Avion Group 2006 3Q Results ended 31 July 2006

Avion Group’s operations continue to be characterised by steady growth in operating revenues.
• Operating revenues of $ 1,400 million
• EBITDA $ 34 million
• EBIT ($24 million)
• Pre-tax profit (loss $ 83 million)
• Net income (loss $ 69 million )
• Total assets increased by 41% to $ 2,129 million
• Working capital to operating activities $ 7.5 million
• Total equity as at 31 July $ 523 million - equity ratio 25%
• Current ratio 0,98
• Total block hours flown 71 thousand
• Number of passengers approximately three million
• 1.7 million tonnes ocean freight transported

Avion Group’s operations continue to be characterised by steady growth in operating revenues.
• Operating revenues of $ 1,400 million
• EBITDA $ 34 million
• EBIT ($24 million)
• Pre-tax profit (loss $ 83 million)
• Net income (loss $ 69 million )
• Total assets increased by 41% to $ 2,129 million
• Working capital to operating activities $ 7.5 million
• Total equity as at 31 July $ 523 million - equity ratio 25%
• Current ratio 0,98
• Total block hours flown 71 thousand
• Number of passengers approximately three million
• 1.7 million tonnes ocean freight transported

Statement from the Executive Chairman, Magnus Thorsteinsson:
I should emphasise that figures for the comparative period include Avion Group prior to the completion of the acquisition of Excel Airways Group and before significant acquisitions such as Eimskip, Travel City Direct and Star Airlines.

During the period the IPO of Avion Group raised $160 million and shortly afterwards a further $160 million was raised from a bond issue. The capital raisings increased Avion Group’s capability to make further acquisitions to support its investment program. The Group’s balance sheet was strengthened with total equity at the beginning of the period increasing from $461 million to $ 482 million at 31 July 2006.

During the third quarter, Star Europe, Avion Group’s subsidiary, started operating in Germany. Star Europe in Germany recently received its aircraft operating certificate ‘AOC’ after only three months – a process that normally takes between 12 and 18 months. Two Airbus 320 aircraft were scheduled to fly during Summer 2006. Due to an increase in demand, this was increased to four aircraft with additional aircraft planned for Summer 2007. The cost related to establishing Star Europe was less than originally expected.

Excel Airways announced the formation of a wholly owned subsidiary in Ireland in May. The subsidiary, which will represent the airline under the Excel brand, will base its headquarters in Dublin. The first flight is scheduled for Spring 2007.
In the middle of May Eimskip announced the acquisition of 55% stake in Innovate Holdings, which specialises in storage and distribution of temperature controlled cargo. Eimskip formerly planned to acquire a 50% stake in Innovate Holdings, but acquired a controlling interest of 55%. The company has been consolidated into the financial statements of Avion and Eimskip with effect from 1 May 2006.

At the end of May Eimskip announced the acquisition of 50% equity stake in Kursiu Linija, which is the only Lithuanian short sea container shipping line providing “door to door” freight delivery services in the Baltic States, Poland, Russia, United Kingdom and Northern Europe. Eimskip now controls 100% equity stake.

Restructuring of Air Atlanta Icelandic’s fleet and the strengthening of the management team was finalised in the third quarter. These changes will strenghten the company in the fourth quarter and in the future. As H1 results stated the cost associated with the restructuring was above budget, the cost in the third quarter was higher than expected.

Avion Aircraft Trading purchased three Boeing 747-400 cargo aircraft from Air France in the third quarter and they are for sale in the fourth quarter. One Airbus A300-600 cargo aircraft was sold to FedEx. Two Airbus A300-600 aircraft were purchased from China Airline in August. In September these aircraft were sold to an airline in India.

Avion Group announced at the end of June its intent to sell 51% share of Avion Aircraft Trading to an international investment group. During final negotiations other parties showed strong interest. Avion Group’s Board of Directors decided not to conclude the sale at this time and continue further talks with other interested parties.

Since the end of the third quarter, Avion Group has made further acquisitions.

At the beginning of August Avion Group announced its intention to make a takeover bid to acquire all of the outstanding trust units of Atlas Cold Storage Income Trust (TSX: FZR.UN) at a price of CDN$7.00 cash per Unit. The aggregate acquisition cost, including assumed debt of the Trust, will be CDN$574 million. The offer was made through Eimskip Atlas Canada, Inc. a wholly-owned subsidiary of Eimskip. Recently the offer was extended to 6 October 2006. The terms of the offer remained unchanged.

Avion Group announced a strategic joint venture with Advent Air Ltd (AAIR.LN). an Australasian airline group, listed on the Alternative Investment Market of the London Stock Exchange. Under the terms of the agreement, Avion’s subsidiaries, Star Airlines of France and Star Europe of Germany, will between them provide up to four Airbus A320 aircraft to Advent Air’s subsidiary, Skywest Ltd. Additionally, Avion signed an agreement to purchase 9.8 million ordinary shares in the capital of Advent Air Ltd, representing approximately 5% of the currently issued share capital of the company. The share purchase represents an investment of £1,421,147 by Avion Group.

The French Tour Operatore Vacances Heliades was acquired in September. On completion of the acquisition, XL Leisure Group will be France’s fifth largest tour operator. Heliades specialises in travel to Greece and Cyprus.

Results from operations in the first nine months in 2006
Total revenues amounted to $ 1,400 million in the first nine months ended 31 July 2006 and total expenses amounted to $ 1,424 million. EBITDA amounted to $ 34 million and the EBITDA margin was 2.5%.
Financial expenses amounted to $ 59 million for the nine months ended 31 July 2006, and taxes amounted to $ 14 million. Net income amounted to (loss $ 69 million).

Balance Sheet
Non-current liabilities amounted to $ 761 million at the end of the first nine months ended 31 July 2006 compared with $421 million at 31 October 2005. Non-current assets increased from $ 1,053 at 31 October 2005 to $ 1.304 million at 31 July 2006. Current assets increased from $ 452 million at 31 October 2005 to $ 826 million at 31 July 2006. Current liabilities increased from $634 million at 31 October 2005 to $ 845 million at 31 July 2006.
Equity increased from $451 million at year end 2005 to $ 523 million at the end of the first nine months. The equity ratio now stands at 25%. The current ratio for the first nine months stood at 0.98 compared to 0.71 at year end 2005.
The Group’s cash position remains strong with $ 283 million in short term funds at the end of the period. Avion Group’s working capital to operating activities stood at $ 42 million for the period and cash to operations was $ 7.5 million for the period.

Future prospects
Avion Group’s revised budget for the current financial year forecasts lower EBITDA than had been expected. The fourth quarter will be difficult because of challenging market conditions in the UK due to terrorist threats, delays and an unusually hot Summer. Additionally, currency changes will result in $10 million reduction in EBITDA than forecasted initially. The results for the fourth quarter and therefore the year in total are projected to fall short of EBITDA forecast of $165 million, as previously stated.
Group revenue is forecast to increase from $ 1.400 million in financial year 2005 to $ 2.100 million in the financial year 2006. According to revised budgets EBITDA is forecast to increase from $ 115 million in the financial year 2005 to $ 120- 125 million in the year 2006.

Quarterly income statement
Avion Group changed it’s financial year end in 2005 so all comparisons for last year are for different reporting periods. Third quarter 2006 is therefore for the period 1 May to 31 July 2006 and third quarter 2005 is from 1 July 2005 to 30 September 2005.

Results approved and presentation of results
The Board of Directors of Avion Group approved the results for the first quarter at a board meeting on 24 September 2006. Avion Group’s financial statements can be viewed at the Group’s offices at Hlíðarsmára 3 and at the Group’s website www.aviongroup.com.

Here you can view the interim results for the first nine months 2006

Here you can view the presentation of the interim results

About Avion Group
Avion Group is a leading investment company, focused on air, land and sea transportation solutions worldwide. The company is organized into three business divisions -- Aviation Services, Charter & Leisure and Shipping & Logistics.
Aviation Services consists of ACMI (Aircraft, Crew, Maintenance, Insurance) provider Air Atlanta Icelandic, maintenance provider Avia Technical Services and airport handling provider Southair. Charter & Leisure is represented by XL Leisure Group which consists of the leisure service travel providers Excel Airways Group in the UK, Star Airlines, the second biggest charter airline in France and the newly founded airline Star Europe in Germany. There are currently approximately 60 Boeing and Airbus aircraft in the fleet.
The Shipping and Logistics division is represented by Eimskip, the market leading transport company in the North Atlantic and the prime maritime transportation company in Iceland. Eimskip’s fleet consists of approximately 36 ships, 40 coldstores and 850 trucks.
Avion Group employs close to 6,500 people at 118 operational bases worldwide.

Contact Information

Dögg Hjaltalín

Director - Investor Relations

Avion Group

Contact via E-mail