service fees for using the call center, sales office or airport counter to book tickets.

56 Effective from May 2011, fuel surcharges are surcharges that are imposed on Thai AirAsia’s international flights to partially offset increases in Thai AirAsia’s fuel costs. Thai AirAsia is prohibited by Thai laws and regulations from imposing fuel surcharges on domestic flights. Thai AirAsia imposes three levels of fuel surcharges, depending on the length of the flight, ranging from Baht 100 to Baht 300 per passenger. Prior to November 2008, Thai AirAsia had also imposed fuel surcharges on its international and domestic flights, which were not prohibited under Thai laws and regulations at that time. Fuel surcharges in 2008 were Baht 550 for domestic flights and three levels of fuel surcharges for international flights, depending on the length of the flight, ranging from Baht 850 to Baht 1,200 per passenger. Even though Thai AirAsia ceased imposing fuel surcharges in November 2008, revenues from fuel surcharges were Baht 150.8 million in 2009 reflecting ticket sales made prior to November 2008 for travel in 2009. See “Business — Ancillary Services — Add-on Services and Fees” for details of the relevant charges.

In-flight Revenues In-flight revenues include revenues derived from in-flight services, including in-flight sales of meals and beverages, in-flight sales of merchandise and the sale of duty free products on our international flights.

Freight Revenue Freight revenue consists primarily of revenue from freight.

Operating Costs The following table shows the breakdown of Thai AirAsia’s operating costs for the periods specified.

Year Ended December 31, 2009 2010 2011 (Baht in (Baht in (Baht in (US$ in millions) % millions) % millions) millions) % Fuel costs(1) ...... 3,357.2 36.0 3,974.0 39.9 6,405.8 202.1 46.6 Aircraft rental ...... 1,712.4 18.4 2,200.6 22.1 2,727.7 86.1 19.8 Ramp and airport operations ...... 1,030.9 11.1 1,162.4 11.7 1,366.5 43.1 9.9 Staff costs ...... 834.3 9.0 1,036.8 10.4 1,272.1 40.1 9.2 Repair and maintenance ...... 1,264.1 13.6 964.9 9.7 1,101.5 34.8 8.0 Guest services and distribution ...... 505.2 5.4 609.5 6.1 751.5 23.7 5.5 Other operating costs ...... 611.8 6.5 17.0 0.1 132.5 4.2 1.0 Total ...... 9,315.9 100.0 9,965.2 100.0 13,757.6 434.1 100.0

(1) Includes gains or losses from fuel swap transactions.

Fuel Costs Fuel costs comprise the cost of jet fuel that Thai AirAsia purchases in connection with its air services, which fluctuate in accordance with the prices of fuel and the volume of fuel that it consumes. These costs include gains or losses from fuel swap contracts entered into by AirAsia Berhad on Thai AirAsia’s behalf to hedge a portion of the risk of any physical price movements of fuel in the world market. Thai AirAsia receives or makes payments from or to AirAsia Berhad for the gains or losses, respectively, relating to such fuel swap contracts.

Aircraft Rental Aircraft rental relates to the cost of leasing aircraft that Thai AirAsia holds under operating leases. Thai AirAsia currently leases all of its aircraft pursuant to contractual arrangements described in more detail in “Related Party Transactions — Past and Ongoing Related Party Transactions — AirAsia Aircraft Leases”.

Ramp and Airport Operations Ramp costs comprise principally expenses relating to ramp equipment, including the repair and maintenance of such equipment. Airport operations costs consist primarily of airport landing and take-off fees, navigation fees imposed by countries that Thai AirAsia flies to, check-in counter charges, aerobridge charges and customs, immigration and quarantine charges.

Staff Costs Staff costs comprise primarily costs relating to Thai AirAsia’s staff who are directly involved in providing air services, including pilots, cabin crew, engineers, maintenance crew, guest services staff and ramp staff. These

57 costs include salaries and allowances, training costs, accommodation and meal costs, and other miscellaneous allowances and expenses.

Repair and Maintenance Repair and maintenance costs consist primarily of the costs of maintaining, repairing and overhauling all of Thai AirAsia’s aircraft and engines, technical handling fees in relation to pre-flight inspections and the cost of aircraft spare parts and other related equipment.

Guest Services and Distribution Guest services costs consist of expenses relating to the provision of in-flight services, including the purchase of food and beverages for in-flight sales, the cost of merchandise for in-flight sales, commissions to cabin crew for the in-flight sale of food, beverages and merchandise and ground handling charges. Distribution costs comprise expenses incurred in connection with ticket sales, including commissions paid to call center and travel agents in connection with those sales, credit card commissions and booking fees payable to AirAsia Berhad for our share of fees in relation to using NewSkies software.

Other Operating Costs Our other operating costs include depreciation and amortization and insurance.

Net Gain on Exchange Rates Net gain on exchange rates comprises realized and unrealized foreign exchange gains and losses in relation to foreign exchange rate movements on Thai AirAsia’s revenues, expenses, assets and liabilities that are denominated in currencies other than Baht.

Other Income Other income includes other revenue from airport fees collected from passengers, interest income from bank deposits and receivables from related parties, revenues from fees for the use of the AirAsia website for the sale of travel insurance under the Go Insurance brand, income from the sale of advertising space in Thai AirAsia aircraft, and other miscellaneous income. The following table shows the breakdown of Thai AirAsia’s other income for the periods specified.

Year Ended December 31, 2009 2010 2011 (Baht in (Baht in (Baht in (US$ in millions) % millions) % millions) millions) % Other revenue from airport fees collected from passengers ...... 131.3 60.2 223.4 61.6 253.8 8.0 56.3 Interest income ...... 9.6 4.4 50.3 13.9 135.9 4.3 30.1 Website usage fees ...... 25.8 11.8 26.9 7.4 30.2 1.0 6.7 Aircraft advertising ...... — — — — 6.9 0.2 1.5 Others ...... 51.2 23.6 62.4 17.1 24.3 0.8 5.4 Total ...... 217.9 100.0 363.0 100.0 451.1 14.2 100.0

Selling Expenses Selling expenses comprise expenses principally relating to advertising and sales promotion and other related expenses, such as commissions, salaries and travelling costs. The following table shows the breakdown of Thai AirAsia’s selling expense for the periods specified.

Year Ended December 31, 2009 2010 2011 (Baht in (Baht in (Baht in (US$ in millions) % millions) % millions) millions) % Advertising and sales promotion ...... 195.3 80.4 260.0 72.6 255.8 8.1 57.5 Commissions and salaries ...... 14.1 5.8 18.9 5.3 28.6 0.9 6.4 Others ...... 33.6 13.8 79.0 22.1 160.3 5.1 36.0 Total ...... 243.0 100.0 357.9 100.0 444.7 14.0 100.0

58 Administrative Expenses Administrative expenses comprise expenses relating to administrative and information technology staff salaries and allowances, management remuneration, information technology equipment and license fees, office rental expenses, professional fees, depreciation relating to office space that we use, utilities such as electricity, fuel and water, and other items. The following table shows the breakdown of Thai AirAsia’s administrative expenses for the periods specified.

Year Ended December 31, 2009 2010 2011 (Baht in (Baht in (Baht in (US$ in millions) % millions) % millions) millions) % Staff salaries and allowances ...... 47.2 19.7 37.9 15.7 84.8 2.7 23.7 Management remuneration ...... 24.8 10.3 28.8 11.9 48.2 1.5 13.5 Professional fees ...... 30.7 12.8 28.1 11.6 47.1 1.5 13.2 Office rental ...... 36.4 15.2 40.0 16.6 43.6 1.4 12.2 Depreciation ...... 29.1 12.1 31.7 13.1 33.0 1.0 9.2 Information technology ...... 9.7 4.0 7.7 3.2 11.6 0.4 3.2 Utilities ...... 10.2 4.3 11.6 4.8 11.1 0.4 3.1 Others ...... 51.7 21.6 55.5 23.0 78.5 2.5 21.9 Total ...... 239.8 100.0 241.3 100.0 357.9 11.3 100.0

Finance Costs Finance costs include interest on loans, overdrafts and finance lease payments.

Tax Expenses Tax expenses comprise income taxes payable to the relevant tax authorities.

Principal Components of Statement of Financial Position The discussion below relates to the financial statements of Thai AirAsia and not the proportionate consolidated and company financial statements of the Company.

Assets Trade and Other Receivables, Net Trade and other receivables, net include trade accounts receivables from freight and from sale of tickets via third party sales agents and the GoCorporate program.

Inventories Inventories principally consist of the value of items to be sold on Thai AirAsia flights.

Prepaid Expenses Prepaid expenses principally consist of advanced payment for fuel, ramp and airport expenses in certain airports, and health insurance for Thai AirAsia’s employees.

Leasehold Improvements and Equipment, Net Leasehold improvements and equipment, net include the value of leasehold improvements, computers, office installments and facilities, operational facilities, vehicles, spare parts, and assets to be installed.

Other Non-Current Assets Other non-current assets principally consist of deposits for aircraft leases, deposits for fuel price swaps, deposits for lease rentals and deposits for airport and ramp expenses in certain airports.

Liabilities Trade Accounts Payable Trade accounts payable include payables relating to aircraft insurance premiums, travel insurance premiums, fuel for aircraft, and airport and ramp services in certain airports.

59 Other Accounts Payable Other accounts payable principally consist of sales promotion with third parties, office facilities, and advanced payment from sales agents.

Deferred Revenues Deferred revenues principally comprise the amounts collected from the sale of air tickets for future flights, in relation to which revenues will not have been recognized until Thai AirAsia provides the relevant air services to its customers.

Accrued Expenses Accrued expenses principally consist of trade accounts payable for which Thai AirAsia has not received invoices.

Recent Developments Results of Operations — Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011 Revenue. Revenues increased 17.0% to Baht 4,868.1 million (US$153.6 million) in the three months ended March 31, 2012 from Baht 4,160.2 million in the three months ended March 31, 2011, primarily attributable to increases in passenger revenues, revenues from baggage handling and other service fees, in-flight revenues and freight revenue. Passenger revenues. Passenger revenues increased 13.6% to Baht 3,892.4 million (US$122.8 million) in the three months ended March 31, 2012 from Baht 3,425.2 million in the three months ended March 31, 2011, primarily because of an increase in the number of passengers carried, from 1.8 million in the three months ended March 31, 2011 to 2.1 million in the three months ended March 31, 2012, partially offset by a decrease in average fares. Passengers carried increased following an increase in capacity, which contributed to an increase in average passenger load factor to 87% in the three months ended March 31, 2012 from 84% in the three months ended March 31, 2011. Passenger revenues increased following an increase in the number of flights, especially from the Chiang Mai hub, which did not account for a significant portion of passenger revenues in the three months ended March 31, 2011 as compared with the three months ended March 31, 2012 because it opened with a limited number of flights only in January 2011. Passenger seat capacity increased to 2.5 million seats in the three months ended March 31, 2012 from 2.2 million seats in the three months ended March 31, 2011, while ASKs increased to 2,540 million passenger kilometers in the three months ended March 31, 2012 from 2,261 million passenger kilometers in the three months ended March 31, 2011, primarily because Thai AirAsia took delivery of four Airbus A320 aircraft. Aircraft utilization slightly decreased to 11.5 block hours per day in the three months ended March 31, 2012 from 11.7 block hours per day in the three months ended March 31, 2011, and average stage length decreased slightly to 1,033 kilometers in the three months ended March 31, 2012 from 1,049 kilometers in the three months ended March 30, 2011, in each case primarily as a result of flying more flights with shorter stage lengths following increases in new shorter-distance domestic routes. Average fares decreased to Baht 1,778 in the three months ended March 31, 2012 from Baht 1,850 in the three months ended March 31, 2011, principally because Thai AirAsia instituted a promotional campaign with lower fares to increase demand after the floods in 2011. RPKs increased to 2,174 million passenger kilometers in the three months ended March 31, 2012 from 1,906 million passenger kilometers in the three months ended March 31, 2011. Baggage handling and other service fees. Revenues from baggage handling and other service fees increased 34.8% to Baht 876.8 million (US$27.7 million) in the three months ended March 31, 2012 from Baht 650.6 million in the three months ended March 31, 2011, primarily as a result of fuel surcharges that Thai AirAsia re-introduced with respect to all international flight bookings made from May 3, 2011, amounting to Baht 146.9 million in the three months ended March 31, 2012. The increase was also attributable to an increase in revenues from baggage handling fees, principally reflecting the increase in passenger volumes and increases in baggage handling fees per bag. In-flight revenues. In-flight revenues increased 4.2% to Baht 54.0 million (US$1.7 million) in the three months ended March 31, 2012 from Baht 51.8 million in the three months ended March 31, 2011. The higher in-flight revenues in the three months ended March 31, 2012 principally reflected an increase in in-flight sales of meals, beverages and duty free items attributable to the increase in number of passengers carried.

60 Freight revenue. Freight revenue increased 37.7% to Baht 44.9 million (US$1.4 million) in the three months ended March 31, 2012 from Baht 32.6 million in the three months ended March 31, 2011, principally as a result of higher freight volumes. Operating costs. Operating costs increased 25.3% to Baht 4,030.7 million in the three months ended March 31, 2012 (US$127.2 million) from Baht 3,215.8 million in the three months ended March 31, 2011, primarily attributable to increases in fuel costs, aircraft rental costs, ramp and airport operations, staff costs, repair and maintenance costs and guest services and distribution. Fuel costs. Fuel costs increased 29.8% to Baht 1,867.9 million (US$58.9 million) in the three months ended March 31, 2012 from Baht 1,438.8 million in the three months ended March 31, 2011, primarily due to a significant increase in the average price of jet fuel to US$127.3 per barrel in the three months ended March 31, 2012 from US$111.2 per barrel in the three months ended March 31, 2011 and an increase in Thai AirAsia’s number of flights, which increased fuel consumption. Thai AirAsia’s jet fuel consumption increased to 457,426 barrels in the three months ended March 31, 2012 from 399,816 barrels in the three months ended March 31, 2011. Aircraft rental. Aircraft rental costs increased 14.9% to Baht 753.1 million (US$23.8 million) in the three months ended March 31, 2012 from Baht 655.2 million in the three months ended March 31, 2011, primarily attributable to an increase in the number of Airbus A320 aircraft. Ramp and airport operations. Ramp and airport operations increased 14.9% to Baht 387.9 million (US$12.2 million) in the three months ended March 31, 2012 from Baht 337.5 million in the three months ended March 31, 2011, primarily attributable to an increase in navigational charges attributable to an increase in the number of Airbus A320 aircraft, resulting in an increase in the number of flights. Staff costs. Staff costs increased 36.9% to Baht 405.7 million (US$12.8 million) in the three months ended March 31, 2012 from Baht 296.3 million in the three months ended March 31, 2011, primarily due to an increase in headcount to 2,039 as of March 31, 2012 from 1,810 as of March 31, 2011 and an increase in salaries. Repair and maintenance. Repair and maintenance costs increased 31.6% to Baht 356.9 million (US$11.3 million) in the three months ended March 31, 2012 from Baht 271.2 million in the three months ended March 31, 2011, primarily as a result of the lease of four additional Airbus A320 aircraft, unscheduled maintenance and an increase in repair and maintenance rates in accordance with the terms of existing agreements. Guest services and distribution. Guest services and distribution increased 13.4% to Baht 216.1 million (US$6.8 million) in the three months ended March 31, 2012 from Baht 190.6 million in the three months ended March 31, 2011, primarily attributable to higher passenger volumes. Other operating costs. Other operating costs increased 64.2% to Baht 43.1 million (US$1.4 million) in the three months ended March 31, 2012 from Baht 26.3 million in the three months ended March 31, 2011, primarily due to an increase in insurance costs following the increase in the number of aircraft and, to a lesser extent, from the cost of new operating software. Gross profit. As a result of the above, Thai AirAsia’s gross profit decreased 11.3% to Baht 837.4 million (US$26.4 million) in the three months ended March 31, 2012 from Baht 944.4 million in the three months ended March 31, 2011. As a percentage of revenues, Thai AirAsia’s gross profit decreased to 17.2% in the three months ended March 31, 2012 from 22.7% in the three months ended March 31, 2011, principally as a result of Thai AirAsia’s operating costs, principally fuel costs, increasing at a faster rate than Thai AirAsia’s revenues. Net gain on exchange rates. Net gain on exchange rates decreased 90.7% to Baht 3.3 million (US$0.1 million) in the three months ended March 31, 2012 from Baht 36.0 million in the three months ended March 31, 2011, principally as a result of the lower U.S. Dollar-denominated outstanding intercompany balances to AirAsia Berhad. Other income. Other income decreased 39.2% to Baht 96.3 million (US$3.0 million) in the three months ended March 31, 2012 from Baht 158.4 million in the three months ended March 31, 2011, principally because of a decrease in interest income and in other revenue from airport fees collected from passengers. The substantial decrease in interest income to Baht 4.0 million (US$0.1 million) in the three months ended March 31, 2012 from Baht 48.1 million in the three months ended March 31, 2011 was primarily attributable to a decrease in interest from accumulated amounts due from related parties that were repaid within 2011. Other revenue from airport fees collected from passengers decreased to Baht 69.3 million (US$2.2 million) in the three months ended March 31, 2012 from Baht 97.4 million in the three months ended March 31, 2011 despite an increase in passengers, reflecting the timing of the receipt of invoices from the relevant airport authorities and the settlement of such invoices.

61 Profit before expenses. As a result of the above, profit before expenses decreased 17.7% to Baht 937.0 million (US$29.6 million) in the three months ended March 31, 2012 from Baht 1,138.8 million in the three months ended March 31, 2011. Selling expenses. Selling expenses increased 112.3% to Baht 197.3 million (US$6.2 million) in the three months ended March 31, 2012 from Baht 92.9 million in the three months ended March 31, 2011, primarily attributable to an increase in advertising activities, including to promote new routes to Trang, Nakhon Phanom, Chongqing and Chennai, and other selling expenses, including a new brand license fee payable to AirAsia Berhad under the AirAsia Brand License Agreement amounting to Baht 48.8 million (US$1.5 million), which was payable from January 1, 2012 onwards. See “Related Party Transactions — Future Related Party Transactions — AirAsia Brand License Agreement” for a summary of the AirAsia Brand License Agreement. Administrative expenses. Administrative expenses increased 41.6% to Baht 112.1 million (US$3.5 million) in the three months ended March 31, 2012 from Baht 79.2 million in the three months ended March 31, 2011, primarily attributable to increases in administrative staff salaries and allowances, professional fees and other administrative expenses. Profit before finance costs and income tax. As a result of the above, Thai AirAsia’s profit before finance costs and income tax decreased 35.1% to Baht 627.6 million (US$19.8 million) in the three months ended March 31, 2012 from Baht 966.7 million in the three months ended March 31, 2011. Finance costs. Finance costs decreased 92.0% to Baht 6.0 million (US$0.2 million) in the three months ended March 31, 2012 from Baht 75.1 million in the three months ended March 31, 2011, primarily because Thai AirAsia had no interest expense payable to related parties in the three months ended March 31, 2012 compared with such interest expense of Baht 74.8 million in the three months ended March 31, 2011. Finance costs in the three months ended March 31, 2012 were associated primarily with interest expense relating to the CIMB Loan Agreement that Thai AirAsia entered into in April 2011, but which was repaid in full on March 29, 2012. Profit (loss) before income tax. As a result of the above, Thai AirAsia’s profit before income tax decreased 30.3% to Baht 621.6 million (US$19.6 million) in the three months ended March 31, 2012 from Baht 891.6 million in the three months ended March 31, 2011. Income tax. Thai AirAsia had zero income tax accrual in the three months ended March 31, 2011 or the three months ended March 31, 2012 because Thai AirAsia had cumulative tax losses to offset future taxable profits. Net profit for the year. As a result of the above, Thai AirAsia’s net profit decreased 30.3% to Baht 621.6 million (US$19.6 million) in the three months ended March 31, 2012 from Baht 891.6 million in the three months ended March 31, 2011. As a percentage of revenues, Thai AirAsia’s net profit decreased to 12.8% in the three months ended March 31, 2012 from 21.4% in the three months ended March 31, 2011, principally as a result of selling and administrative expenses and fuel costs increasing and profit before expenses decreasing.

Financial Condition As of March 31, 2012, Thai AirAsia had total assets of Baht 4,473.6 million (US$141.2 million), current assets of Baht 3,508.7 million (US$110.7 million), non-current assets of Baht 964.9 million (US$30.4 million), and building improvements and equipment — net of Baht 346.4 million (US$10.9 million), compared with total assets of Baht 3,789.8 million (US$119.6 million), current assets of Baht 2,836.3 million (US$89.5 million), non- current assets of Baht 953.5 million (US$30.1 million) and building improvements and equipment — net of Baht 302.9 million (US$9.6 million) as of December 31, 2011. The increase in total assets in the three months ended March 31, 2012 was primarily attributable to an increase in cash and cash equivalents from Baht 1,359.7 million (US$42.9 million) as of December 31, 2011 to Baht 2,407.2 million (US$76.0 million) as of March 31, 2012. The increase in building improvements and equipment — net in the three months ended March 31, 2012 was primarily attributable to spare parts.

Liquidity and Capital Resources — Cash Flows in the Three Months Ended March 31, 2012 In the three months ended March 31, 2012, Thai AirAsia had operating cash flows before changes in operating assets and liabilities of Baht 623.9 million (US$19.7 million) and net increase in operating assets and liabilities of Baht 966.0 million (US$30.5 million). Net increase in operating assets and liabilities were principally a result of a Baht 509.6 million (US$16.1 million) decrease in value added tax receivable due to the receipt thereof from Thai revenue department, and a Baht 451.6 million (US$14.3 million) increase in deferred revenues, a Baht 64.9 million (US$2.0 million) decrease in amounts due from related parties, partially offset by a

62 Baht 112.2 million (US$3.5 million) increase in cash at financial institutions pledged as security as a collateral for letter of guarantee in relating to value added tax refund process. See “— Indebtedness — Guarantees” below for further information about the letter of guarantee. As a result, Thai AirAsia’s net cash generated from operating activities amounted to Baht 1,591.7 million (US$50.2 million). In the three months ended March 31, 2012, Thai AirAsia’s cash flows used in investing activities of Baht 61.1 million (US$1.9 million) were primarily from the purchase of leasehold improvements and equipment of Baht 38.2 million (US$1.2 million) and the payments for short-term investment amounting to Baht 26.0 million (US$0.8 million). In the three months ended March 31, 2012, Thai AirAsia repaid a long-term borrowing from a financial institution of Baht 499.2 million (US$15.8 million). As a result, Thai AirAsia’s cash flows used in financing activities amounted to Baht 506.2 million (US$16.0 million).

Liquidity and Capital Resources — Liquidity Thai AirAsia’s total outstanding indebtedness (comprising short-term loans from financial institutions, long- term loans from financial institutions, amounts due to related parties and finance lease liabilities) amounted to Baht 376.8 million (US$11.9 million) as of March 31, 2012. Thai AirAsia had a working capital deficit, where total current liabilities were more than total current assets, of Baht 792.1 million (US$25.0 million) as of March 31, 2012. Current liabilities comprise principally deferred revenues amounting to Baht 3,167.9 million (US$100.0 million) in relation to which Thai AirAsia expects to recognize as passenger revenues when it provides the relevant air services.

Indebtedness — Guarantees In the three months ended March 31, 2012, Thai AirAsia incurred new commitments relating to guarantees issued by banks relating to the value added tax refund process. Thai AirAsia was required to arrange for a letter of guarantee so that the Thai revenue department would pay the value added tax receivable referred to in “— Liquidity and Capital Resources — Cash Flows in the Three Months Ended March 31, 2012” above prior to the final determination of the actual amount due to Thai AirAsia. See Note 15 to the notes to the unaudited financial statements of Thai AirAsia as of and for the three months ended March 31, 2011 and 2012 for further details.

Capital Expenditures

Thai AirAsia’s capital expenditure in the three months ended March 31, 2012 amounted to Baht 38.5 million (US$1.2 million), principally in relation to the purchase of aircraft spare parts.

Contractual Obligations Following the delivery of two additional Airbus A320 aircraft and the amendment and extension of various existing aircraft lease agreements in the three months ended March 31, 2012, Thai AirAsia’s operating lease commitments (aircraft) have increased significantly to US$970.6 million as of March 31, 2012. See Note 13 to the notes to the unaudited financial statements of Thai AirAsia as of and for the three months ended March 31, 2011 and 2012 for further details.

Related Party Transactions

Thai AirAsia recorded new categories of related party transactions in the three months ended March 31, 2012, principally in relation to the brand license fee payable to AirAsia Berhad under the Brand License Agreement and in relation to pilot training expenses payable to Asian Aviation Centre of Excellence Sdn Bhd (“CAE”), a joint venture company of AirAsia Berhad and a third party, for training Thai AirAsia’s pilots at the AirAsia Academy in Kuala Lumpur. These fees are currently being negotiated with CAE. In the three months ended March 31, 2012, Thai AirAsia recorded brand license fee expense of Baht 48.8 million (US$1.5 million) and pilot training expense of Baht 35.3 million (US$1.1 million). As of March 31, 2012, Thai AirAsia had accrued expenses payable to related parties of Baht 56.3 million (US$1.8 million) in relation to accrued brand license fees and Baht 35.3 million (US$1.1 million) in relation to accrued pilot training expenses. See “Related Party Transactions” for a summary of Thai AirAsia’s related party transactions and Note 11 of the notes to the unaudited interim financial information of Thai AirAsia as of and for the three months ended March 31, 2011 and 2012 for a summary of the related party transactions as of and for the three months ended March 31, 2011 and 2012.

63 Results of Operations Year Ended December 31, 2011 Compared to Year Ended December 31, 2010 Revenue. Revenues increased 33.5% to Baht 16,157.6 million (US$509.9 million) in 2011 from Baht 12,098.7 million in 2010, primarily attributable to increases in passenger revenues, revenues from baggage handling and other service fees and in-flight revenues, partially offset by a decrease in freight revenue. Passenger revenues. Passenger revenues increased 26.8% to Baht 13,007.5 million (US$410.5 million) in 2011 from Baht 10,260.3 million in 2010, primarily because of an increase in the number of passengers carried, from 5.7 million in 2010 to 6.9 million in 2011, following an increase in capacity and average fares, which contributed to an increase in average passenger load factor to 80% in 2011 from 78% in 2010. Passenger revenues increased following the improvement in the political climate in 2011, with the rate of increase partially offset by the effect of the floods in Thailand between September and December 2011. Political unrest in the country culminated in April to May 2010 in widespread protests. Passenger seat capacity increased to 8.6 million seats in 2011 from 7.3 million seats in 2010, while ASKs increased to 9,199 million passenger kilometers in 2011 from 7,605 million passenger kilometers in 2010, primarily because Thai AirAsia took delivery of three Airbus A320 aircraft, increased its aircraft utilization and flew longer stage lengths. Aircraft utilization increased to 11.5 block hours per day in 2011 from 9.9 block hours per day in 2010 following increases in frequency on existing routes and the introduction of new routes from Thai AirAsia’s new Chiang Mai hub that was established during the year. Thai AirAsia’s average stage length increased to 1,074 kilometers in 2011 from 1,032 kilometers in 2010, primarily as a result of the opening of Thai AirAsia’s hub in Chiang Mai and an increase in chartered flights. Average fares increased to Baht 1,849 in 2011 from Baht 1,791 in 2010, principally because of an increase in load factors. Consequently, RPKs increased to 7,389 million passenger kilometers in 2011 from 5,923 million passenger kilometers in 2010. Baggage handling and other service fees. Revenues from baggage handling and other service fees increased 82.3% to Baht 2,805.3 million (US$88.5 million) in 2011 from Baht 1,538.9 million in 2010, primarily as a result of an increase in revenues from baggage handling fees, principally reflecting the increase in passenger volumes and increases in baggage handling fees per bag. The increase was also attributable to fuel surcharges that Thai AirAsia re-introduced with respect to all international flight bookings made from May 3, 2011, amounting to Baht 238.9 million in 2011. In-flight revenues. In-flight revenues increased 37.1% to Baht 185.5 million (US$5.9 million) in 2011 from Baht 135.3 million in 2010. The higher in-flight revenues in 2011 principally reflected an increase in in-flight sales of meals, beverages and merchandise attributable to the increase in number of passengers carried. Freight revenue. Freight revenue decreased 2.9% to Baht 159.4 million (US$5.0 million) in 2011 from Baht 164.2 million in 2010, principally as a result of lower freight volumes. Operating costs. Operating costs increased 38.1% to Baht 13,757.6 million (US$434.1 million) in 2011 from Baht 9,965.2 million in 2010, primarily attributable to increases in fuel costs, aircraft rental costs, ramp and airport operations, staff costs, repair and maintenance costs and guest services and distribution. Fuel costs. Fuel costs increased 61.2% to Baht 6,405.8 million (US$202.1 million) in 2011 from Baht 3,974.0 million in 2010, primarily due to a significant increase in the average price of jet fuel to US$124.0 per barrel in 2011 from US$88.3 per barrel in 2010 and an increase in Thai AirAsia’s flight frequency, which increased fuel consumption. Thai AirAsia’s jet fuel consumption increased to 1,600,942 barrels in 2011 from 1,346,476 barrels in 2010. Aircraft rental. Aircraft rental costs increased 24.0% to Baht 2,727.7 million (US$86.1 million) in 2011 from Baht 2,200.6 million in 2010, primarily attributable to an increase in the number of Airbus A320 aircraft. Ramp and airport operations. Ramp and airport operations increased 17.6% to Baht 1,366.5 million (US$43.1 million) in 2011 from Baht 1,162.4 million in 2010, primarily attributable to an increase in navigational charges attributable to an increase in frequencies to existing destinations as well as an increase in the number of A320 aircraft. Staff costs. Staff costs increased 22.7% to Baht 1,272.1 million (US$40.1 million) in 2011 from Baht 1,036.8 million in 2010, primarily due to an increase in headcount to 2,026 as of December 31, 2011 from 1,791 as of December 31, 2010 and an increase in salaries.

64 Repair and maintenance. Repair and maintenance costs increased 14.2% to Baht 1,101.5 million (US$34.8 million) in 2011 from Baht 964.9 million in 2010, primarily as a result of the lease of three additional Airbus A320 aircraft during the year. Guest services and distribution. Guest services and distribution increased 23.3% to Baht 751.5 million (US$23.7 million) in 2011 from Baht 609.5 million in 2010, primarily attributable to higher passenger volumes. Other operating costs. Other operating costs increased significantly to Baht 132.5 million (US$4.2 million) in 2011 from Baht 17.0 million in 2010, primarily due to the reversal of an over-accrual of on-time guarantee and aircraft delivery amounts that Thai AirAsia accrued in prior periods in relation to its on-time guarantee program that it terminated in 2010. Gross profit. As a result of the above, Thai AirAsia’s gross profit increased 12.5% to Baht 2,400.0 million (US$75.7 million) in 2011 from Baht 2,133.5 million in 2010. As a percentage of revenues, Thai AirAsia’s gross profit decreased to 14.9% in 2011 from 17.6% in 2010, principally as a result of Thai AirAsia’s operating costs, principally fuel costs, increasing at a faster rate than Thai AirAsia’s revenues. Net gain on exchange rates. Net gain on exchange rates decreased 56.5% to Baht 155.3 million (US$4.9 million) in 2011 from Baht 356.8 million in 2010, principally as a result of the depreciation of the Baht against the U.S. Dollar, which increased U.S. Dollar-denominated outstanding payables to AirAsia Berhad. Other income. Other income increased 24.3% to Baht 451.1 million (US$14.2 million) in 2011 from Baht 363.0 million in 2010, principally because of an increase in other revenue from airport fees collected from passengers and interest income. The 13.6% increase in other revenue from airport fees collected from passengers to Baht 253.8 million (US$8.0 million) in 2011 from Baht 223.4 million in 2010 was primarily due to an increase in the number of passengers carried. The substantial increase in interest income to Baht 135.9 million (US$4.3 million) in 2011 from Baht 50.3 million in 2010 was primarily attributable to an increase in interest from accumulated amounts due from related parties that were repaid in 2011. Profit before expenses. As a result of the above, profit before expenses increased 5.4% to Baht 3,006.4 million (US$94.9 million) in 2011 from Baht 2,853.3 million in 2010. Selling expenses. Selling expenses increased 24.2% to Baht 444.7 million (US$14.0 million) in 2011 from Baht 357.9 million in 2010, primarily attributable to an increase in advertising and sponsorship and other selling expenses. Administrative expenses. Administrative expenses increased 48.3% to Baht 357.9million (US$11.3 million) in 2011 from Baht 241.3 million in 2010, primarily attributable to increases in administrative staff salaries and allowances, professional fees and other administrative expenses, including management remuneration which increased because Thai AirAsia paid bonuses in 2011, but did not pay any bonuses in 2010 following a net loss in 2009. Profit before finance costs and income tax. As a result of the above, Thai AirAsia’s profit before finance costs and income tax decreased 2.2% to Baht 2,203.8 million (US$69.5 million) in 2011 from Baht 2,254.1 million in 2010. Finance costs. Finance costs decreased 24.5% to Baht 183.7 million (US$5.8 million) in 2011 from Baht 243.1 million in 2010, primarily attributable to a decrease in interest expenses paid to related parties to Baht 148.6 million in 2011 from Baht 242.8 million in 2010, partially offset by interest paid under the CIMB Loan Agreement under which we drew down Baht 961.0 million (US$30.3 million) in June 2011 and also to interest paid under promissory notes issued by a Thai commercial bank in 2011. Profit before income tax. As a result of the above, Thai AirAsia’s profit before income tax increased 0.4% to Baht 2,020.1 million (US$63.7 million) in 2011 from Baht 2,011.0 million in 2010. Income tax. Thai AirAsia had zero income tax accrual in 2010 or 2011 because Thai AirAsia had cumulative tax losses to offset future taxable profits. Net profit (loss) for the year. As a result of the above, Thai AirAsia’s net profit increased 0.4% to Baht 2,020.1 million (US$63.7 million) in 2011 from Baht 2,011.0 million in 2010. As a percentage of revenues, Thai AirAsia’s net profit decreased to 12.5% in 2011 from 16.6% in 2010, principally as a result of selling and administrative expenses increasing at a faster rate than profit before expenses.

65 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009 Revenues. Revenues increased 30.4% to Baht 12,098.7 million in 2010 from Baht 9,281.2 million in 2009, primarily attributable to increases in passenger revenues, revenues from baggage handling and other service fees, in-flight revenues and freight revenue. Passenger revenues. Passenger revenues increased 35.3% to Baht 10,260.3 million in 2010 from Baht 7,582.3 million in 2009, primarily because of an increase in the number of passengers carried, from 5.0 million in 2009 to 5.7 million in 2010, following an increase in capacity and average fares, which contributed to an increase in average passenger load factor to 78% in 2010 from 76% in 2009. Passenger revenues increased in spite of the political unrest in the country which culminated in April to May 2010 in protests and resulted in fatalities. Passenger seat capacity increased to 7.3 million seats in 2010 from 6.6 million seats in 2009, while ASKs increased to 7,605 million passenger kilometers in 2010 from 6,511 million passenger kilometers in 2009, primarily because Thai AirAsia replaced all of its remaining eight Boeing 737-300 aircraft with 148 seats with Airbus A320 aircraft with 180 seats, increased its aircraft utilization and flew longer stage lengths. Aircraft utilization increased to 9.9 block hours per day in 2010 from 9.4 block hours per day in 2009 following increases in frequency on existing routes and the introduction of six new routes, including to Kolkata and New Delhi. The new Indian routes also contributed to an increase in Thai AirAsia’s average stage length to 1,032 kilometers in 2010 from 979 kilometers in 2009. Average fares increased to Baht 1,791 in 2010 from Baht 1,520 in 2009, principally because Thai AirAsia added more international flights, which typically command higher air fares and because of increased demand. Consequently, RPKs increased to 5,923 million passenger kilometers in 2010 from 4,921 million passenger kilometers in 2009. Baggage handling and other service fees. Revenues from baggage handling and other service fees increased 3.1% to Baht 1,538.9 million in 2010 from Baht 1,492.5 million in 2009, primarily as a result of an increase in revenues from baggage handling fees, partially offset by a decrease in fuel surcharges. Baggage handling fees increased principally attributable to the increase in passenger volumes and increases in baggage handling fees per bag. Thai AirAsia did not record any revenues from fuel surcharges in 2010 because Thai AirAsia ceased charging fuel surcharges in November 2008. Even though Thai AirAsia ceased imposing fuel surcharges in November 2008, revenues from fuel surcharges were Baht 150.8 million in 2009 reflecting ticket sales made prior to November 2008 for travel in 2009. In-flight revenues. In-flight revenues increased 25.7% to Baht 135.3 million in 2010 from Baht 107.6 million in 2009, principally reflecting an increase in in-flight sales of meals, beverages and merchandise attributable to the increase in number of passengers carried. Freight revenue. Freight revenue increased 66.3% to Baht 164.2 million in 2010 from Baht 98.8 million in 2009, principally as a result of an increase in freight carried. Operating costs. Operating costs increased 7.0% to Baht 9,965.2 million in 2010 from Baht 9,315.9 million in 2009, primarily attributable to increases in fuel costs, aircraft rental costs, ramp and airport operations, staff costs and guest services and distribution, partially offset by a decrease in repair and maintenance costs and other operating costs. Fuel costs. Fuel costs increased 18.4% to Baht 3,974.0 million in 2010 from Baht 3,357.2 million in 2009, primarily due to an increase in average price of jet fuel to US$88.3 per barrel in 2010 from US$68.0 per barrel in 2009 and an increase in our flight frequency. Our jet fuel consumption increased to 1,346,476 barrels in 2010 from 1,217,727 barrels in 2009. Our fuel efficiency improved following the completion of the conversion into an all-Airbus A320 fleet in 2010. Aircraft rental. Aircraft rental costs increased 28.5% to Baht 2,200.6 million in 2010 from Baht 1,712.4 million in 2009, primarily attributable to the lease of seven Airbus A320 aircraft, which was partially offset by the return of eight Boeing 737-300 aircraft which had lower lease rates. Ramp and airport operations. Ramp and airport operations increased 12.8% to Baht 1,162.4 million in 2010 from Baht 1,030.9 million in 2009, primarily attributable to an increase in navigational charges attributable to an increase in frequencies to existing, and the introduction of new, international destinations as well as an increase in the number of A320 aircraft, which attract higher landing fees compared with Boeing 737-300 aircraft. Staff costs. Staff costs increased 24.3% to Baht 1,036.8 million in 2010 from Baht 834.3 million in 2009, primarily due to an increase in headcount to 1,791 as of December 31, 2010 from 1,625 as of December 31, 2009 and an increase in salaries.

66 Repair and maintenance. Repair and maintenance costs decreased 23.7% to Baht 964.9 million in 2010 from Baht 1,264.1 million in 2009, primarily as a result of the return of the Boeing 737-300 aircraft, which had higher maintenance and overhaul costs, and lease of new Airbus A320 aircraft, which had minimal maintenance and overhaul costs. Guest services and distribution. Guest services and distribution increased 20.6% to Baht 609.5 million in 2010 from Baht 505.2 million in 2009, primarily attributable to higher passenger volumes. Other operating costs. Other operating costs decreased 97.2% to Baht 17.0 million in 2010 from Baht 611.8 million in 2009, primarily attributable to the reversal of an over-accrual of on-time guarantee and aircraft delivery amounts that Thai AirAsia accrued in prior periods in relation to its on-time guarantee program that it terminated in 2010. Gross profit (loss). As a result of the above, Thai AirAsia recorded a gross profit of Baht 2,133.5 million in 2010, compared to a gross loss of Baht 34.7 million in 2009. As a percentage of revenues, Thai AirAsia’s gross profit was 17.6% in 2010 compared with a gross loss of 0.4% in 2009, principally as a result of Thai AirAsia’s revenues increasing at a faster rate than its operating costs following the gradual changeover of Thai AirAsia’s fleet from the Boeing 737-300 aircraft to the larger capacity and more fuel efficient Airbus A320 aircraft. Net gain on exchange rates. Net gain on exchange rates increased 175.5% to Baht 356.8 million in 2010 from Baht 129.5 million in 2009, principally as a result of the appreciation of the Baht against the U.S. Dollar, which decreased U.S. Dollar-denominated outstanding payables to AirAsia Berhad. Other income. Other income increased 66.6% to Baht 363.0 million in 2010 from Baht 217.9 million in 2009, principally because of an increase in other revenue from airport fees collected from passengers, interest income and other miscellaneous income. The 70.2% increase in other revenue from airport fees collected from passengers to Baht 223.4 million in 2010 from Baht 131.3 million in 2009 was primarily due to an increase in the number of passengers carried. The substantial increase in interest income to Baht 50.3 million in 2010 from Baht 9.6 million was primarily attributable to an increase in interest from amounts due from related parties, following Thai AirAsia’s commencement of charging 6.0% interest per annum on outstanding balances effective from January 1, 2010. Thai AirAsia did not charge any interest on such amounts in 2009. Profit before expenses. As a result of the above, profit before expenses increased significantly to Baht 2,853.3 million in 2010 from Baht 312.7 million in 2009. Selling expenses. Selling expenses increased 47.3% to Baht 357.9 million in 2010 from Baht 243.0 million in 2009, primarily attributable to increases in our advertising and sales promotion expenses and other related expenses. We commenced a new advertising campaign in 2010 to promote the completion of our conversion into an all-Airbus A320 fleet. Administrative expenses. Administrative expenses increased slightly to Baht 241.3 million in 2010 from Baht 239.8 million in 2009, primarily attributable to increases in office rental and other administrative expenses, including management remuneration which increased because Thai AirAsia increased salaries for management in 2010, partially offset by a decrease in administrative staff salaries and allowances. Profit (loss) before finance costs and income tax. As a result of the above, Thai AirAsia recorded a profit before finance costs and income tax of Baht 2,254.1 million in 2010, compared to a loss before finance costs and income tax of Baht 170.1 million in 2009. Finance costs. Finance costs increased significantly to Baht 243.1 million in 2010 from Baht 0.4 million in 2009, primarily attributable to interest accrued on outstanding payables to AirAsia Berhad in 2010 following AirAsia Berhad’s commencement of charging 6.0% interest per annum on outstanding balances effective from January 1, 2010. The outstanding payables related to fuel swap losses, lease amounts due under operating lease and maintenance costs. AirAsia Berhad did not charge any interest on such amounts in 2009. Profit (loss) before income tax. As a result of the above, Thai AirAsia recorded a profit before income tax of Baht 2,011.0 million in 2010, compared to a loss before income tax of Baht 170.5 million in 2009. Income tax. Thai AirAsia had zero income tax accrual in 2009 or 2010 because in 2009, Thai AirAsia incurred a loss before income tax expense and as of December 31, 2010, Thai AirAsia had cumulative tax losses of Baht 4,248.1 million available to offset future taxable profits. Therefore, Thai AirAsia used Baht 1,567.0 million of tax losses carried forward from prior years to fully offset its 2010 taxable profit. Thai AirAsia’s remaining cumulative tax losses carried forward for 2011 amount to Baht 2,681.1 million (US$84.6 million). Net profit (loss) for the year. As a result of the above, Thai AirAsia recorded a net profit for the year of Baht 2,011.0 million in 2010, compared to a net loss for the year of Baht 170.5 million in 2009. As a percentage of revenues, Thai AirAsia’s net profit was 16.6% in 2010 compared with a net loss of 1.8% in 2009, principally

67 as a result of net gain on exchange rates and other income increasing at a faster rate than selling expenses and finance costs.

Financial Condition Total Assets As of December 31, 2009, 2010 and 2011, Thai AirAsia had total assets of Baht 2,067.1 million, Baht 4,866.8 million and Baht 3,789.8 million (US$119.6 million), respectively.

Current Assets As of December 31, 2009, 2010 and 2011, Thai AirAsia had current assets of Baht 1,357.9 million, Baht 4,058.3 million and Baht 2,836.3 million (US$89.5 million), respectively. The increase in current assets in 2010 was principally attributable to an increase in receivables due from related parties. See “— Liquidity and Capital Resources — Cash Flows” for a further discussion on the increases and decreases in our current assets.

Non-Current Assets As of December 31, 2009, 2010 and 2011, Thai AirAsia had non-current assets of Baht 709.3 million, Baht 808.5 million and Baht 953.5 million (US$30.1 million), respectively.

Building Improvements and Equipment — Net As of December 31, 2009, 2010 and 2011, Thai AirAsia had building improvements and equipment — net of Baht 288.0 million, Baht 274.6 million and Baht 302.9 million (US$9.6 million), respectively. The decreases in building improvements and equipment — net over the 2009 to 2011 period were principally attributable to depreciation. Because Thai AirAsia leases all of its aircraft on an operating lease basis, building improvements and equipment — net does not include the net value of Thai AirAsia’s aircraft. To the extent that Thai AirAsia purchases its aircraft in the future, the net value of any such aircraft will be reflected in building improvements and equipment — net in the future.

Liquidity and Capital Resources Cash Flows The following table sets out Thai AirAsia’s condensed statements of cash flows for the periods indicated.

Year Ended December 31, Cash Flow Data: 2009 2010 2011 2011 Bt Bt Bt US$ (in millions) Cash flows from (used in) operating activities: Operating cash flows before changes in operating assets and liabilities .... 280.9 2,207.4 2,115.3 66.7 Changes in operating assets and liabilities ...... (115.9) (2,523.4) (1,621.4) (51.2) Interest paid ...... (0.4 ) (0.3 ) (24.0 ) (0.8) Interest received ...... 9.2 2.7 51.4 1.6 Total ...... 173.8 (313.6 ) 521.4 16.5 Cash flows from (used in) investing activities: Net decrease (increase) in short-term loans to director ...... (187.0) 87.0 100.0 3.2 Proceeds from sale of building improvement and equipment ...... 3.5 2.4 7.9 0.2 Payments for building improvement and equipment ...... (101.2) (108.6) (82.0) (2.6) Others(1) ...... 5.1 (14.0 ) 4.7 0.1 Total ...... (289.9) (33.2) 30.6 1.0 Cash flows from (used in) financing activities: Proceeds from short-term borrowings from a financial institution ...... — 200.0 — — Payments on short-term borrowings from a financial institution ...... — — (200.0 ) (6.3) Repayments of finance lease ...... (1.4 ) (1.5 ) (6.1 ) (0.2) Proceeds from long-term borrowings from a financial institution ...... — — 961.2 30.3 Repayments on long-term borrowings from a financial institution ...... — — (462.0 ) (14.6) Interest paid ...... — — (35.0) (1.1) Total ...... (1.4 ) 198.5 258.1 8.1 Net (decrease) increase in cash and cash equivalents ...... (117.5) (148.3) 810.0 25.6

(1) Includes payment for general investment, proceeds from general investment, payments for intangible assets and interest received.

68 Year Ended December 31, 2011 In 2011, Thai AirAsia had operating cash flows before changes in operating assets and liabilities of Baht 2,115.3 million (US$66.7 million) and net decrease in operating assets and liabilities of Baht 1,621.4 million (US$51.2 million). Net decrease in operating assets and liabilities were principally a result of a Baht 3,049.0 million (US$96.2 million) decrease in amounts due to related parties principally because Thai AirAsia made payments of a previous outstanding amount due to AirAsia Berhad, a Baht 418.4 million (US$13.2 million) increase in value added tax receivable in relation to three Airbus A320 aircraft that were delivered during the year (pending approval from the Thai revenue department), and a Baht 93.1 million (US$2.9 million) increase in other non-current assets, partially offset by a Baht 1,663.0 million (US$52.5 million) decrease in amounts due from related parties, principally because AirAsia Berhad made payments of previous outstanding amounts and a Baht 342.9 million (US$10.8 million) increase in deferred revenues. The payments made by Thai AirAsia and by AirAsia Berhad principally comprised payments made in June 2011 pursuant to an agreement for transfer of right to receive payment dated June 15, 2011, whereby Thai AirAsia assigned to AirAsia Mauritius the right to receive certain receivables from AirAsia Berhad to settle certain payables by Thai AirAsia to AirAsia Mauritius. As a result, Thai AirAsia’s net cash generated from operating activities amounted to Baht 521.4 million (US$16.5 million). In 2011, Thai AirAsia’s cash flows generated from investing activities of Baht 30.6 million (US$1.0 million) were primarily from the repayments of short-term loan from (net of loan granted to) a director amounting to Baht 100.0 million (US$3.2 million), partially offset by the purchase of building improvements and equipment. In 2011, Thai AirAsia obtained a long-term loan from a financial institution, repaid a portion of such loan and repaid a short-term loan from a financial institution. As a result, Thai AirAsia’s cash flows from financing activities amounted to Baht 258.1 million (US$8.1 million).

Year Ended December 31, 2010 In 2010, Thai AirAsia had operating cash flows before changes in operating assets and liabilities of Baht 2,207.4 million and net decrease in operating assets and liabilities of Baht 2,523.4 million. Net decrease in operating assets and liabilities were principally a result of a Baht 2,612.7 million increase in amounts due from related parties principally because AirAsia Berhad had collected on our behalf a portion of credit card sales in non-Baht currencies made through the AirAsia Group website that were not paid during 2010 (but which were paid in 2011, resulting in a significant decrease in amounts due from related parties), a Baht 146.4 million increase in prepaid expenses, a Baht 181.1 million decrease in trade accounts payable and a Baht 185.3 million decrease in amounts due to related parties, partially offset by a Baht 899.1 million increase in deferred fare revenues. As a result, Thai AirAsia’s net cash used in operating activities amounted to Baht 313.6 million. In 2010, Thai AirAsia’s cash flows used in investing activities of Baht 33.2 million were primarily for payments for building improvements and equipment, partially offset by a decrease in short term loan granted to a director following the repayment of such loan. In 2010, Thai AirAsia obtained a short-term loan from Kasikornbank plc. As a result, Thai AirAsia’s cash flows from financing activities amounted to Baht 198.5 million.

Year Ended December 31, 2009 In 2009, Thai AirAsia had operating cash flows before changes in operating assets and liabilities of Baht 280.9 million and net decrease in operating assets and liabilities of Baht 115.9 million. Net decrease in operating assets and liabilities were principally a result of a Baht 388.9 million decrease in provision for loss on unwind interest rate swap, a Baht 112.0 million decrease in other accounts payable, a Baht 44.2 million decrease in accrued expenses, a Baht 140.2 million increase in other non-current assets and a Baht 111.9 million increase in trade and other receivables as a result of an increase in revenues, partially offset by a Baht 487.6 million increase in amounts due to related parties in relation to the return of Boeing 737-300 aircraft prior to the expiration of their lease term, and a Baht 234.1 million increase in deferred fare revenues. As a result, Thai AirAsia’s net cash generated from operating activities amounted to Baht 173.8 million. In 2009, Thai AirAsia’s cash flows used in investing activities of Baht 289.9 million were primarily due to a short-term loan granted to a director and payments for building improvements and equipment. See “Related Party Transactions — Past and Ongoing Related Party Transactions — Loans to Director and Interest Income” for further information on the loan granted to a director. In 2009, Thai AirAsia made finance lease payments and, as a result, Thai AirAsia’s cash flows used in financing activities amounted to Baht 1.4 million.

69 Liquidity Thai AirAsia’s primary sources of funding are cash from operating activities and equity. Shareholder and other related party advances have also been important sources of funding for Thai AirAsia’s business. Thai AirAsia has also obtained bank loans from time to time. Thai AirAsia’s total outstanding indebtedness (comprising short-term loans from financial institutions, long-term loans from financial institutions, amounts due to related parties and finance lease liabilities) amounted to Baht 4,222.5 million as of December 31, 2009, Baht 4,364.3 million as of December 31, 2010 and Baht 874.3 million (US$27.6 million) as of December 31, 2011. Thai AirAsia had a working capital deficit, where total current liabilities were more than total current assets, of Baht 5,220.7 million as of December 31, 2009, Baht 3,310.0 million as of December 31, 2010 and Baht 1,394.3 million (US$44.0 million) as of December 31, 2011. Thai AirAsia expects its working capital position to improve in 2012 as a result of the receipt of the subscription proceeds from the issue of new shares to the Company originating from the net proceeds of the Combined Offering.

Indebtedness Amounts Due to Related Parties Thai AirAsia has historically received financial support from companies in the AirAsia Group for its working capital requirements. The aggregate principal amount of advances outstanding represented by amounts due to related parties, which are denominated principally in U.S. Dollars, amounted to Baht 4,218.4 million as of December 31, 2009, Baht 4,161.7 million as of December 31, 2010 and Baht 361.1 million (US$11.4 million) as of December 31, 2011. From January 1, 2010, the interest rate on the outstanding balance of these amounts due to related parties was 6.0% per annum and repayment is made on a monthly rolling basis. Prior to January 1, 2010, no interest was payable on the outstanding amounts due to related parties. For more information on these amounts due to related parties and the Financial Assistance Agreement relating to such advances, see “Related Party Transactions”.

Bank Loans Thai AirAsia has obtained certain credit facilities from CIMB Thai and Kasikornbank plc with amounts available to be drawn thereunder. Thai AirAsia’s total bank loans outstanding was zero as of December 31, 2009, Baht 200.0 million as of December 31, 2010 and Baht 499.2 million (US$15.8 million) as of December 31, 2011. In addition, the Company has guaranteed loans granted by Credit Suisse to the Selling Shareholders.

CIMB Facilities On April 25, 2011, Thai AirAsia entered into a certificate and letter of consent (the “Letter of Consent”) with CIMB Thai, under which CIMB Thai approved certain facilities (the “CIMB Facilities”), comprising an overdraft facility in the amount of Baht 5.0 million, a long-term loan in the amount of Baht 970.0 million and a short-term credit line in relation to foreign currency pre-settlement risk in the amount of Baht 45.0 million. The loan agreement dated April 25, 2011 between Thai AirAsia and CIMB Thai (the “CIMB Loan Agreement”) was for the purpose of funding any expenses relating to the delivery of aircraft prior to the expiry date under an aircraft lease agreement dated September 14, 2009 between Thai AirAsia and AirAsia Mauritius. Thai AirAsia drew down Baht 961.0 million on June 2, 2011. The interest rate per annum is the Minimum Lending Rate (“MLR”) minus 1.0%. The principal amount is due in 24 equal monthly installments of not less than Baht 40.5 million, with the first installment due at the end of the month following the first drawdown, which was on June 2, 2011. As of December 31, 2011, the aggregate principal amount of the loan outstanding was Baht 499.2 million. Thai AirAsia repaid in full the outstanding principal amount of the loan on March 29, 2012. On May 11, 2011, Thai AirAsia entered into a Baht 5.0 million overdraft facility agreement with CIMB Thai (the “CIMB Overdraft Facility Agreement”), under which CIMB Thai agreed to provide a Baht 5.0 million overdraft facility in relation to Thai AirAsia’s current account held with CIMB Thai. The interest rate per annum equals to the Minimum Overdraft Rate (“MOR”). Thai AirAsia and CIMB Thai agreed to terminate the CIMB Overdraft Facility Agreement with effect from March 29, 2012.

Credit Suisse Term Loan Each of the Selling Shareholders (together, the “Borrowers”) entered into a loan agreement dated June 7, 2007 (the “Credit Suisse Loan Agreement”) with Credit Suisse, Singapore branch (“Credit Suisse”) in relation to

70 a term loan from Credit Suisse in the Baht-equivalent amount of US$39.0 million to, inter alia, finance the purchase price for the acquisition of all of the Company’s issued share capital that was held by Shin Corporation and Mr. Sitthichai Veerathummnoon (the “Acquired Shares”). The acquisition was completed on June 21, 2007. The interest rate per annum is either the interest hedge rate under the interest rate hedging agreement or, if there is no interest rate hedging agreement in place, the equivalent Baht interest rate necessary to equal a U.S. Dollar rate equal to LIBOR plus 2.5%. The facility is required to be repaid 60 months from the utilization date, which was June 21, 2007. As of December 31, 2011, the aggregate principal amount outstanding was Baht 1,349.8 million (US$42.6 million). If an initial public offering of the Company, Thai AirAsia or any entity established for the purpose of undertaking an initial public offering of all or part of Thai AirAsia or its successors or assigns occurs, the Borrowers have agreed to pay Credit Suisse its pro rata share of a success fee in the form of fully paid call options to purchase shares in the listing vehicle (the “Option Shares”). The number of call options to which the lenders are entitled depends on the valuation of Thai AirAsia at the time of the initial public offering and the initial public offering price per share of the listing vehicle, with the maximum amount equal to 200% of the Baht- equivalent of US$39.0 million divided by 60% of the initial public offering price of the shares of the listing vehicle. Immediately upon the occurrence of the initial public offering, the Borrowers have agreed to procure the transfer of the number of Option Shares equal to the number of outstanding call options to the lenders or, to the extent legal title to the Option Shares cannot be transferred because it would result in, among other things, non-compliance with any minimum shareholding requirements imposed by law, or at the option of the Borrowers or Credit Suisse, to pledge such shares to Credit Suisse. The call options may be exercised at the prevailing exercise price during the option period, which is the period from the first trading day of the listing vehicle’s shares to and including the later of the final maturity date under the Credit Suisse Loan Agreement and the date falling 24 months after the first trading day. The exercise price is the volume weighted average price of each share of the listing vehicle on the five trading days preceding the relevant exercise date. If the call options are exercised, the Borrowers have the option of settling the settlement value by physical delivery of Option Shares or by cash. Under a Call Option and Settlement Agreement dated March 30, 2012 between the Borrowers and Credit Suisse (the “Call Option and Settlement Agreement”), the Borrowers and Credit Suisse have agreed that: • Credit Suisse must exercise all of its call options one business day prior to the date of registration of the Primary Shares sold in the Primary Offering; • the requirements to transfer legal title of the Option Shares to Credit Suisse or to pledge the Option Shares to Credit Suisse are waived; • the Borrowers elect to settle the call options by cash payment of an amount agreed with Credit Suisse, subject to a specified maximum; • the exercise price for each call option is deemed to be equal to the offer price per share of the Combined Offering and the strike price is deemed to be 60% of the offer price per share of the Combined Offering; • a portion of the proceeds of the Vendor Shares must be used to pay the settlement value of the exercise of the Call Options and prepay all outstanding amounts under the Credit Suisse Loan Agreement; and • if the final settlement date does not occur on or prior to June 21, 2012 or the Borrowers do not pay the final settlement amount, the terms of the Credit Suisse Loan Agreement will remain in full force and effect as if the Call Option and Settlement Agreement had not been entered into by the parties. Credit Suisse has also granted the Selling Shareholders various waivers and consents in relation to specified covenants and events of default that may be breached or triggered as a result of or arising from the Combined Offering. In addition, the Selling Shareholders have notified us that they intend to use a portion of the proceeds from their sale of the Vendor Shares received by each of them to prepay in full all outstanding amounts owed by each of them under the Credit Suisse Loan Agreement. The Selling Shareholders expect to make such payments in two installments, reflecting the timing of receipt of the proceeds from the sale of the Vendor Tranche A Shares, which will be on the date of the registration of the increase in paid-up capital in relation to the New Shares sold in the Primary Offering, and the Vendor Tranche B Shares, which will be on the second trading day of our Shares on the SET.

71 The facility is secured by (i) a pledge over the Acquired Shares, which Credit Suisse has agreed to release, in relation to the Vendor Tranche A Shares, on the payment of the proceeds of the Vendor Tranche A Shares into an escrow account one business day prior to the date of registration of the increase in paid-up capital in relation to the New Shares sold in the Primary Offering, in relation to the Vendor Tranche B Shares, on the payment of the proceeds of the Vendor Tranche B Shares into an escrow account one business day prior to the first trading day of our Shares on the SET and, in relation to the remaining Shares held by the Borrowers, after the outstanding amounts under the Credit Suisse Loan Agreement is repaid in full, which will be one business day after the first trading day of our Shares on the SET, (ii) a pledge over the issued shares in Thai AirAsia which is owned by the Company, which Credit Suisse has agreed to release immediately upon the completion of the registration of the increase in paid-up capital in relation to the New Shares sold in the Primary Offering and a pledge over the issued shares in Thai AirAsia which are owned by Mr. Tassapon Bijleveld, which Credit Suisse has agreed to release after the outstanding amounts under the Credit Suisse Loan Agreement are repaid in full, (iii) an assignment of the debt service reserve account and the charged account and (iv) an assignment of the rights of the Borrowers under the shareholders’ agreement of the Company in respect of the Acquired Shares held by the Borrowers, which will be re-assigned to the Borrowers after the outstanding amounts under the Credit Suisse Loan Agreement are repaid in full. In addition, the facility is guaranteed by the Company under a guarantee dated June 21, 2007 between the Company and Credit Suisse, which Credit Suisse has agreed to discharge immediately upon the completion of the registration of the increase in paid-up capital in relation to the New Shares sold in the Primary Offering.

Guarantees Thai AirAsia has entered into guarantees from time to time with Siam Commercial Bank Pcl., Kasikornbank Pcl., and Citibank N.A., in relation to the performance of certain obligations under our third party ground handling, technical support and other flight operation contracts. Thai AirAsia provided its fixed deposit accounts held with Kasikornbank Pcl. and Citibank N.A. as security for such obligations. These guarantee commitments amounted to Baht 7.6 million, US$90,000 and Rupee 27.8 million as of December 31, 2010 and Baht 5.6 million, US$90,000 and Rupee 27.8 million as of December 31, 2011. In addition, Thai AirAsia entered into a guarantee dated June 23, 2011 with Thanachart Bank Pcl. to guarantee 12 student pilot loans, each for Baht 2,242,000. The guarantee is valid from the date any amounts under the relevant student pilot loan were drawn down to the earlier of (a) the date Thai AirAsia notifies Thanachart Bank Pcl that the student pilot has graduated and been appointed as an assistant pilot in Thai AirAsia and (b) the date the student pilot fully repays the loan and/or any outstanding debt to Thanachart Bank Pcl. These guarantee commitments amounted to Baht nil and Baht 26.9 million as of December 31, 2010 and December 31, 2011, respectively. Thai AirAsia has obtained a pledge of the guarantees granted by each of the trainee pilot’s guarantors.

Capital Expenditures Thai AirAsia has historically not incurred significant capital expenditures because it obtains its aircraft under operating leases. Thai AirAsia’s capital expenditures amounted to Baht 105.5 million in 2009, Baht 123.3 million in 2010 and Baht 84.3 million (US$2.7 million) in 2011, principally in relation to the purchase of aircraft spare parts. In the future, Thai AirAsia intends to purchase a number of aircraft, in addition to obtaining aircraft under operating leases. As of the date of this Offering Memorandum, Thai AirAsia does not have a legal commitment to purchase any aircraft. These purchases will substantially increase Thai AirAsia’s capital expenditures beyond amounts which Thai AirAsia has historically incurred. Thai AirAsia intends to finance the purchase of these aircraft through proceeds from the Combined Offering, operating cash flows and loans. Thai AirAsia may also construct an office building near the Suvarnabhumi International Airport for its office needs, but no firm decision has been made whether to proceed with the project as of the date of this Offering Memorandum. Thai AirAsia’s plans depend on a number of factors, including changes in economic, political or other conditions in the countries where it operates, or events that have a material adverse effect on the airline and the tourism industry.

72 Contractual Obligations The following table sets forth Thai AirAsia’s contractual obligations as of December 31, 2011 for the periods indicated.

Payment Due By Period Less than More than 1 Year 1-3 Years 3-5 Years 5 Years Total (Baht in millions) Long-term debt ...... 486 13 — — 499 Operating lease commitments (aircraft)(1) ...... 2,881 2,657 1,044 1,466 8,048 Operating lease commitments (office) ...... 45 32 3 — 80 Finance lease obligations ...... 5 9 1 — 15 Total contractual obligations ...... 3,417 2,711 1,048 1,466 8,642

(1) Excludes payment obligations under the Booking Fee Agreement and the Fuel Hedging Agreement.

Off-Balance Sheet Transactions As discussed above under “— Indebtedness — Guarantees” and “— Bank Loans — Credit Suisse Loan Agreement” the Company has acted as guarantor and pledged shares in Thai AirAsia as security under the Credit Suisse Loan Agreement. In addition, Thai AirAsia has acted as guarantor to certain pilot trainees’ loans. In addition, Thai AirAsia enters (through AirAsia Berhad) into fuel hedging arrangements from time to time. See “— Market Risk — Fuel Price Risk” below for details. Other than as described above, we do not have any material off-balance sheet transactions.

Market Risks We are exposed to market risk, including jet fuel price risk, foreign currency risk and interest rate risk. See the notes to our proportionate consolidated and company financial statements for a description of our accounting policies and additional information.

Fuel Price Risk We hedge, through AirAsia Berhad, our fuel prices from time to time primarily to stabilize our jet fuel costs, but such hedging may not necessarily decrease our jet fuel expenses. We have agreed with AirAsia Berhad that any gains or losses on such hedges are to be allocated to us on a monthly basis based on the volume of fuel that we budget to use during each such month as a proportion to the budgeted amount of fuel to be used by the AirAsia Group. Because of the nature of these fuel price swap agreements and fuel price option agreements, these agreements constituted financial assets that are required to be marked to market, with the relevant gain or loss recorded in our financial statements as an income or expense. We also pass a portion of our fuel price increases to our passengers on international flights in the form of fuel surcharges. However, our fuel surcharges for our international flights do not fully compensate us for fuel price increases. The DCA does not allow fuel surcharges to be imposed separately from the air fare for scheduled domestic passenger services. In 2009, AirAsia Berhad entered into various fuel price hedging arrangements with third parties on our behalf. Due to the large volumes of fuel hedged and degree of volatility in fuel prices, these fuel price hedging arrangements were “out of the money”, resulting in margin calls. As a result, AirAsia Berhad terminated these hedging arrangements prior to their respective maturities, resulting in penalty charges becoming payable. In 2009, Thai AirAsia recorded fuel swap transaction expenses of Baht 275.6 million, comprising losses upon maturity of Baht 253.0 million and a loss on unwind of fuel swap contract of Baht 22.6 million. In 2010, we recorded fuel swap transaction income of Baht 76.3 million relating to gains on our hedging arrangements during 2010. There were no outstanding fuel hedging agreements as of December 31, 2010. In 2011, our policy is to hedge (through AirAsia Berhad) our fuel requirements monthly to match our forward bookings, and we intend to continue these hedging arrangements in 2012. In 2011, Thai AirAsia recorded fuel swap transaction income of Baht 13.2 million (US$0.4 million), reflecting gains upon maturity as a result of actual fuel prices exceeding the swap contract fuel prices. The outstanding net fair value of fuel swap agreements amounted to US$1.6 million as of December 31, 2011.

Foreign Currency Exchange Rate Risk Our reporting currency is the Baht. However, most of our jet fuel supply, insurance contracts and all of our aircraft leases are denominated in U.S. Dollars or priced in U.S. Dollars but invoiced in Baht at the prevailing

73 exchange rate. Approximately 79% of our operating costs in 2011 were denominated in U.S. Dollars, and the remainder in a variety of other currencies, principally Baht. In addition, approximately 72% of our revenues in 2011 were denominated in Baht, and the remainder in a variety of other currencies, including the Macau Pataca, Malaysian Ringgit, Singapore Dollar, Hong Kong Dollar and U.S. Dollar. Approximately 33% of our assets and 10% of our liabilities as of December 31, 2011 were denominated in currencies other than Baht. We adjust airfare pricing each quarter, but do not adjust fuel costs and miscellaneous operating expenses that are denominated in foreign currencies to adjust for the fluctuation of the Baht. Accordingly, any depreciation in the value of the Baht against our core foreign currencies may have a positive effect on our operating revenues but may result in a detrimental effect on our operating costs. Conversely, an appreciation in the value of the Baht against our core foreign currencies may result in a detrimental effect on our operating revenues but may result in a positive effect on our operating costs. In addition, because our expenses in U.S. Dollars are greater than our revenues generated in U.S. Dollars, foreign exchange transactions from other currencies into U.S. Dollars are required to cover our U.S. Dollar-denominated obligations and trade payables. We have not entered into any hedging contracts to hedge against fluctuations in exchange rates. To cover the difference between our expenses and revenues in U.S. Dollars, our policy has been to manage our U.S. Dollar-denominated exposure by monthly conversion of our non-U.S. Dollar-denominated foreign currency revenues into U.S. Dollars at the spot rate available at the time of conversion. We also calculate our U.S. Dollar- denominated monthly commitments and match our commitments with our U.S. Dollar revenues and the conversion of our non-U.S. Dollar denominated foreign currency revenues. If our U.S. Dollar revenues and converted foreign currency revenues are insufficient to match our U.S. Dollar-denominated obligations in any particular period, we further convert part of our Baht revenues to U.S. Dollars to cover such shortfall.

Interest Rate Risk Thai AirAsia’s outstanding indebtedness (comprising borrowings from financial institutions and finance lease liabilities, but excluding amounts due to related parties) as of December 31, 2011 amounted to Baht 513.2 million (US$16.2 million), including Baht 499.2 million (US$15.8 million) under the CIMB Loan Agreement which attracts a floating rate of interest of MLR minus 1.0% per annum. We may incur indebtedness in the future to fund the acquisition of new aircraft. Increases in interest rates will increase the interest payable under our outstanding floating rate debt and increase the cost of any new borrowings, and could have a material adverse effect on our financial position. We do not hedge our interest rate exposure.

Taxation The prevailing corporate rate of income tax applicable to Thai companies generally is 30% but will be reduced to 23% in 2012, 20% in 2013 and 2014 and revert to 30% thereafter. Neither we nor Thai AirAsia has paid any corporate income tax during the past three years because the Company and Thai AirAsia had incurred losses during those periods or were able to benefit from tax loss carry forwards.

Tax Loss Carry-Forwards Thai AirAsia Tax loss carry-forwards primarily comprise Thai AirAsia’s tax losses arising before 2011 amounting to Baht 2,681.1 million (US$84.6 million) as of December 31, 2011. Under Thai tax regulations, tax loss carry- forwards resulting from the normal course of business activity can be used for a period of five years after the year of the tax loss. The table below sets forth Thai AirAsia’s unused tax loss carry-forwards resulting from its normal course of business, including the years in which the carry-forwards expire, as of December 31, 2011.

Amount of Tax Loss Carry Forward Expires Carry-Forwards Bt US$ (in millions) December 31, 2011 ...... — — December 31, 2012 ...... — — December 31, 2013 ...... 2,681.1 84.6 December 31, 2014 ...... — — December 31, 2015 ...... — — Total ...... 2,681.1 84.6

The amount of income taxes payable by Thai AirAsia in the future will depend on various factors, including its results of operations, the utilization of available tax loss carry-forwards and the level of its capital

74 expenditures. Thai AirAsia’s tax loss carry-forwards may only be used by itself and not by the Company or any other future subsidiary of the Company or of Thai AirAsia. Thai AirAsia may not be able to use the potential future tax benefits of its tax loss carry-forwards in full or at all if it does not generate sufficient taxable income to offset the benefits before they expire.

The Company Tax loss carry-forwards primarily comprise the Company’s tax losses arising before 2011 amounting to Baht 4.1 million (US$0.1 million) as of December 31, 2011. Under Thai tax regulations, tax loss carry-forwards resulting from the normal course of business activity can be used for a period of five years after the year of the tax loss. The table below sets forth the Company’s unused tax loss carry-forwards resulting from its normal course of business, including the years in which the carry-forwards expire, as of December 31, 2011.

Amount of Tax Loss Carry Forward Expires Carry-Forwards Bt US$ (in millions) (in thousands) December 31, 2011 ...... 1.5 47 December 31, 2012 ...... 0.9 28 December 31, 2013 ...... 0.5 16 December 31, 2014 ...... 0.6 19 December 31, 2015 ...... 0.6 19 Total ...... 4.1 129

The amount of income taxes payable by the Company in the future will depend on various factors, including its results of operations, the utilization of available tax loss carry-forwards and the level of its capital expenditures. The Company’s tax loss carry-forwards may only be used by itself and not by Thai AirAsia or any other future subsidiary of the Company. The Company may not be able to use the potential future tax benefits of its tax loss carry-forwards in full or at all if it does not generate sufficient taxable income to offset the benefits before they expire.

Thai Board of Investment Tax Incentives Thai AirAsia has received two letters conditionally granting certain privileges by the Board of Investment relating to the business of mass transit services and transportation of bulk goods, including (a) exemption from payment of import duty on machinery approved by the Board of Investment, (b) exemption from payment of income tax on net profit from promoted operations for a period of eight years from the date on which income is deemed to be first derived from such operations, subject to a maximum exempt corporate tax of Baht 443.0 million and Baht 437.3 million, as the case may be, (c) a five-year carry forward period for losses for tax purposes from promoted operations from the expiry of the eight-year period and (d) exemption from income tax on dividends paid to shareholders from the profit of promoted operations during the corporate tax exemption period. These privileges are granted subject to compliance with various conditions, including the import of one aircraft with a capacity of 180 seats with respect to each letter and the ability to transport one tonne of goods within 30 months or 36 months, as the case may be, from the issue date of the Board of Investment certificate. Thai AirAsia is also required to increase its registered capital before the commencement of operation of the aircraft to be imported by Baht 20 million or Baht 40 million, as the case may be, so that the minimum registered capital is Baht 420 million or Baht 440 million, as the case may be, prior to the issuance of the relevant Board of Investment certificate. Thai AirAsia is in the process of delivering certain documents to the Board of Investment before the Board of Investment issues the relevant certificate granting such privileges.

Inflation According to the Bank of Thailand, Thailand’s annual overall inflation rate, as measured by the headline consumer price index, was negative 0.9%, 3.3% and 3.8% in 2009, 2010 and 2011, respectively. The Bank of Thailand estimates, in their inflation report dated January 2012, that the inflation rate for 2012 and 2013 will be 3.2% and 2.9%, respectively. We believe that inflation in Thailand has not had a significant impact on our results of operations in recent years.

Changes in Thai GAAP As of January 1, 2011 a number of new and revised Thai Financial Reporting Standards (“TFRS”) became effective, and the revisions to TAS 1 and TAS 19 would likely have a material impact on the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements for the

75 year ended December 31, 2011. See Note 3.2(b) to the audited proportionate consolidated and company financials statements of the Company for details.

Non-GAAP Financial Information We use EBIT, EBITDA and EBITDAR to provide additional information about the operating performance of Thai AirAsia. EBITDAR represents earnings before interest and taxation after adding depreciation and amortization and operating lease expenses. EBITDA represents earnings before interest and taxation after adding depreciation and amortization. EBIT represents earnings before interest and taxation. EBIT margins, EBITDA margins and EBITDAR margins represent EBIT, EBITDA or EBITDAR, as the case may be, divided by revenues. EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR or EBITDAR margins are not standard measures, nor measurements of financial performance or liquidity, under Thai GAAP or IFRS, and should not be considered alternatives to net profit (loss), profit (loss) before finance costs and income tax or any other performance measure derived in accordance with Thai GAAP or IFRS, or as an alternative to cash flow from operating activities. EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR and EBITDAR margins are supplemental measures of Thai AirAsia’s performance that are not required by, or presented in accordance with, Thai GAAP or IFRS. As a measure of operating performance, we believe that the most directly comparable measure to EBIT, EBITDA and EBITDAR is net profit. We use EBIT, EBITDA and EBITDAR in addition to net profit because net profit includes many accounting items associated with capital expenditures, such as depreciation, as well as certain other non operating transactions, such as interest income and interest expenses and income tax expenses. These accounting items may vary between companies depending on the method of accounting adopted by each company. By minimizing differences in capital expenditures and the associated depreciation expenses as well as reported tax positions, goodwill amortization and interest income and expenses, EBIT, EBITDA and EBITDAR provides further information about our operating performance and an additional measure for comparing our operating performance with other companies’ results. Funds depicted by EBIT, EBITDA and EBITDAR may not be available for debt service due to covenant restrictions, capital expenditure requirements and other commitments.

The following table reconciles our net profit under Thai GAAP to our definition of EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR and EBITDAR margins for the periods indicated:

Year Ended December 31, Three Months Ended March 31, 2009 2010 2011 2011 2011 2012 2012 Bt Bt Bt US$ Bt Bt US$ (in millions, except for percentages) Net profit (loss) for the period .... (170.5) 2,011.0 2,020.1 63.7 891.6 621.6 19.6 Add: Finance cost ...... 0.4 243.1 183.7 5.8 75.1 6.0 0.2 Income tax expense ...... — — — — — — — EBIT ...... (170.1) 2,254.1 2,203.7 69.5 966.7 627.6 19.8 Add: Depreciation and amortization . . 131.9 123.2 71.5 2.3 18.4 17.7 0.6 EBITDA ...... (38.2) 2,377.3 2,275.3 71.8 985.1 645.3 20.4 Add: Operating lease expenses ...... 1,712.4 2,200.6 2,727.7 86.1 655.2 753.1 23.7 EBITDAR ...... 1,674.2 4,577.9 5,003.0 157.9 1,640.3 1,398.4 44.1 Revenues ...... 9,281.2 12,098.7 16,157.6 509.9 4,160.2 4,868.1 153.6 EBIT margin ...... (1.8)% 18.6% 13.6% 13.6% 23.2% 12.9% 12.9% EBITDA margin ...... (0.4)% 19.6% 14.1% 14.1% 23.7% 13.3% 13.3% EBITDAR margin ...... 18.0% 37.8% 31.0% 31.0% 39.4% 28.7% 28.7% You should not consider EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR and EBITDAR margins in isolation or construe it as an alternative to net income, or as an indicator of operating performance or any other standard measure under Thai GAAP or IFRS. EBIT, EBIT margins, EBITDA, EBITDA margins, EBITDAR and EBITDAR margins measures used in this Offering Memorandum may not be comparable to similarly titled measures used by other companies.

76 INDUSTRY The information presented in this section, including all data (actual, estimates and forecasts) relating to, among others, demand, capacity, passenger numbers, number of flights and market share, has been provided by Strategic Airport Planning Ltd (“S-A-P”), an aviation consulting firm that specializes in the preparation of aviation activity forecasts and strategic business plans, except as otherwise stated, and is derived from S-A-P’s full report which is reproduced in Annex B to this Offering Memorandum. We do not make any representation as to the accuracy of this information. These sources, including the data provided by S-A-P, are based on economic and other assumptions that may prove to be incorrect and the information has not been independently verified by us, the International Managers or the Joint Thai Lead Underwriters, nor any of our or its respective advisors. You should recognize that certain industry data contained in this section is estimated in the absence of official company confirmation or reliable country source information, and you should not place undue reliance on such data This report includes forecasts and other forward-looking estimates. These forward-looking statements are necessarily based on various assumptions and estimates that are inherently subject to various risks and uncertainties relating to possible invalidity of the underlying assumptions and estimates and possible changes or development of social, economic, business, industry, market, legal, government, and regulatory circumstances and conditions and actions taken or omitted to be taken by others. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic and competitive market conditions and future government and business decisions, all of which are difficult or impossible to predict accurately. Actual results and future events could differ materially from such projections. You should not place undue reliance on such statements, or on the ability of S-A-P or any other third party to accurately predict future industry trends or performance. This report contains information supplied by, and analysis based on, public and private sources. To the extent such sources have been cited in this section, S-A-P confirms that it is allowed to reference such sources. While S-A-P believes that the information is correct, it cannot guarantee its validity. Some amounts in this report are rounded. Financial and operating data for some air carrier groups may include cargo and other activities. In the information presented in this section, “we” refers to S-A-P.

1 Aviation Industry Overview 1.1 Background According to IATA (the International Air Transport Association), the Asia-Pacific region became the airline industry’s largest market in 2009. The region’s growth rates are forecast to remain robust over the next 20 years. If the number of people in Asia flew at the same rates per annum as their counterparts in the United States, the global aviation industry would triple in size. The strong historical and projected future growth rates for the Asia- Pacific aviation industry are the result of several factors, including market liberalization efforts and strong economic growth. Aviation activity in Thailand has grown significantly over the past few decades, in part due to the same market liberalization and economic growth factors affecting Asia as a whole. Some of the general Asia trends have been even more pronounced in Thailand, in particular the trend toward low cost carrier (LCC) service. These factors have resulted in average annual growth in traffic of 4.4% from 2005 to 2010, despite several interruptions in growth during that time due to political turmoil, natural disasters, and economic crises. Aviation demand to, from, and within Thailand is driven by inbound tourism, as well as business-related travel and outbound tourism. Thailand’s tourism infrastructure is particularly well-developed and attractive to tourists from around the world. More than half of the aviation activity at the primary airports in Thailand is carried by the four largest Thailand-based airlines: Thai Airways International, Thai AirAsia, Bangkok Airways, and Nok Air.

1.2 Aviation Activity in Thailand 1.2.1 Historical Air Passenger Movements Air passenger activity at commercial airports in Thailand1 grew at an average annual rate of 4.4% from 2005 to 2010. Growth has been strong during several of the years in this period, but has varied significantly due to natural disasters and political disruptions in the country. Despite the disruptions, Thailand still experienced high compound average annual growth rates over the past several years.

1 Includes the airports managed by Airports of Thailand PCL (AOT) and the Thai Department of Civil Aviation (DCA) which, together, represent nearly all commercial airports in Thailand. A few small commercial airports are operated by the private sector.

77 The largest share of passenger traffic in Thailand is carried by Thai Airways International. The second greatest number of passengers is served by Thai AirAsia, which is the only LCC that serves both domestic and international destinations from Suvarnabhumi International Airport. Thai AirAsia and Nok Air operate as LCCs on domestic routes in the country. Since the start of LCC operations in the country in 2004, with the launch of Thai AirAsia, LCC operations at Thai airports have created significant changes to the market including reduced airfares and increased affordability of air travel in the country. Between 2006 and 2010, the share of passengers served by Thai AirAsia at AOT airports increased from 7.9% to 12.7%. The overall share of LCCs at the airports increased from 15.0% to 20.0% of total activities in the same period.

1.2.2 Domestic Scheduled Passenger Services During October 20112, Thai Airways International operated the greatest number of scheduled domestic seats at Suvarnabhumi International Airport (50.2% of total domestic seats) and nationwide (34.2%). LCC Thai AirAsia operated the second greatest number of domestic seats at Suvarnabhumi International Airport (31.4%) and nationwide (23.0%). From its base at Don Mueang International Airport, LCC Nok Air operated the third largest number of scheduled domestic seats nationwide. Thai Airways International domestic flights operated with an average of 251 seats per flight. LCCs Thai AirAsia and Nok Air operated with an average of 180 and 129 seats per flight, respectively.

1.2.3 International Scheduled Passenger Services During October 20112, Thai Airways International operated the greatest number of scheduled international seats at Suvarnabhumi International Airport and across the nation. The AirAsia Group operated the greatest number of international seats at Phuket International Airport (HKT) and Chiang Mai International Airport (CNX). Nationwide, the AirAsia Group carriers accounted for 9.7% of total international departing seats. Thai Airways International flights operated with an average of 311 seats per international departure, the AirAsia Group of carriers operated with an average of 180 seats, and all other carriers operated with an average of 226 seats.

2. Forecasts of Aviation Activity According to The Boeing Company (Boeing), passenger air travel in the Asia-Pacific region — as measured in revenue passenger kilometers (RPKs) — grew at one of the highest rates in the world during this period and is expected to experience continued strong growth rates in the coming years. Travel volumes in the Asia-Pacific region are already large, accounting for approximately 27% of global travel according to Boeing. Asia-Pacific travel volumes are anticipated by Boeing to maintain strong growth rates in the future. Air travel within the Asia-Pacific region — as measured in RPKs — is projected by Boeing to grow at a compound average annual rate of 6.9% from 2010 to 2030. Boeing expects air travel (as measured in RPKs) to, from, and within the Asia-Pacific region to grow at a compound average annual growth rate of 6.7% during the same period. Southeast Asia is one of the world’s most dynamic regions for air travel. Passenger air travel within Southeast Asia — as measured in RPKs — grew at a CAAGR of 6.9% from 1985 to 2010. Although growth rates in the Southeast Asia region slowed somewhat during the recent global economic downturn, passenger travel by air within the region is projected to grow strongly in the future, at a compound average annual rate of 7.4% from 2010 to 2030. By comparison, passenger travel within the Asia-Pacific region is forecast to grow at a compound average annual growth rate of 6.9% during the same period.

3. Growth Factors and Relationships to Air Travel Historically, air travel activity has shown a strong relationship to overall economic activity, as measured by Gross Domestic Product (GDP). Over the last four decades, world airline activity has grown at average rates per annum approximately double those of world GDP. From 1971 to 2010, world GDP grew at a CAAGR of 3.1%, while world airline RPKs grew at a CAAGR of 6.0%.

3.1 Gross Domestic Product 3.1.1 Per Capita GDP and Air Travel Activity In most areas of the world, per capita levels of GDP correlate with per capita air travel levels. Countries with high per capita levels of GDP tend to have high levels of air travel, while countries with low GDP per capita

2 Includes scheduled services at all airports in Thailand, including AOT, DCA, and private sector commercial airports during 1-7 October 2011.

78 levels tend to have lower than average levels of air travel. Countries surrounded by water or with limited competing substitutes for transport tend to have higher-than-average travel levels than other countries do. The propensity to travel in Thailand relative to the country’s per capita income levels is high relative to other countries at similar levels of GDP per capita. This is attributable, in part, to the country’s strong inbound tourism levels. Other countries, such as South Korea and Japan, which have competitive ground-based transportation systems, have lower-than-typical domestic air travel levels per capita. As Thai GDP per capita levels grow, which is expected to occur, travel demand should grow and continue to be high relative to other countries with similar levels of GDP per capita.

3.1.2 GDP Growth in Select Countries in Asia Several countries in the Asia-Pacific region had high rates of growth from 2000 to 2010 for GDP in national currency units and in current US Dollars. According to the International Monetary Fund (IMF), GDP (in national currency units) increased from 2005 to 2010 at a compound average annual growth rate of 16.6% for China, exceeding that of most other countries in the world, and Thailand’s GDP3 grew at a CAAGR of 7.3%4. China’s GDP per capita3 is projected to grow 11.7% per year from 2010 to 2015 and that of Thailand is forecast to grow at 6.6% during the same period4.

3.2 Effects of Economic Growth on Air Travel in Asia Rising wages and broadening distribution of wealth in rapidly developing countries in the Asia-Pacific region will likely result in an increasing share of the population with the ability to travel by air. Thailand’s GDP (in national currency units) grew 11.7% from 2009 to 20104. As Thailand and its neighbors have continued growing through the economic and other crises and as other Asian countries have recovered and are expecting future growth, Thai- and foreign-based carriers have the opportunity to benefit from the air travel demand spurred by regional economic growth. Currently, only a small share of the Thai population travels by air. The S-A-P Group (S-A-P) anticipates that as the economy develops and the middle class grows and becomes a larger share of the population, air travel demand will increase. Continued strong growth of GDP and per capita income, declining poverty rates and increasing disposable income is anticipated by S-A-P to generate strong demand for airline services in Asia and Thailand.

3.3 Population Growth and Urbanization Population growth rates have particularly large impacts on the large populous countries in Asia as even small percentage growth rates result in large increases in total population numbers. The population of Thailand is forecasted by the IMF to grow at a CAAGR of 0.6% from 2010 to 2015, while China’s population is forecasted to grow at a CAAGR of 0.5%. Urbanization rates can serve as an indicator of propensity to travel by air because urban dwellers have higher-than-average income levels and are located in closer proximity to airports than are non-urban dwellers. The development of existing and new urban centers is expected to create new destinations for regional travel in Asia. In 2010, the urbanization rate of Thailand was 34.0%, China’s was 47.0%, and the world’s was 50.4%. The United Nations forecasts that in 2020, the urbanization rate of Thailand will be 38.9%, China’s will be 55.0%, and world’s will be 54.4%.

3.4 Trade and Tourism International travel and tourism rates for countries in Southeast Asia have increased at strong rates from 2009 to 2010. International tourist arrivals at Thailand grew 12.6% from 2009 to 2010, while they grew at 9.4% at China. As tourists from China and other Asia countries continue to travel within the region, air travel in the region can be expected to continue to experience healthy growth. As shown in Figure 1, below, tourist arrivals in Thailand have grown over the past decade despite significant disruptions due to various causes: • In late 2002, the first case of SARS (Severe Acute Respiratory Syndrome) appeared in Asia and spread rapidly to other areas during 2003.

3 In national currency units. 4 Source: IMF, World Economic Outlook Database, April 2011.

79 • The tsunami resulting from the 2004 Indian Ocean earthquake killed an estimated 230,000 people in the region. Thailand was one of the four most affected countries and tourism declined significantly after the tsunami. • In September 2006, the Royal Thai Army staged a coup d’état against the government of Prime Minister Thaksin Shinawatra. • Political unrest in Thailand resulted in an escalation of protests and violence, causing disruptions to tourism demand during 2008 and 2009.

Figure 1 INTERNATIONAL TOURIST ARRIVALS Thailand CY1998 TO CY2010 18,000,000

16,000,000

14,000,000

12,000,000 Unrest 10,000,000 Coup Tsunami 8,000,000 SARS 6,000,000

4,000,000 International Tourist Arrivals at Thailand 2,000,000

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Thailand Department of Tourism, October 2011.

Air service is the most frequently employed mode for entry to Thailand, accounting for 77.7% of international arrivals in 2010. In 2010, 28.5% of international tourist arrivals at Thailand were nationals of ASEAN countries. 22.8% were nationals of other Asian countries, including China, which accounted for 7.0% of total international arrivals.

3.5 Other Aviation Growth Factors Over the last decade, airline price competition has increased as LCCs have grown in market share and airlines struggling with financial challenges and competition have improved efficiency and lowered travel costs. S-A-P anticipates that downward pressure on fares will continue, resulting in increasing demand. The combination of Asia’s large geographic size, the separation of many parts of Asia by bodies of water, and the general lack of competitive sea or land transport alternatives provide an ideal market for air travel. The introduction of widely available low air fares in the Asia-Pacific region has created a competitive transport substitute for ground travel for many people. S-A-P anticipates that Asia-Pacific nations, especially those in Southeast and North Asia, will continue to remove regulatory restrictions on air services, leading to increased competition and lower airfares and cargo pricing. S-A-P also anticipates that governments and the private sector will continue to make the necessary investments in airport capacity, air traffic control systems, and aircraft to foster tourism and other economic development. As a result of investments in terminal and airfield capacity and increased aviation activity demand, airports in the Asia-Pacific region have experienced strong growth rates over the past decade. According to Airports Council International, Suvarnabhumi International Airport was, in terms of passenger movements in 2010, the 17th busiest airport in the world and the fifth busiest airport in Asia.

80 3.6 Development of LCCs The success of LCCs around the world has led many traditional passenger carriers to increase their focus on increasing operating efficiencies, start their own LCC subsidiaries, and compete against the many new LCCs that have initiated operations. Based on the Boeing Company’s analysis of global scheduled airline data for October 2011, LCCs had a share of 26% of worldwide scheduled capacity. Within the Asia-Pacific region, LCC seat capacity increased 14% from 2010 to 2011. LCC seats to and from the Asia-Pacific region increased 21% during the period. Although the introduction of significant levels of LCC activity occurred later in Asia than in the US and Europe, LCC activity in Asia has grown rapidly over the past decade and continues to grow rapidly. LCCs typically have operating costs, as measured in cost per available seat kilometer (CASKs), that are substantially lower than those of full-service carriers. Although LCC revenue per available seat kilometer (RASKs) are also often lower than those of full-service carriers, as LCC activities grow their market shares and markets start to mature, LCC revenues tend to increase, as evidenced by improvements in their RASK.

3.6.1 Effects of LCC on the Asian Aviation Industry The introduction and growth of LCCs have had several effects on the Asian aviation industry: • LCC competition has encouraged established carriers to operate more efficiently, thereby driving down average airfares and stimulating demand across the entire market. • Airport operators in Malaysia and Singapore have created dedicated LCC passenger terminal facilities, which can lead to reduced airline operating costs. • The rapid growth in air travel that LCCs generate is encouraging some governments and airport operators to liberalize bilateral aviation agreements. During the first 7 days of October 2011, 53% of domestic scheduled flights in Thailand were operated by LCCs. 19% of scheduled flights from 13 other major countries in the Asia-Pacific region were operated by LCCs.

3.7 Airline Infrastructure Many airlines in Asia have plans for significant changes to their aircraft fleets. As new, higher-efficiency aircraft are integrated into an airline’s operations, long-term operating costs typically are reduced and, depending on the financial structure of the implementation, lower overall costs per passenger can result, leading to decreased average airfares and associated increases in demand.

3.8 Asian Aviation Industry Growth Prospects We believe that Southeast Asia’s domestic and international markets will enjoy strong long-term growth rates for several reasons:

• Proximity to major populations. Approximately 50% of the world’s population lives within a 2,500 nautical mile radius from Bangkok, indicating the potential size of the regional aviation market. • Location on major trade routes. Southeast Asia is well positioned between Europe and the Pacific region, as well as between North Asia and South Asia.

81 • Proximity to China. With its strong economic growth and increasingly relaxed restrictions on travel to foreign destinations, Chinese travelers should create significant air travel demand. • Location between South Asia and China. The region’s role as a destination for visitors from China (the world’s most populous country) and South Asia, which includes India (the world’s second most populous country), Pakistan (sixth), and Bangladesh (seventh) will grow in prominence as the people of these countries start to travel more frequently. • Transport substitution. As income levels increase and air transport costs decrease, we expect air transport will substitute for land and sea-based transport modes such as rail, buses, and ferries. • Liberalization of aviation agreements. Southeast Asian countries have become more liberal with their aviation agreements, both within ASEAN and with other countries. • Tourist infrastructure. The region’s well-developed tourist infrastructure will continue to attract leisure travelers. • Urbanization. The share of the population in Southeast Asian countries living in cities is generally expected to continue to increase.

3.9 Potential Constraints to Asia Aviation Industry Growth The opportunities for industry-wide aviation activity growth could be offset by several factors: • Increased fuel prices and/or unfavorable currency exchange levels could constrain aviation demand if air and other travel costs increase and travelers’ disposable income levels decrease. • Regional conflicts or scares. Civil unrest, terrorist events, or other events could constrain future activity levels. • Travel restrictions. Government restrictions on travel, by limiting the number of entry/exit visas issued or by imposing high visa costs, could limit future aviation growth. • Insufficient airport or airspace capacity. Socioeconomic or other constraints could result in delays or changes in plans by governments regarding planned infrastructure expansion. • Environmental factors. Natural and man-made environmental events, such as haze, volcanic ash, and natural disasters, could impact future activity levels. • Infrastructure constraints at regional airports. Potential constraints to airline travel growth could arise due to limited growth of infrastructure at regional airports outside of Thailand. Within Thailand, airport infrastructure is not expected to be a constraint due to the remaining capacity still available at the new Suvarnabhumi International Airport as well as the excess capacity at the old Bangkok airport, Don Mueang.

4. Regulatory Environment 4.1 Domestic Airline Regulation Structure in Thailand Aviation in Thailand is regulated by the Department of Civil Aviation. The Department is in charge of “promoting, developing and regulating civil aviation affairs of Thailand to meet international standards and form extensive civil aviation network and services that will satisfy market demand, promote tourism as well as national economic growth and make Thailand a hub of aviation is South-East Asia.” Air service operations are approved and regulated by the department for domestic airlines operating in Thailand and international airlines serving Thailand. The administration of most domestic airports is the responsibility of the Director of the Airports of the Department of Civil Aviation. Samui, Sukhothai, and Trat Airports are administered by Bangkok Airways Company Limited. Suvarnabhumi, Don Mueang, Chiang Mai, Mae Fah Luang-Chiang Rai, Hat Yai and Phuket International Airports are under the AOT. U-Tapao Pattaya International Airport is the responsibility of the Royal Thai Navy.

4.2 International Regulations International flights into, from or over Thailand territory are subject to the current Thailand regulations relating to civil aviation. These regulations correspond in all essentials to the standards and Recommended Practices contained in Annex 9 to the Convention on International Civil Aviation. Scheduled international air services may be operated by a foreign airline into or in transit across Thailand in pursuance of the International

82 Air Services Transit Agreement, provided that the states in which the airline is registered is a contracting party to this agreement, or to an agreement between Thailand and the States in which the airline is registered.

4.3 Liberalization of the Aviation Industry Studies have shown that the liberalization of air services can lead to new and better air services, thereby increasing trade in airlines services, gains in consumer welfare and economic growth. Traffic growth subsequent to liberalization of air services agreements between countries typically averaged between 12% and 35%, significantly greater than during years preceding liberalization. In a number of situations, growth exceeded 50%. The creation of the Single European Aviation Market in 1993 led to an average annual growth rate in traffic between 1995 and 2004 that was almost double the rate of growth in the years 1990 to 1994.

4.4 ASEAN Member States and Open Skies The trend of deregulation and liberalization in Asia is expected to continue, particularly amongst countries that are part of ASEAN. Subsequent to an aviation liberalization roadmap adopted by ASEAN member states in 2004, in November 2010, the member states reaffirmed their collective commitment to building an ASEAN Single Aviation Market by 2015. The November 2010 ASEAN Multilateral Agreement on the Full Liberalization of Passenger Air Services (MAFLPAS) and its two Protocols provides for further expansion of the scope of the ASEAN Multilateral Agreement on Air Services (MAAS) to include other ASEAN cities. The agreement and its protocols provides for designated airlines of a Member State to provide air services from any city with international airport in its territory to any city with international airport in the territory of the other Member States and vice-versa with full third, fourth, and fifth freedom traffic rights. Chinese government aviation officials have signed an agreement with ASEAN to build a more liberal air service framework between China and the ASEAN countries. Other developments contributing to the eventual achievement of open skies are potential similar agreements forthcoming between ASEAN and India as well as ASEAN and Korea. China, Japan, and South Korea have indicated an interest in developing a unified aviation market comprising the ten ASEAN members plus China, Japan, India and South Korea, which could lead to the creation of an East Asian-plus-India Common Market.

83 BUSINESS Overview We are the leading Thai LCC in terms of passengers carried at AOT airports, with a market share of 12.7% for the year ended September 30, 2010, according to S-A-P. Our vision is to be the lowest cost airline in every market we serve without compromising our level of service. We focus on providing high-frequency services on short-haul, point-to-point international and domestic routes. We operate from three hubs in Thailand, namely Bangkok, Phuket and Chiang Mai, and plan to open a fourth hub in Hatyai by 2013 and a fifth hub in Udon Thani by 2014. We target markets within a four-hour flight time from our various hubs, which gives us access to a population of approximately 3,153 million people in Southeast Asia, India and China as of the end of 2010. We believe that the growing population in Thailand (approximately 64 million people as of the end of 2010) provides an attractive market in which we can stimulate air travel among a population that previously could not afford to travel by air or who live in areas not serviced by other airlines. Our business model is based on that of AirAsia Berhad, which will own 45.0% of Thai AirAsia after the completion of the Combined Offering and after the Company completes the subscription of new shares in the Thai AirAsia rights offering, and with whom we have a strategic partnership. We believe our simple single-class, single type fleet configuration, point-to-point operations, high aircraft utilization, scale, distribution channels and extensive route network provide us with a cost advantage over other Thai airlines and one that compares favorably with other LCCs around the world. Our cost competitiveness is evidenced by Thai AirAsia’s cost per ASK of Baht 1.39 (4.61 U.S. cents at an exchange rate of US$1.00 = Baht 30.15) in 2010 and Baht 1.58 (4.99 U.S. cents at an exchange rate of US$1.00 = Baht 31.69) in 2011. Our low costs, low fares, strong brand and marketing and reliable service have enabled us to significantly expand our operations since we started operations in 2004. We have achieved strong growth in revenue from passenger seat sales since we started operations in 2004. Thai AirAsia’s passenger revenue increased from Baht 7,582.3 million in 2009 to Baht 10,260.3 million in 2010 and to Baht 13,007.5 million (US$410.5 million) in 2011, which represents a compounded annual growth rate (“CAGR”) of 31.0% from 2009 to 2011. Similarly, our fleet size grew from 20 aircraft as of December 31, 2009 to 22 aircraft (including one spare) as of December 31, 2011. We took delivery of two additional aircraft in January and February 2012 and we intend to expand our fleet to 48 Airbus A320 aircraft by 2016. Thai AirAsia also achieved a strong EBITDAR margin of 31.0% in 2011. Thai AirAsia’s domestic passenger services comprised 44.1% of its passenger revenue and 57.9% of its total passengers in 2011. Thai AirAsia’s international passenger services comprised 55.9% of its passenger revenue and 42.1% of its total passengers in 2011. We have been able to achieve our success despite an extraordinarily difficult period for the airline industry caused by, among other factors, the adverse effects of the global economic crisis which started in 2007, terrorist attacks, and rising fuel prices and insurance premiums. Our success is also notable given that, since we started operations in 2004, we have competed against strong incumbent operators, some of whom have significantly greater financial resources.

Our Competitive Strengths We operate in one of the largest and fastest growing aviation markets in the world Thailand is a large aviation market with approximately 64 million passenger movements in 2010. The Thai aviation market is further supported by a large domestic market with a 2010 GDP of US$319 billion and 16 million annual tourist arrivals in 2010. Thailand’s aviation market also benefits from its location in Southeast Asia, which has a collective GDP of approximately US$2 trillion and a population of approximately 600 million as of the end of 2010. Thai AirAsia operates in one of the world’s fastest growing air travel regions by passenger volume, according to S-A-P. Southeast Asia had the world’s second fastest passenger growth rate by RPK at 6.9% per annum from 1985 to 2010, behind only China. In addition, Southeast Asia is estimated to continue to be among the fastest growing aviation markets in the world at a CAGR of 7.4% from 2010 to 2030, along with South Asia and China. Air passenger activity at commercial airports in Thailand alone grew by 4.4% per annum from 2005 to 2010. Air travel in Thailand is supported by a number of factors including the country’s GDP growth, per capita income growth, tourist arrivals, topography and liberalizing air travel market. Historically, air traffic growth is correlated with GDP growth and Thailand’s GDP is expected to continue to grow. Thailand’s GDP grew at a CAGR of 7.3% from 2005 to 2010 and is expected to grow at a CAGR of 6.6% from 2010 to 2015, according to

84 S-A-P. Per capita income also has an effect on air travel and suggests potential for growth in Thailand. In 2010, Thailand’s total RPK per capita stood at 895, while Singapore had much higher RPK per capita of 16,975. Furthermore, we expect the significant LCC penetration in Thailand (51.8% of domestic penetration from October 1 to October 7, 2010) will continue to stimulate demand. S-A-P expects international passengers to grow as they have in the past with a CAGR of 4.1% from 2005 to 2010, showing resilience despite extraneous shocks such as SARS in 2002, a tsunami in 2004 and political unrest and the financial crisis in 2008. Finally, given Thailand’s expansive topography lacks an effective road and rail system between many destinations and separation from most international destinations by sea, air transport is expected to capture increased travel demand.

We have successfully established a competitive cost structure and are well positioned to expand margins further Thai AirAsia is able to operate with a competitive cost structure by minimizing costs and maximizing utilization. Thai AirAsia’s total costs per ASK were 4.51 US cents, 4.61 US cents and 4.99 US cents in 2009, 2010 and 2011, respectively. Thai AirAsia minimizes costs through numerous ways, including: • Modern, fuel efficient single aircraft type fleet. In August 2010, Thai AirAsia completed is re-fleeting from 148-seat Boeing 737-300 aircraft to 180-seat Airbus A320 aircraft. The younger fleet helps to minimize maintenance expenses and leads to higher fuel efficiency while the single aircraft type results in increased cost savings as maintenance is simplified, spare part inventory requirements are reduced, scheduling is more efficient and training costs are lower. • Low cost internet ticket sales. In 2011, 75% of Thai AirAsia’s tickets were sold through low cost distribution channels such as AirAsia’s website. • High aircraft utilization and efficient operations. Thai AirAsia’s aircraft were operated at an average of 11.5 block hours a day and its average turnaround time was approximately 30 minutes in 2011. Thai AirAsia optimizes aircraft utilization with simple point-to-point operations, a single fleet type and fast turnaround times. Thai AirAsia also provides incentives for pilots to conserve fuel and operate aircraft more efficiently. In addition, Thai AirAsia has improved margins by optimizing high margin ancillary income. Thai AirAsia can operate profitably with low base fares because of high load factors that drive passenger volume, which on

85 average generated Baht 383 of ancillary income per passenger in 2011. Thai AirAsia generates ancillary income from a number of sources, including baggage fees, convenience fees, seat selection fees, in-flight meals, and merchandise. Ancillary income has very little incremental cost and as a result generates higher margins than passenger revenues.

Continue to grow the LCC business To continue growing the LCC business in Thailand, Thai AirAsia plans to: • Stimulate growth in Thailand’s air travel market. Thai AirAsia intends to continue stimulating growth in Thailand’s air travel market by tapping into Thailand’s growing population, strong tourism dynamics, and geographic configuration. Thai AirAsia intends to continually offer fares that are, on average, substantially lower than the published fares of its full-service competitors, and competitively priced relative to the published fares of its low-cost competitors and alternate modes of transport. Thai AirAsia also intends to offer tickets at promotional prices to generate interest in new or immature markets.

86 • Expand route network. Thai AirAsia intends to expand its route network by using its hubs in Thailand as platforms to operate high-volume, short-haul routes to cities within a four-hour flight time. Opening hubs closer to the north and south of Thailand allows Thai AirAsia to tap into potential markets in Southern China and Eastern India, respectively. Thai AirAsia also focuses on routes that are under-served or not served by other airlines, including routes that bypass Bangkok. Thai AirAsia continually assesses potential routes based on a clear set of criteria that include, amongst others, airport and runway infrastructure, minimum accessible population and existing competition. • Increase flight frequencies. Thai AirAsia intends to increase flight frequencies in established markets as well as markets with expected high growth potential. Thai AirAsia continuously monitors its existing route network and an increase in-flight frequency is generally considered for routes where the load factor is consistently higher than 80% for a certain period of time. • Increase aircraft fleet and open new hubs. To support the growing demand for LCC business, Thai AirAsia plans to procure 24 additional aircraft over the next five years and open additional hubs to create new routes to support passenger demand.

Maximize profitability To maximize profitability, Thai AirAsia plans to: • Maximize route profitability. Thai AirAsia intends to develop and optimize revenue streams by focusing on route profitability through the use of a revenue management system. Thai AirAsia maximizes route profitability by developing a portfolio of routes which have the potential to deliver consistently high passenger load factors at attractive yields. Thai AirAsia continually reevaluates its route network to increase frequencies in profitable routes and eliminate unprofitable ones. In addition, Thai AirAsia employs a revenue management system that allows Thai AirAsia to maximize its revenue from passenger seat sales while still offering fares that are, on average, lower than those of its competitors on the same routes. • Maximize existing and introduce new streams of ancillary income. Thai AirAsia currently generates ancillary income through fees including, but not limited to, baggage handling fees, excess baggage fees, seat selection fees, and in-flight sales of meals and beverages. In 2011, ancillary services revenue per passenger increased 29.5% to Baht 383 compared to Baht 296 in 2010. Thai AirAsia intends to expand its ancillary revenue base by restructuring fees relating to existing ancillary services, such as baggage handling fee rates which were revised in 2009. • Improve operating efficiency. Thai AirAsia intends to continue improving operating efficiency to minimize operating costs. Measures include maintaining a relatively young average fleet age which translates into higher fuel efficiency, maximizing aircraft utilization by decreasing aircraft turnaround time and maximizing on-time performance. This results in reduction of cost per ASK (non-fuel). Furthermore, Thai AirAsia has a policy that pilots are to save fuel on flights by cruising at optimal speeds to consume the least amount of fuel for a given distance. Finally, Thai AirAsia also minimizes operating costs by offering its lowest fares through the Internet to encourage travelers to make Internet bookings, by employing a full ticketless system, which saves administrative costs and related expenses, and by using the bargaining power of the AirAsia Group to negotiate for lower charges, including charges relating to aircraft lease, fuel, fuel hedging and maintenance services.

Continue to strengthen the AirAsia brand To continue strengthening AirAsia’s brand equity, Thai AirAsia plans to: • Invest in and enhance AirAsia’s brand. Thai AirAsia intends to generate publicity and conduct marketing and public relations activities to maintain a high level of brand awareness. Thai AirAsia also intends to continue developing the AirAsia brand and brand awareness in the country, as well as the new markets it intends to serve, by using its traditional marketing channels and social media and digital networks on a more frequent basis. Finally, Thai AirAsia intends to continue developing a strong relationship with the other members of the AirAsia Group for business partnership and brand management. • Focus on customer service. Thai AirAsia intends to emphasize high-quality, friendly and personal service, despite charging low fares and employing an LCC model. As part of its efforts to attract business passengers, Thai AirAsia introduced a “hot seat” service, where passengers may choose seats at emergency exit rows (which have more legroom) or at the first five rows of the aircraft. In order to provide quality services, Thai AirAsia also selects and trains employees to provide services consistent

87 with Thai AirAsia’s goals. Lastly, Thai AirAsia is also committed to improving the quality of its services through initiatives to speed up reservations and check-in through the introduction of new technology, improving baggage handling services and providing rapid and effective responses to guest feedback. • Maintain high safety standards. Thai AirAsia complies with the highest international aviation safety standards and practices and keeps its operations simple and transparent. Thai AirAsia maintains high safety standards to enable it to procure favorable rates on insurance policies. It is also Thai AirAsia’s policy to maintain a low average fleet age to minimize the possibility of mechanical malfunctions.

Our Relationship with AirAsia Berhad We began as a joint venture within the AirAsia Group, which also has LCC operations in Malaysia through AirAsia Berhad (short-haul) and AirAsia X Sdn Bhd (long-haul), in Indonesia through Indonesia AirAsia and in the Philippines through AirAsia Inc. We also expect the AirAsia Group to commence operations in Japan through AirAsia Japan Ltd. AirAsia Berhad owns, through AirAsia Investment, a 49.0% equity interest in Thai AirAsia, which will decrease to 45.0% after we subscribe for new shares in Thai AirAsia using the proceeds of the Combined Offering. Effective May 4, 2012, we treated Thai AirAsia as a subsidiary instead of a joint venture. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of Accounting — Accounting for Investment in Joint Venture” for further information. As part of the AirAsia Group, we benefit from economies of scale because AirAsia Berhad procures various items that we require, including aircraft, fuel, fuel hedging and maintenance services on a group basis. We also benefit from sharing various information technology, including the AirAsia website for Internet sales, reservation system software, revenue management software and flight management software. These arrangements are formalized in various agreements that we have signed with various AirAsia Group members. See “— Operations” and “Related Party Transactions” for further details.

Our Scheduled Passenger Services We provide scheduled passenger air travel services aimed at price-sensitive business and leisure air travel passengers who are willing to forego complimentary meals and airport lounges in exchange for fares that are lower than those offered by traditional full-service airlines. Our passengers can purchase one or more of our ancillary services according to their needs. In 2011, we flew approximately 6.9 million passengers, 57.9% of which were passengers on routes within Thailand, and 42.1% of which were passengers on our international routes.

88 The following table presents Thai AirAsia’s operating information for the periods indicated.

Three Months Ended Year Ended December 31, March 31, 2009 2010 2011 2011 2012 Capacity (million seats) ...... 6.6 7.3 8.6 2.2 2.5 Passengers carried (million) ...... 5.0 5.7 6.9 1.8 2.1 International (million) ...... 2.1 2.4 2.9 0.8 0.8 Domestic (million) ...... 2.9 3.3 4.0 1.1 1.3 Seat load factor (%)(1) ...... 76 78 80 84 87 International (%) ...... 73 77 79 84 83 Domestic (%) ...... 78 79 81 85 89 ASK (million)(2) ...... 6,511 7,605 9,199 2,261 2,540 International (million) ...... 4,040 4,680 5,696 1,372 1,501 Domestic (million) ...... 2,470 2,925 3,502 889 1,040 RPK (million)(3) ...... 4,921 5,923 7,389 1,906 2,174 International (million) ...... 2,974 3,600 4,539 1,144 1,238 Domestic (million) ...... 1,947 2,323 2,851 763 936 Average fare(4) (Baht) ...... 1,520 1,791 1,849 1,850 1,778 Revenue per ASK(5) (RASK): (Baht) ...... 1.43 1.59 1.76 1.84 1.92 (US cent)(8) ...... 4.27 5.28 5.54 5.68 6.21 Cost per ASK(6) (CASK): (Baht) ...... 1.51 1.39 1.58 1.50 1.71 (US cent)(8) ...... 4.51 4.61 4.99 4.63 5.54 Cost per ASK (non-fuel)(7): (Baht) ...... 0.99 0.87 0.89 0.86 0.97 (US cent)(8) ...... 2.96 2.87 2.80 2.66 3.16 Number of aircraft at period end ...... 20 19 22 20 24 Boeing 737-300 ...... 80000 Airbus A320 ...... 12 19 22 20 24 Average number of operating aircraft(9) ...... 15.6 18.0 19.4 19.0 22.7 Number of stages flown ...... 39,388 41,823 47,579 11,971 13,662 International ...... 16,612 17,577 20,251 4,989 5,440 Domestic ...... 22,776 24,246 27,328 6,982 8,222 Average stage length (kilometers)(10) ...... 979 1,032 1,074 1,049 1,033 Aircraft utilization (block hours per day)(11) ...... 9.4 9.9 11.5 11.7 11.5 Ancillary services revenue(12) (Baht in millions) ...... 893.0 1,686.7 2,627.2 660.8 753.6 Ancillary services revenue per passenger (Baht) ...... 179 296 383 364 354 Fuel consumed (barrels) ...... 1,217,727 1,346,476 1,600,942 399,816 457,426 Average fuel price(13) (US$ per barrel) ...... 68.0 88.3 124.0 111.2 127.3 On time performance (%)(14) ...... 89 88 84 76 72

89 (12) Comprises revenues relating to baggage handling fees, excess baggage fees, seat selection fees, in-flight sales of meals and beverages, convenience fees, freight, in-flight sales of merchandise and cancellation and documentation fees. (13) Calculated as average fuel price of Jet kerosene for the period (MOPS price). (14) A flight is deemed “on time” if the actual departure time is no more than 15 minutes of the scheduled departure time.

Our Route Network and Schedules Our route network covers a total of 25 cities across eight countries in Asia. As of December 31, 2011, we had a route network covering 14 international destinations and 11 domestic destinations with 18 international routes and 17 domestic routes*. The map below shows our international and domestic route network as of December 31, 2011.

We focus on short-haul routes to airports in and around major population centers and travel destinations, typically operating within radius of up to 3,500 kilometers and a flight duration of up to four hours from our hubs. Within the Thai AirAsia route network, we offer frequent point-to-point services, without connections, thereby freeing every flight to depart when it is ready, rather than being delayed when inbound flights carrying connecting passengers are late. However, we provide on a limited basis connections to select destinations flown

* Bangkok-Phuket and return (using aircraft from our Bangkok hub) and Phuket-Bangkok and return (using aircraft from our Phuket hub) are counted as two routes, and Bangkok-Chiang Mai and return (using aircraft from our Bangkok hub) and Chiang Mai-Bangkok and return (using aircraft from our Chiang Mai hub) are counted as two routes.

90 by other members of the AirAsia Group, such as AirAsia X’s mid- and long-haul routes. We do not schedule flights that result in our aircraft being parked at airports (other than our hub airports) overnight. This enables us to save on costs because we do not need to base engineering staff (or contract with a service provider) at these airports to perform maintenance checks or keep spare parts outside our hub airports and we do not have to pay extra allowances or accommodation costs for the pilots and cabin crew to stay overnight at a non-hub destination. In addition, we are the sole airline currently flying non-stop on the Chiang Mai — Hatyai, Phuket — Bali, Phuket — Ubon Ratchathani and Phuket — Udon Thani routes. We are part of the wider AirAsia Group that has short-haul LCC operations based in Malaysia, Indonesia and the Philippines and long-haul LCC operations based in Kuala Lumpur, Malaysia. As a result, we benefit from the feed that other members of the AirAsia Group provide when their passengers travel across our respective networks by capturing passengers that we may not otherwise have captured. The table below shows the number of our domestic and international flights for the periods indicated.

Year Ended December 31, Number of Flights: 2009 2010 2011 Flights % Flights % Flights % International ...... 16,612 42.2 17,577 42.0 20,251 42.6 Domestic ...... 22,776 57.8 24,246 58.0 27,328 57.4 Total ...... 39,388 100.0 41,823 100.0 47,579 100.0

An airline must obtain traffic rights to operate domestic and international passenger services and must obtain time slots to gain access to airports. Time slots correspond to the capacity of an airport’s facilities and the ability of a carrier to land at, or take off from, an airport at a specified time and date. See “Regulation of the Airline Industry in Thailand” for further details. We have traffic rights to all the routes that we currently operate, as well as the routes for which we have commenced selling seats as of the date of this Offering Memorandum. Traffic rights in any jurisdiction granted to airlines may be withdrawn by the relevant government. The availability of landing and departure slots (particularly in China) may affect our ability to increase frequencies to existing destinations and our proposed new routes. We require the approval of the Ministry of Transport to commence new domestic routes, which we seek through the DCA. In addition, to increase frequencies to existing domestic routes, we need to obtain a permit from the DCA. As for international routes, we need to apply to the DCA to be designated as a Thai airline under the relevant bilateral agreement between the Thai government and the government of the foreign countries to which we propose to fly before seeking the approval of the relevant regulatory in such a foreign country. In addition, the Bali Concord II declaration endorsed by ASEAN member countries aims to establish a fully integrated ASEAN community, with air travel and tourism one of the stated priorities. Consistent with the Bali Concord II, the ASEAN Multilateral Agreement on Air Services envisages that these countries will enter into implementing protocols with each other, to be effective by 2015, to implement “open-skies” arrangements covering all flights between all ASEAN capital cities. Thailand has signed “open-skies” treaties with the following countries that we serve: Singapore, China (including Macau and Hong Kong), Vietnam, Malaysia, Myanmar and Sri Lanka. When considering adding a new route to our network, we consider factors such as potential load factors, the population density and tourism industry at the point of departure and destination, current and potential competition, airport fees, traffic rights and distance. This process of considering new routes typically takes three months and new routes are approved by Thai AirAsia’s board of directors as part of their approval of Thai AirAsia’s budget. If a new route is not profitable after a trial period of between six to eight months, we either lower the frequency of the route or cancel the route. We currently operate out of three domestic hubs in Thailand, namely Suvarnabhumi International Airport in Bangkok, Phuket International Airport in Phuket and Chiang Mai International Airport in Chiang Mai. We have plans to create a new hub at Hatyai International Airport in Songkla by 2013 and at Udon Thani Airport in Udon Thani by 2014.

Bangkok Our primary hub is at Suvarnabhumi International Airport, which is located in the sub-district of Bang Phli in Samut Prakan Province approximately 25 kilometers east of Bangkok, and is the largest and busiest airport in Thailand, based on the number of aircraft movements and passenger volume. Suvarnabhumi International Airport comprises one passenger terminal with seven concourses. We have received a request from the Airports of

91 Thailand Public Company Limited to move a portion or all of our operations in Bangkok to the Don Muang Airport. We are evaluating such request but have not made any decision. Set forth below is a route map showing our point-to-point network from our hub at Suvarnabhumi International Airport as of December 31, 2011.

As of December 31, 2011, we had 18 operational and one spare Airbus A320 aircraft based in Bangkok and operated 259 flights per week to 10 domestic destinations and 182 flights per week (including the Bangkok- Phuket flight that flies onward to Singapore) to 14 international destinations from Suvarnabhumi International Airport. We plan to increase the number of domestic flights to 336 flights per week and increase the number of international flights to 229 flights per week, which includes flights to new destinations in India (Chennai), by the end of 2012.

92 As of December 31, 2011, a summary of our current flight schedule and flight schedule for routes on which we plan to increase or decrease frequency or start or terminate operations by the end of 2012 from Bangkok, subject to the receipt of applicable approvals, is set forth below.

Planned Flight Schedule Flight Schedule as of December 31, 2011 as of December 31, 2011 Expected Date of Expected Number of Number of Commencement(1), New/(Terminated) Date Service Roundtrip Flights Increase or Roundtrip Flights per From Bangkok to: Commenced per Week Termination Week International: Singapore ...... February 16, 2004 28 February 2012/ 14 September 2012(2) Phuket and onward to October 31, 2007 7 — — Singapore(3) ...... Kuala Lumpur ...... June 16, 2004 21 — — Penang ...... June 16, 2004 7 — — Macau ...... July 5, 2004 28 November 2012 14 Hanoi ...... October 17, 2005 7 — — Phnom Penh ...... November 1, 2005 7 — — Yangon ...... August 16, 2006 14 July 2012 (7) Shenzhen ...... July 15, 2007 7 — — Ho Chi Minh City ...... April 4, 2008 14 — — Hong Kong ...... October 26, 2008 14 — — Bali ...... January 20, 2009 7 — — Guangzhou ...... January 20, 2009 7 — — Kolkata ...... December 1, 2010 7 — — New Delhi ...... December 1, 2010 7 March 2012 (7) Colombo ...... — — March 2012 7(8) Chennai ...... — — March 2012 5 Chongqing ...... — — March 2012 7 Shantou ...... — — October 2012 7 Chengdu ...... — — November 2012 7 Sub-total ...... 182 47 Domestic: Phuket ...... February 3, 2004 56(4) July 2012/ 14 October 2012(5) HatYai...... February 3, 2004 42 March 2012 7 Chiang Mai ...... February 3, 2004 42(6) February 2012/ 14 November 2012(7) Chiang Rai ...... March 28, 2004 21 October 2012 7 Udon Thani ...... April 7, 2004 21 — — Ubon Ratchathani ...... June 16, 2004 14 — — Narathiwat ...... February 9, 2005 7 — — Krabi ...... February 22, 2006 28 October 2012 7 Surat Thani ...... April 1, 2006 14 September 2012 7 Nakhon Si Thammarat ...... November 19, 2008 14 September 2012 7 Trang ...... — — January 2012 7 Nakhon Phanom ...... — — February 2012 7 Sub-total ...... 259 77 Total ...... 441 124

(1) Subject to change, pending receipt of relevant governmental approvals. (2) 7 additional flights per week from February 2012 and 7 additional flights per week from September 2012. (3) We do not sell tickets for Bangkok-Singapore and return on this flight, only Bangkok-Phuket, Phuket-Singapore, Singapore-Phuket and Phuket-Bangkok. (4) Includes the 7 flights per week on the Bangkok-Phuket-Singapore route (see footnote (3)), but excludes the 7 flights per week on the Phuket-Bangkok route in the table under “— Phuket” below. Total number of roundtrip Bangkok-Phuket flights amount to 63 flights per week using aircraft based in Bangkok (56 flights per week) and Phuket (7 flights per week).

93 (5) 7 additional flights per week from July 2012 and 7 additional flights per week from October 2012. (6) Excludes the 4 flights per week on the Chiang Mai-Bangkok route in the table under “— Chiang Mai” below. Total number of roundtrip Bangkok-Chiang Mai flights amount to 46 flights per week using aircraft based in Bangkok (42 flights per week) and Chiang Mai (4 flights per week). With effect from June 2012, all Chiang Mai-Bangkok flights will be operated using aircraft based in Bangkok (49 flights per week and, from November 2012, 56 flights per week). (7) 7 additional flights per week from February 2012 and 7 additional flights per week from November 2012. (8) Based on the current performance of this new route, Thai AirAsia intends to reduce the frequency at a date to be determined to 3 flights per week.

Phuket We began operations from our hub at Phuket International Airport in November 2009. Phuket International Airport is the second-largest and second-busiest airport in Thailand after Bangkok’s Suvarnabhumi International Airport, based on the number of aircraft movements and passenger volume. Phuket International Airport is located approximately 32 kilometers from downtown Phuket. Phuket International Airport comprises a single passenger terminal building that serves both international and domestic flights, from which we operate. Set forth below is a route map showing our point-to-point network from our hub at Phuket International Airport as of December 31, 2011.

As of December 31, 2011, we had two Airbus A320 aircraft based in Phuket and operated 31 flights per week to four domestic destinations (including to Bangkok) and 11 flights per week to two international destinations from Phuket International Airport.

94 As of December 31, 2011, a summary of our current flight schedule from Phuket is set forth below. We do not have any plans to increase or decrease the frequency of our current routes or to add new routes.

Flight Schedule as of December 31, 2011 Number of Date Service Roundtrip Flights From Phuket to: Commenced per Week International(1): Hong Kong ...... November 15, 2009 7 Bali ...... December 17, 2010 4 Sub-total ...... 11 Domestic: Bangkok(2) ...... November 15, 2009 7 Chiang Mai ...... December 3, 2009 14 Udon Thani ...... December 21, 2009 7 Ubon Ratchathani ...... October 12, 2010 3 Sub-total ...... 31 Total ...... 42

(1) See “— Bangkok” above for details of flights from Phuket to Singapore. (2) Excludes the 7 flights per week on the Bangkok-Phuket-Singapore route (see footnote (3) under “— Bangkok” above) and excludes the 56 flights per week on the Bangkok-Phuket route in the table under “— Bangkok” above. Total number of roundtrip Phuket-Bangkok flights amount to 63 flights per week using aircraft based in Bangkok (56 flights per week) and Phuket (7 flights per week).

Chiang Mai We began operations from our hub at Chiang Mai International Airport in January 2011. Chiang Mai International Airport is the third-largest and third-busiest airport in Thailand after Bangkok’s Suvarnabhumi International Airport and Phuket International Airport, based on the number of aircraft movements and passenger volume, and is located approximately four kilometers from downtown Chiang Mai. Chiang Mai International Airport comprises a single passenger terminal serving both international and domestic flights, from which we operate.

95 Set forth below is a route map showing our point-to-point network from our hub at Chiang Mai International Airport as of December 31, 2011.

96 As of December 31, 2011, we had one Airbus A320 aircraft based in Chiang Mai and operated 14 flights per week to Hatyai and Bangkok and seven flights per week to Singapore from Chiang Mai International Airport. We introduced flights to a new destination, Ubon Ratchathani, in November 2011. We also intend to terminate our seven flights per week to Singapore and introduce seven flights per week to Macau by the end of May 2012. As of December 31, 2011, a summary of our current flight schedule and flight schedule for routes on which we plan to increase or decrease frequency or start or terminate operations by the end of 2012 from Chiang Mai, subject to the receipt of applicable approvals, is set forth below.

Planned Flight Schedule Flight Schedule as of December 31, 2011 as of December 31, 2011 Number of Expected Date of Expected Number of Roundtrip Commencement(1), New/(Terminated) Date Service Flights per Increase or Roundtrip Flights per From Chiang Mai to: Commenced Week Termination Week International: Singapore ...... January 24, 2011 7 May 2012 (7) Macau ...... — — May2012 7 Sub-total ...... 7 — Domestic: Bangkok(2) ...... January 24, 2011 4 June 2012 (4) HatYai...... January 24, 2011 7 — — Ubon Ratchathani ...... November 16 2011 3 June 2012 4 Sub-total ...... 14 — Total ...... 21 —

(1) Subject to change, pending receipt of relevant governmental approvals. (2) Excludes the 42 flights per week on the Bangkok-Chiang Mai route in the table under “— Bangkok” above. Total number of roundtrip Chiang Mai-Bangkok flights amount to 46 flights per week using aircraft based in Bangkok (42 flights per week) and Chiang Mai (4 flights per week). With effect from June 2012, all Chiang Mai-Bangkok flights will be operated using aircraft based in Bangkok (49 flights per week and, from November 2012, 56 flights per week) (see table under “— Bangkok” above).

Planned Hub at Hatyai We plan to begin operations from our hub at Hatyai International Airport in Hatyai by 2013. Hatyai International Airport is located approximately eight kilometers from downtown Hatyai, in Songkla province. Hatyai International Airport comprises a single terminal building serving both international and domestic flights. We intend to base one Airbus A320 aircraft in Hatyai.

Planned Hub at Udon Thani We plan to begin operations from our hub at Udon Thani International Airport in Udon Thani by 2014. Udon Thani International Airport is located approximately five kilometers from downtown Udon Thani. Udon Thani International Airport comprises a single terminal building serving both international and domestic flights. We intend to base one Airbus A320 aircraft in Udon Thani.

97 AirAsia Group Network Our customers have access to the combined route network of AirAsia Berhad, Indonesia AirAsia and Thai AirAsia that covers 68 destinations in 15 countries with 82 international routes and 59 domestic routes. The map below shows the AirAsia Group’s point-to-point network as of December 31, 2011.

Our Fleet Aircraft Type We have a total of 22 Airbus A320 aircraft as of December 31, 2011, 21 of which we operate and the remaining aircraft we keep as a spare. We lease all of our aircraft from AirAsia Mauritius, a subsidiary of AirAsia Berhad. See “Related Party Transactions — Past and Ongoing Related Party Transactions — AirAsia Aircraft Lease Agreements” for a summary of the general terms. We phased out the use of our Boeing fleet in August 2010, after which we operate only Airbus A320 aircraft. We took delivery of two additional Airbus A320

98 aircraft in January and February 2012, expanding our fleet to 24. We continuously review our fleet requirements and we expect to expand our fleet by an additional three A320 aircraft in 2012, six A320 aircraft in 2013, and five A320 aircraft in each of 2014, 2015 and 2016. The Airbus A320 aircraft has a proven track record of reliability in short-haul, high frequency operations. By building a uniform fleet, costs for spare parts and training are reduced, allowing us to keep fares low. Having a uniform fleet also means that almost any aircraft may be used for any route, thereby simplifying and increasing the flexibility of our flight scheduling arrangements. As all of Thai AirAsia’s aircraft are Airbus A320s, Thai AirAsia enjoys cost savings from operating one aircraft type. Each Airbus A320 aircraft is configured, and each Boeing 737-300 aircraft that we operated until August 2010 was configured, to seat a single class in order to maximize seating capacity. Our seating configuration maximizes seating capacity by fitting 180 seats in our Airbus A320 aircraft and, until we phased out our Boeing 737-300 aircraft, 148 seats in such aircraft. The average age of our fleet as of December 31, 2011 is two years and four months. Our aircraft leases typically have a term of between nine and 12 years, with an option to renew subject to the terms of the leases. Events of default under the lease agreements include, but are not limited to, our failure to make rent payments or to comply with our obligations under the lease, the insolvency of Thai AirAsia and a cross default of financial indebtedness over US$5 million. See “Related Party Transactions — Past and Ongoing Related Party Transactions — AirAsia Aircraft Lease Agreements” for details. We keep an operational spare aircraft in case of aircraft related issues, such as unscheduled maintenance. When an aircraft falls behind schedule, it often remains behind schedule during the remainder of that day. See “Risk Factors — Risks Relating to the Company and Thai AirAsia — We rely on a high daily aircraft utilization rate to optimize our revenues, making us especially vulnerable to delays”. For the current size of our operations, we believe that we have adequate spare aircraft to meet our needs.

Aircraft Utilization We plan our routes and operations for an average aircraft utilization of above 12.0 block hours per day, as compared to the 8.0 block hours per day utilization typical of full-service airlines. In 2011, our average aircraft utilization was 11.5 block hours per day. The increased aircraft utilization is achieved through a longer working day by commencing daily operations at 6:15 a.m. and ceasing at 4:55 am the following day, as well as shorter turnaround times of approximately 25 to 30 minutes, compared to the approximately 45- to 120-minute turnaround times typical of full-service airlines. To provide added flexibility to our fleet management, we have obtained permission from the DCA of Thailand to use aircraft from AirAsia Berhad and Indonesia AirAsia on a short-term wet lease basis in case of maintenance delays or seasonal increases in demand.

Aircraft Procurement We analyze our aircraft procurement needs independently from the other members of the AirAsia Group. However, AirAsia Berhad consolidates the respective requirements of each member of the AirAsia Group and places a consolidated order for the required number of aircraft from the aircraft manufacturer. This enables us to benefit from bulk discounts off the official list price of such aircraft and priority of delivery dates over some non-AirAsia Group airlines. In June 2011, AirAsia Berhad announced that it had placed an order for 200 Airbus A320neo aircraft to be powered by CFM International’s LEAP-X engines.

Pricing and Revenue Management We have a multiple fare structure comprising up to 12 tiers of fares, or “fare buckets” per route. In determining how many seats to allocate to each fare bucket for each flight and each departure date, we consider factors including market demand, competition, historical performance and forecasts. Generally, our policy is not to lower our fares once they have been published, and as there are a limited number of seats in the lower fare buckets, the earlier a passenger books a seat, the more likely it is that the passenger will be able to purchase a seat at the lowest published fare. We typically sell only the highest fare bucket close to the day of travel, when time sensitivity outweighs price sensitivity. Such seats would typically be sold at an average discount of approximately 10% of the published domestic fares offered by full-service airlines. Revenues from these “last minute” fares help maintain our revenue from passenger seat sales. This pricing structure offers our guests savings depending on which distribution channel they use to book, how far in advance a particular booking is made and the level of demand for the seats. All of our fares are priced based on one-way travel. Seats must be purchased at the time of reservation and are non-refundable except for

99 the portion relating to any applicable airport tax. However, the time of travel (other than in the case of promotional fares) can be changed up to 48 hours prior to departure subject to an administration fee and the payment of the fare difference. We also allow our GoCorporate customers to change their flight schedules up to two hours prior to departure subject to an administration fee (other than GoCorporate customers on flexible fares) and the payment of the fare difference. The DCA prescribes a fare ceiling on domestic flights of Baht 30 per kilometer per seat. We are not subject to any fare ceilings on our international flights. We use the same revenue management system that is used by AirAsia Berhad, which facilitates daily monitoring and inventory allocation decisions by making recommendations on pricing adjustments to be made on the basis of the lowest price consistent with demand and profitable operations. In addition, we hold bi-weekly meetings to analyze booking trends, address routes that require adjustments and discuss promotions. While we seek to maximize our revenue, our low-cost structure enables us to offer fares that are on average lower than our full-service competitors on the same routes. Moreover, we periodically offer promotional fares that are more discounted than our already low fares to promote less popular routes. See “— Advertising and Promotions” for further details.

Distribution and Sales We have three principal distribution channels, the Internet, direct sales through our sales offices and call centers, indirect sales. All travel with us is through electronic tickets, thereby reducing costs associated with printing, mailing and modifying tickets, as well as re-issuing lost or stolen tickets. The following chart shows the proportion of our total bookings sold through each of our major distribution channels for the periods indicated.

Year Ended December 31, 2009 2010 2011 (% of passengers) Internet sales ...... 72 69 75 Direct sales ...... 26 27 20 Indirect sales ...... 2 4 5 Total ...... 100 100 100

Internet Sales We rely on the AirAsia Group website, www.airasia.com, for our Internet sales. Online bookings are paid for by credit card or direct debit, reducing credit risk and accounting processes. This also improves our operating cash flows as all revenues from Internet sales (including airport taxes and fuel surcharges) are received directly by our acquiring bank for crediting to our account. To encourage Internet reservations, our lowest fares (which include our promotional fares) are available only through the AirAsia Group website. Use of the Internet to make flight reservations has increased from 72% of our total passengers in 2009 to 75% in 2011, and we expect the trend to continue in the future. Online bookings lower our costs by reducing operating costs. Consequently, the Internet is our lowest-cost distribution channel. Through the AirAsia Group website, we also offer our guests additional services and products which generate ancillary revenue. See “— Ancillary Services” for a description of such services and products. We use a common reservations and ticketing platform with the wider AirAsia Group. As a result, customers can purchase tickets not just to destinations that we fly to, but also to any destination flown to by any of the other members of the AirAsia Group. All sales using the www.airasia.com website result in the direct payment to Thai AirAsia for flights that it operates.

Direct Sales Direct sales are made at sales offices, ticket counters, airport counters, call centers and for group bookings. Our direct sales comprised 26% of our total passengers in 2009, 27% in 2010 and 20% in 2011.

Sales Offices, Ticket Counters and Airport Counters We operate sales offices in three locations (one in each of Bangkok, Phuket and Chiang Mai) and small ticket counters in eight locations (five in Bangkok, and one in each of Phuket, Chiang Mai and Hatyai). We also sell tickets at our ticket counters located in the airports which we serve. These sales offices, ticket counters and airport counters allow guests to walk in to make or change reservations and settle payments either in cash or by using a credit or debit card.

100 Call Centers We offer our customers the ability to call a telephone number in Thailand 13 hours a day from 8:00 am to 9:00 pm to reserve their seats on one of our flights. Guests may settle payment of their call center bookings by using a credit or debit card, or by cash at any branch of Siam Commercial Bank, Bangkok Bank and KBank and counter services of 7-Eleven stores throughout Thailand.

Group Bookings We offer special fares to our customers for group passenger bookings.

Indirect Sales Our indirect sales comprised 2% of our total passengers in 2009, 4% in 2010 and 5% in 2011.

Third Party Travel Agents We maintained a network of 248 “sky agents” and 108 “BSP agents” as of December 31, 2011. Our “sky agents” are travel agents who have registered with us and maintain a prepaid account with us from which bookings made by their guests are debited. “BSP agents” are agents who are members of, and have credit limits with, IATA. IATA transfers amounts due to us weekly arising from bookings made by such BSP agents. Both types of agents are required to book tickets from the AirAsia website. The services that travel agents provide are particularly useful for travelers who do not have Internet access and/or credit cards, especially in rural remote areas of Thailand or in other developing countries.

GoCorporate Bookings We offer our GoCorporate package to business travelers who maintain corporate accounts with us, providing them with a hassle-free way of booking online with a corporate discount. We maintained a network of 132 corporate accounts as of December 31, 2011. Our GoCorporate package allows customers to change their flight up to two hours before the flights and to check-in complimentary baggage of up to 15 kilograms. Our GoCorporate bookings comprised 1% of our total passengers in 2009, 2010 and 2011.

Ancillary Services We provide various ancillary services and generate additional revenue through the provision of additional products and services connected to our core air passenger service, including add-on services, in-flight services and other products and services. Ancillary services have comprised an increasing portion of our revenue in recent years, accounting for 9.6%, 13.9% and 16.3% of our revenues in 2009, 2010 and 2011, respectively.

Add-on Services and Fees Through the AirAsia Group website, we offer our passengers a range of add-on products and services such as: • Check-in luggage: charges are based on the weight of the luggage that passengers are checking in and on whether the check-in luggage allowance is pre-booked at the time of reservation or purchased at the airport. Our current pre-booked checked bag fees for our flights start from Baht 370 for international flights and Baht 270 for domestic flights for 15 kilograms to Baht 630 for international flights and Baht 500 for domestic flights for 30 kilograms per flight sector. Checked bag fees for international flights are currently Baht 530 for international flights and Baht 480 for domestic flights for 15 kilograms if paid at check-in, with excess luggage fees of Baht 450 for international flights and Baht 350 for domestic flights per kilogram in excess thereof; • Seat selection: passengers can select their preferred seats on their flights by paying a fee. We began providing this service in 2009 and currently charge Baht 350 for the selection of each “Hot Seat” (typically seats at the emergency exit rows and the first five rows of the aircraft) and Baht 65 for any other seat. Our seat selection service replaced our express boarding service that was in place in 2008 at a fee of Baht 200 for international flights and Baht 100 for domestic flights; • Sports equipment fee: entitles our passengers to bring sports equipment such as their golf clubs, dive bag, surfboards or any other item of oversized sports equipment up to 20 kilograms in addition to their check-in luggage for a fee of Baht 750 for international and domestic flights;

101 • Bookings and booking changes: passengers making their bookings through our call center, sales offices, airport sales counters and group desks and Thai AirAsia Tesco booths are currently charged a per passenger booking service fee of Baht 210. Passengers may also make rebookings, name changes and itinerary changes more than 48 hours before their estimated time of departure, for which we charge processing fees.; and • Convenience fees: In 2009, we began charging passengers paying for their tickets by credit cards a convenience fee, currently Baht 50 per passenger for each way. Prior to June 25, 2009, we also charged administration fees of Baht 225 per seat for international flights and Baht 50 per seat for domestic flights and insurance surcharges to partially cover our insurance costs amounting to Baht 50 per seat for international and domestic flights.

In-Flight Services Our in-flight services include in-flight sale of beverages, food and merchandise. Food that is pre-booked at the time of ticket purchase is priced at a 15% discount to the prices charged when purchased during the flight and comes bundled with a complimentary cup of mineral water. For flights shorter than 75 minutes, hot meals can only be pre-booked online and are not available for in-flight purchase to ensure the quality of our on-board service. In addition, we offer merchandise including souvenirs (such as airplane models and graphic t-shirts), travel gadgets (such as phone chargers and earphones), seasonal or festive items and travel essentials (such as luggage locks and pillow and comforter kits). From December 2010, through King Power International, we also offer duty free products which can be purchased on our international flights using cash and credit cards.

AirAsia KBank Credit Card On December 2, 2009, we entered into a co-branded credit card agreement with KASIKORNBANK Public Company Limited (“KBank”) pursuant to which KBank agreed to issue co-branded classic and platinum credit cards to its clients bearing the AirAsia logo. We generate revenues from this partnership through receiving fees from KBank for new customers and certain fees based on KBank’s net receivables, annual fees of customers and total spending amounts of the customers. We have agreed not to terminate the agreement prior to May 28, 2012 and the agreement is scheduled to terminate on May 28, 2014. Holders of the AirAsia KBank credit card enjoy priority bookings on our promotional flights, a loyalty program which provides them with worldwide dining and hotel privileges, travel assistance and accident insurance and other privileges or discounts through marketing promotions conducted by KBank.

CIMB Savers Account On April 1, 2010, we entered into the CIMB Thai AirAsia savers program agreement with CIMB Thai Bank Public Company Limited (“CIMB Thai”) pursuant to which CIMB Thai agreed to provide co-branded online savings accounts to its clients bearing the AirAsia logo. The agreement is scheduled to terminate on March 31, 2013, subject to automatic renewals unless terminated under the terms of the agreement. Account holders can earn higher interest rates than normal savings accounts, earn cash rebates on the outstanding balances in the savers account if certain conditions are met, receive a chance to win free flights on and gift vouchers from Thai AirAsia, and enjoy no or discounted ATM fees. We generate revenues from this partnership through receiving specified amounts calculated under the terms of the agreement if the account balance of the program meets certain thresholds.

Go Insurance We offer, through Krungthai Panich Insurance Co. Ltd., travel insurance coverage to our passengers under the Go Insurance brand. Customers who use Go Insurance benefit from insurance against accidental death and dismemberment, trip cancellation, flight delay, damage to baggage and personal effects and others. We generate revenue by receiving fees for the use of the AirAsia website for such insurance sales.

Aircraft In-flight Branding We generate revenue by providing advertising space on each of our aircraft in places such as the overhead bin compartments, meal trays, inside the washrooms, on the rear of each seat as well as on the rear of each boarding pass.

102 AirAsia Go AirAsia Go is an online travel portal through which the AirAsia Group is able to offer packages which include our flights, hotels, tours, transportation options and events. We derive revenue from AirAsia Go only with respect to the ticket price that we receive for the flights that we provide as part of the travel package.

Freight We offer limited freight service on our scheduled flights, including courier and mail services. As our core business involves providing passenger air travel services, freight services are only provided if additional space is available in an aircraft.

AirAsia BIG Loyalty Program In 2011, AirAsia Berhad launched the AirAsia BIG Loyalty Program as a means of creating and retaining customer loyalty. Members of the program earn points for purchasing tickets on any flight operated by an AirAsia Group member and purchasing ancillary services such as pre-booked baggage, meals and comfort kits, seat selection and Go Insurance. Members also earn points through hotel stays, travel packages, car rentals and other spending with various partners, including AirAsia Megastore, AirAsia Go, Tune Hotels, Hotel Properties Limited, Healthway Medical Group and Budget car rentals. Points may be redeemed, either in full or through a cash top-up, for air travel on flights operated by an AirAsia Group member, AirAsia gift vouchers, AirAsia merchandise, travel packages by AirAsia Go and hotel stays at Tune Hotels. Thai AirAsia earns revenue through redemption seating purchased by the operating company owning the AirAsia BIG Loyalty Program when members redeem their points for flights on Thai AirAsia. The number of points required to redeem a seat depends on the number of seats available on, and the destination of, the particular flight for which redemption is to be made.

Advertising and Promotions We benefit from the goodwill of the AirAsia name, which we license from AirAsia Berhad, but we also conduct marketing activities to build upon the AirAsia name in Thailand. Our logo and tagline “Now Everyone Can Fly” underscores our objective to be a people’s airline. By providing low fares that are on average often substantially less than published fares offered by full-service airlines, we stimulate demand and create new markets. Our brand name was primarily established through a combination of tactical advertising, effective public relations and promotions by AirAsia Berhad. We have an agreement with AirAsia Berhad, whereby AirAsia Berhad provides certain marketing services to us in exchange for a fee. See “Related Party Transactions — Past and Ongoing Related Party Transactions — Booking Fee Agreement” for a summary. We allocate up to 2% of our total budgeted revenue for our marketing campaigns and activities every year. To ensure effective utilization of our marketing budget, we are selective in determining the advertising medium and usually use print, supported by radio and billboards to advertise our promotional fares. We regularly offer promotional fares that are more discounted than our already low fares. For example, we typically conduct two scheduled promotions a year, timed to launch ticket sales for flights during each of the two aviation industry- mandated flying seasons, during which the airfare component may be as low as Baht zero. In addition to our scheduled promotions, we may also conduct other promotions such as the “Fabulous Fly-Day” promotion launched in October 2010, which offers promotional rates on Fridays for our less popular routes to stimulate short term demand. We also use television advertising occasionally for promotional and theme advertising. For example, we launched our “100% Airbus 100% Happiness” television campaign in 2010 to publicize our new Airbus fleet. We participate, and plan to continue participating, in community and charity projects, such as giving free plane rides to children with hearing disabilities in 2010 and to youth activists visiting a woman’s prison in Bangkok in 2011.

Customer Service We are committed to providing high quality customer service by providing our guests with a safe, low-cost, valuable, reliable and friendly service. In line with our no-frills, low-cost business model, we eliminate services that we believe our guests view as non-essential, including complimentary meals and airport lounges. As an alternative, a number of value-added service enhancements are available on a “user pays” basis. Such service enhancements include sales of in-flight food, beverages and merchandise. We continuously monitor our on-time performance. Our average on-time performance (which measures the proportion of flights departing within 15 minutes of the scheduled departure time) in 2011 was 84%.

103 Our ground support service has a system in place to inform guests of delayed or cancelled flights by SMS or telephone. Guests that cannot be contacted through these means are notified at the check-in counter. To provide the highest quality customer service, we strive to employ staff who speak English and who are outgoing, friendly and professional. Staff are selected through a rigorous recruitment process, which is followed by extensive and ongoing training and performance management activities. We specifically budget for training for each customer service personnel every year to ensure staff are fully prepared to assist passengers effectively and efficiently.

Operations Safety and Security We are fully committed on all levels of operation to the safety and security of our passengers and employees. This commitment is reflected in our system of maintenance of our aircraft, extensive training given to our pilots, cabin crew and employees and the strict policies and procedures in compliance with local regulations, international standards and best practices regarding all areas of our business that are involved with the operation of our aircraft.

Safety Our aircraft are equipped with advanced and highly accurate instrument landing systems (“ILS”) that provide necessary lateral and vertical guidance to the pilot in navigating the aircraft for a precision approach. A precision approach is a descent procedure using a navigation facility aligned with a runway. The ILS in our aircraft has a height call-out feature that further assists the pilot in navigating the aircraft’s descent. In addition, our aircraft are equipped with traffic alert and collision avoidance system (“TCAS”) technology and enhanced ground proximity warning system (“EGPWS”). TCAS technology allows pilots to detect the presence of all other TCAS and transponder-equipped aircraft, as well as coordinate maneuvers between two opposing aircraft which are equipped with TCAS, thereby reducing the risk of mid-air collisions. EGPWS is a terrain awareness and alerting system which uses aircraft inputs, including geographic position, altitude, airspeed and glide scope, together with internal terrain, obstacles and airport databases to predict a potential conflict between the aircraft flight path and terrain or an obstacle. In addition, EGPWS provides alerts for excessive glide scope deviation and incorrect landing configurations, and is able to provide flight path angle indications and altitude call-outs. We have established processes to assist in the identification of potential safety issues. These include: • a reliability program that tracks the reliability of the aircraft’s system and components; • monthly review of the results of the reliability program; • technical crew and cabin safety emergency procedures training; • safety awareness program for all our staff; and • ramp safety awareness training. We have developed a quality assurance system to monitor all areas related to ground and flight operations as part of our wider quality management objectives. Our quality assurance teams oversee and monitor all aspects of our aircraft operations to ensure that industry safety standards, including DCA’s guidelines, are strictly adhered to. DCA conducts safety audits on us twice every year and regulatory authorities from other countries also regularly conduct safety audits. Since we began operations in 2004, none of our aircraft has been involved in a serious incident. See “Risk Factors — Risks Relating to the Company and Thai AirAsia — Our business, financial condition, results of operation and prospects could be materially and adversely affected in the event of an emergency, accident or incident involving any of our aircraft or any of the aircraft of any AirAsia Group company” for a discussion of the potential consequences of an accident or incident. We have implemented a flight data monitoring system (“FDM”) to reduce accident and incident rates, while optimizing costs to remain competitive. FDM is a quality assurance process, which involves the analysis of flight data on a routine basis, with the aim of promoting the early detection of situations which require, or potentially require, corrective action. We believe that the adoption of the FDM contributes to increased flight safety and operational efficiency as it enables our engineers and management to track and evaluate flight operations trends, identify risk precursors, and take the appropriate preventive and/or remedial action where necessary.

104 Security While the relevant airport operators are responsible for security screening of passengers and baggage at our domestic and international destinations, we train our staff to remain vigilant in identifying potential security breaches, as well as to handle unruly passengers. All potential employees undergo thorough screening of their background prior to being hired. We provide extensive training to ensure that our staff have appropriate skills to carry out their relevant duties as stipulated in our employee manuals. All crew and ground handling staff are required to undergo dangerous goods awareness training to be able to identify potentially dangerous goods and items that threaten the safety of the flight (these include flammable liquids and containers that are likely to explode under pressure). Following the terrorist attacks in the United States on September 11, 2001, the International Civil Aviation Organization (“ICAO”) implemented regulations and guidelines requiring airlines to adhere to certain security measures. These include: • installation of reinforced doors and review of policies and procedures on cockpit visits; • occupying of jump seats; • the removal of checked-in luggage from the aircraft when the passenger fails to board the aircraft; • review of items allowed as cabin luggage; • enhanced holding baggage surveillance; and • crew training on handling of disruptive passengers and passenger profiling. We are in compliance with all of DCA’s and the ICAO’s regulations. In addition, cockpits in all of our aircraft have reinforced, bulletproof doors.

Maintenance and Spare Parts Maintenance We provide line maintenance and light maintenance, which is maintenance below a “C” level check (conducted at 6,000-hour intervals) for all of our aircraft. Any maintenance above a “C” level check or any structural repairs is outsourced to other certified maintenance, repair and overhaul (“MRO”) service providers such as Thai Airways International and Thai Aviation Industries in Thailand, ST Aerospace in Singapore or Sepang Aircraft Engineering in Malaysia. Through the AirAsia Aircraft Lease Agreements, Thai AirAsia is able to rely on manufacturer’s warranties and product support granted to AirAsia Berhad.

Spare Parts We maintain an inventory of rotable and consumable spare parts, in all three of our hubs, with the majority of inventory found in Bangkok. AirAsia Berhad also maintains inventory in Kuala Lumpur to which we have access. AirAsia Berhad also has spare engines that we can borrow. As of December 31, 2011, we kept Baht 208.5 million (US$6.6 million) of aircraft spares parts (net book value).

Fuel Fuel is a major cost component for airlines. Thai AirAsia’s fuel costs in 2009, 2010 and 2011 were Baht 3,357.2 million, Baht 3,974.0 million and Baht 6,405.8 million (US$202.1 million), accounting for 36.0%, 39.9% and 46.6% of Thai AirAsia’s total operating costs, respectively. See “Risk Factors — Risks Relating to the Company and Thai AirAsia — Our business, financial condition, results of operation and prospects are materially and adversely affected by the cost or unavailability of sufficient quantities of fuel”. We purchase a substantial majority of our fuel from PTT and Shell Thailand. Prior to 2011, in Kuala Lumpur, Penang and Macau, AirAsia Berhad entered into supply agreements on Thai AirAsia’s behalf, for which it reimburses AirAsia Berhad at its actual cost in U.S. Dollars, so that it benefits from economies of scale. From 2011 onwards, Thai AirAsia purchases its fuel requirements in Kuala Lumpur and Penang directly, and AirAsia Berhad continues to purchase fuel on Thai AirAsia’s behalf in Macau. In Asia, fuel prices are benchmarked against MOPS. Jet kerosene prices, and therefore fuel prices, are extremely volatile and are subject to many global economic and geopolitical factors. We implement various fuel management strategies to manage the risk of rising fuel prices, including hedging. We have granted AirAsia Berhad the right and discretion to enter into hedges to manage the risk of any physical price movements of fuel in the world market. See “Related Party Transactions — Past and Ongoing Related Party Transactions — Fuel

105 Hedging Arrangements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risks — Fuel Price Risk” for details. We cannot assure you that we will be able to continue to secure new jet fuel derivative contracts on commercially reasonable terms or at all. In addition to hedging fuel prices, we have implemented the following fuel management strategies in order to reduce costs and minimize inherent risks: • Fuel policy. We control our fuel supply by uplifting as much fuel as possible within optimal limits and regulatory requirements, in destinations where fuel is least expensive, to facilitate the use of the least expensive fuel stock; • Payment upfront. Upfront payment for all purchases gives us negotiating power to obtain better pricing; • Fuel consumption policy. We attempt to minimize fuel consumption by establishing clear guidelines covering all areas of flight operations so that aircraft fuel burn rates can be maintained at a functional minimum. This includes selecting the route that is the shortest distance to fly, selecting the closest alternate airport, allowing the aircraft to reach optimum height within the shortest amount of time, determining the optimum flight level to match the engine performance versus weight as less fuel is consumed at optimum height, applying best practice flying techniques for all flight profiles by taking straight-line paths as much as possible, and decreasing the overall weight of the aircraft by reducing excess weight and, as far as possible, matching supply with demand for food and beverages, on board documents and water; and • Fuel surcharge. Effective with respect to all flight bookings made from May 3, 2011, we re-introduced fuel surcharges for all of our international routes. The DCA prohibits the imposition of fuel surcharges that are separate from air fares for domestic routes. The fuel surcharges range from Baht 100 to Baht 300 for international routes, depending on the scheduled flight time of the route.

Information Technology We share various information technology with the wider AirAsia Group. AirAsia Berhad invests in information technology where its use directly lowers the AirAsia Group’s costs, enables scalable operations and improves efficiency and safety. Our key operating software systems (centralized in Kuala Lumpur, Malaysia) include NewSkies 3.2 by Navitaire which we use for inventory and sales management/reservations, Microsoft’s Axapta Financial Management (Axapta) which we use for our financial operations, the Geneva Optimum Airline Performance (“OAP”) software which we use for flight scheduling and crew rostering, Navtech software which we use for flight planning and Swiss Aviation Software Ltd.’s AMOS operating system (“AMOS”), which we use for the management of aircraft maintenance engineering and logistics. We subscribe for Axapta, OAP, Navtech and AMOS on an annual basis so as not to commit to these software should they become obsolete, and not be burdened by a potentially large capital outlay. NewSkies 3.2 software by Navitaire provides real time access to booking information. This software, which operates through a single database, fully integrates bookings received through the Internet, the Nationwide Call Center and sales offices. The software includes “SkyAgent”, which allows travel agents to book flights online at lower costs, as well as SkySpeed, the reservation system software used by the Nationwide Call Center and sales offices. We set up a disaster recovery center to handle server failures. See “Risk Factors — Risks Relating to the Company and Thai AirAsia — We rely on automated systems and the Internet to operate our business and any failure of these systems may have a material adverse effect on our operations”. Axapta software provides accounting, financial reporting and analysis capabilities, thereby assisting in the improvement of the efficiency of our financial operations and enabling strategic planning activities, the effective management of cash flow and regulatory compliance. OAP software provides the most up-to-date information from which to base decisions for sickness replacement, disruption of services and training requirements. Navtech software, provided and hosted by Asprecise Pte Ltd (an affiliate of Temasek Capital Singapore), is a full-service solution designed to meet all airworthiness, reliability, records, inventory and purchasing requirements of the relevant aviation authorities, as well as other financial and executive reports as may be required by us. The AMOS software uses current and historical records and operational and maintenance activities of each aircraft to prepare maintenance planning and resources and inventory control modules, which are then used by our engineers.

106 Airport Operations Airport Handling Service We provide our own ground handling and ground support services at all domestic airports, including ramp services, other than at two domestic airports where we contract to a third party service provider. Our affiliated companies such as AirAsia Berhad and Indonesia AirAsia, as well as a limited number of established third parties, provide these services to us at international destinations. We believe that providing our own ground handling and ground support services ensures that costs are kept low while productivity is high. Providing our own services also helps ensure that we can monitor and maintain our high customer service levels. Our ground handling services include baggage and freight handling and aircraft push backs. The equipment used to perform these services, including tow tractors and trolleys, are owned by us. The ground support services that we provide include check-in counters allocated to us and boarding services. We rent check-in counters as well as departure gates at each of our hubs, for an indefinite period of time. Other airport operations, including security screening of passengers and luggage, are the responsibility of the authorities at the airports. We have station representatives present to oversee the ground handling operations in all of our destinations.

Airport Charges As with other airlines, we are assessed airport charges, including landing and parking fees, check-in counter charges, air navigation flight charges and security fees. In keeping with our low-cost model, we negotiated advantageous terms for these airport charges by delivering a consistently high volume of passengers. Whenever possible, we prefer to use less expensive airport facilities such as outdoor boarding steps rather than the more expensive passenger boarding bridges.

Insurance We have aviation and non-aviation insurance coverage in connection with our operations. We believe that our overall insurance coverage is consistent with industry practice and is maintained at adequate levels. We carry passenger and third party liability insurance, as required by the terms of our lease agreements, under which we are insured for an amount of up to US$600.0 million for any one occurrence. We also insure our aircraft against loss and damage, under which we are insured for an amount of up to US$50,000 for any one claim. In addition, we carry non-aviation insurance which covers our assets, accident and hospitalization insurance for our employees, neon sign insurance, fidelity guarantee insurance and money insurance. We do not carry insurance covering business interruptions. We have not experienced any material interruption to our business and operations. Insurance rates are based on an evaluation of the insured’s track record in terms of safety, volume and growth potential.

Competition We face competition from other scheduled airlines that service our domestic and international routes. On some of our routes, there is also competition from other transportation modes, such as ground and sea. The intensity of this competition varies from route to route and depends on a number of factors, including the strengths of competing airlines and other transportation modes. See “Risk Factors — Risks Relating to our Company and Thai AirAsia — Increased competition in the airline industry along with competition from other forms of transportation and communication could materially and adversely affect our business, financial condition, results of operation and prospects”. Despite operating in some of the busiest airports in Southeast Asia, China and India, and competing against some of the leading global airlines, our low-cost structure has enabled us to be profitable while offering significantly lower average fares than our full-service competitors on both our domestic and international routes. We compete principally on price and frequency of service. We believe our low cost operations put us in a better position to endure a decrease in fares as a result of any deterioration in market conditions, the entry of new competition into our market or aggressive pricing by competitors.

Domestic The main competitors on our domestic routes include Thai Airways, a full-service carrier offering multi- class scheduled services to a broad network of 11 domestic destinations as of December 31, 2011, complimentary in-flight meals, a frequent flyer program and airport lounges, as well as Bangkok Airways, a boutique full- service carrier, and low-cost carriers such as Nok Air (an affiliate of Thai Airways) and Orient Thai Airlines.

107 The following table shows our competitors on our top five domestic routes as of December 31, 2011 in terms of flight frequency.

Thai Thai Bangkok Orient AirAsia Airways Nok Air Airways Thai (number of roundtrip flights per week) Bangkok — Phuket ...... 63 63 28 42 14 Bangkok — Chiang Mai ...... 49 70 70 35 28 Bangkok — Hat Yai ...... 42 21 42 — 21 Bangkok — Krabi ...... 28 21 — — — Bangkok — Chiang Rai ...... 21 21 — — 14

International The main competitors on our international routes include full-service carriers such as Thai Airways, Cathay Pacific Airways, Singapore Airlines, Vietnam Airlines, Air Macau, Myanmar Airlines International, Malaysian Airlines as well as low-cost carriers such as Tiger Airways, Jetstar Airways and Orient Thai Airlines. AirAsia Berhad and Indonesia AirAsia are also our competitors on some of our routes. The following table shows our competitors on our top six international routes as of December 31, 2011 in terms of flight frequency.

Thai AirAsia Thai Singapore Malaysian Air Vietnam Cathay Bangkok Myanmar AirAsia Affiliates(1) Airways Airlines Airlines Macau Airlines Pacific Airways Airways Others(2) (number of roundtrip flights per week) Bangkok — Singapore . . . 28 — 28 35 — — — 7 — 7 56 Bangkok — Kuala Lumpur ...... 21 35 21 — 28 — — — — — 14 Bangkok — Macau ...... 28 — — — — 14 — — — — — Bangkok — Ho Chi Minh City ...... 14 — 14 — — — 14 — — — 17 Bangkok — Hong Kong ...... 14 — 35 — — — — 42 — — 35 Bangkok — Yangon ..... 14 — 14 — — — — — 14 14 —

(1) Includes AirAsia Berhad and Indonesia AirAsia. (2) Does not include indirect flights.

Future Competition In the future, we may face competition from potential new entrants. For example, Thai Airways has announced its intention to establish a new “light premium” (in between full service and LCC) carrier named Thai Smile that will serve international and domestic destinations within a four-hour radius from Bangkok. Thai Smile is scheduled to begin operations from Bangkok’s Suvarnabhumi International Airport to five foreign destinations and one domestic destination in the second half of 2012, with plans to increase to 16 domestic and international destinations by 2015. The Thai Smile fleet will initially comprise three Airbus A320 aircraft, with plans to increase the fleet by eight additional Airbus A320 aircraft to be delivered between 2013 and 2015. In addition, Scoot, a new LCC owned by Singapore Airlines, has announced plans to fly between Singapore and Bangkok using Boeing 777 aircraft.

Intellectual Property We operate under the AirAsia brand in Thailand and use the AirAsia name, trademark and logo under license from AirAsia Berhad under the AirAsia Brand License Agreement. Under the terms of the AirAsia Brand License Agreement, Thai AirAsia is required to pay an annual license fee equivalent to 1% of its total revenue per annum. See “Related Party Transaction — Future Related Party Transactions — AirAsia Brand License Agreement” for a summary of the terms of these agreements. Our AirAsia Brand License Agreement allows us to use the AirAsia procedures manual and other business knowhow produced or compiled by AirAsia Berhad. We do not own, and are not the registered owner of, any part of the AirAsia name, trademark or logo either in Thailand or outside Thailand.

Real Property As of December 31, 2011, we do not own any land or buildings. We lease the office space that we use for our corporate headquarters from Oriental Siam (1978) Co., Ltd. while we lease our hangar, aircraft parking and

108 other operational space from the relevant airport authorities. We also lease warehouse space from Total Industrial Services Co., Ltd. and Kontarat Group Co., Ltd. that we use to store stock for in-flight sales and other items, respectively. A substantial majority of the lease agreements signed by Thai AirAsia are office space leases, warehouse leases and leases of Tesco Lotus booths within Thailand, space lease agreements in Thai airports with AOT, the Thai Treasury Department and the DCA, as well as space lease agreements in airports located in other countries. A substantial majority of the airport space lease agreements have a term of between one and three years.

Employees and Training General As of December 31, 2009, 2010 and 2011, we had 1,625, 1,791 and 2,026 employees, respectively. Our employees, divided by function and geographic split were as follows:

As of December 31, By Function: 2009 2010 2011 Pilots and co-pilots ...... 202 203 258 Cabin crew ...... 278 331 410 Ground operations ...... 699 742 798 Engineering ...... 183 198 205 Marketing ...... 18 32 20 Call center and reservation ...... 9 9 10 Head office ...... 156 174 222 Others ...... 80 102 103 Total ...... 1,625 1,791 2,026

As of December 31, By Location: 2009 2010 2011 Bangkok ...... 1,340 1,489 1,622 Phuket ...... 82 96 136 Chiang Mai ...... 38 44 81 Others ...... 165 162 187 Total ...... 1,625 1,791 2,026

We are not involved in any material labor disputes which has a material effect on our financial position and business, and we are not aware of any circumstances that would give rise to any labor disputes which may materially and adversely affect our financial position and business. We cannot however assure you that we will not experience any labor disputes in the future. In addition, we have not entered into collective bargaining arrangements with our employees or with any trade unions and our employees are not unionized. We recognize the need to ensure continuity in our management in order to maintain our edge over our competitors. Our directors believe that our continued success depends, among other factors, on the support and dedication of our management personnel. We have put in place human resource strategies, which include competitive compensation, fit-for-purpose recruitment and a succession plan. The loss of any key personnel could materially and adversely affect the Company. See “Risk Factors — Risks Relating to the Company and Thai AirAsia — We depend on our personnel, especially our executive officers and key management, and any difficulties in attracting or retaining such personnel or failure to maintain our corporate culture may have a material adverse effect on our business, financial condition, results of operation and prospects”. In view thereof, we have made efforts to motivate and retain our staff through performance-based incentives, and to enhance employees’ skills and competencies by providing training. To this end, we engage our employees continuously in conferences and training for them to acquire and enhance relevant skills and competencies (both functional and developmental) in line with our business objectives. On-the-job training is another significant approach of transferring knowledge from specialists to new or junior employees. The investment in human capital increases the competency of our existing employees. In addition, these development activities serve to groom the lower and middle management staff to progressively assume the responsibilities of senior management.

109 Employee Efficiencies and Costs Our staff remuneration policy focuses on maximizing efficiency and productivity while keeping staff costs at the minimum functional level consistent with low-cost carrier industry standards. We offer employees at all levels a wide range of incentives, including variable bonuses. A large portion of our staff cost is linked to performance.

Aircrew We adopt a fixed schedule hourly pay scale for our pilots. We believe that our current pay scale for our pilots is comparable with other airlines in the ASEAN region. Cabin crew remuneration is based on a basic salary, with flight and productivity allowances given. The flight allowance, which makes up the greatest proportion of the remuneration payable to cabin crew, is calculated based on the scheduled flight time, while the productivity allowance is linked to the number of leave days taken, as well as punctuality and availability for duty on standby. We maintain an aircraft to pilot ratio of one to 1:10 and an aircraft to cabin crew ratio of 1:17 for our Airbus A320 aircraft.

Ground Crew Ground crew remuneration is based on a basic salary, with a large proportion of total compensation based on performance, commission from sale of seats, and productivity. Total compensation is linked to factors such as customer service skills, product knowledge, attendance and punctuality.

Engineers Our engineers are remunerated based on a basic salary, with type-rating allowances given in recognition of each engineer’s qualifications. Type-ratings include air frame, engines, electrical, instrument and radio ratings. We are selective as to which engineers we hire and our turnover is low since we believe we offer our engineers relatively higher salaries compared with other airlines in the ASEAN region and provide good training. We maintain an aircraft to engineer and mechanic ratio of 1:8.5.

Training Pilots All of our cadet pilots are enrolled in the Bangkok Aviation Center Co., Ltd, in Thailand (the “Bangkok Aviation Center”). The Bangkok Aviation Center is equipped with modern training equipment and is certified by the FAA, JAR and CAA, and includes a standardized curriculum. We do not discriminate in the recruitment of cadet pilots, and staff from various departments have enlisted in the program. Cadet pilots typically graduate after one year of training, after which they are required to train with simulators to be type-rated to fly Airbus A320 aircraft. We assist our cadet pilots in financing their tuition, subject to a bond, in exchange for the cadets’ commitment to work for us for a period of ten years. We also recruit experienced pilots from other airlines. We have 258 pilots as of December 31, 2011 and expect to require a total of approximately 480 pilots by 2016. See “Risk Factors — Risks Relating to the Company and Thai AirAsia — Any difficulties that we may experience in attracting and retaining qualified personnel at reasonable costs or any failure to maintain our corporate culture may have a material adverse effect on our business, financial condition, results of operation and prospects” for a discussion on risks associated with a potential shortfall of pilots in the future. Our newly recruited pilots who are not already type-rated undergo type training. A type-rating is a rating that allows a pilot to fly a specified type of aircraft. Pilots currently use Airbus A320 flight simulators operated by the AirAsia Academy based in Kuala Lumpur, which AirAsia Berhad established in 2005, under the management of CAE Inc., the supplier of the flight simulators for training purposes, with an emphasis on all aspects of flight operations.

Cabin Crew Our 60 day cabin crew training program takes place at the AirAsia Academy in Kuala Lumpur and at the Thai AirAsia offices in Bangkok. All training is performed by our cabin crew and pilot instructors. Courses include safety emergency procedures, first aid, cabin familiarization, aviation, public announcements, grooming, customer care, in-flight sales and selling skills. The safety and regulatory components of this program have been approved by the DCA.

110 Cabin crew are required to speak English and continuously undergo training, such as training regarding corporate resource management, handling of dangerous goods, handling disruptive passengers and a terrorist awareness course. Cabin crew are also required to attend refresher courses on safety emergency procedures and first aid every year.

Ground Crew Guest handling personnel undergo a guest services training program which takes place at the AirAsia Academy in Kuala Lumpur and which includes training in our reservation and check-in systems, central baggage tracing procedures and customer service. Ground crew undergo training throughout the year, such as training to identify dangerous goods, perform first aid and handle bomb threats. Ground handling personnel also undergo ramp training that lasts for two to three weeks which involves apron driving, aircraft loading and unloading, marshalling, towing, apron safety and emergency procedures. New employees also learn about civil aviation regulations, the airport layout and regulation of vehicle movement within the airport.

Engineers All of our engineers are trained at the AirAsia Academy in Kuala Lumpur. The training course is 45 days in duration, with an additional three months of on-job-training and subsequent checkouts by Thai AirAsia’s Quality Assurance Department. In exchange, our engineers commit to work for us for a period of two years. Our engineers are based in our hubs in Bangkok, Phuket and Chiang Mai.

Major Customers No customer contributed more than 10% of our total revenue in 2009, 2010 or 2011. Customers mainly consist of individuals traveling by air. For details on revenue generated by passenger seat sales, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Revenue — Passenger Seat Sales”.

Major Suppliers In 2009, 2010 and 2011, the only suppliers which accounted for 10% or more of our total cost of sales were PTT and Shell Thailand. Our jet fuel purchases from PTT accounted for 79.4%, 78.7% and 70.2% of our aircraft fuel expenses and 26.3%, 32.0% and 32.7% of our total cost of sales in 2009, 2010 and 2011, respectively. Our jet fuel purchases from Shell Thailand accounted for 7.5%, 8.4% and 15.1% of our aircraft fuel expenses and 2.5%, 3.4% and 7.0% of our total cost of sales in 2009, 2010 and 2011, respectively. Nevertheless, we believe that comparable jet fuel supply, in terms of quality and quantity, and support is available from other established suppliers. Save as disclosed above, there are no other suppliers which accounted for 10% or more of our total cost of sales in 2009, 2010 and 2011.

Environment We migrated our aircraft fleet from the Boeing 737-300, which use more fuel and have higher emissions, to the Airbus A320. We have, through AirAsia Berhad, ordered the Airbus A320neo, which we expect will be more fuel efficient and have lower emissions levels.

Research and Development We continue to monitor our flight operations and have a team working with Airbus SAS to improve on reducing weight on our aircraft. We also continue to evaluate and enhance our business processes to promote efficiency through the development of in-house system facilities for, among others, capital expenditure management, procurement, service quality and employee benefits management. We incur minimal amounts for research and development activities, which do not amount to a significant percentage of our revenues.

Legal Proceedings From time to time, we may be involved in legal proceedings concerning matters that arise in our day-to-day business operations. However, we are not engaged in any material litigation, regulatory proceedings, claims or arbitration either as plaintiff or defendant, which would have a material effect on our business, financial condition, results of operations and prospects, and our directors have no knowledge of any such litigation, proceedings, claims or arbitration pending or threatened against us.

111 RELATED PARTY TRANSACTIONS Overview Thai AirAsia is a party to a number of agreements or transactions with “related parties” as defined, under Thai laws, regulations and accounting standards, including our shareholders and directors and their associate companies, and we engage from time to time in transactions with them. We believe these agreements and transactions have generally been entered into on arm’s length terms or on terms that we believe have generally been at least as favorable to us as similar transactions with non-affiliates would have been, other than as described below. We describe below the material transactions that the Thai AirAsia has entered into with its shareholders and directors, associate companies, and other related companies.

Our Related Parties Some of the Thai AirAsia’s key related parties include: • AirAsia Berhad; • AirAsia Mauritius; • Indonesia AirAsia; and • directors, including Mr. Tassapon Bijleveld.

The following tables summarize the Company’s and Thai AirAsia’s related party transactions for the periods and as of the dates indicated.

Year Ended December 31, 2009 2010 2011 2011 Bt Bt Bt US$ (in millions) Interest Income: AirAsia Berhad(1) ...... — 37.2 111.4 3.5 Indonesia AirAsia ...... — 4.9 11.6 0.4 Mr. Tassapon Bijleveld ...... — 5.2 1.3 0.0 Total ...... — 47.3 124.3 3.9 Share of Loss (Gain) from Fuel Swap Agreements: AirAsia Berhad(2) ...... 253.1 (76.3) (13.2) (0.4) Share of Staff Costs for Accounting Services: AirAsia Berhad(3) ...... — (26.1) (26.5) (0.8) Indonesia AirAsia(4) ...... — (8.9) (7.3) (0.2) Total ...... — (35.0) (33.8) (1.0) Aircraft Rental: AirAsia Mauritius(5) ...... 1,712.4 2,200.6 2,727.7 86.1 Aircraft Repair and Maintenance: AirAsia Mauritius(6) ...... 968.7 805.6 998.0 31.5 Purchase of Merchandise and Equipment: AirAsia Berhad(7) ...... 55.6 91.3 53.4 1.7 Management Fee Expenses: AirAsia Berhad(8) ...... 16.5 15.3 14.8 0.5 Booking Fee Expenses: AirAsia Berhad(9) ...... 33.1 36.7 57.2 1.8 Estimated Costs of Aircraft Redelivery Before Maturities (Adjusted to Actual): AirAsia Mauritius ...... 346.7 (114.3) — — Loss on Unwind Fuel Price Swap Agreement: AirAsia Berhad ...... 22.6 — — — Interest Expense: AirAsia Mauritius(10) ...... — 242.8 148.6 4.7 Provision for Loss on Unwind Interest Rate Swap Agreement (Adjust to Actual): AirAsia Berhad ...... (6.1) — — — Passenger Revenues and Expenses Received and Paid on Behalf of: Passenger revenues received on behalf of Thai AirAsia by AirAsia Berhad and Indonesia AirAsia(11) ...... 2,171.9 3,864.2 3,378.9 106.6 Cash received on behalf of AirAsia Berhad and Indonesia AirAsia(12) ...... 485.7 596.2 459.0 14.5 Expenses paid on behalf of Thai AirAsia by AirAsia Berhad and Indonesia AirAsia(13) ...... 575.1 673.9 715.4 22.6 Advance payments on behalf of AirAsia Berhad and Indonesia AirAsia(14) ...... 307.9 143.4 429.7 13.6

112 (1) No outstanding amounts were subject to interest as of December 31, 2011. (2) Outstanding amount of share of loss from fuel swap agreements payable amounted to Baht 2.7 million (US$0.1 million) as of December 31, 2011. (3) Outstanding amount of share of staff costs for accounting services receivable amounted to Baht 3.6 million (US$0.1 million) as of December 31, 2011. (4) Outstanding amount of share of staff costs for accounting services receivable amounted to Baht 16.3 million (US$0.5 million) as of December 31, 2011. (5) Outstanding amount of aircraft rental payable amounted to Baht 245.5 million (US$7.8 million) as of December 31, 2011. (6) Outstanding amount of aircraft repair and maintenance payable amounted to Baht 92.4 million (US$2.9 million) as of December 31, 2011. (7) Outstanding amount of purchase of merchandise and equipment payable amounted to Baht 24.3 million (US$0.8 million) as of December 31, 2011. (8) Outstanding amount of management fee expenses payable amounted to Baht 1.3 million (US$41.0 thousand) as of December 31, 2011. (9) Outstanding amount of booking fee expenses payable amounted to Baht 5.4 million (US$0.2 million) as of December 31, 2011. (10) No outstanding amounts were subject to interest as of December 31, 2011. (11) Outstanding amount of passenger revenues received on behalf of Thai AirAsia by AirAsia Berhad and Indonesia AirAsia receivable amounted to Baht 221.6 million (US$7.0 million) as of December 31, 2011. (12) Outstanding amount of cash received on behalf of AirAsia Berhad and Indonesia AirAsia payable amounted to Baht 46.9 million (US$1.5 million) as of December 31, 2011. (13) Outstanding amount of expenses paid on behalf of Thai AirAsia by AirAsia Berhad and Indonesia AirAsia payable amounted to Baht 115.5 million (US$3.64 million) as of December 31, 2011. Of this amount, Baht 36.8 million (US$1.2 million) was payable to Indonesia AirAsia. (14) Outstanding amount of advance payments on behalf of AirAsia Berhad and Indonesia AirAsia receivable amounted to Baht 206.7 million (US$6.5 million) as of December 31, 2011. Of this amount, Baht 167.2 million (US$5.3 million) was receivable from Indonesia AirAsia.

As of December 31, 2009 2010 2011 2011 Bt Bt Bt US$ (in millions) Amounts Due from Related Parties: AirAsia Berhad ...... 3,385.4 5,271.7 175.0 5.5 PT Indonesia AirAsia ...... 77.2 119.4 260.3 8.2 Total ...... 3,462.6 5,391.1 435.3 13.7 Amounts Due to Related Parties: AirAsia Berhad ...... 3,692.5 2,666.5 159.3 5.0 AirAsia Mauritius ...... 3,911.3 4,154.2 361.1 11.4 Total ...... 7,603.8 6,820.7 520.4 16.4 Short-Term Loan to Director: Mr. Tassapon Bijleveld ...... 187.0 105.2 — — Other Non-Current Assets: AirAsia Mauritius (Aircraft Deposit)(1) ...... 335.6 410.6 497.9 15.7 AirAsia Berhad (Fuel Price Swap Deposit) ...... 16.8 16.8 15.8 0.5 Total ...... 352.4 427.4 513.7 16.2

(1) Outstanding amount of aircraft deposit payable amounted to Baht 23.2 million (US$0.7 million) as of December 31, 2011.

Past and Ongoing Related Party Transactions An audit committee of the Company and Thai AirAsia has considered the related party transactions of the Company and Thai AirAsia, respectively, and provided their view that such related party transactions have been entered into on a reasonable basis, in the ordinary course of business of the Company and Thai AirAsia and based on general commercial terms, taking into account the interests of the Company and Thai AirAsia.

Fuel Hedging Arrangements On February 2, 2004, Thai AirAsia entered into a fuel hedging agreement with AirAsia Berhad (the “Fuel Hedging Agreement”), whereby Thai AirAsia authorized AirAsia Berhad, at its discretion, to enter into hedges to manage the risk of any physical price movements of fuel in the world market to protect our interests. In accordance with the terms of the agreement, Thai AirAsia is required to pay our portion of losses to, and entitled to receive our portion of gains from, AirAsia Berhad. The Fuel Hedging Agreement terminates upon notice

113 following an event of default, which include our failure to make payments under the agreement, the general default of either party to perform its obligations under the agreement and the insolvency or bankruptcy of either party. Thai AirAsia’s share of gain (loss) from fuel swap agreements amounted to a net loss of Baht 275.6 million in 2009, a gain of Baht 76.3 million in 2010 and a gain of Baht 13.2 million (US$0.4 million) in 2011. Thai AirAsia’s outstanding share of loss from fuel swap agreements payable to AirAsia Berhad amounted to Baht 2.7 million (US$0.1 million) as of December 31, 2011.

Aircraft Leases Thai AirAsia sub-leases aircraft from AirAsia Mauritius under operating leases. Aircraft rentals amounted to Baht 1,712.4 million in 2009, Baht 2,200.6 million in 2010 and Baht 2,727.7 million (US$86.1 million) in 2011. Thai AirAsia intends to purchase or continue to lease new aircraft from members of the AirAsia Group, including AirAsia Mauritius. Thai AirAsia has entered into 24 aircraft lease agreements with AirAsia Mauritius dated as of the dates specified in the table below (as amended, the “AirAsia Aircraft Lease Agreements”).

Serial Number Date of Relevant AirAsia Aircraft Lease Agreement Date of Delivery(1) Term MSN 4917 February 14, 2012 (last amended on February 14, 2012) February 16, 2012 144 months MSN 4980 January 23, 2012 (last amended on January 23, 2012) January 23, 2012 144 months MSN 4979 December 23, 2011 (last amended on January 1, 2012) December 23, 2011 144 months MSN 4807 August 26, 2011 (last amended on January 1, 2012) September 1, 2011 144 months MSN 4557 January 20, 2011 (last amended on January 1, 2012) January 20, 2011 144 months MSN 4426 September 30, 2010 (last amended on January 1, 2012) September 30, 2010 144 months MSN 4390 August 10, 2010 (last amended on January 1, 2012) August 10, 2010 144 months MSN 4386 August 5, 2010 (last amended on January 1, 2012) August 5, 2010 144 months MSN 4367 July 20, 2010 (last amended on January 1, 2012) July 20, 2010 144 months MSN 4333 June 18, 2010 (last amended on January 1, 2012) June 18, 2010 144 months MSN 4302 May 21, 2010 (last amended on January 1, 2012) May 21, 2010 144 months MSN 4278 May 18, 2010 (last amended on January 1, 2012) May 18, 2010 144 months MSN 4126 December 4, 2009 (last amended on January 1, 2012) December 4, 2009 144 months MSN 4088 November 6, 2009 (last amended on January 1, 2012) November 6, 2009 144 months MSN 4019 September 16, 2009 (last amended on January 1, 2012) September 16, 2009 144 months MSN 3729 December 30, 2008 (last amended on December 30, 2011) January 7, 2009 144 months MSN 3679 November 12, 2008 (last amended on November 12, 2011) November 12, 2008 144 months MSN 3576 February 2, 2009 (last amended on January 1, 2012) February 6, 2009(2) 138 months MSN 3505 May 28, 2011 June 3, 2011(3) 144 months MSN 3489 May 14, 2011 May 16, 2011(4) 144 months MSN 3394 February 4, 2011 (last amended on January 1, 2012) February 7, 2011(5) 108 months MSN 3338 December 11, 2010 (last amended on January 1, 2012) December 11, 2010(6) 108 months MSN 3299 November 8, 2010 (last amended on January 1, 2012) November 8, 2010(7) 108 months MSN 3277 October 12, 2010 (last amended on January 1, 2012) October 19, 2010(8) 108 months

(1) Where an aircraft was subject to an earlier Aircraft Lease Agreement that had expired and was replaced by a later Aircraft Lease Agreement, the “Date of Delivery” in the table above for the purposes of calculating the term of such later Aircraft Lease Agreement is deemed to be the expiry date of the term under the earlier Aircraft Lease Agreement and not the date on which the relevant aircraft was actually delivered. (2) MSN 3576 was originally delivered to Thai AirAsia on August 6, 2008. (3) MSN 3505 was originally delivered to Thai AirAsia on June 3, 2008. (4) MSN 3489 was originally delivered to Thai AirAsia on May 16, 2008. (5) MSN 3394 was originally delivered to Thai AirAsia on February 7, 2008. (6) MSN 3338 was originally delivered to Thai AirAsia on December 11, 2007. (7) MSN 3299 was originally delivered to Thai AirAsia on November 8, 2007. (8) MSN 3277 was originally delivered to Thai AirAsia on October 19, 2007. The term of each lease commences on the date the aircraft is delivered under the relevant lease (the “Date of Delivery”). The leases may be renewed upon written agreement between AirAsia Mauritius and Thai AirAsia, subject to the terms of the head lease and any financing agreements in relation to the aircraft. Substantially all of our aircraft leases are subordinated to the rights and interests of the lessors of the headlease agreements or of the beneficiaries of the installment sale agreements and related financing documents, and the aircraft under such leases are mortgaged to the security trustees under the financing documents.

114 Rental Payments Under the terms of the AirAsia Aircraft Lease Agreements, the first rental period commences on the Date of Delivery. Thai AirAsia is required to pay a fixed monthly rent for each aircraft. Thai AirAsia is also required to pay either a supplemental monthly rent or a maintenance reserve for each aircraft to cover certain maintenance costs specified under the relevant agreement. However, where Thai AirAsia is required to pay a supplemental monthly rent, AirAsia Mauritius has agreed to reimburse certain maintenance costs to Thai AirAsia in accordance with the terms of the agreement, provided no event of default has occurred or is continuing. As security for Thai AirAsia’s payment obligations, Thai AirAsia is required to make a deposit to AirAsia Mauritius.

Warranties Through the AirAsia Aircraft Lease Agreements, Thai AirAsia is able to rely on manufacturer’s warranties and product support granted to AirAsia Berhad. Such warranties and support are made available to Thai AirAsia under the terms of the AirAsia Aircraft Lease Agreements, provided that no event of default has occurred or is continuing and/or that the expiry date has not passed, as relevant. Such manufacturer’s warranties typically cover the repair or remedy of any defect in the aircraft, including the compensation for loss of use of the aircraft. Under certain leases, we also enter into separate airframe warranty agreements and engine warranty agreements with AirAsia Mauritius, the parties to the head lease, the owner, the manufacturer and the security trustee, as relevant.

Indemnities Thai AirAsia agreed to indemnify AirAsia Mauritius, and under certain leases, the owner of the aircraft, for any taxes and governmental payment requirements arising as a result of the lease of the aircraft to us. In addition, Thai AirAsia agreed to indemnify AirAsia Mauritius, the owner of the aircraft, the head lessor, any financing parties and their employees and agents for any loss suffered which arises directly or indirectly from certain events, including, but not limited to, the lease, sub-lease, maintenance or repair of the aircraft.

Covenants Thai AirAsia agreed to certain covenants under the AirAsia Aircraft Lease Agreements. Examples of the typical covenants, include: • registering the aircraft in accordance with the applicable laws of the state of registration; • providing documents relating to the aircraft to AirAsia Mauritius; • permitting the security trustee to inspect the aircraft under the terms of the AirAsia Aircraft Lease Agreements; • fixing notices on the aircraft stating (i) the security trustee’s security interest and (ii) the ownership of the aircraft; • at its own cost, maintain and operate the aircraft in accordance with prevailing applicable standards; and • not removing any parts or engines or otherwise altering the aircraft, except as otherwise allowed under the terms of the agreement.

Events of Loss Thai AirAsia is required to pay an agreed value under the relevant AirAsia Aircraft Lease Agreement if an event of loss occurs. Under certain leases, following payment of the agreed value to the security trustee, AirAsia Mauritius has agreed to procure the owner of the aircraft to transfer ownership of the aircraft, without recourse or warranty, to Thai AirAsia. Events of loss include (i) the actual or constructive, compromised, arranged or agreed total loss of the aircraft, (ii) the aircraft being destroyed, damaged beyond economic repair or permanently rendered unfit for normal use, (iii) the aircraft being requisitioned for title, or title to the aircraft being otherwise compulsorily acquired by the government, the state of registry or any other authority, and (iv) the aircraft being hijacked, stolen, confiscated, detained or requisitioned for use or hire for specified periods of time under the agreement.

Events of Default The occurrence of an event of default constitutes a repudiation of the agreement by Thai AirAsia, and AirAsia Mauritius may accept such repudiation and terminate the agreement, take court action or take possession of or redeliver the aircraft. Events of default typically include, but are not limited to, (i) any failure by Thai AirAsia to pay amounts due under the agreement, (ii) the breach of any of Thai AirAsia’s obligations under the

115 agreement which would be reasonably likely to have a material adverse effect or which is not remedied within 15 days, as relevant, (iii) the cross-default of any of Thai AirAsia’s other financial indebtedness which is in excess of certain amounts up to US$20 million, as specified under the relevant AirAsia Aircraft Lease Agreement, and not paid when due or is declared to become prematurely due and payable as a result of an event of default, (iv) the insolvency of Thai AirAsia, (v) any event or series of events which, in the opinion of AirAsia Mauritius, has or is likely to have a material adverse effect on Thai AirAsia, (vi) Thai AirAsia’s failure to obtain by the relevant deadline or the revocation, cessation or cancellation of, or the non-renewal or variance of any authorization to enable Thai AirAsia to perform Thai AirAsia’s obligations under the agreement, including obtaining the registration of the aircraft, the certificate of airworthiness and any other airline license or air transport license required, (vii) the non-payment of any European Organization for the Safety of Air Navigation charges, (viii) the arrest, confiscation or seizure of the aircraft which is not released within 15 business days and (ix) if relevant, the breach of the terms of the subordination acknowledgement.

Costs from Aircraft Redelivery Before Maturities Thai AirAsia’s lease agreements with AirAsia Mauritius in relation to Thai AirAsia’s previous Boeing 737-300 aircraft contained provisions for the imposition of penalties if such aircraft were to be redelivered prior to the maturities under their respective lease agreements. Following Thai AirAsia’s redelivery of Boeing 737-300 aircraft prior to the maturities in 2008 and 2009, Thai AirAsia estimated the amount of costs incurred from aircraft redelivery before maturities of Baht 98.3 million in 2008 and Baht 346.7 million in 2009. However, Thai AirAsia subsequently made an adjustment of Baht 114.3 million in 2010 for the difference between the estimated costs and the actual costs. There were no penalties from aircraft redelivery before maturities in 2011.

Aircraft Repair and Maintenance AirAsia Berhad enters into various repair and maintenance agreements, including an agreement with GE Commercial Aviation Services covering all aircraft used by the AirAsia Group. The terms of the agreement with GE Commercial Aviation Services allows Thai AirAsia to benefit from the AirAsia Group’s negotiated repair and maintenance rates. In addition, in accordance with the terms of the AirAsia Aircraft Lease Agreements, Thai AirAsia is required to pay either a supplemental monthly rent or a maintenance reserve for each aircraft to cover certain maintenance costs specified under the relevant agreement. However, where Thai AirAsia is required to pay a supplemental monthly rent, AirAsia Mauritius has agreed to reimburse certain maintenance costs to Thai AirAsia in accordance with the terms of the agreement, provided no event of default has occurred or is continuing. See “— Aircraft Leases — Rental Payments” above for details. Aircraft repair and maintenance amounted to Baht 968.7 million in 2009, Baht 805.6 million in 2010 and Baht 998.0 million (US$31.5 million) in 2011.

Purchase of Merchandise and Equipment Thai AirAsia purchases a portion of its in-flight sales inventory to sell on its flights from AirAsia Berhad. Purchase of merchandise and equipment amounted to Baht 55.6 million in 2009, Baht 91.3 million in 2010 and Baht 53.4 million (US$1.7 million) in 2011.

Management Fee Expenses On February 2, 2006, Thai AirAsia entered into an administrative fee agreement with AirAsia Berhad (the “Administrative Fee Agreement”), whereby AirAsia Berhad agreed to render support services in consideration for a management fee of US$40,000 per month. Support services under the agreement include managerial support, staff deployment, consultancy and other assistance in respect of our operations. Under its terms, the Administrative Fee Agreement terminates upon notice following an event of default. Events of default include our failure to make payments under the agreement, the general default of either party to perform its obligations under the agreement and the insolvency or bankruptcy of either party. Management fee expenses amounted to Baht 16.5 million in 2009, Baht 15.3 million in 2010 and Baht 14.8 million (US$0.5 million) in 2011.

Booking Fee Agreement On February 2, 2004, Thai AirAsia entered into a booking fee agreement with AirAsia Berhad (“Booking Fee Agreement”), whereby AirAsia Berhad agreed to provide airline booking and marketing services to Thai AirAsia in consideration for a booking fee calculated under the terms of the agreement, with such fee based on the number of Thai AirAsia flights booked. Under its terms, the Booking Fee Agreement terminates upon notice following an event of default. Events of default include Thai AirAsia’s failure to make payments under the agreement, the general default of either party to perform its obligations under the agreement and the insolvency or bankruptcy of either party.

116 Passenger Revenues and Cash Received on Behalf of AirAsia Group Members AirAsia Berhad and Indonesia AirAsia each receives, on Thai AirAsia’s behalf, passenger revenues from passengers booking Thai AirAsia air tickets through AirAsia Berhad and Indonesia AirAsia, respectively. Similarly, Thai AirAsia receives, on each of AirAsia Berhad’s and Indonesia AirAsia’s behalf, passenger revenues from passengers booking AirAsia Berhad and Indonesia AirAsia air tickets through Thai AirAsia. These amounts receivable from and payable to Thai AirAsia are set-off against each other, with the remaining amounts receivable from or payable to, as the case may be, AirAsia Berhad and Indonesia AirAsia, accordingly. Amounts received on behalf of AirAsia Group members are subject to the AirAsia Group’s Standard Operating Procedures agreed upon by the various AirAsia Group members. See “— Related Party Transaction Policies” below for a summary of the Standard Operating Procedures.

Expenses and Advance Payments on Behalf of Thai AirAsia AirAsia Berhad and Indonesia AirAsia each pays expenses and makes advance payments, on Thai AirAsia’s behalf, in relation to certain costs that are invoiced to AirAsia Berhad and Indonesia AirAsia, respectively, including airport and other charges incurred by Thai AirAsia in Malaysia and Indonesia, respectively. Similarly, Thai AirAsia pays expenses and makes advance payments, on each of AirAsia Berhad’s and Indonesia AirAsia’s behalf, certain costs that are invoiced to Thai AirAsia, including airport and other charges in Thailand incurred by AirAsia Berhad and Indonesia AirAsia, respectively. The amounts that are reimbursable to and payable by Thai AirAsia are set-off against each other, with the remaining amounts being reimbursable to or payable by, as the case may be, AirAsia Berhad and Indonesia AirAsia, accordingly. Payments made on behalf of AirAsia Group members are subject to the AirAsia Group’s Standard Operating Procedures agreed upon by the various AirAsia Group members. See “— Related Party Transaction Policies” below for a summary of the Standard Operating Procedures.

Financial Assistance Agreement On August 3, 2009, Thai AirAsia entered into a financial assistance agreement with AirAsia Berhad (the “Financial Assistance Agreement”), under which Thai AirAsia agreed that commencing January 1, 2010, it is to repay the outstanding amount of financial assistance provided by AirAsia Berhad as of December 31, 2008, or Ringgit 247.8 million, together with any interest accrued. The interest rate is calculated at the rate equivalent to AirAsia Berhad’s average cost of borrowings. AirAsia Berhad is to net off the aggregate invoices issued to Thai AirAsia each month and issue an invoice for the net amount, which Thai AirAsia is to pay not later than 30 days following receipt of such invoice. Any failure to pay within 30 days entitles AirAsia Berhad to a late payment interest equivalent to AirAsia’s average cost of borrowings from the due date until the payment. AirAsia Berhad has confirmed, in a letter dated January 18, 2012 to Thai AirAsia, that (a) all outstanding amounts due from Thai AirAsia to AirAsia Berhad under the Financial Assistance Agreement have been satisfied in full, (b) effective from September 15, 2011, Thai AirAsia has been discharged from all its obligations under the Financial Assistance Agreement, and (c) the Financial Assistance Agreement is deemed to have been terminated effective from January 18, 2012.

Amounts Due from Related Parties and Interest Income As a result of the various related party transactions described above, Thai AirAsia had amounts due from related parties of Baht 3,462.6 million as of December 31, 2009, Baht 5,391.1 million as of December 31, 2010 and Baht 435.3 million (US$13.7 million) as of December 31, 2011. These amounts are denominated in U.S. Dollars and are payable on demand. Effective January 1, 2010, the outstanding amounts due from related parties are subject to interest charged at 6.0% per annum, amounting to Baht 42.1 million in 2010 and Baht 123.0 million (US$3.9 million) in 2011.

Amounts Due to Related Parties and Interest Expense As a result of the various related party transactions described above, Thai AirAsia had amounts due to related parties of Baht 7,603.8 million as of December 31, 2009, Baht 6,820.7 million as of December 31, 2010 and Baht 520.4 million (US$16.4 million) as of December 31, 2011. These amounts are denominated in U.S. Dollars and are payable on demand. Effective January 1, 2010, the outstanding amounts due to related parties are subject to interest charged at 6.0% per annum, amounting to Baht 242.8 million in 2010 and Baht 148.6 million (US$4.7 million) in 2011.

117 Loans to Director and Interest Income In 2009, Thai AirAsia provided an on-demand loan on favorable terms to Mr. Tassapon Bijleveld up to a credit limit of Baht 190.0 million, with interest accruing at 1.5% per annum, of which Baht 187.0 million was drawn in 2009 and was outstanding as of December 31, 2009. The amount outstanding as of December 31, 2010 was Baht 105.2 million. Interest income from Mr. Tassapon Bijleveld amounted to Baht 5.2 million in 2010 and Baht 1.3 million (US$41,000) in 2011. Thai AirAsia has terminated the loan and Mr. Tassapon Bijleveld has repaid all outstanding principal amounts under the loan as of December 31, 2011.

Other Non-Current Assets Thai AirAsia also makes deposits with related parties for the lease of aircraft and the fuel price swap, which are accounted for in the statement of financial position as other non-current assets. These related party non-current assets amounted to Baht 352.4 million as of December 31, 2009, Baht 427.4 million as of December 31, 2010 and Baht 513.6 million (US$16.2 million) as of December 31, 2011.

Guarantee and Pledges Relating to the Credit Suisse Loan Agreement In relation to our loan from Credit Suisse under the Credit Suisse Loan Agreement, the Company has agreed to guarantee payments under the loan by the Borrowers. In addition, the Company and Mr. Tassapon Bijleveld agreed to pledge the shares they hold in Thai AirAsia and the Borrowers agreed to pledge the shares they hold in the Company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation — Indebtedness — Bank Loans — Credit Suisse Term Loan” for details.

Call Centre Services Prior to February 1, 2011, Thai AirAsia used the call centre services of Asian Contact Centres Sdn Bhd (“ACCS”). ACCS is a joint venture between AirAsia Berhad and a listed company in Malaysia and has Mr. Anthony Francis Fernandes, who is also a director of Thai AirAsia, as one of its directors. Thai AirAsia recorded operating costs with respect to such services of Baht 69.1 million in 2009, Baht 52.2 million in 2010 and Baht 22.9 million (US$0.7 million) in 2011. Trade accounts payable to ACCS amounted to Baht 7.1 million as of December 31, 2009, Baht 11.1 million as of December 31, 2010 and Baht zero as of December 31, 2011. Thai AirAsia ceases using the services of ACCS beginning from February 1, 2011.

Future Related Party Transactions Thai AirAsia Shareholders’ Agreement The Company entered into the Thai AirAsia Shareholders’ Agreement with AirAsia Investment (previously known as AA International Ltd.), AirAsia Berhad, and Thai AirAsia dated February 14, 2012 for the purpose of operating Thai AirAsia. The business of Thai AirAsia is to offer “no frills” passenger air transport services and ancillary services, with operations based in Thailand. Thai AirAsia’s business is to be modelled on the AirAsia business model exclusively, unless otherwise agreed. Thai AirAsia is to be an approved and licensed operator of air transport services based in Thailand, and the parties are jointly responsible for the procurement of the necessary approvals and licenses, and once obtained, the Company is responsible for the maintenance of the approvals and licenses to operate licensed air transport services in Thailand. AirAsia Investment and AirAsia Berhad are to provide any relevant assistance in maintaining approvals and licenses, if requested by the Company or Thai AirAsia. The scope of Thai AirAsia’s passenger air transport routes is limited to domestic and non-domestic flights originating from Thailand. The parties also agreed that Thai AirAsia is to engage AirAsia Berhad to provide necessary services and infrastructure required by Thai AirAsia on a commercial and arms- length basis. In addition, the parties agreed that Thai AirAsia and AirAsia Berhad will enter into a technical and management assistance agreement, under which AirAsia Berhad is to provide necessary technical and managerial support to the Company.

Management Board of Directors. The parties agree that the board of directors is to consist of not more than nine directors and that the quorum to pass a board resolution requires a majority of the directors. The Company has the right to appoint not more than three directors and AirAsia Investment has the right to appoint not more than two directors. One of the directors appointed by the Company can be nominated to be the chairman of the board of directors. The Company and AirAsia Investment each has the right to nominate and appoint not more than two independent directors, provided such independent directors have the requisite qualifications specified under the relevant laws and regulations.

118 The board of directors is required to meet not less than four times a year. Certain matters are required to be proposed to the board of directors and all decisions relating to such matters require a majority vote. Such matters include: • amending the memorandum or articles of association; • changing the authorized or registered capital and issuing any new class of shares, securities or convertible instruments; • decisions relating to dividends and shareholder distributions; • approval of the business plan and/or budget for each financial year; • approval of commercial, legal and financial transactions, capital expenditures, capital commitments and hedging transactions over Baht 100 million; • approval of limits of authority for transactions of Thai AirAsia; • any reconstruction, merger, consolidation, amalgamation, change of business of Thai AirAsia or any sale, transfer or disposal of any substantial part of the Company’s undertakings, assets or property; and • appointment or removal of senior management and the employment terms, remuneration and benefits of directors and senior management. Shareholders. The shareholders are required to meet at least once a year and the quorum for a shareholders’ meeting requires shareholders representing not less than 25% of the registered capital of Thai AirAsia. Each share entitles the shareholder to cast one vote, and decisions generally require the majority vote of the shareholders who are in attendance and entitled to vote at each meeting. Certain matters require a vote of not less than 75% of the total number of votes. Such matters include amending the memorandum or articles of association or changing the registered capital, dissolution, liquidation or amalgamation of Thai AirAsia, allotment of new shares and conversion into a public limited company.

Transfer of Shares A shareholder is only allowed to transfer or otherwise dispose of or encumber shares in Thai AirAsia in accordance with the terms of the Thai AirAsia Shareholders’ Agreement. Under the agreement, a shareholder may transfer any or all of its shares to any of its affiliates upon ten days’ prior notice to the other shareholder. A shareholder intending to transfer shares is required to give notice to the other shareholder specifying the terms of the transfer, with a copy to Thai AirAsia, and invite the other shareholder to purchase the Shares and the offer is required to remain valid for a period of 30 days. Transferees are required to enter into an accession agreement in the form attached to the Thai AirAsia Shareholders’ Agreement (if they not already party to it) and the transferor is required to procure the transfer to the transferee of all loans made by it or any of its affiliates. A transferor intending to sell all of its Thai AirAsia shares to a third party is required to give written notice to the other shareholder. If the other shareholder notifies the transferor of its intention to sell any or all of its shares, the transferor is required to use its best endeavors to procure the third party to purchase all or part of the other shareholder’s shares on a pro rata basis in relation to the total number of shares sold.

Non-Competition Each shareholder has covenanted that it would not be concerned in any business operating in Thailand which is directly or likely to compete with the business of Thai AirAsia. Each shareholder also covenanted that it would not establish or assist in the establishment of any new entity which is directly or likely to compete with the business of Thai AirAsia in Thailand or Malaysia, except Thai AirAsia’s and AirAsia Berhad’s flights originating and terminating in their respective home countries on a point-to-point basis. In addition, each shareholder covenanted that it would not operate any business which directly or indirectly competes with the then existing business in Thailand or Malaysia of any other party to the Thai AirAsia Shareholders’ Agreement.

Default Events of default include, among others, (i) a serious or persistent default in performing and observing any of its obligations under the Thai AirAsia Shareholders’ Agreement which is not remedied within 30 days, (ii) the insolvency, liquidation or winding up of a party, (iii) any inability to pay debts as they become due which is not remedied within 30 days, (iv) the entering into of any composition or arrangement with creditors or any appointment of an administrator which is not revoked within 30 days, (v) any disposal of shares other than as permitted under the Thai AirAsia Shareholders’ Agreement and (vi) any change in control.

119 Following an event of default, the non-defaulting parties are entitled to purchase or sell shares by serving notice to the defaulting party. If the non-defaulting parties elect to sell their shares, the defaulting party is required to arrange a third party to purchase the shares in accordance with the terms of the Thai AirAsia Shareholders’ Agreement.

Term The Thai AirAsia Shareholder’s Agreement is effective from the date the Thai SEC issues a letter to the Company notifying that it has commenced counting the period of effectiveness of the draft prospectus filed by the Company in relation to an initial public offering. The agreement may be terminated upon (i) written agreement of the parties, (ii) either AirAsia Investment or the Company, together with their respective affiliates, holding, in total, less than 20% of the total issued shares of Thai AirAsia, (iii) a party ceasing to have any further rights and obligations under the agreement as a result of it and its affiliates ceasing to hold any shares of Thai AirAsia, (iv) a special resolution to wind-up Thai AirAsia or to put it into voluntary or compulsory liquidation or (v) the listing of Thai AirAsia’s shares on the SET.

Asia Aviation Shareholders’ Agreement Each of the Selling Shareholders has entered into a shareholders’ agreement dated March 27, 2012 (the “New Asia Aviation Shareholders’ Agreement”) in respect of their relationship and the conduct of the business and affairs of the Company, which is intended to replace the existing shareholders’ agreement dated June 21, 2007 among the Selling Shareholders (the “Existing Asia Aviation Shareholders’ Agreement”). The New Asia Aviation Shareholders’ Agreement becomes effective upon the release by Credit Suisse of its interest in the rights of the Borrowers under the Existing Asia Aviation Shareholders’ Agreement of the Company that were assigned to Credit Suisse as security under the Credit Suisse Loan Agreement, whereupon the Existing Asia Aviation Shareholders’ Agreement will be terminated. The Selling Shareholders have entered into the New Asia Aviation Shareholders’ Agreement to ensure compliance with applicable laws and treaties that impose limitations on foreign shareholdings with respect to the business activities of Thai AirAsia. Under the New Asia Aviation Shareholders’ Agreement, the Selling Shareholders have agreed that the only business of the Company is the ownership of a shareholding of 51.0% or more in Thai AirAsia. The New Asia Aviation Shareholders’ Agreement classifies 51.0% of the Shares of the Company after the Combined Offering that are held by the parties to the New Asia Aviation Shareholders’ Agreement as “Restricted Shares” and the remaining Shares held by such parties as “Free Shares”. Each party may create a security interest over his Free Shares or transfer Free Shares to any person without any restrictions. In addition, the transfer of Restricted Shares is limited to the transfer of all (and not some only) of the Restricted Shares in a single transfer. However, each party has agreed not to transfer or create any security interest over his Restricted Shares for a period of five years from the completion of the Primary Offering. After the expiry of the five-year lock-up period, if such transfer is to be made to a third party, the transferring shareholder must first offer such Restricted Shares on terms no less favorable than the terms offered to the third party to the other shareholders who are a party to the New Asia Aviation Shareholders’ Agreement in proportion to their shareholding. The offer must be open for 20 business days and, if accepted, must be completed within 65 business days. If the offer is declined, all of such Restricted Shares may be transferred to such third party if the transferee is approved and agreed in writing by a majority in number of the other shareholders who are parties to the New Asia Aviation Shareholders’ Agreement who together own a majority of the total shares held by such other shareholders, and such transferee must accede to the New Asia Aviation Shareholders’ Agreement. The restrictions on transfer described above do not apply to transfers of Restricted Shares to any other party to the New Asia Aviation Shareholders’ Agreement or to his spouse, children, siblings or parents, provided they accede to the New Asia Aviation Shareholders’ Agreement. No transfers of Shares may be effected if it could result in the contravention of any applicable law or international treaty that imposes a limit on the ownership of Shares in the Company or Thai AirAsia while they continue their ordinary business activities. In addition, after the expiry of the five-year lock-up period, each party has also agreed that no party may create a security interest over his Restricted Shares unless such security interest is on terms that ensure continued compliance with any applicable law or international treaty that imposes a limit on the ownership of Shares in the Company or Thai AirAsia while they continue their ordinary business activities, and all other parties have agreed in writing. Each Selling Shareholder has agreed, following the expiry of the SET Lock-Up, to deposit such Restricted Shares with the TSD or an alternative custodian or escrow agent for so long as any applicable law or international treaty that imposes a limit on the ownership of Shares in the Company or Thai AirAsia while they continue their ordinary business activities requires.

120 Subject to the transfer restrictions described above, if a party desires to transfer his Restricted Shares to a third party, such transferring party is required to notify the other parties of the terms and conditions of the proposed transfer and the other parties have the right to elect to participate in the transfer on the same terms and conditions. To the extent the prospective purchaser refuses to purchase such Shares from the other parties who elect to participate in the transfer, the transferring party must not transfer his Shares to the purchaser unless, simultaneously with such transfer, the transferring party purchases the Shares from the other parties who elect to participate in the transfer. In addition, if any one or more of the parties holding in aggregate more than 12.5% of the total Shares in issue sell all of their Shares to a third party purchaser, such sellers may require by notice to the other parties that such other parties sell all of their Shares to the same purchaser on the same terms and conditions as those received by the seller. If there is a breach of the New Asia Aviation Shareholders’ Agreement that is not remedied within 10 business days after notice is given to remedy such breach, a non-defaulting party may issue a default notice to all other parties. Within 15 business days after the default notice, the defaulting party must offer to sell all of his Shares to the other parties by delivering a transfer notice to the other parties. Within 15 business days of receipt of the transfer notice, the other shareholders must notify the defaulting shareholder in writing whether they (as a group) accept or reject the offer. The sale price for such shares is to be equal to 90% of the volume weighted average price at which the Shares were traded on the SET during the five trading days prior to the giving of the acceptance notice of the offer or, if the Shares were not traded on the SET during such five days, 90% of the fair market value as determined by an independent certified valuer.

AirAsia Brand License Agreement AirAsia Berhad and Thai AirAsia entered into the AirAsia Brand License Agreement dated January 1, 2012. Under the terms of the agreement, AirAsia Berhad granted Thai AirAsia a non-exclusive and non-assignable license to reproduce and use the AirAsia brand, except that AirAsia Berhad undertakes that Thai AirAsia’s license to the AirAsia brand in Thailand is on an exclusive basis for the purposes of Thai AirAsia’s business operations under the permitted name of “AirAsia” (including the adoption of such name as part of Thai AirAsia’s corporate name for the duration of the AirAsia Brand License Agreement). Thai AirAsia is required to use the AirAsia brand in accordance with the AirAsia branding guidelines, including for the purposes of marketing communications. Any usage of the AirAsia brand, or any part thereof, in connection with any items of merchandise requires the written consent of AirAsia Berhad. The initial term of the AirAsia Brand License Agreement is five years. Thai AirAsia may extend the agreement for additional five year terms, provided that Thai AirAsia provides AirAsia Berhad with a notice of extension at least one year prior to the expiry of the then current term and the AirAsia Brand License Agreement has not been lawfully terminated prior to such notice of extension.

License Fee Thai AirAsia is required to pay a license fee in U.S. dollars of 1% of its total revenue per annum. Payment of the license fee is to be made on a quarterly basis. Such quarterly payment is calculated based on Thai AirAsia’s accounts and records at the end of each quarter and adjusted once the final audited accounts for the year is available.

Obligations AirAsia Berhad agreed, among other things, (i) to permit Thai AirAsia to undertake its business operations in accordance with the terms of the agreement, (ii) to provide Thai AirAsia with reasonable know-how, advice and guidance relating to the implementation of and/or adherence to the AirAsia branding guidelines in connection with Thai AirAsia’s business operations, (iii) to not directly or indirectly invest in or license another low cost air carrier based in Thailand and (iv) to provide reasonable assistance and advice in respect of the initial and ongoing training requires for customer service staff. Thai AirAsia agreed, among others, to (i) undertake its business operations in accordance with the terms of the agreement, (ii) take all necessary steps to ensure compliance with the AirAsia branding guidelines, (iii) ensure that all customer service staff undergo training as required by AirAsia Berhad from time to time, (iv) not, and to ensure that its majority shareholders do not, do anything which is additional to or not in accordance with, or may be detrimental or prejudicial to, the AirAsia brand or the AirAsia branding guidelines, (v) protect and promote the goodwill associated with the AirAsia brand and branding guidelines and ensure its staff, representatives and agents conduct the business operations in such a manner as to maintain the quality and reputation of the AirAsia brand, (vi) provide certain information to AirAsia Berhad, (vii) not make use of the AirAsia brand other than for the proper conduct of Thai AirAsia’s business, and (viii) not solicit AirAsia

121 Berhad’s crew and staff members without the prior written consent of AirAsia Berhad. Thai AirAsia has also agreed to adopt and apply a customer relations and complaints handling policy consistent with the AirAsia branding guidelines and to adopt the conditions of carriage of AirAsia Berhad where permitted by applicable laws and competent authorities. Thai AirAsia and AirAsia Berhad are to provide the other party with full details of any complaints received in respect of the business operations. In addition, Thai AirAsia is required to have technical and operational control of its aircraft, to comply with all applicable laws governing activity in relation to its aircraft and to execute or perform its business operations and maintain certain insurance policies specified under the AirAsia License Agreement. Thai AirAsia is also required to use suppliers nominated by AirAsia Berhad for certain specified items.

Marketing In connection with marketing and promotions, Thai AirAsia is required to comply with the standard operating procedures in the AirAsia procedures manual. Thai AirAsia is also required to cooperate with AirAsia Berhad in any advertising campaign, sales promotion program or other special activity in which AirAsia Berhad may engage or specify, including the display of point-of-service advertising and distribution of promotional literature.

AirAsia Brand AirAsia Berhad has exclusive ownership of the AirAsia brand and all parts of it, including any amendments and modifications to it, and all marketing communications and slogans used to promote the AirAsia brand. AirAsia Berhad also has exclusive rights to make additions or modifications to the AirAsia brand, the AirAsia branding guidelines and the AirAsia procedures manual. Thai AirAsia is required to use the AirAsia brand in strict accordance with the AirAsia procedures manual or as directed by AirAsia Berhad from time to time. Thai AirAsia is also required to, among other things, (i) not cause or permit anything which may damage, endanger or reduce the value or the brand (or any part thereof), other intellectual property of AirAsia Berhad and AirAsia Berhad’s title to the brand, (ii) not contest the validity of the AirAsia brand or AirAsia Berhad’s rights, interests or ownership of the AirAsia brand, (iii) provide AirAsia Berhad with details of any suspected infringement of the brand (or any part thereof) or other intellectual property of AirAsia Berhad and give reasonable assistance to AirAsia Berhad in dealing with such infringement or claim, (iv) affix notices to protect the brand on all documents or advertising associated with Thai AirAsia’s business operations, as directed by AirAsia Berhad, (v) cease to use the brand upon expiry or termination of the AirAsia Brand License Agreement or if AirAsia Berhad amends or ceases to use the brand and (vi) not apply for registration of the brand or name or any part thereof. In addition, to ensure maintenance of the AirAsia brand, Thai AirAsia is required to use suppliers nominated in writing by AirAsia Berhad for certain goods and services specified under the AirAsia Brand License Agreement. AirAsia Berhad has the right to undertake branding guideline reviews. Thai AirAsia is prohibited from modifying the AirAsia brand in its business operations without prior written consent of AirAsia Berhad. Under the terms of the AirAsia Brand License Agreement, AirAsia Berhad will own any permitted modifications to the AirAsia brand.

Indemnities AirAsia Berhad is to indemnify and hold harmless Thai AirAsia from any claims asserted or recovered by a third party if (i) the claim is made against Thai AirAsia for infringing on a third party’s intellectual property rights in relation to its use of the AirAsia brand in the course of its business operations and in accordance with the terms of the AirAsia Business License Agreement and (ii) any losses, damages, costs or expenses directly incurred as a result of any breach by AirAsia Berhad of the representations and warranties in the AirAsia Brand License Agreement; provided such liability does not arise out of Thai AirAsia’s breach of the agreement, negligence or wilful misconduct. Thai AirAsia is to indemnify and hold harmless AirAsia Berhad from claims asserted or recovered by a third party for, among others, (i) claims or actions arising from Thai AirAsia’s business operations, (ii) claims or actions for any loss or damage from the use of the AirAsia brand not in accordance with the AirAsia Business License Agreement and (iii) any damages, costs or expenses directly incurred as a result of any breach by Thai AirAsia of the representations and warranties in the AirAsia Business License Agreement; provided such liability does not arise out of AirAsia Berhad’s breach of the agreement, gross negligence or wilful misconduct.

122 Termination AirAsia Berhad may terminate the AirAsia Brand License Agreement immediately upon notice (i) if Thai AirAsia takes any legal or procedural step to challenge AirAsia Berhad’s exclusive right to all or any part of the AirAsia brand or the validity of all or any part of the AirAsia Brand License Agreement, (ii) if Thai AirAsia’s air operator certificate or air services license is revoked or cancelled, (iii) if a force majeure under the agreement occurs or (iv) if there is a change of control of Thai AirAsia, other than in connection with an initial public offering. Either party may terminate the agreement immediately upon notice under certain circumstances, including, among others, (i) if there is any breach by a party which is not remedied under the terms of the agreement, (ii) if a party makes or offers to make any arrangement or composition with or for the benefit of its creditors, (iii) if a party ceases or threatens to cease to carry on business or suspends or threatens to suspend all or substantially all of its operations, except in a case of a permitted strike as described in the agreement (iv) if a party suspends payment of or is unable to pay its debts and (v) if a party becomes insolvent or bankrupt. Thai AirAsia has agreed that on expiry or other termination of the AirAsia Brand License Agreement, it will, among others, (i) immediately and permanently cease to use the AirAsia brand and (ii) immediately cease carrying on its business operations under the AirAsia brand and refrain from any action that would or may indicate a relationship with AirAsia Berhad.

Shared Service Center Service Agreements Thai AirAsia and AirAsia Berhad entered into a service agreement dated January 1, 2012 with respect to certain financial accounting services (the “AirAsia Berhad Shared Service Center Service Agreement”). Under the terms of the agreement, Thai AirAsia has agreed to establish a shared service center staffed by Thai AirAsia’s employees to perform various mutually agreed standard operating procedures for financial accounting services to AirAsia Berhad. The services to be provided do not include management accounting services or system development, but the shared service center will be responsible for the maintenance of system security and access levels to AirAsia Berhad’s accounting software. AirAsia Berhad has agreed to pay a monthly fee for such services, with the amount tied to the number of aircraft operated by AirAsia Berhad plus a specified markup, together with reimbursement of Thai AirAsia’s costs (other than remuneration) on an actual costs basis. The AirAsia Berhad Shared Service Center Service Agreement is valid for a term of five years from the date of the agreement, unless terminated in accordance with its terms. The AirAsia Berhad Shared Service Center Service Agreement may be terminated by either party upon 60 days’ written notice for any material breach of the Agreement, if AirAsia Berhad terminates its operations or if the shared service center is not able to provide the contracted services. AirAsia Berhad may also terminate the AirAsia Berhad Shared Service Center Service Agreement upon giving 90 days’ written notice if it wishes to stop using the contracted services. Thai AirAsia and Indonesia AirAsia also entered into a service agreement dated January 1, 2012 (the “Indonesia AirAsia Shared Service Center Service Agreement”), with substantially the same terms as the AirAsia Berhad Shared Service Center Service Agreement described above.

ICT Service Agreement AirAsia Berhad and Thai AirAsia entered into a service agreement dated October 1, 2011 with respect to certain information and communication technology services (the “ICT Service Agreement”). Under the terms of the agreement, AirAsia Berhad has agreed to perform various specified information and communication technology services to Thai AirAsia. Thai AirAsia has agreed to pay for such services as invoiced on a monthly basis by AirAsia Berhad. If there is a significant change in the services provided or the cost thereof, AirAsia Berhad has agreed to advise Thai AirAsia of the changes in cost allocations related to the services provided. The ICT Service Agreement is valid for a term of five years from the date of the agreement, unless terminated in accordance with its terms. The ICT Service Agreement may be terminated by either party upon 60 days’ written notice if AirAsia Berhad terminates its operations. The ICT Service Agreement may also be terminated upon written notice upon the occurrence of an event of default.

Related Party Transaction Policies Our board of directors has established and approved policies governing related party and connected transactions to avoid conflicts of interest and to manage these transactions. Our audit committee is responsible

123 for ensuring that the terms and conditions of related party transactions are consistent with market practice and that the prices to be charged in these transactions are evaluated and compared with market prices. If market prices are not available, our audit committee must ensure that the prices are reasonable and the transactions are carried out in the Company’s and the shareholders’ best interests. We may use information from the report of an independent third party appointed by us to evaluate the reasonableness of a proposed transaction as well as to compare prices and other terms to ensure reasonable pricing and provide the best arrangement for us. Approval for related party transactions is to be granted by our management, our board of directors or our shareholders, depending on the size of the proposed related party transaction. Any manager or director who has a conflict of interest will not be allowed to vote on or approve a transaction. In executing related party transactions, we comply with the regulations of the Thai SEC and SET, as well as the accounting standards regarding disclosure of information concerning related persons and companies as determined by the Institute of Certified Accountants and Auditors of Thailand. In addition, all AirAsia Group members are required to comply with Standard Operating Procedures that set forth the guidelines, policies and procedures to govern the identification, recording, reporting and monitoring of intercompany transactions and balances. Under the Standard Operating Procedures, intercompany transactions should be carried out based on normal commercial terms that are generally available to third parties, on arm’s length basis, not to the detriment of the minority shareholders and in compliance with the relevant legislative requirements of the jurisdiction of each party to the intercompany transaction. In addition, all intercompany transactions should be supported by written documents or contracts, and intercompany contracts should be approved in a similar manner as contracts with third parties. The Standard Operating Procedures also contain provisions regarding: • the recording of intercompany transactions and balances; • monitoring of intercompany transactions and balances; • chargebacks to the relevant intercompany party; • payments made on behalf of an intercompany party; • collections received on behalf of an intercompany party; and • detailed procedures relating to the above.

124 REGULATION OF THE AIRLINE INDUSTRY IN THAILAND International Regulatory Framework The Chicago Convention The regulatory system for international air transport is based upon principles laid down by the Convention on International Civil Aviation signed at Chicago on December 7, 1944 (the “Chicago Convention”), which was entered into and ratified by Thailand in 1944 and 1947, respectively. The Chicago Convention recognizes the principle that each state has sovereignty over its airspace and has the right to regulate the operation of scheduled and unscheduled international air services over or into its territory. The Chicago Convention also established ICAO, which operates as a specialized agency of the United Nations. ICAO has developed standards and recommended practices for a wide range of international air transport activities such as aircraft operations, rules of the air, personnel licensing, security standards, accident investigation, navigation services, airport design and environmental protection. As a member of ICAO, Thailand has adopted most of the standards and practices recommended by ICAO.

Freedoms of the Air In addition, international air transport is founded on a collection of transport rights that derive from two multilateral air transport agreements among states, the International Air Transport Agreement of 1944 (the “Five Freedoms Agreement”) and the International Air Services Transit Agreement of 1944 (the “Transit Agreement”); in addition, these rights are referred to in air services agreements negotiated between individual states. The Five Freedoms Agreement defines certain “air freedoms”, or traffic rights, which each signatory state may grant to another signatory state by agreement and which may be summarized as follows: • First Freedom. Often referred to as “transit rights”, the privilege of a carrier to use the airspace of a sovereign state other than its home state without landing. • Second Freedom. The privilege of a carrier to land in a sovereign state other than its home state for non-traffic purposes, such as refueling or maintenance. • Third Freedom. Often referred to as “transport rights”, the privilege of a carrier to put down, in a sovereign state other than its home state, passengers, mail and cargo taken on in the home state. • Fourth Freedom. The privilege of a carrier to take on passengers, mail and cargo destined for its home state. • Fifth Freedom. The privilege of a carrier to take on passengers, mail and cargo in a sovereign state other than its home state, and then fly on to another sovereign state (rather than return to the home state) to unload the passengers, mail and cargo provided the flight originates from or continues to the carrier’s home state. Thailand is not a party to the Five Freedoms Agreement but has entered into air services agreements that refer to such freedoms. Thailand also signed the Transit Agreement in 1944 and ratified it in 1947. The Transit Agreement gives airlines based in contracting states rights for scheduled flights to fly over the territories of the other contracting states without landing and to make non-traffic stops in such territories, while the Chicago Convention permits non-scheduled flights (including cargo flights) to fly over the territories of the signatory states and gives rights for non-scheduled flights to make stops for non-traffic purposes in territories of such states, subject to certain restrictions which can be imposed by individual states.

General Agreement On Trade in Services Thailand became a founding member of the World Trade Organization (“WTO”) on December 28, 1994. All WTO members are also members of the General Agreement on Trade in Services (“GATS”) and, to varying degrees, have assumed commitments under GATS following the principle of progressive liberalization. The GATS Annex on Air Transport Services applies to measures affecting trade in air transport services, whether scheduled or non-scheduled, and ancillary services, which are not relevant to traffic rights agreements. These are aircraft repair and maintenance services (excluding line maintenance), selling and marketing of air transport services (excluding their pricing and other conditions) and computer reservations system services. However, Thailand made specific commitments under GATS in relation to air transport services to provide most favored nation access to the Thai economy only in relation to aircraft repair and maintenance services and the sale and marketing of air transport services. The specific commitments made by Thailand under GATS do not reduce Thailand’s obligations under air service agreements.

125 IATA In addition to the interstate regulatory framework, scheduled air transport companies created IATA, the trade association for international airlines, in 1945 in Havana, Cuba. IATA holds a mandate to establish regulations for the air transport profession and to supply participant members with a forum for the coordination and the proper implementation of tariffs on international routes. IATA provides a forum for tariff coordination on international routes by convening traffic conferences and also serves as an international liaison in areas such as commercial and financial procedures (e.g., commercial documentation, common ticket dispensers and the licensing of travel agents).

International Limitations on Liability of Carriers The Convention for the Unification of Certain Rules Relating to International Carriage by Air Signed at Warsaw on October 12, 1929 (the “Warsaw Convention”) and the Protocol to Amend the Convention for the Unification of Certain Rules Relating to International Carriage by Air Signed at Warsaw on October 12, 1929 Done at The Hague, October 28, 1955 (the “Hague Protocol”) established limited liability for air transport companies based on a presumption fault. The financial limits on liability set out in the Warsaw Convention may be exceeded only if the victim proves gross negligence on the part of the air transport company. Certain countries, particularly the United States, have contested both the principle of limited liability and the damage amounts available under the Warsaw Convention. Thailand has yet to accede to the Warsaw Convention or the Hague Protocol. In 1999, member states of the ICAO adopted the Convention for the Unification of Certain Rules for International Carriage (the “Montreal Convention”), which amended the Warsaw Convention with respect to compensation for passengers and owners of cargo involved in aviation disasters. The Montreal Convention introduced a two-tier liability system for carriers. The first tier involves a strict liability regime for air transport companies with respect to the first 100,000 IMF Special Drawing Rights. The second tier provides for unlimited liability if an air transport company cannot disprove liability for an aviation disaster. As of December 31, 2009, the limitation of liability for passengers under the first tier was expanded by 13.1% under the auto-escalation mechanism provided for in the Montreal Convention. As a result, passengers are now afforded up to 113,100 IMF Special Drawing Rights per individual passenger, 19 IMF Special Drawing Rights per kilogram for cargo, IMF 1,131 Special Drawing Rights for baggage and 4.694 IMF Special Drawing Rights for passenger delays. Thailand has yet to accede to the Montreal Convention. The Warsaw Convention, the Hague Protocol or the Montreal Convention may apply where a journey originates and terminates in countries that are parties to the relevant convention, even if the journey connects through a country that is not a party to the relevant convention. The Rome Convention on Damage Caused by Foreign Aircraft to Third Parties on the Surface signed at Rome on October 7, 1952 (the “Rome Convention”) also regulates third-party damages. Thailand has not ratified the Rome Convention and third-party damages in Thailand are regulated in accordance with the principles of Thai law.

International Security Interests The Convention on International Interests in Mobile Equipment (the “Cape Town Convention”), which took effect on March 1, 2006 when it was ratified by eight countries, creates international standards for registration of ownership, security interests (liens), leases and conditional sales contracts, as well as various legal remedies for default, including relief pending final determination of claims and safeguards for debtors. The Cape Town Convention’s Aircraft Protocol also standardized transactions involving movable property, particularly aircraft and aircraft engines, and as such, aircraft under lease, hire-purchase or conditional sale may be subject to an international security interest. The Cape Town Convention also establishes the priority of creditors under aircraft financing transactions in the signatory countries.

Allocation of Time Slots at International Airports Access to international airports is primarily regulated by the allotment of time slots. Time slots correspond to the capacity of an airport’s facilities and the ability of a carrier to land at, or take off from, an airport at a specified time and date.

126 Time slots are allotted twice a year, at the time airline flight schedules for the relevant IATA timetable period are collected by the designated airport coordinator, according to the following procedures: • the airport coordinator notifies all air carriers of airport capacity for the season and historical time slot information; • airlines submit to the airport coordinator their requests for time slots five months prior to the beginning of each timetable period; • the airport coordinator first allocates time slots to airlines exercising “grandfather rights” (airlines that had operated the same time slots during the previous equivalent timetable period); • the airport coordinator gives airlines information regarding preliminary time slot allocations, including which time slots were allotted to incumbents and which time slots are required to be adjusted due to airport capacity limitations; • a pool is created which includes all available time slots, whether they are newly created, unused or abandoned for any reason; and • the airport coordinator allocates the pooled time slots to new entrants and to incumbents on a pro rata basis. Requests for new time slots are rarely satisfied at busy airports. At the close of this preliminary allotment process, an IATA schedule coordination conference is organized in June and November of each year, to enable airlines to coordinate the time slots they are allotted in different airports, so that when a flight links two airports, the time slots granted on each platform are compatible with one another; and exchange time slots among themselves in the event that the time slots originally allotted by the airport coordinators are unsatisfactory. Unused time slots are typically re-allotted. The grandfather rights of historic users give established airlines a decisive commercial advantage over other airlines at busy airports.

International Air Traffic Tariffs and International Airport Landing Charges Airlines are subject to air transport tariffs which are divided into air navigation charges and airport charges. Air navigation charges include routing charges for overflights and terminal charges. Airport charges include landing fees and passenger charges. In 2011, we paid a total of Baht 1,289.8 million (US$40.7 million), for these air navigation and airport charges.

Domestic Regulatory Framework The airline industry in Thailand is governed by the Announcement of the National Executive Council No. 58 (“NEC No. 58”) and the Air Navigation Act B.E. 2497 (1954), as amended (the “Air Navigation Act”). The authority responsible for overseeing the industry in Thailand is the DCA.

DCA The DCA is an organization within the Ministry of Transport (the “MOT”) which administers aviation activities. The DCA is the authority for all activities that involve the transportation of passengers, mail and cargo from and into Thai airspace and is responsible for aircraft certification, registration, personnel certification, airport licensing, air operator certification, air traffic control and air navigation equipment certification. The DCA’s main objective is to ensure that the air transportation system operated by direct service providers is safe for passengers and to ensure that air transport service operators conduct their activities in compliance with appropriate regulations. As Thailand is a member of the ICAO, Thai aviation laws and regulations have been based on the ICAO standards and recommended practice.

Airline Operations in Thailand To operate either scheduled or non-scheduled air transport services in Thailand, the NEC No. 58 requires an air transport service operator to obtain an ASL from the Minister of Transport. An ASL can be suspended or revoked by the Minister of Transport if the licensee fails to comply with the conditions prescribed in the license or the laws and regulations regarding air navigation or safety standards prescribed by the DCA. The ASL is valid for a period determined by the DCA. Our current ASL was issued on November 6, 2008 and is valid for five years. According to the Air Navigation Act, an air service operator is required to obtain an AOC. An AOC is issued by the DCA under the Rule of Civil Aviation Board of Thailand (“CAB”) No. 85 to certify that the

127 licensee has complied with the safety standards prescribed by the CAB in the provision of air services. An AOC is issued for a term of not more than five years and can be renewed for further terms of not more than five years, subject to the licensee’s passing a safety inspection by the DCA. Our current AOC was issued on December 26, 2008 and was latest amended on October 28, 2010, and will continue to be in effect under its terms until November 5, 2013, unless surrendered, suspended or revoked. An AOC can be suspended or revoked if the air service provider fails to comply with the operations specifications attached to the AOC, the operating manuals approved by the relevant competent authorities, or the laws regarding air navigation and safety standards as prescribed by the DCA. An AOC can also be suspended or revoked if the air service provider amends its operating manuals without obtaining the approval of the relevant competent authority. The Air Navigation Act contains provisions regulating air navigation in Thailand. The Air Navigation Act also contains provisions in relation to the registration of aircraft, external marking of aircraft, aircraft types, aircraft production, airworthiness control, journey log books, aerodromes, air navigation facilities, accidents, qualifications of operating personnel, ramp services and technical services. The Air Navigation Act provides for the registration of aircraft to be administered by the DCA where the applicant (i) is the owner or (ii) has a right of possession over the aircraft and has received permission from the Minister of Transport to carry out the registration. All applicants must be Thai nationals. Where the applicant is a limited company or public company, (i) the company must be incorporated under Thai law, (ii) no shares in the company may be in bearer form, (iii) the majority of the directors must be Thai nationals, (iv) its head office must be located in Thailand and (v) at least 51% of its shares must be held either singly or collectively by either Thai natural persons, ministries or sub-ministries or departments of Thai Government (“Government Entity”), or a limited company or public company in which not less than 51% of the shares are held by a Government Entity or Thai natural persons. In relation to any aircraft registered in Thailand (a “Thai aircraft”), the operator of the Thai aircraft is required to hold a certificate of registration granted by the DCA for such Thai aircraft. Such certificate is granted to certify that the aircraft has been duly entered on the register of Thailand and in accordance with the Chicago Convention and with the Air Navigation Act. A Thai aircraft may fly only if it has been issued a certificate of airworthiness by the DCA. The DCA issues a certificate of airworthiness only when it is satisfied that the aircraft is fit to fly, having considered factors such as the design, construction and materials of the aircraft, the results of flying trials and such other tests as required by the DCA. A standard certificate of airworthiness is valid for a period of three years and can be renewed if the DCA is satisfied that such aircraft has undergone maintenance and is in a condition for safe operation. The Air Navigation Act also established the CAB to issue rules in accordance with the Air Navigation Act and the Annexes to the Chicago Convention, as well as to (a) prescribe rules and method of calculation of domestic airfares and freight rates, subject to the approval of the Minister of Transport, and the maximum tariffs for domestic airfares and freight rates set out under the relevant MOT’s ministerial regulation and (b) approve the rates charged for the use of air navigation facilities. Under the MOT’s ministerial regulation, domestic airfares must be distance based fares and must not exceed Baht 30 per kilometer. Pursuant to the Notification of the DCA Regarding Determination of Domestic Airfares dated January 13, 2010, domestic airfares must not exceed Baht 13 per kilometer for routes which have a flight distance of over 300 kilometers and Baht 22 per kilometer for routes which have a flight distance of under 300 kilometers and which is inconvenient for ground travelling.

Domestic Traffic Rights In order to operate scheduled domestic passenger services, an airline is required to secure rights from the DCA. The DCA is the approving authority for domestic flight rights and grants these rights depending on traffic volume and the spread of services.

International Traffic Rights The operation of international passenger services depends on traffic rights negotiated between the Thai government and the government of another country. These rights are enshrined in an air services agreement (“ASA”) between the two governments with the capacity of the international airline services to be negotiated. As ASAs are negotiated and agreed on a government-to-government basis, the relevant traffic rights under these agreements belong to the relevant governments. In Thailand, any applications for the operation of passenger services to international destinations is required to be directed to the DCA for approval and allocation of the requested traffic rights. Our ability to expand our route network and to increase frequency and capacity is subject to our ability to obtain sufficient traffic rights and time slots to various destinations.

128 Beside traffic rights, international operators are also subject to slot coordination for each IATA season. The two IATA seasons annually are the summer season and winter season. The winter season runs from the last Sunday of October to the last Saturday of March and the summer season runs from the last Sunday of March to the last Saturday of October each year. Generally, schedules are planned approximately six months in advance.

Thailand’s ASAs As of the date of this Offering Memorandum, Thailand is a party to bilateral air services agreements with 99 countries. Each air services agreement contains provisions regarding matters such as landing rights, routes, capacity, tariffs (including freight charges), sales and marketing, other commercial activities and operating authorization. Traffic rights granted in bilateral air services agreements are based on one or more of the air freedoms defined in the Five Freedoms Agreement. Each air services agreement may be amended from time to time at the request of either of the contracting states. Traffic rights for non-scheduled flights are generally granted unilaterally by each state participating in the Chicago Convention in relation to its own airspace directly to the airlines concerned. The home states of these airlines are involved only in the case of disputes. An initiative to liberalize air transport services among ASEAN countries within an “open skies” framework was initiated in 2004. In order to gradually remove restrictions and achieve greater flexibility and capacity in air services operations in ASEAN, as laid out in the initial policy in 2004, and to build a single unified ASEAN aviation market by 2015, the ASEAN countries signed the ASEAN Multilateral Agreement on Air Services in 2009 and the ASEAN Multilateral Agreement on the Full Liberalization of Passenger Air Services in November 2010. Our status as a designated airline allows us to exercise the traffic rights granted to Thailand under the air services agreements to which Thailand is a contracting state. Although the Government has designated and may continue to designate additional airlines according to its liberalization policy, our rights, particularly in relation to frequency and capacity of flights, under the air services agreements would not necessarily be affected by the designation of additional carriers. Any subsequently designated airline would be entitled to enjoy the unused rights of Thailand under the air services agreements. Alternatively, the Government could negotiate with its contracting states to obtain additional traffic rights for the newly designated airline, rather than reducing the rights currently enjoyed by us.

Domestic air traffic tariffs and domestic airport landing charges Pursuant to the Air Navigation Act, the CAB has the power to prescribe the regulations regarding landing and parking charges and passenger service charges, with approval from the Minister of Transport. The CAB prescribes the maximum landing and parking charges and passenger service charges chargeable by AOT and other airport operators.

129 MANAGEMENT AND CORPORATE GOVERNANCE Board of Directors Board of Directors of the Company Our board of directors has ultimate responsibility for the administration of affairs of the Company. Our Articles of Association provide for a board of directors of at least five directors, and not less than half of the directors are required to reside in Thailand. In addition, our Articles of Association provide that one-third, or the number of directors closest to one-third, of our board of directors is required to retire at each annual general meeting of shareholders. The directors who are to retire during the first and second years following the registration of the Company are to be drawn by lots. In subsequent years, those directors who have held the office the longest must retire first and retiring directors are eligible for re-election. The business address of all the directors is 60/1, 3rd Floor, Monririn B Building, Sai Lom Lane, Phahonyothin Road, Samsen Nai Sub-district, Phaya Thai District, Bangkok, Thailand. Our directors are as follows:

Name Age Position Dr. Pongsathorn Siriyodhin ...... 60 Chairman and Independent Director Mr. Tassapon Bijleveld ...... 44 Director Mr. Pornanan Gerdprasert ...... 45 Director Mr. Tanapat Ngamplang ...... 55 Director Mr. Preechaya Rasametanin ...... 53 Director M.L. Bovornovadep Devakula ...... 50 Director Mr. Santisuk Klongchaiya ...... 46 Director Mr. Distorn Vajarodaya ...... 48 Independent Director Mr. Nuttawut Phawborom ...... 47 Independent Director Dr. Pongsathorn Siriyodhin. Dr. Siriyodhin was appointed Chairman and Independent Director of the Company and of Thai AirAsia on December 13, 2011. Dr. Siriyodhim has also been the Chairman of Krungthai Card Public Co. Ltd. since 2001, and the Chairman of Ananda Development Plc since October 2011. Previously, Dr Siriyodhin was a director of Nok Air Co., Ltd. from 2004 until September 2011. Dr. Siriyodhin holds a Bachelor of Arts degree, majoring in economics, from the California State University, a Master’s degree in economics from the California State University and a Ph.D. in economics from the University of Cincinnati. Mr. Tassapon Bijleveld. Mr. Bijleveld was appointed Director of the Company and Thai AirAsia on June 21, 2007 and September 19, 2003, respectively. Mr. Bijleveld is also the Chief Executive Officer of Thai AirAsia, where he has been employed since 2004. Prior to joining Thai AirAsia, he was the Managing Director of Warner Music (Thailand) Ltd. Mr. Bijleveld holds a Bachelor of Business Administration degree from Assumption University and a Master of Marketing degree from Thammasat University. Mr. Pornanan Gerdprasert. Mr. Gerdprasert was appointed Director of the Company and Thai AirAsia on June 21, 2007 and July 1, 2004, respectively. Mr. Gerdprasert is also the Chief Financial Officer of Thai AirAsia, where he has been employed since 2004. Prior to joining Thai AirAsia, he was the Finance and Accounting Director of Teleinfo Media Co., Ltd. Mr. Gerdprasert holds a Bachelor’s degree in accounting, a Higher Diploma in Auditing and a Masters degree in accounting from Thammasat University. Mr. Tanapat Ngamplang. Mr. Ngamplang was appointed Director of the Company on December 13, 2011. Mr. Ngamplang is also the Director of Operation of Thai AirAsia, where he has been employed since 2003. Prior to joining Thai AirAsia, he was the Director of Flight Operation for Phuket Airline Co., Ltd. Mr. Ngamplang holds a Bachelor of Science degree, majoring in electrical engineering, from Royal Thai Air Force Academy, a Bachelor of Arts degree, majoring in public administration, from Sukhothai Thammathirat Open University and a Master of Business Administration degree from Kirk University. Mr. Preechaya Rasametanin. Mr. Rasametanin was appointed Director of Thai AirAsia on January 1, 2004 and a Director of the Company on June 21, 2007. Mr. Rasametanin is also the Director of Engineering of Thai AirAsia, where he has been employed since 2004. Prior to joining Thai AirAsia, he was the Product Support Manager of the Aviation Products Division for Goodyear Thailand Public Company Ltd. Mr. Rasametanin holds a Bachelor of Science degree, majoring in mechanical engineering, from the Royal Thai Air Force Academy. M.L. Bovornovadep Devakula. M.L. Devakula was appointed Director of the Company on December 13, 2011. M.L. Devakula is also the Director of Business Development of Thai AirAsia, where he has been employed since March 1, 2004. Prior to joining Thai AirAsia, he was the Manager of Advance Info Services, Plc from 1999 to 2003 and the Secretary to the Chairman of the board of directors of Shin Corporation Plc. from

130 1994 to 1998, Secretary to the Deputy Prime Minister of Thailand from 1994 to 1998 and Secretary to the Minister of Foreign Affairs from 1994 to 1998. M.L. Devakula holds a Bachelor of Science degree from the State University of New York. Mr. Santisuk Klongchaiya. Mr. Klongchaiya was appointed Director of the Company on December 13, 2011. Mr. Klongchaiya is also the Director of Commercial for Thai AirAsia, where he has been employed since January 1, 2007. Prior to joining Thai AirAsia, he was the General Manager of Warner Music (Thailand) Co., Ltd from 2000 to 2006 and the Marketing Manager of Reebok Wongpaitoon Footwear Plc from 1996 to 2000. Mr. Klongchaiya holds a Bachelor of Business Administration degree, majoring in marketing, from Assumption University and a Master of Science degree, majoring in marketing, from Thammasart University. Mr. Distorn Vajarodaya. Mr. Vajarodaya was appointed Independent Director of the Company on December 13, 2011. He also serves as the Grand Chamberlain of the Royal Household. Previously, he was the Chairman of the board of directors of Suvarnchad Company Limited in 2002 and the Chairman of the board of directors of Golden Place Management Company Limited in 2000. Mr. Vajarodaya holds a Bachelor of Accounting degree from The University of the Thai Chamber of Commerce and a Master of Business Administration degree from Kasetsart University. Mr. Nuttawut Phawborom. Mr. Phawborom was appointed Independent Director of the Company and of Thai AirAsia on December 13, 2011. He has also been an Independent Director at the Health Network Public Company Limited since 2010, a member of the audit committee and Chairman of the remuneration committee of Prasit Pattana Public Company Limited since 2003 and an executive director of KPN Music Company since 1999. Previously, Mr. Phawborom was an advisor of the Deputy Minister of Education from 2000 to 2001. Mr. Phawborom holds a Bachelor of Economics degree from The University of the Thai Chamber of Commerce and a Master of Business Administration degree from City University.

Board of Directors of Thai AirAsia Thai AirAsia’s board of directors has ultimate responsibility for the administration of the affairs of Thai AirAsia. Thai AirAsia’s Articles of Association provide for a board of directors of not more than nine directors. Thai AirAsia’s Articles of Association provide that one third, or the number of directors closest to one-third, of its board of directors is required to retire at each annual general meeting of shareholders. Further, under the terms of the Thai AirAsia Shareholders’ Agreement, the Company has a right to appoint not more than three directors of Thai AirAsia and AirAsia Investment has the right to appoint not more than two directors of Thai AirAsia. The business address of all Thai AirAsia’s directors is 99 1st Floor, OSC Building, Kingkaew Road, Tambon Rachatewa, Ampur Bangplee, Samutprakarn. Thai AirAsia’s directors are as follows:

Name Age Position Dr. Pongsathorn Siriyodhin ...... 60 Chairman and Independent Director Tan Sri Anthony Francis Fernandes ...... 47 Director Dato Kamarudin Bin Meranun ...... 49 Director Mr. Tassapon Bijleveld ...... 44 Director Mr. Pornanan Gerdprasert ...... 45 Director Mr. Preechaya Rasametanin ...... 53 Director Mr. Nuttawut Phowborom ...... 47 Independent Director Dato Ahmad Farid Bin Ridzuan ...... 50 Independent Director Dr. Pongsathorn Siriyodhin. See “— Board of Directors of the Company” for information on Dr. Siriyodhin. Tan Sri Anthony Francis Fernandes. Mr. Tony Fernandes was appointed Director of Thai AirAsia on September 19, 2003. Mr. Tony Fernandes has also been the Group Chief Executive Officer of AirAsia Berhad since December 2001. Prior to joining the AirAsia Group, Mr. Tony Fernandes was Financial Controller at Virgin Communications London from 1987 to 1989, Senior Financial Analyst at Warner Music International London from 1989 to 1992, Managing Director at Warner Music Malaysia from 1992 to 1996 and Regional Managing Director, ASEAN and Vice President, ASEAN at Warner Music South East Asia from 1996 to 1999 and from 1999 to 2001, respectively. Mr. Tony Fernandes holds a Master of Business Administration degree from City University and Master of Business Administration degree from the London School of Economics. Mr. Tony Fernandes was admitted as an Associate Member of the Association of Chartered Certified Accountants in 1991 and became a Fellow Member in 1996. Dato Kamarudin Bin Meranun. Dato Kamarudin was appointed Director of Thai AirAsia on December 8, 2003. Dato Kamarudin has also been the Group Deputy Chief Executive Officer of AirAsia Berhad since

131 December 2005. Prior to that, Dato Kamarudin was a Director of AirAsia Berhad from 2001 to 2004 and an Executive Director of AirAsia Berhad from 2004 to 2005. Prior to joining the AirAsia Group, Dato Kamarudin was a Portfolio Manager at Arab-Malaysian Merchant Bank from 1988 to 1993 and an Executive Director of Innosabah Capital Management Sdn. Bhd., a subsidiary of Innosabah Securities Sdn. Bhd., in 1994. Dato Kamarudin subsequently acquired the shares of the joint venture partner of Innosabah Capital Management Sdn. Bhd., which was later renamed Intrinsic Capital Management Sdn. Bhd. Dato Kamarudin holds a Diploma in Actuarial Science from the University Technology MARA, a Bachelor of Science degree, magna cum laude, majoring in finance, and a Master of Business Administration from Central Michigan University. Mr. Tassapon Bijleveld. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Bijleveld. Mr. Pornanan Gerdprasert. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Gerdprasert. Mr. Preechaya Rasametanin. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Rasametanin. Mr. Nuttawut Phawborom. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Phawborom. Dato Ahmad Farid Bin Ridzuan. Mr. Ridzuan was appointed Independent Director of Thai AirAsia on December 13, 2011. Previously, he was the Executive Director of Leo Burnett Advertising Sdn. Bhd. from 1998- 2002, Managing Director of Acxiom Asia Limited from 1997-1998 and Vice-President of Marketing & Sales Group Marketing Division of Cellular Communication Network Sdn. Bhd from 1994-1997. Dato’ Ridzuan holds a Master of Business Administration degree from United States International University and a Bachelor of Business Administration degree, majoring in marketing, from Western Michigan University.

Audit Committees of the Company and Thai AirAsia Our audit committee was appointed by our shareholders at a shareholders’ meeting on December 13, 2011. Thai AirAsia’s audit committee was appointed by Thai AirAsia’s shareholders at a shareholders’ meeting on January 25, 2012. The Thai SEC and SET regulations require our audit committee to consist of at least three independent directors, one of whom is to have sufficient knowledge and experience to review the reliability of the financial statements. The members of our audit committee are as follows:

Name Age Position Within Committee Dr. Pongsathorn Siriyodhin ...... 60 Chairman Mr. Nuttawut Phowborom ...... 47 Member Mr. Distorn Vajarodaya ...... 48 Member The members of Thai AirAsia’s audit committee are as follows:

Name Age Position Within Committee Dr. Pongsathorn Siriyodhin ...... 60 Chairman Mr. Nuttawut Phowborom ...... 47 Member Dato Ahmad Farid Bin Ridzuan ...... 50 Member Our and Thai AirAsia’s respective audit committees are accountable to the board of directors of the Company or Thai AirAsia, as relevant, for the performance of their duties. The scope of authority, duties and responsibilities of each audit committee includes the following: • to review the financial reporting process to ensure that it is accurate and adequate; • to review the internal control system and internal audit system to ensure that they are suitable and efficient, to determine an internal audit unit’s independence, as well as to approve the appointment, transfer and dismissal of the chief of an internal audit unit and/or hiring an internal audit company or any other unit in charge of an internal audit; • to review the compliance with the law on securities and exchange, the regulations of the SET, and the laws relating to the business of the Company or Thai AirAsia, as relevant; • to consider, select and nominate an independent person to be the auditor, and to propose such person’s remuneration, as well as to attend a non-management meeting with an auditor at least once a year; • to review the efficiency and the suitability of the risk management;

132 • to review and recommend the scope, duties and responsibilities of the audit committee to be consistent with the situation; • to have the authority to inspect and investigate relevant parties subject to the authority of the audit committee and to have the authority to hire or procure a professional specialist to assist in the inspection and investigation; • to review the connected transactions, or the transactions that may lead to conflicts of interest, to ensure that they are in compliance with the laws and the regulations of the SET, and are reasonable and for the highest benefit of the Company or Thai AirAsia, as relevant; • to prepare, and to disclose in the annual report, an audit committee’s report, which must be signed by the Chairman of the audit committee and consist of at least the following information: (a) an opinion on the accuracy, completeness and credibility of the financial report; (b) an opinion on the adequacy of the internal control system; (c) an opinion on the compliance with the law on securities and exchange, the regulations of the SET, or the laws relating to the relevant business; (d) an opinion on the suitability of the relevant auditor; (e) an opinion on the transactions that may lead to conflicts of interests; (f) the number of the audit committee meetings, and the attendance at such meetings by each committee member; (g) an opinion or overview of comments received by the audit committee from its performance of duties in accordance with the charter; and (h) other transactions which, according to the audit committee’s opinion, should be known to the shareholders and general investors; • in its performance of duties, if it is found or suspected that there is a transaction or any of the following acts which may materially affect the financial condition and operating results, the audit committee shall report to the board of directors for ratification within the period of time that the audit committee thinks fit: (a) a transaction which causes a conflict of interest; (b) any fraud or irregularity which causes a conflict of interest; (c) an infringement of the law on securities and exchange, the regulations of the SET, or any law relating to the Company’s business. If the board of directors or management fails to make a rectification within the period of time as aforementioned, any audit committee member may report on the transaction or act as aforementioned to the office of the Thai SEC or SET; and • to perform any other act as assigned by the relevant board of directors, with the approval of the audit committee.

Executive Officers Executive Officers of the Company Our executive officers consist of the following persons:

133 Mr. Tanapat Ngamplang. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Ngamplang. Mr. Preechaya Rasametanin. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Rasametanin. M.L. Bovornovadep Devakula. See “— Board of Directors — Board of Directors of the Company” for information on M.L. Devakula. Mr. Santisuk Klongchaiya. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Klongchaiya.

Executive Officers of Thai AirAsia The executive officers of Thai AirAsia consist of the following persons:

Name Age Position Mr. Tassapon Bijleveld ...... 44 Chief Executive Officer Mr. Pornanan Gerdprasert ...... 45 Chief Financial Officer Mr. Tanapat Ngamplang ...... 55 Director of Operations Mr. Preechaya Rasametanin ...... 53 Director of Engineering M.L. Bovornovadep Devakula ...... 48 Director of Business Development Mr. Santisuk Klongchaiya ...... 46 Director of Commercial Mr. Vorakit Techapalokul ...... 42 Director of People Mr. Natthawach Siriwongsal ...... 38 Director of Commercial, Ancillary Certain information with respect to the executive officers of Thai AirAsia is set out below: Mr. Tassapon Bijleveld. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Bijleveld. Mr. Pornanan Gerdprasert. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Gerdprasert. Mr. Tanapat Ngamplang. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Ngamplang. Mr. Preechaya Rasametanin. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Rasametanin. M.L. Bovornovadep Devakula. See “— Board of Directors — Board of Directors of the Company” for information on M.L. Devakula. Mr. Santisuk Klongchaiya. See “— Board of Directors — Board of Directors of the Company” for information on Mr. Klongchaiya. Mr. Vorakit Techapalokul. Mr. Techapalokul has been the Director of People of Thai AirAsia since September 2011. Prior to joining Thai AirAsia, he was the Business Unit Human Resources Manager of Nestle Thai Co., Ltd. from 2009 to 2011, the Human Resources Business Partner of Cadbury Adams Thailand from 2006 to 2009 and Human Resources Manager in CS Loxinfo Co., Ltd. from 2003 to 2006. Mr. Techapalokul holds a Bachelor’s degree from Chulalongkorn University and a Master’s degree from National Institution of Development Administration. Mr. Natthawach Siriwongsal. Mr. Siriwongsal has been the Director of Commercial, Ancillary of Thai AirAsia since September 2011. Prior to joining Thai AirAsia, he was the Head of Marketing and GTM of LG Mobile division in LG Electronics from 2009 to 2011, Group Brand Manager in Pepsi-Cola (Thai) from 2007 to 2009 and Group Brand Manager in Nestle Thai from 2001 to 2007. Mr. Siriwongsal holds a Master’s degree in marketing from Thammasart University and a Bachelor of Business Administration degree, majoring in finance, from Assumption University.

Our Corporate Governance Policy Our board of directors has passed a resolution to approve our corporate governance policy, which lays down guidelines that comply with the SET principles of good corporate governance and best practice recommendations. The following is a summary of our corporate governance policy: • protect and facilitate shareholders’ rights by promoting the equal treatment of shareholders in all matters, timely dissemination of information, exercise of such rights, facilitating shareholder’s attendance and voting at the meetings, giving information relating to shareholder’s meeting and giving opportunity to shareholders to ask questions and express their opinions at the shareholder meetings;

134 • provide fair treatment of stakeholders, which includes the shareholders, customers, employees, business partners and the society, the community and the environment; • provide a structure to implement clear duties, responsibilities and independence for the board of directors; • provide timely and transparent disclosure of information; • implement appropriate internal controls and risk management; and • inculcate good ethics and implement appropriate codes of conduct. This policy became effective on January 27, 2012 and we expect it will be updated annually to keep it in line with best business practices. We expect these changes to be communicated to our board of directors, management and all employees to comply with both the letter and spirit of the corporate governance policy.

Policy of Investment in Subsidiaries, Associates and Jointly Controlled Entities We focus on investing in businesses with growth potential and good returns on investment. We have a policy of making investments of a sufficient size to allow us to participate in the management and business outlook of the entity in which we are investing to allow us to direct the business towards sustainable growth. Prior to making any investments, our policy is to undertake a feasibility study and to consider the growth potential and risk. We will then present the investment to the Company’s board of directors for consideration and approval. Presently, we have invested in Thai AirAsia, a low cost airline with the goal of being the leader in the budget airline industry and able to serve the customers extensively. We take a long-term view with respect to the fundamentals and outlook of our investment in Thai AirAsia. In the future, we may invest in businesses which are consistent with our business condition and strategic plans.

Policy of Managing Subsidiaries, Associates and Jointly Controlled Entities Our policy is to closely monitor the performance and operations of our subsidiaries, associates and jointly controlled entities. We affect the actions of our subsidiaries, associates and jointly controlled entities through presenting our results of analysis, including our comments and suggestions, to the board of directors of the relevant subsidiary, associate or jointly controlled entity. Under the Thai AirAsia Shareholders’ Agreement, we can nominate and appoint three directors to Thai AirAsia’s board of directors. We choose directors based on their qualifications and relevant business experience. We also aim to ensure that such directors do not have any conflicts of interest with Thai AirAsia’s business. Such directors are to manage Thai AirAsia’s business in accordance with the relevant rules and regulations, the Thai AirAsia Shareholder’s Agreement, Thai AirAsia’s articles of association and the Company’s policies.

Compensation The remuneration policy for the Company and Thai AirAsia is for the remuneration of directors to be reviewed annually by the respective boards of directors and submitted to the respective shareholders for approval. In 2011, the total management remuneration of Thai AirAsia was Baht 48.2 million (US$1.5 million).

Interest in Shares Other than as described under “Principal Shareholders”, none of our directors or executive officers owns any of our Shares.

135 PRINCIPAL AND SELLING SHAREHOLDERS The following table sets forth certain information with respect to the registered ownership of our Shares as of March 31, 2012, based on an aggregate of 4,100,000,000 Shares outstanding as of that date. See “Business — History and Development” for further details.

Shares Shares Owned Purchased/ Shares Owned Immediately Before (Sold) in the Immediately After Completion of the Combined Completion of the Combined Offering Offering Combined Offering Name No. of Shares % No. of Shares No. of Shares % Directors and Executive Officers: Mr. Tassapon Bijleveld ...... 2,254,999,800 55.0 (654,500,000) 1,600,449,800 33.0 Mr. Pornanan Gerdprasert ...... 410,000,400 10.0 (119,000,000) 291,000,400 6.0 Mr. Tanapat Ngamplang ...... 409,999,900 10.0 (119,000,000) 290,999,900 6.0 Mr. Preechaya Rasametanin ...... 409,999,900 10.0 (119,000,000) 290,999,900 6.0 M. L. Bovornovadep Devakula ...... 409,999,900 10.0 (119,000,000) 290,999,900 6.0 Mr. Santisuk Klongchaiya ...... 205,000,000 5.0 (59,500,000) 145,500,000 3.0 Others ...... 100 — — 100 — Public Shareholders(1) ...... —— 1,940,000,000 1,940,000,000 40.0 Total ...... 4,100,000,000 100.0 750,000,000 4,850,000,000 100.0

(1) None of the public shareholders will be a director or an executive officer of the Company or of Thai AirAsia immediately after the Combined Offering, nor will any such individual public shareholder be allocated in the Combined Offering more than 5.0% of the Shares outstanding immediately after completion of the Combined Offering.

136 DESCRIPTION OF SHARES Set forth below is certain general information relating to our Shares including brief summaries of certain provisions of our Articles of Association, the PLCA and the SEC Act, all as currently in effect.

General We are governed by our Articles of Association, the SEC Act and the provisions of the PLCA. We were converted from a private limited company into a public company limited on December 26, 2011.

Share Capital As of March 31, 2012, our paid-up share capital prior to the Combined Offering was Baht 410,000,000, consisting of 4,100,000,000 Shares of Baht 0.10 par value each, while our registered share capital was Baht 485,000,000, consisting of 4,850,000,000 Shares of Baht 0.10 par value each. All Issued Shares are fully paid and in registered form, and are recorded in our share register book maintained by the TSD.

Transfer of Shares Under the PLCA, which applies to shares listed on the SET, a transfer of listed shares in scrip form is valid between the transferor and the transferee by an endorsement on the back of the share certificate representing the shares transferred, execution by the transferor and the transferee, and the delivery of the endorsed certificate to the purchaser. For a transfer to be valid against the issuer company, a request for an entry of the transfer into a share register book must be received by the company (through the TSD as its registrar). To be valid against a third party the entry of the transfer must actually be made into the share register book. See “Taxation — Thai Taxation” for a description of Thai stamp duty on transfers and “The Thai Securities Market” for a description of transfer procedures for trades on the SET.

Limitation on Foreign Ownership of Shares Under the PLCA, we are not allowed to set up share transfer restrictions, unless the purpose of the restriction is to preserve our lawful rights and benefits or to maintain the ratio of shareholding between Thai shareholders and non-Thai shareholders. Under our Articles of Association, no more than 0.1% of the total issued Shares in the Company may be held by non-Thai shareholders. The Foreign Business Act B.E. 2542 (1999) restricts foreigners from engaging in certain specified activities, including domestic air transportation. Domestic air transportation is considered a business related to Thai national security, and any foreigners engaging in domestic air transportation is required to obtain the permission of the MOC and the prior approval of the Cabinet. The Air Navigation Act B.E. 2497 (1954) and the Notification of Department of Air Transportation Regarding Qualification and Criteria for Consideration of Permission of an Air Operator dated July 2, 2008 issued under the Announcement of the National Executive Council No. 58 requires that air service operations and applicants of aircraft registrations which are a limited company or public company limited to (i) have no bearer shares, (ii) have a board of directors which comprises a majority Thai nationals (iii) and have at least 51% of the shares belong to persons in one or more of the following categories: • natural persons being of Thai nationality; • ministries, public bodies and departments of the Government; • limited companies or public companies limited of which ministries, public bodies or departments of the Government hold not less than 51% of the total number of shares; • limited companies or public companies limited of which natural persons being of Thai nationality hold not less than 51% of the total number of shares; • other juristic persons to be prescribed in any ministerial regulations. Our Articles of Association do not provide sanctions for the transfer of Shares in violation of the limitations contained in our Articles of Association, or a method for requiring the divestiture of such Shares. Nonetheless, if a non-Thai person acquires Shares which results in the aggregate percentage of Shares owned by non-Thai persons exceeding 0.1% of our issued Shares, there can be no assurance that such person will not lose the benefit of such investment (i.e. he will not be entitled to attend and vote at any shareholders’ meeting and/or receive any dividends) either because our registrar may refuse to register the ownership of such Shares or because divestment

137 may be required by applicable Thai law and regulations. It is not always possible for a non-Thai person acquiring shares to know in advance whether the Shares being acquired will fall within legal limits and be eligible to be registered in such person’s name.

Dividends Annual dividends are recommended by our board of directors, and are subject to shareholders’ approval at the annual general meeting of the shareholders. The board of directors by resolution may decide to pay to the shareholders such interim dividends as appear to the directors to be justified by our profits and as permitted under our articles of association. After such interim dividends have been paid, such dividend payment shall be reported to the shareholders at the next shareholders meeting. Dividends (annual or interim) are distributed equally on each outstanding Share. Dividends may be distributed either in cash or, if approved by the shareholders in a general meeting, in the form of shares. See “Dividend Policy” for a description of our dividend policy. Pursuant to the PLCA, we cannot make any distribution of dividends otherwise than out of our net profit. If we have an accumulated loss, we cannot pay any individuals even if we record a positive net profit for the year. In addition, in any year in which we have a net profit, we are required by the PLCA and by our Articles of Association to set aside as a reserve an amount not less than 5% of our annual net profit less any accumulated losses carried forward until the total reserve is not less than 10% of our registered capital. Any claim made against us with respect to the payment of dividends will be valid only within 10 years from the relevant payment date.

General Meetings of the Shareholders Our board of directors is required to convene an annual general meeting of shareholders within four months from the last day of our fiscal year. Our board of directors may call an extraordinary general meeting whenever the board of directors deems it appropriate, and is required to call such a meeting upon the written request of the holders of 20% or more of our total issued Shares, or not less than 25 shareholders holding, in aggregate, not less than 10% of our total issued Shares. Notice of any general meeting must be given to all shareholders and the Registrar, Department of Business Development, MOC at least seven days in advance. Publication of said notice must be made for three consecutive days in a local newspaper not less than three days prior to the meeting. A quorum for any shareholders’ meeting is constituted by the presence, either in person or by proxy, of not less than 25 shareholders or one half of the total number of shareholders, in either case holding in aggregate, not less than one-third of the total number of issued shares. If a quorum is not present within one hour, a general meeting shall be dissolved in the case where the meeting was requested by shareholders and in every other case shall be adjourned to another date prior to which notice must be sent to shareholders at least seven days in advance. A quorum is not required for the adjourned meeting to be properly constituted. Our Articles of Association provide that at the annual general meetings of shareholders, shareholders shall: • review the report of the board of directors regarding the operating results in the preceding year; • consider and approve the Company’s financial statements and the auditor’s report for the past year; • consider and approve profit allocation; • consider and elect new directors in place of those who are retiring by rotation; • fix the remuneration of directors; • appoint and fix the remuneration of our auditor; and • consider any other business.

Voting Rights A shareholder is entitled to one vote per Share. A resolution can be adopted at a general meeting of shareholders by a simple majority of the votes of the shareholders who attend the meeting and casting their votes, except, among others, in the following matters, which require at least three fourths of all shareholders present and entitled to vote: • the sale or transfer of all or a substantial part of our business to other persons; • the purchase by us or acceptance of transfer of the businesses of other companies to us; • the making, amendment or termination of contracts relating to the leasing out of all or a substantial part of our business, the assignment of any other persons to manage our business or the consolidation of the business with other persons with an objective towards profit and loss sharing; and

138 • the increase or reduction of registered capital, issuance of bonds, amalgamation with another company, • the dissolution and the amendment of our Memorandum of Association and Articles of Association. The removal of a director before his/her term requires a resolution of a general meeting of shareholders of not less than three fourths of all shareholders present and entitled to vote, holding Shares in aggregate of not less than one half of the total number of Shares present and entitled to vote. In addition, to fix the remuneration of directors requires a resolution of a general meeting of shareholders of not less than two thirds of all votes present.

Issuance of Additional Shares The PLCA provides that all or some of any new shares issued may, by a resolution of shareholders adopted at a general meeting, be offered to existing shareholders in proportion to their respective shareholding or offered to the public or other persons. Such resolution must be registered with the Registrar, Department of Business Development, MOC. Every increase of the registered and paid-up share capital must be registered with the MOC and no share certificate can be issued without such prior registration. As of the date hereof, we have not adopted any resolution of shareholders providing for pre-emptive rights to the existing shareholders.

Financial Statements The PLCA provides that our board of directors must prepare a non-consolidated balance sheet and income statement annually, at the end of each fiscal year. The balance sheet and income statement must be certified by the auditor and approved by the shareholders at the annual general meeting of shareholders. A copy of the balance sheet, income statement, auditor’s report and the annual report of the board of directors, together with the notice of the annual general meeting of shareholders, will be sent to all shareholders at their respective addresses as listed in the share register book. In addition to the PLCA requirements set out above, as a SET-listed company and in compliance with the regulations of the Thai SEC, we will be required to prepare and submit to the SET and the Thai SEC annual audited non-consolidated and consolidated financial statements within three months, as the case may be, from the end of each accounting year and quarterly reviewed non-consolidated and consolidated financial statements within 45 days from the end of each quarter.

Liquidation Rights The PLCA provides that in the event of liquidation, the assets remaining after payment of all debts, liquidation expenses and taxes will be distributed among the shareholders in proportion to the number of shares held.

Acquisition by Us of Our Own Shares Pursuant to the PLCA and our Articles of Association, we may not own our own shares, or take them in pledge, provided that: • we may repurchase our Shares from dissenting shareholders who vote against a shareholders’ resolution at a shareholders’ meeting approving an amendment to our Articles of Association in respect of voting rights and the right to receive dividends which such shareholders view to be unfair to them; or • we may repurchase our Shares for financial management purposes when we have accumulated profits and excess liquidity, provided that the share repurchase will not cause us financial difficulty. In order for us to repurchase Shares, we must obtain approval from our shareholders. However, if the share repurchase is not more than 10% of the paid-up capital, our board of directors is authorized to approve such share repurchase without shareholder approval. Shares purchased and held by our Company may not be counted towards forming a quorum for meeting of our shareholders, and do not carry any voting rights or the right to receive any dividend. Under Thai law, we are required to sell these Shares within the period prescribed by the Share repurchase scheme but not exceeding three years from the completion of the share repurchase. If we fail to dispose of the Shares within this prescribed period, we are required to reduce our paid-up capital by writing off the unsold Shares.

139 DESCRIPTION OF THE NVDR ISSUER AND THE NVDRS The following is a summary of the terms and conditions of the NVDRs and of the NVDR Issuer. You should read the summary below together with the full terms and conditions of the NVDRs and the NVDR Issuer described in “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus” to the Offering Memorandum. We have neither prepared nor independently confirmed the statements in, and do not take any responsibility for the contents of, “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”. Investment in Thai companies or in certain Thai securities by “non-Thai persons” may be limited by the Foreign Business Act B.E. 2542 (1999), by a Board of Investment Promotion certificate issued under the Investment Promotion Act B.E. 2520 (1977), as amended, or by restrictions contained in a company’s articles of association. Thai SEC regulations issued in August 2000 enabled the creation of a new class of securities in Thai companies, non-voting depository receipts, or “NVDRs”, that may be held by both Thai persons and non-Thai persons. No person may hold NVDRs and shares in a Thai listed company that reaches or exceeds 25% of the total number of voting rights of such company. The NVDRs are a SET-listed security issued by the Thai NVDR Company Limited, a wholly owned subsidiary of the SET, representing underlying shares registered in the name of Thai NVDR Company Limited, enabling non-Thais to receive the underlying economic benefits of shares that may otherwise only be held by Thai persons. The Thai NVDR Company Limited may issue additional NVDRs from time to time upon receipt of NVDR purchase orders from investors and after the purchase of the underlying shares. Holders of NVDRs are not considered shareholders of the underlying issuer, and do not have any rights as shareholders of the underlying issuer. Thai NVDR Company Limited, as the shareholder of the underlying issuer, reserves the right to attend the meeting of the shareholders of the underlying issuer but shall not vote unless the meeting has been called specifically to consider delisting of the underlying securities. Where any person, on his own or with his related person, acquires or disposes of the NVDRs and the underlying shares and thereby (treating each NVDR as the equivalent of one underlying share) increases or decreases the number of the shares by any multiple of 5% of the total number of voting rights of such business, such person shall report to the Thai NVDR Company Limited within three business days following the date of such acquisition or disposition. A more detailed description of the Thai NVDR Company Limited and of the terms and conditions of the NVDRs are provided in Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus, which you should read. We have neither prepared nor independently confirmed the statements in, and do not take any responsibility for the contents of, “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”.

140 THE THAI SECURITIES MARKET History The first organized stock exchange in Thailand was formed as a limited partnership in 1962 which later became a limited liability company and changed its name to the Bangkok Stock Exchange Co., Ltd in 1963. Approximately 35 securities were listed on the Bangkok Stock Exchange but trading remained low by comparison with present volumes. Following a Government initiative in 1969, plans were drawn up for an official stock exchange, and in May 1974 the Securities Exchange of Thailand Act B.E. 2517 (1974) (the “SET Act”) was enacted, leading to the replacement of the Bangkok Stock Exchange with the Securities Exchange of Thailand. In January 1991, the Securities Exchange of Thailand was renamed the Stock Exchange of Thailand. The SET Act provided the basis for regulation of the primary and secondary securities markets in quoted securities in Thailand and placed responsibility for control of the SET with the Ministry of Finance. Dealings at the SET commenced on April 30, 1975, with a total of 16 quoted securities. The SET Index was also established on this date. The SET Index was established to show the market price movement of the traded securities. The SET Index includes all listed shares. It was set at 100 on the SET’s opening day. The SET Index uses the most recent transacted price for a security when no transaction in that security occurs on a particular day and is adjusted for new listings, de-listings and capitalization changes. The SET is the principal stock exchange in Thailand. Public limited companies, state enterprises, juristic persons established under special purpose legislation or investment projects having the appropriate qualifications may file applications with the SET to have their securities listed. In February 1992, the National Legislative Assembly passed the Securities and Exchange Act B.E. 2535 (1992), or the Thai SEC Act, which replaced the SET Act and came into force in May 1992. The Thai SEC Act had provided for the establishment of the Securities and Exchange Commission, or the Thai SEC, and empowered it to introduce policies for the development and supervision of the securities markets and related activities in Thailand. The PLCA, which came into force in June 1992, repealing the Public Limited Companies Act B.E. 2521 (1978), provides that only companies incorporated (or which have converted their incorporation status) under the PLCA are permitted to issue shares or other equity-linked securities to the public. A public offering of newly issued securities is permitted only where the issuer of such securities has received approval from the Thai SEC to offer such securities and a registration statement in the prescribed form together with a draft prospectus submitted to the Thai SEC by the issuer of the securities have become effective. While primary responsibility for the regulation of new securities issues has shifted to the Thai SEC, the SET continues to operate the stock exchange and is responsible for listing application approvals once the Thai SEC registration, prospectus and related requirements have been met for domestic offers. In July 1992, the SET expanded its Securities Depository Centre, or SDC, by allowing, in addition to brokers, local custodians, sub-brokers and any juristic person who is allowed to be an eligible depositor as stipulated by the SET to become members of the settlement system. At the same time, the SET introduced regulations to facilitate the establishment of the scripless trading system. In the past several years, due in part to the economic situation in Thailand and Southeast Asia as well as the depreciation in the value of the Baht, the SET has experienced significant volatility. Between January 3, 1996 and December 27, 2002, the SET Index fell from 1,323.43 to 356.48, a decline of 73.1%. See “Risk Factors — Risks Relating to Our Shares — There are risks associated with the trading and delivery of our Shares on the Stock Exchange of Thailand”; and “Risk Factors — Risks Relating to Our Shares — The Thai securities market is relatively small and may cause the market price of our Shares to be more volatile” for a discussion of the risks relating to the trading and prices of our Shares on the SET.

The Stock Exchange of Thailand The SET is the principal stock exchange in Thailand and is organized as a non-profit entity, composed of members which are securities companies. The SET is responsible, inter alia, for processing all listing applications, for ensuring that disclosure requirements for listed companies are met and for monitoring all trading activities in respect of listed securities. TSD now acts as clearing house, securities depository, dividend paying agent, transfer agent, and registrar for the great majority of all listed Thai companies. As of December 31, 2011, the SET had 472 listed companies, a market capitalization of Baht 8,407.7 billion, and a daily average turnover of Baht 28,854. million per day. There are five separate boards on the SET on which trading takes place on computerized systems: the main board for regular trading of shares, preference shares, warrants, NVDRs, investment units and investment units of Thai Trust Funds; the odd-lot board for dealings in odd lots; the special board for the trading of government bonds debentures and convertible bonds; the big lot board for dealings in large lots of securities and the foreign

141 board for trading in foreign registered shares which are available to be registered in the name of non-Thai nationals. The SET established the “foreign board” on the exchange in September 1987 for dealings only in securities registered in the name of non-Thai persons. Trading in this foreign board has so far been sporadic although on occasions the volumes traded have been material in relation to those traded on the “main” (or “domestic”) board. The prices at which shares have been dealt on the foreign board have at times been at a premium to those then being quoted on the main board. Shares are traded in one board lot (100 shares) or multiples of board lots except that, in the case of shares for which the closing price on each trading day has been in excess of Baht 500 for six consecutive months, the SET may consider changing the board lot to 50 shares. Trading hours are divided into two sessions. In the first session, trading commences between 9.55 a.m. and 10.00 a.m. and ceases at 12.30 p.m., and in the second session trading commences at any time from 2.25 p.m. to 2.30 p.m. and ceases between 4.35 p.m. and 4.40 p.m., except that trading on the odd-lot board ceases at 4.30 p.m. Trading days are Monday through Friday, except for Thai public holidays and holidays as prescribed by the SET in each year. The SET requires that bid and offer quotations for shares or NVDRs be within prescribed spreads, depending on the market price per share or NVDR and in accordance with a table of values. Subject to certain exceptions, the SET also limits upward and downward price movements for shares or NVDRs during a trading session to 30% of the previous business day’s closing price. From January 1, 2010 to December 31, 2011, brokers are permitted to charge brokerage or agent’s fees for share or NVDR trades from their customers other than those who are non-member securities companies at the following rates of the trade value per day:

Trade Value per Day Rate Not exceeding Baht 5,000,000 Not less than 0.25% and not exceeding 1% More than Baht 5,000,000 but not exceeding Baht 10,000,000 Not less than 0.22% and not exceeding 1% More than Baht 10,000,000 but not exceeding Baht 20,000,000 Not less than 0.18% and not exceeding 1% Exceeding Baht 20,000,000 At the rate as agreed with the customers and not exceeding 1% From January 1, 2010 to December 31, 2011, the following rates of the trade value per day shall be applied in the event that shares or NVDRs are traded through the Internet:

Rate Cash Balance Account or Credit Balance Trade Value per Day Account Other Accounts Not exceeding Baht 5,000,000 Not less than 0.15% and not Not less than 0.20% and not exceeding 1% exceeding 1% More than Baht 5,000,000 but not Not less than 0.13% and not Not less than 0.18% and not exceeding Baht 10,000,000 exceeding 1% exceeding 1% More than Baht 10,000,000 but not Not less than 0.11% and not Not less than 0.15% and not exceeding Baht 20,000,000 exceeding 1% exceeding 1% Exceeding Baht 20,000,000 At the rate as agreed with the customers and not exceeding 1% From January 1, 2012 onwards brokers are permitted to charge brokerage or agent’s fees at the rate as agreed with their customers. Under the disclosure regulations of the SET, listed companies are required to report the following, among other things, to the Thai SEC and the SET for public disclosure: • corporate resolution or other event which will have a material effect on the rights of a company’s shareholders or that might materially affect the value of the shares or the benefit of the shareholders; in principle, such events are required to be reported on the day such an event occurs or on the next trading day at least one hour before the commencement of trading; • audited annual financial statements for each accounting period, conforming to prescribed disclosure standards, which must be filed within three months of the end of the relevant accounting period; • annual registration form (Form 56-1), which must be filed within three months of the end of the relevant accounting period;

142 • an annual report, which must be filed within 120 days of the end of the relevant accounting period; and • quarterly unaudited financial statements reviewed by a licensed auditor, which must be filed within 45 days of the end of each quarter.

Thailand Securities Depository Company Limited In November 1994, the SET established a private limited company, Thailand Securities Depository Co., Ltd., or TSD, pursuant to the Thai SEC Act to undertake four main functions: registrar, securities depository centre, clearing house and broker operation services. Since the commencement of its operations in January 1995, TSD operates a clearing and settlement system for scripless shares of Thai public companies. The TSD is 99.9% owned by the SET and has a registered capital of Baht 200.0 million. Under the Thai SEC Act, TSD may operate without a license from the Thai SEC as long as the SET owns a minimum of 75% of the total shares of TSD. The following persons may become members of TSD: (1) securities companies; (2) commercial banks; (3) finance companies; (4) life or non-life insurance companies; (5) financial institutions established by specified legislation; and (6) other persons as prescribed by the SET.

Short Selling The Thai SEC issued a new notification in August 2009 (effective from September 2009) allowing securities companies to conduct short selling activities, either for their own account or for the account of their customers. Before undertaking short selling for its own account, a securities company is required to procure its source for borrowing securities so that it is able to deliver the securities pursuant to the short selling transaction in the time period prescribed by clearing house, TSD or as agreed between the parties. In case of short selling to the order of a customer, a securities company is required to ensure the availability of securities or the availability of a source of securities for the purpose of lending those securities to the customer, except where a customer has shown that it has already borrowed the securities and is able to deliver the securities for the settlement purpose pursuant to the short selling transaction within the time prescribed by the clearing house, TSD or as agreed between the parties. Under the SET notification issued in January 2001 and amended in 2010, a securities company which is a member of the SET may carry out short selling only with respect to securities specified by the SET. This is however not the case where a securities company is short selling securities for which it is allowed to be a market maker.

Securities Lending and Borrowing The Thai SEC issued notifications allowing a person wanting to conduct the business of securities lending and borrowing to apply for a license from the Minister of Finance through the Thai SEC. In the borrowing or lending of securities, both the licensed securities borrower and securities lender are required, among other things to prescribe the procedures for accepting the customers, arrange for having risk management system and arrange for a securities lending agreement to be executed. Pursuant to Thai SEC regulations, the securities borrower may be required to provide security, to the lender thereof. The security may be given which includes, among other things, in the form of cash, treasury bills, Government bonds, bonds of the BOT, listed securities, units of daily redemption fund or other instruments specified by the Thai SEC.

Market Making Market makers are responsible for creating liquidity in securities listed on the SET. The SET, pursuant to its notification issued in April 2010, as amended which replaced the previous notification, allows a member of the SET to be registered as a market maker for the securities that it is registered for. A non-SET member certified by a SET member can also be registered as a market maker for certain specified securities if it qualifies under the notification. The SET notification also clarifies the duties and function of the market maker.

MAI In June 1999, the SET established, with the Thai SEC’s approval, the Market for Alternative Investment renamed as MAI, to facilitate access to capital markets by small and medium-sized enterprises, or SMEs. The MAI’s principal objectives include providing alternative financing for, and encouraging venture capital investment in, SMEs, facilitating debt restructuring by enabling creditors to sell securities received in debt-equity conversions, and providing additional investment alternatives to public investors. We are not listed, and do not intend to list, on the MAI. As of December 31, 2011, the MAI had 70 listed companies, a market capitalization of Baht 66 billion and a year-to-date average turnover of Baht 658 million per day.

143 Independent Directors and Audit Committee Requirements In 2008, the Thai SEC issued regulations requiring all companies applying for a public offering with the Thai SEC to ensure at least one third of the Board is composed of independent directors, with the necessary qualifications required by the regulations, and in any case, the number of the independent directors shall not be less than three. In January 1998, the SET issued regulations requiring all public companies whose shares are listed on the SET to set up an audit committee. In addition, in October 2003, the Thai SEC issued similar regulations for companies that apply for a public offering with the Thai SEC. The audit committee must include not less than three independent directors appointed by the shareholders or by the board of directors in accordance with the rules of the SET and the Thai SEC. The SET and the Thai SEC both require at least one member of the audit committee to have sufficient knowledge and experience to review the reliability of the financial statements. The SET and the Thai SEC specifically require the audit committee to carry out the following duties: • to review the company’s financial reporting process to ensure that it is accurate and adequate; • to review the company’s internal control system and internal audit system to ensure that they are suitable and efficient, to determine an internal audit unit’s independence, as well as to approve the appointment, transfer and dismissal of the chief of an internal audit unit or any other unit in charge of an internal audit; • to review the company’s compliance with the law on securities and exchange, the regulations of the SET, and the laws relating to the company’s business; • to consider, select and nominate an independent person to be the company’s auditor, and to propose such person’s remuneration, as well as to attend a non-management meeting with an auditor at least once a year; • to review the connected transactions, or the transactions that may lead to conflicts of interest, to ensure that they are in compliance with the laws and the regulations of the SET, and are reasonable and for the highest benefit of the company; • to prepare, and to disclose in the company’s annual report, an audit committee’s report which must be signed by the Chairman of the audit committee and consist of at least the following information: (a) an opinion on the accuracy, completeness and credibility of the company’s financial report; (b) an opinion on the adequacy of the company’s internal control system; (c) an opinion on the compliance with the law on securities and exchange, the regulations of the SET, or the laws relating to the company’s business; (d) an opinion on the suitability of an auditor; (e) an opinion on the transactions that may lead to conflicts of interests; (f) the number of the audit committee meetings, and the attendance at such meetings by each committee member; (g) an opinion or overview of comments received by the audit committee from its performance of duties in accordance with the charter; and (h) other transactions which, according to the audit committee’s opinion, should be known to the shareholders and general investors, subject to the scope of duties and responsibilities assigned by the Company’s board of directors. • to perform any other act as assigned by the company’s board of directors, with the approval of the audit committee.

Thai SEC Reporting and Tender Offer Requirements Under the Thai SEC Act, the Thai SEC and the Capital Market Supervisory Board notifications issued thereunder, an acquisition or disposition of shares or convertible securities of a listed company (either on his own or acting in concert with others) such that the holder now holds any multiple of 5% of the total number of voting rights of such company must be reported to the Thai SEC. Notwithstanding the above, a disposition of convertible securities in a listed company is not required to be reported to the Thai SEC.

144 A mandatory tender offer must be made when a person (either on his own or acting in concert with others) acquires shares in a listed company resulting in such person holding shares which are equal to or in excess of the following threshold amounts: • 25% of the total number of voting rights of such company; • 50% of the total number of voting rights of such company; or • 75% of the total number of voting rights of such company. In the case where a listed company buys back its own shares, a mandatory tender offer is also required to be made if a person acquires any additional shares in the company resulting in such person’s shareholding becoming equal to or in excess of the foregoing thresholds. In addition, a mandatory bid is required to be made if a person (either on his own or acting in concert with others) acquires significant controlling power in a juristic person that is an existing shareholder of a listed company (“chain principle”), regardless of whether such controlling power is direct or indirect through shareholding or control in any juristic persons down through the juristic person that is the existing shareholder of the listed company. However, a mandatory bid is exempted in any of the following circumstances: (a) where shares are acquired by inheritance or from the exercise of rights to purchase shares or of conversion rights attaching to convertible securities acquired by inheritance; (b) where the acquisition of shares takes place following a stock dividend or the exercise of pre-emptive rights to purchase new shares in proportion to the number of existing shares already held (“rights offering”); (c) where shares are acquired in the course of a separate tender offer for all of the securities of the company or from the exercise of rights to purchase shares or conversion rights attaching to convertible securities acquired in the course of a separate tender offer for all of the securities of the company, in accordance with the relevant Thai SEC notifications; (d) the acquisition of shares by the following persons who, according to relevant regulations, do not normally exercise voting rights at a shareholders’ meeting of a listed company: (i) the Thai Trust Fund (which is a passive open-ended mutual fund established and managed by Thai Trust Fund Management Company Limited, 99.0% of whose shares are controlled by the SET); and (ii) Thai NVDR Company Limited, as a result of its sale of non-voting depository receipts; (e) where the acquirer reduces his shareholding or controlling power, in a manner prescribed by the notifications of the Thai SEC; (f) where the Thai SEC has granted approval for a partial tender offer; and (g) where a waiver is obtained from the Thai SEC or from the Thai Takeover Panel in one of the following circumstances: (i) a waiver of the mandatory tender offer may be obtained from the Thai SEC in the following cases: • the acquisition of shares triggering the mandatory bid obligation causes no change in the control of the company; • the acquisition was made with a purpose of assisting or rehabilitating the company; • the acquisition of new shares and the shareholders’ meeting approves the issue of such shares to such person without need to make the tender offer for all securities of the company (whitewash), in accordance with criteria prescribed by the Thai SEC; • the acquisition in a circumstance where the Takeover Panel has established a precedent; and • in any other circumstances in which the Thai SEC deems necessary and otherwise appropriate; (ii) a waiver of the mandatory tender offer may be obtained from the Takeover Panel in the following cases: • the acquisition of significant controlling power over a juristic person which is a shareholder of a listed company (“chain principle”) without an intention to take over such listed company; and

145 • in any other circumstances where the Thai SEC deems a waiver should be considered by the Takeover Panel.

Foreign Ownership The Thai Government has generally allowed foreign investment, but on a controlled basis in certain sectors of the economy. Investment in Thai companies or in certain Thai securities by “non-Thai persons” (as defined in relevant laws or in a company’s articles of association) may be limited by the Foreign Business Act B.E. 2542 (1999), by a Board of Investment Promotion Certificate issued under the Investment Promotion Act B.E. 2520 (1977), as amended, or by restrictions contained in a company’s articles of association. The articles of association of many Thai companies, including us, contain such restrictions. See “Description of Shares — Limitation on Foreign Ownership of Shares”. The TSD, as our registrar, may refuse to register transfers of Shares to a non-Thai person, or divestment may otherwise be required, if as a result of such transfer the percentage of issued and outstanding Shares registered in the name of non-Thai persons would exceed the then applicable limitation on foreign ownership of the Shares. Ownership of the Shares by non-Thai persons as such is not otherwise restricted by Thai law. Where a foreign person acquires shares that would exceed the applicable limit, the investor is exposed to the risk of losing the benefit of such investment because ownership may not be registered in such foreign person’s name. See “Risk Factors — Risks Relating to the Shares — The Company is subject to foreign ownership restrictions” for details. It is not always possible for a foreign purchaser of Thai securities (that are subject to such limits) to know in advance whether shares purchased by him will fall within the limits and be eligible to be registered in his name, or whether the company or the TSD, as share registrar, will have to decline to effect registration of the transfer. It is a criminal offense in Thailand for a Thai national to hold shares as a nominee for a foreign person if it is done to avoid any applicable maximum limit on foreign ownership imposed by Thai law.

Settlement General All settlement and clearance of transactions effected on the SET must be handled by the TSD on the third business day following the day of the contract date. The TSD offsets sales and purchases of each member and only the net balance of securities and cash delivered or received by the member through the TSD is credited.

Shares in Certificated Form As between sellers and their brokers, sellers must deliver the relevant share certificates duly endorsed to their brokers by no later than midday on the next business day following the date of the contract subject to the internal regulation of the brokers. The respective brokers for the seller and buyer receive the payment or, as the case may be, the securities certificates on or before the third business day after the contract date. On or before the fourth business day after the contract date, the broker for the seller must deliver the duly endorsed securities certificates to or for the order of the buyer. Delivery is made in the form of certificate(s) or certificate receipt(s). The latter is an acknowledgment by the registrar for the shares in question that the shares are in the course of registration and must be exchanged for share certificates before the new owner can have them registered in his name.

Shares in Scripless Form In July 1992, the SET introduced regulations to facilitate the establishment of a scripless trading system. Under this scripless system, a member broker, sub-broker or local custodian may deposit certificates in respect of securities with the TSD. Any person becoming a TSD participant is required to open at least one account with the TSD for the deposit, withdrawal or transfer of securities. After the TSD has accepted a deposit of securities, it will hold such securities on behalf of its participants or its participants’ clients. In addition, each TSD participant is obliged to maintain a list of owners of the securities deposited with it for establishing ownership rights to the securities and any other shareholder rights. Sales and purchases of securities are settled by off-setting the relevant securities deposit accounts via computers and at the end of each trading day the TSD delivers a statement showing the balance of securities held for each participant.

Transfer of Shares Transfers of listed shares, whether effected on or off the SET are governed by the PLCA, and the Thai SEC Act. Under the PLCA, and the Thai SEC Act, a transfer of listed shares in certificated form is valid as between

146 the transferor and the transferee by an endorsement on the back of a share certificate representing the shares transferred, execution by the transferor and the transferee, and the delivery of the endorsed certificate to the purchaser or his broker. To be valid as against the company, a request for an entry of the transfer into a share register must be received by the company; and to be valid against a third party, the entry of the transfer must actually be made into the share register. Under the Thai SEC Act, transfers of scripless shares are made by way of appropriate instruction to the relevant brokers, sub-brokers or custodians with whom the transferor and the transferee involved maintain securities accounts in accordance with individual arrangements with such brokers, sub-brokers or custodians. Upon receipt of such instructions, the relevant brokers, sub-brokers or custodians will, in accordance with such arrangements, effect the relevant changes in the list of owners of the securities they are required to maintain for rights and entitlement purposes.

Share Transfer Registration A public listed company (or TSD if acting as its registrar) must record in the share register the transfer of its shares within 14 days of receipt of a written request for an entry of the transfer. If the transferee requires a new share certificate, the company (or TSD if acting as its registrar) must issue a new share certificate to the transferee within one month from the date that the transferee delivers to it the request, duly signed by the transferee (with at least one witness signing in attestation to the signature), and the previous share certificate or other relevant evidence must be properly returned by the transferee. In such cases, the company must record the transfer in the share register within seven days of receipt of a written request for an entry of transfer.

Listing of Newly Issued Shares Although a company whose shares are listed on the SET is required to maintain a listing on the SET for all its issued shares of that class, it must make a separate application for the listing of new shares of that class when they are issued. The SEC is entitled to consider a listing application for up to seven days from the date of submission of the completed listing application. Unless and until listing approval is given and listing has become effective, the shares may not be dealt in on the SET but purchasers and sellers may be matched through brokers in off-exchange transactions.

Internet Trading In January 2000, the SET allowed the trading of securities through the Internet. A member broker wishing to offer Internet trading services is required to apply for permission from the SET and the broker’s computer and security systems must meet the regulations of the SET.

147 TAXATION The discussion below is not intended to constitute a complete analysis of all tax consequences relating to the ownership of our Shares. Prospective purchasers of our Shares should consult their own tax advisors concerning the tax consequences of their particular situations. This description is based on laws, regulations and interpretations as now in effect and available as of the date of this Offering Memorandum. The laws, regulations and interpretations, however, may change at any time, and any change could be retroactive to the date of issuance of the Shares. These laws and regulations are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below.

Thai Taxation This summary contains a description of the principal Thai income tax consequences of the purchase, ownership and disposition of ordinary shares by an individual or corporate investor who is not resident in Thailand for tax purposes (referred to herein as “non-resident individual holders” and “non-resident corporate holders”, respectively, and together as “non-resident holders”). It does not purport to be a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase ordinary shares. The summary is based upon the tax laws of Thailand in effect on the date of this Offering Memorandum. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN PROFESSIONAL ADVISORS CONCERNING THE ACQUISITION, OWNERSHIP AND DISPOSITION OF ORDINARY SHARES, INCLUDING THE CONSEQUENCES UNDER THAI LAW, THE LAWS OF THE JURISDICTION OF WHICH THEY ARE RESIDENT AND ANY TAX TREATY BETWEEN THAILAND AND THEIR COUNTRY OF RESIDENCE FOR TAX PURPOSES. In general, the registered owner of ordinary shares will be treated as the owner of such ordinary shares for Thai tax purposes. In the case of ordinary shares that settle through the TSD’s scripless system, the holder whose name appears on the list of owners with respect to the ordinary shares maintained by each TSD-member broker, sub-broker, or custodian will be treated as the owner for Thai tax purposes. See “The Thai Securities Market — Settlement”.

Taxation of Dividends Dividends in respect of ordinary shares are generally subject to Thai withholding tax at a rate of 10%, whether paid to non-resident corporate investors or to non-resident individual investors.

Taxation of Capital Gains Gains realized by a non-resident corporate holder from the sale or other disposition of ordinary shares outside Thailand in connection with which payment is made neither from nor within Thailand and neither the purchaser nor the seller reside or do business in Thailand, are not subject to Thai tax. A non-resident corporate holder will be subject to a withholding tax of 15% on gains realized on any sale or other disposition of ordinary shares in Thailand (including a sale through the SET) unless such holder is entitled to an exemption under an applicable tax treaty. Gains realized by a non-resident individual holder from the sale or other disposition of ordinary shares outside Thailand in connection with which payment is made neither from nor within Thailand and neither the purchaser nor the seller resides or does business in Thailand, are not subject to Thai tax. Gains realized by a non-resident individual holder on a sale of ordinary shares through the SET are exempt from Thai income tax. Unless exempt under an applicable tax treaty, gains realized by a non-resident individual holder from a sale or other disposition of ordinary shares made otherwise than through the SET and in which payment is made from or within Thailand is subject to Thai income tax at a rate of 15%. Any such tax withheld is creditable against the Thai personal income tax. In the foregoing cases, where withholding tax applies, the purchaser of such ordinary shares (or in the case of a sale through the SET, the broker executing such sale on behalf of the purchaser) is required under Thai law to withhold the applicable amount of Thai withholding tax from the sales price and make payment thereof to the relevant Thai tax authority.

Personal Income Tax Non-resident individual holders are required under certain circumstances to file a Thai personal income tax return and may be subject to Thai personal income tax at marginal rates between 5% and 37% on income earned in Thailand, including any cash dividends and other distributions paid by us and any gains on sale or other dispositions of the ordinary shares realized during any calendar year. Tax withheld by us in respect of such

148 dividends and other distributions, and by purchasers in respect of any such gains, may be credited against any Thai personal income tax payable at year end by such non-resident individual holders, who may be entitled to a refund with respect to such taxes withheld.

Tax Treaties Each non-resident holder should inquire for himself or herself whether he or she is entitled to the benefit of a tax treaty between Thailand and his or her resident country. Where an applicable tax treaty so provides, any otherwise taxable gain on the sale or other disposition of ordinary shares may be exempt from or subject to reduced Thai withholding tax. Thailand currently has tax treaties for the avoidance of double taxation within the following countries: Armenia, Australia, Austria, Bahrain, Bangladesh, Belgium, Republic of Bulgaria, Canada, Chile, China, Republic of Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Israel, Italy, Japan, Republic of Korea, Kuwait, Laos, Luxembourg, Malaysia, Republic of Mauritius, Myanmar, Nepal, The Netherlands, New Zealand, Norway, Oman, Pakistan, the Philippines, Poland, Romania, Russia, Seychelles, Singapore, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Republic of Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan and Vietnam.

Stamp Duty Generally, a stamp duty of Baht 1 per every Baht 1,000 (or a fraction thereof) of the greater of the paid-up value of shares and the selling price of the shares is payable within 15 days from the date of execution of a share transfer instrument, or within 30 days from the date the share transfer instrument is brought into Thailand if executed outside Thailand. No stamp duty is payable on a transfer of listed securities where TSD, as a person appointed by the SET, is acting as a registrar of such securities.

NVDRs For a summary of the Thai tax considerations for non-resident investors with respect to the NVDRs, see “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus — Part 6 Thai Taxation Considerations for Non-Resident Investors”.

149 THAI FOREIGN EXCHANGE REGULATIONS Thai foreign exchange controls are administered by the BOT on behalf of the Ministry of Finance, pursuant to the Exchange Control Act B.E. 2485 (1942), as amended. The BOT has granted commercial banks and certain other entities the authority to conduct foreign exchange transactions as authorized agents of the BOT. The BOT instituted measures in 1998 to restrict certain foreign exchange related transactions by domestic financial institutions with non-residents of Thailand and to safeguard against instability and speculation in the domestic currency market. However, the easing of exchange controls may be granted from time to time as the BOT considers appropriate to the financial circumstance. These measures, which were amended on February 29, 2008, among other things, (i) limit the value of foreign exchange related transactions for underlying trade or investment activities in Thailand not exceeding the actual value of the underlying trade or investment activity and, for transactions without any underlying trade or investment activity in Thailand, not exceeding Baht 300 million or Baht 10 million, depending on the type of transaction, per non-resident and its related parties as a group; and (ii) regulate direct loans granted to non-residents. The inward remittance of money into Thailand for investment in securities does not require registration with the exchange control authorities. On February 4, 2008, the BOT issued significant relevant Notifications of the Competent Officer on Rules and Practices Regarding Currency Exchange No. 15 and the Notification of the Competent Officer on Rules and Practices Regarding Currency Exchange No. 20 on October 5, 2010 (collectively, the “Notifications”) which amended the criteria for depositing foreign currency into a foreign currency account. The Notifications required that any person (excluding non-residents, short-term foreign residents, foreign embassy staff, persons with diplomatic immunity and staff of certain international organizations) bringing foreign currency into Thailand must, within 360 days, either (i) sell such foreign currency to an authorized agent or (ii) deposit it into a foreign currency account opened with a commercial bank in Thailand for which a specified form must be submitted to such authorized agent if the amount sold or deposited is at least US$50,000 (or its equivalent). The Notifications also provide that a person depositing foreign currency must prove one of the following to an authorized agency: (a) the deposit originated abroad, in which case the depositor may deposit an unlimited amount of foreign currency as requested into the foreign currency account, except where the Competent Officer sets the amount; (b) the deposit is purchased, exchanged or borrowed from an authorized agency by a Thai resident and: (i) if the depositor can prove that he will be subject to an obligation to pay those foreign currency funds outside Thailand or to an authorized agency, the depositor may deposit the foreign currency amounts in the foreign currency account. However, the amount deposited must not exceed the payment obligation, and the daily balance of the foreign currency deposited in all accounts held by that depositor must not exceed US$1,000,000 or its equivalent for an individual, or US$100,000,000 or its equivalent for a legal entity; (ii) if the amount deposited exceeds the amount specified in (i), the depositor must prove that he will be required to pay those foreign currency funds outside Thailand or to an authorized agency within 12 months from the date of deposit, in which case, the amount deposited must not exceed the payment obligation; or (iii) if the depositor cannot prove it has a payment obligation, the deposit must be placed in a separate account, and the daily balance of foreign currency in all accounts held by that depositor must not exceed US$100,000 or its equivalent for an individual, or US$300,000 or its equivalent for a legal entity; or (c) the depositor (except for certain persons, including government organizations and Thai state-owned enterprises) is a person who does not have a foreign exchange license, the depositor may deposit not more than US$10,000 or its equivalent in cash per day into the foreign currency account. The outward remittance from Thailand of dividends or the proceeds of sale (including capital gain) from the transfer of shares after payment of the applicable Thai taxes, if any, may be made without the requirement to file a specified form to the relevant authorized agent if the amount is less than US$50,000 or the equivalent amount in relevant currency per remittance. Because the BOT has a policy not to allow any person to bring Baht currency out of Thailand, dividends paid to a non-resident must be converted into foreign currency prior to the outward remittance from Thailand. If the amount is at least US$50,000 or its equivalent in the relevant currency, a specified form must be submitted to the authorized commercial bank together with documents or evidence as to the particular transaction (such as evidence of the disposal of shares).

150 Export of share certificates or other securities certificates from Thailand does not require prior approval from an exchange control officer appointed by the BOT. The exporter may either dispatch the certificates by mail or carry them when travelling abroad. On February 29, 2008, the BOT issued Notification of the Competent Officer on Rules and Practices Regarding Currency Exchange No. 17, which establishes the criteria for the withdrawal and deposit of the Baht into (i) non-resident Baht accounts for securities, for example, for the purpose of investing in equity instruments, debt instruments and units (“NRBS”), and (ii) non-resident Baht accounts for other purposes, including an investment in at least 10.0% or more of the total share capital of companies in Thailand. Further to the Notification of the Competent Officer on Rules and Practices Regarding Currency Exchange No. 17 above, the BOT has also issued the Rules and Practices on the Measures to Prevent Thai Baht Speculation dated February 29, 2008. The measures establish rules and practices for domestic financial institutions to undertake transactions involving Baht with non-residents in order to reduce volatility of the Baht resulting from speculative activities or from non-residents’ financial transactions without underlying trade or investment in Thailand. One of the measures relates to non-resident Baht accounts and non-resident Baht accounts for securities. Where a non-resident wishes to open an NRBS, such account is to be a current or savings account only, and the financial institution is required to monitor the outstanding balances of all NRBSs at the end of each day to ensure that such accounts do not exceed the limit of Baht 300.0 million per non-resident. Such limitation includes balances of all NRBSs opened by each non-resident with all financial institutions in Thailand, except for those approved by the BOT on a case-by-case basis.

151 PLAN OF DISTRIBUTION We, the Selling Shareholders and the International Managers have entered into a purchase agreement dated May 22, 2012 (the “International Purchase Agreement”) pursuant to which we have agreed to sell, and the International Managers have agreed to purchase or to procure purchasers for, subject to certain conditions, the number of New Shares (represented by Non-Voting Depositary Receipts (“NVDRs” and, together with the Shares, the “Securities”)) in the International Offering indicated in the following table.

International Manager Number of Shares/NVDRs Credit Suisse (Singapore) Limited ...... 266,667,000 CIMB Bank (L) Limited ...... 133,333,000 Total ...... 400,000,000 The International Managers have agreed to purchase all of the Securities sold under the International Purchase Agreement if any of these Securities are not purchased. The International Managers are offering the Securities when, as and if issued to and accepted by them, subject to the validity of the Securities and other conditions contained in the International Purchase Agreement, such as the receipt by the International Managers of certificates from each of the Selling Shareholders and legal opinions. The International Managers reserve the right to withdraw, cancel or modify such offers and to reject orders in whole or in part. Investors in the International Offer will be required to purchase and receive NVDRs in lieu of Shares. See “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”, “Special Note Regarding NVDRs”, and “Risk Factors — Risks Relating to the NVDRs” for further information concerning the NVDRs. We and the Selling Shareholders have agreed to indemnify the International Managers against certain liabilities.

Underwriting Commission The International Managers have agreed to purchase and/or procure the purchase of the Securities under the International Purchase Agreement at a purchase price equal to the Offer Price of the NVDRs/Shares set forth on the cover page of this Offering Memorandum. We will pay or allow the each of the International Managers an underwriting commission of 1.0% of the Offer Price for each of the Securities that International Manager purchases or procures purchasers for under the International Purchase Agreement.

General Purchasers of Securities sold by the International Managers may be required to pay stamp taxes and/or other charges in accordance with the laws and practice of the country of purchase. Investors in the International Offer will be required to pay to the International Managers, in addition to the Offer Price, a brokerage fee equal to 1.0% of the purchase price of the Securities at the time of settlement.

Domestic Offer We and the Selling Shareholders have also entered into an underwriting agreement (the “Thai Underwriting Agreement”) with the Thai underwriters, for whom CIMB Securities (Thailand) Co., Ltd. and Thanachart Securities Public Company Limited are acting as the Joint Thai Lead Underwriters, for the sale of the shares in Thailand. Subject to the terms and conditions in the Thai Underwriting Agreement, and concurrently with the sale of 400,000,000 shares to the International Managers pursuant to the International Purchase Agreement, we and the Selling Shareholders have agreed to appoint the Thai underwriters to procure subscribers for, and the Thai underwriters severally have agreed to procure subscribers for, or failing which to subscribe for, 812,500,000 shares from us and the Selling Shareholders. The closing of the International Offer is conditional upon the closing of the Domestic Offer and vice versa.

Securities Are Not Being Registered under the U.S. Securities Act The International Managers, directly or through their investees, propose to offer the Securities for resale in transactions not requiring registration under the U.S. Securities Act or applicable state securities laws, in sales pursuant to Regulation S under the U.S. Securities Act or pursuant to another available exemption from the registration requirements of the U.S. Securities Act. Specifically, none of the International Managers will offer or sell the Securities except outside the United States in offshore transactions in reliance on Regulation S under the U.S. Securities Act or pursuant to another available exemption from the registration requirements of the U.S. Securities Act.

152 In addition, until the expiration of 40 days after the later of the commencement of the International Offer and the end of the subscription period, an offer or sale of the Securities within the United States by any broker- dealer (whether or not it is participating in the International Offer) may violate the registration requirements of the U.S. Securities Act if such offer or sale is made otherwise than pursuant to another exemption under the U.S. Securities Act. Securities sold pursuant to Regulation S may not be offered or resold within the United States (as defined in Regulation S) except under an exemption from the registration requirements of the U.S. Securities Act or under a registration statement declared effective under the U.S. Securities Act. Each purchaser of the Securities will be deemed to have made the representations, agreements and acknowledgments as described under the “Transfer Restrictions” section of this Offering Memorandum.

Lock-up We and each of the Selling Shareholders have agreed with the International Managers that for a period of 180 days following the closing date of the Primary Offering, we and each Selling Shareholder will not, without the prior written consent of the International Managers: (i) issue, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, hypothecate or encumber or otherwise transfer or dispose of any Shares or any securities convertible into or exercisable or exchangeable for or repayable with Shares or that carry rights to subscribe for or purchase Shares (collectively, “Lock-Up Shares”); (ii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Shares whether any transaction described in (i) or (ii) is to be settled by delivery of Shares or other securities, in cash or otherwise; (iii) deposit any Shares or any securities convertible into or exchangeable for or that carry rights to subscribe for or purchase Shares in any depositary receipt facilities; or (iv) publicly disclose any intention to do any of the above. The restrictions set forth above do not apply to the sale of the Vendor Tranche B Shares by the Selling Shareholders and the settlement of all amounts relating to the call option shares granted under the Credit Suisse Loan Agreement.

Delivery of Securities Payment for the Securities is expected to be made on or about May 29, 2012. We are required to register the increase in our paid-in registered capital with the Ministry of Commerce before we are permitted to issue and deliver the Shares. NVDRs will not be issued and delivered until we have first delivered the underlying Shares to the NVDR Issuer following such registration. There is uncertainty under Thai law as to the status of purchasers of Securities in the period between payment for such Securities and registration of the increase in paid-in registered capital. It is possible that, during this period, purchasers of Shares will not be shareholders and instead will be our unsecured creditors. For a description of the status of purchasers of NVDRs in the period between payment for NVDRs and the delivery of NVDRs, see “Annex A — Issuance of Non-Voting Depositary Receipts — Prospectus”. In addition, the International Managers or their respective affiliates may make arrangements with particular purchasers of the Securities to provide certain undertakings with respect to the delivery of the Securities purchased by them.

Other Relationships Some of the International Managers and the Joint Thai Lead Underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions. See, for example, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness — Bank Loans — Credit Suisse Loan Agreement”. In addition, in the ordinary course of their business activities, the International Managers and the Joint Thai Lead Underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of us or our affiliates. The International Managers and the Joint Thai Lead Underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views

153 in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions General None of the Company, the Selling Shareholders, the International Managers and the Joint Thai Lead Underwriters have taken any action, or will take any action, in any jurisdiction other than Thailand that would permit a public offering of our Shares, or the possession, circulation or distribution of this Offering Memorandum or any other material relating to the Combined Offering in any jurisdiction other than Thailand where action for that purpose is required. Accordingly, each purchaser of the Securities may not offer or sell, directly or indirectly, any Securities and may not distribute or publish this Offering Memorandum or any other offering material or advertisements in connection with the Securities in or from any country or jurisdiction except in compliance with any applicable rules and regulations of such country or jurisdiction.

European Economic Community Each of the International Managers have represented and agreed that the Securities have not been and will not be offered, sold or publicly promoted or advertised by it in any Member State of the European Economic Area (“EEA”) which has implemented the Prospectus Directive (each, a “Relevant Member State”) other than in compliance with the Prospectus Directive or any other laws applicable in the EEA governing the issue, offering and sale of securities. No action has been taken, or will be taken, in any Relevant Member State to permit an offer to the public of any of the Securities in that Relevant Member State. Accordingly, the Securities are not being (and will not be) offered and will not be allocated to any person in the EEA other than: (a) to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; (b) to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year; (2) a total balance sheet of more than EUR43,000,000 and (3) an annual net turnover of more than EUR50,000,000, as shown in its last annual or consolidated 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 International Managers for any such offer; or (d) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Securities shall result in a requirement for the publication by the Company or the International Managers of a prospectus pursuant to Article 3 of the Prospectus Directive. For the purposes of this provision, the expression an “offer to the public” in relation to any Securities in any Relevant Member State means the communication to persons in any form and by any means, presenting sufficient information on the terms of the offer and the securities to be offered, so as to enable an investor to decide to purchase or subscribe to these securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in each Relevant Member State.

Hong Kong The contents of this document have not been reviewed by any regulatory authority in Hong Kong. You are advised to exercise caution in relation to the offer. If you are in any doubt about any of the contents of this document, you should obtain independent professional advice. This Offering Memorandum has not been approved by the Securities and Futures Commission in Hong Kong and, accordingly, (i) the Securities may not be offered or sold in Hong Kong by means of this Offering Memorandum or any other document other than to "professional investors" as defined in the Securities and Futures Ordinance of Hong Kong (Cap. 571) and any rules made thereunder, or in other circumstances which do not result in the document being a "prospectus" as defined in the Companies Ordinance of Hong Kong (Cap. 32) or which do not constitute an offer to the public within the meaning of the Companies Ordinance, and (ii) no person shall issue or possess for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement,

154 invitation or document relating to the Securities which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the Securities which are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors (as set out above).

Japan The Securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended; the "FIEA"). Each of the International Managers has represented and agreed that it will not offer or sell any Securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (as defined under Item 5, Paragraph 1, Article 6 of the Foreign Exchange and Foreign Trade Act (Act No. 228 of 1949, as amended)), or to others for reoffering or resale, directly or indirectly, in Japan or to, or for the benefit of, a resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the FIEA and any other applicable laws, regulations and ministerial guidelines of Japan.

Malaysia No approval from the Malaysian Securities Commission has been applied for or will be obtained for the offering for subscription or purchase, the invitation to subscribe for or purchase or the sale of the Securities in Malaysia. This document has not been and will not be registered as a prospectus or deposited as an information memorandum with the Malaysian Securities Commission under the Malaysian Capital Markets and Services Act 2007. Accordingly, no offering for subscription or purchase and no invitation to subscribe for or purchase of the Securities may be made in Malaysia. This document or any document or other materials in connection therewith may not be distributed or made available in Malaysia directly or indirectly for the purpose of any offering for subscription or purchase, invitation to subscribe for or purchase of or sale of, the Securities in Malaysia. In the event, for any reason whatsoever, this document is received in Malaysia, (i) it will not have any effect as an offer or invitation to purchase or subscribe for any securities; (ii) it does not make available, and will not be construed as making available, any securities for purchase or subscription; and (iii) it must be promptly returned to the Company.

People’s Republic of China (excluding Hong Kong SAR, Macau SAR and Taiwan) (the “PRC”) The Securities have not been offered or sold and will not be offered or sold in the PRC as part of the initial distribution of the Securities. This document does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC to any person to whom it is unlawful to make the offer or solicitation in the PRC. The Company does not represent that this document may be lawfully distributed, or that any Securities may be lawfully offered, in compliance with any applicable registration or other requirements in the PRC, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Company which would permit a public offering of any Securities or distribution of this document in the PRC. Accordingly, the Securities are not being offered or sold within the PRC by means of this document or any other document. Neither this document nor any advertisement or other offering material may be distributed or published in the PRC, except under circumstances that will result in compliance with any applicable laws and regulations.

Saudi Arabia Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a “Saudi Investor”) who acquires Securities pursuant to the Offering should note that the offer of Securities is a limited offer under Article 11 of the “Offer of Securities Regulations” as issued by the Board of the Capital Market Authority resolution number 2-11-2004 dated October 4, 2004 and amended by the Board of the Capital Market Authority resolution number 1-28-2008 dated August 18, 2008 (the “KSA Regulations”). Each International Manager has represented, warranted and agreed that the offer of the Securities will not be directed at more than 60 Saudi Investors in total (excluding “Sophisticated Investors” (as defined in Article 10 of the KSA Regulations)) and the minimum amount payable per Saudi Investor will be not less than Saudi Riyal (SR) 1 million or an equivalent amount. The offer of Securities shall not therefore constitute a “public offer” pursuant to the KSA Regulations, but is subject to the following restrictions on secondary market activity under Article 17 of the KSA Regulations: (a) A Saudi Investor (the “transferor”) who has acquired Securities pursuant to a limited offer may not offer or sell Securities to any person (referred to as a “transferee”) unless the offer or sale is made through

155 an authorized person appropriately licensed by the Saudi Arabian Capital Market Authority and the transferee is a Sophisticated Investor (as defined in Article 10 of the KSA Regulations) or the price to be paid by the transferee for such Securities equals or exceeds SR 1 million, or the offer or sale is otherwise in compliance with Article 17 of the KSA Regulations. (b) If the provisions of paragraph (a) cannot be fulfilled because the price of the Securities being offered or sold to the transferee has declined since the date of the original limited offer, the transferor may offer or sell the Securities to the transferee if their purchase price during the period of the original limited offer was equal to or exceeded SR 1 million. (c) If the provisions of (a) and (b) cannot be fulfilled, the transferor may offer or sell Securities if he/ she sells his entire holding of Securities to one transferee. The provisions of paragraphs (a), (b) and (c) shall apply to all subsequent transferees of the Securities. This document may not be distributed in Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority. The Capital Market Authority does not make any representation as to the accuracy or completeness of this document, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this document you should consult an authorized financial adviser.

Singapore The International Managers acknowledge that the Offering Memorandum has not been registered as a prospectus with the Monetary Authority of Singapore, and the Securities will be offered pursuant to exemptions under the Securities and Futures Act, Chapter 289 of Singapore (the “Securities and Futures Act”). Accordingly, each of the International Managers represents and agrees that it has not offered or sold any Securities or caused the Securities to be made the subject of an invitation for subscription or purchase and will not offer or sell any Securities or cause the Securities to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, the Offering Memorandum or any document or material in connection with the offer or sale, or invitation for subscription or purchase, of any Securities, whether directly or indirectly, to any person in Singapore other than (a) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, (b) to a relevant person under Section 275(1) of the Securities and Futures Act, or to any person pursuant to Section 275(1A) of the Securities and Futures Act and in accordance with the conditions specified in Section 275 of the Securities and Futures Act, or (c) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the Securities and Futures Act. Each of the following persons specified in Section 275 of the Securities and Futures Act which has subscribed or purchased Securities, namely a person who is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the Securities and Futures Act)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an individual who is an accredited investor, should note that shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the Securities under Section 275 of the Securities and Futures Act except: (i) to an institutional investor under Section 274 of the Securities and Futures Act or to a relevant person or to any person pursuant to Section 275(1) and Section 275(1A) of the Securities and Futures Act, respectively and in accordance with the conditions specified in Section 275 of the Securities and Futures Act; or (ii) where no consideration is or will be given for the transfer; or (iii) where the transfer is by operation of law; or (iv) pursuant to Section 276(7) of the Securities and Futures Act.

Thailand Each International Manager has agreed that, as a part of the distribution of the Securities offered hereby, and subject to certain exceptions, it will not offer or sell Securities, directly or indirectly, to any person within the

156 Kingdom of Thailand. Each Thai underwriter has agreed pursuant to an intersyndicate agreement that, as part of the distribution of the Offering Shares offered as part of the Domestic Offer and subject to certain exceptions, it will not offer or sell Offering Shares, directly or indirectly, to any person outside the Kingdom of Thailand. Pursuant to the intersyndicate agreement, sales may be made between the International Managers and the Joint Thai Lead Underwriters of such number of Offering Shares as may be mutually agreed. The price of any Offering Shares so sold shall be the Offer Price set forth on the cover page of this Offering Memorandum less the per share amount of the commission.

United Kingdom Each of the International Managers has represented, warranted and undertaken that: (i) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000 (“FSMA”) in connection with the issue or sale of any Securities in circumstances in which section 21(1) of FSMA does not apply to BSSR; and (ii) it has complied and will comply with all applicable provisions of FSMA with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom.

United States The Securities have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States. The Securities are being offered and sold outside of the United States in reliance on Regulation S under the Securities Act.

157 TRANSFER RESTRICTIONS Because the following restrictions will apply to the International Offer, purchasers are advised to consult their own legal counsel prior to making any offer, resale, pledge or transfer of the Securities. Each purchaser of the Securities outside the United States pursuant to Regulation S under the U.S. Securities Act (other than investors in Thailand), by accepting delivery of this Offering Memorandum and the Securities, will be deemed to have represented, agreed and acknowledged that: • It is authorized to consummate the purchase of the Securities in compliance with all applicable laws and regulations. • It acknowledges (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed to it that such customer acknowledges) that the Securities have not been and will not be registered under the U.S. Securities Act. • It certifies that either (i) it is, or at the time the Securities are purchased will be, the beneficial owner of the Securities and it is located outside the United States (within the meaning of Regulation S); or (ii) it is a broker-dealer acting on behalf of its customer and its customer has confirmed to it that (A) such customer is, or at the time the Securities are purchased pursuant to Regulation S will be, the beneficial owner of the Securities and (B) such customer is located outside the United States (within the meaning of Regulation S). • It agrees (or if it is a broker-dealer acting on behalf of a customer, its customer has confirmed to it that such customer agrees) that it (or such customer) will not offer, sell, pledge or otherwise transfer the Securities other than in accordance with any applicable laws of the states or territories of the United States and any other jurisdiction, including Thailand. • It is eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire the Securities, and will comply with such laws, rules, regulations, guidelines and approvals in any sale, pledge or transfer of the Securities. • It acknowledges that the Company, the Selling Shareholders, the International Managers, the Joint Thai Lead Underwriters and their respective representatives, agents, affiliates and nominees will rely upon the truth and accuracy of the foregoing representations, agreements and acknowledgments and agrees that, if any of such representations, agreements and acknowledgments deemed to have been made by virtue of its purchase of the Securities are no longer accurate, it will promptly notify the Company, and if it is acquiring any Securities as a fiduciary or agent for one or more accounts, it has sole investment discretion with respect to each such account and that it has full power to make the foregoing representations, agreements and acknowledgments on behalf of each such account. • It is relying on this Offering Memorandum and not on any other information or representation concerning the Company, the Selling Shareholders or the Securities and none of the Company, the Selling Shareholders nor any other person responsible for this Offering Memorandum or any part of it, nor the International Managers or the Joint Thai Lead Underwriters, will have any liability for any such other information or representation. Any resale, pledge or other transfer, or attempted resale, pledge or other transfer, made other than in compliance with the above stated restrictions, will not be recognized by the Company.

158 LEGAL MATTERS Certain matters in connection with the offering will be passed upon for us by White & Case Pte. Ltd. with respect to matters of U.S. federal securities laws and English law. Certain matters in connection with the offering will be passed upon for us by Weerawong, Chinnavat & Peangpanor Ltd. with respect to matters of Thai law. Certain legal matters in connection with the offering will be passed upon for the International Managers by Allen & Overy LLP with respect to matters of U.S. federal securities laws and English law and by Allen & Overy (Thailand) Co., Ltd., with respect to matters of Thai law.

INDEPENDENT ACCOUNTANTS The audited proportionate consolidated and company financial statements of the Company as of and for the years ended December 31, 2009, 2010 and 2011, each of which has been prepared and presented in accordance with Thai GAAP and included in this Offering Memorandum, have been audited by PwC Thailand, a member firm of PricewaterhouseCoopers International Limited, which expressed an unqualified opinion on those financial statements. The audited financial statements of Thai AirAsia as of and for the years ended December 31, 2009, 2010 and 2011, each of which has been prepared and presented in accordance with Thai GAAP and included in this Offering Memorandum, have been audited by PwC Thailand, a member firm of PricewaterhouseCoopers International Limited, which expressed an unqualified opinion on those financial statements.

159 SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN THAI GAAP AND IFRS The following is a general summary of certain principal differences between Thai GAAP and IFRS that we believe are applicable to us. Thai GAAP differs in certain material respects from IFRS. A brief description of certain significant accounting differences between Thai GAAP and IFRS as applicable to our Company and Thai AirAsia for the financial years ended December 31, 2009, 2010 and 2011 and the three months ended March 31, 2011 and 2012 is set out below. The organizations that promulgate Thai GAAP and IFRS have issued new pronouncements that may impact subsequent periods and have significant ongoing projects that could affect the differences between Thai GAAP and IFRS described below and the impact of these differences relative to the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements in the future. Accordingly, this summary is not intended to provide a comprehensive listing of all existing or future differences between Thai GAAP and IFRS related to us or the industry in which we operate. No attempt has been made to quantify the differences. Had we undertaken to identify the differences specifically affecting the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements presented in this Offering Memorandum, other potentially significant differences may have come to our attention that are not provided in the following summary. Accordingly, we can provide no assurance that this summary of certain significant differences between Thai GAAP and IFRS provides a complete description of all differences that may have an impact on the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements. IFRS is generally more restrictive and comprehensive than Thai GAAP regarding the recognition and measurement of transactions, account classifications and disclosure requirements. No attempt has been made in this summary to identify disclosure, presentation or classification differences that would affect the manner in which transactions and events are reflected in the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements or the respective notes thereto. Thai Financial Reporting Standards (“TFRS”) and accounting interpretations were renumbered, effective June 26, 2009, following the endorsement in the Government Gazette and the announcement by the FAP in order to conform to the numbers used in the IFRS. Unless otherwise stated, references to TFRS below are based on the renumbered TFRS. In making an investment decision, investors must rely upon their own examination of the Company and Thai AirAsia’s financial statements, the terms of the offering and the financial information. Potential investors should consult their own professional advisers for an understanding of the differences between Thai GAAP and IFRS and how these differences might affect the financial information in this Offering Memorandum.

Presentation of Financial Statements Under Thai GAAP, TAS 1 “Presentation of Financial Statements” provides guidance on the overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. The format of the financial statements under Thai GAAP follows the format prescribed by the Department of Business Development under the Ministry of Commerce. Prior to the financial year beginning on January 1, 2009, guidance on the presentation of financial statements under IFRS was covered by IAS 1 “Presentation of Financial Statements” which was similar to those required under Thai GAAP. From January 1, 2009, IAS 1 was revised, resulting in a number of significant differences between Thai GAAP and IFRS. For example, IAS 1 (revised) requires all changes in equity arising from transactions with owners in their capacity as owners to be presented separately from non-owner changes in the statement of changes in equity. Non-owner changes will be presented in the statement of comprehensive income. An entity has a choice of presenting income and expenses in one statement (a statement of comprehensive income) or in two statements (an income statement and a statement of comprehensive income). In addition, IAS 1 (revised) requires presentation of a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting policy retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. This effectively means that the entity is required to present three years of statement of financial positions in these instances. TAS 1 has recently been revised based on IAS 1 (revised) and became effective on January 1, 2011. However, the TAS 1 (revised) provides a one-time policy choice for an entity to present two years of financial positions when TAS 1 (revised) was adopted on January 1, 2011. On the adoption of TAS 1 (revised), the Company and Thai AirAsia have elected to present income and expenses in one statement of comprehensive income.

160 Employee Benefits Prior to the financial year beginning on January 1, 2011, there was no effective Thai GAAP in relation to accounting for employee benefits. Our primary obligations in respect of employee benefits are contributions on behalf of employees to our provident funds and the payment of statutory severance benefits on retirement and terminating employment involuntarily under Thai Labor Law. In our proportionate consolidated and company financial statements and Thai AirAsia’s financial statements, we charge contributions to the provident funds and statutory severance and retirement payments when incurred. No provision was recognized for such benefits. Under IFRS, IAS 19 “Employee Benefits” requires an entity to recognize employee benefits as expenses in the period which the entity receives service from the employee, rather than when the benefits are paid or payable. In addition, obligations for post-employment benefits which are defined benefit plans are recognized net of the fair value of any plan assets on the balance sheet, using the Projected Unit Credit Method, as the present value of the estimated future cash outflows based on employee wages, turnover rate, retirement ages, mortality, length of service and others, and using the interest rates of high quality corporate bond rates or government bond rates (in countries where there is no deep market for corporate bond) that are denominated in the currency in which the benefits will be paid, which have terms to maturity approximately the term of the related obligations. Actuarial gains or losses arising from changes in actuarial assumptions may be recognized using corridor approach or any systematic method that results in faster recognition of actuarial gains and losses. The cost associated with providing these benefits are charged to profit or loss so as to spread the cost over the period of employment during which the entitlement to benefit is earned. TAS 19 “Employee Benefits”, which is based on IAS 19, became effective on January 1, 2011. On the adoption of TAS 19, the Company and Thai AirAsia have elected to adjust the transitional adjustment to the opening retained earnings as at January 1, 2011 as permitted by TAS 19. The Company and Thai AirAsia have also elected to recognize actuarial gains or losses immediately in other comprehensive income in the period in which they arise.

Foreign Currency Translation Under Thai GAAP, TAS 21 “The Effects of Changes in Foreign Exchange Rates” was based on the previous version of IAS 21 “The Effects of Changes in Foreign Exchange Rates” and has no concept of functional currency. Assets, liabilities and operating results of each entity are recorded in each respective local currency and the proportionate consolidated financial statements are presented in Baht. Under IFRS, IAS 21 requires each entity to determine its functional currency and measure its results and financial position in that currency. However, the entity may choose a presentation currency to present its financial statements. TAS 21 has recently been revised based on IAS 21 and will become effective on January 1, 2013. Although early adoption is permitted, the Company and Thai AirAsia have not early adopted this standard.

Operating Segments Under Thai GAAP, TAS 14 “Reporting Financial Information by Segment” was based on IAS 14 (1993) “Reporting Financial Information by Segment”. Disclosure was required in relation to primary and secondary segments information based on either business segments or geographical segments, depending on an entity’s risks and returns governing the primary segment. The secondary segment format requires less disclosure. The Company does not disclose segment information because the Company has only one significant segment which is the provision of air transportation services. Under IFRS, prior to the financial year beginning on January 1, 2009, IAS 14 (revised 2005) “Segment Reporting” prescribed similar but more extensive disclosure than required under TAS 14. From the financial year beginning on January 1, 2009, IAS 14 (revised 2005) was superseded by IFRS 8 Operating Segments (“IFRS 8”). IFRS 8 requires segment information to be reported based on the entity’s operating segment. Operating segments are components of an enterprise in which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, financial information is required to be reported on the same basis as is used internally for evaluating segment performance and deciding how to allocate resources to segments. TFRS 8 “Operating Segments”, which is based on IFRS 8, has recently been issued and will become effective on January 1, 2013. Although early adoption is permitted, the Company and Thai AirAsia have not early adopted this standard.

161 Income Taxes There is no currently effective Thai GAAP in relation to accounting for income taxes and deferred taxes. While not specifically addressed in Thai GAAP, provisions for income taxes are typically based on corporate income taxes currently payable in the period under the Revenue Code of Thailand. However, no deferred taxes have been recognized in the Company’s proportionate consolidated and company financial statements and Thai AirAsia’s financial statements as of December 31, 2009, 2010 and 2011. Under IAS 12 “Income Taxes”, deferred taxes are recognized for the estimated future tax effects of temporary differences. Temporary differences, which are differences between the carrying amount of an asset or liability in the balance sheet and its tax base, comprise taxable temporary differences and deductible temporary differences. Deferred tax liabilities are the amounts of income tax payable in future periods in respect of taxable temporary differences. Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of deductible temporary differences and the carryforward of unused tax losses when it is probable that the asset can be utilized. TAS 12 “Income Taxes”, which is based on IAS 12, has recently been issued and will become effective on January 1, 2013. Although early adoption is permitted, the Company and Thai AirAsia have not early adopted this standard.

Financial Instruments — Recognition and Measurement While there is no one single standard capturing accounting for all types of financial instruments, there are a number of TFRS standards which provide guidance on accounting for financial instruments, such as TAS 105 “Accounting for Investment in Debt and Equity Securities” and TAS 101 “Doubtful Accounts and Bad Debts”. Under IFRS, IAS 39 “Financial Instruments: Recognition and Measurement” has extensive guidance on the recognition and measurement of financial instruments, including the categorization of financial assets and liabilities, accounting for derivatives and hedging activities and impairment. The International Accounting Standards Board has also issued IFRS 9 “Financial Instruments” which will eventually supersede IAS 39. IFRS 9 is effective for the annual period beginning on or after January 1, 2015 but early adoption is permitted. Significant differences between Thai GAAP and IAS 39 as applicable to the Company and Thai AirAsia for the year ended December 31, 2009, 2010 and 2011 are as follows:

Categorization of Financial Assets and Liabilities Categorization of financial assets and liabilities under Thai GAAP follows the general guidance in the Framework and in each respective standard. In contrast, IAS 39 requires financial assets to be categorized into (i) financial asset at fair value through profit or loss, (ii) held to maturity investments, (iii) loan and receivables and (iv) available for sale financial assets. The categorization depends on the purpose for which the financial assets were acquired. Financial liabilities are either categorized into financial liability at fair value through profit or loss or financial liability carried at amortized cost. All financial assets and liabilities are initially recognized at fair value net of transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Subsequent accounting depends on their respective categories.

Derivative Financial Instruments Under IFRS, derivatives financial instruments are required to be marked to market at fair value and recognized on the balance sheet. Changes to fair value are recognized through profit and loss. If hedge accounting is elected and appropriate based upon the specific criteria of IAS 39, the impact of recording the derivative instrument is offset to the extent the hedging relationship is effective. If a hedge is designated as a fair value hedge, changes in the derivative’s fair value are recorded in profit and loss and the hedged item is marked to market for changes in fair value associated with the hedged risk. If designated as a cash flow hedge, the effective portion of the hedge is recorded in equity as a component of other comprehensive income, and released from other comprehensive income into earnings as the hedged item affects earnings. All ineffectiveness in the hedging relationship, as well as derivative instruments not qualifying for hedge accounting, is reflected in the statement of income immediately. The Company and Thai AirAsia were not a party to derivative agreements for the year ended December 31, 2009, 2010 and 2011.

Financial Guarantees Thai AirAsia provides financial guarantees to banks for loans given to pilot trainees in accordance with the professional pilot course. Such financial guarantees are disclosed in the financial statements for the years ended December 31, 2009, 2010 and 2011.

162 Under IAS 39, financial guarantee contracts are accounted for as financial liabilities and should initially be recognized at fair value by the issuer. Subsequent to the initial recognition, financial guarantee contracts are measured and recognized at the higher of the amount determined in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”, and the amount initially recognized at fair value less, when appropriate, cumulative amortization of the initial amount recognized in accordance with IAS 18 “Revenue”.

Financial Instruments — Presentation and Disclosure Thai GAAP addresses financial instruments presentation through TAS 32 “Financial Instruments: Presentation and Disclosure” which is based on the previous version of IAS 32 “Financial Instruments: Presentation”. The current version of IAS 32 revised the definitions of financial liabilities, and equity instrument and provided additional guidance on the classification between financial liability and equity instrument. It also provides additional guidance on classification of contracts settled in an entity’s own equity instruments, puttable instruments and treasury shares. Disclosure requirements under TAS 32 are not as extensive as those required by IFRS 7 “Financial Instruments: Disclosure”. IFRS 7 requires extensive qualitative and quantitative disclosure about exposure to risks rising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk and how the entity manages those risks.

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A-31 [THIS PAGE INTENTIONALLY LEFT BLANK] ANNEX B REPORT OF THE AVIATION CONSULTANT: THAI AIRASIA CO., LTD. DATED JANUARY 16, 2012

B-1

Asia-Pacific: Americas: 55 Soi Langsuan, Suite 1902 1342 Jones Street Ploenchit Road Suite 6 Bangkok, Thailand 10330 San Francisco, California 94109 USA +66 (86) 060-4626 (office) +1 415 577-2127 (office) +1 978 246-6031 (fax) +1 978 246-6031 (fax)

Please use San Francisco address for correspondence. [email protected]

Report of the Aviation Consultant

Thai AirAsia Co. Ltd. Bangkok, Thailand

prepared by The S-A-P Group Bangkok and San Francisco

report date 16 January 2012

B-2 Report of the Aviation Consultant: Thai AirAsia Co Ltd i 16 January 2012

TABLE OF CONTENTS

1 AVIATION INDUSTRY OVERVIEW ...... 1 1.1 Background ...... 1 1.1.1 Aviation in the Asia-Pacific Region ...... 1 1.1.2 Aviation in Thailand ...... 1 1.2 Aviation Activity in Thailand ...... 3 1.2.1 Historical Air Passenger Movements ...... 3 1.2.2 Domestic Scheduled Passenger Services: Seats ...... 6 1.2.3 Domestic Scheduled Passenger Services: Average Seat Capacity ...... 6 1.2.4 International Scheduled Passenger Services: Seats ...... 7 1.2.1 International Scheduled Passenger Services: Average Seat Capacity ...... 7

2 FORECASTS OF AVIATION ACTIVITY ...... 8 2.1 Historical and Forecast Global Air Travel Growth Rates ...... 8 2.2 Historical and Forecast Air Travel Growth Rates in Southeast Asia ...... 10

3 GROWTH FACTORS AND RELATIONSHIPS TO AIR TRAVEL ...... 11 3.1 Gross Domestic Product ...... 11 3.1.1 World GDP and Air Travel Activity ...... 11 3.1.2 Per Capita GDP and Air Travel Activity ...... 12 3.1.3 GDP Growth in Select Countries in Asia ...... 14 3.2 Effects of Economic Growth on Air Travel in Asia ...... 16 3.2.1 China ...... 16 3.2.2 Thailand ...... 16 3.3 Population Growth and Urbanization ...... 16 3.4 Trade and Tourism ...... 18 3.4.1 Global Trade and Air Travel ...... 18 3.4.2 Tourism and Air Travel in Southeast Asia ...... 18 3.4.3 Historical Foreign Visitor Arrivals in Thailand ...... 19 3.4.4 Mode of Transport for International Arrivals at Thailand ...... 21 3.4.5 Visitor Arrivals in Thailand by Country of Residence ...... 21 3.5 Airline Service and Fares ...... 23 3.5.1 Medium-Haul and Long-Haul Opportunities ...... 23 3.5.2 Airfares and Low Cost Carriers ...... 23 3.6 Other Aviation Growth Factors...... 23 3.6.1 Geographical Characteristics...... 23 3.6.2 Liberalization of Air Travel ...... 23 3.6.3 Transportation Infrastructure ...... 23

4 COMPETITIVE LANDSCAPE ...... 24 4.1 Key Financial and Operating Performance for Select Carriers ...... 24 4.2 Development of Low Cost Carriers ...... 25 4.2.1 Effects of LCC on the Asian Aviation Industry ...... 25 4.3 Airline Infrastructure ...... 26 4.4 Asian Aviation Industry Growth Prospects ...... 27 4.5 Potential Constraints to Asia Aviation Industry Growth ...... 28

5 REGULATORY ENVIRONMENT ...... 28 5.1 Domestic Airline Regulation Structure in Thailand ...... 28 5.2 International Regulations ...... 29 5.3 Liberalization of the Aviation Industry ...... 29 5.4 ASEAN Member States and Open Skies...... 30 5.4.1 Within ASEAN ...... 30 5.4.2 Outside of ASEAN ...... 31 5.5 Open Skies Agreements with Thailand ...... 31

The S-A-P Group

B-3 Report of the Aviation Consultant: Thai AirAsia Co Ltd ii 16 January 2012

ABBREVIATIONS AND DEFINITIONS

AirAsia Group AirAsia Berhad, AirAsia X, PT Indonesia AirAsia, and Thai AirAsia Co Ltd AOT Airports of Thailand Public Company Limited ASEAN Association of Southeast Asian Nations ASK Available seat kilometer(s) (equals one passenger seat flown one kilometer)

CAAGR compound average annual growth rate CASK cost per available seat kilometer DCA Thai Department of Civil Aviation FSC full-service carrier

FY Fiscal Year GDP Gross Domestic Product IATA International Air Transport Association ICAO International Civil Aviation Organization

IMF International Monetary Fund km kilometer(s) LCC low-cost carrier n.a. not available or not applicable

RASK revenue per available seat kilometer RPK revenue passenger kilometer(s) (one revenue passenger flown one kilometer) S-A-P The S-A-P Group (Strategic Airport Planning Ltd) Southeast Asia Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam

Thai AirAsia Thai AirAsia Company Limited UNWTO United Nations World Tourism Organization

The S-A-P Group

B-4 Report of the Aviation Consultant: Thai AirAsia Co Ltd iii 16 January 2012

IMPORTANT NOTES

The S-A-P Group (Strategic Airport Planning Ltd) was asked by Thai AirAsia Company Limited to prepare this Report of the Aviation Consultant on Thai AirAsia Co Ltd and air travel in Southeast Asia. This independent expert report was prepared to be included in documentation (including, but not limited to any prospectus or offering circular) to support the Initial Public Offering of Thai AirAsia Co Ltd or its majority shareholder, Asia Aviation Public Company Limited, to occur in 2012.

The S-A-P Group (S-A-P) is an aviation consulting firm that specializes in the preparation of aviation activity forecasts and strategic business plans. Over the past 16 years, staff of The S-A-P Group have prepared forecasts of aviation activity in Australia (Sydney, Perth, Adelaide, Darwin), Indonesia (Jakarta), Malaysia, New Zealand (Auckland and Wellington), South Korea (Seoul), Thailand (Bangkok, Phuket, Chiang Mai, Chiang Rai, and Had Yai) and the United States (numerous).

This report includes forecasts and other forward-looking estimates. These forward-looking statements are necessarily based on various assumptions and estimates that are inherently subject to various risks and uncertainties relating to possible invalidity of the underlying assumptions and estimates and possible changes or development of social, economic, business, industry, market, legal, government, and regulatory circumstances and conditions and actions taken or omitted to be taken by others.

Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic and competitive market conditions and future government and business decisions, all of which are difficult or impossible to predict accurately. This report contains information supplied by and analysis based on public and private sources. To the extent such sources have been cited herein, we hereby confirm that the S-A-P Group is allowed to reference such sources. While we believe that the information is correct, we cannot guarantee its validity. Some amounts in this report are rounded. Financial and operating data for some air carrier groups may include cargo and other activities.

We are not obligated to update this report after today’s date. However, if we become aware of material changes affecting the items documented in this report, either (a) between the date of the report and the issue of the prospectus, or (b) after the issue of the prospectus and before the issue of the securities, then we agree to notify Thai AirAsia Company Limited.

STRATEGIC AIRPORT PLANNING LTD Date of report: 16 January 2012

Bill A. Matz Managing Director

The S-A-P Group

B-5 Report of the Aviation Consultant: Thai AirAsia Co Ltd 1 16 January 2012

REPORT OF THE AVIATION CONSULTANT

Thai AirAsia Co Ltd

16 January 2012

1 AVIATION INDUSTRY OVERVIEW

1.1 Background

1.1.1 Aviation in the Asia-Pacific Region

According to IATA (the International Air Transport Association), the Asia-Pacific region became the airline industry's largest market in 2009. Strong growth continued in 2010 as over a quarter of the world’s travelers journeyed to, from, or within the Asia-Pacific region on commercial flights. The Asia-Pacific region’s growth rates are forecast to remain robust over the next 20 years. If the number of people in Asia flew at the same rates per annum as their counterparts in the United States, the global aviation industry would triple in size.

The strong historical and projected future growth rates for the Asia-Pacific aviation industry are the result of several factors, including:

• Market liberalization efforts, which have allowed for the introduction of new entrant low-cost carriers (LCC) and increased competition, leading to reduced airfares and the introduction of new services and markets.

• Strong economic growth in most countries, leading to increased demand for domestic and international passenger services and for inbound transport of goods.

• Strong economic growth across the region and other parts of the world, leading to strong inbound international passenger services and demand for outbound cargo services.

1.1.2 Aviation in Thailand

Aviation activity in Thailand has grown significantly over the past few decades, in part due to the same market liberalization and economic growth factors affecting Asia as a whole. Some of the general Asia trends have been even more pronounced in Thailand, in particular the trend toward LCC carrier service. These factors have resulted in average annual growth in traffic of 4.4% from 2005 to 2010, despite several interruptions in growth during that time due to political turmoil, natural disasters, and economic crises.

Aviation demand to, from, and within Thailand is driven by inbound tourism, as well as business-related travel and outbound tourism. Thailand’s tourism infrastructure is particularly well-developed and attractive to tourists from around the world.

More than half of the aviation activity at the primary airports in Thailand is carried by the four largest Thailand-based airlines: Thai Airways International, Thai AirAsia, Bangkok Airways, and Nok Air.

Thai Airways International is the national carrier of the Kingdom of Thailand and largest airline in the country. It operates full service domestic, regional and international flights in a hub and spoke system from its base in Bangkok to destinations around the world and within Thailand. Thai Airways International was founded in 1960 as a joint venture between Thailand's domestic carrier, Thai Airways Company and Scandinavian Airlines System. The Thai government took full ownership of the carrier in 1977 and listed

The S-A-P Group

B-6 Report of the Aviation Consultant: Thai AirAsia Co Ltd 2 16 January 2012

shares on the Thai Stock Exchange in 1991. Thai Airways also has an LCC partner, Nok Air, which serves domestic routes in Thailand.

Thai AirAsia is an associate company of the AirAsia group of airlines, which includes Indonesia AirAsia and AirAsia X. AirAsia was founded in 2001 in Malaysia with a focus on low cost service. Thai AirAsia launched domestic operations in Thailand on February 2004 and serves domestic and regional destinations from its base of operations at Suvarnabhumi International Airport. The carrier serves destinations in Thailand and other countries using a fleet of 21 Airbus A-320 aircraft in a single-class configuration of 180 seats. Thai AirAsia is 51% owned by Asia Aviation PCL and 49% owned by AirAsia Berhad.

Bangkok Airways began scheduled services in 1986, becoming Thailand's first privately-owned domestic airline. The airline is 92% owned by Dr. Prasert Prasarttong-Osoth. In a unique capital investment for an airline, Bangkok Air in 1989 built its own airport on the island resort of Koh Samui, Thailand. The airline later developed airports in Sukhothai and Trat. From its base at Suvarnabhumi International Airport, the carrier operates 17 aircraft, including ATR 72-500s and Airbus A-319s and A-320s. Bangkok Air recently cancelled an Airbus A-350 aircraft order that would have allowed for operations to Europe.

Nok Air is an LCC that serves domestic routes in Thailand. The carrier is partially owned by Thai Airways International. Since its inception, Nok Air has operated largely independently from its parent company. Nok Air operates Boeing B-737-400 and B-737-800 and ATR 72-200 aircraft. The carrier’s primary base of operations is Don Mueang International Airport. However, the carrier has temporarily relocated its operations to Suvarnabhumi International due to the recent flooding-related closure of Don Mueang airport.

The S-A-P Group

B-7 Report of the Aviation Consultant: Thai AirAsia Co Ltd 3 16 January 2012

1.2 Aviation Activity in Thailand

1.2.1 Historical Air Passenger Movements

As shown in Table 1, below, air passenger activity at commercial airports in Thailand1 grew at an average annual rate of 4.4% from 2005 to 2010. Growth has been strong during several of the years in this period, but has varied significantly due to natural disasters and political disruptions in the country. Despite the disruptions, Thailand still experienced high compound average annual growth rates over the past several years.

Table 1

HISTORICAL AIR PASSENGER MOVEMENTS Thailand 2005-2010

CAAGR 2005 2006 2007 2008 2009 2010 2005~2010 Domestic passengers DCA airports 4,426,568 4,823,692 5,376,415 4,296,139 5,092,804 5,653,579 5.0% AOT airports 17,102,635 19,772,586 20,727,678 20,021,472 21,109,118 21,549,308 4.7% Subtotal 21,529,203 24,596,278 26,104,093 24,317,611 26,201,922 27,202,887 4.8% International passengers (a) 29,999,039 34,256,445 35,433,805 33,683,888 32,828,075 36,690,283 4.1% Total 51,528,242 58,852,723 61,537,898 58,001,499 59,029,997 63,893,170 4.4%

______Sources: AOT and DCA, July 2011. (a) AOT airports.

As shown in Table 2, below, the largest share of passenger traffic in Thailand is carried by Thai Airways International. The second greatest number of passengers is served by Thai AirAsia, which is the only LCC that serves both domestic and international destinations from Suvarnabhumi International Airport. Thai AirAsia and Nok Air operate as LCCs on domestic routes in the country.

Since the start of LCC operations in the country in 2004, with the launch of Thai AirAsia, LCC operations at Thai airports have created significant changes to the market including reduced airfares and increased affordability of air travel in the country.

The S-A-P Group

B-8 Report of the Aviation Consultant: Thai AirAsia Co Ltd 4 16 January 2012

Table 2

HISTORICAL AIR PASSENGER MOVEMENTS, BY AIRLINE AOT Airports in Thailand 2006-2010 (period: 1 October to 30 September)

CAAGR Full Service/Mainline Carriers 2006 2007 2008 2009 2010 2006~2010 Thai Airways International 22,463,733 23,308,495 22,342,145 22,517,047 21,637,221 -0.9% Bangkok Airways 2,499,257 2,515,311 2,466,657 2,875,734 3,141,726 5.9% Orient Thai Airlines 2,741,923 2,084,766 1,184,326 753,151 1,406,138 -15.4% Cathay Pacific Airways 1,442,158 1,337,343 1,314,490 1,401,463 1,392,701 -0.9% Emirates 926,827 996,814 918,992 1,001,111 1,220,538 7.1% China Airlines 1,267,394 1,164,394 1,136,886 1,001,783 783,804 -11.3% Korean Air 742,850 762,028 734,030 654,932 769,554 0.9% Singapore Airlines 1,315,323 1,206,930 1,104,283 814,221 671,320 -15.5% Eva Air 701,845 669,745 669,338 614,978 534,491 -6.6% JALways 723,121 785,300 691,810 639,227 461,034 -10.6% Silk Air 338,238 281,080 374,077 339,250 335,661 -0.2% Others 10,745,676 11,338,372 12,056,040 11,677,400 14,265,712 7.3% Subtotal 45,908,345 46,450,578 44,993,074 44,290,297 46,619,900 0.4%

Low-Cost Carriers Thai Air Asia 4,251,827 4,762,073 5,773,827 6,728,445 7,418,362 14.9% AirAsia 580,111 583,362 297,512 329,197 413,618 -8.1% Indonesia Air Asia - 14,293 59,882 96,543 92,464 n.a. AirAsia Group 4,831,938 5,359,728 6,131,221 7,154,185 7,924,444 13.2% Nok Air 2,537,281 3,354,441 2,624,959 1,819,988 2,975,343 4.1% Tiger Airways 492,265 476,539 146,270 187,508 255,673 -15.1% Others 259,202 520,197 512,236 485,215 464,231 15.7% Subtotal 8,120,686 9,710,905 9,414,686 9,646,896 11,619,691 9.4% Total 54,029,031 56,161,483 54,407,760 53,937,193 58,239,591 1.9%

______Source: AOT, October 2011.

The S-A-P Group

B-9 Report of the Aviation Consultant: Thai AirAsia Co Ltd 5 16 January 2012

Table 3, below, documents the airline market shares for passengers (domestic and international) at AOT airports2 from 2006 to 2010.

Between 2006 and 2010, the share of passengers served by Thai AirAsia at AOT airports increased from 7.9% to 12.7%. The overall share of LCCs at the airports increased from 15.0% to 20.0% of total activities in the same period.

Table 3

HISTORICAL AIR PASSENGER MOVEMENTS, BY AIRLINE MARKET SHARE AOT Airports in Thailand 2006-2010 (period: 1 October to 30 September)

Full Service/Mainline Carriers 2006 2007 2008 2009 2010 Thai Airways International 41.6% 41.5% 41.1% 41.7% 37.2% Bangkok Airways 4.6% 4.5% 4.5% 5.3% 5.4% All others 38.8% 36.7% 37.1% 35.0% 37.5% Full Service/Mainline Carriers 85.0% 82.7% 82.7% 82.1% 80.0%

Low-Cost Carriers Thai Air Asia 7.9% 8.5% 10.6% 12.5% 12.7% AirAsia 1.1% 1.0% 0.5% 0.6% 0.7% Indonesia Air Asia 0.0% 0.0% 0.1% 0.2% 0.2% AirAsia Group 8.9% 9.5% 11.3% 13.3% 13.6% All others 6.1% 7.7% 6.0% 4.6% 6.3% Low-Cost Carriers 15.0% 17.3% 17.3% 17.9% 20.0%

Total 100.0% 100.0% 100.0% 100.0% 100.0%

______Source: AOT, October 2011.

2 Source: AOT, October 2011. AOT operates Suvarnabhumi and Don Mueang international airports in Bangkok and the international airports in Chiang Mai, Chiang Rai, Phuket, and Hatyai. Data by airline for other commercial airports is not available. AO T airport data represents 91% of total traffic in Thailand and all international traffic. Throughout this report, AOT data reflects AOT financial years (1 October to 30 September of the year noted).

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B-10 Report of the Aviation Consultant: Thai AirAsia Co Ltd 6 16 January 2012

1.2.2 Domestic Scheduled Passenger Services: Seats

Table 4, below, provides a summary of the carrier shares of departing domestic scheduled weekly passenger seats operated by carriers serving Thailand airports during October 20113. As shown, Thai Airways International operated the greatest number of domestic seats at Suvarnabhumi International Airport (50.2% of total domestic seats) and nationwide (34.2%). LCC Thai AirAsia operated the second greatest number of domestic seats at Suvarnabhumi International Airport (31.4%) and nationwide (23.0%). From its base at Don Mueang International Airport, LCC Nok Air operated the third largest number of scheduled domestic seats nationwide.

Table 4

DEPARTING DOMESTIC SCHEDULED PASSENGER SERVICES (SHARE OF SEATS) Departures from Airports in Thailand

Activity Period: 1-7 October 2011

Weekly domestic departing seats; shares Suvarnabhumi Don Mueang Phuket Chiang Mai International International International International All other Operating carriers Airport (BKK) Airport (DMK) Airport (HKT) Airport (CNX) airports Total Thai Airways Int'l 50.2% -- 43.0% 31.0% 24.0% 34.2% Thai AirAsia 31.4% -- 26.0% 27.1% 22.0% 23.0% Nok Air -- 68.0% 6.0% 13.4% 26.0% 18.7% Bangkok Airways 18.4% -- 18.0% 12.0% 16.5% 14.0% Orient Thai Airlines -- 32.0% 7.0% 10.4% 8.0% 8.7% Nok Mini ------6.1% 3.5% 1.4%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

______Source: The S-A-P Group, based on data from OAG, October 2011.

1.2.3 Domestic Scheduled Passenger Services: Average Seat Capacity

Thai Airways International domestic flights operated with an average of 251 seats per flight. LCCs Thai AirAsia and Nok Air operated with an average of 180 and 129 seats per flight, respectively.

3 Includes scheduled services at all airports in Thailand, including AOT, DCA, and private sector commercial airports during 1-7 October 2011.

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B-11 Report of the Aviation Consultant: Thai AirAsia Co Ltd 7 16 January 2012

1.2.4 International Scheduled Passenger Services: Seats

Table 5, below, provides a summary of departing international scheduled weekly passenger seats operated by carriers serving Thai airports during October 20114. As shown, Thai Airways International operated the greatest number of international seats at Suvarnabhumi International Airport and across the nation. The AirAsia Group operated the greatest number of international seats at Phuket International Airport (HKT) and Chiang Mai International Airport (CNX). Nationwide, the AirAsia Group carriers accounted for 9.7% of total international departing seats.

Table 5

DEPARTING INTERNATIONAL SCHEDULED PASSENGER SERVICES (SEATS) Departures from Airports in Thailand Activity Period: 1-7 October 2011

Weekly international departing seats; shares Suvarnabhumi Don Mueang Phuket Chiang Mai International International International International All other Operating carriers Airport (BKK) Airport (DMK) Airport (HKT) Airport (CNX) airports Total Thai Airways Int'l 36.0% -- 8.7% -- -- 32.8%

Thai AirAsia 6.3% -- 8.1% 31.0% -- 6.6% AirAsia 1.1% -- 12.6% 31.0% 35.2% 2.6% Indonesia AirAsia 0.5% -- 1.2% -- -- 0.5% AirAsia Group 7.9% -- 21.9% 62.0% 35.2% 9.7%

Cathay Pacific Airwa 4.2% ------3.8% Emirates Airlines 3.6% ------3.3% Bangkok Airways 0.2% ------23.5% 2.5% Qatar Airways 2.0% -- 5.0% -- -- 2.2% Korean Air 1.5% -- 6.2% 7.8% -- 2.1% Tiger Airways 1.0% -- 5.8% -- 35.2% 1.9% China Airlines 2.0% -- 0.5% -- -- 1.9% All others 41.6% -- 51.9% 30.2% 6.1% 39.8%

Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

______Source: The S-A-P Group, based on data from OAG, October 2011.

1.2.1 International Scheduled Passenger Services: Average Seat Capacity

Thai Airways International flights operated with an average of 311 seats per international departure, the AirAsia Group of carriers operated with an average of 180 seats, and all other carriers operated with an average of 226 seats.

4 Includes scheduled services at all airports in Thailand, including AOT, DCA, and private sector commercial airports during 1-7 October 2011.

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B-12 Report of the Aviation Consultant: Thai AirAsia Co Ltd 8 16 January 2012

2 FORECASTS OF AVIATION ACTIVITY

Historical and forecast passenger growth rates for select air markets are provided in the sections that follow. The forecasts are based on industry publications that rely on econometric analysis of socioeconomic growth factors, global surveys of origins and destinations and infrastructure development, and other factors and analysis.

As with most aviation activity forecasts, significant levels of judgment are employed and actual results may be significantly different than the forecasts.

2.1 Historical and Forecast Global Air Travel Growth Rates

As shown in Table 6, which follows, global passenger air travel, as measured in revenue passenger kilometers (RPKs), grew at a compound average annual growth rate of 4.6% from 1985 to 2010.

According to The Boeing Company, passenger air travel in the Asia-Pacific region—as measured in RPKs— grew at one of the highest rates in the world during this period and is expected to experience continued strong growth rates in the coming years. Travel volumes in the Asia-Pacific region are already large, accounting for approximately 27% of global travel according to Boeing.

Asia-Pacific travel volumes are anticipated by Boeing to maintain strong growth rates in the future. Air travel within the Asia-Pacific region—as measured in RPKs—is projected by Boeing to grow at a compound average annual rate of 6.9% from 2010 to 2030. Boeing expects air travel (RPKs) to, from, and within the Asia-Pacific region to grow at a compound average annual growth rate of 6.7% during the same period.

Historical and forecast growth rates for passenger activity within select world regions for 1985 to 2030 are shown in Table 6, below.

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B-13 Report of the Aviation Consultant: Thai AirAsia Co Ltd 9 16 January 2012

Table 6

HISTORICAL AND FORECAST ANNUAL PASSENGER GROWTH RATES Activity (in RPKs) Within Select Regions of the World 1985 to 2030

CAAGR Historical Forecast 1985~1990 1990~1995 1995~2000 2000~2005 2005~2010 1985~2010 2010~2030 Global 6.8% 3.3% 5.7% 4.1% 2.9%4 .66%% 5.1%

Within regions within China 16.7% 25.4% 5.4% 13.5% 13.5% 14.77%% 7.5% within Europe 8.7% 3.5% 7.5% 4.6% 2.7% 5.44%% 4.0% within Middle East 1.9% 1.3% 5.7% 4.6% 9.6% 4.66%% 5.0% within North America 4.6% 2.6% 5.3% 3.6% -2.0% 2.88%% 2.3%

within Northeast Asia 9.2% 6.1% 3.2% 0.9% 1.2% 4.11%% 3.3% within Oceania 7.1% 10.2% 2.9% 4.4% 4.5%5 .88%% 4.7% within South America2.8%3.2%6.2%3.7%10.8%55.33%% 7.0% within South Asia 2.1% 5.6% 1.0% 8.5% 14.5% 6.22%% 9.4% within Southeast Asia 11.1% 12.5% -0.1% 7.6% 3.7%6 .99%% 7.4%

______Source: The Boeing Company, Current Market Outlook, 2003, 2009, and 2011. Northeast Asia: Japan, North Korea and South Korea South Asia: India, Pakistan, and Afghanistan Southeast Asia: Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Taiwan, Thailand, and Vietnam

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B-14 Report of the Aviation Consultant: Thai AirAsia Co Ltd 10 16 January 2012

2.2 Historical and Forecast Air Travel Growth Rates in Southeast Asia

Southeast Asia is one of the world’s most dynamic regions for air travel. Passenger air travel within Southeast Asia—as measured in RPKs—grew at a CAAGR of 6.9% from 1985 to 2010. Although growth rates in the Southeast Asia region slowed somewhat during the recent global economic downturn, passenger travel by air within the region is projected to grow strongly in the future, at a compound average annual rate of 7.4% from 2010 to 2030. By comparison, passenger travel within the Asia-Pacific region is forecast to grow at a compound average annual growth rate of 6.9% during the same period.

Historical and forecast growth rates for passenger activity within the Southeast Asia region and between the Southeast Asia region and select world regions are shown in Table 7, below.

Table 7

HISTORICAL AND FORECAST ANNUAL PASSENGER GROWTH RATES Activity (in RPKs) Within and Between Southeast Asia and Select Regions of the World 1985 to 2030

CAAGR Historical Forecast 1985~1990 1990~1995 1995~2000 2000~2005 2005~2010 1985~2010 2010~2030 Within Southeast Asia 11.1% 12.5% -0.1% 7.6% 3.7% 6.99%% 7.4%

Between Southeast Asia and China 12.4% 9.7% 5.0% 9.1% 3.3%7 .88%% 8.3% Europe 11.8% 7.3% 7.8% 3.0% 0.0% 5.99%% 5.2% Middle East -6.2% 13.4% 3.1% 7.8% 13.7% 6.11%% 6.7% North America 13.8% 11.1% 4.4% 4.5% -2.7%6 .11%% 6.4% Northeast Asia 15.2% 6.4% 1.8% 7.0% 0.9%6 .11%% 6.0% Oceania 14.7% 6.4% 6.9% 4.8% 2.0%6 .99%% 5.9% South Asia 0.5% 6.9% 6.2% 8.1% 6.9%5 .77%% 8.5%

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B-15 Report of the Aviation Consultant: Thai AirAsia Co Ltd 11 16 January 2012

3 GROWTH FACTORS AND RELATIONSHIPS TO AIR TRAVEL

3.1 Gross Domestic Product

3.1.1 World GDP and Air Travel Activity

Historically, air travel activity has shown a strong relationship to overall economic activity, as measured by gross domestic product (GDP). Over the last four decades, world airline activity has grown at average rates per annum approximately double those of world GDP.

Figure 1, below, illustrates the historical relationship between GDP levels and airline activity. From 1971 to 2010, world GDP grew at a CAAGR of 3.1%, while world airline RPKs grew at a CAAGR of 6.0%.

Figure 1

RELATIONSHIP BETWEEN WORLD GDP AND WORLD AIRLINE RPKs 1971 to 2010

1,100 Indexed World Airline RPKs (1971 = 100) 1,000 Indexed World GDP (1971 = 100) 900

800

700

600

500

400

300

200

100

Indexed World GDP and Airline RPKs (1971 = 100) = (1971 RPKs and Airline GDP World Indexed 0 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 Year

______Sources: Airline Monitor, Boeing and World Bank, World Development Indicators, 2011.

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B-16 Report of the Aviation Consultant: Thai AirAsia Co Ltd 12 16 January 2012

3.1.2 Per Capita GDP and Air Travel Activity

Per capita income growth results from growth in gross domestic product (GDP) levels and employment. Increased disposable income results from growth in the middle class in countries that are experiencing increased per capita and household income levels.

In most areas of the world, per capita levels of GDP correlate with per capita air travel levels. Countries with high per capita levels of GDP tend to have high levels of air travel, while countries with low GDP per capita levels tend to have lower than average levels of air travel. Countries surrounded by water or with limited competing substitutes for transport tend to have higher-than-average travel levels than other countries do.

Figure 2, which follows, highlights this relationship for sixteen countries in the Asia-Pacific region. The propensity to travel in Thailand relative to the country’s per capita income levels is high relative to other countries at similar levels of GDP per capita. This is attributable, in part, to the country’s strong inbound tourism levels. The data indicate that as GDP per capita grows, as is expected to occur, travel demand should grow and continue to be high relative to other countries with similar levels of GDP per capita. (Note: the air travel revenue passenger kilometer (RPK) amounts include travel by both local residents and foreign visitors.)

Figure 2

RELATIONSHIPS BETWEEN PER CAPITA GROSS DOMESTIC PRODUCT (GDP) AND AIR TRAVEL Select Countries in the Asia-Pacific Region 2010

Per capita 100,000 Domestic GDP y = 7E-05x0.9392 and int'l RPKs (in current Domestic R² = 0.8507 Country (millions) US$) and int'l RPKs Singapore Australia 95,579 55,590 4,300 10,000 Brunei Bangladesh 4,905 638 30 New Zealand Brunei 5,260 31,228 12,614 Australia Cambodia 18,000 814 1,260 China 400,610 4,382 299 Malaysia South Korea 1,000 India 99,692 1,265 82 Thailand Japan Indonesia 46,974 3,015 200 Japan 138,079 42,820 1,083 China Lao PDR 3,000 984 466 Vietnam Malaysia 51,564 8,423 1,825 Indonesia Total RPKs per capita (CY2010) capita per RPKs Total 100 New Zealand 25,512 32,143 5,839 India Philippines 28,087 2,007 299 Singapore 87,674 43,117 16,975 Bangladesh South Korea 91,759 20,591 1,876 Thailand 57,201 4,992 895 10 Vietnam 21,095 1,174 239 $0 $10,000 $20,000 $30,000 $40,000 $50,000 GDP per capita (CY2010, in US$)

______Sources: The S-A-P Group reference files, including ICAO, 2010 Annual Report. Note: Amounts include domestic and international air travel to/from reporting airports in the countries shown and may include some transfer passengers. Some amounts are estimated.

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B-17 Report of the Aviation Consultant: Thai AirAsia Co Ltd 13 16 January 2012

Figure 3, below, illustrates the per capita relationships between GDP and domestic air travel for thirteen countries in the Asia-Pacific region. Countries such as South Korea and Japan, which have competitive ground-based transportation systems, have lower-than-typical domestic air travel levels per capita.

Figure 3

RELATIONSHIPS BETWEEN PER CAPITA GDP AND DOMESTIC AIR TRAVEL Select Countries in the Asia-Pacific Region 2010

Per capita 10,000 y = 7E-05x0.9392 Domestic GDP R² = 0.8507 RPKs (in current Domestic New Zealand Australia Country (millions) US$) RPKs Australia 48,677 55,590 2,190 1,000 Cambodia Bangladesh 33 638 0 Japan Malaysia Cambodia 9,000 814 630 China China 327,122 4,382 244 Indonesia 100 Thailand India 49,807 1,265 41 Vietnam South Korea Indonesia 34,314 3,015 146 Philippines Japan 65,867 42,820 517 India Malaysia 10,845 8,423 384 New Zealand 3,703 32,143 848 10

Philippines 7,891 2,007 84 (CY2010) capita per RPKs Domestic South Korea 4,638 20,591 95 Thailand 3,944 4,992 62 Vietnam 8,374 1,174 95 1 $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 GDP per capita (CY2010, in US$)

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B-18 Report of the Aviation Consultant: Thai AirAsia Co Ltd 14 16 January 2012

3.1.3 GDP Growth in Select Countries in Asia

According to the International Monetary Fund (IMF), GDP (in national currency units) increased from 2005 to 2010 at a compound average annual growth rate of 16.6% for China, exceeding that of most other countries in the world, and Thailand’s GDP5 grew at a CAAGR of 7.3%. China’s GDP per capita5 is projected to grow 11.7% per year from 2010 to 2015 and that of Thailand is forecast to grow at 6.6% during the same period6.

As shown in Tables 8 and 9, below, which document key economic indicators for select countries in the Asia-Pacific region, several countries in the region had high rates of growth from 2000 to 2010 for GDP (in current US Dollars). The IMF projects that total current GDP for the Asian countries shown below will experience strong growth over the next five years.

Table 8

KEY ECONOMIC INDICATORS Select Countries in Asia 2000-2015

CAAGR growth GDP (current US$ million) (a) Estimated GDP (current US$ million) (a) Actual Projected 2005~ 2010~ Country 2000 2005 2010 2011E 2013E 2015E 2010 2015E Indonesia $ 165,521 $ 285,856 $ 706,735 822,631$ 997,944$ $ 1,212,317 19.8% 11.4% Thailand $ 122,725 $ 176,352 $ 318,850 332,470$ 397,986$ $ 460,501 12.6% 7.6% Malaysia $ 93,789 $ 138,022 $ 237,959 247,781$ 288,978$ $ 336,195 11.5% 7.2% Singapore $ 94,308 $ 125,429 $ 222,699 253,736$ 278,768$ $ 305,028 12.2% 6.5% Philippines $ 75,912 $ 98,829 $ 188,719 202,865$ 233,397$ $ 269,226 13.8% 7.4% Vietnam $ 31,176 $ 52,931 $ 103,574 118,567$ 143,272$ $ 176,312 14.4% 11.2% Lao PDR $ 1,640 $ 2,726 $ 6,341 $ 6,946 $ 7,979 $ 9,615 18.4% 8.7% Cambodia $ 3,653 6,286$ $ 11,629 $ 13,001 $ 15,798 $ 19,098 13.1% 10.4%

China $ 1,198,478 $ 2,256,919 $ 5,878,257 6,515,861$ 8,057,406$ $ 10,061,803 21.1% 11.3% India $ 479,871 809,723$ $ 1,537,966 1,704,063$ $ 2,061,138 $ 2,516,310 13.7% 10.3%

______Source: IMF, World Economic Outlook Database (WEO), October 2011. Some amounts are estimated. (a) Gross domestic product, current prices (U.S. dollars). Values are based upon GDP in national currency and the exchange rate projections provided by country economists for the group of other emerging market and developing countries. Exchanges rates for advanced economies are established in the WEO assumptions for each WEO exercise.

5 in national currency units. 6 Source: IMF, World Economic Outlook Database, April 2011.

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B-19 Report of the Aviation Consultant: Thai AirAsia Co Ltd 15 16 January 2012

Table 9

KEY ECONOMIC INDICATORS Select Countries in Asia 2000-2015

CAAGR growth Per Capita GDP (current US$) (a) Estimated Per Capita GDP (current US$) (a) Actual Projected 2005~ 2010~ Country 2000 2005 2010 2011E 2013E 2015E 2010 2015E Indonesia $ 807 $ 1,300 $ 3,015 $ 3,421 $ 4,052 $ 4,816 18.3% 9.8% Thailand $ 1,983 $ 2,825 $ 4,992 $ 5,174 $ 6,120 $ 6,997 12.1% 7.0% Malaysia $ 4,030 $ 5,213 $ 8,423 $ 8,624 9,725$ $ 10,939 10.1% 5.4% Singapore $ 22,791 $ 28,500 $ 43,117 $ 48,285 $ 51,254 $ 54,179 8.6% 4.7% Philippines $ 987 $ 1,159 $ 2,007 $ 2,117 $ 2,342 $ 2,597 11.6% 5.3% Vietnam $ 402 637$ $ 1,174 $ 1,328 $ 1,566 $ 1,882 13.0% 9.9% Lao PDR $ 304 464$ $ 984 1,059$ $ 1,173 $ 1,363 16.2% 6.7% Cambodia $ 288 455$ $ 814 901$ $ 1,073 $ 1,272 12.4% 9.3%

China $ 946 $ 1,726 $ 4,382 $ 4,833 $ 5,917 7,316$ 20.5% 10.8% India $ 460 716$ $ 1,265 $ 1,412 $ 1,663 $ 1,978 12.0% 9.4%

Average (b) $ 816 $ 1,345 $ 2,980 $ 3,296 $ 3,950 $ 4,771 17.2% 9.9% Average (c) $ 1,260 $ 1,769 $ 3,360 $ 3,667 $ 4,228 $ 4,863 13.7% 7.7%

______Source: World Bank, World Development Indicators, and IMF, World Economic Outlook Database, October 2011. Some amounts are estimated. (a) Gross domestic product, current prices (U.S. dollars). Values are based upon GDP in national currency and the exchange rate projections provided by country economists for the group of other emerging market and developing countries. Exchanges rates for advanced economies are established in the WEO assumptions for each WEO exercise. (b) All Asian countries shown. (c) All Asian countries shown, except India and China.

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B-20 Report of the Aviation Consultant: Thai AirAsia Co Ltd 16 16 January 2012

3.2 Effects of Economic Growth on Air Travel in Asia

Rising wages and broadening distribution of wealth in rapidly developing countries such as China and other countries in Asia will likely result in an increasing share of the population with the ability to travel by air.

3.2.1 China

According to the IMF, China’s GDP (in national currency units) grew at an average annual rate of 14.9% from 2000 to 2010. Although growth slowed somewhat during the recent economic downturn, growth was still high relative to most other countries in the world, and China’s GDP7 grew 16.7% from 2009 to 2010. The Civil Aviation Administration of China projects that the number of airline passengers in China will more than double between 2010 and 2020 as economic growth in the country stimulates air travel demand.

Aviation activity to, from, and within China rose from 2.3 million passengers in 1978 to 564.3 million in 2010. Total domestic airline passenger traffic in China is now the world’s second largest, following that of the United States. As the country’s growth continues, China serves as a large and growing regional neighbor with opportunities for trade, cooperation, travel, and tourism with Thailand.

3.2.2 Thailand

Thailand’s GDP7 grew 11.7% from 2009 to 2010. As Thailand and its neighbors have continued growing through the economic and other crises and as other Asian countries have recovered and are expecting future growth, Thai- and foreign-based carriers have the opportunity to benefit from the air travel demand spurred by regional economic growth.

Currently, only a small share of the Thai population travels by air. S-A-P anticipates that as the economy develops and the middle class grows and becomes a larger share of the population, air travel demand will increase. S-A-P also anticipates that as the middle class grows in Thailand’s secondary cities, demand for service from these cities to new domestic and international destinations will increase. This service can be supported by the increased use of small, regional jets.

Continued strong growth of GDP and per capita income, declining poverty rates and increasing disposable income is anticipated by S-A-P to generate strong demand for airline services in Asia and Thailand.

3.3 Population Growth and Urbanization

Population growth rates have particularly large impacts on the large populous countries in Asia as even small percentage growth rates result in large increases in total population numbers. Population growth in large countries such as China that are also experiencing strong economic growth will result in increased demand for air travel.

Urbanization rates can serve as an indicator of propensity to travel by air because urban dwellers have higher-than-average income levels and are located in closer proximity to airports than are non-urban dwellers. The development of existing and new urban centers is expected to create new destinations for regional travel in Asia

7 in national currency units. Source: IMF, World Economic Outlook Database, April 2011.

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B-21 Report of the Aviation Consultant: Thai AirAsia Co Ltd 17 16 January 2012

Population and urbanization shares (the share of a country’s population living in urban areas) for countries in the Asia-Pacific region are expected to grow over the next 10 years, as shown in Table 10, below.

Table 10

POPULATION INDICATORS Select Countries in Asia and the Pacific Multiple Years

Cities of 1 million persons or greater Urbanisation Share of (share of total Number of urban Population population cities (a) population 2010 2010~'15 2010 2020 2005 2005 Country Actual CAAGR Actual Forecast actual actual Indonesia 234,377,000 1.3% 44.3% 48.1% 7 18.0% Philippines 94,013,000 2.0% 48.9% 52.6% 2 22.0% Vietnam 88,257,000 1.2% 30.4% 37.0% 3 50.0% Thailand 63,878,000 0.6% 34.0% 38.9% 1 32.3% Myanmar 61,187,000 2.0% 33.7% 40.7% 1 27.0% Malaysia 28,251,000 1.7% 72.2% 78.5% 1 8.0% Cambodia 14,289,000 1.0% 21.1% 23.8% 1 50.0% Lao PDR 6,443,000 1.9% 33.2% 44.2% -- 0.0% Singapore 5,165,000 1.7% 100.0% 100.0% 1 100.0% Total/average SE Asia 595,860,000 1.4% 46.4% 51.5% 17 34.1%

India 1,215,939,000 1.3% 30.0% 33.9% 40 40.0% China 1,341,414,000 0.5% 47.0% 55.0% 93 43.0%

World Total 6,818,066,000 1.1% 50.4% 54.4% ______Sources: IMF World Economic Outlook Database, April 2011, and UN, World Urbanization Prospects: The 2010 Revision Population Database, October 2011. Urbanization: World Urbanization Prospects, the 2009 Revision: Highlights. New York, 2010 Note: 2010~2016 population growth rates represent IMF forecasts. (a) Cities or agglomerations.

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B-22 Report of the Aviation Consultant: Thai AirAsia Co Ltd 18 16 January 2012

3.4 Trade and Tourism

3.4.1 Global Trade and Air Travel

Increased intra-regional business and reduced trade barriers between countries generate cross-border travel demand. High levels of trade and other commercial activities lead to increased demand for travel, including travel by air for business and tourism. Countries with competitive aviation industries and strong pricing competition generate increased levels of aviation activity per capita. Most countries in Asia have been moving toward increased business relationships, reduced trade barriers, increased trade and tourism, and increased air travel levels.

3.4.2 Tourism and Air Travel in Southeast Asia

International travel and tourism rates for countries in Southeast Asia have, as shown in Table 11, below, increased at strong rates from 2009 to 2010. As tourists from China and other Asia countries continue to travel within the region, air travel in the region can be expected to continue to experience healthy growth.

As shown below, Thailand in 2010 attracted the second greatest number of tourist arrivals amongst countries in Southeast Asia and the third greatest number amongst countries in Asia.

Table 11

INTERNATIONAL TOURIST ARRIVALS Arrivals at Select Countries 2010

Arrivals Growth Country 2010 2009~2010 Malaysia 24,577,000 3.9% Thailand 15,936,400 12.6% Singapore 9,161,000 22.3% Indonesia 7,003,000 10.7% Vietnam 5,050,000 34.8% Philippines 3,520,000 16.7% Cambodia 2,399,000 17.3%

China 55,665,000 9.4% India 5,584,000 8.0%

______Sources: World Tourism Organization (UNWTO), June 2011, and Thailand Department of Tourism, October 2011.

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B-23 Report of the Aviation Consultant: Thai AirAsia Co Ltd 19 16 January 2012

3.4.3 Historical Foreign Visitor Arrivals in Thailand

As shown in Figure 4, below, tourist arrivals in Thailand have grown over the past decade despite significant disruptions due to various causes:

• In late 2002, the first case of SARS (Severe Acute Respiratory Syndrome) appeared in Asia and spread rapidly to other areas during 2003. Tourism in Thailand and throughout Asia declined significantly due to public fears about the disease and official travel restrictions designed to identify and reduce the spread of infected travelers.

• The tsunami resulting from the 2004 Indian Ocean earthquake killed an estimated 230,000 people in the region. Thailand was one of the four most affected countries and tourism declined significantly after the tsunami. Although much of the tourism infrastructure was not extensively damaged, the psychological effects on potential tourism resulted in declines in tourism even to beach areas that were not impacted from the tsunami.

• In September 2006, the Royal Thai Army staged a coup d'état against the government of Prime Minister Thaksin Shinawatra.

• In 2008, ongoing political change and unrest in Thailand resulted in an escalation of protests and violence, including protests that closed Suvarnabhumi and Don Mueang international airports during late 2008, causing disruptions to immediate tourist activity and ongoing tourism during 2008 and 2009.

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B-24 Report of the Aviation Consultant: Thai AirAsia Co Ltd 20 16 January 2012

Figure 4

INTERNATIONAL TOURIST ARRIVALS Thailand 1998 to 2010

18,000,000

16,000,000

14,000,000

12,000,000 Unrest 10,000,000 Coup Tsunami 8,000,000 SARS 6,000,000

4,000,000 International Tourist Arrivals at Thailand at Arrivals Tourist International 2,000,000

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

______Source: Thailand Department of Tourism, October 2011.

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B-25 Report of the Aviation Consultant: Thai AirAsia Co Ltd 21 16 January 2012

3.4.4 Mode of Transport for International Arrivals at Thailand

As shown in Table 12, below, air service is the most frequently employed mode for entry to Thailand.

Table 12

MODE OF TRANSPORT International Arrivals at Thailand 2010

Arrivals Share Air 12,377,874 77.7% Land 3,072,585 19.3% Sea 485,941 3.0% Total 15,936,400 100.0%

______Source: Thailand Department of Tourism, October 2011.

3.4.5 Visitor Arrivals in Thailand by Country of Residence

Table 13, below, provides a summary of the foreign visitor arrivals, by country of residence, in Thailand during 2009 and 2010. Amongst Asian countries, visitor arrivals from China, Malaysia, Korea and India grew rapidly from 2009 to 2010. We believe that a share of this growth can be attributed to the availability of LCC services to Thailand.

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B-26 Report of the Aviation Consultant: Thai AirAsia Co Ltd 22 16 January 2012

TableTable ___ 13

INTERNATIONALINTERNATIONAL TOURIST TOURIST ARRIVALS ARRIVALS ThailandThailand CY20092009 to to CY2010 2010

International Tourist Arrivals 2009 2010 Growth Nationality Number Share Number Share 2010~2009 Malaysia 1,757,813 12.4% 2,058,956 12.9% 17.1% Laos 655,034 4.6% 715,345 4.5% 9.2% Singapore 563,575 4.0% 603,538 3.8% 7.1% Vietnam 363,029 2.6% 380,368 2.4% 4.8% Indonesia 227,205 1.6% 286,072 1.8% 25.9% Philippines 217,705 1.5% 246,430 1.5% 13.2% Cambodia 96,586 0.7% 146,274 0.9% 51.4% Myanmar 79,279 0.6% 90,179 0.6% 13.7% Brunei 8,353 0.1% 7,073 0.0% -15.3% Subtotal (ASEAN) 3,968,579 28.0% 4,534,235 28.5% 14.3%

China 777,508 5.5% 1,122,219 7.0% 44.3% Japan 1,004,453 7.1% 993,674 6.2% -1.1% Korea 618,227 4.4% 805,445 5.1% 30.3% Taiwan 362,783 2.6% 369,220 2.3% 1.8% Hong Kong 318,762 2.3% 316,476 2.0% -0.7% Others 25,878 0.2% 25,895 0.2% 0.1% Subtotal (other Asia) 3,107,611 22.0% 3,632,929 22.8% 16.9%

South Asia 826,437 5.8% 995,321 6.2% 20.4% Oceania 737,459 5.2% 789,632 5.0% 7.1% Europe 4,059,988 28.7% 4,442,375 27.9% 9.4% Americas 853,381 6.0% 844,644 5.3% -1.0% Middle East 483,983 3.4% 569,334 3.6% 17.6% Africa 112,403 0.8% 127,930 0.8% 13.8% Subtotal 7,073,651 50.0% 7,769,236 48.8% 9.8% Total 14,149,841 100.0% 15,936,400 100.0% 12.6%

______Source: Thailand Department of Tourism, October 2011.

The S-A-P Group

B-27 Report of the Aviation Consultant: Thai AirAsia Co Ltd 23 16 January 2012

3.5 Airline Service and Fares

3.5.1 Medium-Haul and Long-Haul Opportunities

The introduction of larger aircraft as well as smaller aircraft that can fly further is projected by S-A-P to help to increase opportunities for international service to and from Thailand to other parts of the world.

3.5.2 Airfares and Low Cost Carriers

Over the last decade, price competition has increased as LCCs have grown in market share and airlines struggling with financial challenges and competition have improved efficiency and lowered travel costs. S-A-P anticipates that downward pressure on fares will continue, resulting in increasing demand.

3.6 Other Aviation Growth Factors

3.6.1 Geographical Characteristics

Countries with widely distributed population centers or with large surrounding bodies of water or mountains tend to have higher-than-average aviation activity levels. The combination of Asia’s large geographic size, the separation of many parts of Asia by bodies of water, and the general lack of competitive sea or land transport alternatives provide an ideal market for air travel.

Unlike in the US and Europe, where extensive road and rail networks provide a competitive substitute for air transport, modal competition is less common in Southeast Asia. The introduction of widely available low air fares in the Asia-Pacific region has greatly reduced the cost barrier to air travel and created a competitive transport substitute for ground travel for many people.

3.6.2 Liberalization of Air Travel

S-A-P anticipates that Asia-Pacific nations, especially those in Southeast and North Asia, will continue to remove regulatory restrictions on air services, leading to increased competition and lower airfares and cargo pricing.

3.6.3 Transportation Infrastructure

S-A-P anticipates that governments and the private sector will continue to make the necessary investments in airport capacity, air traffic control systems, and aircraft to foster tourism and other economic development. Airport capacity and airline capacity changes mutually support growth in one another. The rapid growth of air passenger demand in Asia has encouraged some governments and airport operators to develop new airport capacity to accommodate the increased demand.

Countries with limited forms of competitive ground transport options, such as road or rail, often have above average levels of aviation activity per capita. Just as cellular phone networks in developing countries that utilize the airways for communication can be less resource-intensive to develop than landline infrastructure can be, air carrier networks can similarly bypass roadway and railway development to facilitate long distance travel more quickly and efficiently than land-based options can.

As a result of investments in terminal and airfield capacity and increased aviation activity demand, airports in the Asia-Pacific region have experienced strong growth rates over the past decade. According to Airports Council International, Suvarnabhumi International Airport was, in terms of passenger movements in 2010, the 17th busiest airport in the world and the fifth busiest airport in Asia.

The S-A-P Group

B-28 Report of the Aviation Consultant: Thai AirAsia Co Ltd 24 16 January 2012

4 COMPETITIVE LANDSCAPE

Potential business constraints to the future growth of Thai AirAsia include the competitive strength of large, well-established Asian carriers, as well as continued strong competition from other LCCs.

4.1 Key Financial and Operating Performance for Select Carriers

Table 14, which follows, provides key performance data for select full-service and low-cost carriers.

Table 14

KEY FINANCIAL AND OPERATING PERFORMANCE Select Full-Service and Low-Cost Carriers FY ending in 2010 and 2011

US$ millions US cents US$ millions Operating Operating Operating Pax Pax Aircraft Oper rev Mainline carriers Revenue Profit Margin RASK CASK load factor (millions) in fleet per aircraft FY ending Asia Japan Airlines (Japan) $16,018 $2,216 13.8% 18.48 15.92 69% 34.8 174 $ 92.1 Mar 11 ANA Group (Japan) $15,963 $797 5.0% 18.44 17.52 67% 45.7 152 $ 105.0 Mar 11 Air China (China) $12,203 $1,617 13.2% 11.36 9.86 80% 46.2 255 $ 47.9 Dec 10 Cathay Pacific (SAR China) $11,523 $1,813 15.7% 9.95 8.39 83% 26.8 121 $ 95.2 Dec 10 China Southern Airlines (China) $11,317 $930 8.2% 8.05 7.39 79% 76.5 324 $ 34.9 Dec 10 China Eastern Airlines (China) $11,089 $841 7.6% 8.87 8.20 78% 67.8 248 $ 44.7 Dec 10 Singapore Airlines (Singapore) $10,957 $959 8.8% 10.14 9.25 78% 16.6 110 $ 99.6 Mar 11 Korean Air (South Korea) $9,923 $949 9.6% 12.49 11.29 76% 22.9 131 $ 75.7 Dec 10 Thai Airways Int'l (Thailand) $5,822 $717 12.3% 7.70 6.75 74% 18.2 90 64.7$ Dec 10 China Airlines (Taiwan) $4,401 $470 10.7% 11.05 9.87 81% n/a 65 67.7$ Dec 10 Average (Asia Top 10) $10,922 $1,131 10.5% 11.65 10.44 77% 39.5 167 72.8$

Average (Europe Top 10) $11,780 $305 2.9% 12.46 12.20 77% 31.3 175 61.2$

Average (N. Amer. Top 10) $12,316 $680 7.7% 10.03 9.30 81% 51.6 344 35.7$

Low-cost carriers Asia Jetstar/Jetstar Asia (Australia, Singapore) $2,241 $134 6.0% 7.48 7.04 79% 14.6 61 36.7$ Jun 10 AirAsia (Malaysia) $1,231 $333 27.0% 5.05 3.69 76% 16.1 50 24.6$ Dec 10 IndiGo (India) $750 $132 17.6% 6.56 5.40 84% 8.5 27 $ 27.8 Mar 11 Skymark Airlines (Japan) $678 $163 24.1% 12.42 9.43 82% 4.4 13 $ 52.1 Mar 11 Cebu Pacific Air (Philippines) $646 $143 22.2% 6.22 4.84 75% 10.5 29 22.3$ Dec 10 spiceJet (India) $644 $29 4.5% 6.65 6.35 81% 6.8 21 $ 30.7 Mar 11 Spring Airlines (China) $510 $71 13.9% 5.96 5.13 95% 5.9 18 28.3$ Dec 10 Tiger Airways (Singapore, Australia) $469 $36 7.6% 5.98 5.53 85% 4.8 18 $ 26.1 Mar 11 Air Do (Japan) $448 $21 4.7% n/a n/a 80% n/a 10 $ 44.8 Mar 11 Thai AirAsia (Thailand) $391 $61 15.6% 5.15 4.35 78% 5.7 19 20.6$ Dec 10 Average (Asia Top 10) $801 $112 14.3% 6.83 5.75 82% 8.6 27 31.4$

Average (Europe Top 10) $2,658 $162 5.2% 8.03 7.55 73% 21.6 80 42.4$

Average (N. Amer. Top 8) $2,957 $241 8.6% 0.07 0.06 82% 21.6 131 22.7$

______Source: The S-A-P Group, based on industry sources, September 2011. Europe Mainline includes Lufthansa Group, Air France-KLM Group, IAG (British Airways, Iberia), SAS Group, Turkish Airlines SWISS, Aeroflot-Russian Airlines, Alitalia, TAP Portugal, Austrian. N. America Mainline includes United Continental Holdings, Delta Air Lines, AMR Corp, US Airways, Air Canada, Alaska Air Group, SkyWest Airlines, Republic Airways Holdings, Aeromexico, Copa Airlines. Europe LCCs include Air Berlin, Ryanair, EasyJet, Virgin, Thomson Airways, Aer Lingus, Norwegian, Vueling Airlines, WIZZ Air, and Icelandair Group. N. America LCCs include Southwest Airlines, JetBlue Airways, AirTran Airways, WestJet Airlines, Spirit Airlines, Virgin America, Allegiant Air, and Interjet.

The S-A-P Group

B-29 Report of the Aviation Consultant: Thai AirAsia Co Ltd 25 16 January 2012

4.2 Development of Low Cost Carriers

Historically, much of the focus of the global airline industry has been on creating opportunities to increase revenues. The success of LCCs around the world, however, has led many traditional passenger carriers to increase their focus on increasing operating efficiencies, start their own LCC subsidiaries, and compete against the many new LCCs that have initiated operations.

Based on the Boeing Company’s analysis of global scheduled airline data for October 2011, overall scheduled airline operations showed signs of moderating, but strong growth, with LCCs now having a worldwide scheduled capacity share of 26%, with an additional 7.7 million seats in the global LCC network compared with October 2010. Similar volume growth was experienced by the intra-Asia market. LCC presence within the Asia-Pacific region grew rapidly, increasing capacity by 2.29 million available seats to 18.9 million, an increase of 14%. Low-cost seats to and from the Asia-Pacific region increased 21% during the period.

Although the introduction of significant levels of LCC activity occurred later in Asia than in the US and Europe, LCC activity in Asia has grown rapidly over the past decade and continues to grow rapidly. Southeast Asia has seen the launch of a high share of Asia-based LCC operators, the result of relaxed aviation policies in the region. The introduction of widely available low airfares in the Asia-Pacific region has greatly reduced the cost barrier to air travel and created a competitive transport substitute for many people.

LCCs typically have operating costs, as measured in CASKs, that are substantially lower than those of FSC. Although LCC RASKs are also often lower than those of full-service carriers, as LCC activities grow their market shares and markets start to mature, LCC revenues tend to increase, as evidenced by improvements in their RASK.

4.2.1 Effects of LCC on the Asian Aviation Industry

The introduction and growth of LCCs have had several effects on the Asian aviation industry:

• LCC competition has encouraged established carriers to operate more efficiently, thereby driving down average airfares and stimulating demand across the entire market. Established carriers may choose to launch strong competitive responses to LCCs, including significant decreases in airfares, increases in seat capacity and flight frequency, and the start of new point-to-point flights, among others. Several Asian network carriers have introduced, or are planning to introduce their own LCCs.

• Airport operators in Malaysia and Singapore have created dedicated LCC passenger terminal facilities, which can lead to reduced airline operating costs and airport service fees that are paid by passengers. Some airport operators in the region are providing aeronautical charge discounts for new routes and for efficient use of airport facilities, such as quick aircraft turnarounds.

• The rapid growth in air travel that LCCs generate is encouraging some governments and airport operators to liberalize bilateral aviation agreements and to develop new airport capacity to accommodate the increased demand.

The S-A-P Group

B-30 Report of the Aviation Consultant: Thai AirAsia Co Ltd 26 16 January 2012

Table 15, which follows, documents LCC seats as a share of weekly scheduled departing seats between and within select Asia-Pacific countries.

Table 15

LCC SEATS AS A SHARE OF TOTAL SCHEDULED MOVEMENTS Select Asia-Pacific Countries Activity Period: 1-7 October 2011

Intra-regional (a) International International activity from all activity from Destination Domestic countries noted Thailand Australia 23% 19% 7% Cambodia 16% 14% 13% China 2% 7% 13% Taiwan -- 3% --

India 57% 18% 8% Indonesia 47% 38% 37% Japan 26% 3% -- Malaysia 59% 52% 56%

New Zealand 15% 25% -- Philippines 74% 28% 18% Republic of Korea 32% 6% 10% Singapore n.a. 30% 43%

Thailand 53% 19% n.a. Vietnam 17% 14% 18%

______Source: The S-A-P Group analysis, based on data from OAG, October 2011. (a) International activity from/to the 14 countries noted.

4.3 Airline Infrastructure

Many airlines in Asia have plans for significant changes to their aircraft fleets. As new, higher-efficiency aircraft are integrated into an airline’s operations, long-term operating costs typically are reduced and, depending on the financial structure of the implementation, lower overall costs per passenger can result, leading to decreased average airfares and associated increases in demand.

The size of new aircraft available currently has grown significantly, particularly with the development of the Airbus A-380, which can hold over 800 passengers in a single-class configuration. Fleet modernization programs can also provide airlines with reduced fuel and other operating costs, including lower aircraft maintenance expenses. Operating a limited number of aircraft types can lead to reduced aircraft training and spare part costs.

The S-A-P Group

B-31 Report of the Aviation Consultant: Thai AirAsia Co Ltd 27 16 January 2012

4.4 Asian Aviation Industry Growth Prospects

We believe that Southeast Asia’s domestic and international markets will enjoy strong long-term growth rates for several reasons:

• Proximity to major populations. Approximately 50% of the world’s population lives within a 2,500 nautical mile radius from Bangkok, indicating the potential size of the regional aviation market. However, as a result of low GDP per capita throughout most of the region and other factors, a large proportion of the population has, historically, been unable to afford air transportation. As mentioned previously, we expect the affordability of air travel to grow with increases in GDP per capita, which should result in higher population penetration. Bangkok

• Location on major trade routes. Southeast Asia is well positioned between Europe and the Pacific region, as well as 1,750 miles between North Asia and South Asia. (~4 hours) • 2,500 miles Proximity to China. With its strong economic growth and (~5.5 hours) increasingly relaxed restrictions on travel to foreign destinations, travelers from the world’s most populous country will create significant demand for leisure and business travel to Southeast Asian countries.

• Proximity to Australia. Australia has one of the most mature economies in the region, with a high GDP per capita, high levels of disposable income, higher propensity to travel per capita, and strong tourism connections with Thailand and other regions in Asia

• Location between South Asia and China. The region’s role as a destination for visitors from China (the world’s most populous country) and South Asia, which includes India (the world’s second most populous country), Pakistan (sixth), and Bangladesh (seventh) will grow in prominence as the people of these countries start to travel more frequently.

• Transport substitution. As income levels increase and air transport costs decrease, we expect air transport will substitute for land and sea-based transport modes such as rail, buses, and ferries. As shown in a previous figure, Thailand has a low per capita income compared to other countries in South East Asia, but a relatively higher propensity to travel than other countries with similar income levels. Therefore, we expect that as incomes increase in Thailand, residents will be able to make use of low- cost air carriers for their travels. As a result, we anticipate that air travel will increase at strong rates.

• Liberalization of aviation agreements. Southeast Asian countries have become more liberal with their aviation agreements, both within ASEAN and with other countries.

• Tourist infrastructure. The region’s well-developed tourist infrastructure will continue to attract leisure travelers.

• Urbanization. The share of the population in Southeast Asian countries living in cities is generally expected to continue to increase.

The S-A-P Group

B-32 Report of the Aviation Consultant: Thai AirAsia Co Ltd 28 16 January 2012

4.5 Potential Constraints to Asia Aviation Industry Growth

The opportunities for industry-wide aviation activity growth could be offset by:

• Increased fuel prices and/or unfavorable currency exchange levels could constrain aviation demand if air and other travel costs increase and travelers’ disposable income levels decrease.

• Regional conflicts or scares. Civil unrest, terrorist events, or other events could constrain future activity levels.

• Travel restrictions. Government restrictions on travel, by limiting the number of entry/exit visas issued or by imposing high visa costs, could limit future aviation growth.

• Insufficient airport or airspace capacity. Socioeconomic or other constraints could result in delays or changes in plans by governments regarding planned infrastructure expansion.

• Environmental factors. Natural and man-made environmental events, such as haze, volcanic ash, and natural disasters, could impact future activity levels.

• Infrastructure constraints at regional airports. Potential constraints to airline travel growth could arise due to limited growth of infrastructure at regional airports outside of Thailand. Within Thailand, airport infrastructure is not expected to be a constraint due to the remaining capacity still available at the new Suvarnabhumi International Airport as well as the excess capacity at the old Bangkok airport, Don Mueang, which currently is serving approximately three million passengers, while at its peak served over thirty million.

5 REGULATORY ENVIRONMENT

5.1 Domestic Airline Regulation Structure in Thailand

Aviation in Thailand is regulated by the Department of Civil Aviation. The Department is in charge of “promoting, developing and regulating civil aviation affairs of Thailand to meet international standards and form extensive civil aviation network and services that will satisfy market demand, promote tourism as well as national economic growth and make Thailand a hub of aviation is South-East Asia.” Air service operations are approved and regulated by the department for domestic airlines operating in Thailand and international airlines serving Thailand.

The responsibilities of the Department include the following:

1. To implement the Air Navigation Act, Act on Certain Offences against Air Navigation and other civil aviation laws relating to licensing of pilot, aircraft mechanic and air traffic controller, aircraft registration, licensing of aerodrome and temporary landing area, authorization for setting up airlines, to monitor and inspect civil aviation activities to comply with the required standard and regulations, to prevent the sabotage of aircraft and airport as well as aircraft hijacking and to investigate aircraft accident.

2. To promote and develop national civil aviation infrastructure in order to build up nationwide air transport network and boost national aviation industry.

3. To systematize the civil aviation in accordance with regulations and universal standard to fully safeguard the rights of consumers and operators.

4. To set up and run affiliated airports to provide the public with quality services and to ensure safety of aircrafts, passengers and other activities pertaining to transport of goods, luggage and postal items by air.

The S-A-P Group

B-33 Report of the Aviation Consultant: Thai AirAsia Co Ltd 29 16 January 2012

5. To cooperate with domestic and international organizations or agencies concerning civil aviation, to deal with international conventions and agreements such as bilateral and multilateral negotiations and signing of agreements on air traffic rights and aircraft standards and to act as a search and rescue centre for aircraft and vessel in distress.

The administration of most domestic airports is the responsibility of the Director of the Airports of the Department of Civil Aviation. Samui, Sukhothai, and Trat Airports are administered by Bangkok Airways Company Limited. Suvarnabhumi, Don Mueang, Chiang Mai, Mae Fah Luang-Chiang Rai, Hat Yai and Phuket International Airports are under AOT. U-Tapao Pattaya International Airport is the responsibility of the Royal Thai Navy.

5.2 International Regulations

International fight into, from or over Thailand territory are subject to the current Thailand regulations relating to civil aviation. These regulations correspond in all essentials to the standards and Recommended Practices contained in Annex 9 to the Convention on International Civil Aviation. To fly over or take-off or land in the territory of Thailand, foreign aircraft/airline is required to obtain prior per mission. Application for such permission shall be made to the Director of Air Transport Control Division as address in designated Authorities. No aircraft entering or leaving the Kingdom shall land before or depart except at or from a Customs Airport.

Scheduled international air services may be operated by a foreign airline into or in transit across Thailand in pursuance the International Air Services Transit Agreement, provided that the states in which the airline is registered is a contracting party to this agreement, or to an agreement between Thailand and the States in which the airline is registered.

5.3 Liberalization of the Aviation Industry

Studies have shown that the liberalization of air services can lead to new and better air services, thereby increasing trade in airlines services, gains in consumer welfare and economic growth. Liberal aviation agreements allow for increased competition on routes and lower airfares, thereby stimulating additional activity.

Traffic growth subsequent to liberalization of air services agreements between countries typically averaged between 12% and 35%, significantly greater than during years preceding liberalization. In a number of situations, growth exceeded 50%, and in some cases reached almost 100% of the pre-liberalization rates. The creation of the Single European Aviation Market in 1993 led to an average annual growth rate in traffic between 1995 and 2004 that was almost double the rate of growth in the years 1990 to 1994.

Countries across the Asia-Pacific region and in particular, Southeast Asia, are liberalizing broadly the international bilateral agreements that can, in their extreme, regulate items such as the precise number and type of carriers that can operate, the number of total seats that can be provided, and the levels of airfares that can be charged.

The December 2008 lifting of restrictions on the Kuala Lumpur-Singapore route offers a good example of the impact that the easing of aviation market restrictions can have. Capacity (as measured by weekly flight frequencies, according to OAG) on this route for the month of September 2009 increased 72.5% as compared to September 2008 levels.

The S-A-P Group

B-34 Report of the Aviation Consultant: Thai AirAsia Co Ltd 30 16 January 2012

5.4 ASEAN Member States and Open Skies

The trend of deregulation and liberalization in Asia is expected to continue, particularly amongst countries that are part of ASEAN.

ASEAN was established in 1967 with initially five member countries: Indonesia, Malaysia, Philippines, Singapore and Thailand. Its membership increased over time with Brunei joining in 1984, followed by Vietnam in 1995, Laos and Myanmar in 1997 and Cambodia in 1999. ASEAN was formed to promote regional peace, prosperity and stability.

5.4.1 Within ASEAN

Subsequent to an aviation liberalization roadmap adopted by ASEAN member states in 2004, in November 2010, the member states reaffirmed their collective commitment to building an ASEAN Single Aviation Market by 2015. The November 2010 ASEAN Multilateral Agreement on the Full Liberalisation of Passenger Air Services (MAFLPAS) and its two Protocols provides for further expansion of the scope of the ASEAN Multilateral Agreement on Air Services (MAAS) to include other ASEAN cities. The agreement and its protocols provides for designated airlines of a Member State to provide air services from any city with international airport in its territory to any city with international airport in the territory of the other Member States and vice-versa with full third, fourth, and fifth freedom traffic rights.

Aviation traffic freedoms are defined as follows:

First Freedom: the right to fly over a foreign country without landing there. Also known as the Technical Freedom, it is nearly universal, although some countries maintain restrictions and fees and designated routes may apply.

Second Freedom: the right to stop in another country solely for the purpose of refueling or carrying out maintenance in a foreign country on the way to another country. Because of longer range of modern airliners, second freedom rights are comparatively rarely exercised by passenger carriers today, but they are widely used by air cargo carriers, and are more or less universal between countries

Third Freedom: the right to fly and carry passengers from one's own country to another. This is known as the “first commercial freedom” and is the first right that requires more in-depth negotiation.

Fourth Freedom: the right to fly from another country to one's own. Third and fourth freedom rights are almost always granted simultaneously in bilateral agreements between countries.

Fifth Freedom: the right to fly between two foreign countries during flights while the flight originates or ends in one's own country. Known as “beyond rights”, it covers for example, a Thai airline flying from Bangkok to Sydney Australia, then on to Auckland New Zealand.

Sixth Freedom: the right to fly from a foreign country to another one while stopping in one's own country for non-technical reasons. Airlines in Asia use sixth-freedom rights extensively to fly passengers between Europe and Australasia (also known as the Kangaroo Route).

Seventh Freedom: the right to fly between two foreign countries while not offering flights to one's own country.

Eighth Freedom: the right to fly between two or more airports in a foreign country while continuing service to one's own country, for example, a Thai airline flying from Beijing to Shanghai to Bangkok.

The S-A-P Group

B-35 Report of the Aviation Consultant: Thai AirAsia Co Ltd 31 16 January 2012

Ninth Freedom: the right to fly inside a foreign country without continuing service to one's own country, for example, a Thai airline flying from Beijing to Shanghai.

5.4.2 Outside of ASEAN

Chinese government aviation officials have signed an agreement with ASEAN to build a more liberal air service framework between China and the ASEAN countries. Other developments contributing to the eventual achievement of open skies are potential similar agreements forthcoming between ASEAN and India as well as ASEAN and Korea.

China, Japan, and South Korea have indicated an interest in developing a unified aviation market comprising the ten ASEAN members plus China, Japan, India and South Korea, which could lead to the creation of an East Asian-plus-India Common Market. In addition, South Korea, China, and Japan have been working on a "North Asia Triangle" Open Skies agreement.

5.5 Open Skies Agreements with Thailand

Open skies agreements in effect in Thailand include agreements with the following countries:

• Bahrain • Brunei • Cambodia (ASEAN Agreement 2010) • China (through ASEAN agreement with China) • Indonesia (ASEAN Agreement 2010) • Kuwait

• Laos (ASEAN Agreement 2010) • Malaysia (ASEAN Agreement 2010) • Myanmar (ASEAN Agreement 2010) • Pakistan (MOU with limited open skies for cargo) • Philippines (ASEAN Agreement 2010) • Singapore

• South Korea • Sri Lanka • Switzerland • United States of America • Vietnam

The S-A-P Group

B-36 INDEX TO FINANCIAL STATEMENTS

Page Audited Proportionate Consolidated and Company Financial Statements of Asia Aviation Public Company Limited as of and for the Years Ended December 31, 2009, 2010 and 2011 Audit Report of Certified Public Accountant ...... F-3 Statements of Financial Position ...... F-4 Statements of Comprehensive Income ...... F-7 Statements of Changes in Shareholders’ Equity ...... F-8 Statements of Cash Flows ...... F-10 Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements ...... F-12 Audited Financial Statements of Thai AirAsia Company Limited as of and for the Years Ended December 31, 2009, 2010 and 2011 Audit Report of Certified Public Accountant ...... F-43 Statements of Financial Position ...... F-44 Statements of Comprehensive Income ...... F-46 Statements of Changes in Shareholders’ Equity ...... F-47 Statements of Cash Flows ...... F-48 Notes to the Special Purpose Financial Statements ...... F-50 Unaudited Proportionate Consolidated and Company Interim Financial Information of Asia Aviation Public Company Limited as of and for the Three Months Ended March 31, 2011 and 2012 Review Report of Certified Public Accountant ...... F-75 Statements of Financial Position ...... F-77 Statements of Comprehensive Income (Unaudited) ...... F-80 Statements of Changes in Shareholders’ Equity (Unaudited) ...... F-81 Statements of Cash Flows (Unaudited) ...... F-83 Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) ...... F-85 Unaudited Interim Financial Information of Thai AirAsia Company Limited as of and for the Three Months Ended March 31, 2011 and 2012 Review Report of Certified Public Accountant ...... F-100 Statements of Financial Position ...... F-102 Statements of Comprehensive Income (Unaudited) ...... F-105 Statements of Changes in Shareholders’ Equity (Unaudited) ...... F-106 Statements of Cash Flows (Unaudited) ...... F-107 Condensed Notes to Special Purpose Interim Financial Information (Unaudited) ...... F-109

F-1 ASIA AVIATION PUBLIC COMPANY LIMITED (FORMERLY ASIA AVIATION COMPANY LIMITED)

SPECIAL PURPOSE PROPORTIONATE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS

31 DECEMBER 2011, 2010 AND 2009

F-2 F-3 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Financial Position As at 31 December 2011, 2010 and 2009

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Assets

Current assets

Cash and cash equivalents 8 694,425,971 260,382,950 333,595,159 977,900 6,472,054 6,557,387 Cash at financial institutions pledged as security 7,373,833 25,000,000 ---- Short-term investment 9 4,651,341 4,489,237 4,434,209 - - - Trade and other receivables, net 10 97,835,916 55,286,737 83,791,094 - - - Amounts due from related parties 24.5 140,742,129 1,366,092,516 38,578,877 - - - Short-term loan to a director 24.7 - 52,583,531 93,500,000 - - - Inventories 26,128,736 3,195,014 2,363,268 - - - Prepaid expenses 115,024,798 89,121,327 15,904,427 - - - Value added tax receivable, net 351,470,624 135,384,430 103,232,924 - - - Other current assets 13,392,997 43,855,459 10,042,857 3,530,000 - -

Total current assets 1,451,046,345 2,035,391,201 685,442,815 4,507,900 6,472,054 6,557,387

Non-current assets

Cash at financial institutions pledged as security 28,559,991 12,487,800 ---- Investment in a joint venture 11 - - - 403,999,930 400,000,000 400,000,000 General investment 12 3,534,044 3,743,550 4,108,850 - - - Leasehold improvements and equipment, net 13 154,498,165 137,327,711 143,997,289 2,006 5,800 13,938 Intangible assets, net 14 7,274,065 10,563,422 5,445,554 1,052 2,012 3,296 Goodwill 15 286,184,317 286,184,317 286,184,317 - - - Other non-current assets 16 292,419,374 240,112,467 201,115,898 - - 11,840

Total non-current assets 772,469,956 690,419,267 640,851,908 404,002,988 400,007,812 400,029,074

Total assets 2,223,516,301 2,725,810,468 1,326,294,723 408,510,888 406,479,866 406,586,461

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements. 2

F-4 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Financial Position (Cont'd) As at 31 December 2011, 2010 and 2009

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Liabilities and shareholders' equity

Current liabilities

Trade accounts payable 54,025,061 87,507,017 179,177,236 - - - Other accounts payable 33,848,064 23,895,235 23,459,994 - - - Short-term borrowings from a financial institution 17 - 100,000,000 ---- Amounts due to related parties 24.6 184,156,928 2,081,108,171 2,109,270,066 - 486,987 93,166 Deferred revenues 1,385,345,343 1,186,722,330 737,189,266 - - - Accrued expenses 247,386,536 194,954,635 231,149,578 4,577,061 100,000 23,000 Current portion of long-term borrowing from a financial institution 18 247,859,915 ----- Current portion of finance - lease liabilities 2,431,587 579,141 740,269 - - Other current liabilities 7,175,962 9,758,086 8,385,698 20,736 5,167 6,942

Total current liabilities 2,162,229,396 3,684,524,615 3,289,372,107 4,597,797 592,154 123,108

Non-current liabilities

Long-term borrowing from a financial institution 18 6,713,256 ----- Finance lease liabilities 4,719,811 689,263 1,268,404 - - - Employee benefit obligations 19 42,203,653 -----

Total non-current liabilities 53,636,720 689,263 1,268,404 - - -

Total liabilities 2,215,866,116 3,685,213,878 3,290,640,511 4,597,797 592,154 123,108

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements. 3

F-5 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Financial Position (Cont'd) As at 31 December 2011, 2010 and 2009

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Liabilities and shareholders' equity (Cont'd)

Shareholders' equity

Share capital 20 Authorised share capital Ordinary shares, shares 4,850,000,000 shares of par Baht 0.1 each (2010 and 2009: 41,000,000 shares of par Baht 10 each) 485,000,000 410,000,000 410,000,000 485,000,000 410,000,000 410,000,000

Issued and paid-up share capital Ordinary shares, shares 4,100,000,000 shares of paid-up Baht 0.1 each (2010 and 2009: 41,000,000 shares of paid-up Baht 10 each) 410,000,000 410,000,000 410,000,000 410,000,000 410,000,000 410,000,000 Effect on additional proportion of investment in a joint venture 11 (15,526,868)----- Deficits (386,822,947) (1,369,403,410) (2,374,345,788) (6,086,909) (4,112,288) (3,536,647)

Total shareholders' equity 7,650,185 (959,403,410) (1,964,345,788) 403,913,091 405,887,712 406,463,353

Total liabilities and shareholders' equity 2,223,516,301 2,725,810,468 1,326,294,723 408,510,888 406,479,866 406,586,461

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements. 4

F-6 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Comprehensive Income For the years ended 31 December 2011, 2010 and 2009

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Revenues 21 8,123,184,534 6,049,363,033 4,640,582,353 - - - Operating costs (6,915,278,360) (4,982,586,529) (4,657,973,679)---

Gross profit (loss) 1,207,906,174 1,066,776,504 (17,391,326)--- Net gain on exchange rates 77,957,909 178,421,116 64,755,373 - - - Other income 225,998,637 181,520,690 108,987,233 26,232 16,190 17,061

Profit before expenses 1,511,862,720 1,426,718,310 156,351,280 26,232 16,190 17,061 Selling expenses (223,941,917) (178,965,693) (121,511,922)--- Administrative expenses (181,869,947) (121,248,944) (120,510,823) (2,000,853) (591,831) (646,482)

Profit (loss) before finance costs and income tax 22 1,106,050,856 1,126,503,673 (85,671,465) (1,974,621) (575,641) (629,421) Finance costs (91,928,865) (121,561,295) (193,235)---

Profit (loss) before income tax 1,014,121,991 1,004,942,378 (85,864,700) (1,974,621) (575,641) (629,421) Incometax ------

Profit (loss) for the year 1,014,121,991 1,004,942,378 (85,864,700) (1,974,621) (575,641) (629,421)

Total comprehensive income (expense) for the year 1,014,121,991 1,004,942,378 (85,864,700) (1,974,621) (575,641) (629,421)

Earnings (loss) per share 23

Basic earnings (loss) per share 0.25 0.25 (0.02) (0.00) (0.00) (0.00)

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements. 5

F-7 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Changes in Shareholders' Equity For the years ended 31 December 2011, 2010 and 2009

Proportionate consolidated Other component of equity Issued and Effect on additional paid-up proportion of investment share capital Deficits in a joint venture Total Notes Baht Baht Baht Baht

Opening balance as at 1 January 2009 410,000,000 (2,288,481,088) - (1,878,481,088) Total comprehensive expense for the year - (85,864,700) - (85,864,700)

Closing balance as at 31 December 2009 410,000,000 (2,374,345,788) - (1,964,345,788)

Opening balance as at 1 January 2010 410,000,000 (2,374,345,788) - (1,964,345,788) Total comprehensive income for the year - 1,004,942,378 - 1,004,942,378

Closing balance as at 31 December 2010 410,000,000 (1,369,403,410) - (959,403,410)

Opening balance as at 1 January 2011 410,000,000 (1,369,403,410) - (959,403,410) Adjustment for adoption of a new accounting standard 3.2 - (31,541,528) - (31,541,528)

Balance after adjustment 410,000,000 (1,400,944,938) - (990,944,938) Effect on additional proportion of investment in a joint venture 11 - - (15,526,868) (15,526,868) Total comprehensive income for the year - 1,014,121,991 - 1,014,121,991

Closing balance as at 31 December 2011 410,000,000 (386,822,947) (15,526,868) 7,650,185

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements.

F-8 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Changes in Shareholders' Equity (Cont'd) For the years ended 31 December 2011, 2010 and 2009

Company Issued and paid-up share capital Deficits Total Note Baht Baht Baht

Opening balance as at 1 January 2009 410,000,000 (2,907,226) 407,092,774 Total comprehensive expense for the year - (629,421) (629,421)

Closing balance as at 31 December 2009 410,000,000 (3,536,647) 406,463,353

Opening balance as at 1 January 2010 410,000,000 (3,536,647) 406,463,353 Total comprehensive expense for the year - (575,641) (575,641)

Closing balance as at 31 December 2010 410,000,000 (4,112,288) 405,887,712

Opening balance as at 1 January 2011 410,000,000 (4,112,288) 405,887,712 Adjustment for adoption of a new accounting standard 3.2 - - -

Balance after adjustment 410,000,000 (4,112,288) 405,887,712 Total comprehensive expense for the year - (1,974,621) (1,974,621)

Closing balance as at 31 December 2011 410,000,000 (6,086,909) 403,913,091

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements.

F-9 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Cash Flows For the years ended 31 December 2011, 2010 and 2009

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Cash flows from operating activities Profit (loss) before income tax 1,014,121,991 1,004,942,378 (85,864,700) (1,974,621) (575,641) (629,421) Adjustments for: Doubtful debts expenses (reversals) (1,434,189) (969,445) 1,272,595 - - - Depreciation 13 33,527,657 59,378,324 64,402,389 3,794 8,138 8,138 Amortisation 14 2,460,984 2,223,776 1,537,816 960 1,284 1,284 Loss (gain) on disposals and writes-off of leasehold improvements and equipment and intangible assets 567,341 (706,119) 513,609 - - - Estimated costs of aircrafts redelivery before maturities (Adjusted to actual) 22, 24.2 - (57,138,257) 173,348,702 - - - Reversal of provision for loss on unwind interest rate swap agreements 22, 24.2 - - (3,046,410) - - - Employee benefit expenses 19 9,890,526 ----- Unrealised gain on exchange rates (21,352,923) (1,000,536) (7,760,313) - - - Finance costs 91,928,865 121,561,295 193,235 - - - Interest income (67,541,623) (25,185,603) (4,794,832) (26,232) (16,190) (17,061)

1,062,168,629 1,103,105,813 139,802,091 (1,996,099) (582,409) (637,060)

Changes in operating assets and liabilities: (Excluding the effect on additional proportion of investment in a joint venture) - Cash at financial institutions pledged as security 2,273,965 (37,487,800) ---- - Trade and other receivables (39,435,191) 29,473,802 (55,967,239) - - - - Amounts due from related parties 1,269,742,659 (1,306,339,648) (29,749,078) - - - - Inventories (22,815,370) (831,746) 321,892 - - - - Prepaid expenses (22,832,947) (73,216,900) 18,231,347 - - - - Value added tax receivable (209,946,335) (32,151,506) (19,029,482) - - - - Other current assets 31,152,636 (33,812,602) (3,469,745) (3,530,000) - - - Other non-current assets (46,937,577) (38,996,569) (70,085,160) - 11,840 (132) - Trade accounts payable (35,673,960) (90,560,769) 9,877,856 - - - - Other accounts payable 8,968,778 435,241 (55,990,704) - - - - Amounts due to related parties (1,962,745,382) (92,444,265) 243,892,523 (486,987) 393,821 88,321 - Deferred revenues 168,948,125 449,533,064 117,034,850 - - - - Accrued expenses 49,060,816 (36,194,943) (22,107,446) 4,477,061 77,000 1,000 - Provision for loss on unwind interest rate swap agreements - - (194,453,590) - - - - Other current liabilities (2,697,114) 1,372,388 3,599,419 15,569 (1,775) 3,973

Cash generated from (used in) operation 249,231,732 (158,116,440) 81,907,534 (1,520,456) (101,523) (543,898) Interest paid (12,015,037) (140,666) (193,235) - - - Interest received 25,212,310 1,373,053 4,636,102 26,232 16,190 17,061

Net cash generated from (used in) operating activities 262,429,005 (156,884,053) 86,350,401 (1,494,224) (85,333) (526,837)

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements. 8

F-10 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Statements of Cash Flows (Cont’d) For the years ended 31 December 2011, 2010 and 2009

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Cash flows from investing activities Short-term loan granted to a director 24.7 (31,520,600) (31,700,000) (93,500,000) - - - Repayments of short-term loan to a director 24.7 81,520,600 75,200,000 ---- Investment in a joint venture, net of cash and cash equivalents obtained 11 8,802,867 ----- Payment for additional investment in a joint venture 11 - - - (3,999,930) - - Proceeds from general investment 12 278,800 365,300 ---- Payment for general investment 12 - - (389,500) - - - Proceeds from disposals of leasehold improvements and equipment 3,964,598 1,181,099 1,728,505 - - - Payments for leasehold improvements and equipment (41,424,662) (54,293,178) (50,614,954) - - - Payments for intangible assets (1,196,806) (7,341,644) (2,150,532) - - - Interest received 3,328,696 -----

Net cash generated from (used in) investing activities 23,753,493 (16,588,423) (144,926,481) (3,999,930) - -

Cash flows from financing activities Proceed from (repayment of) short-term borrowings from a financial institution 17 (100,000,000) 100,000,000 ---- Repayments of finance lease (3,054,306) (740,269) (686,720) - - - Proceed from long-term borrowing from a financial institution 18 480,581,626 ----- Repayments of long-term borrowing from a financial institution 18 (233,404,958) ----- Interest paid (17,614,762) -----

Net cash generated from (used in) financing activities 126,507,600 99,259,731 (686,720) - - -

Net increase (decrease) in cash and cash equivalents 412,690,098 (74,212,745) (59,262,800) (5,494,154) (85,333) (526,837) Cash and cash equivalents at the beginning of the year 260,382,950 333,595,159 385,097,646 6,472,054 6,557,387 7,084,224 Effect of exchange rates 21,352,923 1,000,536 7,760,313 - - -

Cash and cash equivalents at the end of the year 694,425,971 260,382,950 333,595,159 977,900 6,472,054 6,557,387

Non-cash transactions

Significant non-cash transactions during the years ended 31 December 2011, 2010 and 2009 are as follows:

Purchase of motor vehicles under finance lease agreements 8,962,183 ----- Purchase of leasehold improvements and equipment which have not been paid - 335,048 1,444,498 - - -

The accompanying notes are an integral part of these special purpose proportionate consolidated and company financial statements. 9

F-11 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

1 General information

Asia Aviation Public Company Limited (formerly Asia Aviation Company Limited) (“the Company”) is a public company and incorporated in Thailand. The address of the Company’s registered office is as follows:

60/1 Monririn Tower 3rd floor, B Building, Soi Sailom, Phahol-yothin Road, Samsennai, Phayathai, Bangkok 10400.

The Company and its joint venture’s operating office is located at 99 OSC Building, Kingkaew Road, Rachatewa, Bangplee, Samutprakarn 10540.

The principal business operations of the Company and its joint venture are summarised below:

The Company’s principal business operation is to invest in low-fare airline company which is Thai AirAsia Company Limited. The Company’s shareholding interest is 51%.

The Joint Venture, Thai AirAsia Company Limited, principally provides low-fare airline service.

The Company has registered as a public company with the Department of Business Development, Ministry of Commerce on 26 December 2010 and has changed its name to Asia Aviation Public Company Limited since then.

The special purpose proportionate consolidated and company financial statements were approved by the Board of Directors on 19 March 2012.

2 Financial position

As at 31 December 2011, the Company and its joint venture had total current liabilities exceeding its total current assets at amount of Baht 711 million (2010: Baht 1,649 million and 2009: Baht 2,604 million). Major balances in current liabilities were deferred revenues, which the Company and its joint venture will be able to provide the services as normal operations. In addition, revenues for the year have increased by Baht 2,074 million, and there was a net profit for the year ended 31 December 2011 amounting to Baht 1,014 million (2010: Baht 1,005 million and 2009: loss Baht 85 million). The related financial information for the year then ended of the Company and its joint venture, revealed a significant improvement in operating results. Therefore, these special purpose proportionate consolidated financial statements have been prepared on a going concern basis.

3 Accounting policies

The principal accounting policies adopted in the preparation of these special purpose proportionate consolidated and company financial statements are set out below:

3.1 Basis of preparation

The special purpose proportionate consolidated and company financial statements have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act B.E. 2543, being those Thai Financial Reporting Standards (“TFRS”) issued under the Accounting Profession Act B.E.2547, and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act. for the purpose of inclusion in the Company’s offering circular as part of the Company’s initial public offering of shares to investors.

The special purpose proportionate consolidated and company financial statements are based on local statutory financial statements which are adjusted and reclassified to conform with changes in presentation in the current year and to comply with the requirement of the Department of Business Development, TFRS and the reporting requirements of the Securities and Exchange Commission. The statutory company financial statements for the year ended 31 December 2009 were prepared in accordance with Thai Accounting Standards which are designated as applicable to non-public companies and the Company has chosen not to apply TAS No. 24 “Related Party Disclosures”, No. 31 “Interests in Joint Ventures”, No. 36 “Impairment of Assets” and No. 107 “Financial Instruments Disclosure and Presentation”.

The special purpose proportionate consolidated financial statements have been prepared in its shares of the joint venture’s individual income and expenses, assets and liabilities and cash flows of Thai AirAsia Company Limited which is its joint venture from the Company’s interest at 51% portion (2010 and 2009: 50%) (Note 11).

F-12 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.1 Basis of preparation (Cont’d)

The special purpose proportionate consolidated and company financial statements have been prepared under the historical cost convention, except if disclosed otherwise in the accounting policies.

The preparation of special purpose proportionate consolidated and company financial statements are in conformity with Thai Generally Accepted Accounting Principles requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company and its joint venture’s accounting policies. The areas involving a higher degree of judgment or complex areas where assumptions and estimates are significant to the special purpose financial statements are disclosed in note 5.

An English version of the special purpose proportionate consolidated and company financial statements has been prepared from the special purpose proportionate consolidated and company financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language special purpose proportionate consolidated and company financial statements shall prevail.

3.2 New accounting standards, new financial reporting standards, new interpretation, and amendments to accounting standards

a) Commencing 1 January 2011, the Company and its joint venture have applied the following new accounting standards, new financial reporting standards, new interpretations, and amendments to accounting standards (collectively “the accounting standards”) that are mandatory for the financial year beginning on or after 1 January 2011. The accounting standards which are relevant to the Company and its joint venture are listed below:

TAS 1 (Revised 2009) Presentation of Financial Statements TAS 2 (Revised 2009) Inventories TAS 7 (Revised 2009) Statement of Cash Flows TAS 8 (Revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors TAS 10 (Revised 2009) Events after the Reporting Period TAS 16 (Revised 2009) Property, Plant and Equipment TAS 17 (Revised 2009) Leases TAS 18 (Revised 2009) Revenue TAS 19 Employee Benefits TAS 24 (Revised 2009) Related Party Disclosures TAS 27 (Revised 2009) Consolidated and Separate Financial Statements TAS 31 (Revised 2009) Interests in Joint Ventures TAS 33 (Revised 2009) Earnings per Share TAS 34 (Revised 2009) Interim Financial Reporting TAS 36 (Revised 2009) Impairment of Assets TAS 37 (Revised 2009) Provisions, Contingent Liabilities and Contingent Assets TAS 38 (Revised 2009) Intangible Assets TFRS 3 (Revised 2009) Business Combinations TSIC 31 Revenue - Barter Transactions Involving Advertising Services

F-13 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.2 New accounting standards, new financial reporting standards, new interpretation, and amendments to accounting standards (Cont’d)

The new accounting standards which are considered to have an impact to the special purpose proportionate consolidated and company financial statements are described below:

TAS 1 (Revised 2009), the revised standard requires entities to present the statement of financial position and the statement of comprehensive income. Entities can choose whether to present one statement (the statement of comprehensive income) or two statements (the statement of income and statement of comprehensive income). The Company and its joint venture choose to present one statement.

TAS 19 deals with accounting for employee benefits which requires the entity to measure the defined benefit plan and other long-term employee benefits by using the Projected Unit Credit method (PUC). An entity can choose to recognise any actuarial gain or loss for defined benefit plan either in other comprehensive income or profit or loss. The Company and its joint venture choose to record that gain or loss in the statement of comprehensive income. Actuarial gain or loss for other long-term employee benefits shall be recognised in profit or loss.

The Company and its joint venture apply this standard for the first time by choosing to adjust a total amount against the deficits as of 1 January 2011. The effects of the adoption of the above standards to the special purpose financial statements are as follows:

Proportionate consolidated Company Baht Baht

Statements of changes in shareholders’ equity Deficits as of 1 January 2011 increased 31,541,528 -

TAS 27 (Revised 2009), the revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and gain or loss is recognised in profit or loss. The company and its joint venture will apply the revised standard prospectively to transactions with non- controlling interests from 1 January 2011.

TFRS 3 (Revised 2009), the revised standard continues to apply the purchase method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt and are subsequently re-measured through profit or loss. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expenses. The Company and its joint venture have applied the revised standard prospectively to all business combination since 1 January 2011.

F-14 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.2 New accounting standards, new financial reporting standards, new interpretation, and amendments to accounting standards (Cont’d)

b) New accounting standards and amendments to accounting standards which are currently relevant to the Company and its joint venture but the Company and its joint have not yet early adopted them:

Effective for the periods beginning on or after 1 January 2013 TAS 12 Income taxes TAS 21 (Revised 2009) The Effects of Changes in Foreign Exchange Rates

The management has assessed and determined that the new accounting standards and amendments to accounting standards will not significantly impact the financial statements being presented except the new accounting standard as disclosed below:

TAS 12 deals with taxes on income, comprising current tax and deferred tax. Current tax assets and liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using tax rates that tax law have been enacted or substantively enacted by the end of the reporting period. Deferred taxes are measured by based on the temporary difference between the tax base of an asset or liability and its carrying amount in the financial statements and using the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. The Company and its joint venture will apply this standard from 1 January 2013 retrospectively with an expected incur of deferred tax account and an impact to retained earnings and income tax expense. The management is currently assessing the impact of applying this standard.

3.3 Investment in a joint venture

The Company’s interest in jointly controlled entities is accounted for using proportionate consolidation in the proportionate consolidated financial statements. The Company combines its share of the joint venture’s individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with items in the financial statements.

In the Company’s separate financial statements, interest in jointly controlled entities is accounted for using the cost method.

3.4 Foreign currency translation

Items included in the financial statements are measured using Thai Baht. The proportionate consolidated financial statements are presented in Thai Baht.

Foreign currency transactions are translated into Thai Baht using the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to Thai Baht at the exchange rates prevailing at the statement of financial position date. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

3.5 Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with maturities of three months or less from the date of acquisition and are not pledged as security.

3.6 Trade accounts receivable

Trade accounts receivable are carried at the original invoice amount and subsequently measured at the remaining amount less any allowance for doubtful receivables based on a review of all outstanding amounts at the end of year. The amount of the allowance is the difference between the carrying amount of the receivable and the amount expected to be collectible. Bad debts are written off during the year in which they are identified and recognised in profit or loss within administrative expenses.

F-15 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.7 Inventories

Inventories comprise food, beverage, merchandise and consumables.

Food, beverage and merchandise are stated at the lower of cost or net realisable value. Cost is determined by the first- in, first-out method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventories such as import duties and transportation charges, less all attributable discounts, allowances or rebates.

Consumables used internally for aircraft repairs and maintenance are stated at the lower of cost or net realisable value. Cost is determined on the weighted average basis, and comprises the purchase price and incidentals incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimate of the selling price in the ordinary course of business, less estimated cost necessary to make the sale. Allowance is made, where necessary, for obsolete, slow moving or defective inventories.

3.8 General investment

The Company and its joint venture’s general investment is non-marketable equity security. The classification depends on the purpose for which the investment was acquired. Management determines the appropriate classification of its investment at the time of the purchase and re-evaluates such designation on a regular basis.

General investment is carried at cost less impairment.

A test for impairment is carried out when there is a factor indicating that an investment might be impaired. If the carrying value of the investment is higher than its recoverable amount, impairment loss is charged to profit or loss.

On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss. When disposing of part of the Company and its joint venture’s holding of particular investment in debt or equity securities, the carrying amount of the disposed part is determined by the weighted average carrying amount of the total holding of the investment.

3.9 Leasehold improvements and equipment

Leasehold improvements and equipment are stated at cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and its joint venture and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation is calculated on the straight-line basis to write-off the cost of each asset, to its residual value over the estimated useful life as follows:

Leasehold improvements 5 years Computers 5 years Furniture, fixtures and office equipment 5 years Operating equipment 5 years Motor vehicles 5 years Aircraft spare parts 4 - 10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

F-16 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.9 Leasehold improvements and equipment (Cont’d)

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

Gains or losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

3.10 Intangible assets

3.10.1 Computer software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of 5 years on the straight-line basis.

3.10.2 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired joint venture undertaking at the date of acquisition. Goodwill on acquisition of joint venture is reported in the proportionate consolidated statement of financial position as goodwill and is reported in the company statement of financial position as part of the investment in a joint venture. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash generating units or group of cash generating units that are expected to benefit from the business combination in which the goodwill arose.

Goodwill is tested for impairment as part of the overall investment in a joint venture balance.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

3.11 Leases - where the Company and its joint venture are the lessees

Leases of assets which substantially transfer all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased assets or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in finance lease liabilities. The interest element of the finance cost is charged to profit or loss over the lease period. The assets acquired under finance lease is depreciated over the useful life of the asset.

Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

3.12 Borrowings

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost as the redemption value. Borrowings are classified as current liabilities unless the Company and its joint venture have an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

F-17 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.13 Employee benefits

3.13.1 Provident fund

The Company and its joint venture operate a provident fund that is a defined contribution plan. The fund assets are held in a separate trust fund and are managed by an external fund manager. The provident fund is funded by payments from employees and by the Company and its joint venture. The Company and its joint venture have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Company and its joint venture’s contributions to the provident fund are charged to profit or loss in the year to which they relate.

3.13.2 Retirement benefits

The retirement benefit is a defined benefit plan that an employee will receive on retirement according to Thai Labour Law depending on age and years of service.

The liability of retirement benefit is recognised in the statement of financial position using the present value of the obligation at the statement of financial position date. The retirement benefit is calculated annually by an independent actuary using the projected unit credit method. The present value of the benefit obligation is determined by discounting the estimated future cash outflows using interest rates of referred government bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related retirement liabilities. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise.

3.14 Provisions

Provisions, which exclude the provision relating to employee benefits, are recognised when the Company and its joint venture have a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company and its joint venture expect a provision to be reimbursed, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain.

3.15 Revenue recognition

Passenger revenue and other related services such as baggage handling fee, assigned seat revenue and cancellation and documentation revenue are recognised upon the rendering of services. The value of seats sold for which services have not been rendered is included in deferred revenues.

Revenue from sales comprises receivable for the sale of goods net of output tax, rebates and discounts. Revenue from sales of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer.

Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Company and its joint venture.

Other income is recognised on an accrual basis.

F-18 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

4 Financial risk management

4.1 Financial risk factors

The Company and its joint venture’s activities expose them to a variety of financial risks, including the effects of changes in fuel price and foreign currency exchange rates. The Company and its joint venture’s overall risk management programme focuses on the votality of financial markets and seeks to minimise potential adverse effects on the financial performance. The Company and its joint venture do not have policies to use derivative financial instruments for trading or speculative purpose.

Fuel price risk

The Company and its joint venture are exposed to the fluctuation of fuel price. To manage the risk of fuel price fluctuation, AirAsia Berhad, a related party, is carried out the risk management on behalf of the Company and its joint venture (Note 4.2).

Foreign exchange risk

Foreign currency assets mainly represent deposits at financial institutions, other deposits and amounts due from related parties. Foreign currency liabilities mainly represent trade accounts payable and amount due to related parties.

The Company and its joint venture are exposed to foreign exchange risk arising from currency exposures mainly in respect of US Dollars. The Company and its joint venture manage risk by natural hedge to the extent that payments for foreign currency payables are matched against receivables denominated in the same foreign currency. However, the Company and its joint venture do not use any derivative financial instruments to hedge foreign currency exposure.

Interest rate risk

The Company and its joint venture’s interest rate risk arises from short-term borrowings, long-term borrowing, amount due from related parties and amounts due to related parties. Borrowings issued at variable rates and amounts due from and due to related parties issued at fixed rate. Management considers that interest rate risk is not significant. However, all interest rate derivative transactions, which may be incurred, are subject to approval by the Board of Directors before execution.

Credit risk

Most of the Company and its joint venture’s income, being passenger revenue, is normally paid by clients in advance. The credit risk incurred from amounts due from related parties and short-term loan to a director is low. Management is therefore of the opinion that credit risk is not significant. The Company and its joint venture have not entered into any derivative contracts relating to credit risk. Cash transactions are limited to high credit quality financial institutions.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business, the Company and its joint venture Treasury aims at maintaining flexibility in funding by keeping credit lines available.

4.2 Accounting for derivative financial instruments and hedging activities

Derivative financial instruments, which the Company and its joint venture used to manage risk, comprise fuel price swap agreements.

Fuel price swap agreements

AirAsia Berhad, a related party, has entered into fuel price swap agreements with third parties which protect the Company and its joint venture from the risk of movements in fuel price. The Company and its joint venture have entered into the agreement with AirAsia Berhad under the term of the agreement that gains or losses on fuel price swap agreements are allocated to the Company and its joint venture based on proportion of fuel consumption on a monthly basis. The Company and its joint venture recorded these transactions in profit or loss as a component of operating costs when they incur.

F-19 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

4 Financial risk management (Cont’d)

4.3 Fair value estimation

Fair values of financial assets and liabilities are approximate their carrying amounts because their periods of maturities are short, therefore, there are no significant risk that would impact the Company and its joint venture’s future cash flows.

Fuel price swap agreements

The fair value of fuel price swap agreements at the statement of financial position date is as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 US Dollars US Dollars US Dollars US Dollars US Dollars US Dollars

Favourable fuel price swap agreements 821,892 - 74,165 - - -

There was no outstanding fuel price swap agreement as at 31 December 2010.

5 Critical accounting estimates, assumptions, and judgements

Estimates, assumptions, and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Aircraft maintenance under operating leases

The joint venture has a commitment to maintain aircrafts under operating lease agreements, a provision is made throughout the lease term for the rectification obligations contained within the lease agreements. The provision is based on estimated future repair and maintenance costs of major airframe, certain engine maintenance checks and estimated one-off costs will be incurred at the end of the lease by charging to profit or loss according to the number of flying hours in each year.

6 Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

7 Segment information

The Company and its joint venture do not disclose the segment information because there is no significant business segment other than the provision of air transportation services.

F-20 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

8 Cash and cash equivalents Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Cash on hand 3,248,952 10,171,366 7,112,545 - - 1,250 Deposits held at call with banks 585,811,055 250,211,584 326,482,614 977,900 6,472,054 6,556,137 Short-term bank deposits 3,365,999 ----- Bill of exchange with maturity of three months or less 101,999,965 - - - - -

Total cash and cash equivalents 694,425,971 260,382,950 333,595,159 977,900 6,472,054 6,557,387

The interest rate of deposits held at call with banks was 1.40% per annum (2010: 0.50% per annum and 2009: 0.50% per annum).

As at 31 December 2011, interest rates of short-term bank deposits and bill of exchange with maturity of three months or less were 14.00% per annum and 3.00% per annum, respectively (2010 and 2009: nil).

9 Short-term investment

Movements of short-term investment are summarised as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Opening net book amount 4,489,237 4,434,209 4,275,482 - - - Effect on additional proportion - ofinvestmentinajointventure90,127----- Interest received 71,977 55,028 158,727 - - -

Closing net book amount 4,651,341 4,489,237 4,434,209 - - -

The summary of short-term investment is as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Fixed deposits with maturity of over than three months but within twelve months 4,651,341 4,489,237 4,434,209 - - -

Total short-term investment 4,651,341 4,489,237 4,434,209 - - -

The average interest rate of fixed deposits with maturity of over three months but within twelve months was 1.57% per annum (2010: 1.23% per annum and 2009: 1.25% per annum).

F-21 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

10 Trade and other receivables, net Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Trade accounts receivable 79,456,542 40,603,844 34,885,685 - - - Less Allowance for doubtful accounts - (1,434,189) (2,403,634) - - -

Trade accounts receivable, net 79,456,542 39,169,655 32,482,051 - - - Accrued revenues 16,596,705 2,809,863 38,991,465 - - - Other accounts receivable 1,782,669 13,307,219 12,317,578 - - -

Total trade and other receivables, net 97,835,916 55,286,737 83,791,094 - - -

Outstanding trade accounts receivable can be analysed by age as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Up to 3 months 71,932,116 36,900,006 24,773,483 - - - 3-6 months 3,805,546 568,199 3,293,000 - - - 6-12 months 2,553,899 553,948 219,248 - - - Over 12 months 1,164,981 2,581,691 6,599,954 - - -

79,456,542 40,603,844 34,885,685 - - - Less Allowance for doubtful accounts - (1,434,189) (2,403,634) - - -

79,456,542 39,169,655 32,482,051 - - -

11 Investment in a joint venture

Details of jointly controlled company are as follows:

Company 2011 2010 2009 Par value Total %of Total %of Total %of Baht number of shareholding Number of shareholding Number of shareholding Business per share shares percent shares percent shares percent

Thai AirAsia providing a Company Limited low-fare airline service 10 20,399,993 51.00 20,000,000 50.00 20,000,000 50.00

Thai AirAsia Company Limited is jointly controlled by the Company and AirAsia Investment Ltd. (formerly AA International Ltd.), incorporated in Malaysia, which own 51% and 49% of the joint venture’s shares, respectively. Investment in Thai AirAsia Company Limited is considered as investment in a joint venture.

Movements of investment in a joint venture during the year are as follows: Company 2011 2010 2009 Baht Baht Baht

Opening net book amount 400,000,000 400,000,000 400,000,000 Additional investment in a joint venture 3,999,930 - -

Closing net book amount 403,999,930 400,000,000 400,000,000

F-22 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

11 Investment in a joint venture (Cont’d)

On 8 November 2011, the Company entered into the Agreement for Sale and Purchase Shares in Thai AirAsia Company Limited with a director of Thai AirAsia Company Limited to purchase 399,993 shares additionally at a par value of Baht 10 constituting 1% of total issued and paid-up share capital of its joint venture, Thai AirAsia Company Limited. The total purchase value was Baht 3,999,930. Therefore, the Company’s interest in Thai AirAsia Company Limited increased from 50% to 51% from that date. However, the additional investment did not result in control according to the shareholders’ agreement.

Details of net assets acquired and effect of the additional proportion of investment in a joint venture are as follows:

As at 8 November 2011(a) Baht

Purchase consideration 3,999,930 Net identifiable assets (liabilities) (11,526,938)

Effect on additional proportion of investment in a joint venture 15,526,868

Cash paid for the additional proportion of investment 3,999,930 Less Proportionate cash and cash equivalents of a joint venture (12,802,797)

Cash inflows on the additional proportion of investment in a joint venture (8,802,867)

Net assets at 100% interest of assets and liabilities in Thai AirAsia Company Limited are as follows:

As at 8 November 2011(a) Baht

Cash and cash equivalents 1,280,302,080 Short-term investment 9,012,844 Trade accounts receivable and amounts due from related parties 451,513,613 Inventories and other current assets 1,006,392,758 Cash at financial institutions pledged as security 72,000,035 General Investment 6,929,500 Leasehold improvements and equipment, net 281,220,782 Intangible assets and other non-current assets 555,102,117 Trade accounts payable and amount due to a related party (568,717,581) Deferred revenues (2,967,540,700) Accrued expenses and other current liabilities (447,020,475) Long-term borrowing from a financial institution (739,663,251) Finance lease liabilities (15,084,652) Employee benefit obligations (77,161,203)

Identifiable net assets (liabilities) (1,152,714,133)

Interest acquired 1.00% Proportionate identifiable net assets (liabilities) (11,526,938)

(a) The carrying amount of asset and liabilities was based on 30 September 2011(reviewed), which was the nearest accounting period date, to the acquisition date (8 November 2011) which the financial information was available.

Investment in a joint venture as at 31 December 2011, 2010 and 2009 includes goodwill of Baht 286,184,317.

F-23 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

11 Investment in a joint venture (Cont’d)

The following amounts represent assets, liabilities, and revenues and profit (loss) of the joint venture:

2011 2010 2009 Baht Baht Baht

Non-current assets 953,495,582 808,454,277 709,277,034 Current assets 2,836,350,864 4,058,324,477 1,357,864,022

Total assets 3,789,846,446 4,866,778,754 2,067,141,056

Non-current liabilities 105,170,074 1,378,526 2,536,808 Current liabilities 4,230,651,645 7,368,351,104 6,578,591,164

Total liabilities 4,335,821,719 7,369,729,630 6,581,127,972

Net assets (545,975,273) (2,502,950,876) (4,513,986,916)

Revenues 16,157,597,567 12,098,726,066 9,281,164,705

Profit (loss) before income tax 2,020,058,659 2,011,036,040 (170,470,558) Income tax - - -

Profit (loss) for the year 2,020,058,659 2,011,036,040 (170,470,558)

12 General investment

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Opening book amount 3,743,550 4,108,850 3,719,350 - - - Effect on additional proportion ofinvestmentinajointventure69,294----- Increase in investment - - 389,500 - - - Decrease in investment (278,800) (365,300) - - - -

Closing book amount 3,534,044 3,743,550 4,108,850 - - -

General investment is the investment in ordinary shares of Aeronautical Radio of Thailand Limited.

F-24 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

13 Leasehold improvements and equipment, net

Proportionate consolidated Furniture, fixtures & Leasehold office Operating Motor Aircraft Assets under improvements Computers equipment equipment vehicles spare parts installation Total Baht Baht Baht Baht Baht Baht Baht Baht

At 1 January 2009 Cost 12,471,538 24,656,353 8,430,957 34,626,346 29,652,492 168,991,684 1,366,005 280,195,375 Less Accumulated depreciation (5,521,913) (15,574,975) (5,216,519) (16,385,531) (10,252,287) (68,434,112) - (121,385,337)

Net book amount 6,949,625 9,081,378 3,214,438 18,240,815 19,400,205 100,557,572 1,366,005 158,810,038

For the year ended 31 December 2009 Opening net book amount 6,949,625 9,081,378 3,214,438 18,240,815 19,400,205 100,557,572 1,366,005 158,810,038 Additions 184,136 3,601,639 123,760 1,771,824 4,857,757 39,153,594 2,139,044 51,831,754

F-25 Disposals, net - - - - (2,190,965) - - (2,190,965) Writes-off, net - (48,439) (2,710) - - - - (51,149) Transfers 906,081 58,900 - 1,057,005 - - (2,021,986) - Reclassification - - - - 670,988 - (670,988) - Depreciation charge (2,237,482) (4,102,532) (1,220,145) (6,501,658) (5,515,177) (44,825,395) - (64,402,389)

Closing net book amount 5,802,360 8,590,946 2,115,343 14,567,986 17,222,808 94,885,771 812,075 143,997,289

23 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

13 Leasehold improvements and equipment, net (Cont’d)

At 31 December 2009 Cost 13,561,755 27,669,386 8,531,032 37,455,175 30,188,608 208,145,278 812,075 326,363,309 Less Accumulated depreciation (7,759,395) (19,078,440) (6,415,689) (22,887,189) (12,965,800) (113,259,507) - (182,366,020)

Net book amount 5,802,360 8,590,946 2,115,343 14,567,986 17,222,808 94,885,771 812,075 143,997,289

For the year ended 31 December 2010 Opening net book amount 5,802,360 8,590,946 2,115,343 14,567,986 17,222,808 94,885,771 812,075 143,997,289 Additions 1,028,089 3,373,694 1,424,148 2,460,929 8,455,238 34,315,971 2,125,659 53,183,728 F-26 Disposals, net - - - - (474,761) - - (474,761) Writes-off, net - (159) (61) (1) - - - (221) Transfers 1,609,138 - - - - - (1,609,138) - Depreciation charge (2,511,772) (3,578,508) (1,059,187) (6,303,429) (6,462,911) (39,462,517) - (59,378,324)

Closing net book amount 5,927,815 8,385,973 2,480,243 10,725,485 18,740,374 89,739,225 1,328,596 137,327,711

At 31 December 2010 Cost 16,198,982 30,146,886 9,951,555 39,801,104 36,220,663 242,461,249 1,328,596 376,109,035 Less Accumulated depreciation (10,271,167) (21,760,913) (7,471,312) (29,075,619) (17,480,289) (152,722,024) - (238,781,324)

Net book amount 5,927,815 8,385,973 2,480,243 10,725,485 18,740,374 89,739,225 1,328,596 137,327,711

24 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

13 Leasehold improvements and equipment, net (Cont’d) Proportionate consolidated Furniture, fixtures & Leasehold office Operating Motor Aircraft Assets under improvements Computers equipment equipment vehicles spare parts installation Total Baht Baht Baht Baht Baht Baht Baht Baht

For the year ended 31 December 2011 Opening net book amount 5,927,815 8,385,973 2,480,243 10,725,485 18,740,374 89,739,225 1,328,596 137,327,711 Effect on additional proportion of investment in a joint venture 99,292 160,339 37,827 210,398 438,601 1,855,910 9,796 2,812,163 Additions 452,777 4,731,025 248,288 1,304,385 8,775,625 29,217,808 5,481,206 50,211,114 Disposals, net (202,921) (24,028) (11,536) (3) (1,585,319) 3,409 - (1,820,398) Writes-off, net - - - - - (303,088) (201,680) (504,768) Transfers 952,422 - 309,948 2,933,552 - - (4,195,922) - Depreciation charge (2,471,462) (3,423,369) (1,019,980) (5,221,501) (7,195,308) (14,196,037) - (33,527,657)

4,757,923 9,829,940 2,044,790 9,952,316 19,173,973 106,317,227 2,421,996 154,498,165

F-27 Closing net book amount

At 31 December 2011 Cost 17,125,648 34,160,575 10,623,370 44,752,425 40,714,208 274,893,829 2,421,996 424,692,051 Less Accumulated depreciation (12,367,725) (24,330,635) (8,578,580) (34,800,109) (21,540,235) (168,576,602) - (270,193,886)

Net book amount 4,757,923 9,829,940 2,044,790 9,952,316 19,173,973 106,317,227 2,421,996 154,498,165

The leased assets included above, where the Company and its joint venture are lessees under finance lease agreements, comprise motor vehicles, total proportionate cost of which is Baht 8.60 million and total proportionate accumulated depreciation of Baht 1.10 million (2010: total proportionate cost of Baht 3.78 million and total proportionate accumulated depreciation of Baht 2.63 million and 2009: total proportionate cost of Baht 3.78 million and total proportionate accumulated depreciation of Baht 1.85 million).

As at 31 December 2011, the gross carrying amount of fully depreciated leasehold improvements and equipment that are still in use totalling proportionate gross amount of Baht 50.44 million (2010: total proportionate gross amount of Baht 43.49 million and 2009: total proportionate gross amount of Baht 21.71 million).

25 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

13 Leasehold improvements and equipment, net (Cont’d)

Company Office equipment Baht

At 1 January 2009 Cost 40,687 Less Accumulated depreciation (18,611)

Net book amount 22,076

For the year ended 31 December 2009 Opening net book amount 22,076 Depreciation charge (8,138)

Closing net book amount 13,938

At 31 December 2009 Cost 40,687 Less Accumulated depreciation (26,749)

Net book amount 13,938

For the year ended 31 December 2010 Opening net book amount 13,938 Depreciation charge (8,138)

Closing net book amount 5,800

At 31 December 2010 Cost 40,687 Less Accumulated depreciation (34,887)

Net book amount 5,800

For the year ended 31 December 2011 Opening net book amount 5,800 Depreciation charge (3,794)

Closing net book amount 2,006

At 31 December 2011 Cost 40,687 Less Accumulated depreciation (38,681)

Net book amount 2,006

F-28 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

14 Intangible assets, net Proportionate consolidated Computer software Computer under software installation Total Baht Baht Baht

At 1 January 2009 Cost 9,475,285 988,304 10,463,589 Less Accumulated amortisation (5,630,751) - (5,630,751)

Net book amount 3,844,534 988,304 4,832,838

For the year ended 31 December 2009 Opening net book amount 3,844,534 988,304 4,832,838 Additions 816,163 1,334,369 2,150,532 Transfers 549,483 (549,483) - Amortisation charge (1,537,816) - (1,537,816)

Closing net book amount 3,672,364 1,773,190 5,445,554

At 31 December 2009 Cost 10,840,931 1,773,190 12,614,121 Less Accumulated amortisation (7,168,567) - (7,168,567)

Net book amount 3,672,364 1,773,190 5,445,554

For the year ended 31 December 2010 Opening net book amount 3,672,364 1,773,190 5,445,554 Additions 4,958,267 2,383,377 7,341,644 Transfers 1,432,324 (1,432,324) - Amortisation charge (2,223,776) - (2,223,776)

Closing net book amount 7,839,179 2,724,243 10,563,422

At 31 December 2010 Cost 17,231,522 2,724,243 19,955,765 Less Accumulated amortisation (9,392,343) - (9,392,343)

Net book amount 7,839,179 2,724,243 10,563,422

For the year ended 31 December 2011 Opening net book amount 7,839,179 2,724,243 10,563,422 Effect on additional proportion of investment in a joint venture 126,191 55,404 181,595 Additions 91,864 1,104,941 1,196,805 Writes-off and adjustments, net (619) (2,206,154) (2,206,773) Transfers 287,805 (287,805) - Amortisation charge (2,460,984) - (2,460,984)

Closing net book amount 5,883,436 1,390,629 7,274,065

At 31 December 2011 Cost 15,769,674 1,390,629 17,160,303 Less Accumulated amortisation (9,886,238) - (9,886,238)

Net book amount 5,883,436 1,390,629 7,274,065

F-29 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

14 Intangible assets, net (Cont’d)

Company Computer software Baht

At 1 January 2009 Cost 6,420 Less Accumulated amortisation (1,840)

Net book amount 4,580

For the year ended 31 December 2009 Opening net book amount 4,580 Amortisation charge (1,284)

Closing net book amount 3,296

At 31 December 2009 Cost 6,420 Less Accumulated amortisation (3,124)

Net book amount 3,296

For the year ended 31 December 2010 Opening net book amount 3,296 Amortisation charge (1,284)

Closing net book amount 2,012

At 31 December 2010 Cost 6,420 Less Accumulated amortisation (4,408)

Net book amount 2,012

For the year ended 31 December 2011 Opening net book amount 2,012 Amortisation charge (960)

Closing net book amount 1,052

At 31 December 2011 Cost 6,420 Less Accumulated amortisation (5,368)

Net book amount 1,052

F-30 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

15 Goodwill

No impairment loss was required for the carrying amount of goodwill as assessed at 31 December 2011, 2010 and 2009 by management as the recoverable amount was in excess of the carrying amount.

The recoverable amount of a cash-generating unit (CGU) contained goodwill is determined based on fair value less cost to sell calculation. The calculation uses pre-tax cash flow projection based on financial budget approved by management covering a five-year period. Cash flows beyond the five-year period is extrapolated using estimated growth rates, the cash flow projections are based on long-term business plans with a corresponding increase in capital expenditure to support the growth rate. These cash flows are then aggregated with a terminal value. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

The key assumptions used for fair value less cost to sell calculation are as follows:

Growth rate1 3.00% Discount rate2 6.75%

1 Weighted average growth rate used to extrapolate cash flow beyond the budget period.

2 Pre-tax discount rate, determined from the Company incremental borrowing rate, is applied to the cash flow projection.

16 Other non-current assets

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Note Baht Baht Baht Baht Baht Baht

Aircraft rental deposits 24.8 253,912,027 205,285,063 167,814,986 - - - Fuel price swap deposits 24.8 8,045,374 8,412,400 8,412,400 - - - Rental deposits 9,276,291 9,100,722 9,242,503 - - - Other deposits 21,185,682 17,314,282 15,646,009 - - 11,840

Total other non-current assets 292,419,374 240,112,467 201,115,898 - - 11,840

17 Short-term borrowings from a financial institution

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Promissory notes - 100,000,000 - - - -

Total short-term borrowings from a financial institution - 100,000,000 - - - -

Short-term borrowings from a financial institution were four-month promissory notes with a local commercial bank which were due for repayment in 2011 and had interest rate at MLR (approximately 6.56% per annum). The Company and its joint venture used their fixed deposit account amounting to Baht 25 million (proportionated) as the collateral for these promissory notes. During the year ended 31 December 2011, the Company and its joint venture had already repaid these borrowings.

F-31 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

18 Long-term borrowing from a financial institution

Maturity of long-term borrowing from a financial institution is as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Within 1 year 247,859,915 ----- Over 1 year but less than 5 years 6,713,256 - - - - -

254,573,171 - - - - -

Movements of long-term borrowing from a financial institution are summarised as follows:

Proportionate consolidated Company Baht Baht

For the year ended 31 December 2011 Opening net book value - - Effect on additional proportion of investment in a joint venture 7,396,503 - Addition during the year 480,581,626 - Loan repayments (233,404,958) -

Closing net book value 254,573,171 -

On 25 April 2011, the joint venture entered into a borrowing agreement with a local commercial bank with respect to the credit facility of Baht 495 million (proportionate) in order to repay debts to related parties. This borrowing bears an interest at the rate of MLR - 1% per annum (approximately 6.65% per annum), with a repayment term within 2 years.

This borrowing is secured by a fixed deposit account amounting to Baht 25 million (proportionate). In addition, the Company and its joint venture have to maintain deposits at bank not less than amount of Baht 255 million (proportionate) over the borrowing periods.

F-32 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

19 Employee benefit obligations

Movements of the retirement benefit obligations over the year are as follows:

Proportionate consolidated Company Note Baht Baht

For the year ended 31 December 2011 Opening book amount as at 1 January 2011 - - Adjustment to deficits brought forward as at 1 January 2011 3.2 31,541,528 - Effect on additional proportion of investment in a joint venture 771,599 - Current service costs 8,556,614 - Interest costs 1,333,912 - Actuarial (gain) loss -- Benefit paid - -

Closing book amount as at 31 December 2011 42,203,653 -

The amounts recognised in profit or loss are as follows:

Proportionate consolidated Company 2011 2011 Baht Baht

Current service costs 8,556,614 - Interest costs 1,333,912 -

Total, included in staff costs 9,890,526 -

The principal actuarial assumptions used are as follows:

Proportionate consolidated Company

Discount rate % per annum 4.16 - Future salary increase rate % per annum 5.34 - 7.00 - Resignation rate % per annum 0.00 - 11.00 -

F-33 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

20 Share capital

Number of authorised ordinary Issued and paid-up Ordinary Par value shares ordinary shares Shares Baht Shares Shares Baht

At 1 January 2009 10.00 41,000,000 41,000,000 410,000,000 Issue of shares - - - -

At 31 December 2009 10.00 41,000,000 41,000,000 410,000,000

At 1 January 2010 10.00 41,000,000 41,000,000 410,000,000 Issue of shares - - - -

At 31 December 2010 pre-split 10.00 41,000,000 41,000,000 410,000,000

At 26 December 2011 post-split 0.10 4,100,000,000 4,100,000,000 410,000,000 Additional shares registered 0.10 750,000,000 - -

At 31 December 2011 0.10 4,850,000,000 4,100,000,000 410,000,000

At the Extraordinary Shareholders’ Meeting held on 26 December 2011, there were matters approved by the shareholders as follows:

x An alteration of par value from Baht 10 per share to Baht 0.10 per share. Therefore, the number of the Company’s shares increased from 41 million shares to 4,100 million shares. The Company registered the alteration of par value with the Ministry of Commerce on 26 December 2011.

x An increase in the authorised share capital of the Company from 4,100 million shares to 4,850 million shares by issuing additional ordinary shares of 750 million shares with a par value of Baht 0.10 each. The Company registered the increase in the additional shares with the Ministry of Commerce on 26 December 2011.

x The allocation of new additional ordinary shares of no greater than 750 million shares with a par value of Baht 0.10 per share for the Initial Public Offering.

21 Revenues

Revenues from sales and services are as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Passenger revenues 6,630,354,597 5,130,154,251 3,791,146,240 - - - Baggage handling and other service fees 1,332,005,113 769,468,940 746,243,009 - - - In-flight revenues 80,275,240 67,635,474 53,822,472 - - - Freight revenues 80,549,584 82,104,368 49,370,632 - - -

Total revenues 8,123,184,534 6,049,363,033 4,640,582,353 - - -

F-34 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

22 Expense by nature

The following expenditure items, classified by nature, have been charged in arriving at the operating profit (loss):

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Notes Baht Baht Baht Baht Baht Baht

Depreciation and amortisation 13,14 35,988,641 61,602,100 65,940,205 4,754 9,422 9,422 Staff costs 720,936,869 561,691,372 460,624,324 437,636 475,720 447,598 Fuel costs 3,220,341,012 1,986,982,945 1,667,316,398 - - - Aircraft rental 24.2 1,371,072,992 1,100,295,587 856,182,091 - - - Repair and maintenance 553,552,554 482,440,936 632,052,773 - - - Ramp and airport operating costs 686,780,497 581,190,754 515,431,659 - - - Estimated costs of aircraft redelivery before maturities (Adjusted to actual) 24.2 - (57,138,257) 173,348,702 - - - Loss on unwind fuel price swap agreements 24.2 - - 11,278,537 - - - Reversal of provision for loss on unwind interest rate swap agreements 24.2 - - (3,046,411) - - -

23 Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing the net profit (loss) attributable to shareholders by the weighted average number of paid-up ordinary shares outstanding during the year.

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009

Net profit (loss) attributable to shareholders (Baht) 1,014,121,991 1,004,942,378 (85,864,700) (1,974,621) (575,641) (629,421)

Weighted average number of paid-up ordinary shares outstanding (Shares) 4,100,000,000 4,100,000,000 4,100,000,000 4,100,000,000 4,100,000,000 4,100,000,000

Basic earnings (loss) per share (Baht) after share split 0.25 0.25 (0.02) (0.00) (0.00) (0.00)

The above calculations already have been reflected the share spilt as mentioned in note 20.

The Company does not have diluted ordinary shares as at 31 December 2011, 2010 and 2009.

F-35 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

24 Related party transactions

Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties.

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

The major shareholder of the Company is Mr. Tassapon Bijleveld, which own 55% of the Company’s ordinary shares.

Related party transactions were carried out on conditions as follows:

Pricing policies

- Interest income At a mutual agreed rate and equivalent to interest expenses rate paid to other related parties. - Share of loss (gain) on fuel price swap agreements Based on fuel consumption ratio. - Chargeable staff costs for shared accounting services Actual staff costs allocated by number of aircrafts. - Aircraft rental For aircrafts owned by AirAsia Berhad, rental charge is based on AirAsia Berhad's cost of capital. For sub-leased aircrafts, rental charge is based on master agreement that AirAsia Group has leased from a third party adjust with some assumptions to reflect The joint venture’s credit risk profile. - Aircraft repair and maintenance Based on the average of the contractual amount between AirAsia Berhad and the vendor, adjusted for annual escalation and stepped incremental rates under the master agreement. - Purchase of merchandises and equipment At the purchase price. - Management fee expenses At agreement price with AirAsia Berhad. - Booking fee expenses At agreement price which approximates the master agreement that AirAsia Group has agreed with third parties. - Interest expenses At a rate equivalent to AirAsia Group’s borrowing rate.

The following significant transactions were carried out with related parties:

24.1) Income

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Interest income Other related parties 62,718,814 21,036,364 ---- A director 668,139 2,583,531 - - - -

63,386,953 23,619,895 - - - -

F-36 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

24 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

24.2) Purchases of goods and services

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Share of loss (gain) from fuel price swap agreements Other related party (6,558,801) (38,170,833) 126,530,736 - - -

Chargeable staff costs for shared accounting services Other related parties (17,005,329) (17,499,648) - - - -

Aircraft rental Other related party 1,371,072,992 1,100,295,587 856,182,091 - - -

Aircraft repair and maintenance Other related party 501,725,050 402,809,684 484,342,417 - - -

Purchase of merchandises and equipment Other related party 26,937,820 45,661,396 27,801,551 - - -

Management fee expenses Other related party 7,423,069 7,638,986 8,271,320 - - -

Booking fee expenses Other related party 28,745,760 18,373,947 16,530,897 - - -

Estimated costs of aircraft redelivery before maturities (Adjusted to actual) Other related party - (57,138,257) 173,348,702 - - -

Interest expenses Other related party 74,322,470 121,420,629 - - - -

Loss on unwind fuel price swap agreements Other related party - - 11,278,537 - - -

Reversal of provision for loss on unwind interest rate swap agreements Other related party - - (3,046,410) - - -

F-37 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

24 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

24.2) Purchases of goods and services (Cont’d)

Aircraft redelivery agreement

During the year 2009, the joint venture entered into aircraft redelivery agreement with AirAsia (Mauritius) Limited, a lessor, who was a related party to redeliver Boeing aircrafts before the end of leasing periods with an intention to enter into new aircraft rental agreements to save repair and maintenance costs of the aircrafts. The joint venture’s management estimated the proportionate amount of costs of aircraft redelivery before maturities amounting to Baht 273.50 million and recorded these costs as operating costs during the years 2007, 2008 and 2009. However, management has made a subsequent adjustment for a difference between the estimation and the actual proportionate amount of Baht 57.14 million during the year 2010. The difference was due to the fact that the joint venture could skip some technical checking stages during redelivery process.

Fuel price swap agreements

During the year 2009, AirAsia Berhad, the related party had terminated some of its fuel price swap agreements with third parties before their maturities and allocated penalty charge to the joint venture at proportionate of Baht 11.28 million. The joint venture recorded these costs as operating costs for the year then ended 31 December 2009. During the years 2011 and 2010, there was no such transaction.

Interest rate swap agreements

AirAsia Berhad, the related party has entered into purchase aircraft agreements for using in AirAsia Group. It has entered into loan agreement for aircraft purchasing and interest rate swap agreements which protect the joint venture from the risk of movements in interest rates of loan agreements with third parties.

During the year 2008, AirAsia Berhad has terminated interest rate swap agreements with third parties before their maturities because of a significant decrease in interest rate and allocated a penalty charge to the joint venture. In view of continuing uncertainties in the global economy, AirAsia Berhad has evaluated the global economic situation and made arrangements to further terminations of its swap positions. AirAsia Berhad has estimated the amount of loss on the termination in respect of these interest rate swap agreements and allocated it to the joint venture at proportionate amount of Baht 197.50 million. The joint venture recorded these costs in the financial statements for the year then ended 31 December 2008. AirAsia Berhad called for the payments of these costs during the year 2009 at proportionate amount of Baht 194.46 million. The joint venture recorded the difference between actual payments and provision for loss amounting to Baht 3.05 million (proportionate) in profit or loss. And as at 31 December 2009, the joint venture presented the outstanding balances under amounts due to related parties.

During the years 2011 and 2010, the joint venture had no terminated interest rate swap agreements with third parties before their maturities.

24.3) Management remunerations

Key management includes directors (executive and non-executive). The compensation paid or payable to key management for employee services is shown below:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Salaries and other short-term employee benefits 23,329,959 14,393,970 12,377,880 180,000 - - Retirement benefits 1,053,365 - - - - -

24,383,324 14,393,970 - 180,000 - -

F-38 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

24 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

24.4) Passenger revenues and expenses received and paid on behalf

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Passenger revenues received on behalf of the Company and its joint venture by other related parties 1,718,031,522 1,932,087,734 1,085,941,304 - - - Cash received on behalf of other related party 232,983,292 298,092,233 242,832,113 - - - Expenses paid on behalf of the Company and its joint venture by other related parties 362,955,005 336,932,864 287,531,884 - - - Advance payments on behalf of other related parties 218,597,173 71,717,072 153,971,801 - - -

Outstanding balances arising from receivables, payables, short-term loan to a director and other non-current assets are summarised as follows:

24.5) Amounts due from related parties

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Amounts due from related parties Other related parties 140,742,129 1,366,092,516 38,578,877 - - -

From 1 January 2010, amounts due from related parties have been charged the interest at 6.00% per annum (2010: 6.00% per annum and 2009: nil).

24.6) Amounts due to related parties

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Amounts due to related parties Other related party 184,156,928 2,081,108,171 2,109,270,066 - - - A joint venture - - - 486,987 93,166

184,156,928 2,081,108,171 2,109,270,066 - 486,987 93,166

Amounts due to related parties are mainly denominated in US Dollar. From 1 January 2010, amounts due to related parties have been charged the interest at 6.00% per annum (2010: 6.00% per annum and 2009: nil).

F-39 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

24 Related party transactions (Cont’d)

Outstanding balances arising from receivables, payables, short-term loan to a director and other non-current assets are summarised as follows: (Cont’d)

24.7) Short-term loan to a director

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Short-term loan to a director Beginning balance 52,583,531 93,500,000 ---- Increase during the year 31,520,600 31,700,000 93,500,000 - - - Received during the year (81,520,600) (75,200,000) Increase from interest receivable during the year 655,038 2,583,531 ---- Interest received during the year (3,238,569) - - - - -

Ending balance - 52,583,531 93,500,000 - - -

As at 31 December 2010 and 2009, short-term loan to a director was unsecured and denominated in Thai Baht, carried interest at 1.50% per annum. The loan was fully settled during the year 2011.

24.8) Other non-current assets

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Aircraft rental deposits Other related party 253,912,027 205,285,063 167,814,986 - - -

Fuel price swap deposits Other related party 8,045,374 8,412,400 8,412,400 - - -

25 Commitments

Operating lease commitments

As at 31 December, the Company and its joint venture had outstanding commitments in respect of the non-cancellable office leases and others as follows:

Proportionate consolidated Company 2011 2010 2009 2011 2010 2009 Baht Baht Baht Baht Baht Baht

Not later than 1 year 23,074,434 24,886,928 6,193,728 --- Later than 1 year but not later than 5 years 17,611,543 26,939,652 5,780,000 - - -

Total 40,685,977 51,826,580 11,973,728 - - -

F-40 Asia Aviation Public Company Limited (Formerly Asia Aviation Company Limited) Notes to the Special Purpose Proportionate Consolidated and Company Financial Statements For the years ended 31 December 2011, 2010 and 2009

25 Commitments (Cont’d)

Operating lease commitments (Cont’d)

As at 31 December 2011, the Company and its joint venture had outstanding commitments in respect of non-cancellable aircraft lease agreements made with AirAsia (Mauritius) Limited which covered rental and insurance agreements of 22 aircrafts (2010: 19 aircrafts and 2009: 20 aircrafts) as follows:

Proportionate consolidated 2011 2010 2009 Insurance Insurance Insurance Rental agreements Rental agreements Rental agreements USD USD USD USD USD USD

Not later than 1 year 45,747,483 411,034 29,833,068 425,424 27,009,517 442,221 Later than 1 year but not later than 5 years 59,296,481 - 29,103,341 - 20,113,556 - Laterthan5years 23,480,282 - - - - -

Total 128,524,246 411,034 58,936,409 425,424 47,123,073 442,221

26 Guarantees

As at 31 December 2011, the joint venture had a commitment related to guarantees issued by bank in respect of pilot trainee’s loans in accordance with their professional pilot courses at proportionate amount of Baht 13.72 million (2010: Nil and 2009: Baht 24.66 million). Normally, a guarantee is terminated when the pilot trainee earns a commercial pilot’s license and is assigned as a co-pilot or when the pilot trainee settles all outstanding debts with the bank. However, the joint venture can fully reclaim the stated liabilities from the pilot trainees’ guarantors, who have pledged guarantees with the joint venture.

As at 31 December 2011, 2010 and 2009, the Company had a commitment relating to guarantees given to the borrowers under a credit agreement for the Baht equivalent of USD 39 million. The agreement was between Credit Suisse, Singapore branch, as the lender, and the borrowers, a group of six of the Company’s shareholders. Under the credit agreement, the borrowers pledged the Company’s shares and the Company pledged its investment in equity securities in Thai AirAsia Company Limited to such lenders as a guarantee.

27 Letters of guarantee

As at 31 December 2011, the Company and its joint venture had commitments relating to guarantees issued by banks in respect of ground handling, technical support, and other flight operation activities in the ordinary course of business at proportionate amount of Baht 2.9 million, USD 45,900 and India Rupee 14.2 million (2010: Baht 3.8 million, USD 45,000 and India Rupee 13.5 million and 2009: Baht 2.8 million and USD 45,000). The Company and its joint venture used their fixed deposit accounts at proportionate amount of India Rupee 14.2 million (2010: India Rupee 13.5 million and 2009:nil) as the collateral for these letters of guarantee.

28 Subsequent events

On 1 January 2012, the joint venture has entered into addendums of 20 aircraft specific lease agreements with a related company for extension of their specific lease terms from 3, 5 and 8 years to 12 years from the date of aircraft delivery. The terms and conditions of these addendums are effective from 1 January 2012.

At the Extraordinary Shareholders’ Meeting of the joint venture held on 15 February 2012, the shareholders approved an increase in registered share capital of the joint venture from 40,000,000 shares to 43,555,560 shares by issuing additional ordinary shares of 3,555,560 shares with a par value of Baht 10 each in order to offer to the existing joint venture’s shareholders.

F-41 THAI AIRASIA COMPANY LIMITED

SPECIAL PURPOSE FINANCIAL STATEMENTS

31 DECEMBER 2011, 2010 AND 2009

F-42 F-43 Thai AirAsia Company Limited Statements of Financial Position As at 31 December 2011, 2010 and 2009

2011 2010 2009 Notes Baht Baht Baht

Assets

Current assets

Cash and cash equivalents 8 1,359,702,567 507,821,793 654,075,545 Cash at financial institutions pledged as security 14,458,500 50,000,000 - Short-term investment 9 9,120,279 8,978,474 8,868,419 Trade and other receivables, net 10 191,835,196 110,573,474 167,582,186 Amounts due from related parties 22.5 275,965,053 2,732,185,031 77,157,753 Short-term loan to a director 22.7 - 105,167,062 187,000,000 Inventories 51,232,834 6,390,028 4,726,536 Prepaid expenses 225,538,898 178,242,654 31,808,854 Value added tax receivable, net 689,158,323 270,768,859 206,465,848 Other current assets 19,339,214 88,197,102 20,178,881

Total current assets 2,836,350,864 4,058,324,477 1,357,864,022

Non-current assets

Cash at financial institutions pledged as security 56,000,000 24,975,600 - General investment 11 6,929,500 7,487,100 8,217,700 Leasehold improvements and equipment, net 12 302,933,748 274,643,823 287,966,702 Intangible assets, net 13 14,260,815 21,122,820 10,884,517 Other non-current assets 14 573,371,519 480,224,934 402,208,115

Total non-current assets 953,495,582 808,454,277 709,277,034

Total assets 3,789,846,446 4,866,778,754 2,067,141,056

The accompanying notes are an integral part of these special purpose financial statements.

F-44 Thai AirAsia Company Limited Statements of Financial Position (Cont’d) As at 31 December 2011, 2010 and 2009

2011 2010 2009 Notes Baht Baht Baht Liabilities and shareholders’ equity

Current liabilities

Trade accounts payable 105,931,528 175,014,034 358,354,471 Other accounts payable 66,368,776 47,790,469 46,919,988 Short-term borrowings from a financial institution 15 - 200,000,000 - Amounts due to a related party 22.6 361,092,140 4,161,728,551 4,218,446,966 Deferred revenues 2,716,364,349 2,373,444,659 1,474,378,531 Accrued expenses 476,097,173 389,709,270 462,253,157 Current portion of long-term borrowing from a financial institution 16 486,000,000 - - Current portion of finance lease liabilities 4,767,819 1,158,282 1,480,538 Other current liabilities 14,029,860 19,505,839 16,757,513

Total current liabilities 4,230,651,645 7,368,351,104 6,578,591,164

Non-current libilities

Long-term borrowing from a financial institution 16 13,163,251 - - Finance lease liabilities 9,254,534 1,378,526 2,536,808 Employee benefit obligations 17 82,752,289 - -

Total non-current liabilities 105,170,074 1,378,526 2,536,808

Total liabilities 4,335,821,719 7,369,729,630 6,581,127,972

Shareholders’ equity

Share capital 18 Authorised share capital Ordinary shares, shares 40,000,000 shares of par Baht 10 each 400,000,000 400,000,000 400,000,000

Issued and paid-up share capital Ordinary shares, shares 40,000,000 shares of paid-up Baht 10 each 400,000,000 400,000,000 400,000,000 Premium on share capital 18 1,227,629 1,227,629 1,227,629 Deficits (947,202,902) (2,904,178,505) (4,915,214,545)

Total shareholders’ equity (545,975,273) (2,502,950,876) (4,513,986,916)

Total liabilities and shareholders’ equity 3,789,846,446 4,866,778,754 2,067,141,056

The accompanying notes are an integral part of these special purpose financial statements.

F-45 Thai AirAsia Company Limited Statements of Comprehensive Income For the years ended 31 December 2011, 2010 and 2009

2011 2010 2009 Notes Baht Baht Baht

Revenues 19 16,157,597,567 12,098,726,066 9,281,164,705 Operating costs (13,757,646,077) (9,965,173,058) (9,315,947,358)

Gross profit (loss) 2,399,951,490 2,133,553,008 (34,782,653) Net gain on exchange rates 155,268,528 356,842,232 129,510,746 Other income 451,084,289 363,009,001 217,940,344

Profit before expenses 3,006,304,307 2,853,404,241 312,668,437 Selling expenses (444,678,078) (357,931,386) (243,023,844) Administrative expenses (357,909,177) (241,314,226) (239,728,682)

Profit (loss) before finance costs and income tax 20 2,203,717,052 2,254,158,629 (170,084,089) Finance costs (183,658,393) (243,122,589) (386,469)

Profit (loss) before income tax 2,020,058,659 2,011,036,040 (170,470,558) Incometax ---

Profit (loss) for the year 2,020,058,659 2,011,036,040 (170,470,558)

Total comprehensive income (expense) for the year 2,020,058,659 2,011,036,040 (170,470,558)

Earnings (loss) per share 21

Basic earnings (loss) per share 50.50 50.28 (4.26)

The accompanying notes are an integral part of these special purpose financial statements. 4

F-46 Thai AirAsia Company Limited Statements of Changes in Shareholders’ Equity For the years ended 31 December 2011, 2010 and 2009

Issued and paid-up Premium on share capital share capital Deficits Total Note Baht Baht Baht Baht

Opening balance as at 1 January 2009 400,000,000 1,227,629 (4,744,743,987) (4,343,516,358) Total comprehensive expense for the year - - (170,470,558) (170,470,558)

Closing balance as at 31 December 2009 400,000,000 1,227,629 (4,915,214,545) (4,513,986,916)

Opening balance as at 1 January 2010 400,000,000 1,227,629 (4,915,214,545) (4,513,986,916) Total comprehensive income for the year - - 2,011,036,040 2,011,036,040 F-47

Closing balance as at 31 December 2010 400,000,000 1,227,629 (2,904,178,505) (2,502,950,876)

Opening balance as at 1 January 2011 400,000,000 1,227,629 (2,904,178,505) (2,502,950,876) Adjustment for adoption of a new accounting standard 3.2 - - (63,083,056) (63,083,056)

Balance after adjustment 400,000,000 1,227,629 (2,967,261,561) (2,566,033,932) Total comprehensive income for the year - - 2,020,058,659 2,020,058,659

Closing balance as at 31 December 2011 400,000,000 1,227,629 (947,202,902) (545,975,273)

The accompanying notes are an integral part of these special purpose financial statements. 5 Thai AirAsia Company Limited Statements of Cash Flows For the years ended 31 December 2011, 2010 and 2009

2011 2010 2009 Notes Baht Baht Baht Cash flows from operating activities Profit (loss) before income tax 2,020,058,659 2,011,036,040 (170,470,558) Adjustments for: Doubtful debts expenses (reversals) (2,868,378) (1,938,890) 2,545,190 Depreciation 12 66,711,759 118,740,369 128,788,497 Amortisation 13 44,823,576 823 576 4,444,9844 444 984 3,073,0633 073 063 Loss (gain) on disposals and writes-off of leasehold improvements and equipment and intangible assets 1,046,574 (1,412,236) 1,027,217 Estimated costs of aircrafts redelivery before maturities ((AdjustedAdjusted to actualactual)) 2020,, 22.2 - ((114114,227676,5,519)19) 334646,697,,697,440404 Reversal of provision for loss on unwind interest rate swap agreements 20, 22.2 - - (6,092,821) Employee benefit expenses 17 19,669,233 - - Unrealised gain on exchange rates (41,868,490) (2,001,071) (15,520,626) Finance costs 183,658,393 243,122,589 386,469 Interest income (135,911,978) (50,338,825) (9,555,539)

2,115,319,348 2,207,376,441 280,878,296 Changes in operating assets and liabilities: - Cash at financial institutions pledged as security 4,517,100 (74,975,600) - - Trade and other receivables (78,393,344) 58,947,602 (111,934,476) - Amounts due from related parties 1,662,997,284 (2,612,679,296) (59,498,156) - Inventories (44,842,806) (1,663,492) 643,784 - Prepaid expenses (47,296,244) (146,433,800) 36,462,693 - Value added tax receivable (418,389,464) (64,303,011) (38,058,963) - Other current assets 68,857,888 (68,018,221) (6,939,490) - Other non-current assets (93,146,585) (78,016,819) (140,170,055) - Trade accounts payable (69,082,506) (181,121,534) 19,755,713 - Other accounts payable 18,578,307 870,481 (111,981,406) - Amounts due to related parties ((33,048,987,508508)) ((185185,283,154154)) 487,608,406 - Deferred revenues 342,919,690 899,066,128 234,069,700 - Accrued expenses 86,387,903 (72,543,887) (44,216,890) - Provision for loss on unwind interest rate swap agreements - - (388,907,179) - Other current liabilities (5,475,979) 2,748,326 7,190,885

Cash generated from (used in) operation 449393,963,08,963,0844 (3(31616,0,02929,836),836) 116464,90,9022,86,8622 Interest paid (24,046,808) (281,331) (386,469) Interest received 51,435,756 2,713,726 9,238,085

Net cash generated from (used in) operating activities 521,352,032 (313,597,441) 173,754,478

The accompanying notes are an integral part of these special purpose financial statements. 6

F-48 Thai AirAsia Company Limited Statements of Cash Flows (Cont’d) For the years ended 31 December 2011, 2010 and 2009

2011 2010 2009 Notes Baht Baht Baht Cash flows from investing activities Short-term loan granted to a director 22.7 (63,041,200) (63,400,000) (187,000,000) Repayments of short-term loan to a director 22.7 163,041,200 150,400,000 - Proceeds from general investment 11 557,600 730,600 - Payment for general investment 11 - - (779,000) PdfdilfProceeds from disposals of leasehold improvements and equipment 7,892,381 2,362,198 3,457,009 Payments for leasehold improvements and equipment (82,040,718) (108,586,355) (101,229,907) Payments for intangible assets (2,288,579) (14,683,287) (4,301,066) Interest received 6,477,138 - -

Net cash generated from (used in) investing activities 30,597,822 (33,176,844) (289,852,964)

Cash flows from financing activities Proceed from (repayment of) short-term borrowings from a financial institution 15 (200,000,000) 200,000,000 - Repayments of finance lease (6,087,368) (1,480,538) (1,373,439) Proceeddf from long-terml borrowingb i ffrom a financial institution 16 961,163,251 - - Repayments of long-term borrowing from a financial institution 16 (462,000,000) - - Interest paid (35,013,453) - -

Net cashg generatedenerated from ( (usedused inin)) financin financingg activities 258258,062,430,062,430198,519,462 198,519,462 ((1,373,439)1,373,439)

Net increase (decrease) in cash and cash equivalents 810,012,284 (148,254,823) (117,471,925) Cash and cash equivalents at the beginning of the year 507,821,793 654,075,545 756,026,844 Effect of exchange rates 41,868,490 2,001,071 15,520,626

Cash and cash equivalents at the end of the year 1,359,702,567 507,821,793 654,075,545

Non-cash transactions

Significant non-cash transactions during the years ended 31 December 2011, 2010 and 2009 are as follows:

Purchase of motor vehicles under finance lease agreements 17,572,913 - - Purchase of leasehold improvements and equipment which have not been paid - 670,097 2,889,000

The accompanying notes are an integral part of these special purpose financial statements.

F-49 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

1 General information

Thai AirAsia Company Limited (“the Company”) is a limited company and incorporated in Thailand. The address of the Company’s registered office is as follows:

60/1 Monririn Tower 3rd floor, B Building, Soi Sailom, Phahol-yothin Road, Samsennai, Phayathai, Bangkok 10400.

The Company’s operating office is located at 99 OSC Building, Kingkaew Road, Rachatewa, Bangplee, Samutprakarn 10540.

The principal business operation of the Company is to provide low-fare airline service.

The Company is jointly controlled by Asia Aviation Public Company Limited (formerly Asia Aviation Company Limited), incorporated in Thailand and AirAsia Investment Ltd. (formerly AA International Ltd.), incorporated in Malaysia, which own 51% and 49% of the Company’s shares, respectively.

The special purpose financial statements were approved by the Board of Directors on 19 March 2012.

2 Financial position

As at 31 December 2011, the Company had total current liabilities exceeding its total current assets at amount of Baht 1,394 million (2010: Baht 3,310 million and 2009: Baht 5,221 million). Major balances in current liabilities were deferred revenues, which the Company will be able to provide the services as normal operations. In addition, revenues for the year have increased by Baht 4,059 million, and there was a net profit for the year ended 31 December 2011 amounting to Baht 2,020 million (2010: Baht 2,011 million and 2009: loss Baht 170 million). The related financial information for the year then ended of the Company, revealed a significant improvement in operating results. Therefore, these special purpose financial statements have been prepared on a going concern basis.

3 Accounting policies

The principal accounting policies adopted in the preparation of these special purpose financial statements are set out below:

3.1 Basis of preparation

The special purpose financial statements have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act B.E. 2543, being those Thai Financial Reporting Standards (“TFRS”) issued under the Accounting Profession Act B.E.2547, and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act. for the purpose of inclusion in the Asia Aviation Public Company Limited’s offering circular as part of the Asia Aviation Public Company Limited’s initial public offering of shares to investors.

The special purpose financial statements are based on local statutory financial statements which are adjusted and reclassified to conform with changes in presentation in the current year and to comply with the requirement of the Department of Business Development, TFRS and the reporting requirements of the Securities and Exchange Commission.

F-50 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.1 Basis of preparation (Cont’d)

The special purpose financial statements have been prepared under the historical cost convention, except if disclosed otherwise in the accounting policies.

The preparation of special purpose financial statements are in conformity with Thai Generally Accepted Accounting Principles requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complex areas where assumptions and estimates are significant to the special purpose financial statements are disclosed in note 5.

An English version of the special purpose financial statements has been prepared from the special purpose financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language special purpose financial statements shall prevail.

3.2 New accounting standards, new financial reporting standards, new interpretation, and amendments to accounting standards

a) Commencing 1 January 2011, the Company has applied the following new accounting standards, new financial reporting standards, new interpretations, and amendments to accounting standards (collectively “the accounting standards”) that are mandatory for the financial year beginning on or after 1 January 2011. The accounting standards which are relevant to the Company are listed below :

TAS 1 (Revised 2009) Presentation of Financial Statements TAS 2 (Revised 2009) Inventories TAS 7 (Revised 2009) Statement of Cash Flows TAS 8 (Revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors TAS 10 (Revised 2009) Events after the Reporting Period TAS 16 (Revised 2009) Property, Plant and Equipment TAS 17 (Revised 2009) Leases TAS 18 (Revised 2009) Revenue TAS 19 Employee Benefits TAS 24 (Revised 2009) Related Party Disclosures TAS 33 (Revised 2009) Earnings per Share TAS 34 (Revised 2009) Interim Financial Reporting TAS 36 (Revised 2009) Impairment of Assets TAS 37 (Revised 2009) Provisions, Contingent Liabilities and Contingent Assets TAS 38 (Revised 2009) Intangible Assets TSIC 31 Revenue - Barter Transactions Involving Advertising Services

F-51 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.2 New accounting standards, new financial reporting standards, new interpretation, and amendments to accounting standards (Cont’d)

The new accounting standards which are considered to have an impact to the special purpose financial statements are described below:

TAS 19 deals with accounting for employee benefits which requires the entity to measure the defined benefit plan and other long-term employee benefits by using the Projected Unit Credit method (PUC). An entity can choose to recognise any actuarial gain or loss for defined benefit plan either in other comprehensive income or profit or loss. The Company chooses to record that gain or loss in the statement of comprehensive income. Actuarial gain or loss for other long-term employee benefits shall be recognised in profit or loss.

The Company has applied this standard for the first time by choosing to adjust a total amount against the deficits as of 1 January 2011. The effects of the adoption of the above standards to the special purpose financial statements are as follows:

Baht

Statement of changes in shareholders’ equity Deficits as of 1 January 2011 increased 63,083,056

b) New accounting standards and amendments to accounting standards which are currently relevant to the Company but the Company has not yet early adopted them:

Effective for the periods beginning on or after 1 January 2013 TAS 12 Income taxes TAS 21 (Revised 2009) The Effects of Changes in Foreign Exchange Rates

The Company’s management has assessed and determined that the new accounting standards and amendments to accounting standards will not significantly impact the financial statements being presented except the new accounting standard as disclosed below:

TAS 12 deals with taxes on income, comprising current tax and deferred tax. Current tax assets and liabilities are measured at the amount expected to be paid to or recovered from the taxation authorities, using tax rates that tax law have been enacted or substantively enacted by the end of the reporting period. Deferred taxes are measured by based on the temporary difference between the tax base of an asset or liability and its carrying amount in the financial statements and using the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. The Company will apply this standard from 1 January 2013 retrospectively with an expected incur of deferred tax account and an impact to retained earnings and income tax expense. The Company’s management is currently assessing the impact of applying this standard.

F-52 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.3 Foreign currency translation

Items included in the financial statements are measured using Thai Baht.

3.4 Cash and cash equivalents

3.5 Trade accounts receivable

3.6 Inventories

Inventories comprise food, beverage, merchandise and consumables.

Food, beverage and merchandise are stated at the lower of cost or net realisable value. Cost is determined by the first-in, first-out method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventories such as import duties and transportation charges, less all attributable discounts, allowances or rebates.

F-53 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.7 General investment

The Company’s general investment is non-marketable equity security. The classification depends on the purpose for which the investment was acquired. Management determines the appropriate classification of its investment at the time of the purchase and re-evaluates such designation on a regular basis.

General investment is carried at cost less impairment.

On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to profit or loss. When disposing of part of the Company’s holding of particular investment in debt or equity securities, the carrying amount of the disposed part is determined by the weighted average carrying amount of the total holding of the investment.

3.8 Leasehold improvements and equipment

Leasehold improvements and equipment are stated at cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation is calculated on the straight-line basis to write-off the cost of each asset, to its residual value over the estimated useful life as follows:

Leasehold improvements 5 years Computers 5years Furniture, fixtures and office equipment 5 years Operating equipment 5 years Motor vehicles 5 years Aircraft spare parts 4 - 10 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.

Gains or losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.

F-54 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.9 Intangible assets

Computer software

3.10 Leases - where the Company is the lessee

3.11 Borrowings

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost as the redemption value. Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the statement of financial position date.

3.12 Employee benefits

3.12.1 Provident fund

The Company operates a provident fund that is a defined contribution plan. The fund assets are held in a separate trust fund and are managed by an external fund manager. The provident fund is funded by payments from employees and by the Company. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The Company’s contributions to the provident fund are charged to profit or loss in the year to which they relate.

F-55 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

3 Accounting policies (Cont’d)

3.12 Employee benefits (Cont’d)

3.12.2 Retirement benefits

The retirement benefit is a defined benefit plan that an employee will receive on retirement according to Thai Labour Law depending on age and years of service.

3.13 Provisions

Provisions, which exclude the provision relating to employee benefits, are recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where the Company expects a provision to be reimbursed, the reimbursement is recognised as a separate assets but only when the reimbursement is virtually certain.

3.14 Revenue recognition

Other income is recognised on an accrual basis.

F-56 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

4 Financial risk management

4.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks, including the effects of changes in fuel price and foreign currency exchange rates. The Company’s overall risk management programme focuses on the votality of financial markets and seeks to minimise potential adverse effects on the financial performance. The Company does not have policies to use derivative financial instruments for trading or speculative purpose.

Fuel price risk

The Company is exposed to the fluctuation of fuel price. To manage the risk of fuel price fluctuation, AirAsia Berhad, a related party, is carried out the risk management on behalf of the Company (Note 4.2).

Foreign exchange risk

The Company is exposed to foreign exchange risk arising from currency exposures mainly in respect of US Dollars. The Company manages risk by natural hedge to the extent that payments for foreign currency payables are matched against receivables denominated in the same foreign currency. However, the Company does not use any derivative financial instruments to hedge foreign currency exposure.

Interest rate risk

The Company’s interest rate risk arises from short-term borrowings, long-term borrowing, amount due from related parties and amounts due to related parties. Borrowings issued at variable rates and amounts due from and due to related parties issued at fixed rate. Management considers that interest rate risk is not significant. However, all interest rate derivative transactions, which may be incurred, are subject to approval by the Board of Directors before execution.

Credit risk

Most of the Company’s income, being passenger revenue, is normally paid by clients in advance. The credit risk incurred from amounts due from related parties and short-term loan to a director is low. Management is therefore of the opinion that credit risk is not significant. The Company has not entered into any derivative contracts relating to credit risk. Cash transactions are limited to high credit quality financial institutions.

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying business, the Company Treasury aims at maintaining flexibility in funding by keeping credit lines available.

F-57 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

4 Financial risk management (Cont’d)

4.2 Accounting for derivative financial instruments and hedging activities

Derivative financial instruments, which the Company used to manage risk, comprise fuel price swap agreements.

Fuel price swap agreements

AirAsia Berhad, a related party, has entered into fuel price swap agreements with third parties which protect the Company from the risk of movements in fuel price. The Company has entered into the agreement with AirAsia Berhad under the term of the agreement that gains or losses on fuel price swap agreements are allocated to the Company based on proportion of fuel consumption on a monthly basis. The Company recorded these transactions in profit or loss as a component of operating costs when they incur.

4.3 Fair value estimation

Fair values of financial assets and liabilities are approximate their carrying amounts because their periods of maturities are short, therefore, there is no significant risk that would impact the Company’s future cash flows.

Fuel price swap agreements

The fair value of fuel price swap agreements at the statement of financial position date is as follows:

2011 2010 2009 US Dollars US Dollars US Dollars

Favourable fuel price swap agreements 1,611,554 - 148,329

There was no outstanding fuel price swap agreement as at 31 December 2010.

5 Critical accounting estimates, assumptions, and judgements

Aircraft maintenance under operating leases

The Company has a commitment to maintain aircrafts under operating lease agreements, a provision is made throughout the lease term for the rectification obligations contained within the lease agreements. The provision is based on estimated future repair and maintenance costs of major airframe, certain engine maintenance checks and estimated one-off costs will be incurred at the end of the lease by charging to profit or loss according to the number of flying hours in each year.

6 Capital risk management

F-58 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

7 Segment information

The Company does not disclose the segment information because there is no significant business segment other than the provision of air transportation services.

8 Cash and cash equivalents 2011 2010 2009 Baht Baht Baht

Cash on hand 6,370,496 20,342,732 14,222,591 Deposits held at call with banks 1,146,732,071 487,479,061 639,852,954 Short-term bank deposits 6,600,000 - - Bill of exchange with maturity of three months or less 200,000,000 - -

Total cash and cash equivalents 1,359,702,567 507,821,793 654,075,545

The interest rate of deposits held at call with banks was 1.40% per annum (2010: 0.50% per annum and 2009: 0.50% per annum).

9 Short-term investment

Movements of short-term investment are summarised as follows: 2011 2010 2009 Baht Baht Baht

Opening net book amount 8,978,474 8,868,419 8,550,965 Interest received 141,805 110,055 317,454

Closing net book amount 9,120,279 8,978,474 8,868,419

The summary of short-term investment is as follows:

2011 2010 2009 Baht Baht Baht

Fixed deposits with maturity of over than three months but within twelve months 9,120,279 8,978,474 8,868,419

Total short-term investment 9,120,279 8,978,474 8,868,419

The average interest rate of fixed deposits with maturity of over three months but within twelve months was 1.57% per annum (2010: 1.23% per annum and 2009:1.25% per annum).

F-59 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

10 Trade and other receivables, net

2011 2010 2009 Baht Baht Baht

Trade accounts receivable 155,797,194 81,207,688 69,771,369 Less Allowance for doubtful accounts - (2,868,378) (4,807,268) Trade accounts receivable, net 155,797,194 78,339,310 64,964,101 Accrued revenues 32,542,570 5,619,727 77,982,930 Other accounts receivable 3,495,432 26,614,437 24,635,155

Total trade and other receivables, net 191,835,196 110,573,474 167,582,186

Outstanding trade accounts receivable can be analysed by age as follows:

2011 2010 2009 Baht Baht Baht

Up to 3 months 141,043,413 73,800,012 49,546,963 3-6 months 7,461,857 1,136,398 6,586,002 6-12 months 5,007,647 1,107,896 438,496 Over 12 months 2,284,277 5,163,382 13,199,908 155,797,194 81,207,688 69,771,369 Less Allowance for doubtful accounts - (2,868,378) (4,807,268) 155,797,194 78,339,310 64,964,101

11 General investment

2011 2010 2009 Baht Baht Baht

Opening book amount 7,487,100 8,217,700 7,438,700 Increase in investment - - 779,000 Decrease in investment (557,600) (730,600) -

Closing book amount 6,929,500 7,487,100 8,217,700

General investment of the Company is the investment in ordinary shares of Aeronautical Radio of Thailand Limited.

F-60 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

12 Leasehold improvements and equipment, net

Furniture, fixtures & Leasehold office Operating Motor Aircraft Assets under improvements Computers equipment equipment vehicles spare parts installation Total Baht Baht Baht Baht Baht Baht Baht Baht

At 1 January 2009 Cost 24,943,075 49,312,706 16,780,540 69,252,692 59,304,984 337,983,369 2,732,010 560,309,376 Less Accumulated depreciation (11,043,825) (31,149,950) (10,395,815) (32,771,062) (20,504,573) (136,868,225) - (242,733,450)

Net book amount 13,899,250 18,162,756 6,384,725 36,481,630 38,800,411 201,115,144 2,732,010 317,575,926

For the year ended 31 December 2009 Opening net book amount 13,899,250 18,162,756 6,384,725 36,481,630 38,800,411 201,115,144 2,732,010 317,575,926 Additions 368,270 7,203,275 247,518 3,543,647 9,715,514 78,307,188 4,278,087 103,663,499 Disposals, net - - - - (4,381,930) - - (4,381,930) F-61 Writes-off, net - (96,877) (5,419) - - - - (102,296) Transfers 1,812,162 117,800 - 2,114,010 - - (4,043,972) - Reclassification - - - - 1,341,975 - (1,341,975) - Depreciation charge (4,474,963) (8,205,063) (2,424,013 ) (13,003,316) (11,030,353) (89,650,789) - (128,788,497)

Closing net book amount 11,604,719 17,181,891 4,202,811 29,135,971 34,445,617 189,771,543 1,624,150 287,966,702

19 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

12 Leasehold improvements and equipment, net (Cont’d) Furniture, fixtures & Leasehold office Operating Motor Aircraft Assets under improvements Computers equipment equipment vehicles spare parts installation Total Baht Baht Baht Baht Baht Baht Baht Baht

At 31 December 2009 Cost 27,123,507 55,338,771 16,980,690 74,910,349 60,377,216 416,290,557 1,624,150 652,645,240 Less Accumulated depreciation (15,518,788) (38,156,880) (12,777,879) (45,774,378) (25,931,599) (226,519,014) - (364,678,538)

Net book amount 11,604,719 17,181,891 4,202,811 29,135,971 34,445,617 189,771,543 1,624,150 287,966,702

For the year ended 31 December 2010 Opening net book amount 11,604,719 17,181,891 4,202,811 29,135,971 34,445,617 189,771,543 1,624,150 287,966,702 Additions 2,056,180 6,747,388 2,848,296 4,921,855 16,910,474 68,631,942 4,251,317 106,367,452 Disposals, net - - - - (949,521) - - (949,521) Writes-off, net - (318) (121) (2) - - - (441) F-62 Transfers 3,218,276 - - - - - (3,218,276) - Depreciation charge (5,023,544) (7,157,015) (2,102,097) (12,606,857) (12,925,822) (78,925,034) - (118,740,369)

Closing net book amount 11,855,631 16,771,946 4,948,889 21,450,967 37,480,748 179,478,451 2,657,191 274,643,823

At 31 December 2010 Cost 32,397,963 60,293,772 19,821,739 79,602,204 72,441,325 484,922,499 2,657,191 752,136,693 Less Accumulated depreciation (20,542,332) (43,521,826) (14,872,850) (58,151,237) (34,960,577) (305,444,048) - (477,492,870)

Net book amount 11,855,631 16,771,946 4,948,889 21,450,967 37,480,748 179,478,451 2,657,191 274,643,823

20 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

For the year ended 31 December 2011 Opening net book amount 11,855,631 16,771,946 4,948,889 21,450,967 37,480,748 179,478,451 2,657,191 274,643,823 Additions 901,815 9,359,341 494,324 2,590,572 17,572,913 57,827,139 10,867,526 99,613,630 Disposals, net (403,407) (48,055) (23,070) (4) (3,138,463) - - (3,612,999) Writes-off, net - - - - - (594,289) (404,658) (998,947) Transfers 1,896,202 - 607,740 5,867,106 - - (8,371,048) - Depreciation charge (4,920,977) (6,808,833) (2,022,420) (10,394,290) (14,319,159) (28,246,080) - (66,711,759)

Closing net book amount 9,329,264 19,274,399 4,005,463 19,514,351 37,596,039 208,465,221 4,749,011 302,933,748

At 31 December 2011 F-63 Cost 33,579,714 66,981,543 20,750,369 87,749,882 79,831,808 539,007,692 4,749,011 832,650,019 Less Accumulated depreciation (24,250,450) (47,707,144) (16,744,906) (68,235,531) (42,235,769) (330,542,471) - (529,716,271)

Net book amount 9,329,264 19,274,399 4,005,463 19,514,351 37,596,039 208,465,221 4,749,011 302,933,748

The leased assets included above, where the Company is a lessee under finance lease agreements, comprise motor vehicles, total cost of which is Baht 16.87 million and total accumulated depreciation of Baht 2.16 million (2010: total cost of Baht 7.56 million and total accumulated depreciation of Baht 5.26 million and 2009: total cost of Baht 7.56 million and total accumulated depreciation of Baht 3.70 million).

As at 31 December 2011, the gross carrying amount of fully depreciated leasehold improvements and equipment that are still in use was totalling Baht 98.85 million (2010: Baht 86.98 million and 2009: Baht 43.42 million).

21 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

13 Intangible assets, net Computer software Computer under software installation Total Baht Baht Baht

At 1 January 2009 Cost 18,937,728 1,976,607 20,914,335 Less Accumulated amortisation (11,257,821) - (11,257,821)

Net book amount 7,679,907 1,976,607 9,656,514

For the year ended 31 December 2009 Opening net book amount 7,679,907 1,976,607 9,656,514 Additions 1,632,328 2,668,738 4,301,066 Transfers 1,098,965 (1,098,965) - Amortisation charge (3,073,063) - (3,073,063)

Closing net book amount 7,338,137 3,546,380 10,884,517

At 31 December 2009 Cost 21,669,021 3,546,380 25,215,401 Less Accumulated amortisation (14,330,884) - (14,330,884)

Net book amount 7,338,137 3,546,380 10,884,517

For the year ended 31 December 2010 Opening net book amount 7,338,137 3,546,380 10,884,517 Additions 9,916,534 4,766,753 14,683,287 Transfers 2,864,648 (2,864,648) - Amortisation charge (4,444,984) - (4,444,984)

Closing net book amount 15,674,335 5,448,485 21,122,820

At 31 December 2010 Cost 34,450,203 5,448,485 39,898,688 Less Accumulated amortisation (18,775,868) - (18,775,868)

Net book amount 15,674,335 5,448,485 21,122,820

For the year ended 31 December 2011 Opening net book amount 15,674,335 5,448,485 21,122,820 Additions 120,223 2,168,356 2,288,579 Writes-off and adjustments, net (1,214) (4,325,794) (4,327,008) Transfers 564,323 (564,323) - Amortisation charge (4,823,576) - (4,823,576)

Closing net book amount 11,534,091 2,726,724 14,260,815

At 31 December 2011 Cost 30,908,352 2,726,724 33,635,076 Less Accumulated amortisation (19,374,261) - (19,374,261)

Net book amount 11,534,091 2,726,724 14,260,815

F-64 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

14 Other non-current assets

2011 2010 2009 Note Baht Baht Baht

Aircraft rental deposits 22.8 497,866,890 410,570,125 335,629,972 Fuel price swap deposits 22.8 15,775,250 16,824,800 16,824,800 Rental deposits 18,188,812 18,201,445 18,485,005 Other deposits 41,540,567 34,628,564 31,268,338

Total other non-current assets 573,371,519 480,224,934 402,208,115

15 Short-term borrowings from a financial institution

2011 2010 2009 Baht Baht Baht

Promissory notes - 200,000,000 -

Total short-term borrowings from a financial institution - 200,000,000 -

Short-term borrowings from a financial institution were four-month promissory notes with a local commercial bank which were due for repayment in 2011 and had interest rate at MLR (approximately 6.56% per annum). The Company used its fixed deposit account amounting to Baht 50 million as the collateral for these promissory notes. During the year ended 31 December 2011, the Company had already repaid these borrowings.

16 Long-term borrowing from a financial institution

Maturity of long-term borrowing from a financial institution is as follows:

2011 2010 2009 Baht Baht Baht

Within 1 year 486,000,000 - - Over 1 year but less than 5 years 13,163,251 - - 499,163,251 - -

Movements of long-term borrowing from a financial institution are summarised as follows:

Baht

For the year ended 31 December 2011 Opening net book value - Addition during the year 961,163,251 Loan repayments (462,000,000)

Closing net book value 499,163,251

On 25 April 2011, the Company entered into a borrowing agreement with a local commercial bank with respect to the credit facility of Baht 970 million in order to repay debts to related parties. This borrowing bears an interest at the rate of MLR - 1% per annum (approximately 6.65% per annum), with a repayment term within 2 years.

This borrowing is secured by a fixed deposit account amounting to Baht 50 million. In addition, the Company has to maintain deposits at bank not less than amount of Baht 500 million over the borrowing periods.

F-65 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

17 Employee benefit obligations

Movements of the retirement benefit obligations over the year are as follows:

Note Baht

For the year ended 31 December 2011 Opening book amounts as at 1 January 2011 - Adjustment to deficits brought forward as at 1 January 2011 3.2 63,083,056 Current service costs 17,014,908 Interest costs 2,654,325 Actuarial (gain) loss - Benefits paid -

Closing book amount as at 31 December 2011 82,752,289

The amounts recognised in profit or loss are as follows: 2011 Baht

Current service costs 17,014,908 Interest costs 2,654,325

Total, included in staff costs 19,669,233

The principal actuarial assumptions used are as follows:

Discount rate % per annum 4.16 Future salary increase rate % per annum 5.34 - 7.00 Resignation rate % per annum 0.00 - 11.00

18 Share capital Number of Ordinary Premium on shares shares share capital Total Shares Baht Baht Baht

At 1 January 2009 40,000,000 400,000,000 1,227,629 401,227,629 Issue of shares - - - - At 31 December 2009 40,000,000 400,000,000 1,227,629 401,227,629 Issue of shares - - - - At 31 December 2010 40,000,000 400,000,000 1,227,629 401,227,629 Issue of shares - - - -

At 31 December 2011 40,000,000 400,000,000 1,227,629 401,227,629

The total authorised number of ordinary shares is 40,000,000 shares (2010 and 2009: 40,000,000 shares) with a par value of Baht 10 per share (2010 and 2009: Baht 10 per share). All issued shares are fully paid.

F-66 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

19 Revenues

Revenues from sales and services are as follows: 2011 2010 2009 Baht Baht Baht

Passenger revenues 13,007,455,688 10,260,308,502 7,582,292,480 Baggage handling and other service fees 2,805,257,116 1,538,937,880 1,492,486,018 In-flight revenues 185,490,493 135,270,948 107,644,944 Freight revenues 159,394,270 164,208,736 98,741,263

Total revenues 16,157,597,567 12,098,726,066 9,281,164,705

20 Expense by nature

The following expenditure items, classified by nature, have been charged in arriving at the operating profit (loss):

2011 2010 2009 Notes Baht Baht Baht

Depreciation and amortisation 12,13 71,535,335 123,185,353 131,861,560 Staff costs 1,433,667,587 1,122,431,304 920,353,452 Fuel costs 6,405,837,534 3,973,965,890 3,334,632,796 Aircraft rental 22.2 2,727,706,220 2,200,591,175 1,712,364,182 Repair and maintenance 1,101,464,553 964,881,872 1,264,105,545 Ramp and airport operating costs 1,366,458,157 1,162,381,508 1,030,863,319 Estimated costs of aircraft redelivery before maturities (Adjusted to actual) 22.2 - (114,276,519) 346,697,404 Loss on unwind fuel price swap agreements 22.2 - - 22,557,073 Reversal of provision for loss on unwind interest rate swap agreements 22.2 - - (6,092,821)

21 Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing the net profit (loss) attributable to shareholders by the weighted average number of paid- up ordinary shares outstanding during the year.

2011 2010 2009

Net profit (loss) attributable to shareholders (Baht) 2,020,058,659 2,011,036,040 (170,470,558) Weighted average number of paid-up ordinary shares outstanding during the year (Shares) 40,000,000 40,000,000 40,000,000

Basic earnings (loss) per share (Baht) 50.50 50.28 (4.26)

The Company does not have diluted ordinary shares as at 31 December 2011, 2010 and 2009.

F-67 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

22 Related party transactions

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

Related party transactions were carried out on conditions as follows:

Pricing policies

- Interest income At a mutual agreed rate and equivalent to interest expenses rate paid to other related parties. - Share of loss (gain) on fuel price swap agreements Based on fuel consumption ratio. - Chargeable staff costs for shared accounting services Actual staff costs allocated by number of aircrafts. - Aircraft rental For aircrafts owned by AirAsia Berhad, rental charge is based on AirAsia Berhad's cost of capital. For sub- leased aircrafts, rental charge is based on master agreement that AirAsia Group has leased from a third party adjust with some assumptions to reflect The Company’s credit risk profile. - Aircraft repair and maintenance Based on the average of the contractual amount between AirAsia Berhad and the vendor, adjusted for annual escalation and stepped incremental rates under the master agreement. - Purchase of merchandises and equipment At the purchase price. - Management fee expenses At agreement price with AirAsia Berhad. - Booking fee expenses At agreement price which approximates the master agreement that AirAsia Group has agreed with third parties. - Interest expenses At a rate equivalent to AirAsia Group’s borrowing rate.

The following significant transactions were carried out with related parties:

22.1) Income 2011 2010 2009 Baht Baht Baht Interest income Other related parties 122,978,108 42,072,727 - A director 1,310,076 5,167,062 - 124,288,184 47,239,789 -

F-68 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

22 Related party transactions (Cont’d)

Related party transactions were carried out on conditions as follows: (Cont’d)

22.2) Purchases of goods and services

2011 2010 2009 Baht Baht Baht

Share of loss (gain) from fuel price swap agreements Other related party (13,220,978) (76,341,665) 253,061,471

Chargeable staff costs for shared accounting services Other related parties (33,845,696) (34,999,296) -

Aircraft rental Other related party 2,727,706,220 2,200,591,175 1,712,364,182

Aircraft repair and maintenance Other related party 997,958,217 805,619,368 968,684,834

Purchase of merchandises and equipment Other related party 53,358,495 91,322,792 55,603,101

Management fee expenses Other related party 14,770,940 15,277,972 16,542,640

Booking fee expenses Other related party 57,181,533 36,747,894 33,061,794

Estimated costs of aircraft redelivery before maturities (Adjusted to actual) Other related party - (114,276,519) 346,697,404

Interest expenses Other related party 148,644,940 242,841,258 -

Loss on unwind fuel price swap agreements Other related party - - 22,557,073

Reversal of provision for loss on unwind interest rate swap agreements Other related party - - (6,092,821)

F-69 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

22 Related party transactions (Cont’d)

Related party transactions were carried out on conditions as follows: (Cont’d)

22.2) Purchases of goods and services (Cont’d)

Aircraft redelivery agreement

During the year 2009, the Company entered into aircraft redelivery agreement with AirAsia (Mauritius) Limited, a lessor, who was a related party to redeliver Boeing aircrafts before the end of leasing periods with an intention to enter into new aircraft rental agreements to save repair and maintenance costs of the aircrafts. The Company’s management estimated the amount of costs of aircraft redelivery before maturities amounting to Baht 547.00 million and recorded these costs as operating costs during the years 2007, 2008 and 2009. However, management has made a subsequent adjustment for a difference between the estimation and the actual amount of Baht 114.28 million during the year 2010. The difference was due to the fact that the Company could skip some technical checking stages during redelivery process.

Fuel price swap agreements

During the year 2009, AirAsia Berhad, the related party had terminated some of its fuel price swap agreements with third parties before their maturities and allocated penalty charge to the Company of Baht 22.56 million. The Company recorded these costs as operating costs for the year then ended 31 December 2009. During the years 2011 and 2010, there was no such transaction.

Interest rate swap agreements

AirAsia Berhad, the related party has entered into purchase aircraft agreements for using in Air Asia Group. It has entered into loan agreement for aircraft purchasing and interest rate swap agreements which protect the Company from the risk of movements in interest rates of loan agreements with third parties.

During the year 2008, AirAsia Berhad has terminated interest rate swap agreements with third parties before their maturities because of a significant decrease in interest rate and allocated a penalty charge to the Company. In view of continuing uncertainties in the global economy, AirAsia Berhad has evaluated the global economic situation and made arrangements to further terminations of its swap positions. AirAsia Berhad has estimated the amount of loss on the termination in respect of these interest rate swap agreements and allocated it to the Company of Baht 395.00 million. The Company recorded these costs in the financial statements for the year then ended 31 December 2008. AirAsia Berhad called for the payments of these costs during the year 2009 amounting to Baht 388.91 million. The Company recorded the difference between actual payments and provision for loss amounting to Baht 6.09 million in profit or loss. And as at 31 December 2009, the Company presented the outstanding balances under amounts due to related parties.

During the years 2011 and 2010, the company had no terminated interest rate swap agreements with third parties before their maturities.

22.3) Management remunerations

Key management includes directors (executive and non-executive). The compensation paid or payable to management for employee services is shown below: 2011 2010 2009 Baht Baht Baht

Salaries and other short-term employee benefits 46,107,099 28,787,939 24,755,760 Retirement benefits 2,096,249 - -

48,203,348 28,787,939 24,755,760

F-70 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

22 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

22.4) Passenger revenues and expenses received and paid on behalf

2011 2010 2009 Baht Baht Baht Passenger revenues received on behalf of the Company by other related parties 3,378,937,833 3,864,175,468 2,171,882,609 Cash received on behalf of other related party 459,037,583 596,184,467 485,664,226 Expenses paid on behalf of the Company by other related parties 715,424,322 673,865,728 575,063,769 Advance payments on behalf of other related parties 429,660,570 143,434,144 307,943,602

Outstanding balances arising from receivables, payables, short-term loan to a director and other non-current assets are summarised as follows:

22.5) Amounts due from related parties 2011 2010 2009 Baht Baht Baht Amounts due from related parties Other related parties 275,965,053 2,732,185,031 77,157,753

From 1 January 2010, amounts due from related parties have been charged the interest at 6.00% per annum (2010: 6.00% per annum and 2009: nil).

22.6) Amounts due to a related party 2011 2010 2009 Baht Baht Baht Amounts due to a related party Other related party 361,092,140 4,161,728,551 4,218,446,966

Amounts due to a related party are mainly denominated in US Dollar. From 1 January 2010, amounts due to a related party have been charged the interest at 6.00% per annum (2010: 6.00% per annum and 2009: nil).

22.7) Short-term loan to a director 2011 2010 2009 Baht Baht Baht Short-term loan to a director Beginning balance 105,167,062 187,000,000 - Increase during the year 63,041,200 63,400,000 187,000,000 Received during the year (163,041,200) (150,400,000) - Increase from interest receivable during the year 1,310,076 5,167,062 - Interest received during the year (6,477,138) - - Ending balance - 105,167,062 187,000,000

As at 31 December 2010 and 2009, short-term loan to a director was unsecured and denominated in Thai Baht, carried interest at 1.50% per annum. The loan was fully settled during the year 2011.

F-71 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

22 Related party transactions (Cont’d)

Outstanding balances arising from receivables, payables, short-term loan to a director and other non-current assets are summarised as follows: (Cont’d)

22.8) Other non-current assets

2011 2010 2009 Baht Baht Baht Aircraft rental deposits Other related party 497,866,890 410,570,125 335,629,972 Fuel price swap deposits Other related party 15,775,250 16,824,800 16,824,800

23 Commitments

Operating lease commitments

As at 31 December, the Company had outstanding commitments in respect of the non-cancellable office leases and others as follows: 2011 2010 2009 Baht Baht Baht

Not later than 1 year 45,244,003 49,773,856 12,387,457 Later than 1 year but not later than 5 years 34,532,449 53,879,304 11,560,000

Total 79,776,452 103,653,160 23,947,457

As at 31 December 2011, the Company had outstanding commitments in respect of non-cancellable aircraft lease agreements made with AirAsia (Mauritius) Limited which covered rental and insurance agreements of the 22 aircrafts (2010: 19 aircrafts and 2009: 20 aircrafts) as follows:

2011 2010 2009 Insurance Insurance Insurance Rental agreements Rental agreements Rental agreements USD USD USD USD USD USD

Not later than 1 year 89,700,977 805,951 59,666,136 850,848 54,019,034 884,443 Later than 1 year but not later than 5 years 116,267,650 - 58,206,682 - 40,227,113 - Later than 5 years 46,039,785 - - - - -

Total 252,008,412 805,951 117,872,818 850,848 94,246,147 884,443

24 Guarantees

As at 31 December 2011, there was a commitment related to guarantees issued by bank in respect of pilot trainees’ loans in accordance with its professional pilot courses amounting to Baht 26.9 million (31 December 2010: nil and 2009: Baht 49.32 million). Normally, a guarantee is terminated when the pilot trainee earns a commercial pilot’s license and is assigned as a co-pilot or when the pilot trainee settles all outstanding debts with the bank. However, the Company can fully reclaim the stated liabilities from the pilot trainees’ guarantors, who have pledged guarantees with the Company.

F-72 Thai AirAsia Company Limited Notes to the Special Purpose Financial Statements For the years ended 31 December 2011, 2010 and 2009

25 Letters of guarantee

As at 31 December 2011, the Company had a commitment relating to guarantees issued by banks in respect of ground handling, technical support, and other flight operation activities in the ordinary course of business at amount of Baht 5.6 million, USD 90,000 and India Rupee 27.8 million (2010: Baht 7.6 million, USD 90,000 and India Rupee 27.8 million and 2009: Baht 5.6 million and USD 90,000). The Company used its fixed deposit account at amount of India Rupee 27.8 million (2010: India Rupee 27.8 million and 2009: nil) as the collateral for these letters of guarantee.

26 Subsequent events

On 1 January 2012, the Company has entered into addendums of 20 aircraft specific lease agreements with a related company for extension of their specific lease term from 3, 5 and 8 years to 12 years from the date of aircraft delivery. The terms and conditions of these addendums are effective from 1 January 2012.

At the Extraordinary Shareholders’ Meeting of the Company held on 15 February 2012, the shareholders approved an increase in registered share capital of the Company from 40,000,000 shares to 43,555,560 shares by issuing additional ordinary shares of 3,555,560 shares with a par value of Baht 10 each in order to offer to the existing shareholders.

F-73 ASIA AVIATION PUBLIC COMPANY LIMITED

SPECIAL PURPOSE INTERIM PROPORTIONATE CONSOLIDATED AND COMPANY FINANCIAL INFORMATION (UNAUDITED)

31 MARCH 2012

F-74 F-75 F-76 Asia Aviation Public Company Limited Statements of Financial Position As at 31 March 2012 and 31 December 2011

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Notes Baht Baht Baht Baht

Assets

Current assets

Cash and cash equivalents 1,233,087,528 694,425,971 5,404,471 977,900 Cash at financial institutions pledged as security 89,403,632 7,373,833 - - Short-term investments 17,911,336 4,651,341 - - Trade and other receivables 6 103,291,246 97,835,916 - - Amounts due from related parties 11.5 102,247,842 140,742,129 - - Inventories 24,387,898 26,128,736 - - Prepaid expenses 116,193,415 115,024,798 - - Value added tax receivable, net 91,599,757 351,470,624 - - Other current assets 19,895,608 13,392,997 8,576,007 3,530,000

Total current assets 1,798,018,262 1,451,046,345 13,980,478 4,507,900

Non-current assets

Cash at financial institutions pledged as security 3,763,018 28,559,991 - - Investment in a joint venture 7 - - 403,999,930 403,999,930 General investment 3,534,044 3,534,044 - - Leasehold improvements and equipment, net 8 176,656,988 154,498,165 24 2,006 Intangible assets, net 8 6,878,507 7,274,065 409 1,052 Goodwill 286,184,317 286,184,317 - - Other non-current assets 301,273,807 292,419,374 - -

Total non-current assets 778,290,681 772,469,956 404,000,363 404,002,988

Total assets 2,576,308,943 2,223,516,301 417,980,841 408,510,888

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 3

F-77 Asia Aviation Public Company Limited Statements of Financial Position (Cont’d) As at 31 March 2012 and 31 December 2011

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Notes Baht Baht Baht Baht

Liabilities and shareholders’ equity

Current liabilities

Trade accounts payable 50,507,076 54,025,061 - - Other accounts payable 40,396,003 33,848,064 - - Amounts due to related parties 11.6 190,745,543 184,156,928 10,550,252 - Deferred revenues 1,615,649,228 1,385,345,343 - - Accrued expenses 291,886,325 247,386,536 4,054,561 4,577,061 Current portion of long-term borrowing from a financial institution 9 - 247,859,915 - - Current portion of finance lease liabilities 2,093,770 2,431,587 - - Other current liabilities 11,319,201 7,175,962 8,255 20,736

Total current liabilities 2,202,597,146 2,162,229,396 14,613,068 4,597,797

Non-current liabilities

Long-term borrowing from a financial institution 9 - 6,713,256 - - Finance lease liabilities 4,508,948 4,719,811 - - Employee benefit obligations 10 45,060,506 42,203,653 - -

Total non-current liabilities 49,569,454 53,636,720 - -

Total liabilities 2,252,166,600 2,215,866,116 14,613,068 4,597,797

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 4

F-78 Asia Aviation Public Company Limited Statements of Financial Position (Cont’d) As at 31 March 2012 and 31 December 2011

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Liabilities and shareholders’ equity (Cont’d)

Shareholders’ equity

Share capital Authorised share capital Ordinary shares, shares 4,850,000,000 shares of par Baht 0.1 each 485,000,000 485,000,000 485,000,000 485,000,000

Issued and paid-up share capital Ordinary shares, shares 4,100,000,000 shares of paid-up Baht 0.1 each 410,000,000 410,000,000 410,000,000 410,000,000 Effect on additional proportion of investment in a joint venture (15,526,868) (15,526,868) - - Deficits (70,330,789) (386,822,947) (6,632,227) (6,086,909)

Total shareholders’ equity 324,142,343 7,650,185 403,367,773 403,913,091

Total liabilities and shareholders’equity 2,576,308,943 2,223,516,301 417,980,841 408,510,888

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 5

F-79 Asia Aviation Public Company Limited Statements of Comprehensive Income (Unaudited) For the three-month periods ended 31 March 2012 and 2011

Proportionate consolidated Company 2012 2011 2012 2011 Baht Baht Baht Baht

Revenues 2,482,734,594 2,080,124,405 - - Operating costs (2,055,679,231) (1,607,920,294) - -

Gross profit 427,055,363 472,204,111 - - Net gain on exchange rates 1,705,138 17,984,307 - - Other income 49,101,313 79,216,365 - -

Profit before expenses 477,861,814 569,404,783 - - Selling expenses (100,636,893) (46,469,070) - - Administrative expenses (57,681,628) (39,778,535) (545,318) (209,923)

Profit (loss) before finance costs and income tax 319,543,293 483,157,178 (545,318) (209,923) Finance costs (3,051,135) (37,568,834) - -

Profit (loss) before income tax 316,492,158 445,588,344 (545,318) (209,923) Income tax - - - -

Net profit (loss) for the period 316,492,158 445,588,344 (545,318) (209,923)

Total comprehensive income (expense) for the period 316,492,158 445,588,344 (545,318) (209,923)

Earnings (loss) per share

Basic earnings (loss) per share 0.08 0.11 (0.00) (0.00)

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 6

F-80 Asia Aviation Public Company Limited Statements of Changes in Shareholders’ Equity (Unaudited) For the three-month periods ended 31 March 2012 and 2011

Proportionate consolidated Other component of equity Issued and Effect on additional paid-up proportion of investment share capital Deficits in a joint venture Total Note Baht Baht Baht Baht

Opening balance as at 1 January 2011 410,000,000 (1,369,403,410) - (959,403,410) Adjustment for adoption of a new accounting standard 4 - (31,541,528) - (31,541,528) F-81 Balance after adjustment 410,000,000 (1,400,944,938) - (990,944,938) Total comprehensive income for the period - 445,588,344 - 445,588,344

Closing balance as at 31 March 2011 410,000,000 (955,356,594) - (545,356,594)

Opening balance as at 1 January 2012 410,000,000 (386,822,947) (15,526,868) 7,650,185 Total comprehensive income for the period - 316,492,158 - 316,492,158

Closing balance as at 31 March 2012 410,000,000 (70,330,789) (15,526,868) 324,142,343

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 7 Asia Aviation Public Company Limited Statements of Changes in Shareholders’ Equity (Unaudited) (Cont’d) For the three-month periods ended 31 March 2012 and 2011

Company Issued and paid-up share capital Deficits Total Note Baht Baht Baht

Opening balance as at 1 January 2011 410,000,000 (4,112,288) 405,887,712 Adjustment for adoption of a new accounting standard 4 - - -

Balance after adjustment 410,000,000 (4,112,288) 405,887,712

F-82 Total comprehensive expense for the period - (209,923) (209,923)

Closing balance as at 31 March 2011 410,000,000 (4,322,211) 405,677,789

Opening balance as at 1 January 2012 410,000,000 (6,086,909) 403,913,091 Total comprehensive expense for the period (545,318) (545,318)

Closing balance as at 31 March 2012 410,000,000 (6,632,227) 403,367,773

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 8 Asia Aviation Company Limited Statements of Cash Flows (Unaudited) For the three-month periods ended 31 March 2012 and 2011

Proportionate consolidated Company 2012 2011 2012 2011 Notes Baht Baht Baht Baht Cash flows from operating activities Profit (loss) before income tax 316,492,158 445,588,344 (545,318) (209,923) Adjustments for: Depreciation 8 8,520,822 7,329,228 1,982 1,764 Amortisation 8 511,328 1,869,142 643 317 Loss (gain) on disposals of leasehold improvements and equipment 62,767 (1,581,965) - - Employee benefit expenses 10 2,856,853 2,346,358 - - Unrealised gain on exchange rates (11,800,682) (6,347,548) - - Finance costs 3,051,135 37,568,834 - - Interest income (2,034,686) (24,070,710) - -

317,659,695 462,701,683 (542,693) (207,842) Changes in operating assets and liabilities: - Cash at financial institutions pledged as security (57,232,826) 1,175,850 - - - Trade and other receivables (5,455,330) (12,177,715) - - - Amounts due from related parties 38,494,287 (785,818,396) - 164,446 - Inventories 1,740,838 (278,694) - - - Prepaid expenses (1,168,617) 13,816,802 - - - Value added tax receivable 259,870,867 3,596,226 - - - Other current assets (6,502,611) 512,923 (5,046,007) - - Other non-current assets (8,854,433) (12,675,645) - - - Trade accounts payable (3,517,985) 14,674,627 - - - Other accounts payable 6,547,939 18,986,171 - - - Amounts due to related parties 6,588,615 360,419,821 10,550,252 - - Deferred revenues 230,303,885 103,006,322 - - - Accrued expenses 32,645,832 (55,440,024) (522,500) 19,238 - Other current liabilities 4,143,239 (1,718,573) (12,481) -

Cash generated from (used in) operation 815,263,395 110,781,378 4,426,571 (24,158) Interest paid - (37,410,953) - - Interest received 908,506 23,852,595 - -

Net cash generated from (used in) operating activities 816,171,901 97,223,020 4,426,571 (24,158)

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 9

F-83 Asia Aviation Company Limited Statements of Cash Flows (Unaudited) (Cont’d) For the three-month periods ended 31 March 2012 and 2011

Proportionate consolidated Company 2012 2011 2012 2011 Note Baht Baht Baht Baht Cash flows from investing activities Short-term loan granted to a director - (12,718,117) - - Payments for short-term investments (13,259,995) - - - Proceeds from disposals of leasehold improvements and equipment 612,000 1,583,719 - - Payments for leasehold improvements and equipment (19,500,455) (7,891,510) - - Payments for intangible assets (115,770) (1,083,916) - - Interest received 1,126,180 218,117 - -

Net cash used in investing activities (31,138,040) (19,891,707) - -

Cash flows from financing activities Repayments of short-term borrowings from a financial institution - (50,000,000) - - Repayments of finance lease (548,680) (210,688) - - Repayments of long-term borrowing from a financial institution 9 (254,573,171) - - - Interest paid (3,051,135) (157,881) - -

Net cash used in financing activities (258,172,986) (50,368,569) - -

Net increase (decrease) in cash and cash equivalents 526,860,875 26,962,744 4,426,571 (24,158) Cash and cash equivalents at the beginning of the period 694,425,971 260,382,951 977,900 6,472,054 Effect of exchange rates 11,800,682 6,347,548 - -

Cash and cash equivalents at the end of the period 1,233,087,528 293,693,243 5,404,471 6,447,896

Non-cash transactions Significant non-cash transactions during the periods ended 31 March 2012 and 2011 are as follows:

Purchase of leasehold improvements and equipment which have not been paid 11,853,957 - - -

The accompanying notes are an integral part of these special purpose interim proportionate consolidated and company financial information. 10

F-84 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

1 General information

Asia Aviation Public Company Limited (“the Company”) is a public company and incorporated in Thailand. The address of the Company’s registered office is as follows:

99 OSC Building 1st floor, Moo 5, Kingkaew Road, Rachatewa, Bangplee, Samutprakarn 10540.

The principal business operations of the Company and its joint venture are summarised below:

The Company’s principal business operation is to invest in low-fare airline business company which is Thai AirAsia Company Limited. The Company’s shareholding interest is 51%.

The Joint Venture, Thai AirAsia Company Limited principally provides low-fare airline service.

The special purpose interim proportionate consolidated and company financial information were approved by the Board of Directors on 10 May 2012.

These special purpose interim proportionate consolidated and company financial information have been reviewed, not audited.

2 Basis of preparation

These special purpose interim proportionate consolidated and company financial information have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act B.E. 2543, being those Thai Accounting Standards issued under the Accounting Professions Act B.E. 2547, and the financial reporting requirements of the Securities and Exchange Commission. The primary financial information (i.e., statement of financial position, statements of comprehensive income, changes in shareholders’ equity and cash flows) are prepared in the full format as required by the Securities and Exchange Commission. The notes to the special purpose financial information are prepared in a condensed format according to Thai Accounting Standard 34, “Interim Financial Reporting” and additional notes are presented as required by the Securities and Exchange Commission under the Securities and Exchange Act. for the purpose of inclusion in the Company’s offering circular as part of the Company’s initial public offering of shares to investors.

The special purpose interim proportionate consolidated financial information has been prepared in its shares of the joint venture’s individual income and expenses, assets and liabilities and cash flows of Thai AirAsia Company Limited which is its joint venture from the Company’s interest at 51% portion.

F-85 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

2 Basis of preparation (Cont’d)

An English version of the special purpose interim proportionate consolidated and company financial information has been prepared from the special purpose interim financial information that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language special purpose interim financial information shall prevail.

Costs that are incurred unevenly during the financial year are anticipated or deferred in the interim financial information only if it would also be appropriate to anticipate or defer such costs at the end of the financial year.

3 Significant accounting policies

The accounting policies used in the preparation of the special purpose interim proportionate consolidated and company financial information are consistent with those used in the special purpose proportionate consolidated and company financial statements for the year ended 31 December 2011.

New accounting standards, amendments to accounting standards and new financial reporting standards

The new accounting standards, amendments to accounting standards and new financial reporting standards are mandatory for the accounting periods beginning on or after 1 January 2013, which are currently relevant to the Company and its joint venture but the Company and its joint venture have not early adopted them are as follows:

TAS 12 Income taxes TAS 21 (Revised 2009) The Effects of Changes in Foreign Exchange Rates TFRS 8 Operating Segments

The management has assessed and determined that the new accounting standards, amendments to accounting standards and new financial reporting standards will not significantly impact the special purpose interim proportionate consolidated and company financial information being presented except for TAS 12 which the management is currently assessing the impact of applying this standard.

F-86 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

4 New accounting policies

The Company and its joint venture applied Thai Accounting Standard 19, which dealt with accounting for employee benefits, on 1 January 2011 by adjusting a total amount against the deficits as of 1 January 2011. The effects of the adoption of the above standards were as follows: Proportionate consolidated Company Baht Baht

Statement of changes in shareholders’ equity Deficits as of 1 January 2011 increased 31,541,528 -

5 Segment information

The Company and its joint venture do not disclose the segment information because there is no significant business segment other than the provision of air transportation services.

6 Trade and other receivables

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Trade accounts receivable 87,170,685 79,456,542 - - Accrued revenues 13,665,214 16,596,705 - - Other accounts receivable 2,455,347 1,782,669 - -

Total trade and other receivables 103,291,246 97,835,916 - -

Trade accounts receivable can be analysed by age as follows:

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Up to 3 months 79,943,739 71,932,116 - - 3 - 6 months 224,603 3,805,546 - - 6 - 12 months 5,403,735 2,553,899 - - Over 12 months 1,598,608 1,164,981 - -

Total trade accounts receivable 87,170,685 79,456,542 - -

F-87 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

7 Investment in a joint venture

Details of jointly controlled company are as follows:

Company (Unaudited) (Audited) 31 March 31 December 2012 2011 Total number of Par value % of Cost Cost holding Baht shareholding method method Business shares per share Percent Baht Baht

Thai AirAsia Company Limited providing a low-fare airline service 20,399,993 10 51.00 403,999,930 403,999,930

403,999,930 403,999,930

Thai AirAsia Company Limited is jointly controlled by the Company and AirAsia Investment Ltd., incorporated in Malaysia, which own 51% and 49% of the joint venture’s shares, respectively. Investment in Thai AirAsia Company Limited is considered as investment in a joint venture.

On 14 February 2012 ,the Company entered into an “Amended and Restated Shareholders’ Agreement” with AirAsia Investment Ltd. (a subsidiary of AirAsia Berhad), AirAsia Berhad and Thai AirAsia Company Limited pursuant to which the parties set out their respective rights and obligations with respect to Thai AirAsia Company Limited. According to the “Amended and Restated Shareholders’ Agreement”, the Company will have control over Thai AirAsia Company Limited . Therefore, Thai AirAsia Company Limited will be considered as a subsidiary instead of a joint venture. The “Amended and Restated Shareholders’ Agreement” will be effective from the date that the Securities and Exchange Commission issues a letter to the Company notifying that it has commenced counting the period of effectiveness of the draft prospectus filed by the Company in relation to an initial public offering.

Investment in a joint venture as at 31 March 2012 and 31 December 2011 includes goodwill of Baht 286,184,317.

F-88 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

8 Leasehold improvements, equipment and intangible assets, net

Proportionate consolidated Company (Unaudited) (Unaudited) (Unaudited) (Unaudited) Leasehold Leasehold improvements Intangible improvements Intangible and equipment assets and equipment assets Baht Baht Baht Baht

For the three-month period ended 31 March 2012 Opening net book amount 154,498,165 7,274,065 2,006 1,052 Additions 31,354,412 115,770 - - Disposals, net (674,767) - - - Depreciation/amortisation (8,520,822) (511,328) (1,982) (643)

Closing net book amount 176,656,988 6,878,507 24 409

9 Long-term borrowing from a financial institution

Maturity of long-term borrowing from a financial institution is as follows:

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Within 1 year - 247,859,915 - - Over 1 year but less than 5 years - 6,713,256 - -

- 254,573,171 - -

Movements in long-term borrowing from a financial institution are summarised as follows:

Proportionate consolidated Company (Unaudited) (Unaudited) Baht Baht

For the three-month period ended 31 March 2012 Opening book amount 254,573,171 - Loan repayments (254,573,171) -

Closing book amount - -

F-89 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

10 Employee benefit obligations

Proportionate consolidated Company (Unaudited) (Unaudited) Baht Baht

For the three-month period ended 31 March 2012 Opening book amount as at 1 January 2012 42,203,653 - Retirement benefit expenses during the period 2,856,853 -

Closing book amount as at 31 March 2012 45,060,506 -

11 Related party transactions

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

The major shareholder of the Company is Mr. Tassapon Bijleveld, who owns 55% of the Company’s ordinary shares.

F-90 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

Related party transactions were carried out on conditions as follows:

Pricing policies

- Interest income At a mutual agreed rate and equivalent to interest expenses rate paid to other related parties. - Share of loss (gain) on fuel price swap agreements Based on fuel consumption ratio. - Share of staff costs for accounting services Actual staff costs allocated by number of aircrafts. - Aircraft rental For aircrafts owned by AirAsia Berhad, rental charge is based on AirAsia Berhad’s cost of capital. For sub-leased aircrafts, rental charge is based on master agreement that AirAsia Group has leased from a third party adjusted with some assumptions to reflect the joint venture’s credit risk profile. - Aircraft repair and maintenance Based on the average of the contractual amount between AirAsia Berhad and the vendor, adjusted for annual escalation and stepped incremental rates under the master agreement. - Purchase of merchandises and equipment At the purchase price. - Management fee expenses At agreement price with AirAsia Berhad. - Booking fee expenses At agreement price which approximates the master agreement that AirAsia Group has agreed with third parties. - Pilot training expenses Under negotiation process with Asian Aviation Centre of Excellence Sdn Bhd (CAE). - Brand license fee At 1% of total revenues per annum. - Interest expenses At a rate equivalent to AirAsia Group’s borrowing rate.

F-91 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties:

11.1) Income

Proportionate consolidated Company For the three-month periods ended 31 March (Unaudited) 2012 2011 2012 2011 Baht Baht Baht Baht

Interest income Other related parties 792,236 23,846,245 - - A director - 218,117 - -

792,236 24,064,362 - -

11.2) Purchases of goods and services

Proportionate consolidated Company For the three-month periods ended 31 March (Unaudited) 2012 2011 2012 2011 Baht Baht Baht Baht

Share of gain from fuel price swap agreements Other related party (20,347,566) (5,660,296) - -

Share of staff costs for accounting services Other related parties (4,525,503) (4,056,574) - -

Aircraft rental Other related party 384,066,597 327,578,234 - -

Aircraft repair and maintenance Other related party 148,592,829 120,300,588 - -

Purchase of merchandises and equipment Other related party 23,498,562 9,402,175 - -

Management fee expenses Other related party 1,888,189 1,849,502 - -

Booking fee expenses Other related party 9,077,012 7,565,380 - -

F-92 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

11.2) Purchases of goods and services (Cont’d)

Proportionate consolidated Company For the three-month periods ended 31 March (Unaudited) 2012 2011 2012 2011 Baht Baht Baht Baht

Pilot training expenses Other related parties 18,016,905 - - -

Brand license fee Other related party 24,904,040 - - -

Interest expenses Other related party - 37,410,953 - -

11.3) Management remunerations

Key management includes directors (executive and non-executive). The compensation paid or payable to key management for employee services is shown below:

Proportionate consolidated Company For the three-month periods ended 31 March (Unaudited) 2012 2011 2012 2011 Baht Baht Baht Baht

Salaries and other short-term employee 5,733,981 8,497,055 220,000 - benefits Retirement benefits 296,254 262,031 - -

6,030,235 8,759,086 220,000 -

F-93 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

11.4) Passenger revenues and expenses received and paid on behalf

Proportionate consolidated Company For the three-month periods ended 31 March (Unaudited) 2012 2011 2012 2011 Baht Baht Baht Baht

- Passenger revenues received on behalf of the Company and its joint venture by other related parties 337,781,329 763,513,557 - - - Cash received on behalf of other related party 62,723,283 66,329,372 - - - Expenses paid on behalf of the Company and its joint venture by other related parties 79,392,478 58,592,710 5,550,252 - - Advance payment on behalf of other related parties 21,173,849 79,028,621 - -

Outstanding balances arising from receivables, payables, other non-current assets and accrued expenses are summarised as follows:

11.5) Amounts due from related parties

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Amounts due from related parties Other related parties 102,247,842 140,742,129 - -

Amount due from related parties have been charged the interest for overdue amount at 6.00% per annum (2011: 6.00% per annum).

F-94 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

Outstanding balances arising from receivables, payables, other non-current assets and accrued expenses are summarised as follows: (Cont’d)

11.6) Amounts due to related parties

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Amounts due to related parties Other related parties 185,575,918 184,156,928 - - A joint venture 5,169,625 - 10,550,252 -

190,745,543 184,156,928 10,550,252 -

Amounts due to related parties comprise trade accounts receivable and advance payments. Amounts due to related parties are mainly denominated in US Dollars and have been charged the interest for overdue amount at 6.00% per annum (2011: 6.00% per annum).

11.7) Other non-current assets

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Aircraft rental

deposits Other related party 268,653,899 253,912,027 - -

Fuel price swap deposits Other related party 7,827,911 8,045,374 - -

F-95 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

Outstanding balances arising from receivables, payables, other non-current assets and accrued expenses are summarised as follows: (Cont’d)

11.8) Accrued expenses

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 Baht Baht Baht Baht

Accrued brand license fee Other related party 28,718,688 - - -

Accrued pilot

training expenses Other related party 18,016,905 - - -

12 Net fair value of financial instruments

Fuel price swap agreements

The net fair value of fuel price swap agreements at the statement of financial position date is as follow:

Proportionate consolidated Company (Unaudited) (Audited) (Unaudited) (Audited) 31 March 31 December 31 March 31 December 2012 2011 2012 2011 US Dollars US Dollars US Dollars US Dollars

Favourable fuel price swap agreements 700,027 821,892 - -

F-96 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

13 Commitments

For the three-month period ended 31 March 2012, there were no significant changes in commitments or contingent liabilities, including significant contracts from the year ended 31 December 2011 (please see the special purpose proportionate consolidated and company financial statements for the year ended 31 December 2011).

As at 31 March 2012, the joint venture had outstanding commitments in respect of non-cancellable aircraft lease agreements made with AirAsia (Mauritius) Limited, a related company, which cover rental and insurance agreements of the 24 aircrafts (As at 31 December 2011: 22 aircrafts) as follows:

Proportionate consolidated (Unaudited) (Audited) 31 March 2012 31 December 2011 Insurance Insurance Rental agreement Rental agreement US Dollars US Dollars US Dollars US Dollars

Within 1 year 51,316,182 102,759 45,747,483 411,034 Later than 1 year but not later than 5 years 205,264,730 - 59,296,481 - Later than 5 years 238,445,733 - 23,480,282 -

Total 495,026,645 102,759 128,524,246 411,034

14 Guarantees

As at 31 March 2012, the joint venture had a commitment related to guarantees issued by banks in respect of pilot trainees’ loans in accordance with their professional pilot courses amounting to Baht 13.72 million (31 December 2011: Baht 13.72 million).

As at 31 March 2012 and 31 December 2011, the Company had a commitment relating to guarantees given to the borrowers under a credit agreement for the Baht equivalent of USD 39 million. The agreement was between Credit Suisse, Singapore branch, as the lender, and the borrowers, a group of six of the Company’s shareholders. Under the credit agreement, the borrowers pledged the Company’s shares and the Company pledged its investment in equity securities in Thai AirAsia Company Limited to such lender as a guarantee.

F-97 Asia Aviation Public Company Limited Condensed Notes to the Special Purpose Interim Proportionate Consolidated and Company Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

15 Letters of guarantee

The Company and its joint venture had commitments relating to guarantees issued by banks in respect of ground handling, technical support, and other flight operating activities in the ordinary course of business as follows :

Proportionate consolidated 31 March 2012 (Unaudited) 31 December 2011 (Audited) US India US India Baht Dollars Rupee Baht Dollars Rupee million million million million million million

Guarantees relating to flight operating activities 2.86 0.20 15.72 2.86 0.05 14.19 Guarantees relating to value added tax refund process 321.87 - - - - -

Total 324.73 0.20 15.72 2.86 0.05 14.19

The Company and its joint venture also used its fixed-deposit accounts and bills of exchange as collateral for these letters of guarantee as follows:

Proportionate consolidated 31 March 2012 31 December 2011 (Audited) (Audited) Baht India Rupee Baht India Rupee million million million million

Fixed-deposit accounts 4.28 15.88 3.06 14.19 Bills of exchange 80.58 - - -

Total 84.86 15.88 3.06 14.19

16 Subsequent events

On 4 May 2012, the Securities and Exchange Commission (“SEC”) issued a letter to the Company notifying that SEC has commenced counting the period of effectiveness of the draft prospectus filed by the Company in relation to an initial public offering. Therefore, Thai AirAsia Company Limited changed from a joint venture to a subsidiary from 4 May 2012 onwards under the “Amended and Restated Shareholders’ Agreement” as mentioned in Note 7.

F-98 THAI AIRASIA COMPANY LIMITED

SPECIAL PURPOSE INTERIM FINANCIAL INFORMATION (UNAUDITED)

31 MARCH 2012

F-99 F-100 F-101 Thai AirAsia Company Limited Statements of Financial Position As at 31 March 2012 and 31 December 2011

Unaudited Audited 31 March 31 December 2012 2011 Notes Baht Baht

Assets

Current assets

Cash and cash equivalents 2,407,222,507 1,359,702,567 Cash at financial institutions pledged as security 175,301,300 14,458,500 Short-term investments 35,120,280 9,120,279 Trade and other receivables 6 202,531,924 191,835,196 Amounts due from related parties 11.5 211,036,285 275,965,053 Inventories 47,819,425 51,232,834 Prepaid expenses 227,830,304 225,538,898 Value added tax receivable, net 179,607,428 689,158,323 Other current assets 22,195,301 19,339,214

Total current assets 3,508,664,754 2,836,350,864

Non-current assets

Cash at financial institutions pledged as security 7,378,470 56,000,000 General investment 6,929,500 6,929,500 Leasehold improvements and equipment, net 7 346,386,323 302,933,748 Intangible assets, net 7 13,486,472 14,260,815 Other non-current assets 590,733,158 573,371,519

Total non-current assets 964,913,923 953,495,582

Total assets 4,473,578,677 3,789,846,446

The accompanying notes are an integral part of these special purpose interim financial information.

F-102 Thai AirAsia Company Limited Statements of Financial Position (Cont’d) As at 31 March 2012 and 31 December 2011

Unaudited Audited 31 March 31 December 2012 2011 Notes Baht Baht

Liabilities and shareholders’ equity

Current liabilities

Trade accounts payable 99,033,517 105,931,528 Other accounts payable 79,207,877 66,368,776 Amounts due to related parties 11.6 363,874,474 361,092,140 Deferred revenues 3,167,940,749 2,716,364,349 Accrued expenses 564,376,203 476,097,173 Current portion of long-term borrowing from a financial institution 8 - 486,000,000 Current portion of finance lease liabilities 4,105,433 4,767,819 Other current liabilities 22,178,333 14,029,860

Total current liabilities 4,300,716,586 4,230,651,645

Non-current liabilities

Long-term borrowing from a financial institution 8 - 13,163,251 Finance lease liabilities 8,841,078 9,254,534 Employee benefit obligations 9 88,353,964 82,752,289

Total non-current liabilities 97,195,042 105,170,074

Total liabilities 4,397,911,628 4,335,821,719

The accompanying notes are an integral part of these special purpose interim financial information.

F-103 Thai AirAsia Company Limited Statements of Financial Position (Cont’d) As at 31 March 2012 and 31 December 2011

Unaudited Audited 31 March 31 December 2012 2011 Note Baht Baht

Liabilities and shareholders’ equity (Cont’d)

Shareholders’ equity

Share capital 10 Authorised share capital Ordinary shares, shares 40,000,000 shares of par Baht 10 each 400,000,000 400,000,000 Issued and paid-up share capital Ordinary shares, shares 40,000,000 shares of paid-up Baht 10 each 400,000,000 400,000,000 Premium on share capital 1,227,629 1,227,629 Deficits (325,560,580) (947,202,902)

Total shareholders’ equity 75,667,049 (545,975,273)

Total liabilities and shareholders’ equity 4,473,578,677 3,789,846,446

The accompanying notes are an integral part of these special purpose interim financial information.

F-104 Thai AirAsia Company Limited Statements of Comprehensive Income (Unaudited) For the three-month periods ended 31 March 2012 and 2011

2012 2011 Baht Baht

Revenues 4,868,108,717 4,160,248,810 Operating costs (4,030,744,973) (3,215,840,588)

Gross profit 837,363,744 944,408,222 Net gain on exchange rates 3,343,409 35,968,613 Other income 96,277,118 158,432,731

Profit before expenses 936,984,271 1,138,809,566 Selling expenses (197,327,310) (92,938,141) Administrative expenses (112,032,020) (79,137,224)

Profit before finance costs and income tax 627,624,941 966,734,201 Finance costs (5,982,619) (75,137,667)

Profit before income tax 621,642,322 891,596,534 Income tax - -

Net profit for the period 621,642,322 891,596,534

Total comprehensive income for the period 621,642,322 891,596,534

Earnings per share

Basic earnings per share 15.54 22.29

The accompanying notes are an integral part of these special purpose interim financial information.

F-105 Thai AirAsia Company Limited Statements of Changes in Shareholders’ Equity (Unaudited) For the three-month periods ended 31 March 2012 and 2011

Issued and paid-up Premium on share capital share capital Deficits Total Note Baht Baht Baht Baht

Opening balance as at 1 January 2011 400,000,000 1,227,629 (2,904,178,505) (2,502,950,876) Adjustment for adoption of a new accounting standard 4 - - (63,083,056) (63,083,056)

Balance after adjustment 400,000,000 1,227,629 (2,967,261,561) (2,566,033,932) Total comprehensive income for the period - - 891,596,534 891,596,534 F-106 Closing balance as at 31 March 2011 400,000,000 1,227,629 (2,075,665,027) (1,674,437,398)

Opening balance as at 1 January 2012 400,000,000 1,227,629 (947,202,902) (545,975,273) Total comprehensive income for the period - - 621,642,322 621,642,322

Closing balance as at 31 March 2012 400,000,000 1,227,629 (325,560,580) 75,667,049

The accompanying notes are an integral part of these special purpose interim financial information.

7 Thai AirAsia Company Limited Statements of Cash Flows (Unaudited) For the three-month periods ended 31 March 2012 and 2011

2012 2011 Notes Baht Baht Cash flows from operating activities Profit before income tax 621,642,322 891,596,534 Adjustments for: Depreciation 7 16,703,613 14,654,928 Amortisation 7 1,001,343 3,737,650 Loss (gain) on disposals of leasehold improvements and equipment 123,074 (3,163,930) Employee benefit expenses 9 5,601,675 4,692,716 Unrealised gain on exchange rates (23,138,599) (12,695,095) Finance costs 5,982,619 75,137,667 Interest income (3,989,581) (48,141,422)

623,926,466 925,819,048 Changes in operating assets and liabilities: - Cash at financial institutions pledged as security (112,221,270) 2,351,700 - Trade and other receivables (10,696,728) (24,355,429) - Amounts due from related parties 64,928,768 (1,571,965,682) - Inventories 3,413,409 (557,388) - Prepaid expenses (2,291,406) 27,633,604 - Value added tax receivable 509,550,895 7,192,451 - Other current assets (2,856,087) 1,025,845 - Other non-current assets (17,361,639) (25,351,290) - Trade accounts payable (6,898,011) 29,349,254 - Other accounts payable 12,839,101 37,972,341 - Amounts due to related parties 2,782,334 720,839,642 - Deferred revenues 451,576,400 206,012,644 - Accrued expenses 65,035,968 (110,918,524) - Other current liabilities 8,148,473 (3,437,146)

Cash generated from operation 1,589,876,673 221,611,070 Interest paid - (74,821,906) Interest received 1,781,384 47,705,189

Net cash generated from operating activities 1,591,658,057 194,494,353

The accompanying notes are an integral part of these special purpose interim financial information.

F-107 Thai AirAsia Company Limited Statements of Cash Flows (Unaudited) (Cont’d) For the three-month periods ended 31 March 2012 and 2011

2012 2011 Note Baht Baht Cash flows from investing activities Short-term loan granted to a director - (25,436,233) Payments for short-term investments (26,000,000) - Proceeds from disposals of leasehold improvements and equipment 1,200,000 3,167,438 Payments for leasehold improvements and equipment (38,236,201) (15,783,020) Payments for intangible assets (227,000) (2,167,831) Interest received 2,208,197 436,233

Net cash used in investing activities (61,055,004) (39,783,413)

Cash flows from financing activities Repayments of short-term borrowings from a financial institution - (100,000,000) Repayments of finance lease (1,075,842) (421,375) Repayments of long-term borrowing from a financial institution 8 (499,163,251) - Interest paid (5,982,619) (315,761)

Net cash used in financing activities (506,221,712) (100,737,136)

Net increase in cash and cash equivalents 1,024,381,341 53,973,804 Cash and cash equivalents at the beginning of the period 1,359,702,567 507,821,793 Effect of exchange rates 23,138,599 12,695,095

Cash and cash equivalents at the end of the period 2,407,222,507 574,490,692

Non-cash transactions

Significant non-cash transactions during the periods ended 31 March 2012 and 2011 are as follows:

Purchase of leasehold improvements and equipment which have not been paid 23,243,061 -

The accompanying notes are an integral part of these special purpose interim financial information.

F-108 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

1 General information

Thai AirAsia Company Limited (“the Company”) is a limited company and incorporated in Thailand. The address of the Company’s registered office is as follows:

99 OSC Building, 1st floor, Moo 5, Kingkaew Road, Rachatewa, Bangplee, Samutprakarn 10540.

The principal business operation of the Company is to provide low-fare airline service.

The Company is jointly controlled by Asia Aviation Public Company Limited, incorporated in Thailand and AirAsia Investment Ltd., incorporated in Malaysia, which own 51% and 49% of the Company’s shares, respectively.

The special purpose interim financial information were approved by the Board of Directors on 10 May 2012.

These special purpose interim financial information have been reviewed, not audited.

2 Basis of preparation

These special purpose interim financial information have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act B.E. 2543, being those Thai Accounting Standards issued under the Accounting Professions Act B.E. 2547, and the financial reporting requirements of the Securities and Exchange Commission. The primary financial information (i.e., statement of financial position, statements of comprehensive income, changes in shareholders’ equity and cash flows) are prepared in the full format as required by the Securities and Exchange Commission. The notes to the special purpose financial information are prepared in a condensed format according to Thai Accounting Standard 34, “Interim Financial Reporting” and additional notes are presented as required by the Securities and Exchange Commission under the Securities and Exchange Act. for the purpose of inclusion in the Asia Aviation Public Company Limited’s offering circular as part of the Asia Aviation Public Company Limited’s initial public offering of shares to investors.

An English version of the special purpose interim financial information has been prepared from the special purpose interim financial information that is in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language special purpose interim financial information shall prevail.

F-109 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

3 Significant accounting policies

The accounting policies used in the preparation of the special purpose interim financial information are consistent with those used in the special purpose financial statements for the year ended 31 December 2011.

New accounting standards, amendments to accounting standards and new financial reporting standards

The new accounting standards, amendments to accounting standards and new financial reporting standards are currently mandatory for the accounting periods beginning on or after 1 January 2013, which are relevant to the Company but the Company has not early adopted them are as follow:

TAS 12 Income taxes TAS 21 (Revised 2009) The Effects of Changes in Foreign Exchange Rates TFRS 8 Operating Segments

The Company’s management has assessed and determined that the new accounting standards, amendments to accounting standards and new financial reporting standards will not significantly impact the special purpose interim financial information being presented, except for TAS 12 which the management is currently assessing the impact of applying this standard.

4 New accounting policies

The Company applied Thai Accounting Standard 19, which dealt with accounting for employee benefits, on 1 January 2011 by adjusting a total amount against the deficits as of 1 January 2011. The effects of the adoption of the above standards were as follows:

Baht

Statement of changes in shareholders’ equity Deficits as of 1 January 2011 increased 63,083,056

5 Segment information

The Company does not disclose the segment information because there is no significant business segment other than the provision of air transportation services.

F-110 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

6 Trade and other receivables

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Trade accounts receivable 170,922,971 155,797,194 Accrued revenues 26,794,546 32,542,570 Other accounts receivable 4,814,407 3,495,432

Total trade and other receivables 202,531,924 191,835,196

Trade accounts receivable can be analysed by age as follows:

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Up to 3 months 156,752,484 141,043,413 3 - 6 months 440,398 7,461,857 6 - 12 months 10,595,563 5,007,647 Over 12 months 3,134,526 2,284,277

Total trade accounts receivable 170,922,971 155,797,194

7 Leasehold improvements, equipment and intangible assets, net

Unaudited Leasehold improvements Intangible and equipment assets Baht Baht

For the three-month period ended 31 March 2012 Opening net book amount 302,933,748 14,260,815 Additions 61,479,262 227,000 Disposals, net (1,323,074) - Depreciation/amortisation (16,703,613) (1,001,343)

Closing net book amount 346,386,323 13,486,472

F-111 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

8 Long-term borrowing from a financial institution

Maturity of long-term borrowing from a financial institution is as follows:

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Within 1 year - 486,000,000 Over 1 year but less than 5 years - 13,163,251

- 499,163,251

Movements in long-term borrowing from a financial institution are summarised as follows:

Unaudited Baht

For the three-month period ended 31 March 2012 Opening book amount 499,163,251 Loan repayments (499,163,251)

Closing book amount -

9 Employee benefit obligations

Unaudited Baht

For the three-month period ended 31 March 2012 Opening book amount as at 1 January 2012 82,752,289 Retirement benefit expenses during the period 5,601,675

Closing book amount as at 31 March 2012 88,353,964

10 Share capital

F-112 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions

In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

Related party transactions were carried out on conditions as follows:

Pricing policies

- Aircraft rental For aircrafts owned by AirAsia Berhad, rental charge is based on AirAsia Berhad’s cost of capital. For sub-leased aircrafts, rental charge is based on master agreement that AirAsia Group has leased from a third party adjusted with some assumptions to reflect the Company’s credit risk profile. - Aircraft repair and maintenance Based on the average of the contractual amount between AirAsia Berhad and the vendor, adjusted for annual escalation and stepped incremental rates under the master agreement. - Purchase of merchandises and equipment At the purchase price. - Management fee expenses At agreement price with AirAsia Berhad. - Booking fee expenses At agreement price which approximates the master agreement that AirAsia Group has agreed with third parties. - Pilot training expenses Under negotiation process with Asian Aviation Centre of Excellence Sdn Bhd (CAE). - Brand license fee At 1% of total revenues per annum. - Interest expenses At a rate equivalent to AirAsia Group’s borrowing rate.

F-113 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties:

11.1) Income

For the three-month periods ended 31 March Unaudited 2012 2011 Baht Baht

Interest income Other related parties 1,553,405 47,692,490 A director - 436,233

1,553,405 48,128,723

11.2) Purchases of goods and services

For the three-month periods ended 31 March Unaudited 2012 2011 Baht Baht

Share of gain from fuel price swap agreements Other related party (39,897,202) (11,320,591)

Share of staff costs for accounting services Other related parties (8,873,538) (8,113,149)

Aircraft rental Other related party 753,072,017 655,156,467

Aircraft repair and maintenance Other related party 291,358,589 240,601,175

Purchase of merchandises and equipment Other related party 46,075,628 18,804,350

Management fee expenses Other related party 3,702,332 3,699,004

Booking fee expenses Other related party 17,798,069 15,130,761

Pilot training expenses Other related party 35,327,277 -

F-114 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

11.2) Purchases of goods and services (Cont’d)

For the three-month periods ended 31 March Unaudited 2012 2011 Baht Baht

Brand license fee Other related party 48,831,467 -

Interest expenses Other related party - 74,821,906

11.3) Management remunerations

Key management includes directors (executive and non-executive). The compensation paid or payable to management for employee services is shown below:

For the three-month periods ended 31 March Unaudited 2012 2011 Baht Baht

Salaries and other short-term employee benefits 10,811,731 16,994,110 Retirement benefits 580,891 524,062

11,392,622 17,518,172

F-115 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

The following significant transactions were carried out with related parties: (Cont’d)

11.4) Passenger revenues and expenses received and paid on behalf

For the three-month periods ended 31 March Unaudited 2012 2011 Baht Baht

- Passenger revenues received on behalf of the Company by other related parties 662,316,559 1,527,027,113 - Cash received on behalf of other related party 122,986,871 132,658,744 - Expenses paid on behalf of the Company by other related parties 150,338,981 117,185,420 - Advance payment on behalf of other related parties 47,067,617 158,057,242

Outstanding balances arising from receivables, payables, other non-current assets and accrued expenses are summarised as follows:

11.5) Amounts due from related parties

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Amounts due from related parties Other related parties 200,486,033 275,965,053 A joint venturer 10,550,252 -

211,036,285 275,965,053

Amounts due from related parties comprise trade accounts receivable and advance payments. Trade accounts receivable have been charged the interest for overdue amount at 6.00% per annum (2011: 6.00% per annum).

F-116 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

Outstanding balances arising from receivables, payables, other non-current assets and accrued expenses are summarised as follows: (Cont’d)

11.6) Amounts due to related parties

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Amounts due to related parties Other related parties 363,874,474 361,092,140

Amounts due to related parties are mainly denominated in US Dollars and have been charged the interest for overdue amount at 6.00% per annum (2011: 6.00% per annum).

11.7) Other non-current assets

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Aircraft rental deposits Other related party 526,772,532 497,866,890

Fuel price swap deposits Other related party 15,348,850 15,775,250

F-117 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

11 Related party transactions (Cont’d)

Outstanding balances arising from receivables, payables, other non-current assets and accrued expenses are summarised as follows: (Cont’d)

11.8) Accrued expenses

Unaudited Audited 31 March 31 December 2012 2011 Baht Baht

Accrued brand license fee Other related party 56,311,172 -

Accrued pilot training expenses Other related party 35,327,277 -

12 Net fair value of financial instruments

Fuel price swap agreements

The net fair value of fuel price swap agreements at the special purpose statement of financial position date is as follows:

Unaudited Audited 31 March 31 December 2012 2011 US Dollars US Dollars

Favourable fuel price swap agreements 1,372,603 1,611,554

13 Commitments

For the three-month period ended 31 March 2012, there were no significant changes in commitments or contingent liabilities, including significant contracts from the year ended 31 December 2011 (please see the special purpose financial statements for the year ended 31 December 2011).

F-118 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

13 Commitments (Cont’d)

As at 31 March 2012, the Company had outstanding commitments in respect of non-cancellable aircraft lease agreements made with AirAsia (Mauritius) Limited, a related company, which cover rental and insurance agreements of the 24 aircrafts (As at 31 December 2011: 22 aircrafts) as follows:

Unaudited Audited 31 March 2012 31 December 2011 Insurance Insurance Rental agreement Rental agreement US Dollars US Dollars US Dollars US Dollars

Within 1 year 100,620,000 201,488 89,700,977 805,951 Later than 1 year but not later than 5 years 402,480,000 - 116,267,650 - Later than 5 years 467,540,814 - 46,039,785 -

Total 970,640,814 201,488 252,008,412 805,951

14 Guarantee

As at 31 March 2012, there was a commitment related to guarantees issued by banks in respect of pilot trainees’ loans in accordance with their professional pilot courses amounting to Baht 26.9 million (31 December 2011: Baht 26.9 million).

15 Letters of guarantee

The Company had commitments relating to guarantees issued by banks in respect of ground handling, technical support, and other flight operating activities in the ordinary course of business as follows:

Unaudited Audited 31 March 2012 31 December 2011 US India US India Baht Dollars Rupee Baht Dollars Rupee million million million million million million

Guarantees relating to flight operating activities 5.60 0.39 30.83 5.60 0.09 27.83 Guarantees relating to value added tax refund process 631.11 - - - - -

Total 636.71 0.39 30.83 5.60 0.09 27.83

F-119 Thai AirAsia Company Limited Condensed Notes to Special Purpose Interim Financial Information (Unaudited) For the three-month periods ended 31 March 2012 and 2011

15 Letters of guarantee (Cont’d)

The Company also used its fixed-deposit accounts and bills of exchange as collateral for these letters of guarantee as follows:

Unaudited Audited 31 March 2012 31 December 2011 Baht India Rupee Baht India Rupee million million million million

Fixed-deposit accounts 8.40 31.13 6.00 27.83 Bills of exchange 158.00 - - -

Total 166.40 31.13 6.00 27.83

17 Subsequent events

On 14 February 2012, the Company entered into an “Amended and Restated Shareholders’ Agreement” with AirAsia Investment Ltd. (a subsidiary of AirAsia Berhad), AirAsia Berhad and Asia Aviation Public Company Limited pursuant to which the parties set out their respective rights and obligations with respect to the Company. According to the “Amended and Restated Shareholders’ Agreement,” Asia Aviation Public Company Limited will have control over the Company. Therefore, the Company will be considered as a subsidiary of Asia Aviation Public Company Limited instead of a joint venture. The “Amended and Restated shareholders’ Agreement” will be effective from the date that the Securities and Exchange Commission (“SEC”) issues a letter to Asia Aviation Public Company Limited notifying that it has commenced counting the period of effectiveness of the draft prospectus filed by Asia Aviation Public Company Limited in relation to an initial public offering.

On 4 May 2012, SEC issued a letter to Asia Aviation Public Company Limited notifying that SEC has commenced counting the period of effectiveness of the draft prospectus filed by Asia Aviation Public Company Limited in relation to an initial public offering. Therefore, the Company changed from a joint venture to a subsidiary of Asia Aviation Public Company Limited from 4 May 2012 onwards.

F-120 Registered Office of the Company Asia Aviation Public Company Limited 60/1 Monririn Building B, 3rd Floor, Soi Sailom Phahol Yothin Road, Samsen Nai Phayathai, Bangkok Thailand

Legal Advisors To the Company as to U.S. Federal and English law as to Thai law White & Case Pte. Ltd. Weerawong, Chinnavat & Peangpanor Ltd. 8 Marina View #27-01 22nd Floor, Mercury Tower Asia Square Tower 1 540 Ploenchit Road Singapore 018960 Lumpini, Pathumwan Republic of Singapore Bangkok 10330 Thailand

To the International Managers as to U.S. Federal and English law as to Thai law Allen & Overy LLP Allen & Overy (Thailand) Co., Ltd. 50 Collyer Quay 22nd Floor, Sindhorn Tower 3 #09-01 OUE Bayfront 130-132 Wireless Road Singapore 049321 Lumpini, Pathumwan Republic of Singapore Bangkok 10330 Thailand

Independent Accountants PricewaterhouseCoopers ABAS Ltd. 15th Floor, Bangkok City Tower 179/74-80 South Sathorn Road Bangkok 10120 Thailand 1,940,000,000 Ordinary Shares

Offering Memorandum

May 22, 2012