Public Offering and Listing of Atlantic Airways P/F 2007

Følgende resumé er en oversættelse af det opridelige resumé som er udfærdiget på engelsk. Såfremt den danske oversættelse ikke er i overensstemmelse med det oprindelige resumé på engelsk, er det den engelske tekst, som er gældende. Oplysningerne i dette resumé er blot et sammendrag af de oplysninger, der er indeholdt i registreringsdokumentet samt værdipapirnoten, hvor flere detaljerede oplysninger forefindes. Investorerne bør læse oplysningerne i registreringsdokumentet samt værdipapirnoten, og i særdeleshed kapitlerne om risikofaktorer i begge dokumenter. Enhver beslutning om at investere i de udbudte aktier bør træffes på baggrund af prospektet som helhed. Prospektet er er udgivet den 14. november 2007.

RESUMÉ Denne opsummering angår den forventede børsnotering af samtlige 1.035.000 udstedte aktier i Atlantic Airways P/F på OMX Nordic Exchange Iceland hf. samt aktieudbuddet af 341.550 aktier. Oplysningerne i denne opsummering er blot et sammendrag af de oplysninger, der er indeholdt i registreringsdokumentet samt værdipapirnoten, hvor flere detaljerede oplysninger forefindes. Investorerne bør læse oplysningerne i registreringsdokumentet samt værdipapirnoten, og i særdeleshed kapitlerne om risikofaktorer (”Risk Factors”) i begge dokumenter.

Udsteder Atlantic Airways P/F ID-nr. 1223 Adresse: FO-380 Sørvágur, Færøerne

Udbyder Handels- og erhvervsministeriet på vegne af den færøske regering Adresse: Tinganes, FO-100 Tórshavn, Færøerne

Manager Kaupthing Bank hf. – Investment Banking ID-nr. 560882-0419 Adresse: Borgartún 19, 105 Reykjavík, Island

1.1. Børsnotering på OMX ICE’s hovedmarked Den 2. marts 2006 besluttede regeringen at forberede udstederen på en børsnotering på OMX ICE. Atlantic Airways opfylder betingelserne for børsnotering på hovedmarkedet, hvad angår størrelse og den driftsmæssige historie. Efter aktieudbuddet forventes det, at Atlantic Airways opfylder betingelserne for børsnotering på hovedmarkedet, hvad angår størrelse, driftsmæssig historie og aktiefordeling. Det kan dog ikke garanteres, at kravene for aktiefordeling er opfyldt. Børsnoteringen forventes at finde sted den 10. december 2007, hvilket derefter vil være den førstkommende dato, hvorpå aktierne vil blive optaget til handel på OMX ICE. Datoen for børsnoteringen, der kan finde sted senere, vil blive offentliggjort en dag i forvejen på www.omxgroup.com/nordicexchange. 1.2. Aktieudbud I alt 341.550 aktier, hvilket svarer til 33 % af den samlede aktiekapital i Atlantic Airways, vil blive udbudt til salg. Alle aktier, der udbydes i dette aktieudbud, er eksisterende aktier, som udbyderen ejer. Det samlede provenue fra aktieudbuddet forventes at ligge mellem DKK 82.655.100 og DKK 89.144.550. Forud for børsnoteringen vil aktieudbuddet blive udført i tre trancher. Alle aktier i alle trancher i aktieudbuddet bliver solgt til samme kurs, der kan ligge mellem DKK 242 per aktie og DKK 261 per aktie.

1. Bookbuilding Investorer, der er villige til at bestille minimum 20.000 aktier, vil tage del i en bookbuilding-procedure, der vil afgøre den endelig aktieudbudskurs for alle aktier i alle trancher. I bookbuildingen vil 155.250 aktier blive udbudt til en pris på mellem DKK 242 per aktie og DKK 261 per aktie. Det samlede provenue forventes at ligge mellem DKK 37.570.500 og DKK 40.520.250.

Resumé - 2 2. Privat udbydelse til medarbejdere 31.050 aktier vil blive udbudt til medarbejdere samt bestyrelsen i Atlantic Airways til den kurs, der fastlægges under bookbuilding-proceduren. Det samlede provenue forventes at ligge mellem DKK 7.514.100 og DKK 8.104.050.

3. Offentlig udbydelse 155.250 aktier vil blive udbudt til investorer, der bestiller op til 20.000 aktier til den kurs, der fastsættes under bookbuilding-proceduren. De samlede indtægter forventes at ligge mellem DKK 37.570.500 og DKK 40.520.250.

Afhængig af den efterspørgsel, der udvises af forskellige grupper af investorer, forbeholder udbyderen sig retten til at allokere de udbudte aktier anderledes. Tegningsperioden for de tre trancher er sammenfaldende. Følgelig vil tegningskursen ikke være fastlagt før udgangen af tegningsperioden. 1.3. Forventet tidsplan Tegningsperiode ...... 19-27. november 2007 Første mulige afslutning af tegningsperioden ...... 21. november 2007 Aktiekurs fastsat ud fra bookbuilding-procedure ...... 28. november 2007 Resultat af offentliggjort udbydelse ...... 28. november 2007 Betaling for tildelte aktier ...... 7. december 2007 Første handelsdag ...... 10. december 2007

Hvis tegningsperioden afsluttes før 27. november 2007, vil alle efterfølgende datoer rykkes tilsvarende frem. 1.4. Market making Forud for børsnoteringen forventer Atlantic Airways at indgå i en market making aftale vedrørende selskabets aktier på OMX ICE. Formålet med market making aftalen er at forbedre likviditeten af udstederens aktier på OMX ICE for at fremme udviklingen af en kurs og for at opfordre til effektiv og gennemsigtig prisdannelse. Atlantic Airways har opfordret de færøske finansielle institutioner til at deltage i et købstilbud på en passende market making aftale med selskabet. Betingelserne for aftalen er endnu ikke færdigbehandlede, men vil foreligge før den første handelsdag.

2. INFORMATION OM ATLANTIC AIRWAYS 2.1. Baggrund og udvikling Atlantic Airways blev grundlagt i november 1987 og begyndte flyvningerne til København i 1988 og udgjorde dermed et alternativ til det danske luftfartselskab Mærsk Air, der havde været eneste selskab på ruten siden 1970. De to hovedaktionærer var det færøske selskab P/F Flogleiðir med 51 % og danske Cimber Air, der ejede 49 % af aktierne. P/F Flogleiðir var et holdingselskab, som den færøske regering ejede 75 % af. Under den svære økonomiske krise i starten af 1990’erne undergik virksomheden en finansiel omstrukturering. Siden 1992 har den færøske regering ejet 100 % af aktierne og været eneindehaver af Atlantic Airways.

Resumé - 3 Atlantic Airways har været overskudsgivende siden 1995 og er vokset betydeligt, hvad angår den generelle investeringsvolumen og bruttoindtægt siden 2000, hvor bruttoindtægten er steget fra DKK 57,7 mio. i 2000 til DKK 126,2 mio. i 2006. Virksomheden er blevet udvidet ved at etablere nye erhvervsmæssige aktiviteter som f.eks. nye ruter, charter-aktiviteter og helikopterservice.

I marts 2006 besluttede den færøske regering ved lov delvist at privatisere Atlantic Airways ved at sælge 33 % af aktierne i virksomheden. I de forklarende noter til loven om privatiseringen af Atlantic Airways fremsætter regeringen sine intentioner om at sælge yderligere 33 % af aktiekapitalen til institutionelle investorer efter børsnoteringen af virksomheden. Timingen af den anden runde er endnu ikke fastlagt. Da der snart er parlamentsvalg, kan man ikke vide, om den anden runde vil blive udført ifølge den fremlagte plan. Valget afholdes senest den 19. januar 2008. Ifølge den fremlagte plan vil regeringen fortsætte med at være en vægtig ejer efter den anden salgsrunde. En andel på 34 % i virksomheden vil sikre, at der ikke kan foretages ændringer af vedtægterne uden regeringens godkendelse deraf. 2.2. Virksomhedsoversigt Atlantic er et internationalt luftfartsselskab med base i Sørvág på Færøerne. Driften er baseret på fastvinget drift og helikopterdrift. En stor del af virksomhedens omsætning stammer fra de fastvingede aktiviteter. I 2006 stammede 94 % af den samlede omsætning fra den fastvingede drift. Atlantic Airways’ fastvingede drift er baseret på:

Ruteflyvningstjenester Den dominerende rute inden for ruteflyvningerne og grundpillen for Atlantic Airways’ aktiviteter er ruten mellem Færøerne og København. I 2006 stammede 44 % af den samlede omsætning fra København-ruten. Desuden har Atlantic Airways ruteflyvninger til i alt otte destinationer i nabolandene, hvoraf nogle kun betjenes i sommersæsonen.

Charterdrift Virksomheden bruger sin flyflåde og kernekompetencer på charterflyvninger uden for Færøerne. I løbet af de sidste to år har virksomhedsmæssige charterflyvninger på vegne af Aker Stord AS spillet en central rolle i charterdriften. Omsætningen fra helikopteraktiviteterne beløb sig til 6 % af den samlede omsætning for 2006. Virksomhedens helikopterdrift er baseret på:

Indenlandsk helikoptertjenester Atlantic Airways tilbyder regelmæssige flyvninger mellem øerne til de mest fjerntliggende øer på Færøerne, som ellers ikke er forbundet til hovedinfrastrukturen. Desuden tilbyder Atlantic Airways Færøerne en redningstjeneste året rundt 24 timer i døgnet.

Internationale helikoptertjenester I tråd med virksomhedens hovedformål om at øge indtjeningen fra aktiviteter uden for Færøerne har Atlantic Airways investeret i en Bell 412-helikopter med primært fokus på offshore-aktiviteter i Nordsøen.

Virksomheden bestyres af administrerende direktør Magni Arge og økonomichef Marius Davidsen. De står for virksomhedens daglige drift og repræsenterer virksomheden i alle anliggender vedrørende den normale drift. Atlantic Airways' bestyrelse forvalter virksomhedens generelle aktiviteter og bestræber sig på at holde organisationen og driften i overensstemmelse med virksomhedens mission og strategi. Virksomhedens bestyrelse styrer virksomhedens anliggender og arbejder på at sikre, at virksomhedens organisation og

Resumé - 4 aktiviteter altid er i orden, og at regnskabsførelsen og håndteringen af virksomhedens aktiver er tilstrækkeligt superviseret. Bestyrelsesformanden, Christian Andreasen, og Erling í Liða, Petur J. Eiriksson, Ingi Solberg Joensen samt Verna Rasmussen udgør udstederens bestyrelse.

Pr. 30. juni 2007 havde Atlantic Airways 187 ansatte, og de samlede aktiver og egenkapitalen beløb sig til henholdsvis DKK 409 og DKK 208.

Organisationsstruktur

Resumé - 5 2.3. Finansielt sammendrag Følgende tabel fokuserer på nøglepostene fra Atlantic Airways' resultatopgørelse samt balance for regnskabsårene, der er afsluttet 31. december 2004, 2005 og 2006 samt halvårsperioderne, der er afsluttet 30. juni 2007 og 2006.

Finansiel oversigt 1/1-30/6 1/1-30/6 DKK 1.000 2004 2005 2006 2006* 2007 Nettosalg 234,365 379,586 518,990 231,357 272,999 Flyomkostninger -143,908 -262,840 -392,750 -165,449 -196,470 Medarbejderomkostninger -41,551 -57,539 -79,711 -36,601 -44,666 Afskrivninger -28,201 -34,159 -39,586 -25,427 -19,476 Resultat før finansielle poster 20,705 25,048 6,944 3,880 12,387

Finansiel indtægt 753 1,082 2,581 330 5,633 Finansielle omkostninger -3,743 -2,508 -4,455 -1,552 -2,736 Resultat før skat 17,714 23,622 5,070 2,658 15,284

Skat -3,543 -2,888 -913 -532 -2,751 Overskud 14,171 20,734 4,157 2,126 12,533

1/1-30/6 1/1-30/6 DKK 1.000 2004 2005 2006 2006* 2007 Egenkapital 126,146 136,880 195,868 139,538 208,401 Passiver 78,457 127,622 167,784 167,420 200,487 Samlede aktiver 204,603 264,502 363,653 306,958 408,889 * Ikke revideret eller gennemgået

Investeringer I de seneste år har ekspansionen af Atlantic Airways krævet investeringer. Tabellen nedenfor viser tilføjelserne i løbet af de sidste tre år som anført i Årsregnskaberne.

DKK 1.000 2004 2005 2006 1/1-30/6 2007 Fly og vedligeholdelse 21,857 74,741 58,712 31,334 Driftsmæssige reservedele 721 1,346 12,441 5,598 Udstyr 1,464 5,092 6,352 2,371 Bygninger 0 0 45,667 0 Samlede investeringer 24,042 81,179 123,172 39,303

Atlantic Airways' investeringer skyldes hovedsageligt investeringer i fly, udstyr til fly samt motorer til fly. I 2006 besluttede den færøske regering at tilføje hangaren ved Vágar lufthavn, der tidligere er leaset af Atlantic Airways til virksomhedens som et apportindskud på DKK 43,8 mio. Samtidig bidrog den færøske regering med en Bell 212-helikopter til en værdi af DKK 8,2 mio. For disse indskud modtog den færøske regering DKK 28,5 mio. i aktier til en kurs på 182. Kursen over par på DKK 23,5 mio. er optaget under udbudsspræmiereserven.

Resumé - 6 Tendenser Virksomhedens fremtidige økonomiske resultat vil afhænge af dens evne til at tilpasse sig fremtidige ændringer på markedet. Der er mange uvisheder, når man ser på fremtidige tendenser, der kan påvirke virksomheden. De punkter, der er nævnt nedenfor, udgør ikke en udtømmende liste, men er de punkter, der sandsynligvis har betydelig indflydelse på Atlantic Airways: • Den generelle globale tendens med liberalisering af flyselskabsmarkedet. o Færøerne forventes at tiltræde aftalen om oprettelse af et fælles europæisk luftfartsområde, der kan skærpe konkurrencen på ruter til og fra Færøerne. • Lavpris-flyselskaberne har foranlediget et paradigmeskift fra servicekvalitet til prisorienterede kunder. Forretnings- og fleksible rejser er billige hos Atlantic, men der er begrænset fleksibilitet, hvad angår det billigere fritidsrejsesegment, da omfanget er lavt. o En forlænget landingsbane i Vágar lufthavn betyder, at det vil være muligt for flyselskaber at bruge større fly med deraf følgende lavere omkostninger pr. sæde/mil. Atlantic Airways er p.t. ved at evaluere forskellige alternativer i den henseende. • Fremtidige brændstofpriser. De seneste års høje brændstofpriser har haft indflydelse på rentabiliteten af luftfartsbranchen. På langt sigt vil øgede brændstofpriser til dels kunne modregnes i tillægsafgifter på brændstof. Historisk set har luftfartsselskaber været konservative i at tilføje den form for tillægsafgift. • Fremtidige stigende valutakurser på USD kan have en negativ virkning på indtjeningen, da en betydelig del af virksomhedens indkøb foretages i USD, f.eks. brændstof, reservedele og fly. Dette kan også modregnes i øgede aktivværdier. Da fly og helikoptere ofte købes og sælges i USD, har den nylige udvikling i USD-kursen haft en positiv indvirkning på virksomhedens seneste investeringer. Af de samlede driftsomkostninger omsættes cirka 44 % i fremmed valuta, hovedsageligt USD.

2.4. Lovpligtige revisorer Atlantic Airways P/F’s lovpligtige revisor for den periode, der dækkes af de historiske, økonomiske oplysninger, er Hans Laksá, statsautoriseret revisor fra Rasmussen & Wiehe P/F, statsautoriserede revisorer, Hoyvíksvegur 5, P.O.Box 30, FO-110 Tórshavn, Færøerne, et selskab, der repræsenterer HLB International.

2.5. Kapitalisering og gældsforpligtelser Nedenstående tabel beskriver kapitaliseringen. Prioritetslån er sikret for et beløb på DKK 124 mio. Der er ikke sket nogen betydelig ændring i Atlantic Airways’ økonomiske eller handelsmæssige stilling siden 30. juni 2007. Tallene i nedenstående tabel er baseret på de nyligste regnskaber udarbejdet af ledelsen af Atlantic Airways. Tallene er ikke reviderede eller gennemgået af de lovpligtige revisorer.

Resumé - 7 (Alle tal er angivet i DKK)

Aktuel gæld Prioritetslån (aktuel andel af langfristet gæld) 7,048,368 Varekreditorer 51,995,232 Periodeafgrænsningsposter 8,006,762 Samlet aktuel gæld 67,050,362

Ikke-aktuel gæld Prioritetslån 68,149,933 Samlet ikke-nuværende gæld 68,149,933

Egenkapital Aktiekapital 103,500,000 Andre reserver 23,978,436 Samlet egenkapital 127,478,436

Samlet kapitalisering 262,678,731

For at give oplysninger om Atlantic Airways' gældsforpligtelser analyserer følgende tabel virksomhedens nettogældsforpligtelser på kort sigt samt på mellemlangt og langt sigt: (Alle tal er angivet i DKK og gælder pr. 30. juni 2007)

A. Kontanter 35,907,514 B. Tilsvarende kontante beløb 0 C. Værdipapirer til handel 1) 13,746,000 D. Samlet likviditet (A) + (B) + (C) 49,653,514

E. Aktuelle finansielle debitorer 64,309,556

F. Nuværende bankgæld 0 G. Aktuel andel af ikke-aktuel gæld 2) 7,048,368 H. Anden aktuel finansiel gæld 3) 60,001,994 I. Samlet aktuel finansiel gæld (F) + (G) + (H) 67,050,362

J. Samlede netto-aktuelle finansielle gældsforpligtelser (I) - (E) - (D) -46,912,708

K. Ikke-aktuelle banklån 68,149,933 L. Udstedte obligationer 0 M. Andre ikke-aktuelle lån 0 N. Samlede ikke-aktuelle finansielle gældsforpligtelser (K) + (L) + (M) 68,149,933

O. Samlede netto-finansielle gældsforpligtelser (J)+(N) 21,237,225

1) Svarer til de samlede finansielle aktiver, der tilbageholdes til handel. 2) Svarer til den aktuelle andel af banklån, der forfalder til betaling inden for 12 måneder. 3) Svarer til de samlede varekreditorer, ansættelsesforpligtelser og andre forpligtelser for op til 12 måneder.

Resumé - 8 3. HOVEDAKTIONÆRER På datoen for registreringsdokumentet var der én aktionær i Atlantic Airways.

Aktionær & ejerskab Beskrivelse Nominel værdi År Den færøske regering Omstrukturering 75.000.000 1992 Den færøske regering Apportindskud 28.500.000 2006 I alt 103.500.000 Forud for børsnoteringen vil et aktieudbud blive afholdt. I alt 310.500 aktier vil blive udbudt til offentligheden, og 31.050 aktier til medarbejdere og bestyrelsen i Atlantic Airways.

4. ÅRSAGER TIL AKTIEUDBUD OG BRUG AF AFKASTET Den 2. marts 2006 offentliggjorde den færøske regering i forbindelse med loven om privatiseringen af Atlantic Airways, at regeringen vil sælge 33 % af sin aktiebeholdning i Atlantic Airways, hvilket svarer til 341.550 aktier. Ifølge de forklarende noter til loven om privatisering af Atlantic Airways har regeringen i sinde at sælge yderligere 33 % af aktiekapitalen efter børsnoteringen af selskabet. Timingen af den anden runde er endnu ikke fastlagt. De resterende 34 % vil fortsat tilhøre regeringen indtil videre. Provenuet fra aktieudbudet vil tilfalde den færøske regering som udbyder af aktierne. Provenuets størrelse vil afhænge af resultatet af bookbuilding-proceduren og det solgte antal aktier. § 1 af Guidelines on Privatising Governmental Companies (”Retningslinjer for privatisering af statsejede selskaber”) angiver følgende incitamenter for privatiseringen af en række statsejede virksomheder*: • For at tydeliggøre grænsen mellem den offentlige og private sektor. • For at beskytte skatteydernes kapital, der aktuelt er fastlåst i statsejede virksomheder. • For at reducere den offentlige gæld. • For at øge valgmulighederne for de virksomheder, der aktuelt ejes af staten • For at søge at skabe værdi. • For at øge antallet af aktionærer i kommercielle virksomheder. • For at styrke det færøske kapitalmarked.

*Disse oplysninger er gengivet nøjagtigt, og så vidt udstederen ved og kan fastslå, er ingen fakta blevet udelukket, der ville betyde, at de gengivne oplysninger er unøjagtige eller misvisende. Udbyderen dækker de omkostninger, der stammer direkte fra aktieudbudet. Disse omkostninger forventes at beløbe sig til cirka DKK 4,5 mio. Omkostninger, der påløber på OMX ICE i forbindelse med børsnoteringen og fremtidige afgifter til OMX ICE, betales af udstederen. Afhængig af resultatet af bookbuilding-proceduren er den samlede indtjening fra udstedelsen minimum DKK 82.655.100 og maksimalt DKK 89.144.550. Ved fradrag af omkostninger i forbindelse med udstedelsen forventes det, at nettoindtjeningen fra udstedelsen beløber sig til minimum DKK 78.155.100 og maksimum DKK 84.644.550.

Resumé - 9 5. ASSOCIEREDE TRANSAKTIONER Atlantic Airways har et associeret forhold med bestyrelsen, de administrerende direktører i Atlantic Airways, de administrerende direktører i associerede og minoritetsinteresser, nære familiemedlemmer, som der henvises til heri, og politiske instanser med betydelig indflydelse på Atlantic Airways’ største aktionær, den færøske regering. Historisk set har Atlantic Airways betalt et årligt afdrag på DKK 200.000 plus vedligeholdelsesforpligtelser for at lease hangaren i Vágar lufthavn. Pr. september 2006 er hangaren en del af Atlantic Airways’ aktiver. Den færøske regering besluttede at overdrage hangaren til Atlantic Airways som et apportindskud. Hangaren er vurderet til en værdi af DKK 43,8 mio. Bortset fra leasing af hangaren har der ikke været nogen usædvanlige transaktioner med associerede parter. Atlantic Airways’ bestyrelse mener, at alle Atlantic Airways' nuværende transaktioner med associerede parter udføres på normale og lige vilkår. Atlantic Airways’ engagerer sig i og forventes fortsat at engagere sig i transaktioner med sine associerede parter. 6. STIFTELSESOVERENSKOMST OG VEDTÆGTER

Udstedelses- og aktiekarakteristika Atlantic Airways’ aktiekapital består af aktier på DKK 100 og multipla deraf. Aktierne er skabt under Forordning nr. 250/1993. Atlantic Airways’ aktier er alle udstedt elektronisk på VP og er registreret under navnet på den relevante aktionær eller dennes nominelle ejer. Atlantic Airways’ bestyrelse har bedt om FO-AIR som udstederens symbol på OMX ICE og børssymbol på udstederens aktier i OMX ICE's handelssystem. ISIN-nummeret på aktierne er FO 0000000062.

Rettigheder Alle Atlantic Airways-aktierne er af samme klasse og har samme rettigheder. Udstederens aktier har ingen særlige rettigheder, og der er ingen indskrænkninger af aktierne. Indehavere af udstederens aktiekapital har ret til at stemme på generalforsamlingen, ret til at modtage aktieudbytte, når dette udstedes, har fortegningsret på nye aktier, medmindre der afstås fra denne, og ret til en del af udstederens aktiver ved afvikling, hvilket alt sammen er i overensstemmelse med aktieindehavelse, love og udstederens vedtægter, der til enhver tid måtte være gældende.

Politik om aktieudbytte Udstederens bestyrelse har ikke fastlagt en politik vedrørende aktieudbytte for Atlantic Airways.

Ret til aktieudbytte Der skal træffes beslutning om fordelingen af aktieudbytte på en årlig generalforsamling, der skal holdes før udgangen af april hvert år. Ifølge § 2 af udstederens vedtægter skal der udbetales aktieudbytte til dem, der er registreret som indehavere af udstederens aktier. Hvis aktionærernes udbytte ikke er blevet udbetalt, kan aktionærerne hente deres aktieudbytte på udstederens kontor inden for fem år fra udbetalingens forfaldsdato. Retten til aktieudbytte bortfalder fem år efter ifølge den gældende færøske Lov Nr. 274/1908 om bortfaldet af visse rettigheder.

Ejendomsret og overdragelse Der er ingen begrænsninger i tilladelsen til at overdrage Atlantic Airways-aktier, og aktionærerne kan stille deres aktier som pant, medmindre de i henhold til gældende lov er afskåret derfra. Ikke desto mindre bør det bemærkes, at enkelte aktionærer kan blive enige om, at deres aktier er underlagt visse restriktioner. En

Resumé - 10 part, der køber en aktie i udstederen, kan ikke udøve sin ret som aktionær, medmindre partens navn er blevet registreret i aktiebogen, eller parten har offentliggjort og bevist sit ejerskab af aktien. Det er kun generelle, lovgivningsmæssige bestemmelser, der finder anvendelse på overdragelsen af aktier i Atlantic Airways. Når en aktionær har betalt sin andel fuldt ud til udstederen, får vedkommende udstedt et elektronisk certifikat i VP samt en registreret titel, der overdrager vedkommende de fulde rettigheder, der forudsættes i udstederens vedtægter. Aktieoverdragelsen træder i kraft ved registreringen i VP. Den elektroniske registrering af værdipapirer reguleres af Lov Nr. 87/2006 og Bekendtgørelse Nr. 199 af 16. marts 2006 om registreringen af værdipapirer, der baserer sig på den pågældende lov.

Regler for obligatoriske overtagelsestilbud I kapitel X i den islandske lov om transaktioner med værdipapirer nr. 108/2007 står der, at hvis en part direkte eller indirekte har overtaget styringen af en børsnoteret virksomhed, så skal den pågældende part tilbyde de andre aktionærer samlet overtagelse af aktiemajoriteten. Den gældende færøske Lov Nr. 87/2006 fastsætter lignende bestemmelser for obligatoriske overtagelsestilbud. I visse henseender er den lov, der finder anvendelse på Færøerne, ikke så stram som den islandske lov. Men som beskrevet i kapitel 7 skal en investor i aktierne i Atlantic Airways overholde de bestemmelser, der er fastlagt i både den færøske og den islandske lov angående børsnoterede selskaber. Se kapitel 8 i Lov Nr. 87/2006 for yderligere oplysninger. På det tidspunkt, hvor en fremtidig børsnotering forventes, vil den færøske regering eje over 67 % af aktiekapitalen i Atlantic Airways, hvilket overstiger tærsklen for det obligatoriske overtagelsestilbud. Ifølge FME’s fortolkning af bestemmelsen vedrørende obligatoriske overtagelsestilbud i den islandske lov om transaktioner med værdipapirer, der er udgivet på http://fme.is/?PageID=229, opstår pligten til at udstede et overtagelsestilbud ikke, når en enkelt aktionær eller en aktionær, der handler efter samråd med andre, opnår juridisk kontrol over en virksomhed ved tidspunktet for børsnoteringen på en offentligt reguleret børs. Denne undtagelse afhænger af, at aktieposten ikke er blevet offentliggjort på tidspunktet for børsnoteringen.

Regler for indløsningspligt og realisering I kapitel 4 af Lov Nr. 250/1993 fastsættes det, at hvis den udstedende part har erhvervet mere end 9/10 af aktiekapitalen i en virksomhed, skal den udstedende part og virksomhedens bestyrelse sammen opnå enighed om ensidigt at tvangsindløse de andre aktionærers aktier. Hvis den udstedende part har erhvervet mere end 9/10 af aktiekapitalen i virksomheden, kan de resterende aktionærer desuden ensidigt anmode om, at den udstedende part erhverver deres resterende aktier til samme kurs som i overtagelsestilbuddet.

Overtagelsestilbud Ingen offentlige overtagelsestilbud er blevet tilbudt tredjeparter for udstederens aktier, og ingen sådanne tilbud fandt sted i løbet af det seneste regnskabsår, det nuværende regnskabsår eller tidligere.

Selskabets opløsning I henhold til kapitel 14 af Lov Nr. 250/1993 vil forslag om opdelingen eller opløsningen af virksomheden være underlagt de samme bestemmelser som ændringer til vedtægterne. Enhver beslutning angående opløsningen af virksomheden skal træffes af aktionærer, der udgør mindst to tredjedele af virksomhedens aktier. En generalforsamling, der har truffet den lovformelige beslutning om opdelingen eller opløsningen af virksomheden, skal ligeledes beslutte, hvordan virksomhedens aktiver skal udbetales, og virksomhedens gældsforpligtelser betales. Generalforsamlingen skal ydermere beslutte, om virksomheden skal opdeles af en offentlig instans, eller om der skal nedsættes en likvidationskomité i henhold til reglerne i Lov om offentlige aktieselskaber. Hvis generalforsamlingen beslutter at opløse virksomheden, skal dette uden ugrundet ophold meddeles registret for aktieselskaber. Desuden er en opløsning eller opdeling af virksomheden eller en fusion med en anden virksomhed underlagt Lov Nr. 250/1993 i henhold til de i kapitel 14 og 15 fastlagte bestemmelser.

Resumé - 11 7. RISIKOFAKTORER Investering i aktier er genstand for adskillige risici. Før man beslutter sig for at investere i aktier i Atlantic Airways, bør alle potentielle investorer overveje samtlige oplysninger i nærværende opsummering, alle dokumenter, der udgør en del af prospektet og i særdeleshed de risici og uvisheder, der er beskrevet nedenfor, og som i væsentlig grad kan påvirke Atlantic Airways og en investering i virksomhedens aktier. Hvis en eller flere af disse begivenheder indtræder, kan aktiekursen falde, og investorerne kan miste en del af deres investering eller måske hele investeringen. Yderligere risici og uvisheder, der ikke aktuelt eksisterer, som ikke på nuværende tidspunkt menes at være væsentlige, eller som Atlantic Airways ikke er bekendt med, kan ligeledes svække virksomhedens aktiviteter og drift. Eksempler på risikofaktorer, der i væsentlig grad kan påvirke kursen på udstederens aktier, er markedsrisiko, likviditetsrisiko og modpartsrisiko. Aktiekursen kan i høj grad bevæge sig op og ned grundet faktorer såsom variationer i driftsoverskuddet eller driftsomkostningerne, ændringer af forholdene på markedet, negativ publicity om virksomheden og dennes produkter i medierne samt ændringer i virksomhedens konkurrencemæssige stilling. Blandt de vigtige risici, som Atlantic Airways er direkte eksponeret for, er risikofaktorer i forbindelse med virksomheden som luftfartsselskab, f.eks. brændstofforsyning og –omkostninger, udnyttelsestakster, den sæsonbetonede faktor og international terror og epidemier. Ændringer i lovgivningen og gældende lov er også potentielle risikofaktorer, der er værd at overveje. 8. FREMLAGTE DOKUMENTER I løbetiden for denne opsummering, der blev udgivet 14. november 2007, kan følgende dokumenter indhentes fra Atlantic Airways’ hjemsted i Vagár lufthavn, FO-380 Sørvágur, Færøerne og elektronisk fra virksomhedens hjemmeside (www.atlantic.fo): • Udstederens vedtægter. • Udstederens reviderede årsregnskaber for regnskabsåret, der afsluttedes 31. december 2004 • Udstederens reviderede årsregnskaber for regnskabsåret, der afsluttedes 31. december 2005. • Udstederens reviderede årsregnskaber for regnskabsåret, der afsluttedes 31. december 2006 • Udstederens reviderede regnskab for perioden 01.01.07-30.06.07.

Såfremt der opstår en betydelig ny faktor, væsentlig fejl eller unøjagtighed vedrørende de oplysninger, der er indeholdt i nærværende opsummering, og som kan påvirke vurderingen af de udbudte aktier, og som opstår eller bemærkes fra det tidspunkt, hvor dette dokument godkendes, og den endelige afslutning af tilbuddet til offentligheden, eller eventuelt tidspunktet, hvor handel på OMX ICE begynder, vil udstederen udarbejde et supplement til opsummeringen.

Resumé - 12

TABLE OF CONTENTS

I. Summary II. Securities Note III. Registration Document a. Articles of association b. 2007 Half-year statement c. 2006 Annual accounts d. 2005 Annual accounts e. 2004 Annual accounts IV. Subscription Form

This Prospectus is published on 14 November 2007. The Prospectus has been scrutinised and approved by the OMX Nordic Exchange Iceland hf. (OMX ICE) on behalf of the Financial Service Authority in Iceland. It was prepared for the listing of Atlantic Airways P/F on the OMX ICE Main Market and the share offering prior to the listing. The Prospectus, published in English only, consists of three documents: Summary, Securities Note and Registration Document, along with Appendices. This Prospectus is available at the following places from the manager and the issuer; Kaupthing Bank, Bókbindaragøta 8, Fo-100 Tórshavn and from Atlantic Airways, FO-380 Sørvágur. The Prospectus can also be obtained from the websites: www.atlantic.fo, www.kaupthing.fo, www.kaupthing.net and www.kbbanki.is.

I SUMMARY Contents

1. SHARE OFFERING AND LISTING ON OMX ICE MAIN MARKET ...... 3 1.1. Listing on OMX ICE Main Market ...... 3 1.2. Share offering ...... 3 1.3. Expected timetable ...... 4 1.4. Market making ...... 4 2. INFORMATION ON ATLANTIC AIRWAYS ...... 5 2.1. History an development ...... 5 2.2. Business overview ...... 5 2.3. Financial summary ...... 7 2.4. Statutory auditors ...... 8 2.5. Capitalisation and indebtness ...... 8 3. MAJOR SHAREHOLDERS ...... 10 4. REASONS FOR THE OFFERING AND USE OF PROCEEDS ...... 10 5. RELATED PARTY TRANSACTIONS ...... 11 6. MEMORANDUM AND ARTICLES OF ASSOCIATION ...... 11 7. RISK FACTORS ...... 13 8. DOCUMENTS ON DISPLAY...... 13

Summary - 2 1. SHARE OFFERING AND LISTING ON OMX ICE MAIN MARKET This Summary concerns the expected listing of all 1,035,000 issued shares in Atlantic Airways P/F on the OMX Nordic Exchange Iceland hf. and the share offering of 341,550 shares. The information in this Summary is only a contraction of the information in the Registration Document and the Securities Note, where more detailed information can be found. Investors are advised to study the information in the Registration Document and the Securities Note, particularly the chapters on "Risk Factors" in both documents.

Issuer Atlantic Airways P/F Id-No. 1223 Address: FO-380 Sørvágur, Faroe Islands

Offeror The Ministry of Trade and Industry on behalf of the Faroese Government Address: Tinganes, FO-100 Tórshavn, Faroe Islands

Manager Kaupthing Bank hf. – Investment Banking Id-No. 560882-0419 Address: Borgartún 19, 105 Reykjavík, Iceland

1.1. Listing on OMX ICE Main Market On 2 March 2006 the Government resolved to prepare the Issuer for a listing on OMX ICE. Atlantic Airways fulfils the conditions for listing on the Main Market regarding the size and operating history. Following the share offering Atlantic Airways is expected to fulfil the conditions for listing on the Main Market regarding the size, operating history and share distribution. However, it can not be guaranteed that the requirements for share distribution will be fulfilled. The listing is expected to take place on 10 December 2007 which will then be the earliest date on which the shares will be admitted to trading on OMX ICE. The date of listing, which may occur later, will be announced one day in advance on www.omxgroup.com/nordicexchange. 1.2. Share offering A total of 341,550 shares corresponding to 33% of total share capital in Atlantic Airways are to be offered for sale. All shares offered in this share offering are existing shares owned by the Offeror. The total proceeds form the share offering is expected to range from DKK 82,655,100 to DKK 89,144,550. Prior to the listing the share offering is to be conducted through three tranches. All shares in all tranches of the share offering are to be sold at the same price which may range from DKK 242 per share to DKK 261 per share.

Summary - 3 1. Bookbuilding Investors willing to order minimum 20,000 shares will participate in a bookbuilding process which will determinate the final share offering price for all shares in all tranches. In the bookbuilding 155,250 shares are to be offered at a price range of DKK 242 per share to DKK 261 per share. The total proceeds is expected to range from DKK 37,570,500 to DKK 40,520,250.

2. Private offering to employees 31,050 shares are to be offered to the employees and the board of Atlantic Airways at the price determined in the bookbuilding process. The total proceeds is expected to range from DKK 7,514,100 to DKK 8,104,050.

3. Public offering 155,250 shares are to be offered to investors ordering up to 20,000 shares at the price determined in the bookbuilding process. The total proceeds is expected to range from DKK 37,570,500 to DKK 40,520,250.

Dependent on the demand presented by different group of investors the Offeror reserve the right to allocate the offered shares differently. The subscription period for the three tranches are coincident. As a consequence the subscription price will not be fixed before the end of the subscription period. 1.3. Expected timetable Subscription period ...... 19-27 November 2007 First possible closing of Subscription period ...... 21 November 2007 Share price fixed on basis of a bookbuilding process ...... 28 November 2007 Outcome of the offering made public ...... 28 November 2007 Payment for the allocated shares ...... 7 December 2007 First day of trading ...... 10 December 2007 If the subscription period is closed prior to 27 November 2007 all subsequent dates will be moved ahead accordingly. 1.4. Market making Prior to the listing Atlantic Airways expects to enter into a market making agreement relating to the Company's shares on the OMX ICE. The aim of the market making agreement is to improve liquidity of the Issuer's shares on OMX ICE in order to promote the development of a market price and to encourage effective and transparent price formation. Atlantic Airways has invited the Faroese financial institutions to participate in a tender offer for an appropriate market making agreement with the company. The terms and commitments for the contract have not been finalised yet but will be in place before the first day of trading.

Summary - 4 2. INFORMATION ON ATLANTIC AIRWAYS 2.1. History an development Atlantic Airways was established in November 1987 and started flying to Copenhagen in 1988, offering an alternative to the Danish carrier Mærsk Air, which had been the sole operator since 1970. The two major shareholders where the Faroese company P/F Flogleiðir with 51% and Cimber Air of Denmark which held 49%. P/F Flogleiðir was a holding company that was 75% owned by the Faroese Government. During the severe economical crisis in the early 1990’s the Company was financially restructured. Since 1992 the Faroese Government has held 100% of the shares and been the sole owner of Atlantic Airways. Atlantic Airways has been profitable since 1995 and has grown substantially in terms of the overall investment volume and gross income since year 2000 with gross income increasing from DKK 57.7 million in 2000 to DKK 126.2 million in 2006. The Company has expanded by starting up new business activities, such as new routes, charter activities and helicopter services. In March 2006 the Faroese Government decided by law to partly privatise Atlantic Airways by selling 33% of the shares in the Company. In the explanatory memorandum to the law on privatisation of Atlantic Airways, the Government states their intentions to sell additional 33% of the share capital to institutional investors following the listing of the Company. The timing of the second round is not decided yet. With a parliamentary election coming up one cannot be sure that the second round will be carried through according to the presented plan. The election will be held 19 January 2008 at latest. According the presented plan the Government will continue as a substantial owner after the second sales round. The 34% share in the Company will ensure that no changes can be made in the articles of association without the Government's approval. 2.2. Business overview Atlantic is an international airline with base in Sørvág, Faroe Island. The operation is based on fixed-wing operations and helicopter operations. A major part of the Companys revenue is related to fixed-wing activities. In 2006 94% of total revenue derived from fixed-wing operations. Atlantic Airways' fixed-wing operations are based on:

Scheduled services The dominant route of the scheduled services and the cornerstone of Atlantic Airways business is the route between the Faroe Islands and Copenhagen. In 2006 44% of total revenue was generated by the Copenhagen route. In addition Atlantic Airways has scheduled flights to a total of eight destinations in neighbouring countries, some of which are only operated during the summer season.

Charter operations The Company is utilising its aircraft fleet and core competencies on charter services outside the Faroe Islands. During the past two years corporate charters on behalf of Aker Stord AS has had a central role in the charter activity.

Summary - 5 Revenue related to helicopter activities accounted for 6% of the total revenue in 2006. The Company's helicopter operations are based on:

Domestic helicopter service Atlantic Airways provides regular island hopping service to the most remote islands on Faroe Islands which are not connected to the main infrastructure. In addition Atlantic Airways provide the Faroe Islands with year round search and rescue service 24 hours a day.

International helicopter service In line with the Company's main objective to increase income from activities outside the Faroe Islands Atlantic Airways has invested in a Bell 412 helicopter with primary focus on the North Sea offshore business.

The Company is led by managing director Magni Arge and financial director Marius Davidsen. They are in charge of the day-to-day operations of the Company and represent the Company in all matters concerning normal operations. The board of Atlantic Airways manages the Company's general affairs and endeavours to keep the organisation and operations consistent with the Company's mission and strategy. The Company's board of directors directs company affairs and works to ensure that the Company's organisation and activities are in good order at all times and that the accounting and the handling of the Company's assets are sufficiently supervised. The chairman of the board, Christian Andreasen, along with Erling í Liða, Petur J. Eiriksson, Ingi Solberg Joensen and Verna Rasmussen form the Issuer's board of directors. As of 30 June 2007, Atlantic Airways employed 187 people and total assets and equity amounted to DKK 409 and DKK 208, respectively.

Organisational structure

Summary - 6 2.3. Financial summary The following table highlights the key items from Atlantic Airways' profit and loss and balance sheet statement for the financial years ending 31 December 2004, 2005 and 2006 and the six month periods ending 30 June 2007 and 2006.

Financial overview 1/1-30/6 1/1-30/6 DKK 1,000 2004 2005 2006 2006* 2007 Net sales 234,365 379,586 518,990 231,357 272,999 Flight expenses -143,908 -262,840 -392,750 -165,449 -196,470 Employee expenditures -41,551 -57,539 -79,711 -36,601 -44,666 Depreciations -28,201 -34,159 -39,586 -25,427 -19,476 Result before financial items 20,705 25,048 6,944 3,880 12,387

Financial income 753 1,082 2,581 330 5,633 Financial expenses -3,743 -2,508 -4,455 -1,552 -2,736 Result before tax 17,714 23,622 5,070 2,658 15,284

Tax -3,543 -2,888 -913 -532 -2,751 Profit 14,171 20,734 4,157 2,126 12,533

1/1-30/6 1/1-30/6 DKK 1,000 2004 2005 2006 2006* 2007 Equity 126,146 136,880 195,868 139,538 208,401 Liabilities 78,457 127,622 167,784 167,420 200,487 Total assets 204,603 264,502 363,653 306,958 408,889 * Not audited nor reviewed

Investments Atlantic Airways' expansion in recent years has required investments. The table below shows the additions of the last three years as stated in the Annual Accounts.

DKK 1,000 2004 2005 2006 1/1-30/6 2007 Aircraft and maintenance 21,857 74,741 58,730 31,334 Operating spare parts 721 1,346 12,422 5,598 Equipment 1,464 5,092 6,352 2,371 Buildings 0 0 45,667 0 Total investments 24,042 81,179 123,172 39,303

Atlantic Airways' investments are mainly due to investment in aircraft, flight equipment and aircraft engines. In 2006 the Faroese Government decided to contribute the hangar at Vágar Airport previously leased by Atlantic Airways to the Company as a non-cash contribution of DKK 43.8 million. Contemporary a Bell-212 helicopter was contributed by the Faroese Government to a value of DKK 8.2 million. For these contributions the Faroese Government received DKK 28.5 millions in shares at a rate of 182. The price above par DKK 23.5 million is recorded under share premium reserve.

Summary - 7 Trends The Company's future financial performance will be dependent on its ability to adapt to future market changes. There are many uncertainties when addressing future trends which can influence the Company. The points mentioned below are not an exhaustive list, but the ones that are likely to have a significant influence on Atlantic Airways: • The general global trend of liberalisation of the airline market. o The Faroe Islands are expected to join the European Common Aviation Agreement which could increase the competition on the routes to and from Faroe Islands. • Low cost airlines have triggered a shift of paradigm from quality in service to price orientated customers. Business and flexible travel comes at a low price with Atlantic while there is limited flexibility in the cheaper leisure travel segment as volumes are low. o An extended runway at Vágar Airport will make it possible for airlines to operate larger aircraft with consequently lower seat/mile costs. Atlantic Airways is currently evaluation different alternatives in this respect. • Future fuel prices. The resent years high fuel prices have had an influence on the profitability of the airline business. In the long run increased fuel costs will partly be offset by fuel surcharges. Historically airlines have been conservative in adding this surcharge. • Future increasing USD exchange rates can negatively impact earnings, since a significant part of the Company's purchases are made in USD, e.g. fuel, spare parts and aircraft. This can also be offset in increased asset values. As aircrafts and helicopters often are traded in USD the recent development in the USD has had a positive influence on the Company's latest investments. Out of the total operating costs approximately 44% are traded in foreign currency, mainly USD.

2.4. Statutory auditors Atlantic Airways P/F’s statutory auditor, for the period covered by the historical financial information, is Hans Laksá, state authorised accountant of Rasmussen & Weihe P/F, State Authorised Public Accountants, Hoyvíksvegur 5, P.O.Box 30, FO-110 Tórshavn, Faroe Islands, an representative firm of HLB International. 2.5. Capitalisation and indebtness The following table sets forth the capitalisation. Mortgage loans are secured for an amount of DKK 124 million. There has been no significant change in the financial or trading position of Atlantic Airways which has occurred since 30 June 2007. The figures in the table below are based on the most recent financial accounts prepared by the management of Atlantic Airways. The figures are not audited nor reviewed by the statutory auditors.

Summary - 8 (All numbers are in DKK and are as at 30 September 2007)

Current debt Mortgage loans (current portion of long-term debt) 7,048,368 Trade payables 51,995,232 Accruals and deferred income 8,006,762 Total current debt 67,050,362

Non-current debt Mortagage loans 68,149,933 Total non-current debt 68,149,933

Equity Share capital 103,500,000 Other reserve 23,978,436 Total equity 127,478,436

Total capitalisation 262,678,731

To provide information on the Atlantic Airways's indebtness the following table analyses the company's net indebtness in the short term and in the medium to long term:

A. Cash 35,907,514 B. Cash equivalent 0 C. Trading securities 1) 13,746,000 D. Total liquidity (A) + (B) + (C) 49,653,514

E. Current Financial Receivables 64,309,556

F. Current Bank debt 0 G. Current portion of non current debt 2) 7,048,368 H. Other current financial debt 3) 60,001,994 I. Total Current Financial Debt (F) + (G) + (H) 67,050,362

J. Total Net Current Financial Indebtedness (I) - (E) - (D) -46,912,708

K. Non Current Bank Loans 68,149,933 L. Bonds Issued 0 M. Other non current loans 0 N. Total Non current Financial Indebtedness (K) + (L) + (M) 68,149,933

O. Total Net Financial Indebtedness (J)+(N) 21,237,225

1) Corresponds to the total of financial assets held for trading. 2) Corresponds to the current portion of bank loans payable within 12 months. 3) Corresponds to the total of trade payables, employment obligations and other liabilities for up to 12 months.

Summary - 9

3. MAJOR SHAREHOLDERS On the date of the Registration Document, there was one shareholder in Atlantic Airways.

Shareholder & ownership Description Nominal value Year Faroese Government Restructuring 75,000,000 1992 Faroese Government Non-cash 28,500,000 2006 contribution Total 103,500,000 Prior to the listing a share offering will be held. A total of 310,500 shares will be offered to the public and 31,050 shares to the employees and the board of Atlantic Airways. 4. REASONS FOR THE OFFERING AND USE OF PROCEEDS The Faroese Government announced on 2 March 2006 in connection with the law on the privatisation of Atlantic Airways that the Government will sell 33% of its holdings in Atlantic Airways, corresponding to 341,550 shares. According to the explanatory memorandum to the law on privatisation of Atlantic Airways, the Government intends to sell additional 33% of the share capital following the listing of the Company. The timing of the second round is not decided yet. The remaining 34% will be maintained as government property until further ado. The proceeds from the share offering will be received by the Faroese Government as the Offeror. The amount of proceeds will depend on the outcome of the bookbuilding process and the number of shares sold. Article 1 of the Guidelines on Privatising Governmental Companies states the following incentives for the privatisation of a number of governmental companies*: • To clarify the border between the public and private sectors. • To protect the taxpayers' capital currently locked-up in governmentally owned companies. • To reduce public debt. • To increase the options of companies which are currently owned by the government. • To strive to create value. • To increase the numbers of shareholders in commercial companies. • To strengthen the Faroese capital market.

*This information has been accurately reproduced and as far as the issuer is aware and is able to ascertain, no facts have been omitted which would render the reproduced information inaccurate or misleading. The Offeror will bear the costs directly related to the share offering. These costs are expected to amount to approximately DKK 4.5 million. Cost incurred at OMX ICE in relation to the listing and future charges from OMX ICE will be paid by the Issuer.

Summary - 10 Dependent on the outcome of the bookbuilding process the total proceeds from the offering are DKK 82,655,100 minimum and DKK 89,144,550 maximum. Deducting the costs related to the offering net proceeds to the offer is anticipated to be DKK 78,155,100 minimum and DKK 84,644,550 maximum. 5. RELATED PARTY TRANSACTIONS Atlantic Airways has a related party relationship with the board of directors, the managing directors of Atlantic Airways, the managing directors of associates and minorities, close family members of individuals referred to herein, and political entities with significant influence on the largest shareholder of Atlantic Airways, which is the Faroese Government. Atlantic Airways has historically paid a yearly instalment of DKK 200,000 plus maintenance obligations for the lease of the hangar in Vágar Airport. As from September 2006 the hangar is a part of the assets of Atlantic Airways. The Faroese Government decided to contribute the hangar to Atlantic Airways as a non-cash contribution. The hangar is valued at DKK 43.8 million. Apart from the lease of the hangar no unusual transactions have taken place with related parties. The board of Atlantic Airways believes that all of Atlantic Airways' present related party transactions are conducted on an arm's length basis. Atlantic Airways engages in and expects to continue to engage in transactions with its affiliates. 6. MEMORANDUM AND ARTICLES OF ASSOCIATION

Issue and share characteristics Atlantic Airways' share capital consists of shares of DKK 100 and multiples thereof. The shares have been created under Royal Decree No. 250/1993. Atlantic Airways' shares are all issued electronically at the VP and are registered under the name of the relevant shareholder or their nominees. The board of directors of Atlantic Airways has requested that FO-AIR be the symbol for the Issuer on OMX ICE and the ticker symbol for the Issuer's shares in the OMX ICE trading system. The ISIN number of the shares is FO 0000000062.

Rights All the shares of Atlantic Airways are of the same class and carry equal rights. The Issuer's shares carry no special rights and no restrictions are placed on them. Owners of the Issuer’s share capital have the right to vote at shareholders' meetings, the right to receive dividends when declared, enjoy pre-emptive rights to new shares, unless waived, and the right to a portion of the Issuer’s assets upon liquidation, all according to share ownership, statutes and the Issuer’s articles of association in effect at any given time.

Dividend policy The Issuer's board of directors has not set a dividend policy for Atlantic Airways.

Summary - 11 Right to dividends A resolution on the distribution of dividends shall be made at an annual general meeting which shall be held before the end of April each year. According to article 2 of the Issuer's articles of association, dividends shall be paid to those that are registered as the owners of the Issuer's shares. If shareholders' dividend has not been paid, then the shareholders may collect their dividend at the Issuer's office within five years of payment being due. This right to a dividend lapses five years later according to Act No. 274/1908 on the lapse of certain claim rights in force in the Faroe Islands.

Right of ownership and transfer There are no limitations on the authorisation to transfer Atlantic Airways shares, and shareholders may pledge their shares unless prohibited from doing so by law. Nevertheless, it should be noted that individual shareholders may agree that their shares are subject to certain restrictions. A party acquiring a share in the Issuer cannot exercise its right as a shareholder unless its name has been registered in the share register or it has announced and proven its ownership of the share. Only general legislative rules apply to the transfer of shares in Atlantic Airways. Once a shareholder has paid in his or her share in full to the Issuer, he or she shall be issued an electronic certificate in the VP and a registered title which confers on him or her the full rights provided for in the articles of association of the Issuer. Transfer of shares becomes effective at registration with the VP. The electronic registration of securities is governed by Royal Decree No. 87/2006 and Ministerial Regulation No. 199 from 16 March 2006 on Registration of Securities which is based on that Royal Decree.

Mandatory takeover bid rules Chapter X of the Icelandic Act on Securities Transactions No. 108/2007 states that if a party has directly or indirectly acquired control in a listed company it shall present other shareholders with a takeover bid. The Royal Decree No. 87/2006 in force in the Faroe Islands state similar provisions for mandatory takeover bids. In certain respects the law in force in the Faroe Islands is not as stringent as the Icelandic Act. But as described in chapter 7 an investor in the shares of Atlantic Airways has to comply with the statutes in both Faroese and Icelandic law concerning listed companies. See chapter 8 of the Royal Decree No. 87/2006 for further information. At the time of the future expected listing, the Faroese Government will own over 67% of the share capital in Atlantic Airways, which exceeds the mandatory takeover bid threshold. According to the FME's interpretation the article regarding mandatory bid in the Icelandic Act on Securities Transactions, published on http://fme.is/?PageID=229, the obligation to issue a takeover bid does not arise due to a single shareholder or a shareholder acting in concert with others having legal control over a company at the time of listing on a regulated stock exchange. This exemption is subject to the shareholding having been disclosed at the time of listing.

Squeeze-out and sell-out rules In chapter 4 of Royal Decree No. 250/1993 it is stated that if the offering party has acquired more than 9/10 of the share capital of the company then the offering party and the board of the company can jointly agree to unilaterally squeeze out the remaining shareholders. Furthermore, if the offering party has acquired more than 9/10 of the share capital of the company then the remaining shareholders can unilaterally request that the offering party acquire their remaining shares at the same price as in the takeover bid.

Summary - 12 Takeover bids No public takeover bids have been offered by third parties for the Issuer’s equity, neither have such bids occurred during the last financial year, the current financial year or earlier.

Dissolution of the Company Pursuant to chapter 14 of the Royal Decree No. 250/1993 proposals on the division or dissolution of the Company will be subject to the same provisions as amendments to the articles of association. Any decision on the dissolution of the Company shall be made by shareholders controlling at least two thirds of the Company’s shares. A shareholders' meeting, which has made a lawful decision on the division or dissolution of the Company, shall also decide on how the assets of the Company should be disbursed and debts paid. The meeting shall also decide if the Company is to be divided by a public authority or a winding-up committee is elected in accordance with provisions in the Public Limited Companies Act. If a shareholders’ meeting has decided on the dissolution of the Company, it shall without delay be announced to the register of limited companies. Otherwise, a dissolution or a division of the Company, or a merger to another company shall be governed by the Royal Decree No. 250/1993 as the provisions are set out in chapter 14 and chapter 15. 7. RISK FACTORS Investing in shares is subject to numerous risks. Prior to making any investment decision regarding shares in Atlantic Airways, all potential investors should consider all the information in this Summary any document that form a part of the Prospectus and, in particular, the risks and uncertainties described below that could materially affect Atlantic Airways and any investment made in its shares. If any of these events occurs, the trading price of the shares could decline and investors might lose a part of their investment or even all of it. Additional risks and uncertainties that do not currently exist, that are not presently considered material, or of which Atlantic Airways is unaware may also impair its business and operation. Examples of risk factors that may have a material effect on the price of the Issuer's shares are market risk, liquidity risk and counterparty risk. The share price can fluctuate considerably due to factors such as variations in operating income or costs, changes in the market environment, adverse publicity about the Company and its products in the media and changes to the Company’s competitive position. Among the important risks to which Atlantic Airways is directly exposed are risk factors relating to the Company as an airline operator, such as fuel supply and cost, utilisation rates, seasonality and international terrorism and epidemics. Changes in regulations and applicable law are also potential risk factors worth considering. 8. DOCUMENTS ON DISPLAY For the life of this Summary, published on 14 November 2007, the following documents may be obtained from Atlantic Airways' registered office Vágar Airport, FO-380 Sørvágur, Faroe Islands and electronically from the Company's website (www.atlantic.fo): • The Issuer’s articles of association. • The Issuer’s audited annual financial statements for the financial year ended 3 1 December 2004. • The Issuer’s audited annual financial statements for the financial year ended 3 1 December 2005.

Summary - 13 • The Issuer's audited annual financial statements for the financial year ended 3 1 December 2006. • The Issuer's audited financial statement for the period 01.01.07-30.06.07. The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Summary which is capable of affecting the assessment of the offered shares and which arises or is noted between the time when this document is approved and the final closing of the offer to the public or, as the case may be, the time when trading on OMX ICE begins, prepare a supplement to this Summary.

Summary - 14

II SECURITIES NOTE

CONTENTS

1. RISK FACTORS ...... 4 1.1. Risks related to investment in the Issuer's shares ...... 4 1.1.1. Risks inherent in equity investments ...... 4 1.1.2. Securities regulation ...... 4 1.1.3. Further share capital increase can dilute shareholdings ...... 5 1.1.4. Shareholder structure ...... 5 2. PERSONS RESPONSIBLE ...... 6 2.1. Statement from the Issuer ...... 6 2.2. Statement from the Offeror ...... 6 3. STATUTORY AUDITORS ...... 7 4. MANAGER ...... 8 5. REFERENCES AND GLOSSARY OF TERMS AND ABBREVIATIONS ...... 9 6. NOTICE TO INVESTORS ...... 11 7. KEY INFORMATION ...... 13 7.1. Working capital statement ...... 13 7.2. Capitalisation and indebtness ...... 13 7.3. Reasons for the offering and use of proceeds ...... 15 7.4. Interests of natural and legal persons involved in the listing and/or offering ...... 15 8. INFORMATION CONCERNING THE SECURITIES TO BE OFFERED / ADMITTED TO TRADING ...... 16 8.1. Total share capital ...... 16 8.2. Issue and share characteristics ...... 16 8.3. Share increase...... 16 8.4. Rights ...... 16 8.5. Dividend policy ...... 17 8.6. Right to dividends ...... 17 8.7. Right of ownership and transfer ...... 17 8.8. Mandatory takeover bid rules ...... 17 8.9. Squeeze-out and sell out rules ...... 18 8.10. Takeover bids ...... 19 8.11. Tax issues ...... 19 8.11.1. Withholding tax on dividends ...... 19 8.11.2. Capital gains and losses on disposal of shares ...... 19

Securities Note - 2 8.11.3. Commercial trading in shares ...... 19 8.11.4. Investors living outside the Faroe Islands ...... 19 8.12. Dissolution of the Company ...... 20 9. TERMS AND CONDITIONS OF THE SHARE OFFERING ...... 21 9.1. Offeror and Manager ...... 21 9.2. Timetable ...... 21 9.3. Process of the share offering ...... 21 9.3.1. Offering through bookbuilding ...... 22 9.3.2. Private offering to employees ...... 23 9.3.3. Public offering ...... 23 9.4. Registering subscriptions ...... 24 9.5. The outcome of public share offering made public ...... 25 9.6. Payment ...... 25 9.7. Share delivery...... 25 9.8. Underwriting ...... 25 10. ADMISSION TO TRADING AND DEALING ARRANGEMENTS ...... 26 10.1. Listing on OMX ICE Main Market – Admission to trading ...... 26 10.2. Market making ...... 26

Securities Note - 3 1. RISK FACTORS The risks and uncertainties described below are factors that are material to the Issuer and any investment made in its shares. If any combination of these events occurs, the trading price of the shares could decline and investors might lose part of their investment or even all of it. Additional risks and uncertainties that do not currently exist, that are not presently considered material, or of which the Issuer is unaware may also impair the business and operation of the Issuer. The following discussion is not exhaustive. 1.1. Risks related to investment in the Issuer's shares

1.1.1. Risks inherent in equity investments Equity investments involve a variety of risks. Examples of such risk factors that may have a material effect on the price of the Company’s shares, and thereby on the investment value, are market risk*, liquidity risk** and counterparty risk***. The share price can fluctuate considerably due to factors such as variations in operating income or costs, changes in the market environment, adverse publicity about the Company and its products in the media and changes to the Company’s competitive position. Moreover, it must be kept in mind that shares are a subordinated claim on the assets of companies. This means that in the event of the Company’s liquidation, the shareholders will receive what is left after all other claims have been met. In many countries, shares have yielded a better return than bonds measured over long periods of time. Nevertheless, long periods can also be found where the return on shares has been worse than on bonds and even negative. Those who intend to invest in the Company should know that there is no guarantee of a return on their investment in the future and investors should bear in mind that even though stocks can provide a good return in general, there is always a risk that an investment in the shares of an individual company will decline in value. It is therefore suggested that those who intend to invest in stocks pay close attention to diversifying their risk and seek investment advice. * Market risk is the current or prospective risk to earnings from adverse movements in, for example, jet fuel costs, aeroplane prices, interest rates and foreign exchange rates – and in the airline business it's especially the USD since investments and fuel costs are heavily influenced by the USD. ** Liquidity risk arises from situations in which a party interested in trading an asset is unable to do so because nobody in the market wants to trade that asset. Liquidity risk becomes particularly important to parties who are about to hold or currently hold an asset, since it affects their ability to trade. *** The risk that the other party in an agreement will default. In general, counterparty risk can be reduced by having an organisation/institution with extremely good credit act as an intermediary between the two parties.

1.1.2. Securities regulation The Issuer is subject to the provisions of Faroese and Icelandic regulations on securities, contained i.a. in the Royal Decree No. 87/2006 and the Icelandic Act on Securities Transactions No. 208/2007 and governmental regulations. Due to the fact that the Company is expected to be listed on the OMX ICE Main Market, the Issuer is also subject to the provisions of rules adopted by OMX ICE. The Issuer endeavours to comply with the said provisions, and any violation of these provisions may have a financial impact on the Issuer. Serious breaches may result in OMX ICE ceasing to list the Company. Should the Issuer violate the respective rules, it may furthermore have an impact on the Issuer's reputation and consequently result in the price of the shares dropping.

Securities Note - 4 Parties investing in the Issuer's shares may thereby become subject to such public regulation relating to securities transactions, such as rules relating to takeover bids, public disclosure of ownership stakes, etc.

1.1.3. Further share capital increase can dilute shareholdings If new shares in the Issuer are issued, the proportional shareholding of those parties who already hold shares in the Issuer will be reduced accordingly, unless they themselves acquire the new shares pro rata to their existing holdings. The purpose of increasing capital is normally to finance projects with the long-term intention of making the Issuer more valuable in the future. Shareholders may therefore be faced with increased risk for their investment alongside the dilution of their shares. It is possible that the Issuer will consider increasing its share capital further in the future in order to finance its continuing growth.

1.1.4. Shareholder structure The structure of shareholder ownership can be a risk factor for investors. A lack of leading investors or large concentrations of ownership are examples of circumstances that can have negative effects. Investors should be aware of the fact that ownership of the Issuer can change rapidly and without any prior warning. After the first sales round the Government will still be the owner of 67% of the share capital of Atlantic Airways. See chapter 7.3 for further information on the sales rounds planned by the Government. According article 78 of the Royal Decree No. 250/1993 this gives them the power to change the articles of association without support from any other shareholder. No changes can be made in the articles of association without the Governments acceptance as long as they own more than 1/3 of the Company. According the explanatory memorandum to the law on privatisation of Atlantic Airways the continued plan is to sell additional 33% subsequent to the listing to institutional investors. With a parliamentary election coming up this plan can be changed or aborted. The election will be held 19 January 2008 at latest.

Securities Note - 5 2. PERSONS RESPONSIBLE

2.1. Statement from the Issuer Atlantic Airways in its capacity as Issuer, Faroese ID-No. 1223, registered office at FO-380 Sørvágur, the Faroe Islands, hereby declares that having taken all reasonable care to ensure that such is the case, the information contained in this Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Tórshavn, 9 November 2007 On behalf of Atlantic Airways

Christian Andreasen Magni Arge Marius Davidsen Chairman of the Board Managing Director Financial Director

2.2. Statement from the Offeror The Faroese Government in its capacity as Offeror, registered office at Tinganes, FO-100 Tórshavn, the Faroe Islands, hereby declares that having taken all reasonable care to ensure that such is the case, the information regarding the share offering contained in this Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Tórshavn, 9 November 2007 On behalf of the Faroese Government

Bjarni Djurholm Minister of Trade and Industry

Securities Note - 6 3. STATUTORY AUDITORS

Auditor's statement As auditors of Atlantic Airways P/F, appointed at the annual general meeting, we examined whether the financial information prepared by the management of Atlantic Airways P/F in the prospectus is consistent with the said financial statements. The Prospectus is the responsibility of the Board of Directors and Management of Atlantic Airways P/F. Our responsibility in to express an opinion on financial information included in the prospectus based on our work.

Basis of Opinion We have examined the financial information in the prospectus and found that the financial information is consistent with the Annual Accounts for 2004, 2005, 2006 and the interim accounts for the first half of 2007. Financial Statements of the Company for the interim accounts for the first half of 2006 have not been audited or reviewed. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion We confirm that all information in this prospectus regarding financial information is consistent with the said financial statements.

Tórshavn, 9 November 2007

HLB Rasmussen & Weihe, P/F State Authorised Public Accountants Hoyvíksvegur 5, P.O.Box 30 FO-110 Tórshavn, Faroe Islands

Hans Laksá State Authorised Public Accountant

Securities Note - 7 4. MANAGER The Manager, Kaupthing Bank hf., Icelandic ID-No. 560882-0419, registered office at Borgartún 19, 105 Reykjavík, Iceland, has been the listing advisor to the Issuer in the preparation of this Securities Note. Having taken all reasonable care to ensure that such is the case, the information contained in this Securities Note is, to the best of the Manager's knowledge, in accordance with the facts and contains no omission likely to affect its import.

Reykjavík, 9 November 2007 On behalf of Kaupthing Bank hf.

Peter Holm Managing Director of Kaupthing Bank, Faroese Branch

Securities Note - 8 5. REFERENCES AND GLOSSARY OF TERMS AND ABBREVIATIONS References to the “Issuer”, "Atlantic Airways" and "the Company" in this Securities Note shall be construed as referring to Atlantic Airways P/F, Faroese ID-No. 1223, unless otherwise clear from the context. Atlantic Airways P/F is the legal Faroese name of the Issuer. References to the "Offeror", "the Faroese Government" and "the Government" in this Securities Note shall be construed as referring to the Faroese Government, the Home Government of the Faroe Islands, unless otherwise clear from the context. Føroya Landsstýri is the Faroese name of the Offeror. References to “OMX ICE” in this Securities Note shall be construed as referring to OMX Nordic Exchange Iceland hf., Icelandic ID-No. 681298-2829, unless otherwise clear from the context. References to the "OMX ICE Main Market” in this Securities Note shall be construed as referring to the Main Market of OMX Nordic Exchange Iceland hf., unless otherwise clear from the context. References to the "Faroese security market" in this Securities Note shall be construes as reffering to the Virðisbrævamarknaður Føroya P/F, abbreviated VMF. On 14 March 2004 the "Iceland Stock Exchange" now OMX Nordic Exchange Iceland hf. and the Faroese Securities Market entered into a collaboration agreement relating to the listing of Faroese securities on ICEX (VMF Market on ICEX) and facilitation of trading of Faroese securities. The Faroese securities are treated in a comparable manner to Icelandic securities listed on OMX ICE but are prefixed with a "FO-" in their trading symbol. Atlantic Airways' shares are denominated in Danish Kroner and issued through VP. References to “VP” in this Securities Note shall be construed as referring to the VP Securities Services, i.e. to Værdipapircentralen A/S, Helgeshøj Allé 61, 2630 Taastrup, Denmark, Danish ID-No. 21599336, unless otherwise clear from the context. References to the "Manager” in this Securities Note shall be construed as referring to Kaupthing Bank hf. – Investment Banking division, Icelandic ID-No. 560882-0419, unless otherwise clear from the context. References to "Kaupthing Bank" shall be construed as referring to Kaupthing Bank hf., Icelandic ID-No. 560882-0419, unless otherwise clear from the context. References to the “Prospectus” in this Securities Note shall be construed as referring to the Summary, the Registration Document and the Securities Note, published on 14 November 2007, along with the Appendices, unless otherwise clear from the context.

Securities Note - 9 Abbreviations used in this Securities Note are listed in the following table.

Royal Decree No. 250/1993 Royal Decree No. 250 from 3 May 1993 on Public Limited Companies in force in the Faroe Island with amendments. DKK Danish krone FME Icelandic Financial Supervisory Authority Guidelines on Privatising See www.tinganes.fo for further information Governmental Companies ICEX Icelandic Stock Exchange, now OMX Nordic Exchange Iceland hf. ISK Icelandic króna OMX ICE OMX Nordic Exchange Iceland hf. Royal Decree No. 87/2006 Royal Decree No. 87 from 10 February 2006 on Trading in Securities in force in the Faroe Islands with amendments. VP Værdipapircentralen A/S, Helgeshøj Allé 61, 2630 Taastrup, Denmark, Danish ID-No. 21599336 The Danish central for clearing and settlement of securities. The English title is VP Securities Services.

Securities Note - 10 6. NOTICE TO INVESTORS This Securities Note concerns the offering of Atlantic Airways shares in the period 19-27 November 2007, when the Offeror will sell 341,550 shares in the Company. This Securities Note also concerns the expected listing of the Company on the OMX ICE Main Market. The Share Offer is to be conducted through three tranches, an offer through bookbuilding, an offer to Atlantic Airways' employees and an public offering. The offering and expected listing will proceed pursuant to Icelandic law and regulations. This Securities Note is prepared pursuant to current legislation and government regulations and OMX ICE rules that apply to the offering and listing. OMX ICE has reviewed and scrutinised this Securities Note which is only published in English. This Securities Note forms a part of the Prospectus which consists of three independent documents: a Summary, a Registration Document and a Securities Note, along with the Company's articles of association and financial statements for the period 2005, 2006 and the half-year 2007, which are to be found in Appendices. The board of directors of Atlantic Airways resolved on 2 March 2006 to prepare the Issuer for a listing on the OMX ICE Main Market. Atlantic Airways fulfils the conditions for listing on the Main Market regarding the size and operating history. Following the share offering Atlantic Airways is expected to fulfil the conditions for listing on the Main Market regarding the size, operating history and share distribution. However, it can not be guaranteed that the requirements for share distribution will be fulfilled. If these requirements are not fulfilled, the listing on OMX ICE will not take place. The listing is expected to take place on 10 December 2007 which will then be the earliest date on which the shares will be admitted to trading on OMX ICE. The date of listing, which may occur later, will be announced one day in advance on www.omxgroup.com/nordicexchange. This Securities Note is prepared to provide clear and thorough information on Atlantic Airways shares. Investors are reminded that Atlantic Airways and its associated and minority undertakings operate in a market that changes rapidly and the Company has grown substantially in recent years. Investment risk in companies operating under such circumstances is generally greater than in companies operating in a more stable environment. Investors are encouraged to acquaint themselves thoroughly with all documents forming the Prospectus as well as its Appendices. Investors are advised to pay particular attention to the chapters on Risk Factors in the Registration Document and the Securities Note dated 14 November 2007. Investors are advised to consider statements made by the Issuer, the Offeror and the Manager of the Securities Note. Information provided in all documents forming the Prospectus is based on facts that are current at the date of publication of the Prospectus. These facts may change between the date of publication and the date the shares are listed. The Issuer will notify OMX ICE and publish an annex to the Prospectus should new information of relevance emerge for the evaluation of Atlantic Airways or the Company's shares during this period. Investors are therefore advised to study all public information issued by or relating to Atlantic Airways and not to rely exclusively on information in this Securities Note or any of the documents forming a part of the Prospectus. This Securities Note or any of the documents forming a part of the Prospectus should not be considered or construed as a promise by the Issuer, Offeror, Manager or other parties of future success in either operations or return on investments. Investors are reminded that investing in shares entails risk as the decision to invest is based on expectations and not promises. Investors must primarily rely on their own judgement regarding any decision to invest in the Issuer's shares, bearing in mind the business environment in which the Company operates, anticipated profits, external conditions and the risk inherent in the investment itself. Prospective investors are advised to contact experts such as financial institutions to assist them in their assessment of the shares in Atlantic Airways as an investment option. Investors are advised to consider their

Securities Note - 11 legal status, including taxation issues that may concern the purchase or sale of shares in the Company and seek independent advice in this respect. This Securities Note, or any document forming a part of the Prospectus, is not being distributed and must not be mailed or otherwise distributed or sent in or into any country in which distribution would require any additional registration measures or other measures to be taken, other than as applicable under Icelandic law and regulations, or would be in conflict with any law or regulation in the respective country. This Securities Note, or any document forming a part of the Prospectus, is not being sent out, directly or indirectly, by use of mail or any other means or instrumentality (including, without limitation, facsimile transmission, electronic mail, telex, telephone and the Internet) in or into the United States, Australia, Canada or Japan, and the offer cannot be accepted by any such use, means, instrumentality or facility of, or from within, the United States, Australia, Canada or Japan. Accordingly, this Prospectus, and any related offering documents are not being and may not be mailed or otherwise distributed, forwarded or sent in or into the United States. The shares in the offer will be offered for sale on Faroe Island but will be available to investors outside the Faroe Island as well. Neither the delivery of this Securities Note nor the offering, sale or delivery of any Shares shall under any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the shares is correct as of any time subsequent to the date indicated in the document containing the same. The Manager expressly does not undertake to review the financial condition or affairs of the Issuer during the validity of this Securities Note or to advise any investor in the shares of any information coming to their attention.

Securities Note - 12 7. KEY INFORMATION 7.1. Working capital statement The chairman of the board and the managing director on behalf of the Issuer declare that in their opinion the Company's working capital is sufficient for the Company’s present requirements. 7.2. Capitalisation and indebtness The following table sets forth the capitalisation. Mortgage loans are secured for an amount of DKK 124 million. There has been no significant change in the financial or trading position of Atlantic Airways which has occurred since 30 September 2007, for which the most recent financial accounts were prepared by the management of Atlantic Airways. The figures are not audited nor reviewed by the statutory auditors.

(All numbers are in DKK and are as at 30 September 2007)

Current debt Mortgage loans (current portion of long-term debt) 7,048,368 Trade payables 51,995,232 Accruals and deferred income 8,006,762 Total current debt 67,050,362

Non-current debt Mortagage loans 68,149,933 Total non-current debt 68,149,933

Equity Share capital 103,500,000 Other reserve 23,978,436 Total equity 127,478,436

Total capitalisation 262,678,731

Securities Note - 13 To provide information on the Atlantic Airways's indebtness the following table analyses the company's net indebtness in the short term and in the medium to long term:

(All numbers are in DKK and are as at 30 September 2007)

A. Cash 35,907,514 B. Cash equivalent 0 C. Trading securities 1) 13,746,000 D. Total liquidity (A) + (B) + (C) 49,653,514

E. Current Financial Receivables 64,309,556

F. Current Bank debt 0 G. Current portion of non current debt 2) 7,048,368 H. Other current financial debt 3) 60,001,994 I. Total Current Financial Debt (F) + (G) + (H) 67,050,362

J. Total Net Current Financial Indebtedness (I) - (E) - (D) -46,912,708

K. Non Current Bank Loans 68,149,933 L. Bonds Issued 0 M. Other non current loans 0 N. Total Non current Financial Indebtedness (K) + (L) + (M) 68,149,933

O. Total Net Financial Indebtedness (J)+(N) 21,237,225

1) Corresponds to the total of financial assets held for trading. 2) Corresponds to the current portion of bank loans payable within 12 months. 3) Corresponds to the total of trade payables, employment obligations and other liabilities for up to 12 months.

Securities Note - 14 7.3. Reasons for the offering and use of proceeds The Faroese Government announced on 2 March 2006 in connection with the law on the privatisation of Atlantic Airways that the Government will sell 33% of its holdings in Atlantic Airways, corresponding to 341,550 shares. All the shares are of the same class. The Government has decided to offer 30% of the shares to public investors and 3% of the shares will be offered to the employees of Atlantic Airways. According to the explanatory memorandum to the law on privatisation of Atlantic Airways, the Government intends to sell an additional 33% of the share capital following the listing of the Company. The timing of the second round is not decided yet. The remaining 34% will be maintained as government property until further ado. The proceeds from the share offering will be received by the Faroese Government as the Offeror. The amount of proceeds will depend on the outcome of the bookbuilding process and the number of shares sold. Article 1 of the Guidelines on Privatising Governmental Companies states the following incentives for the privatisation of a number of governmental companies*: • To clarify the border between the public and private sectors. • To protect the taxpayers' capital currently locked-up in governmentally owned companies. • To reduce public debt. • To increase the options of companies which are currently owned by the government. • To strive to create value. • To increase the numbers of shareholders in commercial companies. • To strengthen the Faroese capital market.

*This information has been accurately reproduced and as far as the issuer is aware and is able to ascertain, no facts have been omitted which would render the reproduced information inaccurate or misleading.

The Offeror will bear the costs directly related to the share offering. These costs are expected to amount to approximately DKK 4.5 million, including advisory fees to the Manager, cost of due diligence, underwriting fee, printing costs and advertising costs. Cost incurred at OMX ICE in relation to the listing and future charges from OMX ICE will be paid by the Issuer. The cost related to the listing is ISK 850,000 corresponding to around DKK 75,000. Dependent on the outcome of the bookbuilding process the total proceeds from the offering are DKK 82,655,100 minimum and DKK 89,144,550 maximum. Deducting the costs related to the offering net proceeds to the offer is anticipated to be DKK 78,155,100 minimum and DKK 84,644,550 maximum.

7.4. Interests of natural and legal persons involved in the listing and/or offering To the best knowledge of the issuer, there are no interest, including conflicting ones, that are material to the issue/offer.

Securities Note - 15 8. INFORMATION CONCERNING THE SECURITIES TO BE OFFERED / ADMITTED TO TRADING 8.1. Total share capital The total number of issued shares in Atlantic Airways is 1,035,000. Each share has a nominal value of DKK 100. Total nominal share capital therefore is DKK 103,500,000. All issued share capital has been paid for. Atlantic Airways does not hold any own shares. According the articles of association the Board is authorised in the period from 1 November 2007 to 31 December 2008 to buy own shares up to a maximum nominal value of DKK 4 million at the rate of minimum 100 and maximum 300. According to article 48 subsection 2 of the Royal Decree No. 250/1993 authorization shall be given on the general meeting to the board if the company shall acquire own shares. The articles of association do not reveal any pre-emption right in relation to the shares sold in the share offering described in this Securities Note. Shareholders only enjoy pre-emptive rights in case of a share capital increase as described in section 8.4. 8.2. Issue and share characteristics All the shares of Atlantic Airways are of the same class and carry equal rights. Atlantic Airways share capital consists of shares of DKK 100 and multiples thereof. The shares have been created under Royal Decree No. 250/1993. Atlantic Airways shares are all issued electronically at the VP (Værdiparpircentralen) and are registered there under the name of the relevant shareholder or their nominees. The ISIN number of the shares is FO0000000062 The board of directors of Atlantic Airways has requested that FO-AIR be the symbol for the Issuer on OMX ICE and the ticker symbol for the Issuer's shares in the OMX ICE trading system. 8.3. Share increase According to article 29 of the Royal Decree No. 250/1993 authorisation to increase the share capital shall be given on the general meeting, with the same majority of votes, as needed for changes in the articles of association. A decision on share capital increase of the Company is valid only if it has the support of at least 2/3 of the cast votes and the support of at least 2/3 of the share capital represented at the meeting. 8.4. Rights All the shares of Atlantic Airways are of the same class and carry equal rights. The Issuer's shares carry no special rights and no restrictions are placed on them. Owners of the Issuer’s share capital have the right to vote at shareholders' meetings, the right to receive dividends when declared, enjoy pre-emptive rights to new shares in case of a share capital increase, unless waived, and the right to a portion of the Issuer’s assets upon liquidation, all according to share ownership, statutes and the Issuer’s articles of association in effect at any given time. Shareholders are not obliged to redeem their shares unless otherwise required by law.

Securities Note - 16 8.5. Dividend policy The Issuer's board of directors has not set a dividend policy for Atlantic Airways. In 2004 and 2005 Atlantic Airways paid out respectively DKK 2 million and DKK 10 million to the sole owner, the Faroese Government. In 2006 no dividend was paid out. 8.6. Right to dividends A resolution on the distribution of dividends shall be made at an annual general meeting which shall be held before the end of April each year. According to article 2 of the Issuer's articles of association, dividends shall be paid to those that are registered as the owners of the Issuer's shares when the general meeting which decides to pay out dividends is held. If shareholders' dividend has not been paid, then the shareholders may collect their dividend at the Issuer's office within five years of payment being due. This right to a dividend lapses five years for the date when the dividend payment falls due according to Act No. 274/1908 on the lapse of certain claim rights in force in the Faroe Islands. 8.7. Right of ownership and transfer There are no limitations on the authorisation to transfer Atlantic Airways shares, and shareholders may pledge their shares unless prohibited from doing so by law. Nevertheless, it should be noted that individual shareholders may agree that their shares are subject to certain restrictions. A party acquiring a share in the Issuer cannot exercise its right as a shareholder unless its name has been registered in the share register. Only general legislative rules apply to the transfer of shares in Atlantic Airways. Once a shareholder has fully paid his share to the Issuer, he shall be issued an electronic certificate in the VP and a registered title which confers on him the full rights provided for in the articles of association of the Issuer. Transfer of shares becomes effective at registration with the VP. The electronic registration of securities is governed by Royal Decree No. 87/2006 and Ministerial Regulation No. 199 from 16 March 2006 on Registration of Securities which is based on that Royal Decree. The Issuer shall accept the share register as full proof of ownership to shares and attached rights. Dividends as well as all announcements shall at any given time be sent to the party registered in the Issuer’s share register as owner of the shares in question. The Issuer is in no way liable if payments or announcements do not reach their recipients because a change of address has not been notified to the share register. Rights to electronic shares must be registered at the VP if they are to enjoy legal protection against legal executions and disposal by means of an agreement. Only account operators which have concluded a valid agreement of association with the VP are authorised to act as intermediaries in registration of title in the VP. A shareholder must therefore select an associated account operator which shall serve as intermediary in electronic registration of title of securities in his/her name. Registration of the ownership of an electronic share at the VP, subsequent to a securities depository final entry, formally gives a registered owner legal authorisation to the rights for which he is registered. The priority of incompatible rights is determined by the chronological order of requests from an associated account operator reaching the VP. 8.8. Mandatory takeover bid rules Chapter X of the Icelandic Act on Securities Transactions No. 108/2007 states that if a party has directly or indirectly acquired control in a listed company it shall present other shareholders with a takeover bid. The Royal Decree No. 87/2006 in force in the Faroe Islands state similar

Securities Note - 17 provisions for mandatory takeover bids. In certain respects the law in force in the Faroe Islands is not as stringent as the Icelandic Act. But as described in chapter 7 an investor in the shares of Atlantic Airways has to comply with the statutes in both Faroese and Icelandic law concerning listed companies. See chapter 8 of the Royal Decree No. 87/2006 for further information. According to article 100 in the Icelandic Act No. 108/2007 if a party has directly or indirectly acquired control of a limited-liability company, which has obtained a listing for one or more classes of its shares on a regulated securities market, this party must, no less than four weeks after achieving such control, make a takeover bid to other shareholders in the company, i.e. a bid to purchase their shares in the company. Control shall mean that the party concerned, and parties acting in concert with that party: (1) have acquired a total of at least 40% of the voting rights in the company, (2) have the right, based on an agreement with other shareholders, to control at least 40% of votes in the company, or (3) have acquired the right to appoint or dismiss a majority of the company’s Board of Directors. Parties shall be deemed to be acting in concert if they have reached an agreement allowing one or more of them to acquire control, or to prevent a takeover from succeeding, whether this agreement is formal or informal, written, oral or otherwise. According to article 100 in the Icelandic Act No. 108/2007 parties shall, however, always be deemed to act in concert if the following connections exist, unless the opposite is proved to be the case: (1) married couples, registered or co-habiting partners, and children of the party who are not financially competent; (2) connections between parties which directly or indirectly involve control by one party of the other, or if two or more companies are directly or indirectly under the control of the same party. Regard shall be had for connections between parties as provided for in Points 1, 2 and 4; (3) companies in which a party directly or indirectly holds a substantial holding, i.e. where the party directly or indirectly owns at least one-third of the voting rights in the company concerned. Regard shall be had for connections between parties as provided for in Points 1, 3 and 4; (4) connections between a company and its Board of Directors and managing directors. According to article 100 in the Icelandic Act. No. 108 a mandatory bid, as provided for in the second paragraph in this chapter (chapter 8.8), becomes the obligation of the party acting in concert who increases his/her share with the result that the limit referred to in the first paragraph is reached. The Financial Supervisory Authority may grant exemptions from mandatory bids as provided for in the first paragraph if special circumstances so warrant. The Financial Supervisory Authority may set conditions for such exemptions, e.g. concerning the time limit which the party in question shall have to dispose of holdings which are in excess of allowable limits and the treatment of voting rights during that period. According to Icelandic Act No. 108/2007 the offering party shall offer all the shareholders in the same class the same terms. The price offered shall be at least the highest price which the offering party or related parties in collaboration with the party have paid for shares in the company in the last six months prior to the offer. The offered price shall, however, at least be equal or greater than the last price the day before the offering party became dominant or at the date of the announcement. At the time of the future expected listing, the Faroese Government will own over 67% of the share capital in Atlantic Airways, which exceeds the mandatory takeover bid threshold. According to the FME's interpretation the article regarding mandatory bid in the Icelandic Act on Securities Transactions, published on http://fme.is/?PageID=229, the obligation to issue a takeover bid does not arise due to a single shareholder or a shareholder acting in concert with others having legal control over a company at the time of listing on a regulated stock exchange. This exemption is subject to the shareholding having been disclosed at the time of listing. 8.9. Squeeze-out and sell out rules In chapter 4 of Royal Decree No. 250/1993 it is stated that if the offering party has acquired more than 9/10 of the share capital of the company then the offering party and the board of the

Securities Note - 18 company can jointly agree to unilaterally squeeze out the remaining shareholders. Furthermore, if the offering party has acquired more than 9/10 of the share capital of the company then the remaining shareholders can unilaterally request that the offering party acquire their remaining shares at the same price as in the takeover bid. 8.10. Takeover bids No public takeover bids have been offered by third parties for the Issuer’s equity, neither have such bids been placed during the last financial year, the current financial year or earlier. 8.11. Tax issues The purpose of this section is to provide prospective investors with a brief overview of the taxation rules in force in the Faroe Islands regarding investments in shares. As the content of this section shall not in any way be construed as tax advice to potential investors, potential investors should seek advice from their own tax consultant with respect to the tax implications of investments in shares. The shares of Atlantic Airways are subject to taxation according to the laws in effect at any given time in the Faroe Islands, currently being Taxation Act in force in the Faroe Islands No. 164 from 21 December 2001 with amendments and the Taxation Act in force in the Faroe Islands No. 86 from 1 September 1983 with amendments.

8.11.1. Withholding tax on dividends Atlantic Airways is obliged to withhold taxes on dividend distributed, regardless of whether the investor is resident in the Faroe Islands or not, however not on dividend distributed to companies and foundations resident in the Faroe Islands. The withholding tax is 18% for dividend paid out to non-resident corporations and 35% for dividend paid out to private investors, both resident and non-resident. For Faroese residential investors the withholding tax is a final tax. However, when filing the capital income tax return, losses on disposal of shares and interest expenses from loans taken out in connection with investment in securities can be deducted against the dividend.

8.11.2. Capital gains and losses on disposal of shares For Faroese investors, the profit from the sale of shares in Atlantic Airways is taxable capital income and will be taxed at 18% for companies or 35% for individuals. Losses on disposal of shares can be deducted against other positive capital income. In case the loss can not be offset against a positive capital income, the loss can be carried forward indefinitely. For companies, losses in general taxable income can be offset against positive capital income. For investors, not resident in the Faroe Islands, capital gains and losses on the disposal of shares in Atlantic Airways are not subject to Faroese taxation, c.f. below.

8.11.3. Commercial trading in shares For Faroese investors who have commercial trade in shares, received dividend and profit/losses on disposal of shares are considered general taxable income and taxed at a rate of 18% for companies and up to a marginal tax rate of approximately 54% for private investors. This exception is mainly attributable to banks and other related financial operations.

8.11.4. Investors living outside the Faroe Islands Atlantic Airways is obliged to withhold taxes on dividend distributed to investors living outside Faroe Islands.

Securities Note - 19 The withholding tax is 18% for dividend paid out to corporations and 35% for dividend paid out to private investors. The Faroe Islands have ratified double taxation treaties with Denmark, Norway, Sweden, Iceland, Finland, Greenland, Austria, Switzerland and India. Pursuant to these treaties the recipient of dividends from a Faroese company may seek a refund of a portion or all of the tax withheld in the Faroe Islands. Non-resident investors are not liable to pay taxes to the Faroe Islands on capital gains and losses on the disposal of shares in P/F Atlantic Airways. Non-resident investors should seek advice from their tax consultant about the taxation of gains and losses on disposal of shares as well as the local rules on taxation of dividend distributed from a Faroese company. 8.12. Dissolution of the Company Pursuant to chapter 14 in the Royal Decree No. 250/1993 proposals on the division or dissolution of the Company will be subject to the same provisions as amendments to the articles of association. Any decision on the dissolution of the Company shall be made by shareholders controlling at least two thirds of the Company’s shares. A shareholders' meeting, which has made a lawful decision on the division or dissolution of the Company, shall also decide on how the assets of the Company should be disbursed and debts paid. The meeting shall also decide if the Company is to be divided by a public authority or a winding-up committee is elected in accordance with provisions in the Royal Decree No. 250/1993. If a shareholders’ meeting has decided on the dissolution of the Company, it shall without delay be announced to The Company Registration Authority, 110 Tórshavn. Otherwise, a dissolution or a division of the Company, or a merger with another company shall be governed by the Royal Decree No. 250/1993 as the provisions are set out in chapter 14 and chapter 15.

Securities Note - 20 9. TERMS AND CONDITIONS OF THE SHARE OFFERING 9.1. Offeror and Manager

Offeror The Ministry of Trade and Industry on behalf of the Faroese Government Address: Tinganes, FO 100 Tórshavn, Faroe Islands Telephone number: +298 356060

Manager of offering and listing on OMX ICE Main Market Kaupthing Bank hf. – Investment Banking division. Icelandic ID-No. 560882-0419 Address: Borgartún 19, 105 Reykjavík, Iceland Telephone number: +354 444 6000 9.2. Timetable Subscription period ...... 19-27 November 2007 First possible closing of Subscription period ...... 21 November 2007 Share price fixed on basis of a bookbuilding process ...... 28 November 2007 Outcome of the offering made public ...... 28 November 2007 Payment for the allocated shares ...... 7 November 2007 First day of trading ...... 10 December 2007 If the subscription period is closed prior to 27 November 2007 all subsequent dates will be moved ahead accordingly. 9.3. Process of the share offering The total proceeds from the share offering are expected to range from DKK 82,655,100 to DKK 89,144,550. A total of 341,550 (33% of total 1,035,000) shares in Atlantic Airways are to be offered for sale. All shares in all tranches of the share offering are to be sold at the same price (bookbuilding price) which may range from DKK 242 per share to DKK 261 per share. Upon acquiring the shares, no fees related to the transaction will become payable by the investor to the Offeror, Manager or the Issuer. All shares offered in this share offering are existing shares owned by the Offeror. The share offering is expected to be underwritten. See section 9.8 for further information about the underwriting. The offering described in this Securities Note will constitute a public offering pursuant to article 43 of the Icelandic Act on Securities Transactions No. 108/2007 and Royal Decree No. 87/2006 in force in the Faroe Island.

Securities Note - 21

The share offer is to be conducted through three separate tranches: 1. Offering through bookbuilding: 155,250 shares offered to investors willing to order minimum 20,000 shares in a bookbuilding process. See section 9.3.1 for further details on this tranche. 2. Private offering to employees: 31,050 shares offered to the employees and the board of Atlantic Airways. See section 9.3.2 for further details on this tranche. 3. Public offering: 155,250 shares offered to investors ordering up to 20,000 shares. See section 9.3.3 for further details on this tranche. Dependent on the demand presented by different group of investors the Offeror reserve the right to allocate the offered shares differently. There is no limit to such claw back. The subscription period for the three tranches are coincident. As a consequence the subscription price will not be fixed before the end of the subscription period. Investors participating in the public offering or the private offering to the employees of Atlantic Airways have to subscribe for either a given number of shares or a total amount in market value. There is no over-allotment facility or green-shoe.

9.3.1. Offering through bookbuilding

Offered amount, price range and number of shares to be sold 15% of total issued shares in Atlantic Airways will be offered through a bookbuilding process to investors who wish to order minimum 20,000 shares corresponding to a total purchase price per investor of between DKK 4,840,000 and DKK 5,220,000 dependent on the outcome of the process. A total of 155,250 shares will be offered in this tranche at a price range of DKK 242 per share to DKK 261 per share, resulting in a total proceeds in the range from DKK 37,570,500 to DKK 40,520,250. All shares are to be sold at the same price, that will be based on the outcome of the bookbuilding process. Prior to the bookbuilding process, the Manager will introduce the offer to potential investors and will, during the bookbuilding process, investigate their interest in participating in the offer with the intention to sell the aforementioned shares at the aforementioned price range. Bookbuilding will start on 19 November 2007 at 9:00 am Faroese time (corresponding to 10:00 am CET and 9:00 am Icelandic time) and finishes on 27 November 2007 at 4:00 pm Faroese time (corresponding to 5:00 pm CET and 4:00 pm Icelandic time). During this period orders will be received from investors. Only one subscription form will be accepted per investor. After the book is closed, no more orders will be accepted. In determining the basis for the allocation of investors' undertakings to subscribe in the bookbuilding process, the Offeror will consider factors such as the share price, how punctually the orders are submitted as well as the objective to obtain a strong and sufficiently broad distribution of ownership. The Offeror and Manager reserve the right not to provide investors with any reasoning about the ultimate allocation of shares.

Minimum and maximum requested subscription The minimum individual requested subscription in this tranche is 20,000 share. There is no maximum with regard to how many shares the investors might subscribe to. In case of oversubscription the shares will be allocated as follows.

Securities Note - 22 Allocation to subscribers In case of over-subscription the Offeror will, after consultation with the Manager, allocate the shares to individual subscribers as follows: (A) Individual subscriptions will be reduced pro rata based on the individual subscriptions, however the Offeror and the Manager will give full allocation to orders up 40,000 shares, which will then be deemed as each individual’s subscription; and (B) if after the adjustments set out in (A) above, the aggregate number of shares subscribed for is greater than 155,250, the Offeror and the Manager, will allocate the shares considering punctuality, meaning first come, first served. Notwithstanding point (A) and (B) the Offeror and the Manager reserve the right to allocate the shares differently considering inter alia the future liquidity of the shares.

9.3.2. Private offering to employees

Offered amount, price range and number of shares to be sold Up to 31,050 shares will be offered to the employees and the board of Atlantic Airways at the price determined in the bookbuilding process described before. At the time of subscription the price of the shares will not be known but will be in the range from DKK 242 per share to DKK 261 per share. The offered share price will be fixed at 28 November 2007. The number of shares offered in this tranche corresponds to 3.0% of total issued shares in Atlantic Airways. The total proceeds is expected to range from DKK 7,514,100 to DKK 8,104,050. The issuer in unaware of the extent to which the members of the Issuer’s management and board intend to subscribe in the private offering to employees.

Minimum and maximum requested subscription The minimum individual requested subscription in this tranche is 1 share. There is no maximum with regard to how many shares the employees and the board of Atlantic Airways might subscribe to. In case of oversubscription the shares will be allocated as follows.

Allocation to subscribers Each employee and the board of Atlantic Airways will be allocated an equal share of the 31,050 shares allocated to this tranche. In the event that the aggregate number of shares subscribed for is greater than 31,050 shares, each employee and board member will as minimum be allocated this guaranteed amount. Shares not allocated through this guarantee will be allocated to the employees and the board of the Company pro rata relative to their subscriptions.

9.3.3. Public offering

Offered amount, price range and number of shares to be sold A total of 155,250 shares will be offered to the public at the price determined in the bookbuilding process. At the time of the subscription the price of the shares will not be known but will be in the range from DKK 242 per share to DKK 261 per share. The offered share price will be fixed at 28 November 2007. The number of shares offered in this tranche corresponds to 15% of total issued shares in Atlantic Airways. The total proceeds is expected to range from DKK 37,570,500 to DKK 40,520,250.

Securities Note - 23 Minimum and maximum requested subscription The minimum individual requested subscription in this tranche is 1 share. The maximum individual requested subscription is 19,999 shares.

Allocation to subscribers In the event that the aggregate number of shares subscribed for in the public offering is greater than 155,250 shares, the Offeror, in consultation with the Manager, will allocate the shares to individual subscribers as follows: (A) Individual subscriptions will be reduced pro rata based on the individual subscriptions, which will then be deemed as each individual’s subscription (B) Notwithstanding point (A) the Offeror and the Manager will, if possible, seek to give full allocation to orders up to a certain minimum amount to be identified by the Offeror in consultation with the Manager following the subscription period.

9.4. Registering subscriptions Subscriptions for shares can be submitted via the filed paper subscription form, which is attached to this Securities Note. The subscription form can also be obtained on the website of Kaupthing Bank, www.kaupthing.fo (where there is a Faroese version and an English version) and from Kaupthing Bank at the following address: KAUPTHING BANK Bókbindaragøta 8 P.O. Box 3090 FO-110 Tórshavn Faroe Islands

Subscription for minimum 20,000 shares Investors participating in the bookbuilding process subscribing minimum 20,000 shares are advised to contact Kaupthing Bank. Subscription forms have to be delivered physically to Kaupthing Bank at the above-mentioned address or faxed to fax number +298 351501 no later than 27 November 2007 at 4:00 pm Faroese time (corresponding to 5:00 pm CET and 4:00 pm Icelandic time). Investors are reminded that in case of over-subscription the shares may ultimately be allocated in receiving order.

Subscription for less than 20,000 shares Subscription forms from investors subscribing less than 20,000 shares can be delivered to Kaupthing Bank or any other account-holding financial institution on Faroe Islands. Subscription forms shall be delivered in due time for the financial institution to be able to process and reforward the subscription form to Kaupthing Bank on 27 November 2007 at 4:00 pm Faroese time (corresponding to 5:00 pm CET and 4:00 pm Icelandic time) at latest. In case the Manager observes an over-subscription in one of the tranches early in the subscription period the Manager has the possibility to close for further subscriptions in this tranche. The first possible closing of the subscription period is 21 November 2007.

General requirements Multiple subscriptions cannot be submitted.

Securities Note - 24 From investors subscribing more than 2,000 shares the Offeror reserves the right to demand payment security which the Offeror considers adequate. Adequate payment security could be a pledge in other securities, a pledge in a bank account or a custody account. The payment security (e.g. pledge) would be cancelled upon payment of the subscription. Subscription is binding on the subscriber and shall be made by filling out the subscription form and constitute a legally binding agreement pursuant to which those subscribing are bound to purchase the shares subscribed for and/or allocated to. When subscribing, the investor declares that he has familiarised himself/herself with, understood and agreed the terms and other aspects of all documents that form the Issuer's Prospectus published on 14 November 2007. 9.5. The outcome of public share offering made public The outcome of the share public offering will be announced through OMX ICE and in the official Faroese Gazette on or about 28 November 2007. The outcome will be published on www.omxgroup.com/nordicexchange. The outcome of the share offering includes the fixed price determined in the bookbuilding process, the total number of shares sold, the proceeds from the offering along with a total subscription in each tranche and a possible reduction in subscription in case of an oversubscription in accordance with the rules described regarding allocation in these tranches. 9.6. Payment As soon as the allocation of the shares has been determined a settlement note will be sent out by the Manager by mail to the investors, indicating the number of allocated shares in Atlantic Airways and the terms of payment. Investors participating in the bookbuilding will be notified directly by the Manager before trading commences. Allocation will take place immediately after the subscription period. Payment for allocated shares will become due seven days after expiration of the time limit for the subscription. Those not receiving an allotment in the offering will not be notified. 9.7. Share delivery All the shares in Atlantic Airways are issued electronically at the VP. Shares subscribed for will be delivered to each investor no later than one trading day after such investor's shares have been paid for according section 9.6. 9.8. Underwriting Prior to subscription period an underwriting agreement will be made between the Offeror and the Faroese financial institutions, under which the financial institutions will, subject to the satisfaction of certain conditions, commit themselves to buy the offered shares for DKK 242 per share. In a tender offer the following financial institutions are invited to underwrite: Føroya Banki, Húsagøta 3, Tórshavn, Eik Banki, Yviri við Strond 2, Tórshavn, Suðuroyar Sparikassi, 900 Vágur and Norðoya Sparikassi, Ósávegur 1, Klaksvík. The Manager will act as lead underwriter and participate with minimum 20% of the shares. In case the shares wont be sold through the planned offering, as described in chapter 9, the Manager will itself purchase and pay for at minimum 20% of the shares not sold through the offering. Shares not sold through the offering or to the Manager will be purchased and paid for by other Faroese financial institutions on similar terms and conditions.

Securities Note - 25 The quotas to each financial institutions is not decided yet but will be decided prior to the subscription period and allocated in a way that minimise the costs associated with the underwriting. The cost is expected to amount to approximately DKK 1 million

10. ADMISSION TO TRADING AND DEALING ARRANGEMENTS 10.1. Listing on OMX ICE Main Market – Admission to trading The Government of the Faroe Islands resolved on 2 March 2006 to prepare the Issuer for a listing on the OMX ICE Main Market. Atlantic Airways fulfils the conditions for listing on the Main Market regarding the size and operating history. Following the share offering, Atlantic Airways is expected to fulfil its condition regarding the number of shareholders as well as the distribution of shares. The future possible listing is expected to take place on 10 December 2007 which will then be the earliest date on which the shares will be admitted to trading on OMX ICE. The date of listing, which though may occur later, will be announced one day in advance to the listing date in an official Faroese Gazette and on www.omxgroup.com/nordicexchange. The board of directors of Atlantic Airways has requested that FO-AIR become the symbol for Atlantic Airways on OMX ICE and the ticker symbol for the Issuer's shares in the OMX ICE trading system. OMX ICE has determined that one Round Lot of the Issuer's shares will amount to 20 shares. A Round Lot, as defined in the NOREX Member Rules, is the minimum number of shares which can generate a Latest Paid Price, as defined in the NOREX Member Rules, in conjunction with trading on OMX ICE. Atlantic Airways' shares have not been previously listed on a regulated stock exchange. Neither Atlantic Airways nor its associated and minority undertakings have plans to seek listing on other stock exchanges. 10.2. Market making There is no market making agreement in place. Atlantic Airways expects to enter into a market making agreement relating to the Company's shares on the OMX ICE. The aim of the market making agreement is to improve liquidity of the Issuer's shares on OMX ICE in order to promote the development of a market price and to encourage effective and transparent price formation. Atlantic Airways has invited the Faroese financial institutions mention in chapter 9.8 to participate in a tender offer for an appropriate market making agreement with the company. The terms and commitments for the contract have not been finalised yet but will be in place before the first day of trading.

Securities Note - 26

III REGISTRATION DOCUMENT

Contents

1. RISK FACTORS ...... 5 1.1. Risk relating to the Airline industry ...... 5 1.1.1. Competition ...... 5 1.1.2. Distribution system ...... 5 1.1.3. Fuel supply and cost ...... 6 1.1.4. Utilisation rates in scheduled services ...... 6 1.1.5. Expansion and employees ...... 6 1.1.6. The economy ...... 7 1.1.7. Seasonality ...... 7 1.1.8. International terrorism and epidemics ...... 7 1.1.9. Insurance issues ...... 7 1.2. Other operational risk ...... 7 1.2.1. Investments in aircraft ...... 7 1.2.2. Internal controls ...... 8 1.2.3. Information systems ...... 8 1.2.4. Third parties operators ...... 8 1.2.5. Third party guarantees...... 9 1.2.6. Airport security ...... 9 1.2.7. Accidents ...... 9 1.2.8. Risks related to reputation ...... 9 1.3. Financial risk ...... 10 1.3.1. Cost structure ...... 10 1.3.2. Currency and interest fluctuations ...... 10 1.3.3. Maintenance costs ...... 10 1.3.4. Liquidity and refinancing risk ...... 10 1.4. Regulatory and legal risk ...... 11 1.4.1. Regulation ...... 11 1.4.2. Tax ...... 11 1.4.3. Trademarks and other intellectual property ...... 11 1.4.4. Litigations ...... 11 2. PERSONS RESPONSIBLE ...... 13 2.1. Statement from the Issuer ...... 13

Registration Document - 2 2.2. Statement from the Offeror ...... 13 3. STATUTORY AUDITORS ...... 14 4. MANAGER...... 15 5. REFERENCES AND GLOSSARY OF TERMS AND ABBREVIATIONS ...... 16 6. DOCUMENTS ON DISPLAY ...... 19 7. NOTICE TO INVESTORS ...... 20 8. PRIVATISATION AND REGULATION ...... 22 8.1. Privatisation ...... 22 8.1.1. Shareholder agreement ...... 22 8.1.2. Listing of Atlantic Airways ...... 23 8.2. Regulatory and governing law ...... 23 8.2.1. General Law ...... 23 8.2.2. Aviation Law ...... 23 9. INTRODUCTION TO ATLANTIC AIRWAYS AND SELECTED FINANCIAL INFORMATION ...... 25 9.1. Background ...... 25 9.2. Atlantic Airways in brief ...... 25 9.2.1. Fixed-wing Operations ...... 26 9.2.2. Helicopter ...... 26 9.3. Selected financial information ...... 27 10. EXTRAORDINARY EVENTS ...... 29 11. INFORMATION ABOUT THE ISSUER ...... 33 11.1. Issuer ...... 33 11.2. Issuer's name ...... 33 11.3. History and milestones ...... 33 11.4. Organisational structure ...... 35 11.5. Visions, mission and objectives ...... 36 11.6. Business Overview ...... 37 11.6.1. Scheduled flights ...... 38 11.6.2. Charter ...... 40 11.6.3. Helicopter ...... 41 11.6.4. Market position and competition ...... 41 11.6.5. Customers ...... 43 11.7. Seasonal trends ...... 44 11.8. Trend information ...... 45

Registration Document - 3 12. OPERATING ASSETS ...... 46 12.1. Fleet ...... 46 13. INVESTMENTS ...... 47 13.1. Historical investments ...... 47 13.2. Future investments ...... 49 14. LEGAL STRUCTURE ...... 50 14.1. Legal structure of Atlantic Airways ...... 50 14.2. Investments in shares - associated and minorities ...... 50 15. ADMINISTRATIVE, MANAGEMENT, SUPERVISORY BODIES, AND SENIOR MANAGEMENT ...... 51 15.1. Corporate governance ...... 51 15.2. Statutory bodies ...... 51 15.3. Board of Directors ...... 51 15.4. Senior management ...... 54 15.5. Additional information on the board of directors and senior management ...... 55 15.6. Auditor ...... 56 15.7. Compliance officer ...... 56 16. EMPLOYEES ...... 57 17. MAJOR SHAREHOLDERS ...... 58 18. RELATED PARTY TRANSACTIONS ...... 59 19. FINANCIAL OVERVIEW ...... 60 19.1. Accounting Standards and Principles ...... 60 19.2. Income statement ...... 60 19.3. Balance sheet ...... 63 19.4. Cash flow ...... 65 19.5. Borrowings requirements ...... 67 19.6. Capitalisation and indebtness ...... 67 19.7. Total share capital ...... 69 19.8. Memorandum and articles of association ...... 70

Appendices A. Articles of association B. 2007 Half-year financial statement C. 2006 Annual accounts D. 2005 Annual accounts E. 2004 Annual accounts

Registration Document - 4 1. RISK FACTORS Investing in shares is subject to numerous risks. Prior to making any investment decision regarding shares in Atlantic Airways, investors should consider all the information in this Registration Document, any document that forms a part of the Prospectus which consists of Summary, Registration Document and Securities Note as well as its Appendices and, in particular, the risks and uncertainties described in this section that could materially affect Atlantic Airways and any investment made in its shares. If any of these events occurs, the trading price of the shares could decline and investors might lose a part of their investment or even all of it. Additional risks and uncertainties that do not currently exist, that are not presently considered material, or of which Atlantic Airways is unaware may also impair its business and operation. These risks and uncertainties could have a materially adverse impact on the business, income, profits, assets, liquidity and/or the share price of Atlantic Airways. The following overview is not exhaustive. 1.1. Risk relating to the Airline industry

1.1.1. Competition Atlantic Airways operates in different service segments: normal scheduled flights, charter flights and helicopter services. Atlantic Airways is a relatively small airline company compared to other international airline carriers. Many of these airlines have considerably greater financial resources than Atlantic Airways. A possible threat from low cost or other stronger carriers is more likely if the operational environment is significantly improved (extended runway, new support technology or new airport) or if there is significant growth in the market deriving from, for instance, the oil industry. Apart from the period November 2004 to May 2006 there has been constant competition on the route between Copenhagen and the Faroe Islands since Atlantic Airways was established and it is therefore likely that competition will be a reality in the future as well. It cannot be ruled out that competition will be introduced by carriers with stronger financial resources than Atlantic Airways, as was the case until November 2004 when Mærsk Air stopped flying to the Faroe Islands. In May 2006 a Faroese company introduced competition on the route to Copenhagen. The company failed to continue its business and ceased to operate in December 2006. Nevertheless the company had a severe, negative impact on the profitability of Atlantic Airways. The extra supply of seats led to a decrease in load-factor and yield and consequently the result for 2006 was lower than for 2005. The demand for airline services is dependent upon the supply and quality of other transportation opportunities, such as transportation by sea. The demand for Atlantic Airways services can be adversely affected if other methods of transportation can be considered as substitutes for its services.

1.1.2. Distribution system Increased ticket sales over the internet have made it easier for price-sensitive customers to shop around, which can in the long term lead to lower ticket prices. Internet sales do not involve any material commissions and therefore it has led to lowered cost of sales and hence has helped the profitability of the Company. This distribution system relies, however, to a great extent on automation over which the Company may have limited control. In 2006

Registration Document - 5 27% of the Company's ticket sales was over the internet. The first half-year of 2007 the number is increased to 30%.

1.1.3. Fuel supply and cost Fuel costs are among the largest cost accounts in Atlantic Airways. The price level of fuel has been subject to wide price fluctuations driven by supply and demand, geopolitical issues and global economic conditions. Therefore the future availability and cost of fuel cannot be predicted with any degree of certainty. Rising fuel costs can adversely affect the financial performance of the Company. In the long run increased fuel unit costs will partly be offset by fuel surcharges. The surcharges do not completely compensate for higher fuel prices as airlines have been conservative in adding the surcharge. Atlantic Airways has implemented a fuel hedging program to partially protect itself against increases in fuel prices. The hedging program is limited in duration. There is no guarantee that this program will be sufficient for the Company in order to hedge all price increases.

1.1.4. Utilisation rates in scheduled services Airlines are normally dependent on maintaining high utilisation of the aircraft. This is done by maximising the revenue deriving from load factor and yield. The utilisation rates can be reduced by delays from many factors that often are out of the control of the management of Atlantic Airways. The most common factors are listed below: • Adverse weather conditions. • Customer processing and baggage handling. • Air traffic and airport congestion. • Maintenance and technical issues. Atlantic Airways' exposure to these delay factors can be connected to current scheduled destinations such as Vágar Airport and possible future scheduled destinations. These factors can harm the Company's reputation as well as future expansion potential. Atlantic Airways' activities are seasonal due to the higher demand for travel in the summer months. Therefore the Company can be exposed to either lack of supply during the high season or lack of demand during the low season.

1.1.5. Expansion and employees The Company frequently considers opportunities to expand its business. If the Company chooses to expand significantly it is likely that it would require additional employees and the facilities to train them. This could become a problem due to, for example, rising pressure on salaries and general working terms. It could mean that the Company would not be able to fulfil its expansion plans, and thus may harm the growth potential of the business. Atlantic Airways' success will, among other things, depend on the Company’s ability to maintain, attain and attract motivated and qualified employees. If the Company were to lose its key employees (such as management, pilots, engineers, cabin crew etc.) and not be able to get adequate replacements or not be able to attract new qualified employees this may have a negative impact on the business of Atlantic Airways.

Registration Document - 6 1.1.6. The economy The demand for Atlantic Airways' scheduled service is primary affected by the general economy in the Faroe Islands and, to a lesser degree, by the global economy. The Faroese economy is highly dependent on the fishing industry. This makes the economy vulnerable to cyclical changes in prices and catches. The global economy is highly dependent on interest rate and inflation levels and the general balance between supply and demand for various goods. Atlantic Airways has strategically worked towards a business model which lessens the dependency on the local Faroese economy; partly by increasing tourism from various countries and partly by diversifying into other business such as charters and helicopters. During the recession in the early 1990's there was a lower demand for airline seats. Potential future recessions could therefore reduce the demand for transport capacity and adversely affect the Company.

1.1.7. Seasonality The business of the Company is very seasonal where the demand is higher in the summer months. The Company reduces its scheduled flights to and from the Faroe Islands during the low season. Redundant capacity is utilised to cover for C-checks, wet-leasing business, ski-charters and ad hoc charters.

1.1.8. International terrorism and epidemics The airline industry has experienced large financial losses in recent years due to terrorist attacks, the war in Iraq, the SARS (Severe Acute Respiratory Syndrome) outbreak in Asia and fear of outbreak of avian influenza. These events have a negative effect on the demand for airline travel in general. The above mentioned events did not have a significant impact on Atlantic Airways' traffic. However such events can have a negative impact on Atlantic Airways' business.

1.1.9. Insurance issues Subsequent to the 11 September 2001 terrorist attacks in the United States, the aviation insurers have increased insurance premiums and reduced the amount of insurance coverage to airline companies. This has also had an impact on Atlantic Airways.

1.2. Other operational risk

1.2.1. Investments in aircraft After negotiations with the Danish government regarding the future of Vágar Airport - the only airport and only runway in the Faroe Islands – the Faroese authorities took over responsibility of the airport in May 2007. The Government has declared that they intend to extend the runway from 1,250 metres to 1,600 metres and to invest in other improvements as well. One intention is to improve operational characteristics, so that other and larger types of aircraft can operate at Vágar Airport. The types of aircraft used by Atlantic Airways are well suited for the current operational characteristics at Vágar Airport and the current market size and mix. As a consequence of the future change in these conditions, Atlantic Airways is currently reviewing the

Registration Document - 7 alternative to the existing fleet of BAe 146/RJ aircrafts. The Company expects a decision on this issue to be made shortly. It should be noted that most airlines try to operate a minimum number of different types of aircraft due to the cost saving element. Operating only one type of aircraft leads to reduced maintenance costs, a reduction in spare parts inventory, lower training costs, lower employee costs and makes flight and crew scheduling more efficient. It should be mentioned that aircraft prices and aircraft leases fluctuate, and by the time the Company needs to acquire additional aircraft, the prices may have increased. Either way when the Company invests in new aircraft, it is likely to become more leveraged.

1.2.2. Internal controls Operational risk relates to the inner workings of Atlantic Airways, the competence of its employees, and the reliability of work processes and information systems. Operational internal control risk is the risk of loss resulting from inadequate or failed internal processes, employees and systems, or from external events. This includes a risk of loss resulting from failure to comply with Danish and Faroese laws and regulations under which Atlantic Airways operates. Atlantic Airways is also exposed to incorrect analyses of new projects, which can have a negative impact on the future outlook. The Company has initiated work towards attaining IOSA certification, an operational safety certification verified by IATA. The Company expects to achieve the IOSA approval not later than in the third quarter of 2008. The Company's routines and procedures on operational, maintenance and quality matters have been reviewed by external experts. Based on the reports the General management and the Quality management is of the opinion that the Company maintains normal industry standard within the mentioned areas. As a consequence of the fatal accident in Stord (see chapter 10, Extraordinary events, for further information) the Company initiated an extensive review of all procedures for operations to short runways. The aim is to take preventative action whilst the Norwegian authorities continue to investigate the cause of the accident at Stord Airport.

1.2.3. Information systems Atlantic Airways' business is dependent on IT-systems such as reservation systems, flight and crew rostering/planning systems, telecommunications systems, website and other IT- systems. Atlantic Airways issues both traditional paper tickets as well as electronic tickets. Atlantic Airways' webpage and booking system must be able to withstand a high volume of traffic from customers and deliver important flight information. These IT-systems are at risk if they are exposed to damage, power loss, computer viruses, hackers, and misuse by employees, fire and similar events. If any significant and repeated failures occur in such IT- systems it may result in loss of important data, increased expenses, disruption of flight services and may harm the attractiveness of Atlantic Airways' services. Failure in IT- systems could therefore affect the profitability of the business negatively.

1.2.4. Third parties operators Atlantic Airways has entered into service agreements with third parties. These services include ground handling, fuel supply, check-in services, baggage services, IT-system hosting and delivery of catering. The Company is likely to re-negotiate contracts in existing markets as well as enter into new agreements in the future in new markets. CSC Hosting Services has issued a warning that it may terminate its contract with Scandinavian Airlines and therefore not be able to supply Atlantic Airways with inventory control systems and

Registration Document - 8 support in the future. The inability to negotiate contracts with providers at competitive prices/terms could harm Atlantic Airways' business.

1.2.5. Third party guarantees Atlantic Airways has not provided any material third party guarantees. Neither has any third party provided any material guarantee on behalf of Atlantic Airways.

1.2.6. Airport security Due to the higher terrorist risk, airport security measures have disrupted airport operations in recent years. This may harm the business of the airline industry. Stricter airport controls in the future may also harm the business of Atlantic Airways. There is no guarantee that the Company can successfully transfer added cost to its customers.

1.2.7. Accidents Like other airline companies Atlantic Airways, could be adversely affected if one of its aircraft was involved in an accident or crash. An accident could involve: • Losses related to claims from injured or deceased passengers • Repair and replacement cost • Losses related to possible diminished public reputation The likelihood of aircraft accident can be reduced by rigid safety standards on the technological and maintenance of aircraft, standards on the air traffic guidance systems and safety procedures before take off. The European Airline Safety Agency (EASA) ensures the highest possible safety standards for aviation in the European Union. Atlantic Airways is approved under JAR-OPS 1/3 Subpart M to manage the maintenance of its aeroplanes and helicopters. The approval is limited to the aircraft registrations specified in the AOC that are mentioned in chapter 8, Privatisation and regulation. The accident in Stord had a negative impact on the Company's image in the immediate aftermath of the accident. The Company also had technical problems with flaps on some of the aircraft which fuelled criticism in the press. This criticism has since subsided, especially after the Norwegian Accident Investigation Board released the preliminary results of its investigations relating to the accident, which did not criticise the Company. There is still a risk in relation to the final report from the Accident Investigation Board will reveal matters that can lead to criticism of the company.

1.2.8. Risks related to reputation Reputation risk is the risk that Atlantic Airways will suffer a loss of revenue due to negative publicity regarding its business practices. This negative publicity may result from mistakes in conducting its business, from wrong decisions, or from Atlantic Airways or a related party not following general laws and regulations. If Atlantic Airways' reputation or credibility is negatively affected, owing to private or public discussion, Atlantic Airways' ability to grow may be impaired and future earnings may be adversely affected. Atlantic Airways' operations are dependent on permits and licenses from various authorities and are subject to public supervision. Any regulatory involvement or rulings issued by these authorities can have a negative impact on Atlantic Airways' reputation, credibility, and its ability to conduct its operations. The accident in Stord, and technical problems with the flaps on some of the aircraft in 2006 have led to higher awareness on safety issues. It is the managements belief that focus on safety and safety culture is fundamental for the future of any airline. This has resulted in an

Registration Document - 9 ongoing process of evaluation of safety issues in general aimed at improving procedures and behaviour to support focus on safety. 1.3. Financial risk

1.3.1. Cost structure The airline industry has relatively high fixed costs, due to high aircraft operating lease rentals and financing commitments, depreciations, employee costs, aircraft fuel and maintenance costs. These expenses are not sensitive to the number of passengers carried in each flight and therefore reduced load factor can affect the profitability of the Company adversely.

1.3.2. Currency and interest fluctuations

Currency Atlantic Airways' financial performance could be significantly affected by changes in foreign exchange rates, especially between the DKK and the USD. Out of the total operating costs approximately 44% is traded in foreign currency, mainly USD. These expenses are related to, for example, costs of purchasing aircraft, aircraft lease payments, maintenance reserves, engine maintenance and aircraft fuel purchases. The Company's debt is in Danish kroner. In relation to the latest acquisition of two Avro RJ aircrafts the Company chose to hedge 50% of the total purchase price of USD 8 million. Apart from this the Company has currently no hedging program. The costs in USD have over the years been relative stable in relation to the Company's income in which is in DKK.

Interest rates Atlantic Airways' financial performance is subject to interest rate fluctuations regarding its variable interest rate attached to interest bearing debt. As of 30 June 2007 the Company had DKK 79 million in interest bearing liabilities, where of 65% were borrowed at a floating interest rate. Increases in the interest rates, could have a significant impact on the financial situation and performance of the Company.

1.3.3. Maintenance costs The type of aircraft operated (BAe 146 and RJ 100) are not in production any more. However, the manufacturer BAE Systems remains a major player in aviation and is committed to supporting the product. The need for maintenance and modifications increases with the age of the aircraft. This need is correlated to the number of cycles/hours flown and calendar age. There is a risk that maintenance costs will increase and utilisation rates will decrease with an ageing aircraft fleet. It should be noted that with the latest investment decisions and negotiated lease contracts the average age of the fleet is reduced.

1.3.4. Liquidity and refinancing risk Atlantic Airways is exposed to a liquidity risk that could materially affect the Company's operating results and financial position. Liquidity risk can be divided into funding risk and market liquidity risk.

Registration Document - 10 The definition of funding risk is the current or prospective risk to earnings and capital arising from the Company’s inability to meet its liabilities when they come due without incurring unacceptable losses. Funding risk arises from the inability to manage unexpected decreases or changes in funding sources. Atlantic Airways has over the last few years had relatively good liquidity, but future expansions may leverage the Company more and expose a funding risk to the Company. Market liquidity risk is the current or prospective risk to earnings and capital arising from the Company’s inability to quickly liquidate or convert its assets/positions without causing a significant movement in the price and with a minimum loss of value. 1.4. Regulatory and legal risk

1.4.1. Regulation Atlantic Airways' business is dependent on compliance with the legislation and regulation described in chapter 8, Privatisation and regulation. There is no guarantee that the Company will be able to fulfil those requirements in the future. The Faroe Islands is in the process of preparing participation in the European Common Aviation Agreement (ECAA), which will liberalise the air traffic territory to and from the Faroe Islands and allow carriers based in the Faroe Islands free access to countries and territories covered by the ECAA agreement and vice versa. If Atlantic Airways wants to fly to a foreign destination under the current regulatory regime the Company is dependent on the approval of the Civil Aviation Administration in Denmark and the respective countries. There is no guarantee that such bilateral agreements will be entered into in the future.

1.4.2. Tax Atlantic Airways could be affected by changes in tax, tariffs and VAT legislation in any of the countries that influence its financial results. Atlantic Airways is not aware of any ongoing tax inspection concerning itself which may have a material impact on Atlantic Airways' financials. An investigation of Atlantic Airways' tax filings, as for any other Company, may be initiated at a later stage in accordance with relevant regulations and affect the Company's prospects. Atlantic Airways and the tax authorities may potentially have different opinions on how some financial arrangements within the Company should be treated from a tax perspective. It is the opinion of Atlantic Airways that it is in compliance with the relevant tax, tariff and VAT regulations and practices and should not expect claims from tax authorities relating to its treatment of income or any other financial issues.

1.4.3. Trademarks and other intellectual property Atlantic Airways has not registered its logo/trademarks and other intellectual property which it relies on in its operations. It could affect Atlantic Airways' business should Atlantic Airways, for some reason, be unable to continue to rely on important intellectual property rights.

1.4.4. Litigations Atlantic Airways has not been involved in any material litigation during the last three years that could substantially affect its financial position. There are currently no arbitrational or governmental proceedings concerning the Issuer.

Registration Document - 11 The Company has a claim against Swiss International Air Lines Ltd. for consequential losses of approximately DKK 5 million. The Company is presently engaged in discussions with Swiss liability insurers Allianz and hopes to solve the matter amicably. Faroe Jet suspended payments on 18 December 2006. In connection with this Atlantic Airways made an agreement on purchasing/taking over assets and obligations. For the time being the parties disagree on an amount of DKK 1.2 million which has been deposited in an escrow account. This dispute may be submitted to arbitration. Until the Norwegian Accident Investigation Board has completed its investigations, litigation in relation to the accident in Stord cannot be ruled out. One of the surviving relatives reported in August 2007 Aker Kværner, Stord Airport and Atlantic Airways to the Norwegian police. According to Norwegian law the police has investigated the accident with regard to identifying any criminating act. The police has not found reason to press any charges. The police investigation can not be closed until the Norwegian Accident Investigation Board has published its report on the accident.

Registration Document - 12 2. PERSONS RESPONSIBLE

2.1. Statement from the Issuer Atlantic Airways in its capacity as the Issuer, Faroese ID-No. 1223, registered office at FO- 380 Sørvágur, Faroe Islands, hereby declares that, having taken all reasonable care to ensure that such is the case, the information contained in this Registration Document is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Tórshavn, 9 November 2007 On behalf of the Issuer

Christian Andreasen Magni Arge Marius Davidsen Chairman of the Board Managing Director Financial Director

2.2. Statement from the Offeror The Faroese Government in its capacity as Offeror, registered office at Tinganes, FO-100 Tórshavn, the Faroe Islands, hereby declares that having taken all reasonable care to ensure that such is the case, the information contained in this Registration Document is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Tórshavn, 9 November 2007 On behalf of the Faroese Government

Bjarni Djurholm Minister of Trade and Industry

Registration Document - 13 3. STATUTORY AUDITORS Auditor's Statement HLB Rasmussen & Weihe P/F, Hoyvíksvegur 5, P.O. Box 30, FO-110 Tórshavn, Faroe Islands have audited the annual accounts fo Atlantic Airways P/F for the years ended December 31, 2004, 2005, 2006 and the interim accounts for the first half of 2007. HLB Rsamussen & Weihe P/F confirms that all information in the Registration Document regarding financial information is consistent with the said financial statements. Registration document As Auditors of Atlantic Airways P/F, appointed at the annual general meeting, we reviewed the financial information prepared by the management of Atlantic Airways P/F in the Registration Document. The financial information in the Registration Document has been prepared in accordance with applicable laws and regulations. The Registration Document is the responsibility of the Board of Directors and Management of Atlantic Airways P/F. Our responsibility is to express an opinion on financial information included in the Registration Document based on our work. Basis of Opinion We conducted our work in accordance with the International Standard on Assurance Engagements. The standard requires that we comply with ethical requirements and plan and perform the work to obtain reasonable assurance whether the financial information in the Registration Document is free from material misstatement. We have reviewed the financial information in the Registration Document and examined that the financial information is in accordance with the Annual Accounts for 2004, 2005, 2006 and the interim accounts for the first half of 2007, prepared in accordance with Generally Accepted Accounting Principles in the Faroe Islands (“FO GAAP”) Financial Statements of the Company for the interim accounts for the first half of 2006 have not been audited or reviewed. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion We confirm that all material issues relating to Atlantic Airways P/F of which we are aware and which, in our opinion, may affect the assessment of the financial position and results of Atlantic Airways P/F as stated in the audited Annual Account for 2004, 2005, 2006 and the interim accounts for the first half of 2007 is included in the Registration Document.

Tórshavn, 9 November 2007

HLB Rasmussen & Weihe P/F State Authorized Public Accountants Hoyvíksvegur 5, P.O.Box 30 FO-110 Tórshavn, Faroe Islands

Hans Laksá State Authorized Public Accountant

Registration Document - 14 4. MANAGER The Manager, Kaupthing Bank hf., Icelandic ID-No. 560882-0419, registered office at Borgartún 19, Reykjavík, Iceland, has been the advisor to the Issuer in the preparation of this Registration Document of this Prospectus. The Manager has in consultation with the management and the Board of Directors of Atlantic Airways P/f compiled this Registration Document, which is based on information gathered from the Company both directly and indirectly through a due diligence review. The Manager has not independently verified the information provided in the Registration Document, but the Manager has reviewed the information provided and confirms that to the best of its knowledge, the information contained in this Registration Document is in accordance with the facts and contains no omission likely to affect its import.

Tórshavn, 9 November 2007 On behalf of Kaupthing Bank hf.

Peter Holm Managing Director of Kaupthing Bank, Faroese Branch

Registration Document - 15 5. REFERENCES AND GLOSSARY OF TERMS AND ABBREVIATIONS References to the “Issuer”, "Atlantic Airways" and "the Company" in this Registration Document shall be construed as referring to P/f Atlantic Airways, Faroese ID-No. 1223, unless otherwise clear from the context, and its affiliates, unless otherwise clear from the context. P/f Atlantic Airways is the legal Faroese name of the Issuer. References to “OMX ICE” in this Registration Document shall be construed as referring to the OMX Nordic Exchange Iceland hf,, Icelandic ID-No. 681298-2829, unless otherwise clear from the context. References to the "OMX ICE Main Market” in this Registration Document shall be construed as referring to the Main Market of the OMX Nordic Exchange Iceland hf., unless otherwise clear from the context. References to the "Faroese security market" in this Registration Document shall be construes as referring to the Virðisbrævamarknaður Føroya P/F, abbreviated VMF. On 14 March 2004 the "Iceland Stock Exchange" now OMX Nordic Exchange Iceland hf. and the Faroese Securities Market entered into a collaboration agreement relating to the listing of Faroese securities on ICEX (VMF Market on ICEX) and facilitation of trading of Faroese securities. The Faroese securities are treated in a comparable manner to Icelandic securities listed on OMX ICE but are prefixed with a "FO-" in their trading symbol. Atlantic Airways' shares are denominated in Danish Kroner and issued through VP. References to “VP” in this Registration Document shall be construed as referring to the VP Securities Services, i.e. to Værdipapircentralen A/S, Helgeshøj Allé 61, 2630 Taastrup, Denmark, Danish ID-No. 21599336, unless otherwise clear from the context. References to the "Manager” in this Registration Document shall be construed as referring to Kaupthing Bank hf. – Investment Banking division, Icelandic ID-No. 560882-0419, unless otherwise clear from the context. References to "the Faroese Government", "the Government" and the "Offeror" shall be construed as referring to the Faroese home ruled government, unless otherwise clear from the context. The abbreviations used in this Registration Document are listed in the following table.

Registration Document - 16

ASK Available seat kilometres - The number of seats available multiplied by the number of kilometres flown. This measures the airline's capacity capability.

Average fare Passenger revenue divided by the number of passengers.

BAE Systems 6 Carlton Gardens, London, SW1Y 5AD, United Kingdom.

BAE Systems is a global company engaged in the development, delivery and support of advanced defence and aerospace systems in the air, on land and at sea.

Block-hours In aviation, block hours is the time between an aircraft leaving from the departure gate and arriving at the destination gate.

Board The directors of P/F Atlantic Airways as detailed in chapter 15 of this document.

C-checks Compulsory annual aircraft inspection.

CEO Chief Executive Officer.

Code share It refers to a practice where a flight operated by an airline is jointly marketed as a flight for one or more other airlines.

Company P/f Atlantic Airways.

Companies Act Royal Decree No. 250 from 3 May 1993 on Public Limited Companies in force in the Faroe Islands with amendments.

DKK Danish currency (krone).

Dry Lease Leasing agreement where the renter only rents the aircraft. In a dry leasing agreement the renter will obtain staff and cover the costs related to operating the plain.

FME Icelandic Financial Supervisory Authority.

GAAP Generally Accepted Accounting Principles.

ICEX Iceland Stock Exchange, now OMX Nordic Exchange hf.

IFRS International Financial Reporting Standards.

ISK Icelandic króna.

IATA International Air Transport Association

IOSA IATA Operational Safety Audit

IT Abbreviation for Information Technology

JAR-OPS Joint Aviation Requirement on Commercial Air Transportation

Kaupthing The group in which Kaupthing Bank hf. is parent company, this including Kaupthing Bank, Faroese Branch and subsidiaries unless otherwise clear from the context.

Load Factor The maximum number of seats in a plane divided by the number of sold seats.

OMX ICE OMX Nordic Exchange Iceland hf.

Royal Decree No. Royal Decree No. 250 from 3 May 1993 on Public Limited Companies in force in 250/1993 the Faroe Islands with amendments.

Royal Decree No. Royal Decree No. 87 from 10 February 2006 on Trading in Securities in force in the 87/2006 Faroe Islands with amendments.

RPK Revenue passenger kilometres. The number of passengers multiplied by the number of kilometres they fly.

Registration Document - 17 Seat kilometres The number of seats available multiplied by the number of kilometres flown. Measures the airline's capacity capability.

Securities Act Royal Decree No. 87 from 10 February 2006 on Trading in Securities in force in the Faroe Islands with amendments.

Sling operations Sling operations involve flying with goods which are hooked underneath the helicopter and transported from one place to another.

UK United Kingdom.

USD US dollar, the currency of the United States of America.

VP Værdipapircentralen A/S, Helgeshøj Allé 61, 2630 Taastrup, Denmark, Danish ID- No. 21599336.

The Danish central for clearing and settlement of securities. The English title is VP Securities Services.

Wet lease Agreement where renter rents the aircraft, staff, insurance and maintenance.

Registration Document - 18 6. DOCUMENTS ON DISPLAY For the life of this Registration Document, published on 14 November 2007, the following documents may be obtained from Atlantic Airways' registered office Vágar Airport, FO-380 Sørvágur, Faroe Islands and electronically from the Company's website (www.atlantic.fo): • The Issuer’s articles of association. • The Issuer’s audited annual financial statements for the financial year ended 3 1 December 2004. • The Issuer’s audited annual financial statements for the financial year ended 3 1 December 2005. • The Issuer's audited annual financial statements for the financial year ended 3 1 December 2006. • The Issuer's audited financial statement for the period 01.01.07-30.06.07. The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Registration Document which is capable of affecting the assessment of the offered shares and which arises or is noted between the time when this document is approved and the final closing of the offer to the public or, as the case may be, the time when trading on OMX ICE begins, prepare a supplement to this Registration Document. If a supplement is prepared, statements contained in any such supplement shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Registration Document or in other documents which are to be found in appendices to this document and on display. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this document.

Registration Document - 19 7. NOTICE TO INVESTORS This Registration Document concerns the listing of Atlantic Airways on the OMX ICE Main Market. As a Faroese public limited company Atlantic Airways mainly operates according to and under Faroese and Danish law. However, Atlantic Airways will be listed on the OMX Nordic Exchange Iceland if the requirements are fulfilled, and is therefore also subject to the Listing Requirements of the Nordic Exchange and the Rules for Issuers of Securities listed on the OMX Nordic Exchange. This Registration Document is prepared pursuant to current legislation and OMX ICE regulations that apply to the listing. OMX ICE has reviewed and scrutinised this Registration Document which is only published in English. This Registration Document forms a part of a Prospectus which consists of three independent documents: a Summary, a Registration Document and a Securities Note, along with Appendices. The law regarding the privatisation and listing of Atlantic Airways, authorises the minister of trade and industry to sell 33% of the share capital of Atlantic Airways and subsequently list the Company on OMX ICE - if the Company fulfils the requirements for listing. The Government resolved on 2 March 2006 to prepare the Issuer for a listing on OMX ICE. Atlantic Airways fulfils the conditions for listing on the Main Market regarding the size and operating history. The Company currently does not fulfil the conditions regarding number of shareholders and share distribution but these two conditions are expected to be fulfilled following the share offering. The listing will only take place if the Issuer fulfils the listing requirements. The listing is expected to take place on 10 December 2007 which will then be the earliest date on which the shares will be admitted to trading on OMX ICE. The date of listing, which may occur later, will be announced one day in advance on www.omxgroup.com/nordicexchange. This Registration Document is prepared in order to provide clear and thorough information on Atlantic Airways and its associated and minority undertakings. Investors are reminded that Atlantic Airways and its associated and minority undertakings operate in markets that can change rapidly. Investment risk in companies operating under such circumstances is generally greater than in companies operating in a more stable environment. Investors are encouraged to familiarise themselves thoroughly with all documents forming a part of the Prospectus which consists of Summary, Registration Document and Securities Note as well as its Appendices. Investors are advised to pay particular attention to the chapters on Risk Factors in the Registration Document and the Securities Note. Investors are advised to consider statements made by the Issuer, the Manager and the Auditors of the Registration Document. Information provided in all documents forming the Prospectus is based on facts that are current at the date of publication of the Prospectus. These facts may change between the date of publication and the date the shares are admitted to trading. The Issuer will notify OMX ICE and publish an annex to the Prospectus should new information emerge that is deemed relevant by the Issuer to the evaluation of Atlantic Airways or the Company's shares during this period. Investors are advised to study all public information issued by or relating to Atlantic Airways and not to rely exclusively on information in this Registration Document or any of the documents forming a part of the Prospectus. This Registration Document or any of the documents forming a part of the Prospectus should not be considered or construed as a promise by the Issuer, Manager or other parties, of future success in either operations or return on investment. Investors are reminded that investing in shares entails risk as the decision to invest is based on expectations and not promises. Investors must primarily rely on their own judgement regarding any decision to invest in the Issuer's shares, bearing in mind the business environment in which the Company operates, anticipated profits, external conditions, and the risk inherent in the

Registration Document - 20 investment itself. Prospective investors are advised to contact independent experts such as financial institutions to assist them in their assessment of the shares in Atlantic Airways as an investment option. Investors are advised to consider their legal status and any tax implications which an acquisition of the Issuer's shares may have, and seek independent advice in that respect. This Registration Document and any document forming a part of the Prospectus shall not be distributed and must not be mailed or otherwise distributed or sent in or into any country in which distribution would require any additional registration measures or other measures to be taken, other than as applicable under Icelandic law and regulations, or would be in conflict with any law or regulation in the respective country. This Registration Document shall not be sent out, directly or indirectly, by use of mail or any other means or instrumentality (including, without limitation, facsimile transmission, electronic mail, telex, telephone and the Internet) in or into the United States, Australia, Canada or Japan, and the offer cannot be accepted by any such use, means, instrumentality or facility of, or from within, the United States, Australia, Canada or Japan. Accordingly, this Prospectus, and any related offering documents shall not be and may not be mailed or otherwise distributed, forwarded or sent in or into the United States. After the expected listing, all material documentation regarding the Issuer will be published in accordance with governing rules effective at any given time. The current Rules for Issuers of Securities Listed on OMX ICE effective as of 1 January 2007 stipulate that all material documentation regarding the Issuer shall be published on www.omxgroup.com/nordicexchange. Neither the delivery of this Registration Document nor the offering, sale or delivery of any Shares shall under any circumstances imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or that any other information supplied in connection with the shares is correct as of any time subsequent to the date indicated in the document containing the same. The Manager expressly does not undertake to review the financial condition or affairs of the Issuer during the validity of this Registration Document or to advise any investor in the shares of any information coming to their attention. Investors should review, inter alia, the most recently published document incorporated by reference into this Registration Document when deciding whether or not to purchase any shares.

Registration Document - 21 8. PRIVATISATION AND REGULATION 8.1. Privatisation The Faroese Government owns shares in a number of Faroese private limited companies and has also major interests in various commercial funds on the Faroe Islands. Some of these companies and funds operate in a market based environment. The international trend has resulted in a reduction in governmental companies in the competitive market, due to the fairness of competition. The Government of the Faroe Islands intends to follow this trend by privatising a number of governmental companies. According to chapter 1 in the explanatory memorandum to the law on the privatisation of Atlantic Airways, the purpose of the privatisation is as follows*: • To clarify the border between the public and private sector • To encourage a more dynamic commercial business • To relieve the Government from the risk and responsibility of current and future investments • To capitalise the value in Atlantic Airways • To strengthen the Faroese capital market

*This information has been accurately reproduced and as far as the issuer is aware and is able to ascertain, no facts have been omitted which would render the reproduced information inaccurate or misleading. The minister of trade and industry, Bjarni Djurholm, presented on 2 March 2006 a law proposal on the privatisation of Atlantic Airways. The proposal was passed by the parliament and according to article 1 of the new act the minister of trade and industry can sell up to 33% of the share capital in Atlantic Airways. In the explanatory memorandum to the law on privatisation of Atlantic Airways the minister of trade and industry revealed his continued plan for the privatisation.

First round 30% to the public 3% to the employees Second round 33% to institutional investors Government's remaining share 34%

Initially the plan was to sell 66% in the first round, but an agreement could not be reached among the political parties. The timing of the second round is not decided yet. With a parliamentary election coming up one cannot be sure that the second round will be carried through according to the presented plan. The election will be held 19 January 2008 at latest.

8.1.1. Shareholder agreement According to the presented plan the Government will continue as a substantial owner after the second sales round. The 34% share in the Company will ensure that no changes can be made in the articles of association without the Government's approval. In addition the Government plans to enter a shareholder agreement with the institutional investors that among other things will ensure the following:

Registration Document - 22 • Headquarter will remain in the Faroe Islands • The Government will get one board member In the explanatory memorandum to the law it is stated, that if the conditions regarding airline traffic to the Faroe Islands change considerably the Government may reconsider a privatisation of the last 34% in Atlantic Airways.

8.1.2. Listing of Atlantic Airways According to article 2 of the act on the privatisation of Atlantic Airways the Company shall be listed on the Faroese security market (Explanation of the Faroese security market is given in chapter 5). As a fully governmental owned company Atlantic Airways currently does not meet the following listing requirements regarding share distribution: • A sufficient number of shares shall be distributed to the public. 25% of the shares is considered to be a sufficient number of shares. OMX ICE may accept a percentage lower than 25 percent of the shares if it is satisfied that the market will operate properly with a lower percentage in view of the large number of shares that are distributed to the public. • The Company shall have a sufficient number of shareholders. Under normal circumstances, companies having at least 500 shareholders holding shares with a value of around EUR 1000 will be considered to fulfill the requirement regarding the number of shareholders. After the first sales round the Company is expected to fulfil these conditions. The Government's incentive to the listing is among others to strengthen the Faroese capital market and give people the opportunity to invest in a Faroese company. 8.2. Regulatory and governing law

8.2.1. General Law As a Faroese public limited company Atlantic Airways mainly operates according to and under Faroese and Danish law. However, Atlantic Airways will be listed on the OMX Nordic Exchange Iceland if the requirements are fulfilled, and is therefore also subject to Icelandic law regarding listed companies. Atlantic Airways is registered in the Faroe Islands in accordance with Royal Decree No. 250/1993 on Public Limited Companies in force in the Faroe Islands. Atlantic Airways' associated companies and minority undertakings are registered in the Faroe Islands and operate in accordance with Royal Decree No. 250/1993. According to chapter 22 of Act No. 148 from 9 March 2004 on the Administration of Justice, in force in the Faroe Islands, the venue for disputes against the Company is at the city court of Tórshavn unless in specific cases other agreement has been made.

8.2.2. Aviation Law The airline industry in the Faroe Islands and internationally is subject to extensive regulation. Additionally a range of regulations relating to safety, noise and competition apply to participants in the aviation industry. The policy area “aviation” is according to the Faroese Home Rule law a “Common Affair” governed by the Danish state and Danish institutions. The Danish ministry of transport and energy has the overall responsibility for civil aviation, but the daily administration is the

Registration Document - 23 responsibility of the Danish Civil Aviation Administration. Civil aviation matters in the Faroe Islands are regulated by a Danish act on aviation only applying to the Faroe Islands. According to existing legislation in the Faroe Islands commercial aviation activities in the form of performance of commercial air transport imply a permit (basis concession) issued by the Danish minister of transport and energy after prior negotiations with the Faroese Home Government on this issue. Furthermore, a holder of a concession has to obtain a prior approval from the Civil Aviation Administration when establishing new air routes. Atlantic Airways has a basic concession. Atlantic Airways is permitted to perform scheduled flights from Vágar to the following destinations: Aalborg, Billund and Copenhagen in Denmark. London Stansted in England, Aberdeen in Scotland. Oslo in Norway, Reykjavik in Iceland and Shetland. In order to operate as an airline in the scheduled domestic passenger services a carrier is required to hold an air operator certificate - also known as AOC. The air operator certificate is issued to Atlantic Airways by the Danish Aviation Administration. According to the AOC, the Civil Aviation Administration – Denmark, as a member of the Joined Aviation Authorities, certifies that the Company has satisfied the operator certification requirements prescribed in JAR-OPS, the Civil Aviation Act of Denmark and the regulations prescribed there under and have been found competent to conduct commercial air transport operations. The certificate is not transferable and, unless sooner surrendered, suspended or revoked, it will continue in effect until 1 October 2008. The above AOC concerns the following types of aircraft owned or leased by the Company and identified by a 5-letter aircraft registration mark.

Type BAe BAe BAe Avro Avro Avro Bell Bell Bell 146-200 146-200 146-200 RJ-100 RJ-100 RJ-85 412 212 412

Code OY- OY- OY- OY- OY- OY- OY- OY- OY- RCW RCA RCB RCC FJE RCD HSR HMB HSJ

Atlantic Airways also has the relevant maintenance system approvals issued by the Civil Aviation Administration in Denmark that is a member of the Joint Aviation Authorities. The above mentioned regulations and permits are not an exhaustive list, but are considered to be of material information to the investors. It should be noted that under the current legislation changes in the pricing system have to be approved by the Danish minister of transport and energy before being implemented. With the plans to join the European Common Aviation Area the price mechanism will be liberalised. The Faroese Home Rule Government has announced that it intends for the Faroe Islands to join the European Common Aviation Area Agreement (ECAA). The ECAA agreement will come into force when it has been ratified by all the EU member countries and at least one non EU county covered by the agreement. Joining the ECAA the Faroese commercial air transport activities will be deregulated correspondingly.

Registration Document - 24 9. INTRODUCTION TO ATLANTIC AIRWAYS AND SELECTED FINANCIAL INFORMATION The following should be read as an introduction to Atlantic Airways. In the subsequent chapter the company will find more detailed information about the Company. 9.1. Background Atlantic Airways was established in November 1987 as a limited company. The two major shareholders where the Faroese company P/F Flogleiðir with 51% and Cimber Air of Denmark which held 49%. P/F Flogleiðir was a holding company that was 75% owned by the Faroese Government. During the severe economical crisis in the early 1990’s the Company was financially restructured. Since 1992 the Faroese Government has held 100% of the shares and been the sole owner of Atlantic Airways. Atlantic Airways has been profitable since 1995 and has grown substantially in terms of the overall investment volume and gross income since year 2000 with gross income increasing from DKK 57.7 million in 2000 to DKK 126.2 million in 2006. In March 2006 the Faroese Government decided by law to partly privatise Atlantic Airways by selling 33% of the shares in the Company. 9.2. Atlantic Airways in brief Atlantic Airways is an international airline. The operation is based on fixed-wing operations and helicopter operations.

Atlantic Airways' fixed-wing operations are based on: 1. Scheduled services between the Faroe Islands and neighbouring destinations/countries. 2. Utilising its aircraft fleet and core competencies on charter services outside the Faroe Islands Atlantic Airways helicopter operations are based on: 1. Domestic helicopter service 2. International helicopter service

As of 30 June 2007, Atlantic Airways employed 187 people.

Registration Document - 25 9.2.1. Fixed-wing Operations The major part of the Company's revenue is related to fixed-wing activities. In 2006 the revenue from fixed-wing operations consisted of 94.0% of the total revenue. The fixed- wing business currently comprises scheduled services and charter operations.

Scheduled services The dominant route of the scheduled services and the Revenue distribution on operations cornerstone of Atlantic Airways business is the route between the Faroe Islands and 100% Copenhagen. The Company 80% offers schedules flights to 60% Copenhagen one-three times a 40% day in the winter season and up to five rotations a day 20% during summer season. The 0% average flights flown weekly 2004 2005 2006 half-year with departure from Faroe 2007 Islands during the summer Scheduled flights Charter Flights Helicopter season is 56 and 24 during winter season. The summer season is from June to August. For further information on the seasonal change, see chapter 11.7. In addition Atlantic Airways has scheduled flights to a total of eight destinations in neighbouring countries – some of which are only operated during the summer season. Scheduled services as part of total revenue has been declining in 2006 compared to 2005. This is in line with the strategy to diversify the activity and to spread the Company's risk and increase income from activity outside the Faroe Islands. In 2007 this trend has been maintained.

Charter operations Charter operations Corporate charters on behalf Number of passengers of Aker Stord AS Norwegian ID-No. 916 297 807 has had a 200,000 central role in the charter activity of Atlantic Airways 150,000 during the past two years. 100,000 Other charter activity consists of wet-leases, corporate 50,000 charter, tour-operator market – mainly in Denmark – and 0 2004 2005 2006 half-year the ad hoc market. 2007 9.2.2. Helicopter Revenue related to helicopter activities accounted for 6% of the total revenue in 2006. The helicopter business currently compromises two main areas: Domestic helicopter service and international helicopter service.

Registration Document - 26 9.3. Selected financial information This section gives an overview of Atlantic Airways' financials and historical performance. The following table shows the key items from Atlantic Airways' audited profit and loss account and balance sheet for the full financial years ending on 31 December 2004, 2005, and 2006. In addition the audited financial statement for the period 01.01.07 – 30.06.07 is inserted and compared with the unaudited financial statement for the same period previous year. The accounts have been prepared in accordance with the Faroese GAAP.

DKK 1,000 1/1-30/6 1/1-30/6 Profit and loss account 2004 2005 2006 2006* 2007 Net sales 234,365 379,586 518,990 231,357 272,999 Flight expenses -143,908 -262,840 -392,750 -165,449 -196,470 Employee expenditures -41,551 -57,539 -79,711 -36,601 -44,666 Depreciations -28,201 -34,159 -39,586 -25,427 -19,476 Result before financial items 20,705 25,048 6,944 3,880 12,387

Financial income 753 1,082 2,581 330 5,633 Financial expenses -3,743 -2,508 -4,455 -1,552 -2,736 Result before tax 17,714 23,622 5,070 2,658 15,284

Tax -3,543 -2,888 -913 -532 -2,751 Profit 14,171 20,734 4,157 2,126 12,533

Total assets 204,603 264,502 363,653 306,958 408,889 Total equity 126,146 136,880 195,868 139,538 208,401

Interest Coverage Ratio 553% 999% 156% 250% 453% Equity ratio 62% 52% 54% 45% 51% Dividend per share 26,667 133,333000 * Not audited nor reviewed Due to the fact that Mærsk Air, the main competitor for the previous 16 years, pulled out in November 2004, total number of passengers increased considerably in 2005, resulting in a 62% increase in net sales. The Company decided to extend the supply of seats by increasing the frequency on the scheduled flights in 2006. In May 2006 a new competitor, Faroe Jet, entered the market and this led to an increase in supply on the Copenhagen route. This resulted in a decreasing load factor and yield. The result for 2006 was therefore considerably lower than for 2005. In December 2006 Faroe Jet suspended payments and ceased operation. The first six months of 2007 indicate, that Atlantic Airways has managed to continue the positive trend from 2005 and previous years. In addition a revaluation of the listed shares have a large impact on the result. The revaluation is made on basis of the market price on the last day of the financial period. The reason for the large increase in revenue in 2006 is due to a 157% growth in charter operations.

Registration Document - 27 In September 2006 the Government decided to contribute a Bell-212 helicopter and an aircraft hangar at Vágar Airport previously rented by Atlantic Airways to the company as a non-cash contribution, which resulted in an increase in equity. In addition the company invested in a new helicopter. These are the main reasons for the increase in total assets. Atlantic Airways paid dividend to its sole owner, the Faroese Government, in 2004 and 2005 in the amount of DKK 2 million and DKK 10 million respectively. At that time the share capital amounted to DKK 75 million, divided into 75 shares of DKK 1 million each. In 2006 no dividend was paid out to the owner.

Registration Document - 28 10. EXTRAORDINARY EVENTS On 10 October 2006 Atlantic Airways experienced every airline company’s worst fear when it was involved in a fatal accident. OY-CRG slid off the runway at Stord Airport in Norway after landing and caught fire. The aircraft had 16 people on board, 12 passengers and a crew of four. Unfortunately, four people died in the fire – three Norwegian passengers and one Faroese flight attendant. Several of the survivors were injured. Since the accident Atlantic Airways has worked closely with the Norwegian Accident Investigation Board (NAIB) to clarify the reason for the accident in order to prevent any such accident from happening again. The investigation is still going on and the NAIB expects to deliver an intermediate report within 12 months and a final report later. Atlantic Airways supports the preliminary report which NAIB published on 25 October 2007 where it stated that the main focus was on the fact that spoilers did not deploy. However a single malfunction should not cause an accident because the safety margin is defined such that the aircraft can stop without spoilers being deployed. However, other factors led to a reduced braking action. The NAIB was of the opinion that the damp runway surface caused water vapour to form underneath the main tyres. The Preliminary report sent out by the NAIB on 25 October 2007 in its full length is quoted below: “The airline company Atlantic Airways has operated the aircraft type BAe146 since 1988. The company provides chartered flights for Aker Kværner, among other things. Stord airport, Sørstokken, is approved for general aircraft traffic for aircraft up to reference code 2C,which includes the BAe146 aircraft type. OY-CRG was flying from Stavanger airport Sola (ENZV) to Stord airport Sørstokken. There were 12 passengers, two cabin crew members and two pilots on board. The aircraft was on schedule for its planned time of arrival. The commander was flying the aircraft. The crew were familiar with the airport at Stord. Before OY-CRG started its approach, the airport performed a routine runway inspection. The runway report did not contain information with regard to whether the runway was dry, damp or wet. Because the crew were not informed otherwise, they assumed that the runway was dry. However, investigations by the AIBN have revealed that the runway was in fact damp. A corresponding aircraft had performed a normal landing towards the south (runway 15) 15 minutesearlier. The crew of OY-CRG were given a wind reading of 120º 6 knots. They had visual contact with the airport at an early stage and decided to carry out a visual approach northwards (runway 33). Upon landing the pilots noted that the aircraft’s lift spoilers did not deploy. The indicator lights that normally light up after 3 seconds did not do so. The pilots immediately called “No spoilers”. Thereafter the pilots experienced that the maximum application of the brakes did not lead to the expected retardation. The alternative braking system was brought into use and then finally the emergency system, without this making any difference. The emergency system does not prevent the wheels from locking. Witnesses observed grey/blue smoke behind the main wheels. The commander had a certain directional control of the aircraft and wanted to avoid leaving the runway at places where he knew that the terrain was particularly unfavourable. The aircraft left the runway end to the north at a relatively low speed. It continued down a

Registration Document - 29 steep slope and the aircraft sustained significant damage as it crashed into lighting poles, trees and large rocks. When the aircraft came to rest, it was not possible to stop the left inner engine (no. 2) due to the damage. It continued to operate at a high rpm for several minutes. The forward left emergency exit could not be opened due to damage to the fuselage that had jammed the door. The forward right emergency exit was blocked by the terrain outside. The commander made several attempts to open and release the cockpit door without success. The cabin roof had sustained a large rift which resulted in fuel from the wings entering the cabin. A fire on the aircraft’s right side spread into the cabin and over to the aircraft’s left side. Three passengers and the forward cabin crew member were killed. The remaining nine passengers and the rear cabin crew member managed to evacuate the aircraft from the aircraft’s rear left emergency exit by jumping to the ground and passing the engine that was still running. Six people sustained serious burns. The preconditions for normal retardation of a BAe146 after landing are that the lift spoilers and brakes work. The primary purpose of lift spoilers is to reduce the remaining lift of the wings. This in turn transfers weight to the undercarriage, allowing the main wheels to grip the runway and the brakes to take effect. The aircraft type is not equipped with the possibility of reversing thrust. AIBN investigations indicate that the aircraft’s tail air brake worked normal. This provided limited aerodynamic braking while the speed was still relatively high. The aircraft type has two independent hydraulic systems that are used for the operation of lift spoilers and brakes, among other things. The aircraft type has a total of six lift spoilers. The “green” hydraulic system operates the outer and middle spoilers and the “yellow” hydraulic system operates the inner spoilers. The lift spoilers are electronically controlled. The AIBN has not yet determined why the aircraft’s lift spoilers were not deployed. The two hydraulic systems and signals from independent electrical circuits entail that the lift spoiler system originally has redundancy. The AIBN has focused particularly on areas where one failure may cause the system to malfunction. However, this task is demanding because most of these areas are burned-out. The aircraft’s six lift spoiler actuators on the wings had sustained serious damage from the fire. It was nevertheless possible to verify that all were in the folded and locked position. In accordance with European regulations, aircraft of the relevant category should normally be able to stop within 60% of the available landing distance. The remaining 40% is intended to be a safety margin. According to the manufacturer’s approved documentation, it is to be expected that the landing distance would increase by 40% if all lift spoilers were inoperative. The AIBN has calculated that under the prevailing conditions OY-CRG should have stopped around 100 metres before the end of the runway. The aircraft’s undercarriage has been thoroughly examined by the AIBN. A number of fragments of “boiled” rubber were found on the runway. Further, a tyre showed clear indications of so-called “rubber reversal” which occurs when a cushion of steam forms and the rubber is “boiled” under the tyres. The AIBN has succeeded in retrieving data from the aircraft’s cockpit voice recorder. The cockpit voice recorder contained normal quality information from the start in Stavanger until the accident at Stord. However, the aircraft’s flight data recorder was so damaged by the fire that only short sequences could be deciphered. One of the sequences contained approximately 3 seconds of data from when the aircraft was close to the end of the runway. The AIBN also has data from the air traffic control service radars in Stavanger and Bergen. The radar data shows the aircraft’s position, altitudes and speeds up until the landing at Stord. The radar data and the correspondence between the air traffic control service and the crew do not indicate anything out of the ordinary prior to landing.

Registration Document - 30 According to the loadsheet, OY-CRG landed with a weight of 33,557 kg (of which 7,620 kg was fuel). This is 3,183 kg below the structural limitations for landing. The company’s approved “Route Performance Manual” shows that when landing at Stord runway 33 with a 5 knot tailwind and with flaps at 33º, the aircraft can operate with a landing weight of 33,951 kg if the runway is dry. The limit is 28,112 kg if the runway is wet. As previously mentioned, the investigations of the AIBN have shown that the runway was damp. It is not usual to calculate a reduction in maximum landing weight if the runway is slightly damp/damp. The runway surface at Sørstokken was not grooved. The AIBN investigation indicates that the touchdown point and landing speed were normal. During the period of 15-25 September 2006 OY-CRG underwent planned maintenance (C12 (B4)) with Malmø Aviation. The aircraft then flew 78 hours and performed 41 landings without technical remarks. The aircraft had later undergone other less comprehensive maintenance. No problems with the aircraft’s lift spoiler system had been reported. The Civil Aviation Authority, Det Norske Veritas (DNV) and the Norwegian Public Roads Administration have carried out various inspections at Stord airport Sørstokken in recent years. AIBN is of the opinion that there is nothing in the reports that could explain why OY- CRG failed to stop on the runway. AIBN has obtained reports of other comparable incidents with the BAe146-/RJ series aircraft type. Several of them are of interest, but so far in the investigation they have yet to provide an explanation for why the lift spoilers were not deployed in the case of the OY- CRG accident. Significant results of the investigation: • None of the aircraft’s six lift spoilers deployed after landing • During rollout a cushion of steam formed under the main wheels and the tyre rubber was “boiled” • The accident had fatal consequences due to burning fuel entering the cabin The AIBN’s further investigations will, among other things, consist of expert analysis of sounds in the cockpit of OY-CRG compared to other recordings from corresponding aircraft. Further, the AIBN will continue in-depth investigations of the hydraulic/electric design of the aircraft type’s lift spoiler system in combination with the braking system. STATUS RECOMMENDATIONS The AIBN investigations have so far not uncovered circumstances that indicate a need to issue immediate safety recommendations. The investigation will continue”

As a consequence of the accident Atlantic Airways decided to check the spoiler system on all aircraft in Atlantic Airways' fleet. According Atlantic Airways no defects were discovered. External experts have revised the Company's technical, operational and, to a certain extent, management procedures. According to the senior management the conclusion is that the Company has good quality within the technical and operative areas. This is also supported by the interim report from AIBN where it is stated that "investigations have so far not uncovered circumstances that indicate a need to issue immediate safety recommendations". See section 1.2.2 for further details. As a consequence of the accident and as a precautionary step while investigations are still going on, Atlantic Airways has discontinued all operations into Stord until certain

Registration Document - 31 improvements have been made. The company has also – on its own initiative - implemented several precautionary procedures with regard to operations on runways shorter than 1,300 metres and developed training programs to prevent any repeat of the accident in Stord. Atlantic Airways has worked closely with the Norwegian police on their investigation into the accident and the police have seen no reason to press charges against the company or its employees. During autumn 2006 and winter 2007 Atlantic Airways was forced to make four diversions to longer runways as flaps did not extend properly, which received considerable media attention. These incidents have no relation whatsoever to the accident in Stord. The flaps are a part of the flight controls which when activated enables a lower speed at approach and landing. If the built-in safety system does not allow flaps to extend, procedures demand that the pilot, for safety and precautionary reasons, diverts and lands flapless on a longer runway than we have available in the Faroe Islands today. The failure to extend the flaps is a known problem of the BAe 146 but is in general avoided by performing different maintenance procedures. The company is working closely with the manufacturer British Aerospace and other experts to identify the reason for flaps not extending and on how to improve the system. As for now focus is on ice on a screw jack as the problem and heating as the solution. The Company is working on an extended simulator training system, where malfunctions in braking systems, spoilers and flaps are trained on a mandatory basis. This is not a requirement from the aviation authorities, but the Company's own decision. In October it became evident that the ongoing privatisation process had met several obstacles in reaching its goal of starting sales in December. The privatisation process therefore came to a halt and was resumed in January 2007 on the Government's initiative.

Registration Document - 32 11. INFORMATION ABOUT THE ISSUER 11.1. Issuer

Faroese legal name P/f Atlantic Airways Company registration no. 1223 Registered office Vágar Airport, FO-380 Sørvágur, Faroe Islands Phone +298 34 10 10 E-mail [email protected] Legal form Limited company Share capital DKK 103,500,000 Website www.atlantic.fo Ticker FO-AIR ISIN code FO 0000000062 Date of incorporation 10 November 1987 VAT Reg. number 379778 Financial calendar The interim financial statement for the current financial year will be published as follows:

4th quarter 2007 published on 25 February 2008

11.2. Issuer's name Atlantic Airways, with the secondary names Atlantic Airport Services, Atlantic Cargo, Atlantic Charter, Atlantic Helicopters, Atlantic Line, Atlantic Tours, Atlantic Travel, Air Faroe, Faroe Air, Faroe Airline, Faroe Airways and Vágar Airport Services, is the Issuer of the shares. Of the seconday names only Faroe Airways and Atlantic Helicopters are used in public today. The other names are put aside for future use. The Company's registered office is located at Vágar Airport, FO-380 Sørvágur, the Faroe Islands. It is registered in the Faroe Islands at the Faroese Business Registration Office (Skráseting Føroya) with registration number 1223. 11.3. History and milestones

1987 Atlantic Airways was formally established as an alternative to the existing monopoly service. 1988 Atlantic Airways starts flying on the Denmark route to Copenhagen

Registration Document - 33 1994 Introduced helicopter activities 1995 First time profits on its operating business Introduced Reykjavik, Iceland, as destination in cooperation with Icelandair. 1996 Regular charter between Reykjavik, Iceland and Narsarsuaq, Greenland Introduced Jutland, Denmark as destination 1997 Introduced Aberdeen, Scotland as destination Leased in a second aircraft during high season 1999 Introduced Stavanger, Norway as destination 2000 Purchased the second aircraft, registration code OY-RCA 2001 Introduced London, England, as destination Search and rescue helicopter contract in the Faroe Islands Purchased the second helicopter, registration code OY-HSR First oil support contract: Statoil, BP, Hess 2003 Support contract Agip/ENI 2004 Corporate shuttle in Norway (Aker Kværner) Purchased the third aircraft, registration code OY-RCB Mærsk Air stops flying to the Faroe Islands 2005 Second Aker Kværner contract supporting Ormen Lange Leased an additional aircraft, registration code OY-RCW Purchased fourth aircraft, registration code OY-RCC 2006 Introduced the route between Sumburgh, Shetland, and London, England. Leased an additional aircraft, registration code OY-RCZ. The leasing contract was terminated 31.12.06 Faroe Jet starts up business Transport contract with Statoil Accident in Stord Faroe Jet suspends payments and stops its activity Purchased the third helicopter, registration code OY-HSJ 2007 Leased an additional aircraft, registration code OY-FJE Purchased two new aircrafts, registration code OY-RCD and OY-RCE Redelivery in October of one leased aircraft, registration code OY-RCW

Registration Document - 34 11.4. Organisational structure Atlantic Airways' senior management has extensive airline industry experience. Magni Arge, the Chief Executive Officer, has led the Company since 1995 and Marius Davidsen, the Chief Financial Officer has been involved with Atlantic Airways since it commenced operations in 1987/88, ensuring consistency and commitment to the development and growth of the Company. Other senior management positions have been created to meet the increased demands of the business as it has expanded. The Company is led by Chief Executive Officer Magni Arge and Chief Financial Officer Marius Davidsen. They are responsible for executing the board's resolutions regarding Atlantic Airways' policy and development as well as the Company's financial performance. Magni Arge is primarily responsible for accomplishing the company’s objectives and general performance. Marius Davidsen is primarily responsible for the Company's financial affairs. The board is in charge of Atlantic Airways' strategy formulation, the vision for the Company as a whole. Christian Andreasen plays a monitoring role as chairman of the board.

Registration Document - 35 11.5. Visions, mission and objectives The Company’s objective is, according to article 1 of its articles of association to run aviation/airline business, and other businesses related hereto.

Vision statement • We want to be the airline of preference in the Faroe Islands and do so by building bridges in the air between the islands and neighbouring countries in a safe and reliable way - and thus give its people a variety of choices and increase their quality of life. • By utilising our core competences in fixed-wing and helicopter operations we aim to build a sustainable and profitable business outside the Faroe Islands. A business which is of value to both our customers and the Company.

Mission statement • We are a customer and safety oriented air logistic company focusing on profitable growth in a competitive environment. • We focus on developing network products with the Faroe Islands as the cornerstone and by developing charter products in western Europe.

Main objectives • We strive to provide the Faroe Islands with an airline service which is reliable, economically sustainable, diversified and internationally competitive. • We focus on providing the business segment with a reliable service to a variety of destinations and frequencies, and to provide the Faroese people affordable fares to enable them to travel abroad at least twice a year. • Our helicopter operation provides the Faroe Islands and the Faroese people with a reliable, high quality search & rescue service, a reliable island hopping service and the off-shore industry with an internationally competitive service. • Our competence and competitive edge is strong enough to gain a foothold outside the Faroe Islands. By 2010 more than half of our income derives from activity outside Faroe Islands. We are thus able to spread our risk and build a stable foundation for the company and its international team of staff. • We are committed to developing and retaining our qualified personnel and to being the company that is the first choice for the best people on the job market.

The vision statements, mission statements and the main objectives are based on the core business and strategy that the Company has followed since it was established. Recent development and growth has highlighted the need to formulate such statements precisely and communicate and implement them overall in the company. The Company is well aware of this and has hosted company days involving all staff in this work during the last two years.

Registration Document - 36 11.6. Business Overview Atlantic Airways was established on 10 November 1987. The business concept was initially to provide an alternative service to travellers travelling on the route between Vágar and Copenhagen which at that time was only operated by Mærsk Air, a Danish airline. Atlantic Airways experienced certain difficulties during its first few years, but managed to make a profit for the first time in 1995. Since then, the Company has recorded a profit each year. As it appears in chapter 11.3, History and milestones, the Company has expanded in recent years by starting up new business activities, such as new routes, charter activities and helicopter services. Atlantic Airways also operates in the charter business, where it has operations in the field of corporate charters and leisure/vacation charters. Finally, Atlantic Airways runs helicopter services such as search and rescue services, scheduled flights in the Faroe Islands and sling operations. With the latest investment in a Bell 412 helicopter the Company will increase focus on the international offshore business.

Atlantic Airways

Aircraft (Fixed Wing) Helicopter (Rotor Wing)

Scheduled services Charter Domestic services International services

Denmark Corporate charters Domestic flights Off shore Iceland Leisure charters Search and rescue United Kingdom Ad-hoc charters Sling operations Norway Off shore

In the following the business categories are described in details. The Company's business is divided in three categories: Scheduled flights, Charter and Helicopter. The current three years the development among these categories has been as follows.

Revenue distribution in million DKK

600 500

K 400 300

mill. DK 200 100 0 2004 2005 2006 half-year 2007

Scheduled flights Charter Flights Helicopter

Registration Document - 37 11.6.1. Scheduled flights Total revenue from scheduled flights in 2006 Numbers of passengers amounted to DKK 258 Scheduled flights million (2005: DKK 263 million, 2004: DKK 171 million). The financial 200,000 numbers include revenue 150,000 deriving from cargo and tax- 100,000 free. 50,000 The marginal decline in 0 revenue from scheduled 2004 2005 2006 half-year flights from 2005 to 2006 is 2007 due to the fact that competition and overcapacity Danmark Iceland United Kingdom Norway led to declining load factor and yield. The number of passengers travelling with Atlantic Airways in 2004 was 146,944 and was at that time the highest number in the history of the company. The number of passengers increased considerably in 2005 with around 70% due to the fact that Mærsk Air discontinued its services to the Faroe Islands in November 2004 and to a general increase in activity in the market. To meet growth in demand for both scheduled and charter business, the Company wanted to add two additional aircraft to the fleet in 2005. One aircraft was purchased and one was leased. In 2006 the number of total passengers (scheduled and charter flights) increased from 241,153 to 344,669, an increase of 43%. The first six months of 2007 revenue deriving from scheduled flights was DKK 140.3 million. Taken in consideration that the third quarter is the most profitable the result indicates that Atlantic Airways has managed to reverse the downward tendency in the latest annual accounts.

Route map

Routes to Denmark The main route of Atlantic Airways is the route between the Faroe Islands and Copenhagen. Atlantic Airways started operating this route in March 1988 and during the first years of

Registration Document - 38 Atlantic's history this was the one and only activity the company relied upon. The dependency upon this route has however declined over recent years. In 2006 44% (2005: 63% and 2004: 64%) of the total revenue was generated by the Copenhagen route. About 45% (2005: 61% and 2004: 65%) of the total number of passengers that the Company carries are on this route. Atlantic Airways has up to 5 daily scheduled flights to Copenhagen Airport. However the frequency of flights varies due to seasonal demand, and there are therefore more flights in the summer than in the winter. Since the mid-1990s the Company has also operated routes to Jutland in Denmark. Currently Billund is operated year around with two flights a week during the low season and up to eight weekly flights during the high season. Three weekly flights are also operated to Aalborg during the summer season.

Routes to Iceland Scheduled flight 2006 In 1995 Atlantic Airways Number of passengers introduced Iceland as a destination. Atlantic Airways currently has 1% regular scheduled flights to 8% 6% Reykjavik. The frequency varies corresponding to the seasonal demand. Atlantic Airways has two scheduled flights a week to Reykjavik in the low season and three to four scheduled flights a 85% week during the high season. The proportion of total revenue in 2006 from the Icelandic route was 3% Danmark Iceland United Kingdom Norway (2005: 3% and 2004: 4%).

Routes to the United Kingdom In 1997 Atlantic Airways introduced Scotland as a destination and in 2001 London was introduced as a destination. The company has operated mainly to Aberdeen in Scotland but also tested Glasgow and Edinburgh. But the business is very much dependent on oil related activity between the two countries, and as for now there are no regular seasonal flights to Scotland. Instead the company has focused more on developing the route to London Stansted. In 2006 Atlantic Airways introduced Sumburgh, Shetland as part of the London route. The route Vágar – Sumburgh – London Stansted was initially launched on a test basis. In 2007 this route pattern has been changed so that the service is linking the Faroe Islands directly to London and London directly to Sumburgh. Incidentally this is the first time that Sumburgh has had a direct flight connection to London and it is also the longest domestic route in the United Kingdom. The proportion of total revenue in 2006 from the UK route was 2% (2005: 2% and 2004: 4%).

Routes to Norway In 1999 Atlantic Airways introduced Norway as a destination. The Company has offered services to both Stavanger and Oslo to test where demands are higher. The frequency varies corresponding to the seasonal demand. Therefore Atlantic Airways has not implemented a fixed schedule in the winter months. The proportion of revenue in 2006 from the Norwegian route was 1% (2005: 1% and 2004: 1%).

Registration Document - 39 11.6.2. Charter In order to reduce the dependency on the small Charter operations Faroese economy the Company Number of passengers has increased activities within the charter area. In 2006 Atlantic Airways' charter 200,000 operations accounted for 43% 150,000 of the total revenue (2005: 23% and 2004: 17%). In total 100,000 revenue this amounted to respectively DKK 223 million 50,000 in 2006, DKK 87 million in 2005 and DKK 29 million in 0 2004 2005 2006 half-year 2004. The first six months of 2007 2007 revenue deriving from charter operations was DKK 109.8 million. Atlantic Airways' charter operations mainly consist of corporate charters, leisure charters and ad hoc charters. Corporate charters on behalf of Aker Stord AS Norwegian ID-No. 916 297 807 has had a central role during the past two years. As these contracts are about to reach a termination the company is currently evaluating substituting charter contracts. The Company has signed a wetlease contract with SAS covering the flights on the route between Copenhagen, Denmark and London City Airport, England. The preliminary duration of this contract is 6 months. Other charter activity consists of wet-leases, tour operator market - mainly in Denmark - and the ad hoc market. The charter business is often characterised by short-term airline service contracts. The Company has experienced growth in ad hoc charters in recent years.

Registration Document - 40 11.6.3. Helicopter Revenue related to helicopter activities accounted for 6% of the total revenue in 2006 (2005: 6% and 2004: 9%). In total revenue this amounted to respectively DKK 33 million in 2006, DKK 24 million in 2005 and DKK 22 million in 2004. The first six months of 2007 revenue deriving from helicopter activities was DKK 23 million. The helicopter business currently compromises two main areas.

Domestic helicopter service Atlantic Airways has an agreement with the Faroese Government to provide a regular island hopping service to the most remote islands which are not connected to the main infrastructure. The activity amounts to more than 500 hours a year. The Company has conducted this service on behalf of the Faroese Government since 1994, when Atlantic Airways took over the helicopter service from the coastal ferry service Strandferðslan (national coastal service company). The contract with the Government may be terminated at the earliest on 31 December 2008, with six months' written notice. In addition Atlantic Airways signed a 10-year contract with the ministry of fisheries in 2000 to provide the Faroe Islands with year round search and rescue service (SAR) 24 hours a day. The contract is valid until 31 December 2010 and can be revaluated every year and terminated with 12 months' written notice. Under the trading name Atlantic Helicopters the Company is involved in a variety of activity such as off-shore services, charter flight and aerial work/sling operations.

International helicopter service In line with the Company's main objective to increase income from activities outside the Faroe Islands Atlantic Airways has invested in a Bell 412 helicopter with primary focus on the North Sea offshore business. The latest agreement signed in this connection was with Bristow Helicopters to perform operations from Norwich (UK) in the period March to July 2007. Negotiations are currently ongoing for further operation in the North Sea area.

11.6.4. Market position and competition Atlantic Airways focuses on developing a network with the Faroe Islands as a corner stone. The Company wants to be the airline of preference in the Faroe Islands and do so by offering people a variety of choices at competitive prices. For an airline, the Faroe Islands is a niche market due to the facts that the tiny market only consists of 50,000 inhabitants, the runways are relatively short and the operational conditions can be challenging, because of fog and windy/turbulent conditions. Consequently the Faroe Islands are less attractive as a destination for foreign airline operators.

Registration Document - 41 The Company started in 1988, flying to Copenhagen and offering an alternative to Danish carrier Mærsk Air, which had been the sole operator since 1970. After 16 years of competition on the routes to Copenhagen and Billund Mærsk Air stopped flying to the Faroe Islands in November 2004. From November 2004 and until the demise of Mærsk Air the route to Copenhagen was operated in a code-share agreement between Atlantic and Mærsk Air. In December 2004 a Danish carrier DAT introduced a service between Denmark and the Faroe Islands but ceased after only a few flights. In May 2006, after a period where Atlantic Airways was the only operator offering flights between the Faroe Islands and neighbouring countries, a new Faroese company called Faroe Jet started. Faroe Jet offered scheduled flights between Copenhagen and the Faroe Islands flying the same type of aircraft that Atlantic Airways operates. Faroe Jet failed to continue its business and ceased to operate on 15 December 2006. Thus Atlantic Airways currently is the sole provider of airline services to the Faroe Islands. The first alternative route was introduced in 1995 when Atlantic, in a code share agreement with Icelandair (later Air Iceland), introduced Iceland as a destination. This co-operation is still in force and the service is extended to Narsarsuaq in Greenland during the summer season. There is no code share agreements on the routes to Denmark, UK or Norway. Due to factors such as the increased availability of air transport to and from the Faroe Islands the market has grown considerably over the last few years. It should be kept in mind that the latest figures shown below are realised during a period with economic growth. A recession might adversely influence the figures.

250.000

200.000

150.000 T ot al passengers, Vagar Airport

100.000 Passangers Flying with Atlantic Airways scheduled flights 50.000

0

4 966 969 972 975 978 98 987 990 993 996 999 002 005 1963 1 1 1 1 1 1981 1 1 1 1 1 1 2 2 Source: www.floghavn.fo (Vágar Airport) and internal information from Atlantic Airways In a broader sense Atlantic Airways is in competition with Smyril Line, which offers travelling by sea to destinations in Denmark, Iceland, Scotland, Shetland and Norway. For many years travelling by air has been an increasing part of total travelling to and from Faroe Islands, reaching a share of around 80% in 2002. In 2003, when Smyril Line launched a new passenger ferry, the share of travellers travelling by air decreased by approximately 5% and has since been stable at 75% of total travelling.

Registration Document - 42 250.000

200.000

150.000 Travellers in total Travellers by air 100.000 Travellers by sea

50.000

0

7 9 3 7 3 7 1 3 97 97 98 98 99 99 00 00 1975 1 1 1981 1 1985 1 1989 1991 1 1995 1 1999 2 2 2005

Source: Statistics Faroe Islands In order to undertake scheduled traffic to and from the Faroe Islands, permission is needed from the authorities. Further, companies with permission need approval from the authorities to make any changes in the pricing system. According to the management of Atlantic Airways this is time consuming and bureaucratic but otherwise does not interfere with its daily work. During the last six years the company has not received any comments in this respect. The formal requirements for flight permission are expected to be eliminated in the future, as the Faroese Government wants the Faroe Islands to be part of the “European Common Aviation Agreement” in 2007. In addition to the challenge of the “European Common Aviation Agreement” the runway is expected to be extended within four years, allowing larger aircraft to land in the Faroe Islands. In March 2007 DKK 365 million were awarded to this project. When the Faroe Islands become part of the “European Common Aviation Agreement” and the runway has been extended, increased competition on the scheduled flights to and from the Faroe Islands can be expected. In the charter business, where Atlantic Airways generated 43% of its total revenue in 2006, the Company operates in an international competitive environment.

11.6.5. Customers Atlantic Airways transported 351,050 passengers in 2006 Total number of passengers (2005: 247,667, 2004: 146.944) and has a strong market position 400,000 on the Faroese market. 300,000 The half-year 2007 the number of passengers transported amounted 200,000 to 170,544. Taken into account that the peak of the seasonal 100,000 demand is in third quarter this is result indicates that the positive 0 trend is maintained. 2004 2005 2006 half-year 2007

Scheduled flight Charter Flights Helicopter

Registration Document - 43 The customer base of Atlantic Airways is well diversified by travel agencies, private and business travellers. Even though travel agencies are among the largest customers of Atlantic Airways, the management does not feel that the Company is reliant on any individual client. In recent years customers have increasingly been using internet services. Since an appropriate system was launched in February 2005 the share of tickets sold via the internet has increased from 12% in 2005 to 27% of total tickets sold in 2006. The following table shows information regarding the aircraft operation. Scheduled flights and charter are represented in all numbers but the load factor, where only the average for the scheduled flights is represented.

2004 2005 2006 01/01-30/06 2007 Passengers 141,175 247,667 344,669 166,258 ASK * 254.2 450.6 896.9 451.8 RPK ** 185.9 295.7 467.4 227.6 Load factor 72% 69% 66% 75% (scheduled flights) ***

* Available Seat Kilometres (in millions) - The number of seats available multiplied by the number of kilometres flown. This measures the airline's capacity capability.

** Revenue Passenger Kilometres (in millions) - The number of passengers multiplied by the number of kilometres they fly.

*** Load factor – The maximum number of seats in a plane divided by the number of sold seats

The total number of aircraft passengers has consistently been increasing over the last few years, as have available seat kilometres (ASK) and revenue passenger kilometres (RPK). Load factor has been declining in the last two years, which can be explained by new routes with lower load factor and in 2006 a new competitor meant a lower load factor on the Copenhagen route. For the first half-year of 2007 load factor increased to a level even higher than what we have seen previous years, even though the peak of the seasonal demand is to be found in the second half-year of 2007. 11.7. Seasonal trends 35,000 Atlantic Airways routes are characterised by seasonal 30,000 demand and therefore one of the management's focuses is on 25,000 2006 matching capacity/supply with 20,000 2005 variation in demand. In practice 2004 15,000 this means that all of Atlantic 2003 Passengerss Airways' routes have reduced 10,000 2002 activity in the winter months and some routes have almost no 5,000 activity in the winter months 0 (meaning the period from y ly r u er September to May). For example ua May June J ob nuary r April emb er Ja eb March Augustt F Oct does Atlantic Airways not fly to Sep NovemberDecember Aalborg in Denmark, to Norway Source: www.floghavn.fo (Vágar Airport)

Registration Document - 44 and to the United Kingdom in the winter months. This seasonal pattern combined with the nature of the business, which is burdened with high fixed costs and high variable costs means that earnings in the second and third quarters are relatively better than the first and fourth quarters. 11.8. Trend information The Company's future financial performance will be dependent on its ability to adapt to future market changes. There are many uncertainties when addressing future trends which can influence the Company. The points mentioned below are not an exhaustive list, but the ones that are likely to have a significant influence on Atlantic Airways: • The general global trend of liberalisation of the airline market. o The Faroe Islands are expected to join the European Common Aviation Agreement which could increase the competition on the routes to and from Faroe Islands. • Low cost airlines have triggered a shift of paradigm from quality in service to price orientated customers. Business and flexible travel comes at a low price with Atlantic while there is limited flexibility in the cheaper leisure travel segment as volumes are low. o An extended runway at Vágar Airport will make it possible for airlines to operate larger aircraft with consequently lower seat/mile costs. Atlantic Airways is currently evaluation different alternatives in this respect. • Future fuel prices. The resent years high fuel prices have had an influence on the profitability of the airline business. In the long run increased fuel costs will partly be offset by fuel surcharges. Historically airlines have been conservative in adding this surcharge. • Future increasing USD exchange rates can negatively impact earnings, since a significant part of the Company's purchases are made in USD, e.g. fuel, spare parts and aircraft. This can also be offset in increased asset values. AS aircrafts and helicopters often are traded in USD the recent development in the USD has had a positive influence on the Company's latest investments. Out of the total operating costs approximately 44% are traded in foreign currency, mainly USD.

Registration Document - 45 12. OPERATING ASSETS 12.1. Fleet The Company operates a single type of aircraft in order to increase scheduling flexibility, reduce operation complexity and minimise costs of training, spare parts and maintenance. As of 30 June 2007 Atlantic Airways operated five aircraft - two under operating leases and three owned by the Company. All aircraft are manufactured by British Aerospace. The RJ - 100 is a new model of the BAe 146-200 from British Aerospace. The helicopter business is operated with three Bell helicopters. Although the last BAe 146 aircraft were produced in 2001, there is no shortage and/or no problems regarding the supply of spare parts. BAE Systems and other authorised vendors in the market can supply all the necessary equipment to BAe 146 aircraft. Additionally there is a market for the BAe 146 aeroplanes. As of 30 September 2006, the Faroese Government made a non-cash contribution that resulted in an equity increase of DKK 52 million by contributing a Bell-212 helicopter and an aircraft hangar at Vágar Airport. The Bell 212 and the hangar previously rented by Atlantic Airways are thus properties of Atlantic Airways. As of 30 June 2007 the Company’s fleet incorporated in the half-year statement was as follows:

Aeroplanes Helicopters

Type BAe 146- BAe 146- BAe 146- Avro RJ- Avro RJ- Bell 212 Bell Bell 412 200 200 200 100 100 412

Code OY-RCW OY-RCA OY-RCB OY-RCC OY-FJE OY-HMB OY- OY- HSR HSJ

Leased Owned Owned Owned Leased Owned Owned Owned

Year 1987 1985 1987 1999 1993 1975 1996 1993

Age 20 22 20 8 14 32 11 14

Both leased aircraft can be redelivered in October 2007. In compliance with the Company's decision to renew the fleet and replace the BAe 146 aircrafts with Avro RJ aircrafts, an Avro RJ-85 aircraft was delivered in October 2007 as replacement for the leased BAe 146- 200, registration code OY-RCW. The next Avro RJ aircraft will be delivered in November 2007. A decision regarding redelivery of the leased aircraft and phasing out BAe 146 aircrafts is depending upon market demand and board decision.

Registration Document - 46 13. INVESTMENTS Atlantic Airways' expansion in recent years has required investments. The table below shows the additions of the last three years as stated in the Annual Accounts.

INVESTMENTS

DKK 1,000 2004 2005 2006 1/1-30/6 2007 Aircraft and maintenance 21,857 74,741 58,730 31,334 Operating spare parts 721 1,346 12,422 5,598 Equipment 1,464 5,092 6,352 2,371 Buildings 0 0 45,667 0 Total investments 24,042 81,179 123,172 39,303

13.1. Historical investments In the following all the Issuer's principal investments are highlighted. The difference between the below mentioned investments and the total amounts listed above are maintenance work. In relation to other businesses the airline business is burdened with relative high maintenance costs. The exchange rate used is the rate at the date of the payments. 2004 • In 2004 a BAe 146 OY-RCB aircraft was purchased for DKK 13.7 million. The investment was financed with own funds. 2005 • In 2005 a RJ-100 OY-RCC aircraft was purchased for USD 7.8 million (DKK 48 million). The investment has been financed with own funds and an increase in long term debt of DKK 24 million. 2006 • In 2006 the Faroese Government made a non-cash contribution – a OY-HMB helicopter valued at DKK 8.2 million and a hangar valued at DKK 43.8 million. This contributions were paid by shares to the Faroese Government, the sole owner at current time. • The Company bought a Bell 412 HP helicopter for DKK 37 million. This amount has been booked as an addition during the year. No depreciations have been made to this amount. • The Company prepaid USD 1 million (DKK 5.9 million) for the rights to buy a new Augusta/Westland helicopter. No depreciations have been made to this amount. The Augusta/Westland helicopter will cost USD 13 million (DKK 74 million). • The investment in the Bell 412 and the prepayment for the Augusta/Westland where partly financed by an increase in long-term debt of DKK 30 million and partly financed by own funds.

Registration Document - 47 01.01.07-30.06.07 • The Company has in this period prepaid USD 1 million (DKK 5.7 million) for two Avro RJ-85 aircrafts. • In addition the Company has paid additional DKK 5.8 million to the Bell 412 bought in 2006 and upgraded in 2007. • The investments are currently financed with own funds. Later on the Company will decide the optimal financing structure which will result in increased borrowing requirements. 30.06.07- date of the registration document • On of the Avro RJ-85 prepaid for in first half-year 2007 has been delivered and paid for. The next Avro RJ-85 will be delivered and paid for in November 2007. The total cost for both Avro RJ aircrafts is USD 8 millions (DKK 45 millions). The investment will be debt financed. • In this period an additional prepayment of USD 750,000 for the Augusta/Westland helicopter has been paid. The remaining amount of USD 11.3 million will be paid on delivery. The payment will mainly be financed by new debt.

Registration Document - 48 13.2. Future investments The question of how the fleet shall be composed in the long run depends on the future conditions for air traffic to and from the Faroe Islands. The Company is currently reviewing the alternative to the existing fleet of BAe 146/RJ aircrafts. As decision has been made to extend the runway at Vágar Airport it is likely that the Company will make a decision on fleet renewal within the next 6 months from the date of this Registration Document. Taking the operational environment and market size into consideration single aisle aircrafts carrying between 100-150 passengers are in a favourable position. Purchase of such a new aircraft is estimated to range between USD 25-40 million. The company holds delivery position for delivery of a new aircraft in 2011. With the Company’s current financial status and the more efficient operation the Company expects to be able to meet the financial engagements in relation to the investment without a capital increase. The purchase will result in increased borrowing requirements. Regarding the helicopter service the Company has bought a new Augusta/Westland helicopter for a cost of USD 13 million to be delivered in March 2008. The company has currently no firm contract for utilisation of the helicopter. However the helicopter market is buoyant. The company expects to either wet lease or dry lease the aircraft. A prepayment of USD 1 million was maid in 2006. The second prepayment of USD 750,000 was paid in October 2007 and the remaining amount will be paid on delivery. The payment will mainly be financed by new debt. Considering the increased activity level for the Company an extension of the Headquarter will most likely be necessary within few years. The cost of such an extension will depend on dimension and quality of the extension but is estimated to be around DKK 30-40 million. The work is not yet initiated and no decision is made in this respect.

Registration Document - 49 14. LEGAL STRUCTURE 14.1. Legal structure of Atlantic Airways The Issuer does not have any subsidiaries, but only associated and minority investments. According to the memorandum to the act on the privatisation of Atlantic Airways the helicopter activity shall be transferred to a wholly owned subsidiary. Currently the Company is preparing to establish a separate air operator certificate (AOC) to conduct commercial air transport operations with helicopters. Helicopter operations are presently performed under a common aeroplane/helicopter AOC number. 14.2. Investments in shares - associated and minorities The investments that Atlantic Airways has made in associates and minorities as of 30 June 2007 are listed in the table below. There has been no significant change in these assets since the most recent financial accounts were published on 10 October 2007 for the six months period ended 30 June 2007.

Unlisted shares ID number Address Operation Owner- Booked value ship 30-06-07 Sp/F Bitland 3743 Tórsgøta 16, IT/technology 9% 27,662 Tórshavn P/F Green Gate 3224 Undir bryggjubakka Travel /leisure 49% 822,472 incoming 3, Tórshavn P/F Gjáagarður 3844 Gjógv Hotel/ leisure 27% 253,880 P/F Útferðir 2329 J. C. Svabosg. 39, Travel/ leisure 16% 140,875 Tórshavn P/F Hotel Føroyar 1927 Oyggjarv. Hotel/ leisure 10% 750,838 45,Tórshavn

These investments do not likely have a significant effect on the assessment of Atlantic Airways' own assets and liabilities, financial position or profits and losses.

Registration Document - 50 15. ADMINISTRATIVE, MANAGEMENT, SUPERVISORY BODIES, AND SENIOR MANAGEMENT 15.1. Corporate governance Corporate governance in Atlantic Airways is defined as the framework by which the Company is directed and controlled and the means by which relationships among Atlantic Airways' management, its board, its shareholders and other stakeholders are conducted. At a board meeting in November 2006, Atlantic Airways implemented a corporate governance programme which is outlined in the internal rules of the Company. The aim of the corporate governance programme is to ensure disclosure and transparency, define the responsibilities of the board and the management, define the rights and obligations of shareholders and stakeholders, ensure equal treatment of shareholders, and avoid potential conflicts of interests between the parties. The board is ultimately responsible for the Company's system of internal controls and for reviewing their effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable assurance against material misstatement or loss. In 2004 the Iceland Chamber of Commerce, OMX ICE and the Confederation of Icelandic Employers issued Guidelines on Corporate Governance. Atlantic Airways has, however, not chosen to set up an audit and remuneration committee. The necessity of a remuneration committee will be evaluated at the next annual meeting. In other respects Atlantic Airways complies with these guidelines, and intends to follow them in the same manner with respect to its future structure and management. 15.2. Statutory bodies The supreme authority in the affairs of Atlantic Airways, within the limits established by its articles of association and statutory provisions, is in the hands of the Company's shareholders’ meetings. The annual general meeting of Atlantic Airways shall be held before the end of April each year. At shareholders’ meetings shareholders have one vote for every DKK 100.00 which they hold in shares. Decisions at shareholders’ meetings are made by majority vote unless otherwise provided for in the articles of association or prescribed by law. 15.3. Board of Directors The board of Atlantic Airways manages the Company’s general affairs and endeavours to keep the organisation and operations consistent with the Company’s mission and strategy. The Company’s board of directors directs company affairs and works to ensure that the Company’s organisation and activities are in good order at all times and that the accounting and the handling of the Company’s assets are sufficiently supervised. According to article 15 of the articles of association the board shall be composed of three members. In addition the employees of the Company are eligible to nominate two representatives according to article 49 of the Companies Act. The members of the board are elected for 1 year at a time. Re-election is allowed.

Registration Document - 51 Atlantic Airways plans to assess the activity, work practices and procedures of the board annually in light of the Company’s progress, with the assistance of outside parties, when appropriate. The administrative rules, which the board of directors adopted on 23 August 2006, state that board members should familiarise themselves with the provisions of law, the Company’s articles of association, securities regulations, any rules which the Company may adopt and relate to the handling of inside information and insider trading, and other relevant rules. The following section lists the current members of the board of directors and their activities. In references made to “related parties” that hold shares in Atlantic Airways, related parties are defined according to article 16 of the Icelandic Financial Supervisory Authority rules on Treatment of Insider Information and Insider Trading as: 1. a spouse, registered partner and cohabiting partner, 2. children, adopted children and step-children living in the insider's home who are not financially competent, 3. other relations living in the insider's home and who have lived in the insider's home for at least one year when the transaction takes place 4. a legal entity: a) where the insider or a party listed in points 1, 2 or 3 above serves as managing director, b) which is directly or indirectly controlled by the insider or a party listed in Points 1, 2 or 3 above, c) other than those referred to in subparagraph a or b, if its financial interests are interwoven those of the insider or a party listed in Points 1, 2 or 3 above. In the following the total remuneration to the board of directors are listed. The numbers represent a fixed payment for their board practice. There are currently no bonus schemes or option schemes in place for the board. It is up to the board to decided the remuneration to each board member. According the Royal Decree No. 250/1993 remuneration shall not exceed the amount which is considered to be normal in view of the nature of the duties of their office and the scope of their work and that which must be considered to be reasonable in the context of the Company's financial position. The board has decided to graduate the amount of remuneration paid to each board member depending on whether they are chairman, deputy chairman, employee representative or not. The employee representatives take part in the directors meeting on the same terms as the other board members.

Christian Andreasen, Rygsgøta 19, FO-160 Argir, Faroe Islands. Lawyer at Advokatskrivstovan, Frúutrøð 4, Tórshavn Chairman of the board of Atlantic Airways, elected to the board of directors in May 2001. Management or board duties in other companies: Manager and board member of P/F Christian Andreasen, P/F KJ Contractors and P/F Property Bonds I Chairman of the board of P/F SMS, P/F J.K. Petersen Contractors, P/F 15 juni 2004 and P/F 12.06.2003.

Registration Document - 52 Board member of P/F Trygd, P/F ISS Føroyar, P/F Fastogn, P/F Mathias Jacobsen & Co, Sp/f PL Holding, P/F 15 Juni 2004 and P/F 23 Juni 2003. Other management or board duties in the last five years: P/F Alma Maskinverkstaður & Smiðja, P/F Faroe Salmon and P/F Kryvjing. Remuneration: Remuneration for the whole years 2006amounted to DKK 132,000.

Erling í Liða, Argjavegur 49 A, FO-160 Argir, Faroe Islands. Marketing director of P/F Føroya Shell, Vestara Bryggja 8, Tórshavn Deputy chairman of the board, elected to the board of directors in June 1997. Management or board duties in other companies: None Other management or board duties in the last five years: None Remuneration: Remuneration for the whole years 2006 amounted to DKK 90,000.

Petur J. Eiriksson, Hæðarsel 22, IS-109 Reykjavik, Iceland. Managing Director of Icelandair Cargo, Brautarholt 10-14, Reykjavík Member of the board, elected to the board of directors in April 2000. Management or board duties in other companies: Iceland Hotels hf. and Icelease ehf. Other management or board duties in the last five years: Iceland Air hf., Reykjavik Excursions hf., East Harbour Company hf., Iceland Travel hf. Urval Utsyn hf. Remuneration: Remuneration for the whole years 2006 amounted to DKK 66,000.

Ingi Solberg Joensen, FO-370 Miðvágur, Faroe Islands. Head of Tax-free department of Atlantic Airways Member of the board (employee representative), elected to the board of directors in September 2006. Management or board duties in other companies: None Other management or board duties in the last five years:

Registration Document - 53 None Remuneration: Board remuneration for the whole years 2006 amounted to DKK 19,250.

Verna Rasmussen, FO-380 Sørvágur, Faroe Islands. Executive Human Resources of Atlantic Airways Member of the board (employee representative), elected to the board of directors in September 2006. Management or board duties in other companies: None Other management or board duties in the last five years: None Remuneration: Board remuneration for the whole years 2006 amounted to DKK 19,250.

15.4. Senior management The managing director and financial director are in charge of the day-to-day operations of the Company and represent the Company in all matters concerning normal operations. They shall manage the accounts of Atlantic Airways and hire the employees. The directors shall grant board members and auditors all necessary information on the operations of the Company which they might request and should be granted according to statutory law. The managing director of Atlantic Airways is Magni Arge and the financial director of Atlantic Airways is Marius Davidsen. There are currently no other senior manager who is relevant to establishing that the issuer has the appropriate expertise and experience for the management of the issuer's business. To motivate senior management and reward them if business targets are achieved there are implemented bonus schemes. There is no option scheme in place and currently no intention to establish such a scheme.

Magni Arge, Borgartún 2, FO-160 Argir, Faroe Islands Managing director of Atlantic Airways, since June 1995. Management or board duties in other companies: Chairman of the board of Eurest Føroyar P/F. Board member of Faroese Employers' Association, P/F Green Gate Incomming, P/F Gjárgarður and P/F Útferðir. Other management or board duties in the last five years : Board member of West Nordic Travel Board Remuneration:

Registration Document - 54 Remuneration for the whole year 2006 amounted to DKK 1,035,000.

Marius Davidsen, FO-380 Sørvágur, Faroe Islands Financial director of Atlantic Airways, since January 2005 Has been involved with Atlantic Airways since it commenced operations in 1987/88 Management or board duties in other companies: None Other management or board duties in the last five years: None Remuneration: Remuneration for the whole year 2006 amounted to DKK 806,400.

15.5. Additional information on the board of directors and senior management No member of the board or any member of the management has any potential conflict of interest between their duties to the Issuer and their private interests or other duties and they have not been granted loans or stock options from the Company. There are no family relationships between any of the members of the board of directors or the management. None of the board members or management have had convictions in relation to fraudulent offences in the previous five years. None of them have been senior managers, members of the administrative, management or supervisory bodies of a company which has been a part of or associated with bankruptcy, receivership, or liquidation in the previous five years. None of them have been subject to any official public incrimination and/or sanctions by statutory or regulatory authorities or been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the management or conduct of the affairs of any issuer in the previous five years. Due to the fact that Atlantic Airways up until now has been 100% governmental owned no member of the board or any member of the management or parties related to the board or management have share holdings in Atlantic Airways. No service contracts providing for benefits for members of the board or management have been made with the Issuer upon termination of employment. No amount has been set aside or accrued by the issuer to provide pension, retirement or similar benefits.

Registration Document - 55 15.6. Auditor According to article 6 and article 19 of the articles of association a chartered accountant is elected at each annual general meeting of Atlantic Airways for a term of one year. The auditor examines the Company’s accounts and all relevant accounting documents for each year of operation, and has access to all the Company’s books and documents for this purpose. According to article 21 of the articles of association the account must be made in accordance with good accounting practice and in a manner so that all required and necessary depreciation and provisions are made. The auditor's fees are shown in the table below.

2004 2005 2006 1/1-30/06 2007 Auditing 132,500 138,400 139,350 130.700 Other services 82,060 46,900 226,550 149.050

The chartered accountants of Atlantic Airways P/F are and have been for the period 2004, 2005, 2006 and for the period 01.01.07-30.06.07 Rasmussen & Weihe, statsautoriserað grannskoðarafelag and representative firm of HLB international, Faroese ID No. 3752, á Glaðisheyggi, FO-110 Tórshavn, 15.7. Compliance officer A compliance officer is employed within the Company. The compliance officer is directly responsible to the managing director and is independent in his or her duties. The compliance officer monitors the implementation of insider rules adopted by the Company, including rules regarding securities trading by employees and primary insiders. The compliance officer is responsible for interpreting the rules, and takes decisions based on the rules. The compliance officer makes proposals for improved working procedures for various positions within the Company, and helps develop and maintain the compliance monitoring system.

Registration Document - 56 16. EMPLOYEES Atlantic Airways headquarters are located at Vágar Airport, 380 Sørvágur, the Faroe Islands. At the end of December 2006 the total number of employees at Atlantic Airways was 177. The Company employs an insignificant number of temporary employees. These temporary employees are mainly recruited during the summer months, when there is a need for additional personnel resources, due to the seasonal demand. Atlantic Airways aims to employ well qualified and service oriented people with comprehensive knowledge in the airline business. One of their main objectives is to develop and retain qualified personnel and to be the first choice for the best people on the job market.

Number of employees divided into departments Year Pilots Flight Technical Handling Marketing and Management Helicopter Total attendants department sales operations 2004 14 22 16 28 12 11 8 111 2005 23 33 21 36 17 13 9 152 2006 29 47 25 31 17 16 12 177 1/1-30/6 2007 40 47 26 30 17 15 12 187

Due to the fact that Atlantic Airways has increased capacity from two to eight aircrafts within seven years there has been a 59% increase in the number of employees from 2004 to 2006.

2004 2005 2006 Employees that have left 2 2 20 Total staff 111 152 177 Employee turnover ratio 1.8% 1.3% 11.3%

The employee turnover ratio is defined as the number of workers which have been replaced in a given time period to the average number of workers. The higher the ratio the more replacements have been made and vice versa. The employee turnover rate at Atlantic Airways has historically been low and stable. The reason for the relatively high ratio in 2006 is due to staff leaving from Atlantic Airways most of whom later became involved in a new start-up carrier that has now ceased to operate. The cabin staff have expressed that the reason for their resignation was the lack of opportunities to work part time. The Company has implemented procedures in order to prevent such staff events in the future.

Registration Document - 57 17. MAJOR SHAREHOLDERS On the date of the Registration Document, there was one shareholder in Atlantic Airways.

Shareholder & ownership Description Nominal value Year Faroese Government Restructuring 75,000,000 1992 Faroese Government Non-cash 28,500,000 2006 contribution Total 103,500,000 Prior to the listing a share offering will be held. A total of 310,500 shares will be offered to the public and 31,050 shares to the employees and board of Atlantic Airways. The Company has no knowledge of any agreement between shareholders on the treatment of voting rights. All shares have the same voting rights. At the time of the expected listing, the Faroese Government will own 67% of the share capital in Atlantic Airways, which exceeds the mandatory takeover bid threshold according to Icelandic and Faroese law. According to the FME's published interpretation of article 100 of the Icelandic Act on Securities Transactions No. 108/2007, the obligation to issue a takeover bid does not arise due to a single shareholder or a shareholder acting in concert with others having legal control over a company at the time of listing on a regulated stock exchange. This exemption is subject to the shareholding having been disclosed at the time of listing. The Issuer is neither directly nor indirectly owned nor controlled by others than the listed shareholders to the extent known to the Issuer.

Registration Document - 58 18. RELATED PARTY TRANSACTIONS Atlantic Airways has a related party relationship with the board of directors, the managing directors of Atlantic Airways, the managing directors of associates and minorities, close family members of individuals referred to herein, and political entities with significant influence on the largest shareholder of Atlantic Airways, which is the Faroese Government. Atlantic Airways has historically paid a yearly instalment of DKK 200,000 plus maintenance obligations for the lease of the hangar in Vágar Airport. As from September 2006 the hangar is a part of the assets of Atlantic Airways. The Faroese Government decided to contribute the hangar to Atlantic Airways as a non-cash contribution. The hangar is valued at DKK 43.8 million. Contemporary with the hangar a Bell-212 helicopter was contributed by the Faroese Government to a value of DKK 8.2 million. For this contribution the Faroese Government received DKK 28.5 million in shares at a rate of 182. The price above par DKK 23.5 million is recorded in the Company's annual accounts under share premium reserve. Apart from the lease of the hangar no unusual transactions have taken place with related parties. The board of Atlantic Airways believes that all of Atlantic Airways' present related party transactions are conducted on an arm's length basis. Atlantic Airways engages in and expects to continue to engage in transactions with its affiliates, including the transactions described below. There are no outstanding loans between Atlantic Airways and associated or minority companies as of the date of the Registration Document. Due to the nature of the largest shareholder, the Faroese Government the term related party can be applied to a number of political entities and persons influencing the decisions made in those entities. However according to the management and the board of directors the only significant related party transactions today are related to the helicopter services. Atlantic Airways has entered into a contract with the Ministry of Fisheries and Maritime Affairs on the provision of search & rescue services (SAR) operations for MRCC. The contract is valid until 31 December 2010 and can be re-evaluated every year and terminated with 12 months' written notice. After 2010 the Ministry of Fisheries and Maritime Affairs will seek for tender offers regarding the task. According to the contract Atlantic Airways is paid DKK 14 million every year, and will in return deliver a state of the art medium-size SAR helicopter and stay alert 24 hours a day, 365 days a year and ready to take off within 60 minutes. The first 170 block-hours are included in the contract but following hours will be billed separately. Atlantic Airways has entered into a contract with the Faroese Government on the provision of helicopter route operations in the Faroe Islands. The contract may be terminated at the earliest on 31 December 2008, with six months' written notice. The contract price is DKK 6.6 million based on 515 flight hours. Additionally the income from sale of tickets is payable to the Company. However, this is not significant income.

Registration Document - 59 19. FINANCIAL OVERVIEW The following review of Atlantic Airways' financial information is based on the audited statutory accounts for each of the years ended 31 December, 2004, 2005 and 2006. In addition the audited financial statement for the period 01.01.07 – 30.06.07 is highlighted and compared with the unaudited financial statement for the same period previous year. The accounts have been prepared in accordance with the Faroese GAAP. There has been no significant change in the financial or trading position of Atlantic Airways' which has occurred since the most recent financial accounts were published on 10 October 2007 for the six months period ended 30 June 2007. 19.1. Accounting Standards and Principles The historical financial statements have been prepared in accordance with the Faroese GAAP. Atlantic Airways will adopt IFRS for the first time in its financial statements for the year ending 31 December 2008, which will include comparative financial statements for the year ending 31 December 2007. IFRS 1 "First Time Adoption of International Financial Reporting Standards" ("IFRS 1") requires that the Company develops accounting policies based on the standards and related interpretations that are effective on 31 December 2007. IFRS 1 also requires that those policies be applied to the opening IFRS balance sheet as of 1 January 2007 and the IFRS financial statements for the two years ending 31 December 2007 and 2008, respectively. 19.2. Income statement

DKK 1,000 1/1-30/6 1/1-30/6 Profit and loss account 2004 2005 2006 2006* 2007 Net sales 234,365 379,586 518,990 231,357 272,999 Flight expenses -143,908 -262,840 -392,750 -165,449 -196,470 Employee expenditures -41,551 -57,539 -79,711 -36,601 -44,666 Depreciations -28,201 -34,159 -39,586 -25,427 -19,476 Result before financial items 20,705 25,048 6,944 3,880 12,387

Financial income 753 1,082 2,581 330 5,633 Financial expenses -3,743 -2,508 -4,455 -1,552 -2,736 Result before tax 17,714 23,622 5,070 2,658 15,284

Tax -3,543 -2,888 -913 -532 -2,751 Profit 14,171 20,734 4,157 2,126 12,533

Total assets 204,603 264,502 363,653 306,958 408,889 Total equity 126,146 136,880 195,868 139,538 208,401

Equity ratio 62% 52% 54% 45% 51% Dividend per share 26,667 133,333000 * Not audited nor reviewed

Registration Document - 60 During the period the material changes to the profit and loss account are the following:

01.01.07-30.06.07 • The half-year statement 2007 shows that Atlantic Airways has managed to continue the positive trend from 2005 and previous years. The net profits for the first 6 months of 2007 are three times the result for the whole year 2006, where Atlantic Airways experienced a declining load-factor and yield. • The record high financial income is due to a revaluation of the Company’s shares in Atlantic Petroleum which amount to DKK 5,049,000. The shares are valued at market price on the last day of the financial period. • Of the claim against SWISS International Air Lines Ltd. the Company lowered the booked claim by DKK 1.5 million in half-year statement 2007. The Company has still not reached an agreement with Swiss liability insurers Allianz regarding the aircraft damaged at Basel Airport and no payment is received. See the following section for further details on this issue. • Even though the fuel price has been high the high load factor for the half-year 2007 has resulted in a relative higher EBITDA margin compared to previous year. 2005-2006 • Net sales increased by DKK 139.4 million corresponding to 36.7% increase, compared to year end 2005. Despite the arrival of a new competitor, the increase in sales was due to a considerable increase in the total number of travellers. The number of passengers flying with Atlantic increased from 247,667 to 351,050 corresponding to an increase of 41.7%. • A significant reason for the revenue increase is due to considerable growth in charter operations. Number of passangers increased from 70,158 in 2005 to 160,548 corresponding to an increase of 129%. • The extra supply of seats from new competition in 2006 led to a lower load-factor and yield. Consequently the result was lower than for 2005. • In addition to the lower load-factor which resulted in a relative high cost compared to the net sales, the high fuel price had a negative influence on the result for 2006. • The Company has a claim against Swiss International Air Lines Ltd. for consequential losses of approximately DKK 5 million in the form of costs of having to lease another aircraft to replace a damaged aircraft, when situated in Basel Airport in October 2006 for inspection. Of this claim, the Company has booked DKK 3.5 million as income in the 2006 profit and loss account. • All financial costs in connection with the accident in Stord are covered by the insurance company. • In connection with a dispute regarding purchasing/taking over assets and obligations from Faroe Jet (see chapter 1.4.4 for further information) Atlantic Airways has deposited an amount of DKK 1.2 million into an escrow account. • As from 1 January 2006 the tax rate has been reduced from 20% to 18%. The tax is calculated on basis of the pre-tax profit adjusted for non-taxable incomes and expenditures.

Registration Document - 61

2004-2005 • Net sales increased by 62% from 2004 to 2005, which corresponds to an increase of DKK 145 million. A significant reason for the revenue increase is due to the increase in passangers from 117,000 in 2004 to 171,000 in 2005. The number of passengers on the Copenhagen route increased by 56% from almost 96,000 to almost 150,000. The Company also achieved growth in charter operations. • There are three main reasons for the increase on the Denmark route. Firstly, Mærsk Air discontinued its services to the Faroe Islands in November 2004. Secondly, the total number of passengers between the Faroe Islands and Copenhagen increased considerably. Thirdly, the Company launched a service to Aalborg during the summer. The reason for the growth in charter operations is mainly the increased charter activity with Aker Stord. • Flight expenses rose from DKK 143.9 million to DKK 262.8 million and employee expenditures from DKK 41.6 million to DKK 57.5 million. The increasing costs are due to the increased activity of the Company. • In 2005 net profits amounted to DKK 20,734,000, compared to DKK 14,171,000 in 2004. Results before financial items amounted DKK 25,048,000, compared to DKK 20,705,000 in 2004. The rise is mainly related to an increase in the market share on the Copenhagen route. • The profit for 2004 of DKK 14.2 million was at that time the best result the Company had achieved since establishment. • The expenses for 2004 were DKK 185.5 million and relative lower compared to the subsequent year where higher fuel prices had a negative influence on the relative costs. In addition the Company has used time and money to train new employees and adjust the organisation to the increased activity of the Company.

Registration Document - 62 19.3. Balance sheet

DKK 1,000 1/1-30/6 1/1-30/6 Assets 2004 2005 2006 2006* 2007 Aircrafts and maintenance 125,003 165,921 167,057 158,866 180,196 Spare parts 4,633 4,369 15,065 9,043 15,760 Operating equipment 2,588 5,507 9,449 6,564 9,886 Building 596 537 45,817 507 44,890 Total fixed assets 132,820 176,334 237,388 174,980 250,732

Shares in associated companies 0 813 1,996 1,466 1,996 Other shares 1,642 1,050 5,510 1,050 10,146 Total financial 1,642 1,863 7,506 2,516 12,142

Consumables 1,384 1,252 945 1,270 1,464 Trade receivables 19,609 37,663 92,459 50,850 67,153 Accrued income and deffered expe 1,347 2,540 2,880 5,331 2,084 Other receivables 5,809 4,061 1,806 1,355 2,939 Liquid funds 41,992 40,789 20,670 70,656 72,374 Total current assets 70,141 86,305 118,759 129,462 146,015

Total assets 204,603 264,502 363,653 306,958 408,889

Liabilities Share capital / Issued capital 75,000 75,000 103,500 75,000 103,500 Share premium reserve 0 0 23,500 0 23,500 Reserve shares in subsidiares 0 0 478 0 478 Retained earnings 51,146 61,880 68,390 64,538 80,923 Total equity 126,146 136,880 195,868 139,538 208,401

Provisions for deferred taxes 13,637 16,525 18,059 16,525 20,810 Total provisions 13,637 16,525 18,059 16,525 20,810

Long-term debt 41,357 64,673 85,161 60,441 79,430 Trade payables 18,702 33,311 58,746 77,695 92,549 Accruals and deferred income 2,761 3,114 5,818 2,759 7,698 Proposed dividend 2,000 10,000 0 10,000 0 Total short- and longterm debt 64,820 111,098 149,725 150,895 179,677

Total liabilities 204,603 264,503 363,653 306,958 408,889 * Not audited nor reviewed

Registration Document - 63 During the period the material changes in the balance sheet are the following:

01.01.07-30.06.07 • The increase in fixed assets is due to a prepayments of USD 1 million for two Avro RJ-85 aircrafts and a DKK 5.7 million payment to the new Bell 412 helicopter. • Just as previous year liquid funds are high ultimo June 2007 due to the prepayment of the air tickets and the fact, that the Company is at the height of the season. In addition the insurance matters related to the accident in Stord are settled.

2005-2006 • The increase in total fixed assets of DKK 61 million is mainly due to the non-cash contribution of the hangar at Vágar Airport and a helicopter from the Faroese government. The aircraft hangar is valued at DKK 43.8 million and the helicopter is valued at DKK 8.2 million. • The increase in long-term debt of DKK 20 million is a consequence of the Company's latest investment in a new Bell 412 helicopter and a new Augusta/Westland helicopter. • Trade receivables amount to DKK 92.5 million, an increase of DKK 54.8 million. The main reason for the increase is an insurance claim of DKK 37.8 million in connection with the accident in Stord. All major insurance matters related to the accident in Stord are settled. • The equity amounts to DKK 195.9 million - an increase of DKK 59 million. This increase is mainly due to the above mentioned non-cash contribution from the Faroese government.

2004-2005 • Total fixed assets increased from DKK 133 million in 2004 to DKK 176 million in 2005. Hereof the most significant increase came from the aircraft and maintenance account, which increased by DKK 42 million. The main reason for this increase is an investment in an aircraft. • There was a significant increase in trade receivables from 2004 to 2005. The main reason for the increase in receivables is the billing and payment terms in the charter operations. Atlantic Airways invoices the charter customer at the end of the month and the customer has 45 credit days to pay for the services provided by Atlantic Airways. • As a consequence of the above mentioned investment in an aircraft the long-term debt increased from DKK 41 million in 2004 to DKK 65 million in 2005.

Registration Document - 64 19.4. Cash flow

DKK 1,000 1/1-30/6 Cash Flow 2004 2005 2006 2007 Result before financial income 20,705 25,048 6,944 12,387 Depreciation 28,201 34,159 39,586 19,476 Working capital from operations 48,906 59,207 46,530 31,863

+/- Trade receivables -19,597 -17,500 -52,880 24,968 +/- Stock -442 133 307 -520 +/- Shares in associated copmanies and other shares -347 -221 -5,643 -4,636 +/- Trade payables 5,918 14,608 25,435 33,804 +/- Other liabilities and accrued expenses 691 353 2,704 1,880 +/- Changes in sharecapital and other reserves 0 0 55,453 0 Change in current assets, provisions and shortterm liab. -13,777 -2,627 25,376 55,496

Cash flow from operations 35,129 56,580 71,906 87,359

Interest income/expenses -2,991 -1,426 -1,874 2,897 Net investment in equipment -23,578 -77,673 -100,639 -32,820 New loans and payments of loans (net) -9,570 23,316 20,488 -5,731 Paid dividends -1,000 -2,000 -10,000 0 Net cash provided by financing activities -37,139 -57,783 -92,026 -35,654

Liquidity surplus -2,010 -1,203 -20,120 51,705

Cash and cash equivalentes at the beginning of the year 44,002 41,992 40,789 20,669

Cash and cash equivalentes at the end of the year 41,992 40,789 20,669 72,374

During the period the material changes in the cash flow statement are as follows:

01.01.07-30.06.07 • Cash and cash equivalents at the end of the period are DKK 72.4 million, up DKK 49.7 million compared to ultimo 2006. The reason is to be found in the trade receivables, which due to the peak season are high and the fact that the insurance claim has been paid by the Insurance company. • Interest income is up by DKK 4.8 million due to a revaluation of the Company's shares in the listed company, Atlantic Petroleum. The shares are valued at market price on the last day of the financial period.

2005-2006 • Working capital from operations amounted to DKK 46.5 million, down DKK 12.7 million compared to 2005. • Changes in share capital and other reserves of DKK 55.5 million in mainly due to the non-cash contribution. The non-cash contribution of DKK 52 million consists of a hangar of DKK 43.8 million and a helicopter of DKK 8.2 million. For this contribution the Faroese Government received DKK 28.5 million in shares at a rate

Registration Document - 65 of 182. The price above par DKK 23.5 million is recorded under share premium reserve. • Net investment in equipment of DKK 100.6 million in the cash flow statement include the helicopter and the hangar bought from the Government and paid by shares in the Company. The remaining amount was primary prepayment of two helicopters at DKK 31 million. • Trade receivables are DKK 52.9 million. The increase is primary a result of an insurance claim of DKK 37.8 million and increased trade receivables related to the higher activity.

2004-2005 • Working capital from operations amounted to DKK 59.2 million, up DKK 10.3 million compared to 2004. • The largest transactions in the cash flow statements in 2005 are related to the investment in an aircraft, maintenance and other tangible assets in 2005. These investments had a negative cash flow effect corresponding to DKK 77.7 million. • In conjunction with the net investment in the airline in 2005 the Company increased its debt, which contributed to a positive cash flow amounting to DKK 23 million. • Debtors also had negative cash flow effect due to the charter activities operations mentioned above. • Trade payables have had a positive cash flow effect due to a general increase in the activity of Atlantic Airways' overall operations.

Registration Document - 66 19.5. Borrowings requirements The Company recently finalised the purchase of two Avro RJ aircrafts. The purchase price was USD 8 millions. In addition the Company has bought a new Augusta/Westland helicopter for a total cost of USD 13 million to be delivered in March 2008. The defrayed expenses are currently financed with own funds. Later on the Company will made a decision regarding the final financing structure which will result in increased borrowing requirements. Currently there are no other material borrowing requirements. Borrowings as of 30 June 2007 amounted to DKK 79.4 million. None of Atlantic Airways borrowings are guaranteed.

19.6. Capitalisation and indebtness The chairman of the board of directors and the CEO on behalf of the company declare that in their opinion the company's working capital is sufficient for the company's present requirements. There has been no significant change in the financial or trading position of Atlantic Airways which has occurred since 30 June 2007. The following table sets forth the capitalisation. Mortgage loans are secured for an amount of DKK 124 million. The table is based on the most recent financial accounts prepared by the management of Atlantic Airways. The figures are not audited nor reviewed by the statutory auditors.

(All numbers are in DKK and are as at 30 September 2007)

Current debt Mortgage loans (current portion of long-term debt) 7,048,368 Trade payables 51,995,232 Accruals and deferred income 8,006,762 Total current debt 67,050,362

Non-current debt Mortagage loans 68,149,933 Total non-current debt 68,149,933

Equity Share capital 103,500,000 Other reserve 23,978,436 Total equity 127,478,436

Total capitalisation 262,678,731

Registration Document - 67 To provide information on the Atlantic Airways's indebtness the following table analyses the company's net indebtness in the short term and in the medium to long term:

(All numbers are in DKK and are as at 30 September 2007)

A. Cash 35,907,514 B. Cash equivalent 0 C. Trading securities 1) 13,746,000 D. Total liquidity (A) + (B) + (C) 49,653,514

E. Current Financial Receivables 64,309,556

F. Current Bank debt 0 G. Current portion of non current debt 2) 7,048,368 H. Other current financial debt 3) 60,001,994 I. Total Current Financial Debt (F) + (G) + (H) 67,050,362

J. Total Net Current Financial Indebtedness (I) - (E) - (D) -46,912,708

K. Non Current Bank Loans 68,149,933 L. Bonds Issued 0 M. Other non current loans 0 N. Total Non current Financial Indebtedness (K) + (L) + (M) 68,149,933

O. Total Net Financial Indebtedness (J)+(N) 21,237,225

1) Corresponds to the total of financial assets held for trading. 2) Corresponds to the current portion of bank loans payable within 12 months. 3) Corresponds to the total of trade payables, employment obligations and other liabilities for up to 12 months.

Registration Document - 68 19.7. Total share capital The total number of issued shares in Atlantic Airways is 1,035,000. All the shares are of the same class. Each share has a nominal value of DKK 100 or multiples hereof. All issued share capital has been paid for.

Own shares Atlantic Airways does not hold any own shares. According the articles of association the Board is authorised in the period from 1 October 2007 to 31 December 2008 to buy own shares up to a maximum nominal value of DKK 4 million at the rate of minimum 100 and maximum 300. According to article 48 of the Royal Decree No. 250/1993 authorisation shall be given at the annual general meeting to the board if the Company wishes to acquire own shares.

Development of the share capital On 22 September 2006, the board of directors of Atlantic Airways was authorised at the annual general meeting to increase the share capital by DKK 28.5 million nominal value through a non-cash contribution. The non-cash contribution increased the total share capital from DKK 75,000,000 to a total of DKK 103,500,000. The increase has been executed and paid for with other values than cash. The assets are a hangar at Vágar Airport valued at DKK 43.8 million and a helicopter valued at DKK 8.2 million. The development of Atlantic Airways' share capital is described in the following table.

Date of Shareholder Transaction Nominal value Ownership registration*

9/12-1992 The Faroese Government Restructuring the Company 75.000.000 100%

22/09-2006 The Faroese Government Non-cash contribution 28.500.000 100%

Total 103.500.000

Atlantic Airways was restructured in 1992 with share capital of DKK 75,000,000. There have not been any changes in share capital in the period 1992-2006. There is currently no authorisation to further increase share capital.

Registration Document - 69 19.8. Memorandum and articles of association

Provisions of the articles of association, statutes, charter or bylaws According to article 15 of the articles of association the board shall have three members. In addition the employees of the Company are eligible to nominate two representatives according to article 49 of the Companies Act. The board is to be elected at the annual general meeting for a term of one year. Re-election is allowed. The board of directors constitutes itself and appoints one or several managing directors to manage the day-to-day business of the Company. The board of directors elects a chairman from its members. The board of directors hold meetings when the chairman finds it necessary or on request from a member of the board or management. In order to form a quorum at least two board members must be present at the meeting. All decisions are made by simple majority of votes. If the votes are even, the vote of the chairman determines the outcome. A book of minutes shall be kept to record what occurs at board meetings and shall be signed by all participants. The signatures of two board members or the joint signature of a managing director and the chairman of the board obligate the Company. The board has authority to give power of attorney.

Issue and share characteristics Atlantic Airways' share capital consists of shares of DKK 100 and multiples thereof. The shares have been created under Royal Decree No. 250/1993. Atlantic Airways' shares are all issued electronically at the VP and are registered under the name of the relevant shareholder or their nominees. The board of directors of Atlantic Airways has requested that FO-AIR be the symbol for the Issuer on OMX ICE and the ticker symbol for the Issuer's shares in the OMX ICE trading system. The ISIN number of the shares is FO 0000000062.

Rights All the shares of Atlantic Airways are of the same class and carry equal rights. The Issuer's shares carry no special rights and no restrictions are placed on them. Owners of the Issuer’s share capital have the right to vote at shareholders' meetings, the right to receive dividends when declared, enjoy pre-emptive rights to new shares, unless waived, and the right to a portion of the Issuer’s assets upon liquidation, all according to share ownership, statutes and the Issuer’s articles of association in effect at any given time.

Dividend policy The Issuer's board of directors has not set a dividend policy for Atlantic Airways.

Right to dividends A resolution on the distribution of dividends shall be made at an annual general meeting which shall be held before the end of April each year. According to article 2 of the Issuer's

Registration Document - 70 articles of association, dividends shall be paid to those that are registered as the owners of the Issuer's shares. If shareholders' dividend has not been paid, then the shareholders may collect their dividend at the Issuer's office within five years of payment being due. This right to a dividend lapses five years later according to Act No. 274/1908 on the lapse of certain claim rights in force in the Faroe Islands.

Right of ownership and transfer There are no limitations on the authorisation to transfer Atlantic Airways shares, and shareholders may pledge their shares unless prohibited from doing so by law. Nevertheless, it should be noted that individual shareholders may agree that their shares are subject to certain restrictions. A party acquiring a share in the Issuer cannot exercise its right as a shareholder unless its name has been registered in the share register or it has announced and proven its ownership of the share. Only general legislative rules apply to the transfer of shares in Atlantic Airways. Once a shareholder has paid in his or her share in full to the Issuer, he or she shall be issued an electronic certificate in the VP and a registered title which confers on him or her the full rights provided for in the articles of association of the Issuer. Transfer of shares becomes effective at registration with the VP. The electronic registration of securities is governed by Royal Decree No. 87/2006 and Ministerial Regulation No. 199 from 16 March 2006 on Registration of Securities which is based on that Royal Decree. The Issuer shall consider the share register as full proof of ownership to shares and attached rights. Dividends as well as all announcements shall at any given time be sent to the party registered in the Issuer’s share register as owner of the shares in question. The Issuer is in no way liable if payments or announcements do not reach their recipients because a change of address has not been notified. Rights to electronic shares must be registered at the VP if they are to enjoy legal protection against legal executions and disposal by means of an agreement. Only account operators which have concluded a valid agreement of association with the VP are authorised to act as intermediaries in registration of title in the VP. A shareholder must therefore select an associated account operator which shall serve as intermediary in electronic registration of title of securities in his/her name. Registration of the ownership of an electronic share at the VP, subsequent to a securities depository final entry, formally gives a registered owner legal authorisation to the rights for which he is registered. The priority of incompatible rights is determined by the chronological order of requests from an associated account operator reaching the VP.

Mandatory takeover bid rules In chapter X of the Icelandic Act on Securities Transactions No. 108/2007 it is stated that if a party has directly or indirectly acquired control in a listed company it shall make other shareholders a takeover bid. The Royal Decree No. 87/2006 in force in the Faroe Islands state similar provisions for mandatory takeover bids. See chapter 8 of the Royal Decree No. 87/2006 for further information. According to article 100 in the Icelandic Act No. 108/2007 if a party has directly or indirectly acquired control of a limited-liability company, which has obtained a listing for one or more classes of its shares on a regulated securities market, this party must, no less than four weeks after achieving such control, make a takeover bid to other shareholders in the company, i.e. a bid to purchase their shares in the company. Control shall mean that the party concerned, and parties acting in concert with that party: (1) have acquired a total of at least 40% of the voting rights in the company, (2) have the right, based on an agreement with other shareholders, to control at least 40% of votes in the company, or (3) have

Registration Document - 71 acquired the right to appoint or dismiss a majority of the company’s Board of Directors. Parties shall be deemed to be acting in concert if they have reached an agreement allowing one or more of them to acquire control, or to prevent a takeover from succeeding, whether this agreement is formal or informal, written, oral or otherwise. According to article 100 in the Icelandic Act No. 108/2007 parties shall, however, always be deemed to act in concert if the following connections exist, unless the opposite is proved to be the case: (1) married couples, registered or co-habiting partners, and children of the party who are not financially competent; (2) connections between parties which directly or indirectly involve control by one party of the other, or if two or more companies are directly or indirectly under the control of the same party. Regard shall be had for connections between parties as provided for in Points 1, 2 and 4; (3) companies in which a party directly or indirectly holds a substantial holding, i.e. where the party directly or indirectly owns at least one-third of the voting rights in the company concerned. Regard shall be had for connections between parties as provided for in Points 1, 3 and 4; (4) connections between a company and its Board of Directors and managing directors. According to article 100 in the Icelandic Act No. 108/2007 a mandatory bid, as provided for in the second paragraph in this chapter (chapter 8.8), becomes the obligation of the party acting in concert who increases his/her share with the result that the limit referred to in the first paragraph is reached. The Financial Supervisory Authority may grant exemptions from mandatory bids as provided for in the first paragraph if special circumstances so warrant. The Financial Supervisory Authority may set conditions for such exemptions, e.g. concerning the time limit which the party in question shall have to dispose of holdings which are in excess of allowable limits and the treatment of voting rights during that period. According to the Icelandic Act No. 108/2007 the offering party shall offer all the shareholders in the same class the same terms. The price offered shall be at least the highest price which the offering party or related parties in collaboration with the party have paid for shares in the company in the last six months prior to the offer. The offered price shall, however, at least be equal or greater than the last price the day before the offering party became dominant or at the date of the announcement. At the time of the expected listing, the Faroese Government will own 67% of the share capital in Atlantic Airways, which exceeds the mandatory takeover bid threshold by 26.6 percentage points. According to the FME's published interpretation of the article regarding mandatory bid in the Icelandic Act on Securities Transactions, published on http://fme.is/?PageID=229, the obligation to issue a takeover bid does not arise due to a single shareholder or a shareholder acting in concert with others having legal control over a company at the time of listing on a regulated stock exchange. This exemption is subject to the shareholding having been disclosed at the time of listing.

Squeeze-out and sell-out rules In chapter 4 of Royal Decree No. 250/1993 it is stated that if the offering party has acquired more than 9/10 of the share capital of the company then the offering party and the board of the company can jointly agree to unilaterally squeeze out the remaining shareholders. Furthermore, if the offering party has acquired more than 9/10 of the share capital of the company then the remaining shareholders can unilaterally request that the offering party acquire their remaining shares at the same price as in the takeover bid.

Takeover bids No public takeover bids have been offered by third parties for the Issuer’s equity, neither have such bids occurred during the last financial year, the current financial year or earlier.

Registration Document - 72 Dissolution of the Company Pursuant to chapter 14 of the Royal Decree No. 250/1993 proposals on the division or dissolution of the Company will be subject to the same provisions as amendments to the articles of association. Any decision on the dissolution of the Company shall be made by shareholders controlling at least two thirds of the Company’s shares. A shareholders' meeting, which has made a lawful decision on the division or dissolution of the Company, shall also decide on how the assets of the Company should be disbursed and debts paid. The meeting shall also decide if the Company is to be divided by a public authority or a winding-up committee is elected in accordance with provisions in the Public Limited Companies Act. If a shareholders’ meeting has decided on the dissolution of the Company, it shall without delay be announced to the register of limited companies. Otherwise, a dissolution or a division of the Company, or a merger to another company shall be governed by the Royal Decree No. 250/1993 as the provisions are set out in chapter 14 and chapter 15.

Action necessary to change the rights of holders of shares Each shareholder is under obligation, without specific undertaking, to abide by the articles of association of Atlantic Airways in their current form or as legitimately amended at any time. Shareholders’ liability for the Company’s affairs is limited to their share contribution. According to the Companies Act the articles may be amended at a legitimate shareholders' meeting, provided that it is clearly stated in the invitation to the meeting which shall be in writing to each shareholder or by announcement in a Faroese public gazette at the latest one week prior to the general meeting. A decision to amend the Company's articles of association is only valid if approved with the support of 2/3 of the votes cast, provided that shareholders controlling at least 2/3 of the shares represented in the meeting participate in the polling, on the condition that other voting power is not reserved in these articles of association or in statutory law. This is in accordance with article 78 of the Royal Decree No. 250/1993. According to article 79 of the Royal Decree 250/1993 more stringent rules apply in some cases.

General Meetings According to the Company's articles of association, article 5, shareholders shall be notified in writing, or by announcement in a Faroese public gazette. A shareholders’ meeting shall be called with at least one week’s notice and at most four weeks’ notice. The same applies to annual general and extraordinary meetings. The notice of the meeting shall state the business of the meeting. Proposals for amendments of the Company's articles of association or merger with other companies cannot be discussed at shareholders’ meetings unless they were mentioned in the call to the meeting. If the agenda includes a motion to amend the articles of association of the Company, the main substance of the motion shall be included in the notice of the meeting. All shareholders, who according to the share register, with a registered share can prove that they are shareholders, are authorised to attend shareholders’ meetings. In addition the press and representatives from OMX ICE have admission to the general meetings.

Registration Document - 73 appendices Advokatskrivstovan Fr. Petersensgøta

Viðtøkur fyri P/f Atlantic Airways

Samtyktar á stovnandi aðalfundi 10. nov. 1987, broyttar á eykaaðalfundi 9. des. 1992, ársaðalfundi 6. mai 1994, eykaaðalfundi 17. okt. 1995, ársaðalfundi 19. apríl 1996, ársaðalfundi 17. apríl 1998, ásaðalfundi 18. mars 2001 og ársaðalfundi 31.maj 2007.

I. Navn felagsins, heimstaður og endamál

§ 1 Navn felagsins er P/f Atlantic Airways við hjánøvnunum Atlantic Airport Services, Atlantic Cargo, Atlantic Charter, Atlantic Helicopters, Atlantic Line, Atlantic Tours, Atlantic Travel, Air Faroe, Faroe Air, Faroe Airline, Faroe Airways og Vagar Airport Services.

Heimstaður felagsins er Sørvágur.

Endamál felagsins er at reka flogferðslu og vinnu, sum hevur samband við flogferðslu.

II. Partabrøvini og partapeningurin

§ 2 Partapeningur felagsins er settur til kr. 103.500.000,00.

Partabrøvini hava nominelt virði á kr. 100,00 hvørt og multipla av hesum. Eingin partabrøv hava framíhjárættindi. Partabrøvini skulu vera navnapartabrøv og negotiabul. Partaeigararnir hava ikki skyldu til at lata partabrøv síni innloysa.

Vinningsbýti verður útgoldið til partaeigarar, sum eru skrásettir í partabrævabókini, tá aðalfundurin, sum hevur samtykt vinningsbýtið, verður hildin.

§ 3 Fráboðan frá felagnum til partaeigararnar skal vera send hvørjum partaeigara skrivliga til bústaðin, sum er skrásettur í partabrævabókini ella við lýsing í almennum føroyskum lýsingarblaði.

Partabrøv kunnu mortificerast uttan dóm eftir teimum til hvørja tíð galdandi lógarreglum fyri negotiabul partabrøv.

§ 3A

Nevndin fær heimild til í tíðarskeiðinum frá 1. oktober 2007 til 31. desember 2008 at keypa egin partabrøv. Felagið kann keypa í mesta lagi egin partabrøv áljóðandi virð á 4.000.000 kr til ein kurs, ið skal vera í minsta lagi 100 og í mesta lagi 300.

Advokatskrivstovan Fr. Petersensgøta

III. Aðalfundur

§ 4 Ársaðalfundur verður hildin av partaeigarunum, sum hava eina atkvøðu fyri hvørjar kr. 100,00, sum teir hava í partapeningi.

Fyri at geva atkvøðurætt krevst, at partabrøvini eru skrásett í partabrævabók felagsins áðrenn aðalfundurin verður hildin.

§ 5 Nevndin í felagnum gevur í fyrsta lagi 4 vikur og í seinasta lagi 1 viku áðrenn aðalfundin boð um fundin, við útgreinan av tíð, stað og fundarskrá. Fráboðanin skal vera skrivlig til hvønn einstakan partaeigara og skal verða send til bústaðin, sum seinast er skrásettur í partabrævabókini ella við lýsing í almennum føroyskum lýsingarblaði.

§ 6 Ársaðalfundurin verður hildin hvørt ár, áðrenn apríl mánaði er liðugur. Á ársaðalfundinum skulu fundarevnini vera hesi: 1.Frásøgn nevndarinnar um virki felagsins í farna ári. 2. Framløga av grannskoðaðum ársroknskapi og fíggjarstøðu til góðkenningar. 3. Uppskot frá nevndini um, hvussu ársavlopið sambært góðkenda roknskapinum skal verða nýtt, ella tap sambært góðkenda roknskapinum verður dekkað. 4. Val av nevndarlimum. 5. Val av grannskoðara, sum heldur fram til næsta ársaðalfund. 6. Uppskot frá nevnd ella partaeigarum, um nakað er.

§ 7 Allir partaeigarir hava rætt til at koma við skrivligum uppskoti til viðgerð av ávísum evnum, um so er at slíkt skrivligt uppskot er fráboðað nevndini í góðari tíð innan aðalfundin, soleiðis at evnið kann verða tikið við á fundarskránna fyri aðalfundin.

§ 8 Eykaaðalfundur verður hildin um nevndin, grannskoðarin ella aðalfundurin krevur tað, ella tá partaeigarir, sum tilsamans eiga 1/10 av partapeninginum, skrivliga krevja eykaaðalfund hildnan til viðgerðar av einum ávísum evni, sum samstundis verður tilskilað.

§ 9 Í seinasta lagi 8 dagar áðrenn hvønn aðalfund, skulu fundarskráin og øll uppskot til fundin vera til taks hjá partaeigarunum til gjøgnumlestur á skrivstovu felagsins. Áðrenn ársaðalfundin skal ársroknskapurin harumframt vera til taks til gjøgnumlestur.

§ 10 Partaeigarar, sum sambært partabrævabókini kann prógva við skrásettum partabrævi, at hann er partaeigari hevur atgongd og atkvøðurætt á aðalfundinum. Atkvøðurættur kann fremjast eftir skrivligari fulltrú. Advokatskrivstovan Fr. Petersensgøta

Harumframt hava fjølmiðlar og umboð fyri ICEX atgongd til aðalfundin.

§ 11 Aðalfundurin velur eftir uppskoti frá nevndini ein fundarstjóra.

§ 12 Allar avgerðir á aðalfundi verða tiknar við vanligum meiriluta av atkvøðum, um annað ikki er ásett í tí til eina og hvørja tíð galdandi partafelagslóg.

§ 13 Fundarfrágreiðing verður skrivað á aðalfundinum og fundarstjórin undirskrivar fundarfrágreiðingina.

§ 14 Fundarstjórin ger av allar spurningar viðvíkjandi atkvøðugreiðslu, men einhvør partaeigari til staðar á aðalfundinum, sum hevur atkvøðurætt, kann krevja skrivliga atkvøðugreiðslu viðvíkjandi einum ávísum evni.

IV. Nevnd

§ 15 Aðalfundurin velur eina nevnd sum hevur 3 limir.

Limir nevndarinnar verða valdir fyri 1 ár í senn. Fráfarandi limir kunnu veljast aftur. Nevndin skipar seg sjálva og setur ein ella fleiri stjórar at hava dagligu leiðslu felagsins um hendi.

§ 16 Nevndin heldur fundir tá nevndarformaðurin metir tað vera neyðugt ella tá ein av nevndar-limunum ella stjórin setur fram ynski um hetta.

§ 17 Fyri at avgerð kann verða tikin á nevndarfundi krevst, at minst tveir nevndarlimir eru til staðar á fundinum. Allar avgerðir verða tiknar við vanligum meiriluta. Um atkvøðugreiðslan stendur á jøvnum, er atkvøða nevndarformansins avgerandi.

§ 18 Felagið verður teknað við undirskrift nevndarformansins og einum stjóra í felag ella við undirskrift av tveimum nevndarlimum í felag.

Nevndarfrágreiðing frá nevndarfundi verður gjørd og undirskrivað av øllum luttakarunum.

Nevndin hevur heimild til at geva fulltrú.

§ 19 Á hvørjum ársaðalfundi verður grannskoðari valdur. Grannskoðarin skal vera ríkisgóðkendur.

Advokatskrivstovan Fr. Petersensgøta

§ 20 Roknskaparár felagsins er kalendaraárið.

§ 21 Roknskapur felagsins verður gjørdur í trá við góðan roknskaparsið og soleiðis at allar neyðturvurligar avskrivingar og avsetingar verða gjørdar.

§ 22 Soleiðis samtykt á ársaðalfundi felagsins í Tórshavn 22. september 2006.

Vegna nevndina í P/F Atlantic Airways:

______

Articles Of Association of P/F Atlantic Airways

Resolved at the statutory general meeting on 10 November 1987, amended at the extraordinary general meeting (EGM) 9 December 1992, the annual general meeting (AGM) 6 May 1994, EGM 17 October 1995, AGM 19 April 1996, AGM 17 April 1998, AGM 18. March 2001 as latest amended at the AGM on 31. May 2007.

I. Name, Registered Office, and Objectives

§ 1. The company´s name is ‘P/F Atlantic Airways’, with the secondary names Atlantic Airport Services, Atlantic Cargo, Atlantic Charter, Atlantic Helicopters, Atlantic Line, Atlantic Tours, Atlantic Travel, Air Faroe, Faroe Air, Faroe Airline, Faroe Airways and Vagar Airport Services.

The company’s registered office is in Sørvágur.

The company’s objective is to run aviation/airline business and other businesses related hereto.

Advokatskrivstovan Fr. Petersensgøta

II. The Shares and the Share Capital

§ 2 The Company’s share capital is DKK 103.500.000,00.

The shares have a nominal value of DKK 100,00 each and multipla hereof. No shares have special rights. The shares shall be made out to a named holder and are freely negotiable. The shareholders are not obliged to redeem their shares.

Dividends are distributed to shareholders, who are registered in the company´s register of shareholders when the general meeting, which decides to pay out dividends, is held.

§ 3 Notice from the limited company to the shareholders shall be forwarded to each shareholder in writing to the address registered in the share register or by announcement in a Faroese public gazette

The shares can be cancelled without judgement according to the existing law at the time concerning negotiable shares.

§ 3 A

The Board Directors is in the period from 1. oktober 2007 til 31. desember 2008 authorised to buy own shares. The company can buy own shares up to a maximum nominal value of DKK 4.000.000 at the rate of minimum 100 and maximum 300.

III. The General Meeting

§ 4. The Annual General Meeting is held by the shareholders, who have one vote for every DKK 100,00 which they hold in shares. In order to give voting rights the shares must be registered in the company’s share register before the general meeting is held.

§ 5 At the earliest 4 weeks and at the latest 1 week prior to the general meeting, the Board of Directors gives notice of the general meeting with specification of time, place and agenda, The notice shall be in writing to each shareholder to the address latest registered in the share register, or by announcement in a Faroese public gazette.

§ 6 The Annual General Meeting is held each year before end of April, for treatment of the following subjects: 1. The Board of Directors report of the company’s activities during the previous accounting year. Advokatskrivstovan Fr. Petersensgøta

2. Presentation of audited annual accounts for approval. 3. The Board of Directors´ proposals on how to use the profit or cover losses according to the approved accounts and annual report. 4. Election of members of the Board of Directors. 5. Election of accountant, who will sit until the next general meeting is held. 6. Proposals from the Board of Directors or the shareholders.

§ 7 At the general meeting every shareholder has authority to bring forward in writing proposals for treatment of a specific subject, provided the Board of Directors is informed of the proposal well in advance of the general meeting, so that the item can be included in the agenda for the general meeting.

§ 8 An extraordinary General Meeting is held when the Board of Directors, the accountant or a general meeting so demands or when shareholders who together hold 1/10 of the share capital in writing so demand for treatment a specific subject which is stated at the same time.

§ 9 At the latest 8 days before every general meeting the agenda and all proposals for the general meeting shall be available to the shareholders for inspection at the company’s office. Furthermore, before an ordinary general meeting the annual accounts shall be available for inspection.

§ 10 Shareholders, who according to the share register, with a registered share can prove that they are a shareholder, have admission to the general meeting. A shareholder can give another person written authority to attend the general meeting and vote by proxy. In addition the press and representatives from ICEX have admission to the general meeting.

§ 11 The general meeting, on proposal from the Board of Directors, chooses a chairman.

§ 12 At the general meeting all issues are decided by a simple majority of votes, unless stipulated differently in the Faroese Companies Act in effect at the time.

§ 13 Minutes shall be taken of the general meeting, and the chairman shall sign it.

§ 14 The chairman of the general meeting decides all questions regarding the voting procedure, but every shareholder present at the general meeting who has voting rights can demand voting in writing regarding a specific subject.

Advokatskrivstovan Fr. Petersensgøta

IV. The Board of Directors

§ 15 The general meeting appoints a Board of Directors which consists of 3 members.

The members of the Board of Directors are elected for 1 year at a time. Re-election is allowed. The Board of Directors constitutes itself, and it appoints one or several Managing Directors to manage the day-to-day business of the company.

§ 16 The Board of Directors holds meetings when the chairman finds it necessary or when one of the other board members or a Managing Director so wishes.

§ 17 In order to form a quorum at least two board members must be present at the meeting. All decisions are made by simple majority of votes. If the votes are even, the vote of the chairman determines the outcome.

18 The company is bound by the joint signature of a Managing Director and the Chairman of the Board of Directors or by the joint signatures of two members of the Board of Directors. Minutes of the board meetings are kept and are signed by all participants. The board has authority to give power of attorney.

§ 19 At every ordinary general meeting an accountant is appointed. The accountant must be chartered.

§ 20 The company’s accounting year is the calendar year.

§ 21 The accounts must be made in accordance with good accounting practice and in a manner so that all required and necessary depreciation and provisions are made.

§ 22 Approved at the company´s Extraordinary General Meeting in Tórshavn on 22 September 2006.

On behalf of Atlantic Airways´ Board of Directors:

P/F Atlantic Airways FO-380 Sørvágur

P/F skrás. nr. 1223 P/F reg. no. 1223

Roknskapur fyri tíðarskeiðið 01.01. – 30.06.2007 Financial statement for the period 01.01. – 30.06.2007

Avrit Copy

INNIHALDSYVIRLIT / TABLE OF CONTENTS

Síða / Page

Partafelagsupplýsingar / Information regarding the company ...... 2

Frágreiðing frá leiðslu / Statement form the management:

Leiðslufrágreiðing / Statement from the management ...... 3

Átekningar / Reports:

Roknskaparátekning / Management’s report ...... 4

Grannskoðanarátekning / Auditor’s report ...... 5

Roknskapur / Financial statement:

Nýttur roknskaparháttur / Accounting policies ...... 6

Rakstrarroknskapur / Income statement ...... 8

Fíggjarstøða pr. 30. juni / Balance as at 30th of June ...... 9

Kapitalfrágreiðing / Cash flow statement ...... 11

Notur til ársroknskapin / Notes to the accounts ...... 12

C:\Documents and Settings\bardur\Desktop\Puk\0859 hálvársroknskapur 2007.doc

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 1

PARTAFELAGSUPPLÝSINGAR / INFORMATION REGARDING THE COMPANY

Felagið / The company

P/F Atlantic Airways FO-380 Sørvágur Skrásetingar nr. 1223 / Reg. no. 1223 Heimstaðarkommuna / Domicile municipality: Sørvágs

Nevnd / Board of directors

Christian Andreasen, formaður / chairman Erling í Liða, næstformaður / vice chairman Petur J. Eiriksson Verna Rasmussen Ingi S. Joensen

Stjórn / Management

Magni Arge, forstjóri / Managing director Marius Davidsen, fíggjarstjóri / Finance director

Grannskoðan / Auditor

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 2

LEIÐSLUFRÀGREIÐING STATEMENT FROM THE MANAGEMENT

Hendingar eftir roknskaparlok Events subsequent to the financial year

Frá degnum fyri fíggjarstøðuni til í dag er einki hent, sum No subsequent events has incurred from the date of the ávirkar metingina av roknskapinum. balance sheet and to today that might affect the true and fair view of the financial statement.

Eigaraviðurskifti Ownership Eigarar skrásettir í yvirlitinum samb. § 28 b stk. 4 í partafelagslógini: Shareholders recorded according to the Companies Act, § 28 b, section 4: Landskassin, v/Føroya Landsstýri, 100 Tórshavn The Government of the Faroe Islands.

Býti av úrsliti Allocation of Profit/loss Uppskot um býti av úrslitinum framgongur av rakstrarroknskapinum. Recommendation regarding allocation of net profit/loss is disclosed in conjunction to the income statement.

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 3

ROKNSKAPARÁTEKNING MANAGEMENT’S REPORT

Roknskapurin fyri tíðarskeiðið 01.01. – 30.06.2007, sum The Financial Statement for the period 01.01. – er greiddur av okkum, er settur upp samsvarandi 30.06.2007, which is prepared by us, is set up in føroyskari lóggávu. Roknskapurin gevur eftir okkara accordance with provisions of Faroese legislation. The tykki eina rættvísandi mynd av felagsins ogn og skuld, financial statements gives a true and fair view of the fíggjarligu støðu og úrsliti. company’s assets and liabilities, financial position and profit/loss for the concerning period.

Sørvágur, hin 26. juli 2007 / Sørvágur the 26th of July 2007

Stjórn / Management:

Magni Arge Marius Davidsen Forstjóri / Managing director Fíggjarstjóri / Finance director

Nevnd / Board af directors

Christian Andreasen Erling í Liða Petur J. Eiriksson Formaður / Chairman Næstformaður / Vice-chairman

Verna Rasmussen Ingi S. Joensen

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 4

GRANNSKOÐANARÁTEKNING AUDITOR’S REPORT

TIL PARTAEIGARARNAR Í ATLANTIC TO THE SHAREHOLDERS OF ATLANTIC AIRWAYS P/F AIRWAYS P/F

Vit hava grannskoðað roknskapin fyri tíðarskeiðið 01.01. We have audited the Report of Atlantic Airways P/F – 30.06.2007 hjá Atlantic Airways P/F, sum er gjørdur for the financial period 1. January – 30th June 2007, eftir ársroknskaparlógini. prepared in accordance with the accounting provisions of Faroese legislation. Leiðslan í felagnum hevur ábyrgdina av roknskapinum. Okkara ábyrgd er við støði í grannskoðanini at gera eina The Board of Directors and the Management are niðurstøðu um roknskapin. responsible for the preparation of the Report. Our responsibility is to express an opinion on the Report Grannskoðanin based on our audit. Vit hava grannskoðað samsvarandi galdandi føroyskum grannskoðanarreglum. Hesar reglur krevja, at vit leggja til Basis of opinion rættis og grannskoða fyri at fáa grundaða vissu fyri, at tað We conducted our audit in accordance with Faroese ikki eru týðandi skeivleikar í roknskapinum. Tá ið vit Auditing Standards. Those Standards require that we grannskoða, kanna vit við stakroyndum grundarlagið comply with the ethical requirements and plan and undir upphæddum og upplýsingum í roknskapinum. Vit perform the audit to obtain reasonable assurance taka eisini støðu til nýtta roknskaparháttin og týðandi whether the Report is free from material roknskaparligu metingarnar, ið leiðslan hevur gjørt, og misstatement. We have tested the basis and somuleiðis, hvussu roknskapurin sum heild er gjørdur. documentation for the amounts and disclosures in Tað er okkara fatan, at grannskoðanin er eitt nøktandi the financial statements. Our audit includes an grundarlag at byggja okkara niðurstøðu á. assessment of the accounting policies applied and the accounting estimates made by the Board of Grannskoðanin hevur ikki givið orsøk til fyrivarni. Directors and the Management. In addition, we have evaluated the overall adequacy of the Niðurstøða presentation in the financial statements. We believe Tað er okkara fatan, at roknskapurin gevur eina that the audit evidence we have obtained is sufficient rættvísandi mynd av felagsins ognum, skyldum og and appropriate to provide a basis for our audit fíggjarligu støðu 30. juni 2007 og av úrslitinum av opinion. virksemi og peningastreymi felagsins í rokn- skapartíðarskeiðnum 1. januar – 30. juni 2007 Our audit has not resulted in any qualification. samsvarandi ársroknskaparlógini. Opinion In our opinion, the Report gives a true and fair view Tórshavn, hin 26. juli 2007 of the financial position at 30th June 2007 of the Company and the result of the Company operations and cash flows for the financial period 1st January – 30th June 2007 in accordance with accounting provisions of Faroese legislation.

Tórshavn, the 30th of July 2007

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

Hans Laksá Jóannes Olsen statsaut. revisor / skrás. revisor State Authorized Public Accountant Registered Public Accountant

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 5

NÝTTUR ROKNSKAPARHÁTTUR ACCOUNTING PRINCIPLES

Alment General

Roknskapurin fyri tíðarskeiðið 01.01. – 30.06.2007 er The Financial Statement for the period 01.01. – greiddur í samsvar við ársroknskaparlógina, og tann nýtti 30.06.2007 has been prepared in accordance with roknskaparhátturin er óbroyttur í mun til undanfarna ár. provisions of the Faroese annual accounts act. Generally accepted accounting principles are applied on Av tí at hetta er fyrstu ferð at felagið ger ein tílíkan a basis consistent with that of the preceding year. hálvársroknskap, finnast eingi samanberingartøl fyri hálvárið fyri tíðarskeiðið 01.01. – 30.06.2007. The comparing financial statement for 2006 includes the Samanberingartølini eru fyri alt árið í 2006. entire year, because a financial statement for the period 01.01. – 30.06.2007, has not been prepared before.

Umrokning av fremmandum gjaldoyra Conversion of foreign currency Flytingar í útlendskum gjaldoyra eru í árinum roknaðar um til kursin dagin, flytingin er framd. Expenses in foreign currencies are recorded at the official exchange rates applicable at the date of payment. Áogn, skuld og aðrir postar í útlendskum gjaldoyra, sum ikki eru avroknaðir við árslok, verða roknaðir um til Receivables, debt and other items in foreign currencies kursin við árslok. are converted into DKK at the official exchange rates applicable on the balance sheet date. Staðfestar og ikki-staðfestar gjaldoyrabroytingar eru tiknar við í rakstrinum undir “fíggjarligir postar.” Realized as well as non-realized exchange fluctuations are recorded under “financial items” in the profit and loss account. Nettosøla

Søla av ferðaseðlum verður inntøkuførd, so hvørt sum Net revenue seldir ferðaseðlar verða nýttir av ferðafólki. Sales of airline tickets during the year is recognised as income, when sold tickets are used by passengers. Virðisáseting av materiellari støðisogn og avskrivingum Fixed assets and depreciations Materiell støðisogn er virðisásett til útveganarvirði við frádrátti av gjørdum avskrivingum. Tangible fixed assets are valued at cost less accumulated depreciation. Avskrivingar verða gjørdar við eins stórum upphæddum, grundaðar á eina meting av brúkstíðini av ognunum. Depreciations are made with identical yearly amounts, based on an assessment of the period of use for the Flogfør ...... 5 – 10 ár assets. Tyrlur ...... 5 – 16 ár Eykalutir ...... 17 ár Aircrafts ...... 5 – 10 years Rakstrargøgn, innbúgv ...... 3 – 10 ár Helicopters ...... 5 – 16 years Høvuðsviðlíkahaldsútreiðslur ...... 5 – 12 ár Spareparts ...... 17 years Hangarur, skrivstovuhølir og sethús 5 – 30 ár Operating equipment ...... 3 – 10 years Primary maintenance expenses ...... 5 – 12 years Avskrivingin uppá flogførini verður roknað við 5 mió. í Buildings ...... 5 – 30 years restvirði. The depreciation on the aircrafts is calculated with 5 Forútgjaldingar fyri tyrlur verður bókað sum tilgongd, mill. DKK in scrap value for each aircraft. men verður ikki avskrivað. Prepayments for helicopters are booked as addition during the year, but are not depreciated. Høvuðsviðlíkahaldsútreiðslur verða avskrivaðar yvir tíðarskeiðið fram til næsta høvuðsviðlíkahald. Primary maintenance expences are depreciated over the Høvuðsviðlíkahaldsútreiðslur eru bókaðar saman við period of time until the next primary maintenance. flogførum í ársroknskapinum. Primary maintenance expensenses are recorded with the aircrafts in the accounts.

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 6

Kapitalpartar í atknýttum feløgum og onnur virðisbrøv Shares in associated companies and other shares

Partabrøv í atknýttum feløgum eru virðisásett til innara Shares in subsidiaries are assessed at net valuation virðið. according to the equity method.

Virðisbrøv skrásett á einum keypsskála verða virðisásett Shares listed on a stock exchange are valued at market til kursin galdandi fyri virðisbrævið á keypsskálanum á price on the last day of the financial period for the statusdegnum. company.

Vørugoymslur Stocks

Vørugoymslur verða virðisásettar til útveganar- ella Stocks are stated at purchase price based on the first-in kostvirði, gjørt upp eftir FIFO-meginregluni, ella til first-out principle, or at the lower of net market value. nettorealisatiónsvirði, har hetta er lægri. Depreciation is made concerning obsolete stock, inclu- Niðurskriving verður gjørd fyri ókurantar vørur, herundir ding goods with slow transferability. eisini vørur, ið eru seint umsetiligar.

Receivables Áogn Receivables are assessed at nominal value less Skuldarar verða virðisásettir við frádrátti av møguligum provisions for losses. The amounts are individually tapsvanda, grundað á eina meting av hvørjum einstøkum assessed. skuldara.

Debt to mortgage holders Skuld til veðhavarar Debt to mortgage holders has been entered into the annual accounts at acquisition value. The debt has hence Skuld til veðhavarar er tikin upp til kostprís, tá skuldin er been assessed to residual value. The expenditure stovnað. Síðani er skuldin gjørd upp til restvirði. connecting to the raising of the loan is posted in the year Útreiðslur í samband við upptøku av láninum eru út- of the raising, while potential currency losses reiðsluførdar í upptøkuárinum, meðan møgulig kurstap concerning bonds are expensed during the instalment av lánsbrøvum verða útreiðsluførd samsvarandi period. avdráttartíðini.

Other debts Onnur skuld

All other debt has been posted at residual value as of Øll onnur skuld er tikin upp til restvirði pr. 30. juni. June 30tht.

Skattur Tax

Skattur av ársúrslitinum er roknaður við 18% við støði í Actual tax is calculated as 18% of pre-tax profit adjusted úrsliti áðrenn skatt, tillagað fyri ikki skattskyldugar for non-taxable incomes and expenditures. inntøkur og útreiðslur. The taxes include both actual tax and deferred tax. Útreiðsluførdi skatturin fevnir um aktuellan skatt av skattskylduga úrslitinum og broyting í útsettum skatti. Deferred tax is calculated as 18% of timing differences between the annual accounts and the tax accounting Útsettur skattur verður roknaður við 18% av teimum by the Faroese tax administration. tíðarbundnu frávikunum, sum stava frá, at inntøkur og útreiðslur ikki verða tiknar við í rakstrarroknskapinum og skattskyldugu inntøkuna í sama tíðarskeiði.

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 7

RAKSTRARROKNSKAPUR / INCOME STATEMENT

Nota 01.01 - 30.06.07 2006

Nettosøla / Net sales 1 272.999.297 518.990.160

Flúgvikostnaður / Flight expenses -196.470.359 -392.749.695 Starvsfólkakostnaður / Employee expenditures 2 -44.665.740 -79.710.545 Avskrivingar / Deprecations 4 -19.476.333 -39.586.417

Úrslit áðrenn fíggjarligar postar / Result before financial items 12.386.865 6.943.503

Fíggjarinntøkur / Financial income 5.632.556 2.580.823 Fíggjarútreiðslur / Financial expenses -2.735.562 -4.454.661

Úrslit áðrenn skatt / Result before tax 15.283.859 5.069.665

Skattur / Tax 3 -2.751.095 -912.540

Úrslit / Profit 12.532.764 4.157.125

Býti av úrsliti / Allocation of profit/loss Hin tøka upphæddin er / The amount at disposal is : Flutt fram frá undanfarnum árum / Retained earnings opening 68.390.035 Úrslit / Result for the period 12.532.764 Íalt / Total 80.922.799

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 8

FÍGGJARSTØÐA PR. 30. JUNI / BALANCE SHEET AS AT JUNE 30th

AKTIV / ASSETS Nota 30.06.2007 2006

Flogfør og viðlíkahald / Aircrafts and maintenance 180.196.278 167.056.919 Eykalutir / Spare parts 15.760.355 15.064.903 Rakstrargøgn / Operating equipment 9.885.267 9.449.140 Hangarur, skrivst.hølir og sethús / Buildings 44.889.922 45.817.480 Materiell støðisogn í alt / Fixed assets 4 250.731.822 237.388.442

Kapitalpartar í atkn. virkjum / Shares in associated companies 1.995.727 1.995.727 Virðisbrøv / Other shares 10.146.000 5.510.000 Fíggjarlig støðisogn í alt / Total financial assets 5 12.141.727 7.505.727

STØÐISOGN Í ALT / TOTAL FIXED ASSETS 262.873.549 244.894.169

Nýtsluvøra / Consumables 1.464.272 944.537 Nýtsluvøra íalt / Total consumables 1.464.272 944.537

Vøru- og tænastuáogn / Trade receivables 6 67.152.916 92.458.736 Tíðarskeiðsbókingar / Accrued income and deferred expenses 2.084.493 2.879.528 Onnur áogn / Other receivables 2.939.230 1.805.958 Áogn í alt / Total receivables 72.176.639 97.144.222

Tøkur peningur / Cash and cash equivalents 72.374.229 20.669.786

OGN Í UMFERÐ Í ALT / TOTAL CURRENT ASSETS 146.015.140 118.758.545

AKTIV Í ALT / TOTAL ASSETS 408.888.689 363.652.714

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 9

FÍGGJARSTØÐA PR. 30. JUNI / BALANCE SHEET AS AT JUNE 30th

PASSIV / LIABILITIES Nota 30.06.2007 2006

Partapeningur / Share capital 7 103.500.000 103.500.000 Yvirkursur við partabrævaútgávu / Share premium reserve 23.500.000 23.500.000 Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum / Reserve shares in subsidiaries 8 478.436 478.436 Flutt úrslit / Retained earnings 9 80.922.799 68.390.035 EGINOGN Í ALT / TOTAL EQUITY 208.401.235 195.868.471

Sett av til útsettan skatt / Provisions for deferred taxes 3 20.810.419 18.059.324 AVSETINGAR Í ALT / TOTAL PROVISIONS 20.810.419 18.059.324

Veðlán / Mortgage loans 79.429.551 85.160.801 Vøru- og tænastuskuld / Trade payables 92.549.325 58.745.668 Tíðaravmarkingar / Accruals and deferred income 7.698.159 5.818.450 Skyldugt vinningsbýti / Proposed dividend 0 0 STUTT- OG LANGFREISTAÐ SKULD Í ALT / TOTAL SHORT- AND LONG-THERM DEBT 10 179.677.035 149.724.919

PASSIV Í ALT / TOTAL LIABILITIES 408.888.689 363.652.714

Veðsetingar og møguligar skyldur v.m. / Mortgaging and contingent liabilities etc. 11

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 10

KAPITALFRÁGREIÐING / CASH FLOW STATEMENT

(Kr. 1000) 30.06.2007 2006

Úrslit áðrenn fíggjarligar postar / Result before financial items 12.387 6.944 Avskrivingar / Depreciation 19.476 39.586 31.863 46.530

Broyting í umferðarfæi, burturleggingum og stuttfreistaðari skuld / Change in current assets, provisions and short-term liabilities :

+/- vøru- og tænastuáogn / trade receivables 24.968 -52.880 +/- goymsla / stock -520 307 +/- onnur virðisbrøv og kapitalpartar / shares in associated -4.636 -5.643 +/- vøru- og tænastuskuld / trade payables 33.804 25.435 +/- onnur skuld og tíðaravmarkingar / other liabilities and accrued expenses 1.880 2.704 +/- broyting í kapitalviðurskiftum / Changes in sharecapital 0 55.453 55.495 25.376

Peningastreymur frá rakstri / Cash flow from operations 87.358 71.906

Rentu-inntøkur/útreiðslur / Interest income/expenses 2.897 -1.874 Nettoíløgur í útbúnað / Net investment in equipment -32.820 -100.639 Lántøka og avdráttir av lánum (netto) / New loans and payments of loans (net) -5.731 20.488 Útgoldið vinningsbýti / Paid dividends 0 -10.000 -35.654 -92.025

LIKVIDITETSÚRSLIT / LIQUIDITY SURPLUS 51.704 -20.119 Tøkur peningur primo / Cash and cash equivalents at the beginning of the period 20.670 40.789 Tøkur peningur ultimo / Cash and cash equivalents at the end of the period 72.374 20.670

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 11

NOTUR / NOTES

01.01 - 30.06.07 2006

1. Útgreining av ferðafólkatali / Specification of numbers of passengers : Ferðafólk flogfør, ruta / Passengers fixed wing 92.201 184.121 Ferðafólk flogfør, leigutúrar / Passengers fixed wing, charter 74.057 160.548 Ferðafólk flogfør / Passangers fixed wing 166.258 344.669

Ferðafólk tyrlur innanlanda/oljupallar / Passengers by Helicopters, domestic/oilrigs 4.286 6.381 Ferðafólk tilsamans / Total passengers 170.544 351.050

Flúgvitímar / Airborne hours: Flogfør, ruta / Airborne hours 2.654 6.098 Flogfør, leigutúrar / Airborne hours, charter 2.289 4.403 Flúgvitímar flogfør / Airborne hours 4.943 10.501

Tyrlur innanlanda/oljupallar / Helicopters domestic/oilrigs 629 933 Flúgvitímar tilsamans / Total airborne hours 5.572 11.434

Uttanlanda inntøka / income overseas : Útflutningsvirði í kr. / Export value in DKK 153.342.422 294.682.616 Útflutningsvirði í % / Export value in % 56% 57%

2. Starvsfólkakostnaður (kr.) / Employee expenditures (DKK) Lønir / Wages and salaries -41.405.280 -73.744.420 Eftirlønargjøld / Pensions -1.959.086 -3.676.277 Gjald til almennar tryggingar / Expenses for social security -1.301.374 -2.289.848 -44.665.740 -79.710.545 Samsýning til stjórn og nevnd / Salaries and compensations paid to Management and Board : Stjórn / Management -1.100.248 -1.841.400 Nevnd / Board -210.000 -420.000 Í alt -1.310.248 -2.261.400

Tal av starvsfólki / Number of employees 187 177

3. Skattur (kr.) / Tax (DKK) Beinleiðis skattur / Taxes 0 0 Broyting av eventualskatti í árinum / Changes in deferred taxes during the year -2.751.095 -912.540 -2.751.095 -912.540

Útsettur Skattur primo / Deffered taxes as of Jan 1st 18.059.324 16.525.130 Broyting av eventualskatti í árinum / Changes in deferred taxes during the year 2.751.095 912.540 Regulering til primo / Adjustment to previous years 0 621.654 20.810.419 18.059.324

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 12

NOTUR / NOTES

4. Materiell støðisogn (kr.) / Tangible fixed assets (DKK) Flogfør og Hangarur, viðlíkahald / Rakstrargøgn / skrivst.hølir Aircrafts and Eykalutir / Operating og sethús / Í alt maintenance spare parts Equipment Buildings Total Útveganarvirði primo / Acquisition value as of Jan 1st 249.925.973 35.841.002 21.224.083 46.866.356 353.857.414 Regulering til primo / Adjustment to previous years 00000 Tilgongd í árinum / Additions during the year 31.333.555 5.598.125 2.370.944 0 39.302.624 Frágongd í árinum / Disposal during the year -13.392.379 -4.428.229 -1.938.067 0 -19.758.675 Útveganarvirði ultimo / Acqui-sition value as of June 30th 267.867.149 37.010.898 21.656.960 46.866.356 373.401.363

Av- og niðurskrivingar primo / Depreciations as of Jan 1st -82.869.056 -20.776.099 -11.774.941 -1.048.876 -116.468.972 Avskrivingar í árinum / Depreciations during the year -16.627.589 -474.444 -1.446.742 -927.558 -19.476.333 Avskr. viðv. frágongd í árinum / Depreciations of disposal 11.825.774 0 1.449.990 0 13.275.764 Avskrivingar ultimo / Depreciations as of June 30th -87.670.871 -21.250.543 -11.771.693 -1.976.434 -122.669.541

Bókað virði ultimo / Book value as at June 30th 2007 180.196.278 15.760.355 9.885.267 44.889.922 250.731.822

Bókað virði primo / Book value as at Dec 31st 2006 167.056.919 15.064.903 9.449.140 45.817.480 237.388.442

Felagið hevur forútgoldið kr. 31.371.111 fyri eina Bell 412HP tyrlu. Avskrivað er ikki uppá hesa upphædd. / The company has prepaid DKK 31.371.111 for a Bell 412 HP helicopter. No depreciations has been made to this amount.

Felagið hevur forútgoldið kr. 5.885.405 fyri rættindi til eina nýggja Bell/Augusta tyrlu. Avskrivað er ikki uppá hesa upphædd. / The company has prepaid DKK 5.885.405 for the rights to buy a new Bell/Augusta helicopter. No depreciations has been made to this amount.

Felagið hevur forútgoldið kr. 5.696.830 fyri tvey nýggj Avro 146 RJ85 flogfar. Avskrivað er ikki uppá hesa upphædd. / The company has prepaid DKK 5.696.830 for two new Avro 146 RJ85 airplanes. No depreciations has been made to this amount.

Felagið hevur goldið kr. 1.928.745 fyri rættindi til eitt nýtt flogfar. Avskrivað er ikki uppá hesa upphædd. / The company has prepaid DKK 1.928.745 for the rights to buy a new airplane. No depreciations has been made to this amount.

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 13

NOTUR / NOTES

5. Fíggjarlig støðisogn (kr.)/ Financial assets (DKK) Kap.atkn. Virðisbrøv Total Bókað virði primo / Book value as of Jan 1st 1.995.727 5.510.000 7.505.727 Tilgongd í árinum / Additions during the year 000 Frágongd í árinum /Disposal during the year 0 -413.000 -413.000 Regulering til undanfarin ár / Adjustment to 000 Virðisbroytingar / Revaluations 0 5.049.000 5.049.000 Bókað virði ultimo / Book value at the end of the period 1.995.727 10.146.000 12.141.727

6. Vøru- og tænastuáogn / Trade receivables 30.06.07 2006

Tryggingarendurgjald / Insurance claim 12.811.868 37.815.445 Vøru- og tænastuáogn / Trade receivables 54.341.048 54.643.291 Vøru- og tænastuáogn í alt / Trade receivables total 67.152.916 92.458.736

7. Partapeningur (kr.) / Share capital (DKK) Partapeningurin kr. 103.500.000 er lutaður sundur í 75 stk. á 1 mió. kr og 1 stk. á 28,5 mió. kr. Partabrøvini eru ikki býtt upp í flokkar / The share capital amounting to DKK 103.500.000 is divided in 75 shares of DKK 1 million each and 1 share of DKK 28,5 million. The shares are not divided in different categories.

Partapeningur primo / Share capital as of Jan 1st 103.500.000 75.000.000 Apportinnskot / Non cash contribution 0 52.000.000 Flutt til yvirkursgrunn / Allocated to share premium reserve 0 -23.500.000 Partapeningur ultimo / Share capital at the end oh the period 103.500.000 103.500.000

8. Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum (kr.)/ Reserve shares in subsidiaries (DKK) Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum primo / 478.436 0 Reserve shares in subsidiaries as of Jan 1st Regulering eftir innanvirðisháttinum til undanfarin ár / Adjustment 0 178.436 acc. to the equity method for previous years Virðisbroytingar / Revaluations 0 300.000 Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum ultimo / Reserve shares in subsidiaries at the end of the period 478.436 478.436

9. Flutt úrslit (kr.) / Retained earnings (DKK) Flutt frá undanfarnum árum / Retaned earnings opening 68.390.035 61.879.564 Flutt til uppskrivingargrunn / Amount allocated to other reserves 0 -478.436 Regulering til kursvirði undanfarin ár / Adjustment to other shares for previous years 0 3.453.436 Regulering til primo viðv. útsettum skatti / Adjustment to previous years for deferred taxes 0 -621.654 + Ársúrslit / Net profit 12.532.764 4.157.125 - avsett til vinningsbýti / dividend 0 0 80.922.799 68.390.035

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 14

NOTUR / NOTES

10. Stutt- og langfreistað skuld (kr.) / Short- and longterm debt (DKK) At gjalda At gjalda eftir Skuld 30.06.07 / innan 1 ár / 5 ár / Due for Skuld 31.12.06 / Debt June 30th Short term debt payment after Debt Dec 31st 2006 0-1 year 5 years skuld 2006

Veðlán / Mortgage debt 79.429.551 6.797.839 48.595.365 85.160.801 Vøru- og tænastuskuld / Trade payables 92.549.325 92.549.325 0 58.745.668 Tíðaravmarkingar / Accrued expenses 7.698.159 7.698.159 0 5.818.450 Skyldugt vinningsbýti / Proposed dividend 0000 Stutt- og langfreistað skuld í alt / Total short- and longterm debt 179.677.035 107.045.323 48.595.365 149.724.919

Hetta kann sundurgreinast soleiðis / Specified as follows: Stuttfreistað skuld í alt / Short-term debt 107.045.323 71.506.948 Langfreistað skuld í alt / Long-term debt 72.631.712 78.217.971

11. Veðsetingar og møguligar skyldur v.m. / Mortgaging and contingent liabilities etc.

Flogfør við einum bókaðum virði pr. 30/6-2007 uppá kr. 180 mió. eru veðsett / Aircraft with a book value of DKK 180 mill. are mortgaged

Av tøka peninginum eru 2 mió. kr. veðsettar / 2 million DKK of the Cash and cash equivalents have been mortgaged

Felagið hevur gjørt sáttmála við Bell/Augusta Aerospace Company, um keyp av tyrlu fyri US$ 6.985.000. Av hesum hevur felagið goldið depositum á US$ 1.000.000. / The company has entered into a contract with Bell/Augusta Aerospace Company , about purchasing a helicopter for US$ 6.985.000. The company has so far paid a deposit of US$ 1.000.000.

Tað áhvílur felagnum ein árlig leasingskylda uppá US$ 600.000 fyri leasing av flogfari / The company is obligated to pay a sum of US$ 600.000 a year for the lease of one aircraft

P/F Atlantic Airways – Roknskapur fyri fyri tíðarskeiðið 01.01.-30.06.2007 / Financial statement for the period 01.01.-30.06.2007 Síða/page 15

P/F Atlantic Airways FO-380 Sørvágur

P/F skrás. nr. 1223 P/F reg. no. 1223

Ársroknskapur 2006 Financial statement 2006

Avrit Copy

INNIHALDSYVIRLIT / TABLE OF CONTENTS

Síða / Page

Partafelagsupplýsingar / Information regarding the company ...... 2

Frágreiðing frá leiðslu / Statement form the management:

Ársfrágreiðing / Statement from the management ...... 3

Átekningar / Reports:

Roknskaparátekning / Management’s report ...... 9

Grannskoðanarátekning / Auditor’s report ...... 10

Ársroknskapur / Financial statement:

Nýttur roknskaparháttur / Accounting policies ...... 11

Rakstrarroknskapur / Income statement ...... 13

Fíggjarstøða pr. 31. desember / Balance as at 31st of December ...... 14

Kapitalfrágreiðing / Cash flow statement ...... 16

Notur til ársroknskapin / Notes to the accounts ...... 17

C:\Documents and Settings\bardur\Desktop\Puk\ársroknskapur 2006.doc

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 1

PARTAFELAGSUPPLÝSINGAR / INFORMATION REGARDING THE COMPANY

Felagið / The company

P/F Atlantic Airways FO-380 Sørvágur Skrásetingar nr. 1223 / Reg. no. 1223 Heimstaðarkommuna / Domicile municipality: Sørvágs

Nevnd / Board of directors

Christian Andreasen, formaður / chairman Erling í Liða, næstformaður / vice chairman Petur J. Eiriksson Verna Rasmussen Ingi S. Joensen

Stjórn / Management

Magni Arge, forstjóri / Managing director Marius Davidsen, fíggjarstjóri / Finance director

Grannskoðan / Auditor

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 2

ÁRSFRÀGREIÐING STATEMENT FROM THE MANAGEMENT

Virksemið í felagnum vaks nógv í 2006 og hevur Company activities increased much in 2006 and have ongantíð verið størri. Hetta sæst aftur í umsetninginum, reached a new peak in the history of the company. sum fór uppum eina hálva milliard krónur. Turnover reflects this and passed DKK 0.5 bill. It grew Umsetningurin vaks úr 379,5 milliónum upp í slakar 519 from DKK 379.5 mill. to almost DKK 519 mill, an milliónur krónur. Hetta svarar til ein vøkstur uppá 139,4 increase of DKK 139.4 mill or 36.7% milliónur ella 36,7 %. The lion's share of this growth came from abroad – Nógv tann størsti parturin av vøkstrinum stavaði frá mostly Norway. The export value – i.e. overseas turnover virkseminum uttanfyri Føroyar – harav munandi partur í or foreign purchases – grew almost 129%, from DKK Noregi. Útflutningsvirði – tað er umsetningur, sum stavar 129 mill to DKK 295 mill. So half of all company income frá útlondum ella útlendskum keyparum – vaks við is earned abroad. sløkum 129 % úr 129 milliónum uppí 295 milliónur krónur og svarar tað til at helmingurin av øllum Despite increased activities the net result declined in inntøkum koma úr útlondum. 2006, to DKK 5.069.665, well below that of 2005.

Hóast virksemið øktist, so viknaði úrslitið kortini Several factors caused this profit reduction. One was munandi í 2006. Úrslitið áðrenn skatt gjørdist 5.069.665 competition from another Faroe carrier company (from krónur. Tað er ein munandi lækking í mun til árið fyri. May till December), which meant less average income and a lower load factor. Other conditions, such as fuel Fleiri faktorar hava spælt inn í hesum sambandi. price spikes, much higher outlays on flight crew Kappingin við annað føroyskt felag, sum tók seg upp í education, higher maintenance costs, lower regularity mei mánaða, hevði við sær lækkandi meðalinntøku og due to weather, extra expenses when Faroe Jet folded, lægri meðalnýtslu av setrum (loadfaktor). Men onnur and the Stord tragedy with one plane wrecked and four viðurskiftir gjørdu seg eisini galdandi. Eitt nú sera høgir lives lost. oljuprísir, munandi størri útreiðslur til útbúgving av flogfólki, størri útreiðslur til viðlíkahald enn vanligt, Though the result is meager relative to the increased minkandi regularitetur orsaka av veðri, serstakar activity, one should appreciate a surplus when útreiðslur í samband við at Faroe Jet stongdi, og considering the adverse conditions of the past year. The sorgarleikurin í Stord, tá eitt av okkara flogførum fórst Board and Management are grateful to our staff who og fýra fólk lótu lív. stood by the company in its uphill struggle in 2006.

Hóast úrslitið er í minna lagi í mun til virksemið, so er tað kortini at fegnast um, at talan er um yvirskot, tá havt Production verður í huga, hvussu nógvum mótgangi felagið var fyri í 2006. Nevnd og stjórn eru teimum starvsfólkum The company had up to six planes in operation during takksom, sum stóðu saman um felagið, tá harðast leikaði the peak season in 2006. The company planes were á. airborne 10.501 hours total against 7.961 hours the year before. This is an increase of 2.540 hours or 32%. Sheduled flight decreased, but chartered flights Framleiðslan increased by leaps and bounds from 1.723 hours to 4.403 hours, i.e. a 155% increase. Felagið hevði upp til seks flogfør í rakstri, tá mest var at gera í 2006. Tilsamans vóru flogførini á flogi í 10.501 Charter flying, which used to be negligible, made up for tímar móti 7.961 tímum árið fyri. Hetta svarar til ein almost half the production of our fixed wing aircrafts. vøkstur uppá 2.540 tímar ella 32%. Rutuflúgvingin The ratio between charter flights and scheduled flights minkaði, ímeðan flúgving við leiguflogfarið ella charter was 42% against 58% in 2006, as opposed to 22% vaks við stórum. Tímatalið fór úr 1.723 tímum upp í against 78% the previous year. 4.403 tímar, og svarar tað til ein vøkstur uppá 155%. Helicopter production hours has changed little in recent Flúgvingin við leiguflogførum, sum fyrr var ein years. The choppers flew 933 hours in 2006 and 930 viðfáningur, stóð sostatt í fjør fyri nærum helminginum hours in 2005. Note, however, that the rescue chopper av framleiðsluni við fastveingjaðum flogførum. Lutfallið and its staff were on stand-by every hour of the past millum leiguflogfør og rutuflúgving var 42 % móti 58%. year. Árið fyri var hetta lutfallið 22% móti 78%. The number of passengers carried by the company Lítil munur var á framleiddum tímum við tyrlum planes and helicopters increased from 248.000 to undanfarnu árini. Tyrlurnar flugu 933 tímar í 2006 móti 351.000, representing an increase of 103.000 passengers 930 árið fyri. Her er kortini umráðandi at gera vart við, at or 42%. Most of the growth – 88.000 passengers – stems bæði bjargingartyrla og bjargingarmanningar vóru á from charter flying abroad.

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 3

varhaldi og klár at fara á flog, hvønn einasta tíma í árinum sum fór. In 2006 Atlantic Airways ran two maintenance stations besides the one at Vágar. One at Stavanger and the other Talið av ferðafólkum, sum felagsins flogfør og tyrlur in Copenhagen. In Denmark maintenance activity has fluttu, vaks úr 248.000 upp í 351.000. Hetta svarar til ein expanded so the company also services other carriers in vøkstur uppá 103.000 feraðfólk ella 42 %. Nógv tann Kastrup. størsti parturin av vøkstrinum – sløk 88.000 ferðafólk - stava frá leiguflúgving uttanlands. Personnel affairs Atlantic Airways rak í 2006 tvær viðlíkahaldsstøðir umframt hana í Vágum. Onnur í Stavanger og hin í Production growth in recent years has made changes in Keypmannahavn. Í Danmark er viðlíkahaldsvirksemið our organization necessary to enable the company to víðkað, so felagið eisini veitir fleiri øðrum flogfeløgum tackle new challenges. Last year the training of pilots tænastur í Kastrup. and flight attendants got top priority and cost much money. Personnel affairs have been organized as a separate company division with its own staff manager. Starvsfólkaviðurskifti The number of full year's jobs increased from 152 to 177, Stórur vøkstur í framleiðsluni seinastu árini hevur elvt til though the total number of staff, some part-time, is much tørv á tillagingum í organisatiónini, so felagið betri er higher. ment at taka við størri avbjóðingum. Í farna ári var avbjóðingin eisini serliga stór til tess at útbúgva flogmenn og flogternur. Tí er nógv orka brúkt til Regular flights útbúgving og menning, eins og starvsfólkamál eru skipaði undir egnari deild og starvsfólkaleiðara. The number of passengers on company regular flights grew from 171.000 to 184.000, i.e. by 13.000 passengers Ársverkini vuksu úr 152 upp í 177, meðan talið av or 8%. hondum, sum tóku lut í arbeiðinum fyri felagið var munandi meiri, tí fleiri eru, sum ikki arbeiða fulla tíð. Denmark

Rutuflúgving The passengers on the Denmark routes increased by 4.3%, or by about 6.500, mostly on the Copenhagen Samlaða talið av ferðafólkum á rutuflogførunum hjá route. In spite of the increase being moderate, it is worth felagnum vaks úr 171.000 og upp í 184.000. Hetta svarar noting, for during most of last year Atlantic Airways had til stívliga 13.000 ferðafólk ella 8%. competition on this route. There are signs of continuing growth as long as the Faroe economy thrives. The company has strengthened its marketing in Denmark Danmark with a sales person stationed at Billund.

Á Danmarkarleiðunum vuksu ferðafólkatølini við 4,3% ella umleið 6.500 ferðandi. Størsti vøksturin var á Iceland farleiðini til Keypmannahavnar. Hóast vøksturin er lítil, so er hann kortini verdur at leggja til merkis, tí stóran The Iceland service expanded considerably with nearly part av farna árið, var Atlantic Airways í kapping á hesi 15.000 passengers carried. The 20% growth reflects the farleið. Tekin eru til framhaldandi vøkstur, so leingi sum increase in co-operation and communications between búskaparvøksturin í Føroyum stendur við. Felagið hevur Faroe and Iceland. But the passenger flow in winter styrkt sína søluumboðan á danska marknaðinum við shows signs of slowing, and this may be on account of a einum sølufólki, ið hevur sætið í Billund. readjustment of the tourism collaboration between the two countries. The co-operation with Air Iceland and Icelandair continues, and Atlantic Airways will keep on Ísland flying to Narsarsuaq in South Greenland. This summer the co-operation has been changed, so that now our Stórur vøkstur var á farleiðini til Íslands, har ferðafólkini company does not only fly for Air Iceland, but also does táttaðu í tey 15.000 og í prosentum var vøksturin um part of the passenger service sales. 20%. Partvíst avspeglar hetta økta virksemið og samskifti millum Føroyar og Ísland. Kortini eru tekin um linking í ferðafólkastreyminum um veturin, og kann hetta hava samband við umlegging av ferðavinnusamstarvinum millum londini bæði. Samstarvið við Air Iceland og Icelandair heldur fram, og Atlantic Airways skal framhaldandi flúgva til Narsarsuaq í Suðurgrønlandi. Í Great Britain summar er samstarvið kortini broytt, so Atlantic Airways

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 4

ikki bert flýgur fráferðirnar fyri Air Iceland, men eisini The number of passengers carried to and within Britain stendur fyri parti av søluni til ferðafólkini. increased by about 50% to 10.500 passengers. There was much British interest in the Shetland-London flight connection. Atlantic Airways broke new ground by Bretland undertaking this air service, the longest within the UK ever. Unfortunately it has proven very difficult to co- Ferðafólkatalið á farleiðunum til og í Bretlandi vaks við ordinate this service from Faroe via Shetland to London um 50% upp í 10.500 ferðafólk. Stórur áhugi var í and back again because of frequent fog interruptions Bretlandi fyri farleiðini millum Hetlands og London. here and there. Atlantic Airways breyt upp úr nýggjum, tá felagið fór undir hesa farleiðina, sum var longsta innanríkisfarleið í This new link was well received, but the income did not Bretlandi nakrantíð. Tíverri vísti tað sera trupult at measure up to expenses, which were high this first year, samskipa flúgvingina úr Føroyum umvegis Hetland til in particular on marketing. Due to operative London og heimaftur, tí óstøðugt mjørkaveður darvaði circumstances the company has decided to rearrange the ofta flúgvingina í øðrum ella báðum støðum. UK service this year so that the flights will be from Vágar to London direct and from London to Shetland Undirtøkan var góð, men inntøkurnar svaraðu ikki til direct. útreiðslurnar, sum eisini vóru serliga høgar til marknaðarføring hetta fyrsta ári. Vegna operativu umstøðurnar hevur felagið gjørt av, at leggja flúgvingina Norway um í ár, so flogið verður beinleiðis úr Føroyum til London og beinleiðis úr London til Hetlands. Even if the company is active in Norway, passenger transportation between our two countries is limited. Statoil's exploration around Faroe last year bettered the Noreg situation somewhat. Demand has not improved this year, so there will be less flying in 2007. Hóast felagið hevur stórt virksemi í Noregi, so er lítil flúgving við ferðafólki beinleiðis millum londini. Nakað vant hendan flúgvingin kortini uppá seg í fjør, tá Statoil Charter and Plane Rental boraði eftir olju undir Føroyum. Áhugin at ferðast loftvegis úr Noregi til Føroya er ikki vaksandi í ár heldur, Charter and plane rental increased throughout last year. og tí er minni flúgving á skránni millum londini í 2007. Overall there was in increase of 156% in flying hours. The increase was from 1.723 to 4.403 hours total, mostly for Aker Stord in Norway, in particular between Melkøya Charter og leiguflúgving and Molde. Other aviation also increased last year, e.g. charter flights for Statoil in connection with exploratory Virksemið innan charter og leiguflúgving var í støðugum drilling, and charters from Denmark. vøkstri stórt sæð alt árið í fjør. Samanlagt var talan um ógvusligan vøkstur uppá 156% mált í flogtímum. It was a hard blow for the company to have two aircraft Samanlagda talið vaks úr 1.723 tímum upp í 4.403 tímar. knocked out of service two days in a row in October, Stórur partur av hesum stavar frá flúgvingini í Noregi when first one plane was badly damaged during haulage fyri Aker Stord, tí har vaks virksemið nógv bæði á at Basel and the next plane wrecked at the end of the Melkøya í Norðurnoregi og í Molde. Men eisini onnur runway at Stord the day after. The company rented two flúgving vant uppá seg í fjør. Eitt nú leiguflúgving fyri aircraft to fulfill its contracts in Norway. The situation Statoil í samband við leitiboring og charterflúgving úr was stabilized shortly after New Year. Danmark. The company consolidated its marketing position last Tað kom felagnum sera illa við, at missa tvey flogfør úr year and appointed a sales manager in charge of the rakstri at kalla dag um dag í oktober mánaða, tá fyrst eitt charter sales. This is due to the necessity of putting more flogfør fekk stóran skaða undir sleiping í Basel og síðani effort into marketing so as to find new work for the annað flogfar fór útav breytini í Stord dagin eftir. Til tess company to offset the falling demand in Norway. at halda sínar skyldur, hevur felagið leiga onnur flogfeløg at hjálpa til við flúgvingini í Noregi. Støðan hesum viðvíkjandi stabiliseraði seg stutt eftir ársskiftið. Helicopter Services

Felagið hevur styrkt um sølufunktiónina í farna ári og Though the number of helicopter hours in the air sett søluleiðara, sum varðir av chartersøluni í fjør. Hetta remains stable, the company succeeded in finding some tí tað er neyðugt at leggja meiri orku í søluna, til tess at new work in off-shore services. The Statoil contract to finna felagnum nýggjar uppgávur, so hvørt sum arbeiði carry staff between the drilling platform and Faroe and minkar í Noregi. associated stand-by duties weighed the most.

The backbone of the helicopter activities is still the SAR- Tyrluflúgving service for the Ministry of Fisheries and inter-island

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 5

transportation for Strandfer›slan. Four people are on 24 Hóast talið av tímum á flogi ikki broyttist, so eydnaðist hour stand-by duty ready for rescue chopper lift-off if kortini at fáa nakað meiri av flúgving í lag innan and when needed. The helicopter was in demand 37 frálandavinnu. Størsta týdningin fekk sáttmálin við times in 2006. Statoil, um at flyta arbeiðsfólk millum boripallin og Føroyar og at standa fyri tyrlutilbúgving í tí sambandinum. A Year of Many Challenges

Beinagrindin í tyrluvirkseminum var kortini framvegis 2006 will no doubt go down in company history as the SAR tænastan fyri Fiskimálastýrið og bygdaflúgvingin year with the biggest challenges so far. The activities fyri Strandferðsluna. Fýra fólk standa á varðhaldi hvønn were greater than ever, but the company also faced dag og hvønn tíma til reiðar at fara á flog við major adversities. The Stord tragedy on October 10, bjargingartyrluni, um kallað verður á tey. Tyrlan var which cost four precious human lives when the plane kallað út 37 ferðir í 2006. went off the runway, was the worst. Three were Norwegian passengers working for Aker Kværner Group. One of the crew died, 41 year old Gudrun Eitt ár við nógvum avbjóðingum Joensen, who had served the company well and for a long time as air hostess. Árið 2006 fer uttan iva í søguna, sum árið við teimum størstu avbjóðingunum higartil. Virksemið var størri enn It was a major challenge to adjust the company to the nakrantíð, men felagið møtti eisini stórum mótgangi. many new activities last year, and we invested in new Sorgarleikurin í Stord 10. oktober, sum kostaði fýra personnel and in training all members of staff. It was dýrabær mannalív, tá flogfarið fór útav breytini, bar av also a new and peculiar position to be in when the øllum. Trý teirra vóru norsk ferðafólk, sum arbeiddu fyri national airline faced competition from another carrier Aker Kværner samtakið. Ein av manningini lat lív. Tað based in Faroe. var 41 ára gamla Gudrun Joensen, sum hevði tænt felagnum væl og leingi sum flogterna. It is a challenge to operate profitably an airline business based in Faroe, as the market is tiny and operational Tað var stór avbjóðing yvirhøvur at laga felagið til nógv circumstances challenging. Much fog impeded air traffic økta virksemið í farna ári, og nógv orka var brúkt til eitt in the summer, and bad weather in the spring and nú at seta og útbúgva starvsfólk. Tað var eisini ein nýggj autumn also made aviation difficult. It seems that climate og serstøk støða fyri felagið, at annað føroyskt felag varð change makes the weather hereabout more sett á stovn at taka kappingina upp við tjóðarflogfelagið. unpredictable. Improving Vágar airport must have top priority to enhance regularity. Tað er torført at reka búskaparliga skilagott virksemi í flogvinnu við Føroyum sum grundvølli, tí marknaðurin er The price of fuel has fluctuated somewhat, but it spiked lítil og operativu avbjóðingarnar til tíðir stórar. Nógvur last year higher than in 2005. Even if we added a fuel mjørki darvaði aftur flogferðsluni um summarið eins og charge on to ticket prices, it was not possible to meet the baldrut veður var til ampa fyri flúgvingina áðrenn og eftir extra fuel costs. summarið. Tað tykist sum veðurlagsbroytingarnar elva til truplari veður um okkara leiðir. Tað hevur tí skund at fáa A new technical word entered Faroe language usage í lag batar á flogvøllinum í Vágum, so tað ber til at halda when two of our aircraft had to return and land in regularitetinum uppi. Bergen and Glasgow, because the safety system prevented the wing flaps from being raised. When that Hóast prísurin á brennievni hevur sveiggjað nakað, so er happens, the planes need to touch down on a longer hann hækkaður uppaftur meiri enn árið fyri. Hóast runway than at Vágar. oljuavgjaldið var hækkað nakað, so bar ikki til at javna inntøkuna í mun til hækkaðu oljuútreiðslurnar. The company has with British Airspace and others thoroughly investigated the cause of the event. Such Eitt nýtt hugtak gjørdist alment í Føroyum, tá tvey av research is innovative. In addition the company has okkara flogførum máttu venda aftur og lenda í Bergen spent the necessary money on safe-guarding the flap ella Glasgow, tí trygdarskipanin foraðu flappunum at fara system. út. Tá flapparnir ikki fara út, má flogfarið seta seg á einari longri breyt enn henni í Vágum. Faroe Jet Felagið hevur saman við framleiðara og øðrum sett umfatandi kanningar í verk, sum kann greina júst hvør On December 15, 2006, representatives of Faroe Jet orsøkin er til slíkar tilburðir. Í hesum starvi eru opened negotiations with Atlantic Airways as they did kanningar, sum felagið stendur fyri, slóðbrótandi. not think their company was in a position to continue Harumframt hevur felagið framt munandi og operations. Atlantic Airways offered Faroe Jet kostnaðarmiklar endurnýggingar á flappskipanum. passengers who had booked tickets passage home for Christmas. Atlantic Airways also consented to buy parts Faroe Jet of Faroe Jet's assets and within our means thus to

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 6

diminish the losses of the company. Hin 15. december 2006 bóðu umboð fyri Faroe Jet um samráðingar við Atlantic Airways, tí felagið metti ikki grundarlag verða fyri at reka felagið frameftir. Atlantic Future Prospects Airways játtaði at tryggja ferðafólkunum, ið høvdu ferðaseðil við Faroe Jet, flutning heim til jóla. Flying operations in Norway will be scaled down later Somuleiðis játtaði felagið at keypa partar av aktivunum this summer, and it is a major challenge to find new úr felagnum og eftir førimuni at medvirka til at minka um opportunities for the company. Chartering to tour tapið í felagnum. operators has increased for this summer and the winter of 2007/08. But this activity does not make up for the scaling down of the Aker commitments these past three Útlit frameftir years. If the company does not get new and bigger contracts in the near future, our activities will have to be Flúgvingin í Noregi fer at minka munandi, tá summarið adjusted to lesser activity than in 2006. It is also possible fer at halla, og tað er ein stór avbjóðing at laga virksemið that one of our aircraft will be based in Copenhagen. til nýggjar avbjóðingar. Virksemið innan charterflúgving fyri túroperatørar er víðkað fyri summarið 2007 og The company will get one more Bell 412 in the summer veturin 2007/08. Talan er kortini ikki um virksemið, sum of 2007, thus increasing its activities in this field. The í vavi kann sammetast við flúgvingina fyri Aker farnu trý idea is to get involved on a larger scale outside the árini. Fær felagið ikki aðrar størri sáttmálar í næstu Faroe sector in off-shore servicing. So far it has been framtíð, má virksemið lagast til eitt lægri støði enn í possible to get contracts in the British sector, and 2006, eins og tað er væl hugsandi, at eitt av felagsins hopefully this area of operations will be developed flogførum fær fast útgangsstøði úr Keypmannahavn. further.

Felagið fær eina Bell 412 tyrlu afturat í rakstur summarið The company plans to offer air services on the basis that 2007 og eisini á tí økinum skal virksemið mennast. it will be the sole operator on routes to and from Faroe. Hugmyndin er at vaksa munandi um virksemið uttanfyri It is our goal to secure the Faroe people regular and up Føroyar innan frálandavinnuna. Higartil hevur borið til to date air connections with their neighbours. The við sáttmálum í bretskum øki og vónandi kann hetta number of passengers has increased much in recent vinnuøkið mennast meiri. years. If the growth continues, more services will to be offered. The company envisages a slower growth, but Útboðið á rutuflúgvingini skal eisini lagast til, at felagið still larger numbers of passengers than seen before. einsamalt býður seg fram til flúgving uppá Føroyar. Tað er felagsins mál at tryggja Føroyum holla og The Board has resolved to start renewing the carrier tíðarhóskandi samband við umheimin. Stórur vøkstur fleet. So far two new Avro RJ 100 planes have been hevur verið í ferðafólkatalinum seinastu árini, og heldur bought, and later in 2007 two new Avro RJ 85 planes vøksturin í ferðafólkatalinum fram, so má eisini útboðið will be added. The latter have been bought from av ferðum økjast. Tað er felagsins fatan, at útlit eru til Switzerland. Then four out of six aircraft will be of the minni vøkstur, men talan er kortini um hægri tøl, enn vit newer Avro RJ models. At the moment the company is hava sæð fyrr. investigating what type of bigger planes are best suited for the extended airstrip at Vágar. Nevndin hevur gjørt av at seta ígongd eina nútímansger av flotanum. Fyribils eru tvey nýggjari Avro RJ 100 flogfør komin í flotan og seinni í 2007 koma tvey flogfør Privatization, the Nationalized Airport and afturat av slagnum Avro RJ 85. Hesi bæði seinnu eru Liberalization keypt frá Swiss. Tá eru fýra av seks flogførum av teimum nýggjaru Avro RJ slagnum. Í løtuni verða eisini metingar Preparations to privatize Atlantic Airways is proceeding gjørdar um, hvørji størri flogfør egna seg best til longda apace. The company will be registered on the Bond and flogvøllin í Vágum. Shares Market, and the plan is to sell 1/3 of the company shares after the summer holiday. The company welcomes this challenge. Einskiljing, yvirtikin flogvøllur og liberalisering We are still waiting for the Faroes to become part of the Arbeiði við at fyrireika einskiljingina er komið langt. liberalized European airspace, which the Faroe Felagið verður skrásett á virðisbrævamarknaðinum og Government plans to effect. If this framework is not in ætlanin er at selja 1/3 av partabrøvum felagsins eftir place, the company must employ other forms of co- summarfrítíðina. Felagið er til reiðar at taka við hesi operation with air companies in the EU. avbjóðing. On May 1, 2007, the Faroe Government took over the Bíða verður framvegis eftir, at Føroyar gerast partur av operation of Vágar Airport. Our company sees this as a felags frælsa europeiska loftrúminum, so sum landsstýrið major breakthrough. Very little investment has been hevur lagt ætlanir um. Fáast hesir karmar ikki at virka, so made to upgrade the operative conditions of Vágar Airport in recent years, even though the income of the

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 7

má felagið taka til aðrar samstarvshættir við feløg innan airport has grown greatly. Considering the difficult Evropasamveldið. logistic circumstances of Faroe and the country's dependence upon regular aviation, it is difficult to Hin 1. mei 2007 tók Føroya Landstýri yvir raksturin av comprehend the lack of investments to improve the flogvøllinum í Vágum, og metir felagið hetta, sum eitt conditions of the islands' air services. stórt framstig. Nærum ongar íløgur og lítil menning hevur verið av operativu umstøðunum við flogvøllin í The Government has decided to lengthen the airstrip at Vágum seinastu nógvu árini, hóast inntøkurnar hjá Vágar and to modernize the terminal. The company flogvøllinum eru vaksnar munandi. Havandi í huga backs this decision to the hilt. Still we hope that the truplu umstøðurnar í Føroyum og hvussu heft samfelagið Government does not wait till after the airstrip has been er at regluligari flúgving, er tað púra óskiljandi, at ongar extended to effect measures which improve the íløgur eru gjørdar í at betra um karmarnar fyri regularity, but acts promptly in this respect. We also flogferðsluni. need other temporary improvements to better passenger servicing and to facilitate the handling of traffic, luggage Landsstýrið hevur nú sett út í kortið at longja flogvøllin í and freight . Vágum og nútímansgera terminalin. Hesum tekur felagið undir við av fullum huga. Tað er kortini okkara vón, at landsstýrið ikki bíðar við tiltøkum, sum kunnu bøta um Events subsequent to the financial year regularitetin, til flogvøllurin er longdur, men heldur fremja hesar ábøtur beinanvegin. Tað er somuleiðis brúk No subsequent events has incurred from the date of the fyri bráðfeingis loysnum, so ferðafólk fáa rúmligari balance sheet and to today that might affect the true and umstøður, og avgreiðslan kann gerast smidligari. fair view of the financial statement.

Hendingar eftir roknskaparlok Ownership

Frá degnum fyri fíggjarstøðuni til í dag er einki hent, sum Shareholders recorded according to the Companies Act, ávirkar metingina av ársroknskapinum. § 28 b, section 4:

The Government of the Faroe Islands. Eigaraviðurskifti

Eigarar skrásettir í yvirlitinum samb. § 28 b stk. 4 í Allocation of Profit/loss partafelagslógini: Recommendation regarding allocation of net profit/loss Landskassin, v/Føroya Landsstýri, 100 Tórshavn is disclosed in conjunction to the income statement.

Býti av ársúrsliti

Uppskot um býti av ársúrslitinum framgongur av rakstrarroknskapinum.

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 8

ROKNSKAPARÁTEKNING MANAGEMENT’S REPORT

Ársroknskapurin, sum er greiddur av okkum, er settur The Financial Statement, which is prepared by us, is set upp samsvarandi føroyskari lóggávu. Ársroknskapurin up in accordance with provisions of Faroese legislation. gevur eftir okkara tykki eina rættvísandi mynd av The financial statements gives a true and fair view of the felagsins ogn og skuld, fíggjarligu støðu og úrsliti. company’s assets and liabilities, financial position and profit/loss for the concerning period.

Sørvágur, hin 31. mai 2007 / Sørvágur the 31st of May 2007

Stjórn / Management:

Magni Arge Marius Davidsen Forstjóri / Managing director Fíggjarstjóri / Finance director

Nevnd / Board af directors

Christian Andreasen Erling í Liða Petur J. Eiriksson Formaður / Chairman Næstformaður / Vice-chairman

Verna Rasmussen Ingi S. Joensen

Ársroknskapurin er lagdur fram og góðtikin á aðalfundi felagsins. The financial statments have been presented and accepted at the General Assembly.

Sørvágur, hin 31. mai 2007 / Sørvágur, the 31st of May 2007

Fundarstjóri / Chairman

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 9

GRANNSKOÐANARÁTEKNING AUDITOR’S REPORT

TIL PARTAEIGARARNAR Í ATLANTIC TO THE SHAREHOLDERS OF ATLANTIC AIRWAYS P/F AIRWAYS P/F

Vit hava grannskoðað ársroknskapin hjá Atlantic Airways We have audited the Annual Report of Atlantic P/F fyri roknskaparárið 1. januar – 31. desember 2006, Airways P/F for the financial year 1. January – 31 sum er gjørdur eftir ársroknskaparlógini. December 2006, prepared in accordance with the accounting provisions of Faroese legislation. Leiðslan í felagnum hevur ábyrgdina av ársroknskapinum. Okkara ábyrgd er við støði í grannskoðanini at gera eina The Board of Directors and the Management are niðurstøðu um ársroknskapin. responsible for the preparation of the Annual Report. Our responsibility is to express an opinion Grannskoðanin on the Annual Report based on our audit. Vit hava grannskoðað samsvarandi galdandi føroyskum grannskoðanarreglum. Hesar reglur krevja, at vit leggja til Basis of opinion rættis og grannskoða fyri at fáa grundaða vissu fyri, at tað We conducted our audit in accordance with Faroese ikki eru týðandi skeivleikar í ársroknskapinum. Tá ið vit Auditing Standards. Those Standards require that we grannskoða, kanna vit við stakroyndum grundarlagið comply with the ethical requirements and plan and undir upphæddum og upplýsingum í ársroknskapinum. perform the audit to obtain reasonable assurance Vit taka eisini støðu til nýtta roknskaparháttin og týðandi whether the Annual Report is free from material roknskaparligu metingarnar, ið leiðslan hevur gjørt, og misstatement. We have tested the basis and somuleiðis, hvussu roknskapurin sum heild er gjørdur. documentation for the amounts and disclosures in Tað er okkara fatan, at grannskoðanin er eitt nøktandi the financial statements. Our audit includes an grundarlag at byggja okkara niðurstøðu á. assessment of the accounting policies applied and the accounting estimates made by the Board of Grannskoðanin hevur ikki givið orsøk til fyrivarni. Directors and the Management. In addition, we have evaluated the overall adequacy of the Niðurstøða presentation in the financial statements. We believe Tað er okkara fatan, at ársroknskapurin gevur eina that the audit evidence we have obtained is sufficient rættvísandi mynd av felagsins ognum, skyldum og and appropriate to provide a basis for our audit fíggjarligu støðu 31. desember 2006 og av úrslitinum av opinion. virksemi og peningastreymi felagsins í roknskaparárinum 1. januar – 31. desember 2006 samsvarandi árs- Our audit has not resulted in any qualification. roknskaparlógini. Opinion In our opinion, the Annual Report gives a true and Tórshavn, hin 31. mai 2007 fair view of the financial position at 31 December 2006 of the Company and the result of the Company operations and cash flows for the financial year 1 Januar – 31 December 2006 in accordance with accounting provisions of Faroese legislation.

Tórshavn, the 31st of May 2007

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

Klaus Rasmussen Jóannes Olsen statsaut. revisor / skrás. revisor State Authorized Public Accountant Registered Public Accountant

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 10

NÝTTUR ROKNSKAPARHÁTTUR ACCOUNTING PRINCIPLES

Alment General

Ársroknskapurin er greiddur í samsvar við árs- The Financial Statement has been prepared in roknskaparlógina, og tann nýtti roknskaparhátturin er accordance with provisions of the Faroese annual óbroyttur í mun til undanfarna ár, burtursæð frá accounts act. Generally accepted accounting principles umrokning av kapitalpørtum og virðisbrøvum. Felagið are applied on a basis consistent with that of the hevur áður upptikið kapitalpartar og virðisbrøv til preceding year, except regarding shares in associated útveganarvirði, men hevur í ár valt at upptaka hetta til companies and other shares. The company has innara virðið, av tí at felagið metir, at hetta gevur eina previously recorded shares in associated companies and meira rættvísandi mynd av hesum posti. Annars er eingin other shares at acquisition value, but it has decided to broyting til nýttan roknskap. change this principle, so that shares in associated companies and other shares this year and forthcoming Roknskaparárið er álmanakkaárið. years will be assessed at net valuation according to the equity method. The company believes that this gives a true and fair view of shares in associated companies and Umrokning av fremmandum gjaldoyra other shares. The financial period endures from January 1st to Flytingar í útlendskum gjaldoyra eru í árinum roknaðar December 31st. um til kursin dagin, flytingin er framd.

Áogn, skuld og aðrir postar í útlendskum gjaldoyra, sum Conversion of foreign currency ikki eru avroknaðir við árslok, verða roknaðir um til kursin við árslok. Expenses in foreign currencies are recorded at the official exchange rates applicable at the date of payment. Staðfestar og ikki-staðfestar gjaldoyrabroytingar eru tiknar við í rakstrinum undir “fíggjarligir postar.” Receivables, debt and other items in foreign currencies are converted into DKK at the official exchange rates applicable on the balance sheet date. Nettosøla Realized as well as non-realized exchange fluctuations Søla av ferðaseðlum verður inntøkuførd, so hvørt sum are recorded under “financial items” in the profit and seldir ferðaseðlar verða nýttir av ferðafólki. loss account.

Virðisáseting av materiellari støðisogn og Net revenue avskrivingum Sales of airline tickets during the year is recognised as Materiell støðisogn er virðisásett til útveganarvirði við income, when sold tickets are used by passengers. frádrátti av gjørdum avskrivingum.

Avskrivingar verða gjørdar við eins stórum upphæddum, Fixed assets and depreciations grundaðar á eina meting av brúkstíðini av ognunum. Tangible fixed assets are valued at cost less accumulated Flogfør ...... 5 – 10 ár depreciation. Tyrlur ...... 5 – 16 ár Eykalutir ...... 17 ár Depreciations are made with identical yearly amounts, Rakstrargøgn, innbúgv ...... 3 – 10 ár based on an assessment of the period of use for the Høvuðsviðlíkahaldsútreiðslur ...... 5 – 12 ár assets. Hangarur, skrivstovuhølir og sethús 5 – 30 ár Aircrafts ...... 5 – 10 years Avskrivingin uppá flogførini verður roknað við 5 mió. í Helicopters ...... 5 – 16 years restvirði. Spareparts ...... 17 years Operating equipment ...... 3 – 10 years Forútgjaldingar fyri tyrlur verður bókað sum tilgongd, Primary maintenance expenses ...... 5 – 12 years men verður ikki avskrivað. Buildings ...... 5 – 30 years

Høvuðsviðlíkahaldsútreiðslur verða avskrivaðar yvir The depreciation on the aircrafts is calculated with 5 tíðarskeiðið fram til næsta høvuðsviðlíkahald. mill. DKK in scrap value for each aircraft. Høvuðsviðlíkahaldsútreiðslur eru bókaðar saman við Prepayments for helicopters are booked as addition flogførum í ársroknskapinum. during the year, but are not depreciated.

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 11

Primary maintenance expences are depreciated over the Kapitalpartar í atknýttum feløgum og onnur period of time until the next primary maintenance. virðisbrøv Primary maintenance expensenses are recorded with the aircrafts in the accounts. Partabrøv í atknýttum feløgum eru virðisásett til innara virðið. Shares in associated companies and other shares Virðisbrøv skrásett á einum keypsskála verða virðisásett til kursin galdandi fyri virðisbrævið á keypsskálanum á Shares in subsidiaries are assessed at net valuation statusdegnum. according to the equity method.

Shares listed on a stock exchange are valued at market Vørugoymslur price on the last day of the financial period for the company. Vørugoymslur verða virðisásettar til útveganar- ella kostvirði, gjørt upp eftir FIFO-meginregluni, ella til nettorealisatiónsvirði, har hetta er lægri. Stocks

Niðurskriving verður gjørd fyri ókurantar vørur, herundir Stocks are stated at purchase price based on the first-in eisini vørur, ið eru seint umsetiligar. first-out principle, or at the lower of net market value.

Depreciation is made concerning obsolete stock, inclu- Áogn ding goods with slow transferability.

Skuldarar verða virðisásettir við frádrátti av møguligum tapsvanda, grundað á eina meting av hvørjum einstøkum Receivables skuldara. Receivables are assessed at nominal value less provisions for losses. The amounts are individually Skuld til veðhavarar assessed.

Skuld til veðhavarar er tikin upp til kostprís, tá skuldin er Debt to mortgage holders stovnað. Síðani er skuldin gjørd upp til restvirði.

Útreiðslur í samband við upptøku av láninum eru út- Debt to mortgage holders has been entered into the reiðsluførdar í upptøkuárinum, meðan møgulig kurstap annual accounts at acquisition value. The debt has hence av lánsbrøvum verða útreiðsluførd samsvarandi been assessed to residual value. The expenditure avdráttartíðini. connecting to the raising of the loan is posted in the year

of the raising, while potential currency losses

concerning bonds are expensed during the instalment Onnur skuld period.

Øll onnur skuld er tikin upp til restvirði pr. 31. desember. Other debts

Skattur All other debt has been posted at residual value as of Dec. 31st. Skattur av ársúrslitinum er roknaður við 18% við støði í úrsliti áðrenn skatt, tillagað fyri ikki skattskyldugar inntøkur og útreiðslur. Tax

Útreiðsluførdi skatturin fevnir um aktuellan skatt av Actual tax is calculated as 18% of pre-tax profit adjusted skattskylduga ársúrslitinum og broyting í útsettum skatti. for non-taxable incomes and expenditures.

Útsettur skattur verður roknaður við 18% av teimum The taxes include both actual tax and deferred tax. tíðarbundnu frávikunum, sum stava frá, at inntøkur og útreiðslur ikki verða tiknar við í rakstrarroknskapinum Deferred tax is calculated as 18% of timing differences og skattskyldugu inntøkuna í sama tíðarskeiði. between the annual accounts and the tax accounting by the Faroese tax administration.

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 12

RAKSTRARROKNSKAPUR / INCOME STATEMENT

Nota/ Note 2006 2005

Nettosøla / Net sales ...... 1 518.990.160 379.586.132

Flúgvikostnaður / Flight expenses ...... -392.749.695 -262.839.915 Starvsfólkakostnaður / Employee expenditures ...... 2 -79.710.545 -57.539.369 Avskrivingar / Deprecations ...... 4 -39.586.417 -34.158.857

Úrslit áðrenn fíggjarligar postar / Result before financial items ... 6.943.503 25.047.991

Rentuinntøka / Financial income ...... 2.580.823 1.081.846 Rentuútreiðslur / Financial expenses ...... -4.454.661 -2.507.824

Úrslit áðrenn skatt / Result before tax ...... 5.069.665 23.622.013

Skattur / Tax ...... 3 -912.540 -2.888.277

Ársúrslit / Profit ...... 4.157.125 20.733.736

Býti av ársúrsliti / Allocation of profit/loss Hin tøka upphæddin er / The amount at disposal is: Flutt fram frá undanfarnum árum / Retained earnings opening ...... 61.879.564 Ársúrslit / Result for the year ...... 4.157.125 Íalt / Total ...... 66.036.689

Verður skotið upp av nevndini at býta soleiðis / Proposal from the board of allocation: Vinningsbýti til partaeigarar / Proposed dividend to shareholders ... 0 Regulering til kursvirði undanfarin ár / Adjustment to other shares for previous years ...... 3.453.436 Burturlagt til uppskrivingargrunn/ Amount allocated to other reserves...... -478.436 Regulering til primo viðv. úts. skatti / Adjustment to deferred taxes for previous years ...... -621.654 At flyta fram til næsta ár / To carry forward to next year ...... 66.036.689 Býtt / Allocated ...... 68.390.035

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 13

FÍGGJARSTØÐA PR. 31. DESEMBER / BALANCE SHEET AS AT DECEMBER 31st

AKTIV / ASSETS Nota/ Note 2006 2005

Flogfør og viðlíkahald / Aircrafts and maintenance ...... 167.056.919 165.921.213 Eykalutir / Spare parts ...... 15.064.903 4.369.279 Rakstrargøgn / Operating equipment ...... 9.449.140 5.506.958 Hangarur, skrivst.hølir og sethús / Buildings ...... 45.817.480 536.545 Materiell støðisogn í alt / Fixed assets ...... 4 237.388.442 176.333.995

Kapitalpartar í atkn. virkjum / Shares in associated companies ...... 1.995.727 813.091 Virðisbrøv / Other shares ...... 5.510.000 1.050.000 Fíggjarlig støðisogn í alt / Total financial assets ...... 5 7.505.727 1.863.091

STØÐISOGN Í ALT / TOTAL FIXED ASSETS ...... 244.894.169 178.197.086

Nýtsluvøra / Consumables ...... 944.537 1.251.934 Nýtsluvøra íalt / Total consumables ...... 944.537 1.251.934

Vøru- og tænastuáogn / Trade receivables ...... 6 92.458.736 37.662.998 Tíðarskeiðsbókingar / Accrued income and deferred expenses ...... 2.879.528 2.539.882 Onnur áogn / Other receivables ...... 1.805.958 4.061.414 Áogn í alt / Total receivables ...... 97.144.222 44.264.294

Tøkur peningur / Cash and cash equivalents ...... 20.669.786 40.789.045

OGN Í UMFERÐ Í ALT / TOTAL CURRENT ASSETS ...... 118.758.545 86.305.273

AKTIV Í ALT / TOTAL ASSETS ...... 363.652.714 264.502.359

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 14

FÍGGJARSTØÐA PR. 31. DESEMBER / BALANCE SHEET AS AT DECEMBER 31st

PASSIV / LIABILITIES Nota/ Note 2006 2005

Partapeningur / Share capital ...... 7 103.500.000 75.000.000 Yvirkursur við partabrævaútgávu / Share premium reserve ...... 7 23.500.000 0 Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum / Reserve shares in subsidiaries ...... 8 478.436 0 Flutt úrslit / Retained earnings ...... 9 68.390.035 61.879.564 EGINOGN Í ALT / TOTAL EQUITY ...... 195.868.471 136.879.564

Sett av til útsettan skatt / Provisions for deferred taxes ...... 3 18.059.324 16.525.130 AVSETINGAR Í ALT / TOTAL PROVISIONS ...... 18.059.324 16.525.130

Veðlán / Mortgage loans ...... 85.160.801 64.672.646 Vøru- og tænastuskuld / Trade payables ...... 58.745.668 33.311.056 Tíðaravmarkingar / Accruals and deferred income ...... 5.818.450 3.113.963 Skyldugt vinningsbýti / Proposed dividend ...... 0 10.000.000 STUTT- OG LANGFREISTAÐ SKULD Í ALT / TOTAL 10 SHORT- AND LONG-THERM DEBT ...... 149.724.919 111.097.665

PASSIV Í ALT / TOTAL LIABILITIES ...... 363.652.714 264.502.359

Veðsetingar og møguligar skyldur v.m. / Mortgaging and 11 contingent liabilities etc.

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 15

KAPITALFRÁGREIÐING / CASH FLOW STATEMENT

(Kr. 1.000) 2006 2005

Úrslit áðrenn fíggjarligar postar / Result before financial items ...... 6.944 25.048 Avskrivingar / Depreciation ...... 39.586 34.159 46.530 59.207

Broyting í umferðarfæi, burturleggingum og stuttfreistaðari skuld / Change in current assets, provisions and short-term liabilities: +/- vøru- og tænastuáogn / trade receivables ...... -52.880 -17.500 +/- goymsla / stock...... 307 133 +/- onnur virðisbrøv og kapitalpartar / shares in associated companies and other shares ...... -5.643 -221 +/- vøru- og tænastuskuld / trade payables ...... 25.435 14.608 +/- onnur skuld og tíðaravmarkingar / other liabilities and accrued expenses ...... 2.704 353 +/- broyting í kapitalviðurskiftum / Changes in sharecapital ...... 55.453 0 25.376 -2.627

Peningastreymur frá rakstri / Cash flow from operations ...... 71.906 56.580

Rentu-inntøkur/útreiðslur / Interest income/expenses ...... -1.874 -1.426 Nettoíløgur í útbúnað / Net investment in equipment ...... -100.640 -77.673 Lántøka og avdráttir av lánum (netto) / New loans and payments of loans (net) ...... 20.488 23.316 Útgoldið vinningsbýti / Paid dividends ...... -10.000 -2.000 -92.026 -57.783

LIKVIDITETSÚRSLIT / LIQUIDITY SURPLUS...... -20.120 -1.203 Tøkur peningur primo / Cash and cash equivalents at the beginning of the year ...... 40.789 41.992 Tøkur peningur ultimo / Cash and cash equivalents at the end of the year ...... 20.669 40.789

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 16

NOTUR / NOTES

2006 2005

1. Útgreining av ferðafólkatali / Specification of numbers of passengers: Ferðafólk flogfør, ruta / Passengers fixed wing ...... 184.121 170.995 Ferðafólk flogfør, leigutúrar / Passengers fixed wing, charter ...... 160.548 70.158 Ferðafólk flogfør / Passangers fixed wing ...... 344.669 241.153

Ferðafólk tyrlur innanlanda/oljupallar / Passengers by Helicopters, domestic/oilrigs ...... 6.381 6.514 Ferðafólk tilsamans / Total passengers...... 351.050 247.667

Flúgvitímar / Airborne hours: Flogfør, ruta / Airborne hours ...... 6.098 6.238 Flogfør, leigutúrar / Airborne hours, charter ...... 4.403 1.723 Flúgvitímar flogfør / Airborne hours ...... 10.501 7.961

Tyrlur innanlanda/oljupallar / Helicopters domestic/oilrigs ...... 933 930 Flúgvitímar tilsamans / Total airborne hours ...... 11.434 8.891

Uttanlanda inntøka / income overseas: Útflutningsvirði í kr. / Export value in DKK ...... 294.682.616 128.879.477 Útflutningsvirði í % / Export value in % ...... 57% 34%

2. Starvsfólkakostnaður (kr.) / Employee expenditures (DKK) Lønir / Wages and salaries ...... -73.744.420 -53.883.306 Eftirlønargjøld / Pensions ...... -3.676.277 -2.871.746 Gjald til almennar tryggingar / Expenses for social security ...... -2.289.848 -784.317 -79.710.545 -57.539.369 Samsýning til stjórn og nevnd / Salaries and compensations paid to Management and Board: Stjórn / Management ...... -1.841.400 -2.378.087 Nevnd / Board ...... -420.000 -330.460 Í alt ...... -2.261.400 -2.708.547

Tal av starvsfólki / Number of employees ...... 177 152

3. Skattur (kr.) / Tax (DKK) Beinleiðis skattur / Taxes ...... 0 0 Broyting av eventualskatti í árinum / Changes in deferred taxes during the year ...... -912.540 -2.888.277 -912.540 -2.888.277

Útsettur Skattur primo / Deffered taxes as of Jan 1st ...... 16.525.130 13.636.853 Broyting av eventualskatti í árinum / Changes in deferred taxes during the year ...... 912.540 2.888.277 Regulering til primo / Adjustment to previous years ...... 621.654 0 18.059.324 16.525.130

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 17

NOTUR / NOTES

4. Materiell støðisogn (kr.) / Tangible fixed assets (DKK) Flogfør og Rakstrar- Hangarur, viðlíkahald / gøgn / skrivst.hølir Aircrafts and Eykalutir / Operating og sethús / maintenance spare parts Equipment Buildings Íalt / Total Útveganarvirði primo / Acquisition value as of Jan 1st ... 351.825.390 23.678.255 15.432.117 1.198.985 392.134.747 Regulering til primo / Adjustment to previous years ...... 2.941.025000 2.941.025 Tilgongd í árinum / Additions during the year ...... 58.730.414 12.422.363 6.352.031 45.667.371 123.172.179 Frágongd í árinum /Disposal during the year ...... -163.570.856 -277.818 -560.065 0 -164.408.739 Útveganarvirðið ultimo / Acquisition value as of Dec 31st. 249.925.973 35.822.800 21.224.083 46.866.356 353.839.212

Av- og niðurskrivingar primo / Depreciations as of Jan 1st ...... -185.904.176 -19.308.976 -9.925.159 -662.440 -215.800.751 Avskrivingar í árinum / Depreciations during the year ..... -35.063.391 -1.726.741 -2.409.849 -386.436 -39.586.417 Avskr. viðv. frágongd í árinum / Depreciations of disposal ...... 138.098.513 277.820 560.065 0 138.936.398 Avskrivingar ultimo / Depreciations as of Dec 31st ...... -82.869.054 -20.757.897 -11.774.943 -1.048.876 -116.450.770

Bókað virði ultimo / Book value as at Dec 31st 2006 ...... 167.056.919 15.064.903 9.449.140 45.817.480 237.388.442

Bókað virði primo / Book value as at Dec 31st 2005 ...... 165.921.213 4.369.279 5.506.958 536.545 176.333.995

Felagið hevur forútgoldið kr. 25.610.523 fyri eina Bell 412HP tyrlu. Henda er bókað sum tilgongd í árinum. Avskrivað er ikki uppá hesa upphædd. / The company has prepaid DKK 25.610.523 for a Bell 412 HP helicopter. This amount has been booked as addition during the year. No depreciations has been made to this amount.

Felagið hevur forútgoldið kr. 5.885.405 fyri rættindi til eina nýggja Bell/Augusta tyrlu. Avskrivað er ikki uppá hesa upphædd. / The company has prepaid DKK 5.885.405 for the rights to buy a new Bell/Augusta helicopter. No depreciations has been made to this amount.

5. Fíggjarlig støðisogn (kr.)/ Financial assets (DKK) Kap.partar atkn. virkjum / Shares in Virðisbrøv / ass. comp. Other shares Íalt / Total Bókað virði primo / Book value as of Jan 1st ...... 813.091 1.050.000 1.863.091 Tilgongd í árinum / Additions during the year ...... 704.200 0 704.200 Frágongd í árinum /Disposal during the year ...... 0 0 0 Regulering til undanfarin ár / Adjustment to previous years...... 178.436 3.275.000 3.453.436 Virðisbroytingar / Revaluations ...... 300.000 1.185.000 1.485.000 Bókað virði ultimo / Book value as of Dec 31st...... 1.995.727 5.510.000 7.505.727

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 18

NOTUR / NOTES

6. Vøru- og tænastuáogn / Trade receivables ...... 2006 2005

Tryggingarendurgjald / Insurance claim ...... 37.815.445 0 Vøru- og tænastuáogn / Trade receivables ...... 54.643.291 37.662.998 Vøru- og tænastuáogn í alt / Trade receivables total...... 92.458.736 37.662.998

7. Partapeningur (kr.) / Share capital (DKK) Partapeningurin kr. 103.500.000 er lutaður sundur í 75 stk. á 1 mió. kr og 1 stk. á 28,5 mió. kr. Partabrøvini eru ikki býtt upp í flokkar / The share capital amounting to DKK 103.500.000 is divided in 75 shares of DKK 1 million each and 1 share of DKK 28,5 million.The shares are not divided in different categories.

Partapeningur primo / Share capital as of Jan 1st ...... 75.000.000 75.000.000 Apportinnskot / Non cash contribution ...... 52.000.000 0 Flutt til yvirkursgrunn / Allocated to share premium reserve ...... -23.500.000 0 Partapeningur ultimo / Share capital as of Dec 31st ...... 103.500.000 75.000.000

8. Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum (kr.)/ Reserve shares in subsidiaries (DKK) ...... Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum primo / Reserve shares in subsidiaries as of Jan 1st ...... 0 0 Regulering eftir innanvirðisháttinum til undanfarin ár / Adjustment acc. to the equity method for previous years ...... 178.436 0 Virðisbroytingar / Revaluations ...... 300.000 0 Tiltakspenin. av nettouppskriving eftir innanvirðisháttinum ultimo / Reserve shares in subsidiaries as of Dec 31st...... 478.436 0

9. Flutt úrslit (kr.) / Retained earnings (DKK) Flutt frá undanfarnum árum / Retaned earnings opening ...... 61.879.564 51.145.828 Flutt til uppskrivingargrunn / Amount allocated to other reserves ..... -478.436 0 Regulering til kursvirði undanfarin ár / Adjustment to other shares for previous years ...... 3.453.436 0 Regulering til primo viðv. útsettum skatti / Adjustment to previous years for deferred taxes ...... -621.654 0 + Ársúrslit / Net profit ...... 4.157.125 20.733.736 - avsett til vinningsbýti / dividend ...... 0 -10.000.000 68.390.035 61.879.564

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 19

NOTUR / NOTES

10. Stutt- og langfreistað skuld (kr.) / Short- and longterm debt (DKK) Skuld 2006 / At gjalda At gjalda eftir Skuld 2005 / Debt Dec 31st innan 1 ár / 5 ár / Due for Debt Dec 31st 2006 Short term debt payment after 2005 0-1 year 5 years

Veðlán / Mortgage debt ...... 85.160.801 6.942.830 51.309.186 64.672.646 Vøru- og tænastuskuld / Trade payables ...... 58.745.668 58.745.668 0 33.311.056 Tíðaravmarkingar / Accrued expenses ...... 5.818.450 5.818.450 0 3.113.963 Skyldugt vinningsbýti / Proposed dividend ..... 0 0 0 10.000.000 Stutt- og langfreistað skuld í alt / Total short- and longterm debt ...... 149.724.919 71.506.948 51.309.186 111.097.665

Hetta kann sundurgreinast soleiðis / Specified as follows: Stuttfreistað skuld í alt / Short-term debt ..... 71.506.948 53.834.357 Langfreistað skuld í alt / Long-term debt ..... 78.217.971 57.263.308

11. Veðsetingar og møguligar skyldur v.m. / Mortgaging and contingent liabilities etc.

Flogfør við einum bókaðum virði pr. 31/12-2006 uppá kr. 161 mió. eru veðsett / Aircraft with a book value of DKK 161 mill. are mortgaged

Av tøka peninginum eru 2 mió. kr. veðsettar / 2 million DKK of the Cash and cash equivalents have been mortgaged

Felagið hevur gjørt sáttmála við Bell/Augusta Aerospace Company, um keyp av tyrlu fyri US$ 6.985.000. Av hesum hevur felagið goldið depositum á US$ 1.000.000. / The company has entered into a contract with Bell/Augusta Aerospace Company, about purchasing a helicopter for US$ 6.985.000. The company has so far paid a deposit of US$ 1.000.000.

Tað áhvílur felagnum ein árlig leasingskylda uppá US$ 600.000 fyri leasing av flogfari / The company is obligated to pay a sum of US$ 600.000 a year for the lease of one aircraft

P/F Atlantic Airways – Ársroknskapur fyri 2006 / Financial statement 2006 Síða 20 Á Glaðsheyggi Box 30 FO-110 Tórshavn RASMUSSEN & WEIHE Tlf (+298) 35 17 00 Statsautoriserað grannskoðarafelag P/F Fax (+298) 35 17 01 Reg. nr. 3752 International worldwide cooperation E-mail: [email protected] Http://www.rasmussen.fo

P/F Atlantic Airways FO-380 Sørvágur

P/F skrás. nr. 1223 P/F reg. no. 1223

Ársroknskapur 2005 Annual accounts 2005

Avrit Copy

RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

INNIHALDSYVIRLIT / TABLE OF CONTENTS

Síða / page

Partafelagsupplýsingar / Information regarding the company ...... 2

Frágreiðing frá leiðslu / Statement form the management:

Ársfrágreiðing / Statement from the management regarding 2005 ...... 3

Átekningar / Reports:

Roknskaparátekning / Management’s report ...... 10

Grannskoðanarátekning / Auditor’s report ...... 11

Ársroknskapur / Financial statement:

Nýttur roknskaparháttur / Accounting policies ...... 12

Rakstrarroknskapur / Profit and loss account ...... 14

Fíggjarstøða pr. 31. desember / Balance as at 31 December ...... 15

Kapitalfrágreiðing / Cash flow statement ...... 17

Notur til ársroknskapin / Notes to the accounts ...... 18

C:\Documents and Settings\bardur\Desktop\Puk\ársroknskapur 2005.doc

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 1 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

PARTAFELAGSUPPLÝSINGAR / INFORMATION REGARDING THE COMPANY

Felagið / The company

P/F Atlantic Airways FO-380 Sørvágur Skrásetingar nr. 1223 / Reg. no. 1223 Heimstaðarkommuna / Domicile municipality: Sørvágs

Nevnd / Board

Christian Andreasen, formaður / chairman Erling í Liða, næstformaður / vice chairman Petur J. Eiriksson Heini Davidsen Annika Jespersen

Stjórn / Management

Magni Arge, forstjóri / Managing director Marius Davidsen, fíggjarstjóri / Finance director

Grannskoðan / Auditor

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 2 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

ÁRSFRÀGREIÐING ANNUAL REPORT

Virksemið hjá felagnum vaks í fjør nógv meiri enn The company’s operations increased more than ever last nakrantíð fyrr, og tað sæst aftur í roknskapartølunum. year as can be seen in the accounts. Operations showed Raksturin gav eitt yvirskot uppá 23,6 milliónir krónur a surplus of 23,6 millions before taxes and 14,2 millions fyri skatt og 20,7 milliónir aftaná skatt. Árið fyri var after taxes which is the best profit the company has úrslitið 17.7 milliónir fyri skatt og 14,2 milliónur krónur achieved so far. The result would have been even better aftaná skatt. Hetta er besta úrslit felagið hevur rokkið if flying had not been hampered by bad weather last higartil, men úrslitið hevði verið uppaftur betur, um ikki year, which costed the company around 5 million dkk flúgvingin var so nógv darvað av ringum veðrið í fjør. more than was intended. Also the expenditures on fuel Hetta kostaði felagnum einar fimm milliónur krónur were much higher than was intended, however this was meiri enn ætlað. Somuleiðis vóru útreiðslurnar til partly recovered with an oil duty. The turnover rised 145 brennievni nógv hægri enn ætlað, men hetta fekst partvís million dkk – from 234 to 379 million dkk corresponding aftur við serligum oljugjaldi. Umsetningurin vaks 145 to an increase by 62%. milliónur krónur – úr 234 upp í 379 milliónur krónur, sum svarar til ein vøkstur uppá 62%. The process of spreading the business base and increase activities abroad continues. Even though flying between Gongdin við at spjaða rakstrargrundarlagið og vaksa um Faroes and Denmark increased particularly in 2005 virksemið í útlondum heldur fram. Hóast flúgvingin income deriving from flying abroad increased millum Føroyar og Danmark vaks serliga nógv í 2005, so proportionally more. vaks inntøkan, ið stavar frá flúgving í útlondum, lutfalsliga meiri. Export value increased by 75% or 55 million dkk - from 73 to 128 million dkk. In percentage of turnover it is an Útflutningsvirðið vaks við 75% ella 55 milliónum increase from 31% to 36% of the total income. Export krónum úr 73 upp í 128 milliónur krónur. Í prosentum av value is the turnover, which is considered to derive from umsetninginum er talan um ein vøkstur úr 31 % til 36 % customers living outside the Faroes Islands and from av allari inntøkuni. Útflutningsvirðið er tann operations abroad. umsetningur, sum mettur verður at stava frá viðskiftafólki búsitandi uttanfyri Føroyar og frá virksemi Such a growth and such challenges, which the company í útlondum. has been facing in 2005 and so far this year requires a lot from everybody in the company. Board and So stórur vøkstur og so stórar avbjóðingar, sum felagið management are grateful for the zest and energy, which hevur verið fyri í 2005 og higartil í ár, krevur nógv av the employees have expressed in 2005. Without such øllum í felagnum. Nevnd og stjórn eru takksom fyri tann positive attitude the company would not have achieved arbeiðshug og tað ágrýtni, sum starvsfólkini hava sýnt í its goal with such profits. Indeed they deserve the title 2005. Uttan slíkan jaligan hugburð hevði felagið ikki employees of the year! rokkið á mál við so góðum úrsliti. Tey hava tí uppiborið heitið ársins starvsfólkalið! Events of the year

Hendingar í árinum Flying activity increased to a great extent at the turn of the year 2004/05 when Maersk Air ceased flying to the Flúgvingin øktist nógv um árskiftið 2004/05, tá Maersk Faroes. The company increased the number of flights Air gavst at flúgva uppá Føroyar. Felagið økti tá um keeping the supply on the same level as before. At the túratalið, so útboðið var á sama støði sum same time flying activity in Norway took one big step frammanundan. Um sama mundi tók flúgvingin í Noregi ahead as well as a charter service from Billund with ski dik á seg, eins og farið varð undir charterflúgvingar úr passengers was launched. Billund við skíferðafólki. It was decided to start negotiations with British Avgjørt var tí at taka upp samráðingar við British Aerospace about leasing one more aircraft. The fourth Aerospace um at leiga eitt flogfar afturat. Fjórða aircraft joined the fleet in the spring and has previously flogfarið kom í flotan á vári, og hevur áður verið í been part of Malmø Aviation fleet. flotanum hjá Malmø Aviation. A new contract was concluded with Aker Stord on flying Nýggjur sáttmáli var eisini gjørdur við Aker Stord um workers to the Ormen Lange project in Molde. The flúgving av arbeiðsfólki til Ormen Lange verkætlanina í service was launched late autumn and continues until Molde. Hendan flúgvingin fór so smátt í gongd seint á Summer 2007, on occasions requiring two aircrafts in heysti og heldur fram til út móti sumri 2007. Tað hevur service in Norway. við sær, at til tíðir skulu tvey flogfør flúgva í Noregi. With the prospects of continued growth it was necessary Við útliti til framhaldandi vøkstur var neyðugt at hugsa to consider enhancing the capacity and negotiations um meiri kapacitet, og tí vórðu samráðingar tiknar upp were initiated with Swiss about buying yet another Avro við Swiss um at keypa eitt Avro RJ 100 flogfar afturat í RJ 100 aircraft to the fleet. The aircraft was built in

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 3 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752 flotan. Flogfarið er bygt í 1999 og er millum tey yngstu 1999 and is among the youngest and most advanced of og mest framkomnu av hesum slagnum. Tað er nakað its kind. It is somewhat bigger than the other BAe 146 størri enn hini BAe 146 flogførini og lastar tí nakað aircrafts and takes more cargo. The aircraft joined the meiri. Flogfarið kom í flotan síðst í oktober 2005 og fleet late October 2005 and with great success. hevur roynst væl. When the competitor ceased flying the Denmark/Faroes Tá kappingarneytin gavst at flúgva á Danmarkarleiðini, route the company set out to go against the horror setti felagið sær fyri at ganga ímóti øllum teimum scenario picturing a decreasing service level, high prices ræðumyndum, sum vóru málaðar á veggin um vánaligari and worse travel connections. tænastu, dýrari prísir og ringari ferðasamband. A flight schedule was set up offering as many services as Ferðaætlanin var snikkað soleiðis til, at útboðið var minst before and in periods even more. Departures were líka stórt sum frammanundan og í fleiri tíðarskeiðum spread over the whole day from morning till night and størri. Fráferðirnar vóru lagdar soleiðis, at tær vórðu now it is possible to departure from the Faroes early in spjaddar út um dagin frá morgni til kvølds, og nú ber til the morning and return in the evening. In addition the at sleppa úr Føroyum tíðliga á morgni og heimaftur á price system was revised in April resulting in lower kvøldi. Harafturat var prísskipanin endurskoðað í apríl, prices and a considerably more flexible price system. og hevði hetta við sær bæði bíligari prísir og eina munandi meiri smidliga prísskipan. Passenger numbers have never before increased as much in one year as they did last year. Taking into account Ferðafólkatølini í Vágum eru ongantíð vaksin so nógv that the economy was at a standstill the greater part of eftir einum ári, sum í fjør. Hetta má sigast at vera ein 2005 it must be a clear proof that the consumer has greið váttan um, at brúkarin hevur tikið væl ímóti hesum received the initiatives well. Mail and freight from tiltøkum, tá hugsað verður um, at búskapurin sum heild abroad are on the same level as before while freight var stagnerandi meginpartin av 2005. Postur og frakt úr from the Faroes has decreased. útlondum er eisini á sama støði sum frammanundan, meðan flutningurin úr Føroyum minkaði. The weather interrupted the flying a great deal last year – both winter and summer. Especially poor was one Veðrið tarnaði flogferðsluni nógv í farna árið – bæði period in July with thick fog for 2,5 days. This is a very vetur og summar. Serliga ringt var tað eina tørnið í juli bad situation to end up in because so many people are mánaði, tá hann køvdi av í mjørka í hálvt triðja put in wait position in different places. When the services samdøgur. Hetta er sera ring støða at koma í, tí so nógv were running again approximately 2000 people were fólk koma í bíðistøðu ymsastaðni. Tá gongd kom á aftur waiting in different places. More than 1000 of them were flúgvingina bíðaðu eini 2.000 fólk eftir farti ymsastaðni in the Faroe Islands. One could call it a state of frá. Av teimum vóru fleiri enn 1.000 í Føroyum. Talan er emergency and therefore both the company and næstan um eina undantaksstøðu, og tí eiga bæði felagið authorities should address the issue to see what steps og myndugleikar at taka upp spurningin, um hvørji tiltøk should be taken to reduce the effect of fog kunnu setast í verk til tess at minka ampan av mjørkaveðri. Price of fuel was climbing into the stratosphere in 2005, which obviously hit air traffic hard. Unfortunately the Prísurin á brennievni fór á himmalferð í 2005 og rakar prices seem to continue being on a higher level than has hetta sjálvsagt meint í flogferðsluni. Tíverri tykist tað been seen before and as a result the extra charge will not sum at prísurin framhaldandi fer at halda sær á einum be removed for the time being. munandi hægri støði, enn vit hava sæð fyrr. Tað hevur við sær, at serliga eykagjaldi ikki verður tikið av fyribils. Production Framleiðslan All in all the aircrafts were in the air 7.961 hours Samanlagt vóru flogførini á flogi í 7.961 tímar móti compared to 4.893 the year before. Corresponding to an 4.893 árið fyri. Hetta svarar til ein vøkstur upp á 3.068 increase of 3.068 hours or by 63%. Scheduled flights tímar ella 63 %. Rutuflúgvingin vaks við 2.063 tímum úr increased by 2.063 hours from 3.621 hours to 5.684 3.621 tímum upp í 5.684 tímar. Flúgving fyri onnur – ella hours. Flying for others – or chartered flights – leiguflogfør – vaks lutfalsliga meiri. Tímatalið vaks úr increased comparatively more. The number of hours 1.272 uppí 2.277 tímar – tað er ein vøkstur upp á 79 %. increased from 1.272 to 2.277 hours – which is a 79% increase. Rutuflúgvingin stóð fyri 75 % av framleiðsluni í 2004, men hesin parturin minkaði til 71% í 2005. Hinvegin Scheduled flights stood for 75% of the production in vaks charter og onnur leiguflúgving úr 25% uppí 29% av 2004, however this part decreased in 2005 to 71%. On samlaðu framleiðsluni. the other hand, charter and other chartered flights had an increase from 25% to 29% of the total production. Tyrlurnar vóru á flogi í 930 tímar í 2005, sum eru 140 tímar fleiri enn árið fyri. Harafturat stóð The helicopters were 930 hours in the air in 2005, which bjargingarmanningin og tyrlan tilbúgvin at fara á flog is an increase of 140 hours compared to the year before. hvønn einasta dag í árinum alt samdøgrið. In addition the rescue crew and the helicopter were on standby to take off 24 hours every day all last year.

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 4 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

Talið av ferðafólkum vaks í nærum sama mun sum tímaframleiðslan. Sløk 248.000 ferðafólk sótu í Number of passengers increased to the same extent last flogførum og tyrlum hjá felagnum í fjør, og tað svarar til year as hour production. 248.000 passengers were ein vøkstur uppá 68 % - ella umleið 100.000 ferðafólk seated in the company’s aircrafts and helicopters last fleiri - sammett við árið fyri. year corresponding to a growth of 68% - or approximately 100.000 more passengers –compared with Viðlíkahaldsstøðin í Keypmannahavn, sum tekur sær av last year. øllum vanligum viðlíkahaldi í samband við ”turn-around” og ”night-stop” í Keypmannahavn, hevur roynst væl. The maintenance station in Copenhagen dealing with all Hetta er í løtuni einasti veitari í floghavnini í regular maintenance in connection with „turn-around“ Keypmannhavn, við servitan innan BAe 146 og Avro RJ and „night-stop“ in Copenhagen has been successful. flogfaratypurnar. Currently this is the only supplier specialized in BAe 146 and Avro RJ aircrafts in Copenhagen Airport.

Starvsfólkaviðurskifti Employees relation Vaksandi framleiðsla krevur fleiri hendur, og talið av ársverkum vaks við umleið 40 úr 111 upp í 152 ársverk. Increasing production requires more hands and the Flestu ársverkini eru millum tey, sum manna flogførini number of man years grew with approximately 40 from og tillagingar verða eisini gjørdar í organisatiónini til tess 111 to 152 man-years. Most full year equivalents are at ganga nýggjum avbjóðingum á møti. Í vetur er settur members of the crew and adjustments are also carried ein starvsfólkaleiðari og meiri orka er sett til at leggja til out in the organisation to embrace new challenges. A rættis og umsita framleiðsluna á fastveingjaðum human resource manager has been employed this winter flogførum. and more energy has been put into organizing and administrating the production of fixed-wing aircraft. Beinleiðis útreiðslurnar til starvsfólkakostnað vuksu úr 41.5 milliónum upp í 57 milliónir krónur. Direct costs for staff expenditure increased from 41.5 million dkk to 57 million dkk.

Rutuflúgving Scheduled Flights Á rutuflogførunum vaks ferðafólkatalið tilsamans við 54.000 ferðafólkum úr 117.000 upp í 170.000 ferðafólk. The number of passengers on scheduled flights increased with 54.000 passengers from 117.000 to 170.000 passengers.

Danmark Denmark Ferðafólkatalið á farleiðunum til Danmarkar vaks við The number of passenger on routes to Denmark 56,5 % úr sløkum 96.000 upp í sløk 150.000 ferðafólk. increased by 56% from barely 96.000 to barely 150.000 Tað eru tríggjar høvuðsorsøkir til hendan vøkstur. Hin passengers. Three main reasons caused this increase. fyrsta, at felagið var stórt sæð einsamalt um at røkja Firstly, the company by and large single handed flúgvingina til Danmarkar í 2005, hin næsta, at samlaða operated the flying to Denmark in 2005, secondly, the talið av ferðandi ímillum Føroyar og Keypmannahavn total number of passengers between Faroes and vaks munandi og hin triðja, at felagið fór undir flúgving Copenhagen increased considerably and thirdly, the til Aalborg í summarhálvuni og fekk góða undirtøku har. company launched a service to Aalborg during the summer half which was a success there. Talið av fráferðum millum Føroyar og Danmark hevur ongantíð verið so stórt sum í fjør. Hetta hevði eisini við The number of services between Faroes and Denmark sær, at útboðið var størri og nýtslan av setrum (load has never been as high as it was last year. This lead to factor) minni, eins og meðalinntøkan fall nakað orsakað an increase of supply and a decrease in load factor as av nýggju prísskipanini. well as the medium income dropped to some extent due to the new price system. Á vári í fjør var ferðaætlanin løgd um, so fyrsta flogfarið fer úr Føroyum tíðliga á morgni og seinasta flogfarið In spring last year the timetable was rearranged such kemur heim á kvøldi. Hetta átak var serliga væl móttikið that the first plane from the Faroes departures early in millum teirra sum ferðast í starvsørindum, tí nú ber til at the morning and the last plane arrives in the evening. stytta tænastuferðina við einum ella tveimum døgum. This campaign was especially well received by Tey sum ikki røkka hesi flogførini kunnu ístaðin nýta passengers travelling on business because it is now fráferðirnar mitt á degi. Tað vóru hvønn einasta dag possible to shorten the business trip with one or two minst tvær fráferðir um dagin til Keypmannahavn, og á days. Passengers who are not able to make these planes hásumri upp til 5 fráferðir um dagin til Danmarkar. may use the departures in the middle of the day. At least two departures are every day to Copenhagen and in high summer up to 5 departures a day to Copenhagen.

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 5 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

Iceland Ísland The number of passengers on the service to Iceland Talið av ferðafólki á Íslandsleiðini vaks við 14 % upp í increased by 14% to 12.300 passengers. Number of 12.300 ferðafólk. Ferðafólkatalið millum Føroyar og passengers between Faroes and Iceland is continuously Ísland veksur støðugt og roknað verður við uppaftur increasing and even larger increase would be expected størri vøkstri í 2006. Íslendingar og føroyingar hava in 2006. Icelandic and Faroese have cooperated in flying samstarvað um flúgving í meiri enn 10 ár, og hetta for more than 10 years and the cooperation continues. samstarv heldur fram. Farleiðin millum Føroyar og Ísland The service between Faroes and Iceland is organized as er skipað sum samflúgving (code-share), so bæði feløgini code-sharing both companies sell tickets in own name to selja ferðaseðlar í egnum navni til sama flogfar. the same plane. In the summer 2005 the Faroese Summarið 2005 fleyg føroyska felagið regluliga fyri Company had regular services to Narsarsuaq and Nuuk íslendska felagið til Narsarsuaq og Nuuk í Grønlandi og in Greenland for the Icelandic company. This hetta samstarv heldur fram í 2006. Saman við ódýrum cooperation continues in 2006. Inexpensive fees for gjøldum fyri nýtslu av íslendska loftrúminum og lágum usage of Icelandic airspace and low travelling fees ferðaavgjøldum, munar samstarvið væl, so lønandi should be sufficient to sustain a profitable route. rakstur fæst á hesi farleiðini. UK Bretland The number of passenger on the services between UK Ferðafólkatalið á farleiðunum millum Bretlands og and Faroes decreased below 7.000 passengers in 2005. Føroya minkaði niðurum 7.000 ferðafólk í 2005. Steðgur The route to Aberdeen was down a greater part of the var í flúgvingini til Aberdeen ein stóran part av vetrinum. winter. Still, prospects are for turning the course in Útlit eru kortini fyri at venda gongdini í 2006, síðani 2006, because the company got the right to launch a felagið fekk rættindi at flúgva eina innanríkisleið í domestic route in the UK between Shetland and London. Bretlandi millum Hetland og London. Hugsanin er at The intention is to combine the route from Faroes to samskipa rutuna úr Føroyum til London umvegis London via Shetland and Shetland has shown great Hetland, og áhugin er stórur fyri hesum í Hetlandi. interest in this.

Noreg Norway Ferðafólkatalið á Noregsleiðini er eisini vaksandi, og The number of passengers on the route to Norway is also kemst hetta serliga av flúgvingini millum Føroyar og increasing mainly due to the services between Faroes Stavanger, sum hevur tikið seg upp í samband við and Stavanger resulting from the flying in Norway. The flúgvingina í Noregi. Vøksturin í ferðafólkatalinum er increase of passengers is not great but the aircraft shall ikki stórur, men flogfarið skal kortini í positión í be in position in Stavanger and the route has benefited Stavanger, og farleiðin er millum annað komin teimum among others the Faroese who work in Hammerfest and føroyingunum væl við, sum arbeiða í Hammerfest og Molde in connection with the Snøhvitt and Ormen Lange Molde í samband við Snøhvitt og Ormen Lange projects. verkætlaninar. Charter and chartered airplanes Charter og leiguflúgving Charter and chartered airplanes were equally Charter og leiguflogferðir vóru javnt býttar um alt árið. distributed throughout the year. Total number of hours Samlaða tímatalið øktist við 1.005 tímum - úr 1.272 was increased with 1.005 hours – from 1.272 hours the tímum árið fyri og upp til 2.277 tímar í 2005– og tað year before to 2.277 hours in 2005 – corresponding to a svarar til ein vøkstur upp á 79 %. growth by 79%.

Flúgvingin við leiguflogførum kann í høvuðsheitum Flights in connection with chartered airplanes can in býtast sundur millum langtíðar leigusáttmálar fyri feløg outline be divided into long time lease contracts with innan- og uttanfyri ferðavinnuna, flúgving fyri onnur companies in and outside the tourist industry, flying for flogfeløg og ad hoc ella einstakir túrar. other airline companies and ad hoc or individual trips.

Størsti sáttmálarnir eru við Aker Stord. Upprunaliga var The largest contracts are with Aker Stord. The intention talan um at flúgva við arbeiðsfólki til Snøhvitt was originally to fly workers to the Snøvitt project in verkætlanina í Norðurnoregi, men uppaftur ein sáttmáli North Norway when yet another contract was concluded var gjørdur við Aker Stord um flutning av fólki til Ormen with Aker Stord about transporting people to the Ormen Lange verkætlanina í Molde. Flúgvingin í Noregi fór Lange project in Molde. Flying in Norway was varisliga í gongd í apríl mánaði í 2004 og er støðugt cautiously initiated in April 2004 and has continuously vaksin síðani. Flúgvingin heldur fram til út móti sumri been growing since. The service will continue until 2007. summer 2007.

Felagið royndi seg eisini við charterflúgvingum fyri The company has also entered the charter market túroperatørar úr Billund og suðureftir. Hetta samstarv servicing tour operators from Billund and southwards. heldur fram og verður víðkað í 2006. This cooperation continues and will be expanded in 2006. Harumframt hevur felagið staðið fyri nógvun einstøkum og smærri charteruppgávum. In addition the company has arranged several individual

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 6 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

and minor charter assignments.

Helicopter services Tyrluflúgving The helicopters were in operation for 930 hours in 2005 Tyrlurnar vóru 930 tímar á flogi í 2005 móti 789 tímum against 789 hours the year before corresponding to a árið fyri og tað svarar til ein vøkstur uppá 18%. growth of 18%.

Nýggjur sáttmáli var skrivaður við Strandferðsluna um A new contract was concluded with SSL flúgving til útoyggjarnar. Sambært nýggja sáttmálanum (Strandferðsluna) about routes to the outlying islands. skal túratalið økjast rættiliga fitt, so flogið verður fýra According to the new agreement the number of trips dagar um vikuna summarhálvuna í mun til tríggjar ferðir shall be increased quite considerably with a service four um vikuna frammanundan. Økingin í rutuflúgvingini sást days a week during the summer half against three times longu aftur í tølunum frá 2005. a week before. The increase in the route schedule was already reflected in the figures for 2005. Leiti- og bjargingartænastan stóð á varðhaldi hvønn dag í árinum 24 tímar um samdøgrið. Fýra mans eru á hvørjari Search and life-saving service was on stand-by 24 hours vakt. Skipari, stýrimaður, bjargingarmaður og ein a day every day last year with 4 men on each shift: a mekanikari, sum eisini passar hoistina (kranan). captain, an officer, a rescues and a mechanic who also looks after the hoist. Tyrlan var útkallað til ymsar bjargingaruppgávur og sjúkraflutning 33 ferðir í 2005. The helicopter was called to participate in search and rescue tasks and transport of patients 33 times in 2005. Lítið flutningsarbeiði var innan alivinnuna og heldur ikki nakað serligt innan byggivinnuna. Kortini var nakað av Little transport activity was in sea farming and not much frálandaflutningi til seismisk skip. Sum heild var was in building trade either. Still some activity was in tyrluaktiviteturin kortini lítil í 2005, og gav tyrluraksturin connection with offshore transport to seismic ships. In hall í fjør. general the helicopter activities were insignificant in 2005 and the helicopter operation came out with a deficit last year.

Future Framtíðin The activity will continue to grow in 2006 and the total Virksemið økist framhaldandi í 2006, og samlaða talið av number of the aircraft’s flying hours will be increased by flogtímum við flogførunum fer at vaksa við umleið 25 – 25 – 30% to a little more than 10.000 hours. The number 30 % upp í góðar 10.000 tímar. Starvsfólkalið verður tí of staff will be increased and the crowd of people will be víðkað, so fjøldin av fólki telur um 200 fólk, tá mest numbering up to 200 at the busiest time this coming stendur á komandi summar. Felagið hevur eisini gjørt summer. The company has entered into a preliminary eina fyribils avtalu við eitt bretskt/canadiskt felag um at agreement with a British/Canadian company about leiga eitt flogfar afturat, sum skal verða til at taka, tá leasing one more aircraft, which shall be disposable mest er at gera. Hetta verður sætta flogfarið í flotanum. during the busiest times. This will be the sixth aircraft in the fleet. Atlantic Airways fekk eina stóra avbjóðing, tá kappingarneytin gavst á Danmarkarleiðini, tí øll ábyrgdin Atlantic Airways faced a great challenge when the fyri loftvegis flutningi hvíldi nú á felagnum. Hesari competitor stopped flying the Denmark route because all avbjóðing tóku vit av, og hava nú innrættað felagið eftir responsibilities for freight by air rested with the nýggja mynstrinum. company. We took up the challenge and the company has now been adjusted to the new pattern. Men tað verður ikki uttan kapping frameftir, tí ein nýggjur kappingarneyti hevur boðað frá, at tey fara undir We will no be left with no challenges in the future flúgving til Keypmannahavnar. Hesa avbjóðing tekur because a new competitor has announced that they will felagið eisini ímóti. Kapping hevur verið á hesi farleið launch regular routes to Copenhagen. The company will stórt sæð øll árini, so felagið kennir seg brynjað til also take this challenge up. There has been competition framhaldandi kapping. on this route all the time more or less and the company is prepared to continue competition. Í 2005 rindaði felagið umleið 15 milliónir krónur í ymsum gjøldum til Vága Floghavn. Hetta røkkur til at In 2005 the company paid 15 million dkk in fees to Vagar gjalda fyri meginpartinum av rakstrinum á flogvøllinum. Airport, which should be enough to cover the greater Tí eru vit ikki nøgd við, at felagið ikki hevur fingið síni part of running the airfield. Based on this we are not ynski uppfylt um betri umstøður til vaksandi satisfied that our wish for improved conditions for the starvsfólkaliðið og betri umstøður at avgreiða growing number of staff and improved conditions to ferðafólkini. serve the passengers has not been granted.

Til tess at mótvirka sveiggjunum í føroyska búskapinum, In order to counteract the volatile Faroese economy the

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 7 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752 arbeiðir felagið áhaldandi við at fjøltátta company continues to work towards getting a diversified búskapargrundarlagið, so tað fær fleiri bein at standa á. Í economic base. In 2006 agreements were reached with 2006 vóru gjørdar avtalur við fleiri túroperatørar í tour operators in Denmark about routes southwards both Danmark um flúgving suðureftir bæði á vetri og sumri. winter and summer. Also the first attempt to establish a Somuleiðis er fyrsta royndin við flúgving til og úr route to and form Shetland has been launched. The Hetlandi sett í verk. Felagið arbeiðir eisini við øðrum company works with other projects about cooperation ætlanum um samstarv innan ymisk øki, ið hava samband within various fields connected to flying. við flúgving.

Extension of airstrip, liberalization and privatization Longri flogvøll, liberalisering og privatisering An extended airstrip in Vagar would give more aircrafts Longdur flogvøllur í Vágum fer at hava við sær, at fleiri to choose from which can be used in the Faroe route. flogfør verða at velja ímillum, sum kunnu brúkast til The company considers investing in a larger aircraft to flúgving uppá Føroyar. Tí umhugsar felagið at gera íløgu operate the main route to Denmark with fewer í størri flogfar, sum kann røkja høvuðsfarleiðina til departures and improved financial profit. In cooperation Danmarkar við færri fráferðum og betri búskaparligum with Airbus a test with an Airbus 319 was carried out on úrslitið. Í samstarvi við Airbus, varð ein roynd gjørd við the current airstrip, which went well. On an extended einum Airbus 319 á verðandi flogvølli og gekk hon væl. airstrip this aircraft would take more freight. Other Hetta flogfarið hevði lastað meiri á einum longdum aircrafts are also being examined. flogvølli. Onnur flogfør verða eisini kannaði. The Faroese Government has stated that Faroes will be Landsstýrið hevur boðað frá, at Føroyar gerast partur av part of a free competition in European airspace by the fríu kappingini í europeiskum loftrúmi frá árskiftinum turn of the year 2006/07. Our assessment is that both 2006/07. Tað er okkara meting, at bæði felagið og company and authorities ought to be well prepared for myndugleikarnir eiga at fyrireika seg væl til tær the fundamental changes deriving from joining the grundleggjandi broytingar, sum standast av, at Føroyar liberal air traffic in Europe for gaining most from our gerast partur av liberalu loftferðsluni í Europa, so vit fáa advantages and protect us from any disadvantage. sum mest burturúr fyrimunum og verja okkum móti vansunum. Board and management are glad that Atlantic Airways’ privatizing process has been initiated. By request from Nevnd og leiðsla eru fegin um, at gongd er komin á the Ministry of Industry the company has been málið um at einskilja Atlantic Airways. Eftir áheitan frá represented in the group who have prepared the draft Vinnumálaráðnum hevur felagið havt umboðan í bill, which has been passed by the parliament. Board and embætisbólkinum, sum hevur fyrireika lógaruppskotið, ið management hope that the privatizing process will be er samtykt av løgtinginum. Nevnd og stjórn vóna, at dealt with as soon as possible aiming at a final einskiljingin av Atlansflog verður avgreidd skjótast clarification by year-end 2006 at the latest. It is of great gjørligt og at ein endalig avkláring fæst á hesum máli í importance for the company to have the matter clarified seinasta lagi innan árslok 2006. Tað hevur stóran týdning because the privatizing process can to some extent fyri felagið at fáa eina endaliga avkláring av hesum máli, obstruct the daily operations of the company. tí einskiljingartilgongdin kann í ávísan mun darva dagliga raksturin av felagnum. The challenges lying ahead are not any less now than they were a year ago. The decision to initiate the Avbjóðingarnar, sum standa fyri framman, eru ikki minni privatizing process has been taken and shall be carried nú enn tær vóru fyri einum ári síðani. Avgerð er tikin um out. The airstrip will be enhanced before long and in at fara undir einskiljingina, og hon skal nú fremjast í 2007 we will be part of a liberal European air space. verki. Flogvøllurin verður longdur í næstum, og í 2007 The company is facing competition from a new player gerast vit partur av frælsa europeiska loftrúminum. and has to defend its business conditions in the Faroes Felagið skal taka upp kapping við nýggjan while at the same time working up new assignments kappingarneyta og verja sína marknaðarstøðu í Føroyum, abroad. meðan hildið verður á at fáa til vega nýggjar arbeiðsuppgávur uttanfyri landoddarnar.

Events subsequent to the financial year Hendingar eftir roknskaparlok No subsequent events has incurred from the date of the Frá degnum fyri fíggjarstøðuni til í dag er einki hent, sum balance sheet and to today that might affect the true and ávirkar metingina av ársroknskapinum. fair view of the annual accounts.

Ownership Eigaraviðurskifti Shareholders recorded according to the Companies Act, Eigarar skrásettir í yvirlitinum samb. § 28 b stk. 4 í ' 28 b, section 4:

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 8 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752 partafelagslógini: The Government of the Faroe Islands. Landskassin, v/Føroya Landsstýri, 100 Tórshavn

Allocation of Profit/loss Býti av ársúrsliti Recommendation regarding allocation of net profit/loss Uppskot um býti av ársúrslitinum framgongur av is disclosed in conjunction to the income statement. rakstrarroknskapinum.

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 9 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

ROKNSKAPARÁTEKNING MANAGEMENT’S REPORT

Ársroknskapurin, sum er greiddur av okkum, er settur The Financial Statement which is prepared by us is set upp samsvarandi føroyskari lóggávu. Ársroknskapurin up in accordance with provisions of Faroese legislation. gevur eftir okkara tykki eina rættvísandi mynd av The financial statements gives a true and fair view of the felagsins ogn og skuld, fíggjarligu støðu og úrsliti. company’s assets and liabilities, financial position and profit/loss for the concerning period.

Sørvágur, hin 4. mai -2006 / Sørvágur4. May 2006

Stjórn:

Magni Arge Marius Davidsen Forstjóri / Managing director Fíggjarstjóri / Finance director

Nevnd:

Christian Andreasen Erling í Liða Petur J. Eiriksson Formaður / Chairman næstformaður / vice-chairman

Heini Davidsen Annika Jespersen

Ársroknskapurin er lagdur fram og góðtikin á aðalfundi felagsins. The annual accounts have been presented and accepted at the General Assembly.

Sørvágur, hin / 2006

Fundarstjóri / Chairman of the General Assembly

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 10 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

GRANNSKOÐANARÁTEKNING AUDITOR’S REPORT

Vit hava grannskoðað ársroknskapin, greiddur av We have audited the financial statements of the leiðsluni, fyri P/F Atlantic Airways fyri árið 2005. company, prepared by the management and the board of directors of P/F Atlantic Airways for 2005. Um grannskoðanina Í samsvari við alment viðurkendar grannskoðanarreglur er Basis of opinion grannskoðanin skipað og framd við tí endamáli at fáa eina We have planned and concluded our audit in grundaða sannføring um, at tað ikki eru týðandi feilir ella accordance with generally accepted auditing vanta týðandi upplýsingar í ársroknskapinum. Undir standards as applied in the Faroe Islands to obtain grannskoðanini hava vit, eftir meting um týdning og reasonable assurance that the financial statements risiko, kannað grundarlag og prógv fyri upphæddum og of the company are free of material errors and øðrum upplýsingum í ársroknskapinum. Vit hava omissions. Based on an evaluation of materiality samstundis tikið støðu til roknskaparháttin og and risk, we have, during the audit, tested the basis roknskaparligu metingarnar, sum leiðslan hevur gjørt, eins and documentation for the amounts and disclosure og vit hava mett, um upplýsingarnar í roknskapinum sum in the financial statements. Our audit includes an heild eru nøktandi. assessment of the accounting policies applied and the accounting estimates made by the management Grannskoðanin hevur ikki givið orsøk til fyrivarni. and board of directors. In addition, we have evaluated the overall adequacy of the presentation Niðurstøða in the financial statements of the company. Tað er okkara fatan, at ársroknskapurin er greiddur í samsvari við roknskaparkrøv í lóggávuni, og at hann Our audit has not resulted in any qualifications. gevur eina rættvísandi mynd av felagsins ogn og skuld, fíggjarligu støðu og úrsliti. Conclusion In our opinion, the financial statements of the company have been prepared in accordance with the Tórshavn, hin 4. mai 2006 accounting provisions of Faroese legislation and gives a true and fair view of the company’s assets and liabilities, financial position and profit/loss for the concerning period.

Tórshavn, 4. May 2006

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

Klaus Rasmussen Jóannes Olsen statsaut. revisor / skrás. revisor State Authorized Public Accountant Registered Public Accountant

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 11 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

NÝTTUR ROKNSKAPARHÁTTUR ACCOUNTING PRINCIPLES

Alment General Ársroknskapurin er greiddur í samsvar við árs- The Financial Statement has been prepared in roknskaparlógina, og tann nýtti roknskaparhátturin er accordance with provisions of the Faroese annual óbroyttur í mun til undanfarna ár. Roknskaparárið er accounts act. Generally accepted accounting principles álmanakkaárið. are applied on a basis consistent with that of the preceding year. The financial period endures from 1 January to 31 December. Umrokning av fremmandum gjaldoyra Flytingar í útlendskum gjaldoyra eru í árinum roknaðar um til kursin dagin, flytingin er framd. Conversion of foreign currency Expenses in foreign currencies are recorded at the Áogn, skuld og aðrir postar í útlendskum gjaldoyra, sum official exchange rates applicable at the date of payment. ikki eru avroknaðir við árslok, verða roknaðir um til kursin við árslok. All balances in foreign currencies are converted into DKK at the official exchange rates applicable on the last Staðfestar og ikki-staðfestar gjaldoyrabroytingar eru day of the accounting year. tiknar við í rakstrinum undir “fíggjarligir postar.” Realized as well as non-realized exchange fluctuations are recorded in the profit and loss account. Nettosøla Nettosølan er søla av avhendaðum ferðaseðlum í árinum, leigutúrum og søla umborð á flogfarinum. Harumframt Net revenue eru inntøkur av tyrluni við í søluni. Net sales cover sales of airline tickets during the year, rental income of the aircraft and sales on board the aircraft. Furthermore, income from helicopter activities Virðisáseting av materiellari støðisogn og is included in net sales. avskrivingum Materiell støðisogn er virðisásett til útveganarvirði við frádrátti av gjørdum avskrivingum. Tangible fixed assets Tangible fixed assets are assessed at the procurement Avskrivingar verða gjørdar við eins stórum upphæddum, price, with the deduction of previous depreciations. grundaðar á eina meting av brúkstíðini av ognunum. Depreciations are made with identical yearly amounts, Flogfør ...... 10%-20% based on an assessment of the period of use for the Tyrlan ...... 6% assets. Eykalutir ...... 6% Rakstrargøgn, innbúgv ...... 10 - 33% Aircrafts ...... 10%-20% Høvuðsviðlíkahaldsútreiðslur ...... 8 - 25% Helicopters ...... 6% Sethús ...... 5% Spareparts ...... 6% Operating equipment ...... 10 - 33% Avskrivingin uppá flogførini verður roknað við 5 mió. í Primary maintenance expenses ...... 8 - 25% restvirði. Building ...... 5%

Tyrlan verður avskrivað yvir 16 ár. The depreciation on the aircrafts is calculated with 5 mill. DKK in scrap value for each aircraft. Høvuðsviðlíkahaldsútreiðslur verða avskrivaðar yvir tíðarskeiðið fram til næsta høvuðsviðlíkahald. The helicopter is depreciated over a period of 16 years. Høvuðsviðlíkahaldsútreiðslur eru bókaðar saman við flogførum í ársroknskapinum. Primary maintenance expences are depreciated over the period of time until the next primary maintenance. Primary maintenance expensenses are posted with the Onnur virðisbrøv og kapitalpartar aircrafts in the accounts. Onnur virðisbrøv og kapitalpartar eru virðisásett til útveganarvirðið. Shares and bonds Shares and bonds are recorded at acquisition value.

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 12 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

Stocks Vørugoymslur Stocks are stated at purchase price based on the first-in Vørugoymslur verða virðisásettar til útveganar- ella first-out principle, or at the lower of net market value. kostvirði, gjørt upp eftir FIFO-meginregluni, ella til nettorealisatiónsvirði, har hetta er lægri. Depreciation is made concerning obsolete stock, inclu- ding goods with slow transferability. Niðurskriving verður gjørd fyri ókurantar vørur, herundir eisini vørur, ið eru seint umsetiligar. Receivables Receivables are assessed at nominal value less provisions for losses. The amounts are individually Áogn assessed. Skuldarar verða virðisásettir við frádrátti av møguligum tapsvanda, grundað á eina meting av hvørjum einstøkum Debt to mortgage holders skuldara. Debt to mortgage holders has been entered into the annual accounts at acquisition value. The debt has hence been assessed to residual value. The expenditure Skuld til veðhavarar connecting to the raising of the loan is posted in the year Skuld til veðhavarar er tikin upp til kostprís, tá skuldin er of the raising. stovnað. Síðani er skuldin gjørd upp til restvirði. Útreiðslur í samband við upptøku av láninum eru út- Other debts All other debt has been posted at residual value as of reiðsluførdar í upptøkuárinum, meðan møgulig kurstap st av lánsbrøvum verða útreiðsluførd samsvarandi Dec. 31 . avdráttartíðini. Tax Actual tax is calculated as 20% of pre-tax profit adjusted Onnur skuld for non-taxable incomes and expenditures. Øll onnur skuld er tikin upp til restvirði pr. 31. desember. The taxes include both actual tax and deferred tax.

Skattur Deferred tax is calculated as 18% of timing differences Skattur av ársúrslitinum er roknaður við 20% við støði í between the annual accounts and the tax accounting úrsliti áðrenn skatt, tillagað fyri ikki skattskyldugar by the Faroese tax administration. inntøkur og útreiðslur.

Útreiðsluførdi skatturin fevnir um aktuellan skatt av skattskylduga ársúrslitinum og broyting í útsettum skatti.

Útsettur skattur verður roknaður við 18% av teimum tíðarbundnu frávikunum, sum stava frá, at inntøkur og útreiðslur ikki verða tiknar við í rakstrarroknskapinum og skattskyldugu inntøkuna í sama tíðarskeiði.

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 13 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

RAKSTRARROKNSKAPUR / PROFIT AND LOSS ACCOUNT

Nota/ Note 2005 2004

Nettosøla / Net sales ...... 1 379.586.132 234.364.808

Flúgvikostnaður / Flight expenses ...... -262.839.915 -143.908.263 Starvsfólkakostnaður / Personnel expences ...... 2 -57.539.369 -41.550.932 Avskrivingar / Deprecations ...... 4 -34.158.857 -28.200.800

Úrslit áðrenn fíggjarligar postar / Result before financial items ... 25.047.991 20.704.813

Rentuinntøka / Financial income ...... 1.081.846 752.511 Rentuútreiðslur / Financial expenses ...... -2.507.824 -3.743.356

Úrslit áðrenn skatt / Result before taxes...... 23.622.013 17.713.968

Skattur / Tax ...... 3 -2.888.277 -3.542.794

Ársúrslit / Profit ...... 20.733.736 14.171.174

Býti av ársúrsliti / Allocation of profit/loss Hin tøka upphæddin er / The amount at disposal is: Flutt fram frá undanfarnum árum / Retained earnings opening ...... 51.145.828 Ársúrslit / Result for the period ...... 20.733.736 Íalt / Total ...... 71.879.564

Verður skotið upp av nevndini at býta soleiðis / Proposal from the board of allocation: Vinningsbýti til partaeigarar / Proposed dividend to shareholders ... 10.000.000 At flyta fram til næsta ár / To carry forward to next period ...... 61.879.564 Býtt / Allocated ...... 71.879.564

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 14 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

FÍGGJARSTØÐA PR. 31. DESEMBER / BALANCE SHEET AS AT 31 DECEMBER

AKTIV / ASSETS Nota/ Note 2005 2004

Flogfør og viðlíkahald / Aircrafts and maintenance ...... 165.921.213 125.002.951 Eykalutir / Spare parts ...... 4.369.279 4.632.717 Rakstrargøgn / Operating equipment ...... 5.506.958 2.587.758 Sethús / Residence building ...... 536.545 596.494 Materiell støðisogn íalt / Fixed assets ...... 4 176.333.995 132.819.920

STØÐISOGN ÍALT / TOTAL FIXED ASSETS ...... 176.333.995 132.819.920

Nýtsluvøra / Consumables ...... 1.251.934 1.384.462 Nýtsluvøra íalt / Total consumables ...... 1.251.934 1.384.462

Vøru- og tænastuáogn / Trade receivables ...... 37.662.998 19.608.671 Tíðarskeiðsbókingar / Accrued income and deferred expenses ...... 2.539.882 1.346.578 Onnur áogn / Other receivables ...... 4.061.414 5.808.782 Áogn íalt / Total receivables ...... 44.264.294 26.764.031

Onnur virðisbrøv og kapitalpartar / Shares and bonds ...... 1.863.091 1.642.000 Onnur virðisbrøv og kapitalpartar íalt/ Total shares and bonds... 1.863.091 1.642.000

Tøkur peningur / Liquid funds ...... 40.789.045 41.992.306

OGN Í UMFERÐ ÍALT / TOTAL CURRENT ASSETS ...... 88.168.364 71.782.799

AKTIV ÍALT / TOTAL ASSETS ...... 264.502.359 204.602.719

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 15 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

FÍGGJARSTØÐA PR. 31. DESEMBER / BALANCE SHEET AS AT 31 DECEMBER

PASSIV / LIABILITIES Nota/ Note 2005 2004

Partapeningur / Share capital ...... 75.000.000 75.000.000 Flutt úrslit / Retained earnings ...... 61.879.564 51.145.828 EGINOGN ÍALT / TOTAL EQUITY ...... 5 136.879.564 126.145.828

Sett av til útsettan skatt / Provisions for deferred taxes ...... 3 16.525.130 13.636.853 AVSETINGAR ÍALT / TOTAL PROVISIONS ...... 16.525.130 13.636.853

Veðlán / Mortgage loans ...... 64.672.646 41.356.789 Vøru- og tænastuskuld / Trade payables ...... 33.311.056 18.701.956 Tíðaravmarkingar / Accruals and deferred income ...... 3.113.963 2.761.293 Skyldugt vinningsbýti / Proposed dividend ...... 10.000.000 2.000.000 STUTT- OG LANGFREISTAÐ SKULD ÍALT / TOTAL 6 SHORT- AND LONG-THERM DEBT ...... 111.097.665 64.820.038

PASSIV ÍALT / TOTAL LIABILITIES ...... 264.502.359 204.602.719

Veðsetingar og møguligar skyldur v.m. / Mortgaging and 7 contingent liabilities etc.

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 16 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

KAPITALFRÁGREIÐING / STATEMENT OF CASH FLOW

(Kr. 1.000) 2005 2004

Úrslit áðrenn fíggjarligar postar / Result before financial income ...... 25.048 20.705 Avskrivingar / Depreciation ...... 34.159 28.201 59.207 48.906

Broyting í umferðarfæi, burturleggingum og stuttfreistaðari skuld / Change in current assets, provisions and short-term liabilities: +/- vøru- og tænastuáogn / debtors ...... -17.500 -19.597 +/- goymsla / stock...... 133 -442 +/- onnur virðisbrøv og kapitalpartar / shares and bonds ...... -221 -347 +/- vøru- og tænastuskuld / trade payables ...... 14.608 5.918 +/- onnur skuld og tíðaravmarkingar / other liabilities and accrued 353 691 expenses ...... -2.627 -13.777

Peningastreymur frá rakstri / Cash flow from operating 56.580 35.129 activities ......

Rentuinntøkur/útreiðslur / Interest expenses ...... -1.426 -2.991 Nettoíløgur í útbúnað / Net investment i equipment ...... -77.673 -23.578 Lántøka og avdráttir av lánum (netto) / New loans and repayment 23.316 -9.570 of debt (net) ...... Útgoldið vinningsbýti / Paid dividends ...... -2.000 -1.000 -57.783 -37.139

LIKVIDITETSÚRSLIT / LIQUIDITY SURPLUS...... -1.203 -2.010 Tøkur peningur primo / Liquidity at the beginning of the year...... 41.992 44.002 Tøkur peningur ultimo / Liquidity at the end of the year ...... 40.789 41.992

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 17 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

NOTUR / NOTES

2005 2004

1. Útgreining av ferðafólkatali / Specification of numbers of passengers: Ferðafólk flogfør, ruta / Passengers fixed wing ...... 170.995 116.792 Ferðafólk flogfør, leigutúrar / Passengers fixed wing, charter ...... 70.158 24.383 Ferðafólk flogfør / Passangers fixed wing ...... 241.153 141.175

Ferðafólk tyrlur innanlanda/oljupallar / Passengers by Helicopters, domestic/oilrigs ...... 6.514 5.769 Ferðafólk tilsamans / Total passengers...... 247.667 146.944

Flúgvitímar / Airborne hours: Flogfør, ruta / Airborne hours ...... 5.684 3.621 Flogfør, leigutúrar / Airborne hours, charter ...... 2.277 1.272 Flúgvitímar flogfør / Airborne hours ...... 7.961 4.893

Tyrlur innanlanda/oljupallar / Helicopters domestic/oilrigs ...... 930 789 Flúgvitímar tilsamans / Total airborne hours ...... 8.891 5.682

Uttanlanda inntøka / income overseas: Útflutningsvirði í kr. / Export value in DKK ...... 128.879.477 73.723.478 Útflutningsvirði í % / Export value in % ...... 36% 31%

2. Starvsfólkakostnaður (kr.) / Personnel expenses (DKK) Lønir / Wages and salaries ...... -53.883.306 -38.982.427 Eftirlønargjøld / Pensions ...... -2.871.746 -2.038.114 Gjald til almennar tryggingar / Expenses for social security ...... -784.317 -530.391 -57.539.369 -41.550.932 Herav goldið til stjórn og nevnd / Amounts paid to Management and Board: Stjórn / Management ...... -1.806.501 -1.504.623 Nevnd / Board ...... -330.460 -324.000

Tal av starvsfólki / Number of employees ...... 152 111

3. Skattur (kr.) / Tax (DKK) Broyting av eventualskatti í árinum / Changes in deferred taxes during the period ...... -2.888.277 -3.542.794 Partafelagsskattur / Company tax ...... 0 0 -2.888.277 -3.542.794

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 18 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

NOTUR / NOTES

4. Materiell støðisogn (kr.) / Tangible fixes assets (DKK) Flogfør og viðlíkahald / Eykalutir / Ragstrar- Aircrafts and Operating gøgn / Sethús / maintenance spare parts Equipment Residence Íalt / Total Útveganarvirði primo / Acquisition value as of Jan 1st ... 286.655.661 22.527.338 10.867.364 1.198.985 321.249.348 Tilgongd í árinum / Additions during the year ...... 74.740.669 1.346.247 5.091.727 0 81.178.643 Frágongd í árinum /Disposal during the year ...... -9.570.940 -195.330 -526.974 0 -10.293.244 Útveganarvirðið ultimo / Acquisition value as of Dec 31st. 351.825.390 23.678.255 15.432.117 1.198.985 392.134.747

Av- og niðurskrivingar primo / Depreciations as of Jan 1st ...... -161.652.710 -17.894.622 -8.279.607 -602.491 -188.429.430 Avskrivingar í árinum / Depreciations during the year ..... -30.531.298 -1.425.054 -2.142.556 -59.949 -34.158.857 Avskr. viðv. frágongd í árinum / Depreciations of disposal ...... 6.279.831 10.700 497.004 0 6.787.535 Avskrivingar ultimo / Depreciations as of Dec 31st ...... -185.904.177 -19.308.976 -9.925.159 -662.440 -215.800.752

Bókað virði ultimo / Book value as at Dec 31st 2005 ...... 165.921.213 4.369.279 5.506.958 536.545 176.333.995

Bókað virði primo / Book value as at Dec 31st 2004 ...... 125.002.951 4.632.717 2.587.758 596.494 132.819.920

5. Eginogn (kr.) / Equity (DKK) Partapeningurin kr. 75.000.000 er lutaður sundur í 75 stk. á 1 mió. kr. Partabrøvini eru ikki býtt upp í flokkar / The share capital amounting to DKK 75.000.000 is divided in 75 shares of DKK 1 million each. The shares are not divided in different categories

2005 2004 Flutt úrslit / Retained earning carried forward: Flutt frá undanfarnum árum/ Balance as of Dec 31st ...... 51.145.828 38.974.654 + flutt frá ársúrsliti / retained earnings transferred from the years result ...... 20.733.736 14.171.174 - avsett til vinningsbýti / dividend ...... -10.000.000 -2.000.000 61.879.564 51.145.828

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 19 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 3752

NOTUR / NOTES

6. Stutt- og langfreistað skuld (kr.) / Short- and longterm debt (DKK) Samlað skuld At gjalda At gjalda eftir Samlað skuld 2005 / innan 1 ár / 5 ár / Due for 2004 / Remaining debt Short term debt payment after Remaining Dec 31st 0-1 year 5 years debt Dec 31st 2004

Veðlán / Mortgage debt ...... 64.672.646 7.409.338 28.915.481 41.356.789 Vøru- og tænastuskuld / Trade payables ...... 33.311.056 33.311.056 0 18.701.956 Tíðaravmarkingar / Accrued expenses ...... 3.113.963 3.113.963 0 2.761.293 Skyldugt vinningsbýti / Proposed dividend ..... 10.000.000 10.000.000 0 2.000.000 Stutt- og langfreistað skuld íalt / Total short- and longterm debt ...... 111.097.665 53.834.357 28.915.481 64.820.038

Hetta kann sundurgreinast soleiðis / Specified as follows: Stuttfreistað skuld íalt / Short-term debt ...... 53.834.357 31.272.064 Langfreistað skuld íalt / Long-term debt ...... 57.263.308 33.547.974

7. Veðsetingar og møguligar skyldur v.m. / Mortgaging and contingent liabilities etc.

Flogfør við einum bókaðum virði pr. 31/12-2005 uppá kr. 166 mió. eru veðsett / Aircraft with a book value of DKK 166 mill. are mortgaged

Av tøka peninginum eru 2,4 mió. kr. veðsettar / 2,4 million DKK of the liquid funds have been mortgaged

Tað áhvílur felagnum ein leasingskylda uppá US$ 5.000 um mánaðan fyri leasing av flogfari / The company is obligated to pay a sum of US$ 5.000 per month for the lease of one aircraft

P/F Atlantic Airways – Ársroknskapur fyri 2005 / Annual accounts 2005 Síða 20 Á Glaðsheyggi Box 30 FO-110 Tórshavn RASMUSSEN & WEIHE Tlf (+298) 35 17 00 Statsautoriserað grannskoðarafelag P/F Fax (+298) 35 17 01 Reg. nr. 267 An associated firm of E-mail: [email protected] Http://www.rasmussen.fo

P/F Atlantic Airways FO-380 Sørvágur

Reg. No. 1223

Annual Accounts 2004

without the annual report

Copy

RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

TABLE OF CONTENTS

Page

Summary of Facts about the Company ...... 2

Management's Report ...... 3

Auditor's Report ...... 4

Accounting Principles Applied ...... 5

Profit and Loss Account ...... 6

Balance Sheet as of 31st December ...... 7

Statement of Cash Flow ...... 9

Notes...... 10

C:\Documents and Settings\bardur\Desktop\Puk\Annual accounts 2004 0859r_04eng.doc

P/F Atlantic Airways – Annual Accounts 2004 Page 1 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

SUMMARY OF FACTS ABOUT THE COMPANY

Company

P/F Atlantic Airways, Faroe Islands FO-380 Sørvágur P/F Reg. No. 1223 Domicile: Sørvágur

Board of Directors

Christian Andreasen, chairman Erling í Liða, vice chairman Petur J. Eiriksson Heini Davidsen Annika Jespersen

Management

Magni Arge, managing director Marius Davidsen, finance director

Auditors

Rasmussen & Weihe Statsautoriserað Grannskoðarafelag P/F

P/F Atlantic Airways – Annual Accounts 2004 Page 2 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

MANAGEMENT'S REPORT

The annual accounts are presented to the General Meeting with the recommandation of adoption.

Sørvágur, May 26th 2005

Management:

Magni Arge Marius Davidsen Managing director Finance director

Board:

______Christian Andreasen Erling í Liða, vice chairman Petur J. Eiriksson chairman

Heini Davidsen Annika Jespersen

Approved at general meeting held on / - 2005

Chairman

P/F Atlantic Airways – Annual Accounts 2004 Page 3 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

AUDITOR'S REPORT

The annual accounts are translated directly from the Faroese annual accounts. The company has chosen not to incorporate the annual report in this English translation. We would like to point out that the annual accounts are not complete without the annual report. We have given the official annual accounts for P/F Atlantic Airways 2004 the following report:

We have audited the financial statements of P/F Atlantic Airways prepared by the Management for the year 2004.

Basis of opinion We have planned and conducted our audit in accordance with generally accepted auditing standards to obtain reasonable assurance that the financial statements are free from material misstatements. Based on an evaluation of materiality and risk, we have tested the basis and documentation for the amounts and disclosures in the financial statements. Our audit includes an assessment of the accounting policies applied and the accounting estimates made by the Management. In addition we have evaluated the overall adequacy of the presentation in the financial statements.

Our audit has not resulted in any qualification.

Opinion In our opinion the financial statements have been presented in accordance with the accounting provision of legislation and give a true and fair view of the company's assets and liabilities, financial position and profit for the year.

Tórshavn, May 26th 2005

Rasmussen & Weihe Statsautoriserað grannskoðarafelag P/F

Klaus Rasmussen Jóannes Olsen State Authorized Registered Public Accountant Public Accountant

P/F Atlantic Airways – Annual Accounts 2004 Page 4 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

ACCOUNTING PRINCIPLES APPLIED

General Primary maintenance expences are depreciated over the period of time until the next primary maintenance. The annual accounts have been prepared in Primary maintenance expensenses are posted with the accordance with the requirements of the Faroese aircrafts in the accounts. Annual Accounts Act.

Shares and bonds Conversion of foreign currency Shares are recorded at acquisition value. Bonds are Expenses in foreign currencies are recorded at the recorded at market price. official exchange rates applicable at the date of payment. Stocks All balances in foreign currencies are converted into DKK at the official exchange rates applicable on the Stocks are stated at purchase price based on the first- last day of the accounting year. in first-out principle, or at the lower of net market value. Confirmed as well as non-confirmed exchange fluctuations are recorded in the profit and loss Depreciation is made concerning obsolete stock, account. including goods with slow transferability.

The company does not apply financial methods in order to secure the corresponding value in DKK of Accounts receivable the items in the annual accounts in foreign currencies. Accounts receivable are recorded at nominal value less provisions for losses. The amounts are Net sales individually assessed.

Net sales cover sales of airline tickets during the year and sales on board the aircraft. Furthermore, income Debt to mortgage holders from helicopter activities is included in net sales. Debt to mortgage holders has been entered into the annual accounts at acquisition value. The debt has Tangible fixed assets hence been assessed to residual value. The expenditure connecting to the raising of the loan is Tangible fixed assets are assessed at the procurement posted in the year of the raising. price, with the deduction of previous depreciations.

Depreciations are made with identical yearly Other debts amounts, based on an assessment of the period of use for the assets. All other debt has been posted at residual value as of Dec. 31st. Aircrafts ...... 10-20% Helicopter ...... 6% Spareparts ...... 6% Tax Fixed assets, household ...... 10 - 33% Primary maintenance expenses ...... 8 - 25% Corporate income tax is calculated with 20% based Building ...... 5% on the result before tax adjusted for non taxable income and costs. The tax in the profit and loss The depreciation is calculated with 5 mill. DKK in account consists of current tax on taxable profit and scrap value for each aircraft. adjustment of deferred tax.

The helicopter is depreciated over a period of 16 Provisions for deferred tax are calculated with 20% of years. accrual differences deriving from different accruals concepts applied to the profit and loss account and to taxable income.

P/F Atlantic Airways – Annual Accounts 2004 Page 5 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

PROFIT AND LOSS ACCOUNT

Note 2004 2003

Net sales ...... 1 234.364.808 199.067.900

Flight expenses ...... -143.908.263 -123.405.440 Personnel expenses ...... 2 -41.550.932 -34.927.931 Deprecations ...... 4 -28.200.800 -24.933.428

Results before financial items ...... 20.704.813 15.801.101

Financial items Financial income ...... 752.511 1.226.136 Financial expenses ...... -3.743.356 -4.863.977

Result before taxes ...... 17.713.968 12.163.260

Tax ...... 3 -3.542.794 -2.432.653

Profit ...... 14.171.174 9.730.607

The recommendation from the Board of Directors for distribution of Profit is shown in the Annual report

P/F Atlantic Airways – Annual Accounts 2004 Page 6 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

BALANCE SHEET AS OF 31st DECEMBER

ASSETS Note 2004 2003

Aircrafts ...... 125.002.951 128.463.502 Spare parts ...... 4.632.717 5.454.300 Operating equipment ...... 2.587.758 2.868.423 Residence building ...... 596.494 656.444 FIXED ASSETS ...... 4 132.819.920 137.442.669

TOTAL FIXED ASSETS ...... 132.819.920 137.442.669

Inventory ...... 1.384.462 942.048 Total inventory...... 1.384.462 942.048

Trade receivables ...... 26.764.031 7.166.752 Total accounts receivable ...... 26.764.031 7.166.752

Shares and bonds ...... 1.642.000 1.295.000 Total shares and bonds...... 1.642.000 1.295.000

Liquid funds ...... 41.992.306 44.001.823

TOTAL CURRENT ASSETS ...... 71.782.799 53.405.622

TOTAL ASSETS ...... 204.602.719 190.848.291

P/F Atlantic Airways – Annual Accounts 2004 Page 7 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

BALANCE SHEET AS OF 31st DECEMBER

LIABILITIES Note 2004 2003

Share capital ...... 75.000.000 75.000.000 Retained earnings carried forward ...... 51.145.828 38.974.654 TOTAL SHAREHOLDER’S EQUITY...... 5 126.145.828 113.974.654

Provisions for deferred taxes ...... 13.636.853 10.094.059 TOTAL PROVISIONS ...... 13.636.853 10.094.059

Mortgage loans ...... 41.356.789 50.926.361 Trade payables ...... 18.701.956 12.782.657 Other liabilities ...... 2.761.293 2.070.560 Accrued expenses ...... 2.000.000 1.000.000 TOTAL SHORT- AND LONG-TERM DEBT...... 6 64.820.038 66.779.578

TOTAL LIABILITIES ...... 204.602.719 190.848.291

Mortgaging and contingent liabilities etc ...... 7

P/F Atlantic Airways – Annual Accounts 2004 Page 8 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

STATEMENT OF CASH FLOW (DKK 1.000)

2004 2003

Result before financial items ...... 20.705 15.801 Depreciation ...... 28.201 24.934 48.906 40.735

Change in current assets, provisions and short-term liabilities: +/- debtors ...... -19.597 -1.466 +/- stock ...... -442 285 +/- shares and bonds ...... -347 0 +/- trade payables ...... 5.918 -9761 +/- other liabilities and accrued expenses ...... 691 142 -13.777 -10.800

Cash flow from operating activities ...... 35.129 29.935

Interest expenses ...... -2.991 -3.638 Net investment in equipment ...... -23.578 -2.801 Repayment of debt and new loan ...... -9.570 -49.241 Dividend ...... -1.000 0 -37.139 -55.680

Liquidity surplus ...... -2.010 -25.745 Liquidity at the beginning of the year ...... 44.002 69.747 Liquidity at the end of the year ...... 41.992 44.002

P/F Atlantic Airways – Annual Accounts 2004 Page 9 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

NOTES

2004 2003

1. Netsales, number of passengers: Passengers by airplane, route ...... 116.792 99.583 Passengers by airplane, charter ...... 24.383 10.234 Total number of passengers by airplane...... 141.175 109.817

Passengers helicopter domestic/oilrigs ...... 5.769 5.573 Total passengers ...... 146.944 115.390

Hours in the air: Airplane, route ...... 3.621 3.258 Airplane, charter ...... 1.272 464 Total hours in the air airplanes ...... 4.893 3.722

Helicopter domestic/oilrigs ...... 789 829 Total hours in the air...... 5.682 4.551

Foreign income : Value of export DKK...... 73.723.478 48.414.522 Value of export % ...... 31% 24%

2. Personnel expenses (DKK.) Wages and salaries ...... -38.982.427 -33.014.306 Pensions ...... -2.038.114 -1.553.415 Expenses for social security ...... -530.391 -360.210 -41.550.932 -34.927.931 Amounts paid to Management and Board: Management ...... -904.464 -966.394 Board ...... -324.000 -324.000

Number of employees ...... 111 96

3. Tax (DKK.) Deferred taxes ...... -3.542.794 -2.432.653

4. Tangible fixed assets (DKK.) Aircrafts and Operating Maintenance spare parts Equipment Residence Total Acquisition value as of Jan 1st ...... 273.054.209 21.992.577 15.129.559 1.342.985 311.519.330 Adjustment to previous years ...... -6.181.594 598 -591 -144.000 -6.325.587 Additions during the year ...... 21.856.814 721.324 1.463.567 0 24.041.705 Disposal during the year ...... -2.073.768 -187.161 -5.725.171 0 -7.986.100 Acquisition value as of Dec 31st ...... 286.655.661 22.527.338 10.867.364 1.198.985 321.249.348

Deprecations as of Jan 1st ...... 144.590.707 16.538.276 12.261.136 686.542 174.076.661 Adjustment to previous years ...... -6.181.594 598 -591 -144.000 -6.325.587 Deprecations during the year ...... 25.040.872 1.355.747 1.744.232 59.949 28.200.800 Deprecations of disposal ...... -1.797.275 0 -5.725.171 0 -7.522.446 Deprecations as of Dec. 31st ...... 161.652.710 17.894.621 8.279.606 602.491 188.429.428

Book value as of Dec. 31st 2004 ...... 125.002.951 4.632.717 2.587.758 596.494 132.819.920

Book value as of Dec. 31st 2003 ...... 128.463.502 5.454.300 2.868.423 656.444 137.442.669

P/F Atlantic Airways – Annual Accounts 2004 Page 10 RASMUSSEN & WEIHE – STATSAUTORISERAÐ GRANNSKOÐARAFELAG P/F – TÓRSHAVN – P/F NR. 267

NOTES

5. Shareholders equity (DKK.) The share capital amounting to DKK 75.000.000 is divided in 75 shares of DKK 1 million each. The shares are not divided in different categories

2004 2003 Retained earnings carried forward: Balance as of Jan 1st ...... 38.974.654 30.244.047 + retained earnings transferred from the years result ...... 14.171.174 9.730.607 - dividend ...... -2.000.000 -1.000.000 51.145.828 38.974.654

6. Mortgage loans/Short- and long-term debt Remaining Short term Due for Remaining debt debt payment debt Dec. 31st 2004 0-1 year after 5 years Dec. 31st 2003

Mortgage debt ...... 41.356.789 7.808.815 13.578.488 50.926.361 Trade payables ...... 18.701.956 18.701.956 0 12.782.657 Other liabilities ...... 2.761.293 2.761.293 0 2.070.560 Accrued expenses ...... 2.000.000 2.000.000 0 1.000.000 Total short- and long-term debt ...... 64.820.038 31.272.064 13.578.488 66.779.578

7. Mortgaging and contingent loyalties etc.

Aircraft and spare-parts with a book value, DKK 125 mill. are mortgaged.

2,6 million DKK of the liquid funds have been mortgaged.

P/F Atlantic Airways – Annual Accounts 2004 Page 11 SUBSCRIPTION FORM

One subscription form per custody account

The undersigned hereby undetakes to subscribe for share capital in the shares in Atlantic Airways sold by the Faroese Government (Føroya Landsstýri) as the Offeror, Tinganes, FO-100 Tórshavn, Faroe Islands

ISIN code: FO0000000062

Name: Atlantic Airways P/F

Nominal value per share: DKK 100

Price per share: The share price will be determined in a bookbuilding process. The price will be fixed on 28 November 2007 and range from DKK 242 per share to DKK 261 per share.

Subscription period: 19 November – 27 November 2007, 4:00 pm Faroese time (corresponding to 5:00 pm CET and 4:00 pm Icelandic time), unless the subscription in part or in whole will be closed earlier. The first possible closing of subscription period is 21 November 2007.

Settlement date: 7 December 2007

ORDERS UP TO 20,000 SHARES ORDERS OVER 20,000 SHARES

To be delivered in one of the subscription places Only to be delivered physically to the manager, listed below Kaupthing Bank, or faxed to fax to +298 351501

Number of shares: Number of shares: or for the value of DKK: To a price per share of DKK:

Order received on November 2007 Order received on November 2007 at subscription place: at the exact time:

The Subscription form has to be submitted to the manager or one of the other subscription places in due time so that financial institution has sufficient time to expedite and forward the subscription form to Kaupthing Bank hf. – Faroese branch no later than at the end of the subscription period.

Manager: Kaupthing Bank, Bókbindaragøta 8, 100 Tórshavn, Faroe Island

Subscription places: Føroya Banki, Húsagøta 3, 100 Tórshavn, Faroe Island or any of its branches Eik Banki, Yiri við Strond 2, 100 Tórshavn, Faroe Island or any of its branches Norðoya Sparikassi, Ósávegur 1, 700 Klaksvík, Faroe Islands or any of its branches Suðuroyar Sparikassi, 900 Vágur Faroe Islands or any of its branches

INFORMATION ABOUT THE SUBSCRIBER (please use capital letters)

Name

Date of birth and personal id no./Company no.

Address

Email

Post code City

Telephone no. Mobile no.

Custody Account no.

Bank Account no.

Name of financial institution

Undersigned declares:

• That all relevant documents have been made known to me before submitting this offer, incl. the Summary, Shares Securities Notes and Share Registration Document dated 12 November 2007

• That I accept that this offer for subscription is binding.

• That the shares may be registered under the name above.

• That if I or any person on whose behalf I am acting are resident in the United States, I or such person, as applicable, held existing shares as of the date of the issue.

______the______2007______