not for distribution in the united states

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NOT FOR DISTRIBUTION IN THE UNITED STATES
Alitalia – Società Aerea Italiana S.p.A.
(incorporated with limited liability under the laws of the Republic of Italy)
€375,000,000
5.250 per cent. Notes due 30 July 2020
The issue price of the €375,000,000 5.250 per cent. Notes due 30 July 2020 (the “Notes”) of Alitalia – Società Aerea Italiana S.p.A.
(the “Issuer” or “Alitalia”) is 100 per cent. of their principal amount.
Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 30 July 2020. The Notes are subject
to redemption, in whole but not in part, at their principal amount, plus interest, if any, to the date fixed for redemption in the event of
certain changes affecting taxation in the Republic of Italy and at the option of the Issuer at any time at an amount calculated on a
“make-whole” basis. In addition, the holder of a Note may, by the exercise of the relevant option, require the Issuer to redeem or, at
the Issuer’s option, purchase such Note at 100 per cent. of its principal amount together with accrued and unpaid interest (if any) to
(but excluding) the Put Date upon the occurrence of a Change of Control (each as defined below). See “Terms and Conditions of the
Notes — Redemption and Purchase”.
The Notes will bear interest from (and including) 30 July 2015 (the “Issue Date”) at the rate of 5.250 per cent. per annum. Interest on
the Notes will be payable annually in arrear on 30 July in each year. Payments on the Notes will be made in Euro without deduction
for or on account of taxes imposed or levied by the Republic of Italy to the extent described under “Terms and Conditions of the Notes
– Taxation”.
The Notes will constitute senior, unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at
least pari passu with all other present and future unsecured obligations of the Issuer, save for certain mandatory exceptions of
applicable law.
The prospectus (the “Prospectus”) has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority
under Directive 2003/71/EC, as amended (including by Directive 2010/73/EU, to the extent that such amendments have been
implemented in a relevant member state of the European Economic Area) (the “Prospectus Directive”). The Central Bank only
approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive.
Application has been made to the Irish Stock Exchange plc (the “Irish Stock Exchange”) for the Notes to be admitted to the official
list of the Irish Stock Exchange (the “Official List”) and trading on its regulated market (“Main Securities Market”). The Main
Securities Market is a regulated market for the purposes of Directive 2004/39/EC. Such approval relates only to the Notes which are to
be admitted to trading on the Main Securities Market or other regulated markets for the purposes of Directive 2004/39/EC or which are
to be offered to the public in any member state of the European Economic Area. This Prospectus is available for viewing on the
website of the Irish Stock Exchange.
This Prospectus is a prospectus for the purposes of Article 5.3 of the Prospectus Directive.
The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”)
and are subject to United States tax law requirements. The Notes are being offered outside the United States by the Sole Underwriter
(as defined below) in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered, sold or
delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act. For a description of certain restrictions on transfers of
the Notes, see “Subscription and Sale”.
Investing in the Notes involves risks. See “Risk Factors” beginning on page 1 of this Prospectus for a discussion of certain risks
prospective investors should consider in connection with any investment in the Notes.
The Notes will be in bearer form in the denomination of €100,000 each and, for so long as the Notes are represented by a Global Note
(as defined below) and Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream,
Luxembourg”) (or other relevant clearing system) allow, in denominations of €1,000 in excess of €100,000, up to and including
€199,000. The Notes will initially be in the form of a temporary global note (the “Temporary Global Note”), without interest
coupons, which will be deposited on or around the Issue Date with a common safekeeper for Euroclear and Clearstream, Luxembourg.
The Temporary Global Note will be exchangeable, in whole or in part, for interests in a permanent global note (the “Permanent
Global Note”, and together with the Temporary Global Note, each a “Global Note”), without interest coupons, not earlier than
40 days after the Issue Date upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot be
collected without such certification of non U.S. beneficial ownership. The Permanent Global Note will be exchangeable in certain
limited circumstances in whole, but not in part, for Notes in definitive form in principal amounts equal to €100,000 and integral
multiples of €1,000 in excess thereof, up to and including €199,000, each with interest coupons attached. No Notes in definitive form
will be issued with a denomination above €199,000. See “Overview of Provisions Relating to the Notes in Global Form”.
SOLE UNDERWRITER
Morgan Stanley
Prospectus dated 28 July 2015
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IMPORTANT NOTICES
This document comprises a prospectus for the purposes of Article 5.4 of the Prospectus Directive and for the
purpose of giving information with regard to the Issuer, the Issuer and its subsidiaries and affiliates taken as a
whole (the “Group” or the “Alitalia Group”) and the Notes which according to the particular nature of the
Issuer and the Notes, is necessary to enable investors to make an informed assessment of the assets and
liabilities, financial position, profit and losses and prospects of the Issuer.
The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the
knowledge of the Issuer (which has taken all reasonable care to ensure that such is the case), the information
contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the
import of such information.
The Issuer has confirmed to Morgan Stanley & Co. International plc (the “Sole Underwriter”) that this
Prospectus contains or incorporates all information regarding the Issuer, the Group and the Notes which is (in
the context of the issue and offering of the Notes) material; such information is true and accurate in all
material respects and is not misleading in any material respect; any opinions, predictions or intentions
expressed in this Prospectus on the part of the Issuer or the Group are honestly held or made and are not
misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make
such information, opinions, predictions or intentions (in such context) not misleading in any material respect;
and all proper enquiries have been made to ascertain and to verify the foregoing.
No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is
accepted by the Sole Underwriter, BNP Paribas Trust Corporation UK Limited as trustee (the “Trustee”) or
BNP Paribas Securities Services, Luxembourg Branch as principal paying agent (the “Principal Paying
Agent”) as to the accuracy or completeness of the information contained in this Prospectus or any other
information provided by the Issuer in connection with the Notes or their distribution.
This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein
by reference (see “Financial Information Relating to CAI and the Issuer — Issuer’s and CAI’s information
incorporated by reference”). This Prospectus should be read and construed on the basis that such documents
are incorporated in and form part of this Prospectus.
Investors should rely only on the information contained in this Prospectus. The Issuer has not authorised
anyone to provide investors with different information. None of the Sole Underwriter or the Issuer is making
any offer of the Notes in any jurisdiction where the offer is not permitted. You should not assume that the
information contained in this Prospectus is accurate as of any date other than the date on the cover of this
Prospectus regardless of the time of delivery of this Prospectus or of any sale of the Notes.
The Issuer has not authorised the making or provision of any representation or information regarding the
Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer.
Any such representation or information should not be relied upon as having been authorised by the Issuer or
the Sole Underwriter.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances
create any implication that the information contained herein concerning the Issuer and/or its Group is correct
at any time subsequent to the date hereof or that any other information supplied in connection with the
offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the
same or that there has been no adverse change, or any event reasonably likely to involve any adverse change,
in the condition (financial or otherwise) of the Issuer and/or its Group since the date of this Prospectus.
Neither this Prospectus nor any other information supplied in connection with the offering, sale or delivery of
any Note (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a
recommendation by the Issuer or the Sole Underwriter that any recipient of this Prospectus should purchase
any Note. Each investor contemplating purchasing any Note should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the
Group. Neither this Prospectus nor any other information supplied in connection with the issue of the Notes
constitutes an offer or invitation by or on behalf of the Issuer or the Sole Underwriter to any person to
subscribe for or to purchase any Notes.
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This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Notes.
Each recipient of this Prospectus shall be taken to have made its own investigation and appraisal of the
condition (financial or otherwise) of the Issuer and the Group and of the rights attaching to the Notes.
The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may be
restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the
Sole Underwriter to inform themselves about and to observe any such restrictions. For a description of certain
restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering
material relating to the Notes, see “Subscription and Sale”.
In particular, the Notes have not been, and will not be, registered under the Securities Act and are subject to
United States tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered
within the United States or to U.S. persons.
In this Prospectus, unless otherwise specified, references to a “Member State” are references to a Member
State of the European Economic Area and references to “€”, “EUR” or “Euro” are to the currency introduced
at the start of the third stage of European economic and monetary union, and as defined in Article 2 of Council
Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as amended. References to
“billions” are to thousands of millions.
This Prospectus is drawn up in the English language. In case there is any discrepancy between the English
text and the Italian text, the English text stands approved for the purposes of approval under the Prospectus
Directive. Certain legislative references and technical terms have been cited in their original language in
order that the correct technical meaning may be ascribed to them under applicable law.
Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures
shown for the same category presented in different tables may vary slightly and figures shown as totals in
certain tables may not be an arithmetic aggregation of the figures which precede them.
In compliance with the requirements of the Irish Stock Exchange, this Prospectus is available on the website
of the Irish Stock Exchange (www.ise.ie).
Forward-looking statements
This Prospectus may contain forward-looking statements, including (without limitation) statements identified
by the use of terminology such as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”,
“projects”, “will”, “would” or similar words. These statements are based on the Issuer’s current expectations
and projections about future events and involve substantial uncertainties. All statements, other than
statements of historical facts, contained herein regarding the Issuer’s strategy, goals, plans, future financial
position, projected revenues and costs or prospects are forward-looking statements. Forward-looking
statements are subject to inherent risks and uncertainties, some of which cannot be predicted or quantified.
Future events or actual results could differ materially from those set forth in, contemplated by or underlying
forward-looking statements. The Issuer does not undertake any obligation to publicly update or revise any
forward-looking statements.
Stabilisation
In connection with the issue of the Notes, Morgan Stanley & Co. International plc. (the “Stabilising
Manager”) (or any person acting for the Stabilising Manager) may over-allot Notes or effect transactions with
a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail.
However, there can be no assurance that the Stabilising Manager (or any person acting on its behalf) will
undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate
public disclosure of the terms of the offer of the Notes is made and, if begun, may be discontinued at any time,
but must end no later than the earlier of thirty (30) days after the issue date of the Notes or sixty (60) days
after the date of allotment of the Notes. Such stabilising shall be in compliance with all applicable laws,
regulations and rules.
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Market share information and statistics
This Prospectus contains statements regarding the Issuer’s industry and its relative competitive position in the
industry that are not based on published statistical data or information obtained from independent third parties,
but are based on the Issuer’s experience and its own investigation of market conditions, including its own
elaborations of such published statistical or third-party data. Although the Issuer’s estimates are based on
information obtained from its customers, sales force, trade and business organisations, market survey agencies
and consultants, government authorities and associations in its industry which it believes to be reliable, there
is no assurance that any of these assumptions are accurate or correctly reflect the Issuer’s position in the
industry. None of the Issuer’s internal surveys or information have been verified by independent sources.
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TABLE OF CONTENTS
Page
RISK FACTORS ................................................................................................................................................. 1
FINANCIAL INFORMATION RELATING TO CAI AND THE ISSUER .................................................... 17
TERMS AND CONDITIONS OF THE NOTES .............................................................................................. 19
OVERVIEW OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ................................... 35
USE OF PROCEEDS ........................................................................................................................................ 37
DESCRIPTION OF THE ISSUER.................................................................................................................... 38
SHAREHOLDERS............................................................................................................................................ 49
REGULATORY ENVIRONMENT .................................................................................................................. 50
MANAGEMENT .............................................................................................................................................. 54
TAXATION ...................................................................................................................................................... 60
SUBSCRIPTION AND SALE .......................................................................................................................... 67
GENERAL INFORMATION............................................................................................................................ 69
INDEX TO THE ISSUER’S UNAUDITED FINANCIAL STATEMENTS AS AT AND FOR THE
YEAR ENDED 31 DECEMBER 2014 ............................................................................................................. 71
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(i)
RISK FACTORS
Before deciding to purchase the Notes, investors should carefully review and consider the following risk
factors and the other information contained in this Prospectus or any supplement to this Prospectus. The
Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Should
one or more of the risks described below materialise, this may have a material adverse effect on the business,
financial condition and results of operations of the Issuer and/or the Group. In particular, it could
significantly and adversely affect the Issuer’s ability to pay interest or repay the principal on the Notes. As a
result, the market value of the Notes may deteriorate and the holders of the Notes (the “Noteholders”) could
lose part or all of their investments.
All of these factors are contingencies which may or may not occur, and the Issuer is not in a position to
express a view on the likelihood of any such contingency occurring. In addition, factors which are material
for the purpose of assessing the market risks associated with the Notes are described below. The order in
which the risks are presented does not reflect the likelihood of their occurrence of the magnitude or
significance of the individual risk. In addition, investors should be aware that the risks described might
combine and thus intensify one another.
The Issuer believes that the factors described below represent the principal risks inherent in investing in the
Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with the
Notes may occur for other reasons which may not be considered significant risks by the Issuer based on
information currently available to the Issuer or which it may not currently be able to anticipate. Prospective
investors should also read the detailed information set out elsewhere in this Prospectus and reach their own
views prior to making any investment decision. An investment in the Notes is only suitable for investors who
are in a position to fully assess the risks relating to such an investment and who have sufficient financial
means to absorb any potential loss stemming therefrom.
RISKS RELATING TO THE AIRLINE INDUSTRY
General economic conditions could have an adverse impact on the Group’s business.
The Group’s revenue is highly sensitive to economic conditions in the markets in which the Group operates.
The Group derives approximately 30% of revenues on routes within Italy and minor revenues on routes to
Spain and Greece, each of which have experienced some form of economic hardship in the recent past.
Demand for air travel and ground services depends on economic conditions, employment levels, consumer
and business confidence and the availability of consumer and business credit.
The airline industry in general tends to experience significant adverse financial results during economic
downturns as leisure travellers often choose to reduce their transportation or reduce the price they pay for such
transportation. Businesses also usually reduce the volume of their business travel, either due to cost-saving
measures or as a result of decreased business activity requiring travel. In addition, premium services could
become less desirable during a significant downturn, which could disproportionately affect the Group’s
revenues. Further, an economic downturn tends to result in a decrease in air cargo revenue, as international
trade decreases and businesses look to run down their inventories and send freight by more economical routes.
The impact of an economic downturn might also induce governments to unilaterally grant subsidies or other
public aid to the Group’s competitors, which could distort the markets and harm the Group’s competitive
position.
Any materialisation of these risks could have a material adverse effect on the Group’s business, financial
condition and/or results of operations.
The airline industry is highly competitive and the Group faces competition from other airlines as well as
from alternative means of transportation.
The Group operates in a highly competitive market, in which it competes with other airlines and relies on
positive brand recognition, amongst other factors, to attract and retain customers. Competition is affected by
factors including fares, routes and frequency of flights, the geographical location of hub airports used by other
airlines, reputation, safety record, reliability and/or punctuality, range and quality of passenger services
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provided and type and age of aircraft. The Group’s competitors include low-cost carriers, legacy airlines,
other established commercial and charter airlines, ground handling service providers, travel conglomerates
with integrated airlines and new airlines entering the market. Due to existing overcapacity in the airline
industry, competition is expected to increase further. As a consequence, competition across full-service
carriers will intensify and the latter will also come under increased pressure from low cost carriers, which in
turn will struggle differentiating solely on the basis of low fares (due to higher costs) and will therefore seek
to improve their offering and/or enter certain markets traditionally catered for by full service carriers only (for
example, business travel).
The Group’s competitors may seek to protect or gain market share through fare-matching or price-discounting
or by offering more attractive flight schedules or services. Certain competitors may also be able to offer lower
fares, for example by providing passengers with fewer services or using financial resources which are
unavailable to the Group.
Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or
results of operations.
Severe weather conditions could have an adverse effect on the Group’s business.
Severe weather conditions may result in substantial additional costs or loss of revenue for the Group.
Inclement weather can lead to flight delays and cancellations, aircraft de-icing, additional heating for cabins
and increased fuel consumption due to cold weather. Any materialisation of these risks could have a material
adverse effect on the Group’s business, financial condition and/or results of operations.
Natural or man-made disasters, epidemics and pandemics could have an adverse effect on airline
operations and demand for air travel.
Any activity from volcanoes, or other natural or man-made disasters, in particular if such disasters occur in the
airspace or regions in which the Group operates or at or in proximity to any of the Group’s major flight
destinations, could result in substantial reductions in, and/or cancellations of, bookings and flights not only to
the affected region but also more generally, thereby reducing overall demand for the Group’s services.
Insurance coverage for such risks may not be available on commercially acceptable terms or at all.
The outbreak of epidemics and pandemics such as “severe acute respiratory syndrome”, “Middle East
respiratory syndrome”, avian flu, swine flu, Ebola or other diseases could also weaken the demand for air
travel and materially adversely affect airline operations.
Any of the above risks could have a material adverse effect on the Group’s business, financial condition
and/or results of operations.
Terrorist attacks, military, civil and political conflicts could have an adverse effect on airline operations.
The terrorist attacks of 11 September 2001 and other attempted terrorist attacks since that date involving
commercial aircraft severely and adversely impacted the prospects of the airline industry, resulting in reduced
demand for air travel and higher security costs for airlines. In addition, in the immediate aftermath of the
terrorist attacks of 11 September 2001, insurers either stopped providing coverage against certain risks
relating to acts of war and other hostilities or substantially increased premiums for renewed coverage, while at
the same time greatly reducing the amount of coverage provided. Furthermore, the political upheavals in
North Africa, the Middle East and the ongoing Ukrainian conflict, where in July 2014 a commercial aircraft
flying over Ukraine was shot down with significant loss of life, adversely affect flight bookings in and around
those regions. The occurrence of further terrorist attacks, acts of sabotage, new military, civil and political
conflicts or the expansion of existing conflicts or similar events, especially if they are directed against air
traffic or occur in markets that are significant to the Group, or if they affect a relatively high proportion of the
overall volume of air traffic generally or crude oil prices (and therefore prices for aviation fuel), could have a
material adverse effect on the Group’s business, financial condition and/or results of operations.
The Group is exposed to the risk of losses from aircraft crashes or similar incidents.
An aircraft accident or incident could result in significant loss for the Group and give rise to costs related to
the repair or replacement of a damaged aircraft and its temporary or permanent loss from service, and claims
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from injured passengers and dependents of deceased passengers. Even if the Group’s insurance coverage
were adequate in the event such circumstances arise, any such event could cause a substantial increase in its
insurance premiums.
In addition, Regulation (EC) No. 2027/97, as amended by Regulation (EC) No. 889/2002, which governs
airline carriers’ liability towards passengers, has increased the potential exposure of airlines to civil liability.
Although the Group has extended its insurance coverage to meet the requirements of the above regulation, no
assurance can be given that laws, regulations or policies will not be applied or amended in the future in a
manner that could have a material adverse effect on the Group’s business, financial condition and/or results of
operations.
Any materialisation of these risks could have a material adverse effect on the Group’s business, financial
Aircraft accidents could have an adverse impact on the Group’s reputation.
Any aircraft accident or incident involving the Group could create a public perception that it is less safe or
reliable than other airlines and cause passengers or cargo customers to lose confidence in the Group and
switch to other airlines or other means of transportation. Passengers or cargo customers could also lose
confidence in the Group if another airline were to suffer such loss or damage. This could have a material
adverse effect on the Group’s business, financial condition and results of operations.
The airline industry is characterised by high operational and regulatory costs.
The airline industry is generally characterised by high fixed costs, low margins and highly volatile revenues.
Each flight is subject to fixed operating costs, including costs for the use of airport infrastructure and services,
take-off, landing and air traffic control fees as well as other air traffic charges, maintenance, financing, lease
and fuel costs, depreciation expenses, insurance and labour costs. By contrast, the revenues generated by each
flight are variable and are directly related to the number of passengers or cargo carried and, in the case of
passengers, the fare structure of the flight. Accordingly, a change in the number of passengers, cargo or in
average fares could have a negative effect on the Group’s business, financial condition and results of
operations. In addition, changes to the regulatory framework in which the Group operates, particularly as
regards tax, safety and environmental regulations, and to other costs inherent in the airline industry, including
aviation fuel, aviation insurance and cost of access to capital or financing, could result in the Group’s
activities being subject to significantly higher costs. Any of these risks could have a material adverse effect
on the Group’s business, financial condition and/or results of operations.
Any breach of applicable rules could materially affect the Group’s ability to continue to operate
commercial passenger and cargo air transport services and in particular lead to operating licences and air
traffic rights being suspended or revoked.
The Group is authorised to operate by virtue of operating licences and air carrier certificates which are subject
to the Group’s ongoing compliance with currently applicable and future statutes, rules and regulations
imposed by governments and other authorities. National, EU and international regulations, as well as bilateral
and multilateral treaties between Italy, EU member states and the EU on the one hand, and other states on the
other, govern airline operations and impose requirements on airline carriers. In particular, these multilateral
and bilateral agreements impose restrictions on the allocation of traffic rights which are necessary for
passenger and cargo airlines operating international commercial airline services in order to land in, take off
from and fly over states.
If a competent authority that has issued an operating licence to the Group should come to the conclusion that
the Group no longer satisfies the relevant requirements to hold such licence, including ownership and control
requirements, it could take measures that could result in the loss of traffic rights and the suspension or
revocation of the operating licence.
Amendments of existing statutes, rules, regulations and treaties or any changes in their interpretation, the
conclusion of new treaties or the breakdown of treaty negotiations, as well as the introduction of new
regulatory requirements or the extension of existing requirements, could also result in significant operational
costs for the Group and limit its flexibility and ability to respond to market conditions, competition or changes
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to its cost structure. Any of these risks could have a material adverse effect on the Group’s business, financial
The Group’s access to airports could be limited by slot allocations and restrictions imposed by legislators or
regulatory authorities.
Air traffic is limited by the airport infrastructure and by the number of slots available for aircraft arrivals and
departures at a particular airport. A slot represents the authorisation to take off and land at a particular time
during a specified scheduling period. Within the EU, slots are assigned to airlines in accordance with Council
Regulation (EEC) No 95/93 of 18 January 1993, as amended by Regulation (EC) No 545/2009 of the
European Parliament and of the Council of 18 June 2009. Established airlines have priority rights (known as
“grandfather rights”) to particular slots at certain airports. In addition, a number of major European airports
and other major international airports are currently operating at close to their full capacity, meaning that there
is limited capacity to operate at these airports. Should slot coordinators or other authorities in charge of
allocating time slots at airports not offer sufficient slots to the Group at the times it needs them or on
acceptable terms, the Group may be unable to expand its activities or obtain more favourable slots and may be
forced to restrict the use of its aircraft. In addition, the rules governing the use of slots provide that the right
of use may expire if the slots are unused either temporarily or in the long term. Therefore, should the Group
fail to use the slots it has been allocated, whether for technical or commercial reasons, it could potentially lose
the right to use these slots.
Legislators or regulatory authorities may impose additional operating restrictions at airports, such as landing
and take-off curfews, limits on aircraft noise and emission levels, mandatory flight paths, runway restrictions
and limits on the number of average daily departures. Such restrictions may limit the ability of the Group to
provide or increase services at such airports and may result in loss of revenue and/or additional costs.
Airport, transit, landing and air traffic control fees, security charges and the costs airlines must pay to
ensure air traffic security may continue to increase.
Airport, transit, landing and air traffic control fees, security charges and the costs airlines must pay to ensure
air traffic security, as well as costs for ground handling services, such as maintenance, fuel and oil services,
baggage and freight handling, passenger check-in and surface transport at the airport, represent a significant
portion of the operating costs of the Group. Any fees imposed by an airport to third party ground handling
operators may further increase such costs, which could affect the fares that the Group must charge to its
passengers or cargo customers in order to operate cost-effectively.
Future events or developments, such as terrorist acts or other conflicts, could also result in more stringent
security regulations being imposed on air traffic, which could also result in an increase in the Group’s
operating costs. If the Group is unable to pass on increases in fees, charges or other costs to its customers,
such increases could have a material adverse effect on its business, financial condition and/or results of
operations.
The Group is dependent on third parties to provide certain services and facilities and is exposed to the risk
of failure of third party service and facility providers.
In order to operate its business, the Group is dependent on the provision of services by third parties, including
air traffic controllers, airport authorities and operators, security personnel, towing and pushback vehicle
drivers, passenger transporters, operators of booking systems and call centres, caterers, check-in staff and
baggage-handling and fuel service providers, contractors that perform aircraft and engine maintenance and
provide customer services and wet lessors (see also “— The Group is exposed to the risk of failure of wet
lessors”). If any third party services or facilities on which the Group depends in order to operate its business
are restricted, temporarily suspended (for example, as a result of technical problems, strikes or insolvency of
the relevant service provider), terminated or become unavailable on commercially acceptable terms, this could
have a material adverse effect on the Group’s business, financial condition and/or results of operations. Any
termination or expiry of contracts entered into by the Group with third-party service or facility providers and
any inability to negotiate and enter into replacement contracts with other third-party service or facility
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providers on similar commercial terms, or any inability to enter into such contracts in any new markets the
Group accesses, could also have a material adverse effect on the Group’s business, financial condition and/or
results of operations. In addition, the efficiency, timeliness and quality of the services provided pursuant to
these contracts by third-party providers are beyond the Group’s direct control.
In order to be able to provide catering services, the Group relies on suppliers of products, services and raw
materials. If supplies fail to meet certain quality, quantity and other specifications, the Group could become
subject to claims and other liabilities and its relationship with customers could suffer as a result. Furthermore,
if a supplier for any reason is not able, or becomes unwilling, to supply the Group with the products or
services it requires, the Group would need to find a new supplier, which may be time consuming and costly.
There can be no assurance that the Group would be able to obtain alternative products and services from
different suppliers of an acceptable quality or standard or on commercially acceptable terms, which could also
affect its relationship with customers and reputation.
The Group’s revenues are subject to seasonal fluctuations.
Demand for the Group’s passenger and cargo air transport and ground handling services fluctuates during the
course of the year, and as a result the levels of the Group’s aircraft utilisation rate and profitability also
fluctuate. Demand is normally higher in summer from May to October and during the Christmas holidays and
lower in winter from November to April (excluding the Christmas holidays). The occurrence of any flight
cancellations or other factors that could adversely affect aircraft utilisation, especially during peak seasons and
periods, could have a materially adverse effect on the Group’s business, financial condition and/or results of
operations.
The Group is exposed to the risk of failure of wet lessors.
The Group has entered, and may enter in the future, into wet lease agreements pursuant to which other airline
carriers (“wet lessors”) grant wet leases (i.e. leases of aircraft with personnel) of aircraft to the Group. In turn,
the Group grants to the same wet lessors dry leases (i.e. leases of aircraft without personnel) of aircraft leased
to the Group under the wet leases. In the event of default by, or insolvency of, a wet lessor, the Group may be
exposed to the risk of not receiving from the relevant wet lessor passenger transport services pursuant to the
wet lease and, nevertheless, of having to comply with its obligations under the dry lease without however
receiving any income from the dry lessor. Any materialisation of these risks could have a material adverse
effect on the Group’s business, financial condition and/or results of operations.
RISKS RELATING TO THE GROUP
The Group’s success and ability to maintain sufficient liquidity depends on its ability to achieve its global
business strategy.
The Group’s future growth, profitability and cash flows depend on its ability to successfully implement its
global business strategies (see “Description of the Issuer — Strategies”). There can be no assurance that the
Issuer can successfully achieve any or all of its strategic initiatives in the manner or time period that it expects.
Further, achieving these objectives will require investments which may result in short-term costs without
generating any current net revenues and, therefore, may be dilutive to the Group’s earnings, at least in the
short term. Moreover, if the Group’s strategic initiatives do not generate the expected benefits in a timely
manner, the Group may face significant liquidity pressures in the medium term and throughout the
implementation period of the strategic initiatives as a result of the associated investments required. The
Group cannot give any assurance that it will realise, in full or in part, the anticipated strategic benefits it
expects its strategies will achieve. The failure to realise those benefits could have a material adverse effect on
the Group’s business, financial condition and/or results of operations.
The Group may incur additional indebtedness for the financing of new aircraft.
The financing of new and existing aircraft has increased in the past, and may further increase, the total amount
of the Group’s outstanding debt and the payments that it is obliged to make to service such debt. The ability
of the Group to generate sufficient cash flow to service such debt in the long term will depend on its future
EMEA 100217621 v16
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financial performance, which will be affected by a range of economic, competitive and business factors, many
of which are beyond its control. Any future orders of additional aircraft could further increase the Group’s
indebtedness and impact the terms on which it is able to secure financing.
The Group’s ability to borrow, enter into sale and leaseback arrangements on commercially acceptable terms,
refinance existing debt or raise additional debt, obtain payment and credit card services (including debt
collection services) and enter into fuel, currency, interest rate and other hedging agreements with suitable
counterparties depends on a number of factors, including prevailing interest rates, capital markets conditions
and the Group’s credit profile. There can be no assurance that the Group’s access to the debt markets will not
become more difficult, expensive or even impossible in the future (including due to new or additional
collateral requirements). This could have a material adverse effect on the Group’s business, financial
The Group’s debt facilities require it to comply with specified financial covenants that may restrict its
current and future operations and limit its flexibility and ability to respond to changes or take certain
actions.
The Group’s business remains dependent on financing, and its debt agreements contain restrictive covenants.
There can be no assurance that these covenants will not constrain the Group’s ability to raise additional
financing in the future, which could delay or prevent the implementation of the Issuer’s plans and have a
material adverse effect on its business, financial condition and/or results of operations.
The Group faces risks in connection with its strategic alliances and joint ventures.
The Group is a member of the SkyTeam alliance, a brand marketing and services alliance between 20
worldwide airlines, and a party to the transatlantic joint venture with Air France, KLM and Delta Airlines (the
“Joint Venture”).
No assurance can be given that the SkyTeam alliance or the Joint Venture entered into by the Group will not
lose member airlines, whether as a result of one or more member airlines terminating their membership or
joint ventures or having their membership suspended. Furthermore, no assurance can be given that the
SkyTeam alliance or the Joint Venture will be able to attract the new members it may need to be successful in
the future. In addition, the success of the SkyTeam alliance and the Joint Venture depends in part on the
actions, brands and strategic plans of other airlines over which the Group has little control. If the SkyTeam
alliance or the Joint Venture were to lose their appeal as a result of changes in its membership or the actions of
a member or if the SkyTeam alliance or the Joint Venture were to dissolve, this could negatively affect,
among other things, the network of flights that the Group is able to offer its customers in the absence of an
alternative solution. Should a member or party leave the SkyTeam alliance or the Joint Venture or fail to meet
its obligations thereunder, this could have a material adverse effect on the Group’s business, financial
The Group is exposed to the risk of flight delays and cancellations due to its high aircraft utilisation rates.
The Group’s business model is characterised by high aircraft utilisation rates to maximise revenues. High
aircraft utilisation rates are achieved by keeping the number of “block hours”, i.e. the hours from take-off to
landing, including taxi time, as high as possible to enable operators to fly more hours on average each day.
High block hours are achieved by reducing turnaround time at airports, including the amount of ground time
for loading and unloading, cleaning, refuelling, crew changes and necessary maintenance. As a result of its
high aircraft utilisation, the Group is exposed to, and may be adversely affected by, the risk of delays and
flight cancellations caused by various factors, many of which may be beyond its control, including air traffic
congestion, air traffic control problems, processing delays on the ground, adverse weather conditions,
industrial action by air traffic controllers, delays or non-performance by third-party service providers and
unscheduled maintenance, increased security measures or breaches of security, international or domestic
conflicts, terrorist activity or other changes in business conditions. A delay or cancellation of one flight could
result in delays or cancellations to subsequent flights. If the Group’s flights become subject to regular or
severe delays or cancellations, its reputation may suffer as a consequence and its customers may choose to fly
with other airlines in the future. The Group could also be required to refund and provide assistance to
passengers for flight delays (see “— Passenger rights and compensation could cause significant costs for the
Group”).
EMEA 100217621 v16
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The Group is dependent on good relations with its employees and unions.
The Group is dependent on qualified personnel, including pilots (who from time to time are in short supply in
the aviation industry), cabin crew and employees with qualifications in aircraft maintenance, information
technology and sales. There can be no assurance that the Group will be able to retain employees in key
positions or recruit a sufficient number of new employees with appropriate technical qualifications to
compensate for the loss of employees or to accommodate its future growth, and, in certain cases, the Group
may have to invest significant amounts of time in recruiting and training new pilots and other personnel. In
addition, the Group’s workforce is partially unionised and covered by collective bargaining agreements that
regulate work conditions and remuneration. These collective bargaining agreements are from time to time
subject to renegotiation with the unions or unions may try to enter into new agreements which are more costly
for the Group or its labour suppliers, resulting in higher direct or indirect labour cost. Furthermore, changes in
law relating to salaries of airline employees and collective bargaining agreements may result in higher costs
for the Group. As a result, the Group may have to increase salaries or face strikes by its employees or other
industrial action. Any of these risks could have a material adverse effect on the Group’s business, financial
The Group depends on the uninterrupted operation of its own and third-party automated systems and
technology.
The ability of the Group to generate bookings, manage ticket sales, receive and process reservations and
payments, manage its traffic network, perform flight operations and engage in other critical business tasks is
dependent on the efficient and uninterrupted operation of its computer and communication systems, including
backup facilities for a breakdown of the Group’s operation control centres, as well as systems used by third
parties conducting business with the Group. For instance, the Group uses tablet PCs in the cockpits of its
aircraft to replace paper documents such as flight maps, manuals and other documents which operate on the
basis of individualised software and related complex IT infrastructure for the exchange of data. In the event
that this system fails, the operation of the Group’s fleet may be suspended. Computer and communication
systems are vulnerable to disruptions, damage, power outages, acts of terrorism or sabotage, computer viruses,
fires and other events and programming errors, and there can be no assurance that systems used by the Group
or third parties, including revenue management systems, and by the Group’s sales partners, such as the
Group’s booking system and reservation systems of travel agencies, will operate efficiently and without
interruption. Any disruption to the computer and communication systems used by the Group or third parties
conducting business with it, particularly if such disruption persists, could significantly impair the Group’s
ability to operate efficiently and could have a material adverse effect on its business, financial condition
and/or results of operations.
The Group is exposed to risks associated with fluctuations in aviation fuel prices. In addition, the existing
tax exemption for aviation fuel in the EU could be repealed or amended.
The operating results of the Group’s passenger and cargo airline businesses are significantly impacted by
changes in the price of aviation fuel, which is very volatile and fluctuates depending on the levels of supply
and demand. If due to political developments, general economic conditions or other circumstances prices for
aviation fuel increase, this could have a material adverse effect on the Group’s business, financial condition
and/or results of operations. In addition, any fall in fuel prices could lead to increased pressure on prices and
greater competition and may affect the Group’s ability to hedge adequately.
Over the past few years there have been discussions both at the EU executive level and within EU Member
States about whether the existing tax exemptions for aviation fuel should be reviewed. There can be no
assurance that the current tax exemptions for aviation fuel will not be repealed or amended. The elimination
or reduction of current tax exemptions for aviation fuel in the EU would lead to a substantial increase in the
Group’s aviation fuel costs, which could have a material adverse effect on the Group’s business, financial
EMEA 100217621 v16
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The Group is exposed to risks associated with fluctuations in interest rates and currency exchange rates.
The Group’s aviation fuel payment obligations and a substantial portion of its aircraft operating lease and
maintenance, repair and overhaul payment obligations, debt-service obligations and underlying financial
liabilities are denominated in U.S. dollars. As a result, the Group is particularly vulnerable to fluctuations in
currency exchange rates of countries in which the Group operates against the U.S. dollar. As the exchange
rate between, in particular, the euro and the U.S. dollar is likely to continue to fluctuate in the future, there can
be no assurance that fluctuations in exchange rates will not materially adversely affect the Group’s results of
operations and financial condition in the future.
In addition, the Group is exposed to the risk of interest rate fluctuation, in particular arising under its financial
indebtedness. This varies according to the fixed or floating interest rate structure in place. As at 30 April
2015, 1.24% of the Group’s financial debt (consisting of €342 million) carried a fixed rate of interest whereas
98.76% of the Group’s financial debt carried a floating rate of interest.
While the Group uses hedging instruments to mitigate these risks, these may not fully protect it against the
adverse effects of fuel price increases or fluctuations in interest or currency exchange rates, largely because
the Group only hedges against a margin of fluctuation. Hedging also reduces the Group’s ability to benefit
from any fuel price decreases or any favourable exchange or interest rate developments. The Group’s
assumptions and estimates regarding the future developments of aviation fuel prices, currency exchange rates
and interest rates, and any risk-avoidance or risk-tolerance criteria selected by it, will have a substantial
impact on the success of its hedging policy. The Group’s business, financial condition and results of
operations could be materially adversely affected if its hedging policy is ultimately unsuccessful.
The Group’s route planning is subject to uncertainty and investments in new routes may not be successful.
The Group is implementing a number of new routes as part of its strategy. When the Group starts operating a
new route, its passenger load factors initially tend to be lower than those on its established routes and its
advertising and other promotional costs tend to be higher. As a result, new routes may require a substantial
amount of investment and may initially generate losses. Customers may also make less use of new routes or
additional capacity on existing routes than the Group may have predicted. In addition, if the Group operates a
new route it may experience more competition than expected, or competition on that route may exceed the
Group’s expectations in other ways. Should the Group be unable to assess demand, capacity and fares
correctly on new routes, this could have a material adverse effect on its business, financial condition and/or
From time to time the Group may be involved in disputes.
At the date of this Prospectus, the Issuer and other Group companies are parties to a limited number of legal
disputes arising in the ordinary course of their activities (see “Description of the Issuer — Litigation”).
There can be no assurance that the Group will not become subject to additional legal proceedings, or that it
would not need to be indemnified by CAI, in relation to the liabilities of CAI (see “Description of the Issuer
— Ring-fencing of CAI’s financial indebtedness and liabilities”). The Group monitors the development of
legal disputes and proceedings, also with the help of external advisers and, where necessary, will record
provisions considered appropriate in light of the circumstances following a prudent analysis of each dispute
and the risks concerned. The evaluation of risks is, however, subjective and necessarily involves estimations
of potential liabilities. There can therefore be no assurance that the ultimate outcome of these disputes will
not have a material adverse impact on the Group’s business, financial condition and/or results of operations.
RISKS RELATING TO REGULATION
Passenger rights and compensation could result in significant cost for the Group.
A number of jurisdictions have implemented rules on passenger rights, obliging airlines to provide assistance
and care, as well as re-routing or reimbursement to passengers in cases of flight disruptions, delays or denied
boarding. In addition, airlines have to compensate passengers in certain cases. For instance, the European
Union has passed legislation for compensating airline passengers who have been denied boarding or whose
flight has been cancelled or subject to delays (Regulation (EC) No 261/2004).
EMEA 100217621 v16
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Such legislation, which came into force in February 2005, imposes, amongst others, fixed levels of
compensation to be paid to passengers in the event of cancellation, except when the airline can prove that such
cancellation was caused by extraordinary circumstances and could not have been avoided even if all
reasonable measures had been taken. The European Court of Justice (“ECJ”) has extended the right of
passengers to receive monetary compensation to cases where passengers whose flights are delayed reach their
final destination three hours or more after the originally scheduled arrival time. Passengers subject to long
delays (ranging from two hours or more to four hours or more, depending on the flight distance) are also
entitled to “assistance” free of charge, including meals, refreshments and telephone calls, as well as hotel
accommodation if the delay extends overnight. For delays of at least five hours, the airline is also required to
offer the option of a refund of the cost of the ticket and, if the passenger has already completed part of the
journey, a return flight to the initial point of departure. Regulation (EC) No 261/2004 generally applies to all
passengers departing from an airport located in the territory of an EU Member State, irrespective of whether
the airline is licenced by a Member State of the EU, and, if the airline is licenced by a Member State of the
EU, also to all passengers departing from an airport outside the EU to a destination within the EU. As a result,
cancellation and delay of flights may lead to a significant financial burden for airlines which are licenced by
an EU Member State or which operate in the EU.
A proposal for revision of Regulation (EC) No 261/2004, which is currently in the legislative process, has
been advanced which is aimed at strengthening and extending passenger rights to obtain compensation in case
flights are delayed or passengers are stranded upon the bankruptcy of an airline, as well as passenger rights in
connection with luggage. With respect to the additional passenger rights in case of delayed or rescheduled
flights, the proposed revised rules provide, among others, that airlines may refuse to pay compensation only
on the basis of an exhaustive list of defined extraordinary circumstances. Furthermore, passengers who have a
return ticket may not be denied boarding at the return journey if they did not use their ticket for the outward
journey.
As a result of the regulatory and legislative framework in which they operate, airlines registered in an EU
Member State or which operate in the EU, including the Group, may incur significant increases in costs in the
future in connection with cancelled or delayed flights. This could have a material adverse effect on the
Group’s business, financial condition and results of operations.
The Group is subject to regulatory measures restricting the emission of greenhouse gases, which in the
future could restrict airline operation and increase costs.
Pursuant to the United Nations Framework Convention on Climate Change and the Kyoto Protocol, the parties
thereto have undertaken to control and reduce the emission of greenhouse gases. In order to meet its
obligations under international law, the EU enacted the EU emissions trading system (“ETS”) by Directive
2003/87/EC in 2003, which applied from 1 January 2005.
Directive 2008/101/EC (the “Directive”) amending Directive 2003/87/EC extended the scope of the ETS to
aviation activities. From 1 January 2012, all flights arriving at or departing from airports situated in the
territory of an EU Member State are generally covered by the ETS. The aircraft operators, as defined in the
Directive, are listed in Regulation (EC) No 748/2009, as subsequently amended. The Directive has been
implemented into Italian law by way of Legislative Decree no. 257 dated 30 December 2010. Under the
Directive, each aircraft operator must surrender a number of allowances equal to the total emissions produced,
duly notified and certified during the preceding calendar year from its aviation activities by 30 April each
year. Administrative sanctions (up to the interdiction at European level) apply to air carriers in breach of such
obligations.
For each year of the current trading period (2013-2020), this quantity is reduced to the equivalent of 95% of
the historical aviation emissions. As a consequence of the reduction of the total quantity of allowances, the
number of allowances to be allocated free of charge to aircraft operators (in the current trading period 82% of
all allowances allocated, with 3% being held in a special reserve for fast growing aircraft operators and new
entrants in the market) will be equally reduced. The applicable reference parameter for the allocation of
allowances free of charge for the period from 1 January 2013 to 31 December 2020 is of
0,000642186914222035 allowances per ton-kilometre. The percentage of allowances auctioned in the current
trading period is equal to 15% of all allowances allocated. In order to tackle the structural supply-demand
imbalances, which are expected to continue, the Environment Commission of the European Parliament has
EMEA 100217621 v16
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approved the introduction of a market stability reserve relating to all carbon markets, which should be
established in 2018 and should be operational from 1 January 2019. The relevant agreement should be voted
on in July 2015. The reserve will function by triggering adjustments to annual auction volumes.
In addition to affecting EU airlines, the ETS in general affects non-EU airlines on their flights arriving in or
departing from the EU. A number of non-EU countries, including China, India, Russia, the United States, are
opposed to the inclusion of their aircraft operators in the ETS. For example, in 2010 the Air Transport
Association of America (ATA) unsuccessfully challenged the validity of the Directive, with the European
Court of Justice concluding on 21 December 2011 that there were no elements affecting the validity of the
Directive. For the period between 2012 and 2016, the ETS generally only applies to flights between airports
in the European Economic Area (EEA). In view of the resolution of the International Civil Aviation
Organization (ICAO) adopted on 4 October 2013, containing the consolidated statement of continuing policies
and practices related to environmental protection, the European Parliament and the Council adopted
Regulation (EC) No. 421/2014, which came into force on 30 April 2014 and applies to the period from 1
January 2013 to 31 December 2016. Such regulation amended the Directive in view of the implementation by
2020 of an international agreement applying a single global market-based measure to international aviation
emissions. On the basis of the decisions made by the Assembly of ICAO to be held in 2016, the EU will need
to review the EU ETS scheme. At present, it is uncertain that the conflict between non-EU countries and the
European Union over the ETS will be successfully resolved in the course of the discussions being held within
the framework of ICAO. If it is not successfully resolved, these countries may impose trade and other
sanctions against the European Union and EU airlines. These and other non-EU countries, as well as the EU,
could also enact additional regulations concerning the emission of greenhouse gases that could restrict airline
operation and increase costs. Any of these risks could have a material adverse effect on the Group’s business,
financial condition and/or results of operations.
The Group is subject to extensive government fees and taxation.
The Group is subject to extensive government fees and taxation that negatively impact its operating profits.
Although these taxes are not operating expenses, they represent an additional cost for the Group’s customers.
Proposals are frequently made to raise taxes, fees, and charges imposed on airlines and their passengers.
Increases in such taxes, fees and charges could have a material adverse effect on the Group’s business,
The Group is exposed to the risk of unfavourable changes to tax, regulatory and administrative laws in the
jurisdictions in which it operates.
The Group operates in various jurisdictions in the Middle East, Europe and Asia and is subject to tax in
respect of certain overseas hubs in which it operates. The Group benefits from tax exemptions in most of
these jurisdictions pursuant to double taxation agreements and airline reciprocal arrangements. The laws (or
the interpretations thereof) or practices relating to taxation (including the current position as to double
taxation, withholding taxes, interest deductibility and tax concessions in certain operations), foreign exchange
or otherwise in these jurisdictions may change. Any such unfavourable change to tax, regulatory and
administrative laws could have a material adverse effect on the Group’s business, financial condition and/or
The Group is exposed to the risk of unfavourable changes to legislation relating to the social security and
pensions reform in Italy.
Changes to legislation relating to the social security and pensions reform in Italy (the pensions reform is still
in the preliminary phases of implementation) represent an element of high risk due to the repercussions they
could cause in terms of their impact on the policies planned for the reorganisation and the restructuring of the
Group. Such repercussions could, in the future, have a material adverse effect on the Group’s business,
The Group may be exposed to food and product safety issues and related liability claims and is subject to
government regulation relating to food safety.
The Group serves food to its customers as part of its on-board catering services. The preparation of food is a
sensitive process and exposes the Group to possible food safety liability claims and issues, such as for food
EMEA 100217621 v16
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poisoning. Existing food safety controls and procedures applied by the Group may prove inadequate.
Furthermore, other, internal or external, events, such as a wilful or accidental third-party contamination or
tampering may occur. For example, a third-party may tamper with or contaminate food, or fail to prepare
food in accordance with special meal preparation requirements and standards, such as those for halal, kosher
or other special meals for people with allergies or other dietary requirements. In addition, the Group is
exposed to possible product liability claims and issues in connection with other product offerings such as
contact and comfort items. For example, plastic items may have sharp edges or may include toxic colours if
they are not made to the appropriate standards and could cause harm to the end user, and in some cases the
Group may need to withdraw or recall a product batch. Any such event, or any negative press surrounding
such event, may harm the Group’s relationship with customers or reputation. This may limit the Group’s
ability to renew contracts on acceptable terms or at all and/or to obtain new business.
In addition, the laws and regulations governing the food industry have become increasingly complex across a
number of jurisdictions and areas, including, among others, food safety, labour, employment, immigration,
security and safety, health and safety, competition and antitrust, consumer protection and the environment.
Even where the Group has proper controls and procedures in place, implementation of these controls and
procedures, and proper reporting on a local or group wide basis may not be adequate and could cause the
Group to fail to comply with such laws or regulations. Any failure or suspected failure to comply with any of
these regulations may result in increased regulatory scrutiny by means of inquiries or investigations, liability
claims or sanctions and increased costs of compliance for, among other things, employee screening, and
increased insurance costs. The Group could also be subject to governmental and private civil remedies,
including fines, penalties, damages, injunctions, disciplinary actions, recalls or seizures and loss of licences, as
well as potential criminal sanctions. Any regulatory sanctions or threat of sanction could also attract adverse
media attention, adversely affect the Group’s reputation and require the attention of management to the
detriment of operations or otherwise limit business operations. Any of these risks could have a material
adverse effect on the Group’s business, financial condition and/or results of operations.
RISKS RELATING TO THE NOTES
The Notes are not rated.
Neither the Notes nor the long-term debt of the Issuer are rated. To the extent that any credit rating agencies
assign credit ratings to the Notes, such ratings may not reflect the potential impact of all risks related to
structure, market, additional factors discussed above, and other factors that may affect the value of the Notes.
A rating or the absence of a rating is not a recommendation to buy, sell or hold securities.
There is no active trading market for the Notes.
The Notes are new securities which may not be widely distributed and for which there is currently no active
trading market. If the Notes are traded after their initial issuance, they may trade at a discount to their initial
offering price, depending upon prevailing interest rates, the market for similar securities, general economic
conditions and the financial condition of the Issuer and the Group. Although application has been made to the
Irish Stock Exchange for the Notes to be admitted to the Official List and admitted to trading on the Main
Securities Market, there is no assurance that such application will be accepted or that an active trading market
will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for
the Notes.
The Notes are fixed rate securities and are vulnerable to fluctuations in market interest rates.
The Notes will carry fixed interest. A holder of a security with a fixed interest rate is exposed to the risk that
the price of such security falls as a result of changes in the current interest rate on the capital market (the
“Market Interest Rate”). While the nominal interest rate of a security with a fixed interest rate is fixed
during the life of such security or during a certain period of time, the Market Interest Rate typically changes
on a daily basis. As the Market Interest Rate changes, the price of such security changes in the opposite
direction. If the Market Interest Rate increases, the price of such security typically falls, until the yield of such
security is approximately equal to the Market Interest Rate. Conversely, if the Market Interest Rate falls, the
price of a security with a fixed interest rate typically increases, until the yield of such security is
approximately equal to the Market Interest Rate. Investors should be aware that movements of the Market
Interest Rate could adversely affect the market price of the Notes.
EMEA 100217621 v16
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The Notes may not be a suitable investment for all investors.
Each potential investor in the Notes must determine the suitability of that investment in light of its own
circumstances. In particular, each potential investor should:
(a)
have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits
and risks of investing in the Notes and the information contained in this Prospectus or any applicable
supplement;
(b)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its
particular financial situation, an investment in the Notes and the impact the Notes will have on its
overall investment portfolio;
(c)
have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes,
including where the currency for principal or interest payments is different from the potential
investor’s currency;
(d)
understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant
indices and financial markets; and
(e)
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for
economic, interest rate and other factors that may affect its investment and its ability to bear the
applicable risks.
The Notes may be redeemed prior to maturity.
In the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to
any withholding or deduction for or on account of, any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of
the Republic of Italy or any political subdivision thereof or any authority therein or thereof having the power
to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions.
The Notes are subject to optional redemption by the Issuer.
An optional redemption feature is likely to limit the market value of Notes. During any period when the
Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above
the price at which they can be redeemed. This also may be true prior to any redemption period.
The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the
Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an
effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at
a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments
available at that time.
Change of Control.
Upon the occurrence of a Change of Control (as defined in the “Terms and Conditions of the Notes”), as set
out in Condition 7(c) (Redemption and Purchase – Redemption at the option of Noteholders upon a Change of
Control), under certain circumstances the Noteholders will have the right to require the Issuer to redeem all
outstanding Notes at 100 per cent. of their principal amount together with interest accrued up to but excluding
the Put Date (as defined in the “Terms and Conditions of the Notes”). However, it is possible that the Issuer
will not have sufficient funds at the time of the Change of Control to make the required redemption of Notes.
If there are not sufficient funds for the redemption, Noteholders may receive less than the principal amount of
the Notes should they elect to exercise such right. Furthermore, if such provisions were exercised by the
Noteholders, this might adversely affect the Issuer’s financial position.
Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors
will have to rely on their procedures for transfer, payment and communication with the Issuer.
The Notes will be represented by the Global Notes except in certain limited circumstances described in the
Permanent Global Note. The Global Notes will be deposited with a common safekeeper for Euroclear and
EMEA 100217621 v16
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Clearstream, Luxembourg. Except in certain limited circumstances described in the Permanent Global Note,
investors will not be entitled to receive definitive Notes. Euroclear and Clearstream, Luxembourg will
maintain records of the beneficial interests in the Global Notes. While the Notes are represented by the
Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream,
Luxembourg.
The Issuer will discharge its payment obligations under the Notes by making payments to or to the order of
the common safekeeper for Euroclear and Clearstream, Luxembourg for distribution to their account holders.
A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream,
Luxembourg to receive payments under the Notes. The Issuer has no responsibility or liability for the records
relating to, or payments made in respect of, beneficial interests in the Global Notes.
Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the Notes.
Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and
Clearstream, Luxembourg to appoint appropriate proxies.
Minimum denomination.
As the Notes have a denomination consisting of the minimum denomination plus a higher integral multiple of
another smaller amount, it is possible that the Notes may be traded in amounts in excess of €100,000 (or its
equivalent) that are not integral multiples of €100,000 (or its equivalent). In such case a Noteholder who, as a
result of trading such amounts, holds a principal amount of less than the minimum denomination will not
receive a Definitive Note in respect of such holding (should Definitive Notes be printed) and would need to
purchase a principal amount of Notes such that its holding amounts to the minimum denomination.
Payments in respect of the Notes may in certain circumstances be made subject to withholding or deduction
of tax.
All payments in respect of Notes will be made free and clear of withholding or deduction of Italian taxation,
unless the withholding or deduction is required by law. In that event, the Issuer will pay such additional
amounts as will result in the Noteholders receiving such amounts as they would have received in respect of
such Notes had no such withholding or deduction been required. The Issuer’s obligation to gross up is,
however, subject to a number of exceptions, including withholding or deduction of:
(a)
imposta sostitutiva (Italian substitute tax), pursuant to Italian Legislative Decree No. 239 of 1 April
1996 (“Decree No. 239”); and
(b)
withholding tax operated in certain EU Member States pursuant to European Council Directive
2003/48/EC regarding the taxation of savings income (the “EU Savings Directive”) and similar
measures agreed with the European Union by certain non-EU countries and territories,
a brief description of which is set out below.
Prospective purchasers of Notes should consult their tax advisers as to the overall tax consequences of
acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts
under the Notes, including in particular the effect of any state, regional or local tax laws of any country or
territory. See also the section headed “Taxation” below.
Imposta sostitutiva
Imposta sostitutiva (Italian substitute tax) is applied to payments of interest and other income (including the
difference between the redemption amount and the issue price) at a rate of 26 per cent. to (a) certain Italian
resident Noteholders and (b) non-Italian resident Noteholders who have not filed in due time with the relevant
depository a declaration (autocertificazione) stating, inter alia, that he or she is resident for tax purposes in a
country which allows for an adequate exchange of information with the Italian tax authorities.
EU Savings Directive
Under the EU Savings Directive each Member State is required to provide to the tax authorities of another
Member State details of payments of interest or other similar income paid by a paying agent (within the
EMEA 100217621 v16
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meaning of the EU Savings Directive) within its jurisdiction to, or collected by such a paying agent (within
the meaning of the EU Savings Directive) for, an individual resident or certain limited types of entity
established in that other Member State.
On 24 March 2014, the Council of the European Union adopted a Council Directive amending and broadening
the scope of the requirements described above. Member States are required to apply these new requirements
from 1 January 2017. The changes will expand the range of payments covered by the Directive, in particular
to include additional types of income payable on securities. The Directive will also expand the circumstances
in which payments that indirectly benefit an individual resident in a Member State must be reported. This
approach will apply to payments made to, or secured for, persons, entities or legal arrangements (including
trusts) where certain conditions are satisfied, and may in some cases apply where the person, entity or
arrangement is established or effectively managed outside of the European Union.
For a transitional period, Austria may instead apply a withholding system in relation to such payments. The
changes referred to above will broaden the types of payments subject to withholding in those Member States
which still operate a withholding system when they are implemented. The end of the transitional period is
dependent upon the conclusion of certain agreements relating to the exchange of information on such
payments with certain non-EU countries.
A number of non-EU countries and certain dependent or associated territories of certain Member States
(including Switzerland), have adopted similar measures (either provision of information or transitional
withholding) in relation to payments made by a paying agent (within the meaning of the EU Savings
Directive) within its jurisdiction to or collected by such a paying agent (within the meaning of the EU Savings
Directive) for, an individual resident or certain limited types of entity established in a Member State. In
addition, the Member States have entered into provision of information or transitional withholding
arrangements with certain of those dependent or associated territories in relation to payments made by a
person in a Member State to, or collected by such a person for, an individual resident or certain limited types
of entity established in one of those territories.
If a payment were to be made or collected through a Member State which has opted for a withholding system
and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any
Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Notes as a
result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a
Member State that is not obliged to withhold or deduct tax pursuant to the EU Savings Directive.
For further information on the EU Savings Directive, see the section headed “Taxation” below.
Investors may be affected by changes of law or administrative practice.
The terms and conditions of the Notes are based on English law in effect as at the date of this Prospectus. No
assurance can be given as to the impact of any possible judicial decision or change to English law and/or
Italian law (where applicable) or administrative practice after the date of this Prospectus.
The modification provisions may bind minority Noteholders.
The terms and conditions of the Notes contain provisions for calling meetings of Noteholders to consider
matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders
including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a
manner contrary to the majority.
FATCA
Whilst the Notes are in global form and held within Euroclear and Clearstream, Luxembourg (together, the
“ICSDs”), in all but the most remote circumstances, it is not expected that the provisions of Sections 1471 to
1474 of the U.S. Internal Revenue Code of 1986, or any regulations thereunder or official interpretations
thereof, or an intergovernmental agreement between the United States and another jurisdiction facilitation the
implementation thereof (or any law implementing such intergovernmental agreement) (“FATCA”) will affect
the amount of any payment received by the ICSDs (see “Taxation — FATCA”).
EMEA 100217621 v16
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However, FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain
leading to the ultimate investor if any such custodian or intermediary generally is unable to receive payments
free of FATCA withholding. It also may affect payment to any ultimate investor that is a financial institution
that is not entitled to receive payments free of withholding under FATCA, or an ultimate investor that fails to
provide its broker (or other custodian or intermediary from which it receives payment) with any information,
forms, other documentation or consents that may be necessary for the payments to be made free of FATCA
withholding. Investors should choose the custodians or intermediaries with care (to ensure each is compliant
with FATCA or other laws or agreements related to FATCA), provide each custodian or intermediary with
any information, forms, other documentation or consents that may be necessary for such custodian or
intermediary to make a payment free of FATCA withholding. Investors should consult their own tax adviser
to obtain a more detailed explanation of FATCA and how FATCA may affect them. The Issuer’s obligations
under the Notes are discharged once it has paid the common safekeeper for the ICSDs and the Issuer has
therefore no responsibility for any amount thereafter transmitted through the ICSDs and custodians or
intermediaries.
Risks related to the market generally
Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk,
interest rate risk and credit risk:
The Notes are exposed to the risks related to the secondary market generally.
The Notes may have no established trading market when issued and one may never develop. If a market does
develop, it may not be very liquid and, consequently, investors may not be able to sell their Notes easily or at
prices that will provide them with a yield comparable to similar investments that have a developed secondary
market. Illiquidity may have a severely adverse effect on the market value of the Notes.
The market value of the Notes may also be significantly affected by factors such as variations in the Group’s
annual and interim results of operations, news announcements or changes in general market conditions. In
addition, broad market fluctuations and general economic and political conditions may adversely affect the
market value of the Notes, regardless of the actual performance of the Group.
The Notes may be delisted in the future.
Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and
admitted to trading on the Main Securities Market. The Notes may subsequently be delisted despite the best
efforts of the Issuer to maintain such listing and, although no assurance is made as to the liquidity of the Notes
as a result of listing, any delisting of the Notes may have a material effect on a Noteholder’s ability to resell
the Notes on the secondary market.
Legal investment considerations may restrict certain investments.
The investment activities of certain investors are subject to legal investment laws and regulations, or review or
regulation by certain authorities. Each potential investor should consult its legal advisers to determine
whether and to what extent (a) Notes are legal investments for it, (b) Notes can be used as collateral for
various types of borrowing and (c) other restrictions apply to the purchase or pledge of any Notes. Financial
institutions should consult their legal advisers or the appropriate regulators to determine the appropriate
treatment of Notes under any applicable risk-based capital or similar rules.
Exchange rate risks and exchange controls.
The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency
conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the
“Investor’s Currency”) other than Euro. These include the risk that exchange rates may change significantly
(including changes due to devaluation of the Euro or revaluation of the Investor’s Currency) and the risk that
authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An
appreciation in the value of the Investor’s Currency relative to the Euro would decrease (a) the Investor’s
Currency-equivalent yield on the Notes, (b) the Investor’s Currency-equivalent value of the principal payable
on the Notes and (c) the Investor’s Currency-equivalent market value of the Notes.
EMEA 100217621 v16
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In addition, government and monetary authorities may impose (as some have done in the past) exchange
controls that could adversely affect an applicable exchange rate. As a result, investors may receive less
interest or principal than expected, or no interest or principal.
EMEA 100217621 v16
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FINANCIAL INFORMATION RELATING TO CAI AND THE ISSUER
Issuer’s and CAI’s information incorporated by reference
This Prospectus should be read and construed in conjunction with:
•
the consolidated balance sheet and consolidated income statement of the Issuer as at and for the
quarter ended 31 March 2015, derived from the Issuer’s consolidated interim financial statements as
at and for the quarter ended 31 March 2015, together with the accompanying notes, prepared in
accordance with Italian Accounting Standard OIC 30 and approved by the Issuer’s board of directors, in
respect of which a limited review in accordance with International Standard on Review Engagements
2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”,
has been performed by Deloitte & Touche S.p.A.; and
•
the audited consolidated annual financial statements of Compagnia Aerea Italiana S.p.A. (“CAI”,
previously called Alitalia - Compagnia Aerea Italiana S.p.A.), which indirectly holds 51% of the
Issuer’s share capital and previously operated the going concern relating to the air carrier business
(the “Going Concern”) which was contributed to the Issuer with effect from 1 January 2015 (see
“Description of the Issuer — History”), as at and for the years ended 31 December 2013 and 2014,
together in each case with the accompanying notes. Such information does not include the financial
information or results of the Issuer. CAI’s audited consolidated annual financial statements as at and
for the years ended 31 December 2013 and 2014 have been prepared in accordance with Italian
GAAP. These relate to an entity which is entirely separate from the Issuer, having a different
business organisation and financial position (see “Description of the Issuer ─ Ring fencing of CAI’s
indebtedness and liabilities”).
Such documents are incorporated into, and form part of, this Prospectus, save that (a) any statement contained
therein shall be modified or superseded for the purpose of this Prospectus to the extent that a statement herein
modifies or supersedes such earlier statement (whether expressly, by implication or otherwise), and (b) any
information contained in the aforementioned financial statements, but not included in the tables set out below,
is not incorporated by reference in this Prospectus because such information is either not relevant for investors
or is covered elsewhere in this Prospectus, and should be read for information purposes only.
In this section, references to pages refer to the English versions of the relevant documentation. This
Prospectus is drawn up in the English language. In case there is any discrepancy between the English text and
the Italian text, the English text stands approved for the purposes of approval under the Prospectus Directive.
The following tables show where the information incorporated by reference in this Prospectus can be found in
the above-mentioned documents:
•
Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March 2015:
Balance Sheet .......................................................................................
Income Statement .................................................................................
Notes to the Financial Statements ........................................................
Independent Auditors’ Report...............................................................
•
Pages 51 to 52
Page 53
Pages 55 to 95
Front page
CAI’s audited consolidated annual financial statements as at and for the years ended 31 December
2014:
Balance Sheet .......................................................................................
Cash Flow Statement ............................................................................
EMEA 100217621 v16
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Pages 125 to 126
Page 128
Page 179
Pages 130 to 213
Front pages
•
2013:
Balance Sheet .......................................................................................
Cash Flow Statement ............................................................................
Pages 99 to 100
Page 102
Page 42
Pages 103 to 182
Front pages
Copies of documents incorporated by reference in this Prospectus have been filed with the Central Bank and
are published on the website of the Irish Stock Exchange (www.ise.ie).
In particular, the following documents are available to the public on the following links:
•
Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March 2015:
http://www.ise.ie/debt_documents/2015%20Q1%20financial%20statements(17870522_1)_569978f8fb80-4ecb-b744-94d393597d12.PDF?v=2462015
•
2014:
http://www.ise.ie/debt_documents/2014%20Audited%20Financial%20Statements(17526701_1)_07a2ff
ae-f0cb-40e2-b100-d3a4f546b3b1.PDF?v=2462015
•
2013:
http://www.ise.ie/debt_documents/2013%20Audited%20Financial%20Statements(17526709_1)_adecd2
1c-e54c-4e30-bcf2-2dccc8207260.PDF?v=2462015
Any websites referred to in this Prospectus are for information purposes only and do not form part of this
Prospectus.
Issuer’s unaudited financial statements as at and for the year ended 31 December 2014 appended to this
Prospectus
The “Index to the Issuer’s Financial Statements” included in this Prospectus contains the balance sheet,
income statement and cash flow statement of the Issuer as at and for the year ended 31 December 2014, which
is derived from and should be read in conjunction with, and is qualified in its entirety by reference to the
Issuer’s unaudited financial statements as at and for the year ended 31 December 2014 prepared in accordance
with Italian GAAP and approved by the Issuer’s board of directors.
Future financial statements
The audited consolidated financial statements of the Issuer and its subsidiaries as at and for the year ended 31
December 2015 will be prepared in accordance with IFRS, together with a reconciliation to show differences
between the IFRS figures and their Italian GAAP equivalents. Future audited consolidated financial
statements and unaudited interim consolidated financial information of the Issuer thereafter will be prepared in
accordance with IFRS only.
Measures
The financial information contained in this Prospectus, in particular that relating to the years ended
31 December 2013 and 2014 for CAI, includes certain measures normally used to evaluate the Group’s
economic and financial performance. These measures are not identified as accounting measures under IFRS
or Italian GAAP and therefore undue reliance should not be placed on such measures.
EMEA 100217621 v16
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TERMS AND CONDITIONS OF THE NOTES
The issue of the Notes was authorised by a resolution of the Board of Directors of Alitalia - Società Aerea
Italiana S.p.A. (the “Issuer”, which expression shall include any Person substituted in place of the Issuer in
accordance with Condition 13(d) (Substitution) or any permitted successor(s) or assignee(s)) passed on 25
June 2015. The Notes are constituted by a trust deed (the “Trust Deed”) dated 30 July 2015 between the
Issuer and BNP Paribas Trust Corporation UK Limited (the “Trustee” which expression shall include all
Persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Notes
(the “Noteholders”). These terms and conditions (the “Conditions”) include summaries of, and are subject
to, the detailed provisions of the Trust Deed, which includes the form of the Notes and the coupons relating to
them (the “Coupons”). Copies of the Trust Deed and of the Paying Agency Agreement (the “Paying Agency
Agreement”) dated 30 July 2015 relating to the Notes between the Issuer, the Trustee and the initial principal
paying agent and the other paying agents named in it, are available for inspection during usual business hours
at the specified offices of the principal paying agent for the time being (the “Principal Paying Agent”) and
the other paying agents for the time being (the “Paying Agents”, which expression shall include the Principal
Paying Agent). The Noteholders and the holders of the Coupons (whether or not attached to the relevant
Notes) (the “Couponholders”) are entitled to the benefit of, are bound by, and are deemed to have notice of,
all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of
the Paying Agency Agreement.
1.
Definitions and Interpretation
(a)
Definitions: in these Conditions:
“2014 Accounting Principles” means the Accounting Principles as applied by the Issuer in the audited
consolidated financial statements of the Issuer for the financial year ended 31 December 2014.
“Accounting Principles” means generally accepted accounting principles in Italy, including IFRS.
“Acting in Concert” means a group of Persons who, pursuant to an agreement or understanding, actively cooperate through the acquisition or holding of Equity Interests of an entity by any of them, either directly or
indirectly, for the purposes of obtaining or consolidating control of the Issuer.
“Auditors” means (i) one of PricewaterhouseCoopers S.p.A., Ernst & Young S.p.A., KPMG S.p.A. or
Deloitte & Touche S.p.A. or (ii) any other reputable firm of auditors of international standing appointed by the
Issuer.
“Board of Directors” means the board of directors of the Issuer.
“Capital Stock” means:
(i)
in the case of a corporation, corporate stock;
(ii)
in the case of an association or business entity, any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock;
(iii)
in the case of a partnership or limited liability company, partnership interests (whether general
or limited) or membership interests; and
(iv)
any other interest or participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing
any debt securities convertible into Capital Stock, whether or not such debt securities include any right of
participation with Capital Stock.
“Cash” means, on a consolidated basis, any available cash at bank and marketable debt obligations which
have a credit rating of at least A/A-2 by S&P or equivalent and are in any case available on demand to meet
the financial obligations of the Group, which shall be taken into account only with respect to the mark to
market value.
EMEA 100217621 v16
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A “Change of Control” shall be deemed to occur each time that any Person or Persons Acting in Concert or
any Person or Persons acting on behalf of any such Person(s) (other than a Permitted Holder, acting directly or
indirectly), at any time, whether directly or indirectly, acquires the control of the Issuer pursuant to Article
2359 paragraphs (1) and (2) of the Italian Civil Code.
“Cure” means any remedial action that will allow the Issuer to cure a breach of Condition 4(b) or Condition
5(a).
“Cure Amount” means the amount, in cash or non-cash consideration, excluding a revaluation of assets, that
derives from any remedial action that is applied as part of a Cure, such amount to be certified by an
independent investment bank.
“Debt” means, on a consolidated basis, any indebtedness in relation to:
(i)
any loan or facility of any kind (including, by way of example, bank overdrafts);
(ii)
any notes, debt instrument of any nature, redeemable and preferred shares, or option or agreement
according to which the Issuer and/or its Subsidiaries shall, upon third parties’ requests, redeem or purchase
their own or third parties’ instruments or similar financial instruments, provided that such shares, options or
agreements are treated as financial indebtedness pursuant to the applicable Accounting Principles;
(iii)
any receivable, including future, assigned or discounted receivables with recourse (“pro solvendo”),
including in relation to any factoring arrangements entered into in the ordinary course of business and any
securitisation of receivables;
(iv)
any agreements treated as financial lease agreements pursuant to the applicable Accounting Principles;
(v)
any cost and expense related to purchases in respect of the supply of assets or services, to the extent
that the relevant amounts shall be paid:
(a)
on or later than 180 (one hundred and eighty) days, in relation to aircraft; and
(b)
on or later than 270 (two hundred and seventy) days after the date of supply, in relation to any
assets (other than aircraft) or services,
and such delayed payments mainly constitute a financing facility;
(vi)
any transaction related to financial instruments (other than derivatives, but without prejudice to
paragraph (x) below), as defined according to Legislative Decree no. 58/1998 (as subsequently amended);
(vii)
any transaction (including, by way of example, forward sale and purchase transactions) which,
pursuant to the applicable Accounting Principles, shall be treated as having the same economic effect as
financial indebtedness or as being comparable to loans or financing (including, by way of example, any
financing related to the purchase of an asset);
(viii) any amount due as a consequence of enforcement of any acceptance or backing (“avalli”) of bills,
indemnity obligation, recourse or reimbursement obligation related to any security of any kind, surety, letter of
credit or any similar instrument issued by a bank or a financial intermediary, other than those provided by law
or regulation;
(ix)
any amount due as a consequence of enforcement of any personal guarantee or indemnity obligation
or any other act aimed at securing third parties against financial losses, including any Guarantee; and
(x)
any amount due under derivative transactions of any kind (“derivati”) (including, in the event of
expiry or termination or close out of that derivative transaction, the marked-to-market value of such derivative
transactions).
For the avoidance of doubt, any present or future indebtedness falling within paragraph (ii) of the definition of
“Equity” shall not constitute Debt.
EMEA 100217621 v16
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“EBITDAR” means earnings before tax, any material items of an unusual or non recurring nature which
represent gains or losses, financial gains and charges, adjustments of the value of financial assets, depreciation
and amortisation of tangible and intangible assets and aircraft rent on a consolidated basis.
“Equity” means, with respect to the consolidated financial statements of the Issuer, the aggregate of (i) the
amount related to the items referred to in the section Stato Patrimoniale – Passivo letter (A) (Patrimonio
Netto), under article 2424 of the Italian civil code or any equivalent items under IFRS and (ii) any present or
future indebtedness which (x) is subordinated (with respect to both principal and interest) to the Notes, (y) has
a maturity date falling not earlier than 6 months after the Maturity Date and (z) is provided by the
shareholders of the Issuer and/or companies controlled, directly or indirectly, by, or under common control of,
Etihad Airways P.S.J.C. or companies controlled, directly or indirectly by any controlling company of Etihad
Airways P.S.J.C.
“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or exchangeable for, Capital Stock).
“Euro” means the lawful currency of the member states of the European Union that participate in the third
stage of the European Economic and Monetary Union.
“Extraordinary Resolution” has the meaning set out in the Trust Deed.
“Financial Year” means the annual accounting period of the Group ending on 31 December in each year.
“Group” means the Issuer and its Subsidiaries from time to time.
“Guarantee” means any guarantee, indemnity, undertaking to hold any party indemnified and harmless
(“manleva”), bond (“fideiussione”), autonomous guarantee and/or first demand guarantee (including any
“credito documentario”, “avallo”, advance bond, bid bond, payment bond, retention bond, performance bond,
letter of credit bank and/or insurance guarantees) and/or any other guarantee.
“Hedging Obligations” means, with respect to any Person, the obligations of such Person under currency
exchange, interest rate, energy price or commodity swap, cap and collar agreements, and other similar or like
agreements or arrangements.
“IFRS” means International Financial Reporting Standards as endorsed by the European Union and in effect
on the date of any calculation or determination required hereunder.
An “Insolvency Event” will have occurred in respect of the Issuer or any of its Material Subsidiaries if:
(i)
any one of them becomes subject to any applicable bankruptcy, liquidation, administration,
receivership, insolvency, composition or restructuring (including, without limitation, fallimento, liquidazione
coatta amministrativa, concordato preventivo and amministrazione straordinaria, each such expression
bearing the meaning ascribed to it by the laws of the Republic of Italy, and including also any equivalent or
analogous proceedings under the law of the jurisdiction in which it is deemed to carry on business) or similar
proceedings;
(ii)
an application for the commencement of any of the proceedings under (i) above is made in respect of
or by any one of them or the same proceedings are otherwise initiated against any one of them or notice is
given of intention to appoint an administrator in relation to any one of them unless (A) the commencement of
such proceedings is being disputed in good faith with a reasonable prospect of success as confirmed by an
opinion of independent legal advisers of recognised standing or (B) such proceedings are discharged or stayed
within 90 days;
(iii)
any one of them takes any action for a re-adjustment or deferral of any of its payment obligations, or
makes a general assignment or an arrangement or composition with or for the benefit of its creditors, or is
granted by a competent court a moratorium, in each case in respect of all or a substantial part of its Debt, or
applies for a suspension of payments in relation to all or a substantial part of its Debt; or
(iv)
an order is made or an effective resolution is passed for the winding-up, liquidation, administration or
dissolution in any form of any one of them (except a winding-up for the purposes of or pursuant to Permitted
EMEA 100217621 v16
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Reorganisation) or any of the events under article 2484 of the Italian civil code occurs with respect to any one
of them.
“Insolvent” means that the Issuer or any of its Material Subsidiaries is, or is deemed for the purposes of any
applicable law to be, unable to pay its debts, taken as a whole, as they fall due or is insolvent.
“Interpolated Mid Swap Rate” means the interpolation between the two Reference Mid Swap Rates for a
term equal to the Remaining Life taken at 3.00 pm (London time) on the date which is two Business Days
prior to the dispatch of the notice of redemption to Noteholders under Condition 7(d).
“Issue Date” means the date of issue of the Notes.
“Material Subsidiary” means, at any time, any Subsidiary of the Issuer:
(i)
whose gross revenues (consolidated in the case of a Subsidiary of the Issuer which itself has
Subsidiaries) or whose total net assets (consolidated in the case of a Subsidiary of the Issuer which itself has
Subsidiaries) represent not less than ten per cent. of the consolidated gross revenues (excluding intra-group
items), or, as the case may be, the consolidated total net assets of the Group, all as calculated respectively by
reference to the latest financial statements (consolidated or, as the case may be, unconsolidated) of the
Subsidiary of the Issuer and the then latest audited consolidated financial statements of the Issuer; provided
that in the case of a Subsidiary of the Issuer acquired after the end of the financial period to which the then
latest audited consolidated financial statements of the Issuer relate for the purpose of applying each of the
foregoing tests, the reference to the Issuer’s latest audited consolidated financial statements shall be deemed to
be a reference to such financial statements as if such Subsidiary of the Issuer had been shown therein by
reference to its then latest relevant financial statements, adjusted as deemed appropriate by the Auditors for
the time being after consultation with the Issuer; or
(ii)
to which is transferred all or Substantially All of the business, undertaking and assets of another
Subsidiary of the Issuer which immediately prior to such transfer is a Material Subsidiary, whereupon (a) in
the case of a transfer by a Material Subsidiary, the transferor Material Subsidiary shall immediately cease to
be a Material Subsidiary and (b) the transferee Subsidiary of the Issuer shall immediately become a Material
Subsidiary, provided that on or after the date on which the relevant financial statements for the financial
period current at the date of such transfer are published, whether such transferor Subsidiary of the Issuer or
such transferee Subsidiary of the Issuer is or is not a Material Subsidiary shall be determined pursuant to the
provisions of sub-paragraph (i) above.
A report by a director or other authorised signatory of the Issuer that in its opinion (making such adjustments
(if any) as they shall deem appropriate) a Subsidiary of the Issuer is or is not or was or was not at any
particular time or during any particular period a Material Subsidiary shall, in the absence of manifest error, be
conclusive and binding on the Issuer, the Trustee and the Noteholders.
“Net Financial Position” means, on a consolidated basis, the sum of Debt and Cash.
“Net Total Assets” means, on any given date, the aggregate value of the Group’s aircraft, aircraft equipment
and ground operations assets (including equipment, takeoff and landing slots and related tangible assets),
inventory, brand, maintenance reserves and cash as shown in the latest audited annual consolidated financial
statements of the Issuer.
“Permitted Encumbrance” means any Security Interest on aircraft, aircraft equipment or ground operations
assets (including equipment, takeoff and landing slots and related tangible assets) or lease receivables in
respect of aircraft or aircraft equipment of the Issuer or any Subsidiary of the Issuer (including by means of
special purpose entities owning aircraft or aircraft equipment), or any Security Interest relating to factoring in
the ordinary course of business, credit support arrangements in relation to Hedging Obligations or the
securitisation of receivables.
“Permitted Holder” means Intesa Sanpaolo S.p.A., Poste Italiane S.p.A., UniCredit S.p.A. and Etihad
Investment Holding Company LLC, or any of their successors or assigns.
“Permitted Indebtedness” means, as of the relevant Reference Date, that:
EMEA 100217621 v16
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(i)
the Total Debt is not higher than 60 per cent. of the Net Total Assets; and
(ii)
the Secured Debt is not higher than 30 per cent. of the Net Total Assets,
in each case, determined in accordance with the relevant consolidated financial statements of the Issuer and in
accordance with the 2014 Accounting Principles.
“Permitted Reorganisation” means:
(i)
in relation to any Material Subsidiary:
(A) any:
(1) “fusione” or “scissione” (such expressions bearing the meanings ascribed to them by the
laws of the Republic of Italy) or any other, amalgamation, reorganisation, merger,
consolidation, demerger (whether in whole or in part) or other similar arrangement; or
(2) contribution in kind, conveyance, sale, assignment, transfer, lease of, or any kind of
disposal of all or any of its assets or its going concern; or
(3) purchase or exchange of its assets or its going concern, whether or not effected through a
capital increase subscribed and paid up by means of a contribution in kind; or
(4) lease of its assets or its going concern,
whereby all or Substantially All of its assets and undertaking (as evidenced in its latest audited
financial statements (consolidated, if available)) are transferred, sold contributed, assigned or
otherwise vested in (x) the Issuer, (y) any Subsidiary or Subsidiaries of the Issuer and/or (z) any
Subsidiary or Subsidiaries of a Material Subsidiary; or
(B) a sale, demerger, contribution or other disposal of all or Substantially All of the relevant Material
Subsidiary’s assets (as evidenced in its latest audited financial statements (consolidated, if
available)) whilst solvent to any Person for cash on commercial arm’s length terms; and
(ii)
in relation to the Issuer, any:
(1) “fusione” or “scissione” (such expressions bearing the meanings ascribed to them by the
laws of the Republic of Italy) or any other, amalgamation, reorganisation, merger,
consolidation, demerger (whether in whole or in part) or other similar arrangement; or
(2) contribution in kind, conveyance, sale, assignment, transfer, lease of, or any kind of
disposal of all or any of its assets or its going concern; or
(3) purchase or exchange of its assets or its going concern, whether or not effected through a
capital increase subscribed and paid up by means of a contribution in kind; or
(4) lease of its assets or its going concern,
whereby all or Substantially All of its assets and undertaking (as evidenced in its latest audited
consolidated financial statements) are transferred, sold contributed, assigned or otherwise vested in
a single body corporates which assume(s) or maintain(s) (as the case may be) the liability as
principal debtor in respect of the Notes.
“Reference Date” means 31 December of each year, starting from 31 December 2016.
“Reference Mid Swap Rates” means two rates each calculated as the average of the bid and ask reported by
Intercapital Brokers (now ICAP plc) as published on the Thomson Reuters screen ICAPEURO (or such other
page or service as may replace such page for the purposes of displaying such rate) for a 6 month Euribor
swapped to fixed rate, one with a tenor rounding down and one with a tenor rounding up to the nearest whole
year remaining until the Maturity Date of the Notes.
EMEA 100217621 v16
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“Relevant Debt” means any Debt which is in the form of, or represented or evidenced by, bonds, notes,
debentures, loan stock or other securities which for the time being are, or are intended to be or capable of
being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market.
For the avoidance of doubt, Relevant Debt shall not include any Hedging Obligation.
“Relevant Jurisdiction” means the Republic of Italy or any authority thereof or therein having power to tax
or any other jurisdiction or any authority thereof or therein having power to tax to which the Issuer becomes
subject in respect of payments made by it of principal and interest on the Notes and Coupons.
“Remaining Life” means from any date the number of years remaining until the Maturity Date, rounded
down to three decimal places.
“Reporting Date” means a date falling no later than 30 days after the approval by the Board of Directors of
the Issuer’s audited annual consolidated financial statements, and in any event which is no later than 180 days
after the relevant Reference Date, provided that (in relation to Condition 5(b)(ii) only) the first Reporting Date
shall be the date falling no later than 30 days after the approval by the Board of Directors of the Issuer’s
audited annual consolidated financial statements as of and for the period ended 31 December 2016, and in any
event no later than 180 days after 31 December 2016.
“Secured Debt” means the portion of Total Debt at the relevant Reference Date that is secured by a Security
Interest on any asset of any member of the Group.
“Security Interest” means any mortgage, charge, pledge, lien or other security interest including, without
limitation, anything analogous to any of the foregoing under the laws of any applicable jurisdiction.
‘‘S&P’’ means Standard & Poor’s Rating Services, a division of The McGraw Hill Companies, Inc. or any
successor thereto from time to time.
“Subsidiary” means in relation to any company, corporation or legal entity (excluding, for the avoidance of
doubt, any consortium pursuant to article 2602 of the Italian civil code) (a “holding company”), any company,
corporation or legal entity (excluding, for the avoidance of doubt, any consortium pursuant to article 2602 of
the Italian civil code) which is controlled, directly or indirectly, by the holding company pursuant to article
2359, paragraph 1, No. 1 and 2, of the Italian civil code.
“Substantially All” shall mean a part of the whole which accounts for eighty per cent. (80%) or more.
“TARGET Settlement Day” means any day on which the TARGET system is open.
“TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer
(known as TARGET2) System which was launched on 19 November 2007 or any successor thereto.
“Total Debt” means, on any given date, the aggregate amount of all Debt of the Group as shown in the latest
audited annual consolidated financial statements of the Issuer.
(b)
Interpretation: in these Conditions:
(i)
“business day” means a day on which commercial banks and foreign exchange markets are open in
the relevant city and which is a TARGET Settlement Day;
(ii)
“Person” means any individual, company, corporation, firm, partnership, joint venture, association,
organisation, state or agency of a state or other entity, whether or not having separate legal personality;
(iii)
“Relevant Date” means whichever is the later of (i) the date on which a payment first becomes due;
and (ii) if the full amount payable has not been received by the Principal Paying Agent or the Trustee on or
prior to such due date, the date on which, the full amount having been so received, notice to that effect shall
have been given to the Noteholders;
(iv)
any reference in these Conditions to principal and/or interest shall be deemed to include any
additional amounts which may be payable under Condition 9 (Taxation) or any undertaking given in addition
to or substitution for such amounts under the Trust Deed; and
EMEA 100217621 v16
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(v)
any reference in these Conditions to the Notes include (unless the context requires otherwise) any
other securities issued pursuant to Condition 16 (Further Issues) and forming a single series with the Notes.
2.
Form, Denomination and Title
a)
Form and denomination: The Notes are serially numbered and in bearer form in the denomination of
€100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000, each with Coupons
attached on issue. No definitive Notes will be issued with a denomination above €199,000.
b)
Title: Title to the Notes and Coupons passes by delivery. The holder of any Note or Coupon will
(except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is
overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or
loss) and no Person will be liable for so treating the holder.
3.
Status
The Notes and Coupons constitute (subject to Condition 4 (Negative Pledge and Permitted Indebtedness))
senior unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference
among themselves. The payment obligations of the Issuer under the Notes and the Coupons shall, save for
such exceptions as may be provided by applicable legislation and subject to Condition 4 (Negative Pledge and
Permitted Indebtedness), at all times rank at least equally with all its other present and future unsecured and
unsubordinated obligations.
4.
Negative Pledge and Permitted Indebtedness
So long as any Note or Coupon remains outstanding (as defined in the Trust Deed):
a) the Issuer will not, and will ensure that none of its Material Subsidiaries will, create, or permit to subsist,
any Security Interest (other than a Permitted Encumbrance) upon the whole or any part of its present or
future undertaking, assets or revenues to secure any Relevant Debt or to secure any guarantee or
indemnity in respect of any Relevant Debt, without at the same time or prior thereto according to the
Notes and the Coupons the same Security Interest as is created or subsisting to secure any such Relevant
Debt, guarantee or indemnity or such other Security Interest as either (i) the Trustee shall in its absolute
discretion deem not materially less beneficial to the interest of the Noteholders; or (ii) shall be approved
by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders; and
b) subject to Condition 5(c), the Issuer shall ensure that it remains in compliance with the thresholds
specified in the definition of “Permitted Indebtedness”.
5.
Covenants
a)
Financial Covenants: So long as any of the Notes remain outstanding (as defined in the Trust Deed),
and subject to Condition 5(c) below, the Issuer shall ensure that as at each Reference Date:
(i)
the ratio of Net Financial Position to EBITDAR is lower than 1.0:1; and
(ii)
the ratio of Debt to Equity is lower than 1.5:1.0,
in each case, determined in accordance with the relevant consolidated financial statements of the Issuer and in
accordance with the 2014 Accounting Principles (together, the “Original Financial Covenants”), save that
when the Issuer adopts IFRS as its Accounting Principles, the above ratios will be recalculated as follows.
If in respect of a Reference Date, the relevant determination would result in a ratio which, when multiplied by
a factor of 1.3, is:
(i)
lower than that which would have been obtained under the Original Financial Covenants, then the
Original Financial Covenants shall remain unchanged;
EMEA 100217621 v16
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(ii)
higher than that which would have been obtained under the Original Financial Covenants, the Original
Financial Covenants applicable thereafter shall be multiplied by 1.3 (the “New Financial
Covenants”), and from the next following Reference Date the New Financial Covenants shall apply
mutatis mutandis.
b)
Compliance Certificate: On or prior to each Reporting Date, the Issuer will deliver to the Trustee (i)
its latest audited annual consolidated financial statements and (ii) a certificate, signed by the Chief Financial
Officer of the Issuer, containing (a) the formulae for the calculation of the Original Financial Covenants or the
New Financial Covenants, as the case may be, and the Permitted Indebtedness and (b) a statement as to the
correctness of such formulae and confirming that it has complied with the Original Financial Covenants or the
New Financial Covenants, as the case may be, and the thresholds specified in the definition of Permitted
Indebtedness or, if it has not complied with such obligations as of the Reference Date, it shall set forth in
reasonable detail the manner in which a Cure has been adopted and it shall provide all the relevant
documentation required under the definition of Cure Amount in order to show that the Cure Amount has been
effective pursuant to Condition 5(c) or the reasons for its non-compliance, as the case may be (a “Compliance
Certificate”).
For the avoidance of doubt, the Trustee shall have no duty to investigate or monitor compliance by the Issuer
with the Original Financial Covenants or the New Financial Covenants or the Permitted Indebtedness,
including if and when a Cure has been effected, and can rely without liability and without further enquiry on
the Issuer’s Compliance Certificate as to its compliance or non-compliance as aforementioned.
c)
Cure Process:
(i)
No default under the Original Financial Covenants or the New Financial Covenants or the definition
of Permitted Indebtedness shall occur if, on a date (the “Cure Date”) prior to the date of delivery of the
relevant Compliance Certificate, the Issuer (at its sole discretion and without assuming any obligation in
respect thereof on its behalf or on behalf of its shareholders or other third parties) procures that a Cure is
effected in accordance with paragraph (ii) below (a “Cure Right”) such that, after taking into account the
Cure, the relevant obligation is not breached.
(ii)
A Cure Amount shall be deemed to have been received on the last day of the relevant Financial Year,
such that EBITDAR, Equity or Net Total Assets shall be increased by the amount of the Cure Amount or Debt,
Net Financial Position, Secured Debt or Total Debt, as the case may be, shall be reduced by the amount of the
Cure Amount (without double counting) and the relevant ratio shall be recalculated accordingly, to determine
whether the Cure Amount is sufficient to prevent a breach of the relevant obligation.
(iii)
There shall be no limit on the amount of any Cure Amount.
6.
Interest
The Notes bear interest from and including the Issue Date at the rate of 5.250 per cent. per annum, payable
annually in arrear on 30 July in each year (each an “Interest Payment Date”).
Each Note will cease to bear interest from and including the due date for redemption unless, upon due
presentation, payment of principal is improperly withheld or refused. In such event it shall continue to bear
interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all
sums due in respect of such Note up to that day are received by or on behalf of the relevant holder, and (b) the
day which is seven days after the Trustee or the Principal Paying Agent has notified Noteholders of receipt of
all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the
subsequent payment to the relevant holders under these Conditions).
Where interest is to be calculated in respect of a period which is equal to or shorter than an Interest Period (as
defined below), the day-count fraction used will be the number of days in the relevant period, from and
including the date from which interest begins to accrue to but excluding the date on which it falls due, divided
by the number of days in the Interest Period in which the relevant period falls (including the first such day but
excluding the last).
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In these Conditions, the period beginning on and including the Issue Date and ending on but excluding the
first Interest Payment Date and each successive period beginning on and including an Interest Payment Date
and ending on but excluding the next succeeding Interest Payment Date is called an “Interest Period”.
Interest in respect of any Note shall be calculated per €1,000 in principal amount of the Notes (the
“Calculation Amount”). The amount of interest payable per Calculation Amount for any period shall be
equal to the product of 5.250 per cent., the Calculation Amount and the day-count fraction for the relevant
period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).
7.
Redemption and Purchase
a)
Final redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be
redeemed at their principal amount on 30 July 2020 (the “Maturity Date”). The Notes may not be redeemed
at the option of the Issuer other than in accordance with this Condition 7 (Redemption and Purchase).
b)
Redemption for taxation reasons: The Notes may be redeemed at the option of the Issuer in whole,
but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which
notice shall be irrevocable), at their principal amount, (together with interest accrued to the date fixed for
redemption), if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that it has or
will become obliged to pay additional amounts as provided or referred to in this Condition 7 (Redemption and
Purchase) as a result of any change in, or amendment to, the laws or regulations of the Republic of Italy or
any political subdivision or any authority thereof or therein having power to tax, or any change in the
application or official interpretation of such laws or regulations, which change or amendment becomes
effective on or after the Issue Date, and (ii) such obligation cannot be avoided by the Issuer taking reasonable
measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to
the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in
respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition
7(b), the Issuer shall deliver to the Trustee (a) a certificate signed by a duly authorised director of the Issuer
stating that the obligation referred to in (i) above cannot be avoided by the Issuer taking reasonable measures
available to it and (b) an opinion of independent legal advisers of recognised standing to the effect that the
Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment
and the Trustee shall be entitled to accept such certificate and legal opinion as sufficient evidence of the
satisfaction of the condition precedent set out in (ii) above, in which event it shall be conclusive and binding
on the Noteholders and the Couponholders.
c)
Redemption at the option of the Noteholders upon the Occurrence of a Change of Control: If a
Change of Control occurs, the holder of each Note, excluding any holder of a Note who solely or Acting in
Concert exercises control of the Issuer pursuant to Article 2359 paragraphs (1) and (2) of the Italian Civil
Code, will have the option (a “Put Option”) (unless prior to the giving of the relevant Put Event Notice (as
defined below) the Issuer has given notice of redemption under Condition 7(b) above) to require the Issuer to
redeem or, at the Issuer’s option, purchase (or procure the purchase of) that Note on the Put Date (as defined
below) at its principal amount then outstanding together with interest accrued to (but excluding) the Put Date.
Promptly upon the Issuer becoming aware that a Change of Control has occurred, and in any event within 14
days after becoming aware of the occurrence of such Change of Control, the Issuer shall give notice (a “Put
Event Notice”) to the Noteholders in accordance with Condition 17 (Notices) specifying the nature of the Put
Event and the procedure for exercising the Put Option.
To exercise the Put Option, the holder of a Note must deliver such Note to the specified office of any Paying
Agent at any time during normal business hours of such Paying Agent falling within the period (the “Put
Period”) of 30 days after the date on which a Put Event Notice is given, accompanied by a duly signed and
completed notice of exercise in the form (for the time being current) obtainable from the specified office of
any Paying Agent (a “Put Notice”). The Note should be delivered together with all Coupons appertaining
thereto maturing after the date which is seven days after the expiration of the Put Period (the “Put Date”),
EMEA 100217621 v16
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failing which the Paying Agent will require payment from or on behalf of the Noteholder of an amount equal
to the face value of any missing such Coupon. Any amount so paid will be reimbursed to the Noteholder
against presentation and surrender of the relevant missing Coupon (or any replacement therefor issued
pursuant to Condition 12 (Replacement of Notes and Coupons)) at any time after such payment, but before the
expiry of the period of five years from the date on which such Coupon would have become due, but not
thereafter. The Paying Agent to which such Note and Put Notice are delivered will issue to the Noteholder
concerned a non-transferable receipt in respect of the Note so delivered. Payment in respect of any Note so
delivered will be made, if the holder duly specified a bank account in the Put Notice to which payment is to be
made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date
against presentation and surrender or (as the case may be) endorsement of such receipt at the specified office
of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of these Conditions,
receipts issued pursuant to this Condition 7(c) shall be treated as if they were Notes. The Issuer shall redeem
or purchase (or procure the purchase of) the relevant Notes on the Put Date unless previously redeemed (or
purchased) and cancelled.
If 85 per cent. or more in principal amount of the Notes then outstanding have been redeemed or purchased
pursuant to this Condition 7(c), the Issuer may, on giving not less than 30 nor more than 60 days’ notice to the
Noteholders (such notice being given within 30 days after the Put Date), redeem or purchase (or procure the
purchase of), at its option, all but not some only of the remaining outstanding Notes at their principal amount,
together with interest accrued to (but excluding) the date fixed for such redemption or purchase.
The Trustee is under no obligation to ascertain whether a Change of Control or any event which could lead to
the occurrence of or could constitute a Change of Control has occurred and, until it shall have actual
knowledge or notice pursuant to the Trust Deed to the contrary, the Trustee may assume that no Change of
Control or other such event has occurred.
d)
Redemption at the option of the Issuer: Unless a Put Event Notice has been given pursuant to
Condition 7(c) above, the Issuer may, at any time, on giving not less than 30 nor more than 60 days’ notice to
the Noteholders in accordance with Condition 17 (Notices) (which notice shall be irrevocable and shall
specify the date fixed for redemption (the “Optional Redemption Date”)), redeem all, but not some only, of
the Notes at a redemption price per Note equal to the higher of the following, in each case together with
interest accrued to but excluding the Optional Redemption Date:
(i)
100 per cent. of the principal amount outstanding of the Note; and
(ii)
the sum of the then current values of the remaining scheduled payments of principal and
interest (not including any interest accrued on the Notes to, but excluding, the Optional
Redemption Date) discounted to the Optional Redemption Date on an annual basis (based on
the Actual/Actual ICMA day count fraction) at a rate equal to the Interpolated Mid Swap Rate
plus 0.50 per cent. in respect of the number of years to the maturity of the Notes calculated by
the Issuer.
e)
No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as
provided in Conditions 7(a), 7(b), 7(c) and 7(d) above.
f)
Notice of redemption: All Notes in respect of which any notice of redemption is given under this
Condition shall be redeemed on the date specified in such notice in accordance with this Condition.
g)
Purchase: The Issuer and its Subsidiaries may at any time purchase Notes in the open market or
otherwise at any price (provided that, if they should be cancelled under Condition 7(h) below, they are
purchased together with all unmatured Coupons relating to them). The Notes so purchased, while held by or
on behalf of the Issuer or any such Subsidiary of the Issuer, shall not entitle the holder to vote at any meetings
of the Noteholders and shall not be deemed to be outstanding for the purposes of these Conditions and the
Trust Deed. Such Notes may be held, reissued, resold, or at the option of the Issuer, surrendered to the Paying
Agent for cancellation.
EMEA 100217621 v16
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h)
Cancellation: All Notes redeemed or purchased by or on behalf of the Issuer and any of its
Subsidiaries (together with any unmatured Coupons attached to or surrendered with them) according to
Condition 7(g) may - in the Issuer’s sole discretion - be surrendered for cancellation. Such cancelled Notes
may not be re-issued or resold and the obligation of the Issuer in respect of any such Notes shall be
discharged. For the avoidance of doubt the Issuer shall not be entitled to vote in respect of any uncancelled
Notes purchased and held by it.
8.
Payments
a)
Method of Payment: Payments of principal and interest will be made against presentation and
surrender (or, in the case of a partial payment, endorsement) of Notes or the appropriate Coupons (as the case
may be) at the specified office of any Paying Agent by transfer to a Euro account maintained by the payee
with a bank in a city in which banks have access to the TARGET System. Payments of interest due in respect
of any Note other than on presentation and surrender of matured Coupons shall be made only against
presentation and either surrender or endorsement (as appropriate) of the relevant Note.
b)
Payments subject to laws: All payments are subject in all cases to any applicable fiscal or other
laws and regulations in the place of payment, but without prejudice to the provisions of this Condition 8
(Payments). No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of
such payments.
c)
Surrender of unmatured Coupons: Each Note should be presented for redemption together with
all unmatured Coupons relating to it, failing which the amount of any such missing unmatured Coupon (or, in
the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon
which the sum of principal so paid bears to the total principal amount due) will be deducted from the sum due
for payment. Each amount of principal so deducted will be paid in the manner mentioned above against
surrender of the relevant missing Coupon not later than ten years after the Relevant Date for the relevant
payment of principal in respect of the relevant Note.
d)
Payments on business days: A Note or Coupon may only be presented for payment on a day which
is a business day in the place of presentation and, in the case of payment by credit or transfer to a Euro
account as described above, is a TARGET Settlement Day. No further interest or other payment will be made
as a consequence of the day on which the relevant Note or Coupon may be presented for payment under this
Condition 8 (Payments) falling after the due date.
e)
Paying Agents: The initial Paying Agents and their initial specified offices are listed in the Paying
Agency Agreement. The Issuer reserves the right at any time with the approval of the Trustee to vary or
terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it
will maintain (i) a Principal Paying Agent, (ii) Paying Agents having specified offices in at least two major
European cities approved by the Trustee and (iii) a Paying Agent with a specified office in a European Union
member state that will not be obliged to withhold or deduct tax pursuant to any law implementing European
Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council
meeting of 26-27 November 2000.
9.
Taxation
All payments of principal and interest by or on behalf of the Issuer in respect of the Notes and the Coupons
shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the Republic of
Italy or any authority therein or thereof having power to tax, unless such withholding or deduction is required
by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Noteholders
and the Couponholders of such amounts as would have been received by them had no such withholding or
EMEA 100217621 v16
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deduction been required, except that no such additional amounts shall be payable in respect of any Note or
Coupon:
a)
in relation to any estate, inheritance, gift, sales, transfer or similar taxes; or
b)
presented for payment in the Republic of Italy; or
c)
presented for payment by or on behalf of a holder who is liable to such taxes, duties, assessments or
governmental charges in respect of such Note or Coupon by reason of his having some connection with any
Relevant Jurisdiction other than the mere holding of the Note or Coupon; or
d)
presented for payment by, or on behalf of, a holder who is entitled to avoid such withholding or
deduction in respect of the Note or Coupon by making a declaration or any other statement to the relevant tax
authority, including, but not limited to, a declaration of residence or non-residence or other similar claim for
exemption; or
e)
in the event of payment to a non-Italian resident legal entity or a non-Italian resident individual, to
the extent that interest or other amounts are paid to a non-Italian resident legal entity or a non-Italian resident
individual which is resident in a country which does not allow for a satisfactory exchange of information with
the Italian authorities; or
f)
in all circumstances in which the procedures to obtain an exemption from imposta sostitutiva or any
alternative future system of deduction or withholding set forth in Legislative Decree No. 239 of 1 April 1996,
as amended, have not been met or complied with, except where such procedures have not been met or
complied with due to the actions or omissions of the Issuer or its agents, and any taxes due pursuant to
Legislative Decree No. 461 of 21 November 1997; or
g)
presented for payment by or on behalf of a holder who would have been able to avoid such
withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member
State of the European Union; or
h)
presented for payment more than 30 days after the Relevant Date except to the extent that the holder
of it would have been entitled to such additional amounts on presenting such Note or Coupon for payment on
the last day of such period of 30 days; or
i)
presented for payment where such withholding or deduction is required to be made pursuant to
European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order
to conform to, such Directive; or
j)
in relation to any taxes imposed pursuant to Sections 1471 to 1474 of the US Internal Revenue Code
of 1986 including any implementing regulations and intergovernmental agreements related thereto; or
k)
10.
any combination of items a) through j) above.
Events of Default
If any of the following events occurs the Trustee at its discretion may, and if so requested by holders of not
less than one-fourth in principal amount of the Notes then outstanding or if so directed by an Extraordinary
Resolution shall (subject in each case to the Trustee being indemnified and/or secured and/or prefunded to its
satisfaction), give written notice to the Issuer that the Notes are, and they shall immediately become, due and
payable at their principal amount together (if applicable) with accrued interest:
a)
Non-Payment: the Issuer fails to pay the principal of or any interest on any of the Notes when due
and such failure continues for a period of 14 days; or
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b)
Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its
other obligations in the Notes or the Trust Deed, including the Original Financial Covenants or the New
Financial Covenants or the Permitted Indebtedness, which default is incapable of remedy or (other than in
respect of the Original Financial Covenants or the New Financial Covenants or the Permitted Indebtedness
provisions, to which the 30 day grace period shall not apply), if in the opinion of the Trustee capable of
remedy, is not remedied within 30 days after notice of such default shall have been given to the Issuer by the
Trustee; or
c)
Cross-Default: (i) any other present or future Debt of the Issuer or any of its Material Subsidiaries
for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason
of any actual default, event of default or the like (howsoever described), or (ii) any such Debt is not paid when
due or, as the case may be, within any originally applicable grace period, or (iii) the Issuer or any of its
Material Subsidiaries fails to pay when due any amount payable by it under any present or future Guarantee
for, or indemnity in respect of, any moneys borrowed or raised, provided that the aggregate amount of the
relevant Debt, Guarantees and indemnities under (i), (ii) and (iii) above in respect of which one or more of the
events mentioned above have occurred equals or exceeds €35,000,000 or its equivalent; or
d)
Enforcement Proceedings: an enforceable and/or temporarily enforceable final or provisional
judgment or order is taken or passed (including, without limitation, injunction orders, attachments,
precautionary measures or urgent measures) on or against a part of the property, assets or revenues of the
Group whose value equals or exceeds €35,000,000 or its equivalent and is not discharged or stayed within 60
days after the date(s) thereof or, if later, the date therein specified for payment; or
e)
Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future
(other than any Permitted Encumbrances) created or assumed by the Issuer or any of its Material Subsidiaries
having an aggregate value of at least €35,000,000 or its equivalent becomes enforceable and any step is taken
to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar
Person) unless discharged or stayed within 60 days; or
f)
Insolvency: an Insolvency Event occurs in relation to the Issuer or any of its Material Subsidiaries
(other than for the purposes of, or pursuant to, a Permitted Reorganisation) or the Issuer or any of its Material
Subsidiaries becomes Insolvent; or
g)
Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution of
the Issuer or any of its Material Subsidiaries (other than for the purposes of, or pursuant to, a Permitted
Reorganisation); or
h)
Cessation of business: the Issuer or any of its Material Subsidiaries ceases to carry on all or
Substantially All of the business then being conducted by the Issuer or the Group taken as a whole (calculated
on the basis of the Group’s consolidated total assets) otherwise than as a result of a Permitted Reorganisation;
or
i)
Operating rights: loss by the Issuer or any other member of the Group which from time to time
holds the air operator’s certificate (currently held by the Issuer issued by the Italian Civil Aviation Authority
(Ente Nazionale per l’Aviazione Civile), or any successor body) of such certificate, except where such a
certificate is within 30 days of the date of such loss issued to another member of the Group; or
j)
Nationalisation: any step is taken by any Person with a view to the seizure, compulsory acquisition,
expropriation or nationalisation of all or a material part of the assets of the Issuer or any of its Subsidiaries; or
k)
Illegality: it is or will become unlawful for the Issuer to perform or comply with any one or more of
its obligations under any of the Notes or the Trust Deed; or
EMEA 100217621 v16
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l)
Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an
analogous effect to any of the events referred to in Conditions 10(d), 10(e), 10(f) and 10(g) above.
11.
Prescription
Claims in respect of principal and interest will become void unless presentation for payment is made as
required by Condition 6 (Interest) within a period of ten years in the case of principal and five years in the
case of interest from the appropriate Relevant Date.
12.
Replacement of Notes and Coupons
If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office
of the Principal Paying Agent subject to all applicable laws and stock exchange or other relevant authority
requirements, upon payment by the claimant of the expenses incurred in connection with such replacement
and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that
the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Notes or
Coupons must be surrendered before replacements will be issued.
13.
Meetings of Noteholders, Modification, Waiver and Substitution
a)
Meetings of Noteholders: The Trust Deed contains, inter alia, provisions for convening meetings of
the Noteholders to consider any matter affecting their interests, including, inter alia, provisions governing the
passing of resolutions by Noteholders and the modification of any provisions of these Conditions or any
relevant provisions of the Trust Deed.
All meetings of holders of Notes will be held in accordance with applicable provisions of Italian law in force
at the time. In accordance with Article 2415 of the Italian civil code, the meeting of Noteholders is empowered
to resolve upon the following matters: (i) the appointment and revocation of a joint representative
(rappresentante comune) of the Noteholders, having the powers and duties set out in Article 2418 of the
Italian civil code; (ii) any amendment to these Conditions; (iii) motions for composition with creditors
(concordato) of the Issuer; (iv) establishment of a fund for the expenses necessary for the protection of the
common interests of the Noteholders and the related statements of account; and (v) on any other matter of
common interest to the Noteholders. Such a meeting may be convened by the Board of Directors of the Issuer,
by the joint representative of the Noteholders or, subject to any mandatory provisions of Italian law, the
Trustee (subject to it being indemnified and/or secured and /or prefunded to its satisfaction) when the Board of
Directors, the joint representative or, subject to any mandatory provisions of Italian law, the Trustee, as the
case may be, deems it necessary or appropriate, and such a meeting shall be convened when a request is made
by the Noteholders holding not less than one-twentieth in principal amount of the Notes for the time being
outstanding, in each case in accordance with Article 2415 of the Italian civil code.
According to the Italian civil code, the vote required to pass a resolution by the Noteholders’ meeting will be
(a) in the case of the first meeting, one or more Persons that hold or represent holders of more than one half of
the aggregate principal amount of the outstanding Notes, and (b) in the case of the second and any further
adjourned meeting, one or more Persons that hold or represent holders of at least two-thirds of the aggregate
principal amount of the outstanding Notes so present or represented at such meeting. Any such second or
further adjourned meeting will be validly held if there are one or more Persons present that hold or represent
holders of more than one-third of the aggregate principal amount of the outstanding Notes; provided, however,
that the Issuer’s by-laws may provide for a higher quorum (to the extent permitted under Italian law). If the
business of such meeting includes consideration of any matter provided under Article 2415 paragraph 1, item
2 of the Italian civil code, such resolution may only be approved at any meeting by a resolution passed at a
meeting of holders of the Notes by one or more Persons present that hold or represent holders of not less than
one-half of the aggregate principal amount of the outstanding Notes, unless a different majority is required
pursuant to Article 2369, paragraph 3 of the Italian civil code.
The Notes shall not entitle the Issuer to participate and vote in the Noteholders’ meetings. Directors and
statutory auditors of the Issuer shall be entitled to attend the Noteholders’ meetings. The resolutions validly
adopted in meetings are binding on Noteholders whether present or not.
EMEA 100217621 v16
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In the event the Noteholders’ meeting fails to appoint a joint representative (rappresentante comune), such
appointment may be made at the request of any Noteholder or at the request of the Board of Directors of the
Issuer by the president of the court of the venue where the registered office of the Issuer is located.
Any meeting shall be held on a date and at a time and place approved by the Trustee.
b)
Modification and Waiver: The Trustee may agree, without the consent of the Noteholders or
Couponholders, to (i) any modification of any of the provisions of the Trust Deed that is of a formal, minor or
technical nature or is made to correct a manifest error, and (ii) any other modification (except as mentioned in
the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of the provisions of
the Trust Deed that is in the opinion of the Trustee not materially prejudicial to the interests of the
Noteholders. Any such modification, authorisation or waiver shall be binding on the Noteholders and the
Couponholders and, if the Trustee so requires, such modification shall be notified to the Noteholders as soon
as practicable. Any modification or waiver should be subject to such terms and conditions (if any) as the
Trustee may determine.
c)
Entitlement of the Trustee: In connection with the exercise of its functions (including but not
limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Noteholders
as a class and shall not have regard to the consequences of such exercise for individual Noteholders or
Couponholders and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be
entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any
such exercise upon individual Noteholders or Couponholders.
d)
Substitution: The Trust Deed contains provisions permitting the Trustee to agree in circumstances
including, but not limited to circumstances which would constitute a Permitted Reorganisation, subject to such
other conditions as the Trustee may in its absolute discretion require, but without the consent of the
Noteholders or the Couponholders, to the substitution of the Issuer’s successor, transferee or assignee or any
Subsidiary of the Issuer or its successor, transferee or assignee in place of the Issuer, or of any previous
substituted Person, as principal debtor under the Trust Deed and the Notes. In the case of such a substitution,
the Trustee may agree, without the consent of the Noteholders or the Couponholders, to a change of the law
governing the Notes, the Coupons, the Talons and/or the Trust Deed provided that such change of the law
governing the Notes would not in the opinion of the Trustee be materially prejudicial to the interests of the
Noteholders. In addition, notice of any such substitution shall be given to the Irish Stock Exchange and
published in accordance with Condition 17 (Notices).
14.
Enforcement
At any time after the Notes become due and payable, the Trustee may, at its discretion and without further
notice, institute such actions, steps or proceedings against the Issuer as it may think fit to enforce the terms of
the Trust Deed, the Notes and the Coupons, but it need not take any such actions, steps or proceedings unless
(a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholders
holding at least one-fifth in principal amount of the Notes outstanding, and (b) it shall have been indemnified
and/or secured and/or prefunded to its satisfaction. No Noteholder or Couponholder may proceed directly
against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable
time and such failure is continuing.
15.
Indemnification of the Trustee
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility.
The Trustee is entitled to enter into business transactions with the Issuer and any entity related to the Issuer
without accounting for any profit.
The Trustee may rely without liability to Noteholders or Couponholders on a report, confirmation or
certificate or any advice of any accountants, financial advisers, financial institution or any other expert,
whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any
EMEA 100217621 v16
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engagement letter relating thereto entered into by the Trustee or in any other manner) by reference to a
monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such
report, confirmation or certificate or advice and such report, confirmation or certificate or advice shall be
binding on the Issuer, the Trustee and the Noteholders.
16.
Further Issues
The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue
further securities either having the same terms and conditions as the Notes in all respects (or in all respects
except for the first payment of interest on them) and so that such further issue shall be consolidated and form a
single series with the outstanding securities of any series (including the Notes) or upon such terms as the
Issuer may determine at the time of their issue. References in these Conditions to the Notes include (unless the
context requires otherwise) any other securities issued pursuant to this Condition and forming a single series
with the Notes. Any further securities forming a single series with the outstanding securities of any series
(including the Notes) constituted by the Trust Deed or any deed supplemental to it shall, and any other
securities may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed.
17.
Notices
Notices to the Noteholders shall be valid if published in a leading English language daily newspaper (which is
expected to be the Financial Times) and, so long as the Notes are admitted to trading on the Irish Stock
Exchange and it is a requirement of applicable law or regulations, a leading newspaper having general
circulation in the Republic of Ireland or published on the website of the Irish Stock Exchange (www.ise.ie) or
in either case, if such publication is not practicable, in a leading English language daily newspaper having
general circulation in Europe. Any such notice shall be deemed to have been given on the date of first
publication (or if required to be published in more than one newspaper, on the first date on which publication
shall have been made in all the required newspapers). Couponholders shall be deemed for all purposes to have
notice of the contents of any notice given to the Noteholders in accordance with this Condition.
18.
Contracts (Rights of Third Parties) Act 1999
No Person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of
Third Parties) Act 1999.
19.
Governing Law
a)
Governing Law: The Trust Deed, the Notes and the Coupons and any non-contractual obligations
arising out of or in connection with them are governed by and shall be construed in accordance with English
law. Condition 13(a) and the provisions of Schedule 3 of the Trust Deed which relate to the convening of
meetings of Noteholders and the appointment of a Noteholders’ representative are subject to compliance with
Italian law.
b)
Jurisdiction: The courts of England are to have jurisdiction to settle any disputes which may arise
out of or in connection with the Notes or the Coupons and accordingly any legal action or proceedings arising
out of or in connection with the Notes or the Coupons (“Proceedings”) may be brought in such courts.
Pursuant to the Trust Deed, the Issuer has irrevocably submitted to the jurisdiction of such courts.
c)
Agent for Service of Process: Pursuant to the Trust Deed, the Issuer has irrevocably appointed an
agent in England to receive service of process in any Proceedings in England based on any of the Notes or the
Coupons.
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OVERVIEW OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM
The Notes will initially be in the form of a Temporary Global Note which will be deposited on or around the
Issue Date with a common safekeeper for Euroclear and Clearstream, Luxembourg.
The Notes will be issued in new global note (“NGN”) form. On 13 June 2006, the European Central Bank
(the “ECB”) announced that Notes in NGN form are in compliance with the “Standards for the use of EU
securities settlement systems in ESCB credit operations” of the central banking system for the euro (the
“Eurosystem”), provided that certain other criteria are fulfilled. At the same time the ECB also announced
that arrangements for Notes in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of
30 June 2006 and that debt securities in global bearer form issued through Euroclear and Clearstream,
Luxembourg after 31 December 2006, will only be eligible as collateral for Eurosystem operations if the NGN
form is used.
The Notes are intended to be held in a manner which would allow Eurosystem eligibility – that is, in a manner
which would allow the Notes to be recognised as eligible collateral for Eurosystem monetary policy and
intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such
recognition will depend upon satisfaction of the Eurosystem eligibility criteria. As at the date of this
Prospectus, one of the Eurosystem eligibility criteria for debt securities is an investment grade rating and,
accordingly, as the Notes are unrated, they are not currently expected to satisfy the requirements for
Eurosystem eligibility.
The Temporary Global Note will be exchangeable in whole or in part for interests in the Permanent Global
Note not earlier than 40 days after the Issue Date upon certification as to non-U.S. beneficial ownership. No
payments will be made under the Temporary Global Note unless exchange for interests in the Permanent
Global Note is improperly withheld or refused. In addition, interest payments in respect of the Notes cannot
be collected without such certification of non-U.S. beneficial ownership.
The Permanent Global Note will become exchangeable in whole, but not in part, for Notes in definitive form
(“Definitive Notes”) in the denomination of €100,000 each and integral multiples of €1,000 in excess thereof,
up to and including €199,000 each, at the request of the bearer of the Permanent Global Note against
presentation and surrender of the Permanent Global Note to the Paying Agent if either of the following events
(each, an “Exchange Event”) occurs: (a) Euroclear or Clearstream, Luxembourg is closed for business for a
continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently
to cease business or (b) any of the circumstances described in Condition 10 (Events of Default).
So long as the Notes are represented by a Global Note and the relevant clearing system(s) so permit, the Notes
will be tradeable only in the minimum authorised denomination of €100,000 and higher integral multiples of
€1,000, notwithstanding that no Definitive Notes will be issued with a denomination above €199,000.
Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the
prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons
attached, in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the
bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of
the Paying Agent within 30 days of the occurrence of the relevant Exchange Event.
In addition, the Temporary Global Note and the Permanent Global Note will contain provisions which modify
the Conditions as they apply to the Temporary Global Note and the Permanent Global Note. The following is
a summary of certain of those provisions:
Payments
All payments in respect of the Temporary Global Note and the Permanent Global Note will be made against
presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the
Temporary Global Note or (as the case may be) the Permanent Global Note to or to the order of the Paying
Agent and will be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the
Notes. On each occasion on which a payment of principal or interest is made in respect of the Temporary
Global Note or (as the case may be) the Permanent Global Note, the Issuer shall procure that the payment is
entered pro rata in the records of Euroclear and Clearstream, Luxembourg.
EMEA 100217621 v16
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Payments on business days
In the case of all payments made in respect of the Temporary Global Note and the Permanent Global Note
“business day” means any day on which the TARGET System is open.
Exercise of put option
In order to exercise the option contained in Condition 7(d) (Redemption at the option of Noteholders upon a
Change of Control) the bearer of the Permanent Global Note must, within the period specified in the
Conditions for the deposit of the relevant Note and put notice, give written notice of such exercise to the
Paying Agent specifying the principal amount of Notes in respect of which such option is being exercised.
Any such notice will be irrevocable and may not be withdrawn.
Notices
Notwithstanding Condition 17 (Notices), while all the Notes are represented by the Permanent Global Note
(or, as the case may be, by the Permanent Global Note and/or the Temporary Global Note) and the Permanent
Global Note is (or, as the case may be, the Permanent Global Note and/or the Temporary Global Note are)
deposited with a common safekeeper for Euroclear and Clearstream, Luxembourg, notices to Noteholders may
be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg and, in any case, such
notices shall be deemed to have been given to the Noteholders in accordance with Condition 17 (Notices) on
the date of delivery to Euroclear and Clearstream, Luxembourg, except that, for so long as such Notes are
admitted to trading on the Irish Stock Exchange and it is a requirement of applicable law or regulations, such
notices shall be filed with the Companies Announcement Office of the Irish Stock Exchange.
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USE OF PROCEEDS
The net proceeds of the issue of the Notes will be used for general corporate purposes, including, without
limitation, the acquisition and financing (including, without limitation, any leasing transaction), renegotiations
and/or refinancing of aircraft and related parts carried out in compliance with the business plan.
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DESCRIPTION OF THE ISSUER
Overview
Alitalia – Società Aerea Italiana S.p.A. is a company limited by shares (società per azioni) incorporated under
Italian law on 24 September 2014, with termination date on 31 December 2050. Its registered office and
principal place of business is at Fiumicino (Rome), via A. Nassetti, Pal. Alfa, 00054 and it is registered with
the Companies’ Register of Rome under registration number 13029381004. The Issuer may be contacted by
telephone on +39 0665631 and by email at the following certified email address:
[email protected].
The Issuer commenced operations on 1 January 2015, following the contribution by CAI of the Going
Concern to the Issuer.
The Issuer is the parent company and main operating entity of the group (the “Group”). The Group generates
most of its revenues from its air carrier business, which consists of passenger operations both in Europe and
internationally.
The Group’s hub is Aeroporto Internazionale Leonardo da Vinci in Rome, also known as Rome-Fiumicino
airport (“Fiumicino”).
The Group maintains a well-balanced and extensive route network both directly and through alliances and
codeshare arrangements, flying to 339 destinations in 108 countries as of 30 April 2015. The Group currently
operates regularly scheduled flights to 28 airports in Italy, 54 airports in Europe and serves 36 destinations in
34 countries and regions outside Europe.
The Group is a party to the Joint Venture and coordinates flights and shares revenues and costs in respect of
its transatlantic route network with the Joint Venture parties. In addition, the Group is a member of the
SkyTeam alliance, a global airline alliance which includes 20 members and serves 1,052 destinations.
The following table shows selected consolidated financial and operating data relating to CAI for the years
ended 31 December 2013 and 2014 and relating to the Issuer for the quarter ended 31 March 2015:
31 March
2015(*)
(€)
Financial data:
Revenue (millions).....................................................................
EBITDAR(millions)(2) ...............................................................
Long-term debt (millions) ..........................................................
Total Assets (millions) ...............................................................
Net Debt (millions) ....................................................................
Financial metrics are prepared under Italian GAAP
590
(83)
131
2,735
66
31 March
2015
Operating data:
Operating fleet (aircraft) ............................................................
Flights ........................................................................................
Destinations ...............................................................................
Capacity (thousands of seats).....................................................
Passengers (thousands) ..............................................................
ASKs (billions)(3) .......................................................................
RPKs (billions)(4) .......................................................................
Seat load factor (5) ......................................................................
Passenger block hours (6) ............................................................
118
46,980
104
6,572
4,554
9.2
6.7
72.5%
91,059
31 December
2014
(audited)(1)(€)
3,181
124
398
2,595
269
31 December
2014
125
214,187
104
31,021
22,445
44.8
34.0
75.9%
420,818
31 December
2013
(audited)(1)(€)
3,406
172
492
2,471
925
31 December
2013
129
217,309
99
32,183
22,688
45.6
34.1
74.8%
432,519
______________________
Note:
(*) Limited review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by
the Independent Auditor of the Entity”, performed by Deloitte & Touche S.p.A.
(1)
The term “audited” is referred only to financial data included in consolidated financial statements of CAI, which are “Revenue”, “Long Term
Debt” and “Total Assets”.
(2)
Earnings before interest, tax, depreciation, amortisation and rent. EBITDAR and similar measures are calculated and used differently by different
companies and, therefore, should not be relied upon for the purpose of comparing companies who use this metric. EBITDAR does not include the
EMEA 100217621 v16
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(3)
(4)
(5)
(6)
profits deriving from the disposal of Alitalia Loyalty S.p.A. as well as certain expenses which are considered extraordinary items under the Italian
GAAP accounting principles adopted in the preparation of the interim financial statements as at and for the quarter ended 31 March 2015.
ASKs, or available seat kilometres, are the number of seats available for sale multiplied by the number of kilometres flown (only scheduled
flights).
RPKs, or revenue passenger kilometres, are the average number of passengers multiplied by the number of kilometres flown (only scheduled
flights).
The seat load factor is the ratio of RPK to ASK.
A block hour is defined as the flight time plus any taxi time at origin and destination.
History
The Issuer commenced operations on 1 January 2015, following completion of the transaction (the
“Transaction”) involving the Issuer’s indirect shareholders CAI and Etihad Airways P.S.J.C. (“Etihad
Airways”).
The Transaction involved the following main steps:
(i)
pursuant to a deed of contribution dated 22 December 2014 entered into between CAI and the Issuer
(the “Deed of Contribution”), CAI made a contribution by way of a bulk transfer to the Issuer of the
Going Concern, including all of its fleet, employees, trademark, cash and contracts, in order to make
an in-kind subscription to the Issuer’s capital increase of €403.3 million. CAI received a 51% equity
stake in the Issuer in exchange for its contribution of the Going Concern, which it contributed to its
wholly owned subsidiary MidCo S.p.A. on 23 December 2014; and
(ii)
Etihad Airways’ wholly owned subsidiary Etihad Investment Holding Company LLC (“EIHC”)
subscribed to an additional capital increase of the Issuer by injecting Euro €387.5 million in cash and
received a 49% equity stake in the Issuer in exchange for this investment. Etihad Airways also
acquired, through its controlled subsidiary Global Loyalty Company LLC, a 75% stake in Alitalia
Loyalty S.p.A. (in which the remaining 25% of the share capital is held by the Issuer, and which
operates the “MilleMiglia” frequent flyer programme (“MilleMiglia”)) for €112.5 million and
committed to acquire in 2016 5 pairs of slots at London Heathrow airport valued at €60 million, to be
leased back to the Issuer on an arm’s length basis.
As a result of the Transaction, CAI indirectly holds (through its wholly owned subsidiary MidCo S.p.A.) 51%
of the Issuer’s share capital and Etihad Airways indirectly holds (through EIHC) the remaining 49%.
Ring-fencing of CAI’s financial indebtedness and liabilities
Pursuant to the Deed of Contribution, in the context of the Transaction CAI retained all of its outstanding
financial indebtedness not related to aircraft financing and leasing, amounting to €531 million in total, and
certain additional liabilities and litigation exposures (whether pending, potential or undisclosed) not relating to
the Going Concern (the “Retained Liabilities”). The Retained Liabilities were explicitly excluded from the
Going Concern and, accordingly, the Going Concern is ring-fenced against the Retained Liabilities pursuant to
Italian Law. In addition, CAI agreed to indemnify the Issuer in the unlikely event that the Issuer should be
liable for the Retained Liabilities. In the context of the Transaction, CAI's financial indebtedness was
restructured through an out of court agreement with the relevant creditors (i.e. Italian banks that are
shareholders of CAI and, indirectly, the Issuer).
Corporate Structure
The chart below shows the Group structure as at the date of this Prospectus:
EMEA 100217621 v16
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CAI and CAI-controlled entities.
EIHC and EIHC-controlled entities.
Non-controlling investments.
The Issuer
The Issuer is the main operating entity of the Group.
Principal Subsidiaries
Alitalia CityLiner S.p.A. ("CityLiner”)
CityLiner operates short haul domestic and international routes with low passenger volumes (for example,
between Milan Linate airport (“Linate”) and London City airport) using regional airliners and carries
passengers from minor airports to the Group's hub Fiumicino. CityLiner holds a separate air operator
certificate (“AOC”) from the AOC held by the Issuer.
Challey Limited
Challey Limited is the sub-holding company of the Group’s Irish-registered special purpose vehicles (the
“Challey Entities”) which hold the Group’s fleet.
Strategic Alliances/Cooperation
Etihad Airways
The Group expects to benefit from network and operational synergies with Etihad Airways and Etihad
Airways’ airline partners.
Network synergies will allow the Group to increase the number of destinations served by it and access new
markets, through the combination of the Group’s flight networks with those of Etihad Airways and Etihad
Airways’ equity partners.
Operational synergies include the benefit of increased economies of scale of Etihad Airways and Etihad
Airways’ airline partners, particularly in relation to their strategic relationships with suppliers and lessors.
Thanks to such synergies, through specific arrangements with Etihad Airways the Group has already achieved
a reduction in the costs incurred in respect of aircraft leases, the procurement of equipment for aircraft retrofits
and the purchase of IT systems and technologies that will allow the Group to benefit from Etihad Airways’
distribution, revenue management and operational platforms.
The Group will collaborate with Etihad Airways and Etihad Airways’ airline partners by providing certain
services, including training to pilots employed by Etihad Airways’ partner airlines (for example, training to
EMEA 100217621 v16
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130 pilots employed by Air Berlin in 2015) as well as ground handling services (for example, to Air Serbia
and Aer Lingus).
SkyTeam Alliance
The Group is a member of the SkyTeam alliance with Aeroflot, Aerolíneas Argentinas, Aeromexico, Air
Europa, Air France, China Airlines, China Eastern Airlines, China Southern Airlines, Czech Airlines, Delta
Air Lines, Garuda Indonesia, Kenya Airways, KLM Royal Dutch Airlines, Korean Air, Middle East Airlines,
Saudia, Tarom, Vietnam Airlines and Xiamen Airlines, collectively serving 1,052 destinations. The SkyTeam
alliance provides technology platforms and aligns standards, ensuring a seamless and consistent delivery of
service across the globe. The SkyTeam alliance is designed to integrate the Group’s customer propositions.
Air France-KLM and Delta Airlines
The Group is a party to the Joint Venture. The Joint Venture allows pooling and sharing of certain revenues
and costs, expanded codeshare arrangements, reciprocal arrangements for frequent flyer programmes and
cooperation in other areas. The Joint Venture parties are also able to provide customers with a greater choice
of routes and departure times. Under the Joint Venture, each airline collects the revenue from the flights that
it operates regardless of which airline the customer used to book the flight, and then makes a balancing
transfer payment (or receipt) to share the overall revenue and relevant costs in the agreed proportions.
Partnership with Air France-KLM
The Issuer has announced that in January 2017 it will not renew the partnership agreement and ancillary
agreements entered into with Air France-KLM, which govern passenger services operated by these airlines (in
particular, the coordination of flights and the sharing of revenues and costs) in respect of the routes from Italy
(Milan and Rome) to Paris and Amsterdam and the marketing and sale of the Group’s cargo belly services
undertaken by Air France-KLM.
Codeshare Agreements
Codeshare agreements allow airlines operating as “marketing carriers” to sell tickets on flights operated by
other airlines, so-called “operating carriers”, coded with the marketing carriers’ flight number. Operating
carriers will also sell seats on the same flights, coded with their own flight number. This means that flights
operated under codeshare agreements by operating carriers are also included within the relevant marketing
carriers’ networks. An operating carrier is entitled to the proceeds of tickets sold both by it and the marketing
carrier on the routes it operates, net of the marketing carrier’s commission. The Group has codeshare
agreements with a number of airlines, some of which are also members of the SkyTeam alliance, covering
codesharing, links between frequent flyer programmes and various other activities. The Group offers
codeshare services on selected routes with most SkyTeam member airlines as well as on routes with Etihad
Airways and Etihad Airways’ equity partners, in particular Air Berlin and Etihad Regional.
Strategies
The Group has developed a three-year business plan based on reorganising its business and rebuilding its
customer proposition by optimising its strengths, in order to create a sustainable and profitable business and
strengthen its competitive position.
The Group’s brand, aircraft livery and visual identity have been upgraded and repositioned in order to create a
single brand for Italy and abroad which works across all communication phases and platforms. The Group
will also leverage the “Made in Italy” brand and key assets, with respect to high quality and style of the
products and the level of service offered, in order to enhance guest experience.
In addition, a new customer division has been created encompassing in-flight service, customer excellence
training, performance management and recruitment. The key objective of this new division is to develop a
customer-focused culture enhancing personnel’s skills and defining a customer strategy to allow the Group to
compete more effectively in the domestic, international and intercontinental markets and, in particular, to
regain its leading position in the Italian market.
The Group intends to achieve its business plan through the following key strategies:
EMEA 100217621 v16
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Network
The Group has already exited a number of non-performing short-haul point to point and bypass routes,
optimised the size of its narrowbody fleet and reshaped its network by optimising its connectivity and links to
Etihad Airways’ and Etihad Airways’ equity partners’ networks.
The Group is planning on investing in selected long-haul routes from Fiumicino and Milano Malpensa airport
(“Malpensa”) as well as introducing new connections between other Italian cities and Abu Dhabi. According
to its business plan, the Group’s domestic, international and intercontinental operations will be organised as
follows:
•
Domestic: while loss making routes and flights are reduced, Fiumicino will remain the Group’s longhaul hub. Measures will be implemented to enable more effective competition against competing low
cost carriers while more focus will be placed on connecting traffic feeding the hub, thus avoiding
competition from low cost carriers. The Group’s operations at Linate will be improved, especially in
respect of international routes, in order to leverage the airport’s proximity to Milan.
•
International: the Group will focus on Fiumicino as its long-haul hub in order to serve the Rome
catchment and connect domestic networks. The Group will serve the Milan catchment through
Linate, from where it will operate new European routes, and will also leverage joint routes operated
from Fiumicino and Linate. The Group has also provided Air Berlin with additional flights from
Linate so that they can jointly build a competitive proposition on the high value Italy – Germany
market.
•
Intercontinental: the Group will focus on the development of Fiumicino as its prime long-haul hub
and improve Northern Italian services from Malpensa and Venice Marco Polo airports on a strategic
point to point basis.
Strategic mix of destinations served
The Group serves a mixture of airports in, or in close proximity to, major European and international cities as
well as airports in tourist destinations in order to satisfy both business and leisure travellers, and will continue
to constantly review its network in order to strategically allocate capacity to routes which provide optimal
profitability.
The Group’s cooperation with Etihad Airways and Etihad Airways’ equity partners will lead to an increase in
the number of destinations served by the Group. By combining its flight networks with those of Etihad
Airways and Etihad Airways’ equity partners, the Group expects to be able to increase the number of flights it
operates and to serve destinations in over 40 markets where it has not previously operated, in Central, East and
South Africa, South-East Asia, central and southern China and Australia.
The Group intends to take advantage of Etihad Airways’ Abu Dhabi hub as a connection point to the
Southeast and Australasia and has introduced new long-haul flights to this strategic hub from Fiumicino,
Malpensa and Venice Marco Polo airport, with associated benefits from Etihad Airways’ customer bases.
Positioning the Group as a full service carrier for premium passengers
The Group is continuing to promote its brand image as a full service carrier. The Group’s network is designed
to offer the most convenient proposition to its high value customers with an unrivalled scale of direct services
to key global cities from its hub Fiumicino. In addition, the Group will use its quality of service, flight
frequency and on-time performance to position itself as a “premium service airline” and maintain its
stronghold on its targeted routes.
The Group also invests in competitive onboard products and optimises its mix of traffic, passenger yields and
load factors. The Group will continue to make full use of MilleMiglia in developing its business and will seek
to continue to increase the number of members in this programme.
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Maintaining a cost-efficient structure
The Group will continue to monitor its costs closely, in particular:
•
Aircraft operating expenses
Taking into account lease payments and maintenance expenses, the Group monitors the average age
of its aircraft with the aim of maintaining an optimal composition of new and older aircraft. The
Group will continue to closely monitor the operating expenses of its aircraft and make any required
aircraft replacements and adjustments.
•
Airport costs
The Group will continue to target airports with large catchment areas in order to serve potentially
large passenger volumes. The Group also expects to benefit from Etihad Airways’ economies of scale
by being able to negotiate favourable terms with airport operators as well as with other ground service
providers used by Etihad Airways.
•
Personnel costs
The Group will continue to closely monitor its personnel costs.
•
Customer service costs
The Group intends to reinvest in the customer experience in order to provide passengers with a
comfortable travel experience at competitive prices. The Group’s aim is to limit costs while driving a
return on its investment, in particular by closely monitoring the results of costs incurred in providing
additional services (such as high quality food and drink). The Group will continue to provide
additional services, or will introduce new services, where the cost of providing such services is
outweighed by an increase in the demand for the Group’s flights and customer satisfaction.
Providing complete coverage for Expo 2015
According to the Issuer’s management’s estimate, the Group and Etihad Airways are the official global airline
carriers of Expo 2015, the universal exhibition currently being hosted in Milan until 31 October 2015 under
the theme “feeding the planet, energy for life”.
According to the Issuer’s management’s estimate, an estimated 20 million visitors are expected to visit Expo
2015, with more than a third travelling by plane. The Group will provide complete coverage for Expo 2015,
and to this end has started operating flights between Milan and Abu Dhabi in order to connect its flights with
Etihad Airways’ services throughout the Middle East and in India, Southeast Asia and Africa.
Business operations
The Group’s core business is the air carrier business, which accounted for more than 85% per cent. of the
Group’s total revenues as at 30 April 2015. The Group also generates revenues from MilleMiglia, on board
sales of duty free merchandise and other ancillary revenue streams.
Air Carrier Business
As at 30 April 2015, the Group flew to 339 destinations in 108 countries worldwide. During the year ended
31 December 2014, the Group carried 22.4 million passengers.
The Group offers its customers a broad range of services for domestic (European) and international short-haul
and long-haul flights, and serves a large geographical area. The number of principal destinations served by
the Group is as follows: the Americas (9); Europe (54); Africa (7); the Middle East and South Asia (5); and
Asia Pacific (3).
Long-haul Passenger Operations
The Group has an extensive international route network. It currently operates flights directly connecting
Fiumicino and Malpensa to 13 long-haul destinations and, through Etihad Airways’ Abu Dhabi hub, also to
EMEA 100217621 v16
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destinations served by Etihad Airways and Etihad Airways’ equity partners. The Group serves 34 countries
and regions and over 36 destinations outside Europe. The Group’s international network covers 7
geographical regions: North America, Latin America, the Middle East, South Asia, North Africa, Asia Pacific
and Eastern Europe.
The Group focuses on long-haul routes with high traffic volumes where it has an established position. In
accordance with its business plan, the Group will continue to review its routes on the basis of a profitability
analysis of each route in order to improve its network and enable passengers to connect more conveniently to
and from Rome.
Short-haul Passenger Operations
The Group has an extensive short-haul route network across Italy and Europe. It currently operates flights
connecting Italy to 29 European destinations. Including codeshare flights operated by its partner airlines, the
Group serves 24 European countries and regions and 100 destinations. The Group’s Fiumicino hub and
Linate enable the Group to link European cities with other major international cities, increasing the
availability of connections to and from regional cities in Europe and Italy. The Group expects to increase the
number of flights on some routes between Fiumicino and Linate and destinations in Europe. This
development of the short-haul network out of Fiumicino and Linate will be primarily focused on improving
connectivity to the Group’s long-haul operation. The Group also aims to improve its connection network
within Europe by enhancing existing partnerships with airlines.
Other businesses
In addition to its air carrier business, the Group has a number of other businesses that provide it with
additional revenues. These include the Group’s:
•
ground handling services;
•
maintenance services;
•
revenue streams from sales of duty free merchandise which are purchased on board; and
•
other ancillary revenue streams from travel insurance, car hire and accommodation services booked
through its website and at its service centres, the sale of advertising space in the Group’s on board
magazine and third party pilot training programmes offered by it.
Ground handling services
The Group provides ground handling services at Fiumicino, Linate and Reggio Calabria airport. Such
services include, inter alia, passenger and baggage handling, catering and aircraft cleaning and de-icing. In all
other airports, the Group uses third-party service providers available onsite or airport operators, which have
received adequate training on the Group’s equipment and procedures and are regularly audited by the Group.
In order to avoid duplication of costs and operate more efficiently, the Group and its airline partners are
discussing the potential implementation of a system which would involve using a joint ground handling
service provider, where at least two of them operate at the same airport. Services to be provided by such joint
ground handling service provider, which would receive training on the Group’s equipment, would include,
inter alia, check-in, catering, baggage-handling and aircraft de-icing services.
Training
The Group operates flight training facilities for its own pilots as well as third parties at its training academy in
Rome, where it operates B777, A320 and A330 flight simulators and offers a range of simulated aircraft types
and type-related courses, covering narrow-body as well as wide-body commercial aircraft. The Group’s pilots
must complete the simulator training programme twice a year.
MilleMiglia
MilleMiglia builds customer loyalty by offering awards and services to programme participants. Members
earn mileage credit for flights operated by the Group, airlines in SkyTeam and certain other airlines that
EMEA 100217621 v16
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participate in the programme. Miles can also be earned by purchasing the goods and services of the Group’s
network of non-airline partners, such as credit card issuers, retail merchants, hotels and car rental companies.
Mileage credits can be redeemed towards both travel and non-travel awards. As at 31 March 2015, there were
4,662,334 active members in MilleMiglia. As a result of the Transaction, Alitalia Loyalty S.p.A. (the
company which operates MilleMiglia) is now majority controlled and owned by Etihad Airways’ wholly
owned subsidiary Global Loyalty Company LLC.
Fleet
The Group is committed to operating a modern fleet and places significant emphasis on low-fuel consumption
and noise emissions and minimising environmental impact. As of 30 April 2015, the Group operated a total of
22 wide-body aircraft and 109 narrow-body aircraft. Of these aircraft, 87 were leased under operating leases,
one was leased under finance leases and 43 were owned by the Group, as shown in the following table:
Number
Aircraft model
E190.................................................................................................................
E175.................................................................................................................
A319 ................................................................................................................
A320 ................................................................................................................
A321 ................................................................................................................
A330-200 .........................................................................................................
B777-200ER ....................................................................................................
Total ................................................................................................................
As of 30 April 2015
Of which:
Of which:
Operating
Finance
Lease
Lease
5
15
22
52
15
12
10
131
5
15
10
32
9
12
4
87
1
1
Of which:
Owned
12
19
6
6
43
The Group operates the aircraft previously belonging to CAI which, with an average age of 8.5 years as of 30
April 2015, according to the Issuer’s management’s estimate, is one of the youngest operating fleets in
Europe.
Fleet Plan
The Group, after the phase-out of 14 narrow-body aircraft (see “— Financing Arrangements”), the phase-in of
two A330-200 and the purchase from lessors of four ERJ and one A330 already operated by the Group, at the
end of 2015 will operate with a fleet comprising 120 aircraft in total, as shown in the following table:
Aircraft model
E190.................................................................................................................
E175.................................................................................................................
A319 ................................................................................................................
A320 ................................................................................................................
A321 ................................................................................................................
A330-200 .........................................................................................................
B777-200ER ....................................................................................................
Total ................................................................................................................
Number
5
15
22
42
12
14
10
120
As of 31 December 2015
Of which:
Of which:
Operating
Finance
Lease
Lease
3
13
10
31
1
7
13
4
81
1
Of which:
Owned
2
2
12
10
5
1
6
38
Following implementation of the above plan, the average age of the fleet will be of 8.9 years.
Based on its current Business Plan 2015-18, the Group foresees the following phase-ins:
Aircraft model
A320 ................................................................................................................
A330-200 .........................................................................................................
B777-200ER ....................................................................................................
Total.................................................................................................................
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2016
1
1
2
2017
1
1
1
3
2018
1
1
1
3
Total ‘16‘18
3
2
3
8
The Group benefits in part from being able to combine its own aircraft orders with those of Etihad Airways.
The decision to lease or buy the aircraft will be made according to market conditions and network plans.
Leases
The Group has entered, and may enter in the future, into wet lease agreements pursuant to which other airline
carriers (“wet lessors”) grant wet leases (i.e. leases of aircraft with crew) of aircraft to the Group. In turn, the
Group grants to the same wet lessors dry leases (i.e. leases of aircraft without crew) of aircraft leased to the
Group under the wet leases.
Operational Centres and Services
Operational Centres
Italy
The Group’s principal place of business is Fiumicino. The Group also operates from Linate and Malpensa.
Offices, maintenance hangars, storage and other support facilities used by the Group at Fiumicino, Linate,
Malpensa and other Italian airports are either owned by the Group or leased to the Group from the respective
airport owners. In addition, the Group occupies space and airport desks under lease or licence in airports
throughout Italy.
Overseas
At other overseas airports, the Group generally obtains premises on a short-term basis from the relevant
authorities.
Operational Services
At Fiumicino, the Group provides most of the operational services it requires for handling passengers and
cargo. At other Italian airports and at overseas airports, the Group subcontracts the provision of the majority
of its ground handling requirements. Runway, ramp and terminal facilities are provided by airport operators
that charge airlines for the use of these facilities, principally through landing, parking and passenger charges.
Navigation services are provided to the aircraft by countries through whose airspace they fly or by
international bodies. Navigation charges are generally based on distance flown and weight of aircraft.
Sales and Marketing
The Group sells seats on its flights through all major distribution channels, which include its own and third
parties’ websites, its 24-hour service centre, airport ticket offices, charter and package tour operators and
travel agencies.
The Group seeks to promote its business and brand through a cohesive strategy covering public relations,
sponsorships, events and advertising. For example, the Group has set up a pavilion inside the Expo 2015
where, alongside Etihad Airways, it carries out a marketing campaign to maximise its visibility by providing
personalised Expo 2015 livery and on-board and ground communication.
Financing Arrangements
The Group’s debt as of 30 April 2015 amounted to €342 million, which was split between €261 long term
aircraft financings/capital lease liabilities and €81 million short term debt relating to the purchase of 4
Embraer from a lessor in May 2015 (which the Group intends to replace in the short term with a term loan).
€242 million of the long term debt relates to the Challey Entities and is secured on 31 aircraft owned by the
various Challey Entities. The following table shows the allocation of secured third party debt to the Challey
Entities as of 30 April 2015:
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Secured
Aircraft
Debt
8.5 million
20.7 million
11 million
22.3 million
11.1 million
11.5 million
11 million
146.1 million
APC1 Ltd ...........................................................................................................................
APC4 Ltd. ..........................................................................................................................
APC5 Ltd ...........................................................................................................................
APC6 Ltd ...........................................................................................................................
APC7 Ltd ...........................................................................................................................
APC8 Ltd ...........................................................................................................................
APC9 Ltd ...........................................................................................................................
APC12 Ltd .........................................................................................................................
1
2
1
2
1
1
1
22
Agreements have been entered into for the disposal of 14 aircraft owned by the Challey Entities during the
course of 2015. As at 30 April 2015, 5 of these aircraft had already been delivered, with the remaining 9
expected to be delivered before year end.
Following the disposals, the Challey Entities’ outstanding indebtedness will amount to €154 million, secured
on 22 aircraft owned by APC1 Ltd and APC12 Ltd.
The following table shows the Group’s long term debt amortisation on a consolidated basis before and after
the sale of the 14 aircraft:
Outstanding
as of 30
April 2015
Until 31
December
2015
€261 million
€128 million
€86 million
€45 million
€2 million
€88 million
€88 million
€0 million
€0 million
€0 million
€173 million
€40 million
€86 million
€45 million
€2 million
Total debt ............................
Related to aircraft in phase
out .......................................
Total debt after aircraft
phase out .............................
2016
2017
2018
The Challey Entities recently reached an agreement with their principal lender for the extension of their
repayment plan relating to €146 million of its outstanding indebtedness as at 30 April 2015 to December 2022,
which will substantially improve the financial profile of the Group as foreseen in its 2015-2022 business plan.
The following table shows the Group’s revised repayment plan:
as of 30
April 2015
until 31
December
2015
Total ...................... €261 million €106 million
Related
to
aircraft in phase
out ......................... €88 million €88 million
Total debt after
aircraft phase
out ......................... €173 million €18 million
2016
2017
2018
2019
2020
2021
2022
€31 million
€23 million
€22 million €19 million
€19 million
€19 million
€22 million
€31 million
€23 million
€22 million €19 million
€19 million
€19 million
€22 million
In addition, the Issuer has entered into a €200 million working capital revolving facility agreement and a €100
million factoring facility agreement, both of which are committed for 5 years (until 31 December 2019).
Guarantees
As of 30 April 2015, the Group granted guarantees, through major Italian banks, in favour of strategic
counterparts amounting to €132.4 million in total (approximately 67% to fuel suppliers and the remainder to
handlers, lessors and local authorities).
Safety
The Group’s commitment to safety is the primary priority of its management and employees. Aircraft
maintenance, repair and overhaul are critical to the safety and comfort of the Group’s passengers, the efficient
use of its aircraft and the optimisation of its fleet utilisation. All aircraft and engines undergo regular
inspections and maintenance in accordance with the schedules recommended by manufacturers or approved
by aviation authorities.
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All of the Group’s pilots and aircraft are licensed for flight in accordance with the minimum European
Aviation Safety Regulations. This licensing requires special training and is subject to a strict oversight
programme. The Group’s training programmes are oriented towards preventing accidents and cover all
aspects of flight operations. The Group’s crew members are required to undergo training programme in air
and ground safety when they are hired and are tested regularly over the course of their employment.
As part of the integration process with Etihad Airways, the Group will need to adopt and provide safety
performance indicators and statistics, in accordance with Etihad Airways’ oversight concept. A process will
also be undertaken to align audit plans, including all common outstations. Additional support will come from
flight data monitoring alignment and safety investigation support, which will be achieved through system
sharing.
Information and Communication Technology
The Group makes extensive use of information and communication technology systems and works together
with third-party providers of information and communication technology and similar services, as well as using
internally developed software.
Competition
The Group’s major competitors on domestic routes are EasyJet and Ryanair, with Vueling also increasing its
presence on the market. On European routes, the Group’s competitors include Lufthansa, Swiss Austrian and
Iberia.
On intercontinental routes, the Group mainly competes with Qatar and Turkish Airways on flights to the
Middle and Far East and with American Airlines, LATAM and Iberia and the STAR grouping of Lufthansa,
United and Swiss on flights to North and South America.
Intellectual Property
The Group owns a number of intellectual property rights. Its main intellectual property rights are its name and
logo. The Group believes that its various patents, including those relating to its online booking system,
aircraft seating design, licenses, technical assistance agreements and cross license agreements, are important
to its business.
Insurance
The Group currently maintains passenger liability insurance, employer liability insurance, aircraft insurance
for aircraft loss or damage, insurance for pilots’ loss of licence and other business insurance in amounts per
occurrence that are consistent with industry standards and that meet the requirements, particularly with respect
to its minimum coverage obligations, under Italian law and international air transport treaties.
Litigation
No member of the Group is currently party to any governmental, legal or arbitration proceedings which, if
adversely determined, could have a material adverse effect on the Issuer’s business, financial conditions,
results of operations or prospects. The Group is a defendant in a number of minor legal proceedings mainly
relating to its air carrier business (for example, passenger claims for cancellation or lost/damaged baggage),
which are incidental to its business activities and which the Issuer does not consider to be material, such as
pending, threatened or potential passenger or customer claims.
Employees
As of 30 April 2015, the Group had 11,526 employees, of which approximately 53% belonged to unions.
EMEA 100217621 v16
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SHAREHOLDERS
The following table sets forth certain information with respect to the Issuer’s direct shareholders:
Number of
shares
Shareholders
MidCo S.p.A.(1) .......................................................................................................................
Etihad Investment Holding Company LLC (3) ........................................................................
Total .......................................................................................................................................
52,583,614 (2)
50,521,512 (4)
103,105,126
%
51
49
100%
____________
Note:
(1)
This entity is wholly owned by CAI.
(2)
Share class: ordinary shares.
(3)
This entity is wholly owned by Etihad Airways.
(4)
Share class: special category B shares.
Corporate governance
Corporate governance rules for Italian non-listed companies, such as the Issuer, are provided in the Italian
Civil Code. Italian corporate governance rules are designed to prevent the risk of abusive exercise of control
of controlling shareholders.
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REGULATORY ENVIRONMENT
The air transport industry has historically been subject to significant governmental regulation both
internationally and domestically. The Issuer is an air carrier licensed by the Italian civil aviation authority
“Ente Nazionale per l’Aviazione Civile” (“ENAC”). Therefore, the regulatory framework in Italy and in the
EU is of particular importance to the Group’s operations.
The international regulatory framework
The regulatory system for international air transport is based upon the general principle that each state has
sovereignty over its territory and its air space and has the right to control the operation of air services over its
territory. International air transport rights are based primarily on traffic rights, i.e. rights to overfly a certain
territory or to land at a specific destination, granted by individual states to other states in bilateral air service
or air traffic agreements. In turn, states grant the rights they have been granted in bilateral agreements to the
eligible air carriers. In some cases, traffic rights are granted directly to air carries through horizontal and
multilateral agreements.
Non-scheduled flights, such as charter flights, are subject to restrictions imposed by individual states. Air
carriers generally obtain traffic rights for non-scheduled flights from the relevant foreign states.
The International Civil Aviation Organization (“ICAO”), a specialised agency of the United Nations, has
developed standards and recommended practices covering a wide range of matters, including aircraft
operations, personnel licensing, security, accident investigations, navigation services, airport design and
operation and environmental protection. Italy is a member of ICAO.
The International Air Transport Association (“IATA”), the international trade organisation of airlines with
240 members, provides a forum for the coordination of fares on international routes and for international
cooperation in areas such as technical safety, security, navigation services, flight operations and the
development of communication standards and administrative procedures.
Bilateral agreements and EU multilateral air transport agreements
Italy is currently a party to approximately 105 bilateral air traffic agreements. These agreements regulate the
designation of airlines and points of call for the operation on specified routes, airline capacity, for passenger
and cargo services, operational flexibilities and fare-approval procedures. In addition, the EU and EU member
states have concluded air transport agreements, amongst others, with the United States, Canada, Switzerland,
Iceland, Norway, Morocco, Georgia, Jordan, Moldova, the states of Western Balkans (Albania, Bosnia and
Herzegovina, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and United Nations Interim
Administration Mission in Kosovo (UNMIK)) and Israel. Further agreements (for example with Brazil) are
under negotiation or awaiting signature.
On the basis of these agreements, contracting states grant to designated airlines the right to operate scheduled
passenger and air-freight services on specified routes between those states. Most bilateral agreements,
including the Air Transport Agreement between the EU, EU member states and the United States, require that
airlines must be able to demonstrate majority or substantial ownership and control by nationals of their home
state or an EU member state. If, at any time, the Issuer were to no longer be majority owned or controlled by
Italian citizens or corporations, or, where the relevant agreement requires majority ownership and control by
EU nationals, EU citizens and corporations, the contracting states to the relevant bilateral or multilateral
agreements could deny the Issuer traffic rights under such agreements.
The Issuer’s articles of association contain provisions which would allow the Issuer to obtain information
from its shareholders, refuse to register transfers of its shares or interests in its shares and to force the sale of
its shares or interests in its shares by non-EU persons or non-Italian persons (as applicable), should the
Issuer’s air traffic rights and air transport licence (“ATL”) be jeopardised.
European Union
Historically, air traffic between EU member states was regulated by bilateral air traffic agreements. This
bilateral regime was progressively liberalised through regulations aimed at establishing common rules for the
licensing of air carriers within the EU and permitting EU-licensed air carriers to freely operate services
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between points within the EU. In order to qualify for an EU licence, Article 4 of Regulation (EC) No.
1008/2008 of the European Parliament and of the Council of 24 September 2008 (“Regulation 1008/2008”)
requires airlines to have their principal place of business in an EU member state, be principally engaged in air
transport activities, be, directly or indirectly, at least 50% owned and effectively controlled by an EU member
state and/or nationals of an EU member state and to have persons of good repute as managers. Pursuant to
Article 8, Paragraph 1 of Regulation 1008/2008 airlines must be able to demonstrate to the competent
licensing authority that they meet the requirements for a licence at all times. The Issuer’s articles of
association contain provisions which allow it to ensure compliance with these requirements at all times.
Access to traffic routes was initially liberalised by Council Regulation (EEC) No. 2408/92 and, most recently,
by Regulation 1008/2008.
In 1995, the European Economic Area Agreement extended the air traffic regulation regime to countries
which were not EU member states, such as Norway, Iceland and Liechtenstein. Secondary EU aviation
legislation also applies to a large extent to Switzerland pursuant to the EU-Switzerland Aviation Agreement of
2002 and following the decisions by the Joint Community/Switzerland Air Transport Committee set up under
thereunder.
Pursuant to Article 15, Paragraphs 1 and 2 of Regulation 1008/2008, no permit or authorisation by an EU
member state is required for the operation of intra-community air services by EU licensed air carriers. The
Issuer is, therefore, allowed to exercise traffic rights within the European Economic Area to any destination
for both scheduled and chartered flights.
Pursuant to Regulation 1008/2008, EU member states may restrict capacity on air traffic routes to distribute
traffic more evenly between airports, to respond to sudden unavoidable and unforeseeable problems or for
environmental reasons. Such restrictions must not be discriminatory and are subject to review by the
European Commission prior to, or, in the case of sudden problems, immediately after their implementation.
Regulatory requirements
Traffic rights and Operating Permits
The Issuer, as all other airlines, must obtain traffic rights to operate passenger and all cargo services. The
Issuer has traffic rights in respect of all the routes it currently operates.
To operate scheduled and non-scheduled international air services, the Issuer is required to hold an AOC and
an ATL, which are granted and subject to any conditions imposed by ENAC. ENAC also issues operating
specifications for each aircraft type operated by the Group. Upon completion of the Transaction, CAI’s AOC
and ATL were transferred to the Issuer.
For its international scheduled and non-scheduled operations, the Group must also obtain slots at airports and
overflying clearances in order to operate on international routes. The Group must apply for designation to
operate in a country that has a bilateral agreement in place with Italy. The Issuer is a designated carrier in all
countries in which it operates.
Slot allocation
In order to take off from and land at airports, air carriers need airport slots. A slot represents a general
authorisation to take off and land at a specific airport at a particular time during a specified time period. Slot
allocation at primary airports, including Italian airports, is governed by Council Regulation (EEC) No. 95/93
of 18 January 1993 (“Regulation 95/93”), recently amended by Regulation (EC) No. 545/2009 of the
European Parliament and of the Council of 18 June 2009.
Under Regulation 95/93, an airport coordinator distributes slots for each flight schedule period. If the number
of applications exceeds the number of available slots, priority is given to the carriers that held the relevant
slots in the previous flight schedule period and used such slots at least 80% of the time. If a carrier fails to
meet the usage threshold, it may lose the relevant slot and the slot may be allocated to a slot pool for
assignment to other carriers. However, if an air carrier has failed to use a slot for exceptional reasons (e.g. due
to unforeseen and unavoidable circumstances outside the air carrier’s control), the air carrier may be entitled
to retain the slot.
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In 2004 certain amendments were made to Regulation 95/93 to improve slot utilisation procedures, access to
slots for new entrants and services to regional airports. The amended regulation also sets forth criteria,
including environmental criteria, to be used in allocating slots, and provides for independence of airport slot
coordinators and judicial review of their decisions. Airport slot coordinators were given the right to revoke
single slots or a series of slots for the remainder of a flight schedule period as a sanction against slot operators
that engage in abusive market practices.
While air carriers may exchange slots with each other under certain conditions, it is still uncertain whether
Regulation 95/93 permits the commercial trading of slots. However, in 2008, the European Commission
indicated, in a communication on the application of Regulation 95/93, that it will not take action against the
practice of exchanging slots for monetary and other consideration (so-called “secondary trading”), provided
that such exchanges take place in a transparent manner.
The European Commission is currently working on another revision of Regulation 95/93 related to slot
allocation to improve optimal use of airport capacity and infrastructure, enhance competitiveness of operators
and improve environmental performance of airports and air transport. On 1 December 2011, the European
Commission published a proposal for the recasting of Regulation 95/93. In particular, under this proposal,
airlines would be expressly allowed to trade slots at EU airports with each other in a transparent way. At the
same time, priority for the allocation of slots for the next corresponding flight schedule season would only be
given to carriers that have used at least 85% (instead of 80%) of the allocated series of slots. The proposal is
currently in the legislative process.
Airport and air traffic control charges
Airport operators currently charge fees for incoming and outgoing flights on the basis of a number of criteria.
The EU passed Directive 2009/12/EC (“Directive 2009/12”) with a view to setting common principles for the
levying of airport charges at European airports. Directive 2009/12 provides for non-discriminatory pricing
while allowing for the structuring of airport charges for issues of public and general interest, including
environmental issues. Directive 2009/12 was implemented in Italy in 2012 by Legislative Decree no. 1/2012,
converted into law no. 27/2012 (articles 71-81).
Moreover, the so-called Single European Sky Regulations set forth in Council Regulations (EC) No.
549/2004, 550/2004, 551/2004 and 552/2004, as revised and extended by Regulation (EC) No 1070/2009,
harmonised the legal framework for air traffic control services in Europe. Measures for the development of a
common scheme for charges related to air navigation services were laid down in Commission Regulation (EC)
No. 1794/2006, as amended by Commission Regulation (EU) No. 1191/2010 of 16 December 2010. Except
for the charges of the European Organisation for the Safety of Air Navigation (Eurocontrol), national
legislation applies to charges for air navigation services. The European Commission has promulgated
Commission Regulation (EU) No. 691/2010 (“Regulation 691/2010”) laying down a performance scheme for
air navigation services and network functions. Regulation 691/2010 requires the European Commission to
adopt EU-wide performance targets and national supervisory authorities to adopt performance plans.
Performance plans drawn up by national supervisory authorities must contain targets consistent with the EU
performance targets. These performance targets have been set by Commission Decision 2011/121/EU of 21
February 2011.
Environmental issues
The Group is subject to regulations concerning substance and noise emissions from its aircraft or its technical
maintenance facilities, which may become more stringent over time and restrict its ability to use certain
airports. The Group is presently not aware of any environmental problems, whether caused by its aircraft or by
any other of its operations that could have a material effect on its business.
Security
Under Article 13 of Council Regulation (EC) No. 300/2008 of 11 March 2008 on common rules in the field of
civil aviation security, which repealed Regulation (EC) No 2320/2002, an air carrier is required to
demonstrate that it has implemented certain security measures set out in a security programme approved by
ENAC.
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The Issuer believes that it is in compliance with the rules set out in its security programme, which has been
approved by ENAC.
Passenger compensation and Montreal Convention liability regime
In 2004 the EU passed legislation for compensating airline passengers who have been denied boarding or
whose flight has been cancelled or subject to delays (Regulation (EC) No. 261/2004 (“Regulation
261/2004”)). Regulation 261/2004, which came into force in February 2005, imposes fixed levels of
compensation to be paid to passengers in the event of cancelled flights, except in particular where the airline
can prove that such a cancellation is caused by extraordinary circumstances, such as weather, air-traffic
control delays or safety issues. Passengers whose flight has been cancelled or is subject to long delays (two
hours or more for short-haul flights) are also entitled to “assistance” including meals, drinks and telephone
calls, as well as hotel accommodation if the delay extends overnight. For delays of at least five hours, the
airline is also required to offer the option of a refund of the cost of the ticket and, if the passenger has already
completed part of the journey, a return flight to the first point of departure. On 5 February 2014, the European
Parliament voted, in its first reading, on a new draft regulation relating to passenger rights, which was
published by the European Commission on 13 March 2013. Such new draft regulation is designed to
strengthen and extend passenger rights to obtain compensation in case flights are delayed or passengers are
stranded upon the bankruptcy of an airline as well as passenger rights in connection with the loss of or damage
to luggage.
The Sturgeon judgment of the European Court of Justice (“ECJ”) of 19 November 2009 in Joined Cases C402/07 and C-432/07 reinterpreted Regulation 261/2004 to include an obligation on airlines to pay
compensation of an amount comprised between €250 and €600 for flight delays exceeding three hours. The
Sturgeon judgment was confirmed by the ECJ’s judgment of 23 October 2012 in Joined Cases C-581/10 and
C-629/10. The financial consequences of the Sturgeon decision are significant.
In 2013, the ECJ confirmed that the extraordinary circumstances defence only applies to the obligation to pay
compensation, and does not exempt the air carrier from the obligation to provide assistance (judgment of 31
January 2013, Case C-12/11). It further held that Regulation 261/2004 does not provide a defence in case of
“particularly extraordinary” events going beyond “extraordinary circumstances”, which would exempt the air
carrier from its obligation to provide assistance. In addition, no time or monetary limitations generally apply
to such obligation. Should the air carrier fail to comply with its obligation to provide assistance, any
compensation claimed by a passenger will, however, be limited to an amount which, in light of the specific
circumstances of each case, is proved to be necessary, appropriate and reasonable to make up for the
shortcomings of the air carrier.
The Montreal Convention on the Unification of Certain Rules for International Air Carriage was adopted in
May 1999. The Convention consolidated, updated and replaced all previous agreements on air carrier
liability, including the 1929 Warsaw Convention vis-à-vis those countries that have also ratified the Montreal
Convention, including Italy. The Montreal Convention came into force in all EU Member States on 28 June
2004, and was implemented in Italy by Law no. 12 on 10 January 2004. Passengers may generally claim up to
1,131 Special Drawing Rights (SDRs) for lost, damaged or delayed luggage. Conversely, the previous
weight-based compensation system under the 1929 Warsaw Convention continues to apply to cargo. In the
event of a passenger’s death or bodily injury the Montreal Convention imposes strict carrier liability for
damage of up to 113,100 SDRs for each passenger, while the carrier’s liability for damage caused by delay in
the transport of passengers is limited to 4,694 SDRs for each passenger. The Group maintains insurance at
standard industry levels in relation to any compensation or damage it is required to pay pursuant to the
Montreal Convention. Under Regulation (EC) No 2027/97 (as amended by Regulation (EC) No 889/2002) the
rules of the Montreal Convention apply to all flights, whether domestic or international, operated by EU air
carriers.
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MANAGEMENT
Board of Directors
The Issuer’s board of directors is composed of nine members, who were appointed by the shareholders’
meeting held on 4 December 2014. Such appointment was confirmed by the shareholders’ meeting held on 5
May 2015 for a period expiring on the date of the shareholders’ meeting held to approve the financial
statements for the year ended 31 December 2017. The following table sets forth the names, positions and
main activities outside of the Group of the members of the Issuer’s board of directors:
Name
Mr. Luca Cordero di
Montezemolo .................
Position
Chairman of the board of directors;
chairman of the review committee
Main activities outside of Group
Chairman of: Charme Management
S.r.l., Montezemolo & Partners SGR
S.p.A., CAI., MDP Holding Uno
S.r.l., MDP Holding Due S.r.l.,
MDP Holding Tre S.r.l. and MDP
Holding Quattro S.r.l.
Vice Chairman of Unicredit S.p.A.
Board member of: Coesia S.p.A.,
Tod’s S.p.A., NTV S.p.A. and
Poltrona Frau S.p.A.
Sole shareholder of
Agricola Fungarino S.r.l.
Mr. James Reginald
Hogan ............................
Vice Chairman of the board of directors;
member of the review committee
Azienda
President and Chief Executive
Officer of Etihad Airways.
Vice Chairman of: Air Berlin and
Jet
Airways,
the
executive
committee of the World Travel and
Tourism Council (WTTC).
Board member of Virgin Australia.
Member of the International Air
Transport Association (IATA) board
of governors.
Mr. Roberto Colaninno
Honorary Chairman; member of the related
party committee
Sole director of: Immobiliare Rippa
S.r.l. and Colaninno Roberto e
Schiavetti Oretta.
Chairman and Chief Executive
Officer of Piaggio & C. S.p.A.
Chairman of: Omniaholding S.p.A.,
Omniainvest S.p.A. and IMMSI
S.p.A.
Board member of: RCN Finanziaria
S.p.A. and Intermarine S.p.A.
Mr. Silvano Cassano ......
Chief Executive Officer; member of the
review committee
No activity outside the Group.
Mr. James Denis Rigney
Board member; member of the review
committee, related party committee and
Chief Financial Officer of Etihad
Airways.
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internal audit committee
Board member of: Airberlin; Air
Serbia and Jet Airways.
Member of the finance committee of
the International Air Transport
Association.
Mr. Giovanni Bisignani
Board member; chairman of the
nomination and remuneration committee;
member of the related party committee and
internal audit committee
Board member of: Safran and Air
Castle.
Mr. Jean Pierre Mustier
Board member; member of the nomination
and remuneration committee and internal
audit committee
Mr. Paolo Andrea
Colombo ........................
Board member; chairman of the related
party committee
Chairman of: Saipem S.p.A. and
Colombo & Associati S.r.l.
Board member of Ceresio SIM
S.p.A.
Chairman of the board of statutory
auditors of GE Capital Interbanca
S.p.A.
Member of the board of statutory
auditors of: S.A.C.B.O. S.p.A.,
Humanitas
Mirasole
S.p.A.,
Massimo Moratti S.a.p.A. and Gian
Marco Moratti S.a.p.A.
Shareholder and board member of:
Immobiliare Villair S.S and
L’Uliveto di Vendicari S.S.
Mrs. Antonella Mansi
Board member; chairman of the internal
audit committee
Sole director of Retindustria S.r.l.
Chairman of: Aedificatio S.p.A. and
S.I.P.I. S.p.A.
Board member of: Hadri Tanks
S.r.l., Sol.Bat. S.r.l., Loran S.r.l. and
Sol S.p.A.
Chief Executive Officer of Nuova
Solmine S.p.A.
The business address of each member of the Issuer’s board of directors is the Issuer’s registered office.
Board of Statutory Auditors
The Issuer’s board of statutory auditors is composed of five members, who were appointed by the
shareholders’ meeting held on 4 December 2014. Such appointment was confirmed by the shareholders’
meeting held on 5 May 2015 for a period expiring on the date of the shareholders’ meeting held to approve the
financial statements for the year ended 31 December 2017. The following table sets forth the names, positions
and main activities outside of the Group of the members of the Issuer’s board of statutory auditors:
Name
Position
Mr. Corrado Gatti .............................................. Chairman
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Main activities outside of Group
Insolvency trustee (curatore
fallimentare) of: S.I.M.E.R. 84
S.r.l., Abdrabo Mousa Sherif
Hussein, Coseete S.r.l. in
liquidazione, CFN Centralinista
S.r.l. unipersonale in liquidazione,
Forservices 2 S.r.l., Micros
Agency S.r.l., Onea S.r.l., La
Fornacella S.r.l., Italian Bus
Travel S.r.l. in liquidazione and
Revi S.r.l., I Legionari S.r.l.
Board member of: Banca di
Credito Cooperativo di Roma
S.C.,
Ferretti
International
Holding S.p.A., Ferretti S.p.A.
(Deputy Chairman) and Total
Energy Advisor S.r.l.
Chairman of the board of
statutory auditors of: Acea ATO 2
S.p.A., Armonia SGR S.p.A.,
Atlantia S.p.A. and Finmeccanica
Global Services S.p.A.
auditors of: Acea S.p.A., C-Zone
S.p.A. in liquidazione, CQS
Holding S.r.l. in liquidazione,
KTESIOS Holding S.p.A. in
liquidazione and LKTS S.p.A. in
liquidazione.
Mr. Gianluca Ponzellini..................................... Auditor
statutory auditors of: Banca IMI
S.p.A., Arcadiana S.r.l., Pi S.p.A.,
Spaim S.r.l., Spagnoli S.p.A., De
Longhi S.p.A., De Longhi Capital
Services S.r.l. and De Longhi
Appliances S.r.l.
Chairman of: Metodo S.r.l.
auditors of: GS S.p.A., Caretti &
Associati S.p.A., Telecom Italia
S.p.A. and Carrefour Italia S.p.A.
Alternate auditor of: F.lli Fontana
S.r.l., Ital Press Holding S.p.A.,
Iper Orio S.p.A., Colombano
S.p.A. and Fedrigoni S.p.A.
Shareholder and board member
of: La Brabbia – S.a.s. di
Maurizio Ponzellini & C. and
Campo P. società Agricola S.S.
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Mr. Alessandro Cortesi ......................................
Auditor
Board member of: Conbipel
S.p.A., O.E.B. S.r.l. and Brugola
O.E.B. Industriale S.r.l.
auditors of: BCC Risparmio &
Previdenza S.g.r.p.A., Adhesive
Based Chemicals S.r.l., I.C.F.
S.p.A., NMS Group S.r.l., GC3
S.p.A., PPG Univer S.p.A. and
Takeda Italia S.p.A.
Board
S.p.A.
Mr. Giovanni Ghelfi ..........................................
Alternate
Auditor
member
of:
Mascioni
fallimentare) of: P.F.M. Studio
S.r.l., Edizioni Media 60 Group
S.r.l., Freight Express S.r.l. in
liquidazione, INN Plast S.r.l.,
G.N.S. S.r.l. in liquidazione,
Showcenter S.r.l. in liquidazione,
Grafiche P.B. S.r.l., Service
Consulting
S.r.l.,
Venere
costruzioni S.r.l., MCB Markwins
Classic Brands Italy S.r.l. in
liquidazione, El. Ind. S.r.l.,
Edilmaren S.r.l. in liquidazione,
Uniglobe Filiali Italia S.r.l. and
Castello S.r.l.
Judicial
commissioner
(commissario giudiziale) of:
Fineco S.r.l. in liquidazione.
auditors of: Immobiliare Lavinia
S.r.l., Immobiliare Pioppella S.r.l.
and Immobiliare Rondò S.p.A.
statutory auditors of: Lombarda
Calcestruzzi S.r.l.
Mr. Maurizio Longhi ......................................... Alternate Auditor
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fallimentare) of: Revere S.r.l. in
liquidazione, Ceramica Eos in
liquidazione,
U.S.
Viterbese
Calcio ’90, Immobiliare Futura 87
S.r.l., Canard Store S.a.s. di
Assogna Valter e C., Pegaso 2003
S.r.l., Hotel Costiera S.a.s. di
Krajniak Karolina & C., Bellini
Vittorio (Tribunale Viterbo RF
1705/01),
Perazzoni
Ivano
(Tribunale Viterbo RG Fall.
18/11), RE.C.I.T. SpA (Tribunale
Viterbo RF 1421/96) and Storri
Valentino (Tribunale Viterbo RG
Fall. 25/10).
Judicial
commissioner
(commissario giudiziale) of:
Travaglini
Cementi
Armati
Vibrati S.p.A., Travaglini S.r.l.
and Chiavarino S.n.c.
Vice chairman and director of:
Sinergia – Sistema di servizi S.c.a
r.l.
Vice-president, deputy chairman,
member
of
the
executive
committee.
Director of Banca di Credito
Cooperativo di Roma S.C.
Sole auditor of: Federazione delle
Banche di Credito Cooperativo
del Lazio, Umbria e Sardegna
S.C.
statutory auditors of: MOA S.C.
and Banca per lo Sviluppo della
Cooperazione di Credito.
The business address of each member of the board of statutory auditors is the Issuer’s registered office.
Senior Management
The following table sets forth the names, positions and main activities outside of the Group of the Issuer’s
senior managers:
Name
Mr. Antonio Cuccuini
Mr. Duncan Naysmith
Mr. John Shepley
Mr. Ariodante Valeri
Mr. Giancarlo Schisano
Position
Chief People & Performance Officer
Chief Financial Officer
Chief Planning Strategist
Chief Commercial Officer
Chief Operations Officer
Mrs. Aubrey Tiedt
Chief Customer Officer
Main activities outside of
Group
Board member of AMS Holding
S.r.l. (in which the Issuer holds
15% of the share capital).
Conflicts of Interest and Related Party Transactions
Certain of the Issuer’s board members and statutory auditors also hold management positions with the Issuer’s
direct and indirect shareholders and other related parties. In order to prevent potential conflicts of interest
between the duties of the members of the Issuer’s board of directors, board of statutory auditors and senior
management and their private interests or other duties, pursuant to article 13, paragraph 12, of the Issuer’s
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bylaws, related party transactions are subject to the prior assessment and non-binding recommendations of a
related-party transaction committee.
The Issuer’s regulation governing transactions with related parties is a key component of its governance and is
aimed at preventing conflicts of interests and ensuring that any transactions entered into by the Issuer with
related parties (which include the Issuer’s direct and indirect shareholders, board members, statutory auditors
and key managers, as well as any companies in which the Issuer’s directors, statutory auditors and key
managers hold more than 20% of the share capital) are transparent and fair from both a substantial and a
procedural point of view.
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TAXATION
Republic of Italy
The statements herein regarding Italian taxation summarise the principal Italian tax consequences of the
purchase, the ownership, the redemption and the disposal of the Notes.
This is a general summary that does not apply to certain categories of investors and does not purport to be a
comprehensive description of all the tax considerations which may be relevant to a decision to purchase, own
or dispose of the Notes. It does not discuss every aspect of Italian taxation that may be relevant to a
Noteholder if such Noteholder is subject to special circumstances or if such Noteholder is subject to special
treatment under applicable law.
This summary also assumes that the Issuer is resident in the Republic of Italy for tax purposes, is structured
and conducts its business in the manner outlined in this Prospectus. Changes in the Issuer’s organisational
structure, tax residence or the manner in which it conducts its business may invalidate this summary. This
summary also assumes that each transaction with respect to the Notes is at arm’s length. Where in this
summary English terms and expressions are used to refer to Italian concepts, the meaning to be attributed to
such terms and expressions shall be the meaning to be attributed to the equivalent Italian concepts under
Italian tax law.
The statements herein regarding taxation are based on the laws in force in the Republic of Italy as of the date
of this Prospectus and are subject to any changes in law occurring after such date, which changes could be
made on a retroactive basis. The Issuer will not update this summary to reflect changes in laws and if such a
change occurs the information in this summary could become invalid.
Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax
consequences under Italian tax law, under the tax laws of the country in which they are resident for tax
purposes and of any other potentially relevant jurisdiction of acquiring, holding and disposing of the Notes
and receiving payments of interest, principal and/or other amounts under the Notes, including in particular
the effect of any state, regional or local tax laws.
Tax treatment of Notes
Legislative Decree No. 239 of 1 April 1996, as subsequently amended (“Decree 239”), provides for the
applicable regime with respect to, inter alia, the tax treatment of interest, premium and other income
(including the difference between the redemption amount and the issue price) from notes issued by Italian
joint stock companies (società per azioni) with shares traded on a regulated market of EU Member States or
EEA Member States granting for an adequate exchange of information with Italy. For this purpose, bonds
(obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) are securities that incorporate
an unconditional obligation to pay, at redemption, an amount not lower than their nominal value and which do
not grant the holder any direct or indirect right of participation to (or control of) management of the issuer.
Italian resident Noteholders
Where an Italian resident Noteholder is (a) an individual not engaged in an entrepreneurial activity to which
the Notes are connected (unless he has opted for the application of the risparmio gestito regime – see under
section “Tax treatment of the Notes – Capital Gains” below); (b) a non-commercial partnership; (c) a
non-commercial private or public institution; or (d) an investor exempt from Italian corporate income taxation,
interest, premium and other income relating to the Notes, are subject to a withholding tax, referred to as
imposta sostitutiva, levied at the rate of 26 per cent. In the event that the Noteholders described under (a) and
(c) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva
applies as a provisional tax.
An Italian resident individual Noteholder not engaged in an entrepreneurial activity who has opted for the
so-called risparmio gestito is subject to a 26 per cent. annual substitute tax on the increase in value of the
managed assets accrued at the end of each tax year (which increase would include interest, premium and other
income accrued on the Notes). The substitute tax is applied on behalf of the taxpayer by the managing
authorised intermediary. For more information, see also “Tax treatment of the Notes — Capital Gains”.
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Where an Italian resident Noteholder is a company or similar commercial entity, a commercial partnership, or
a permanent establishment in Italy of a foreign company to which the Notes are effectively connected, and the
Notes are deposited with an authorised intermediary, interest, premium and other income from the Notes will
not be subject to imposta sostitutiva, but must be included in the relevant Noteholder’s income tax return and
are therefore subject to general Italian corporate taxation (and, in certain circumstances, depending on the
“status” of the Noteholder, also to the regional tax on productive activities (“IRAP”)).
Where an Italian resident Noteholder is an individual engaged in an entrepreneurial activity to which the
Notes are connected, interests, premium and other income relating to the Notes, are subject to imposta
sostitutiva and will be included its relevant income tax return. As a consequence, interests, premium and other
income will be subject to the ordinary income tax and the imposta sostitutiva may be recovered as a deduction
from the income tax due.
Under the current regime provided by Law Decree No. 351 of 25 September 2001, as amended and
supplemented, converted into Law No. 410 of 23 November 2001 (“Decree 351”), as clarified by the Italian
tax authorities through – among others – Circular No. 47/E of 8 August 2003 and Circular No. 11/E of
28 March 2012, Italian real estate funds (complying with the definition as amended pursuant to Law Decree
No. 78 of 31 May 2010, converted into Law n. 122 of 30 July 2010) created under Article 37 of the
Consolidated Financial Act and Article 14-bis of Law No. 86 of 25 January 1994 (“Real Estate Funds”) are
not subject to imposta sostitutiva.
Pursuant to Art. 9 of Legislative Decree No. 44 of 4 March 2014, the same regime is applicable to Italian real
estate SICAFs qualified as such from a civil law perspective.
If the Noteholder is an open-ended or closed-ended investment fund (the “Fund”), a SICAV (an Italian
investment company with variable capital), or a SICAF (an Italian investment company with fixed share
capital) established in Italy and either (i) the Fund, SICAV or SICAF or (ii) their manager is subject to the
supervision of a regulatory authority, and the relevant Notes are held by an authorised intermediary, interest,
premium and other income accrued during the holding period on such Notes will not be subject to imposta
sostitutiva, but must be included in the management results of the Fund, of the SICAV or of the SICAF. The
Fund, SICAV or SICAF will not be subject to taxation on such results but a withholding or a withholding tax
of 26 per cent. will apply, in certain circumstances, to distributions made in favour of unitholders or
shareholders (the “Collective Investment Fund Tax”).
If the Noteholder is a pension fund (subject to the regime provided for by Article 17 of the Legislative Decree
No. 252 of 5 December 2005 – the “Pension Fund”) and the Notes are deposited with an authorised
intermediary, interest, premium and other income relating to the Notes and accrued during the holding period
will not be subject to imposta sostitutiva, but must be included in the result of the relevant portfolio accrued at
the end of the tax period, to be subject to a 20 per cent. substitute tax (as increased by Law No. 190 of
23 December 2014 (the “Finance Act 2015”) which, however, provides for certain adjustments for fiscal year
2014).
Pursuant to Decree 239, imposta sostitutiva is applied by banks, SIMs, fiduciary companies, SGRs,
stockbrokers and other entities identified by a decree of the Ministry of Finance (each an “Intermediary”).
An Intermediary must (a) be resident in Italy or be a permanent establishment in Italy of a non-Italian resident
financial intermediary and (b) not intervene, in any way, in the collection of interest or in the transfer of the
Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any
assignment or other act, either with or without consideration, which results in a change of the ownership of the
relevant Notes or in a change of the Intermediary with which the Notes are deposited.
Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by
any entity paying interest to a Noteholder.
Non-Italian resident Noteholders
Where the Noteholder is a non-Italian resident without a permanent establishment in Italy to which the Notes
are connected, an exemption from the imposta sostitutiva applies provided that the non-Italian resident
beneficial owner is either (a) resident, for tax purposes, in a country which allows for a satisfactory exchange
EMEA 100217621 v16
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of information with Italy; or (b) an international body or entity set up in accordance with international
agreements which have entered into force in Italy; or (c) a Central Bank or an entity which manages, inter
alia, the official reserves of a foreign State; or (d) an institutional investor which is resident in a country which
allows for a satisfactory exchange of information with Italy, even if it does not possess the status of taxpayer
in its own country of residence.
Please note that according to the Law No. 244 of 24 December 2007 (“Budget Law 2008”) a Decree still to
be issued will introduce a new “white list” replacing the current “black list” system, so as to identify those
countries which allow for a satisfactory exchange of information.
In order to ensure gross payment, non-Italian resident Noteholders must be the beneficial owners of the
payments of interest, premium or other income and (a) promptly deposit, directly or indirectly, the Notes with
(i) a resident bank or SIM, or a permanent establishment in Italy of a non-Italian resident bank; (ii) a
non-Italian resident entity or company participating in a centralised securities management system which is in
contact, via computer, with the Ministry of Economy and Finance; (iii) a non-resident entity or company
which has an account with a centralised clearance and settlement system (such as Euroclear or Clearstream,
Luxembourg) which has a direct relationship with the Italian Ministry of Economy and Finance; or (iv) a
centralised managing company of financial instruments, authorised in accordance with Article 80 of the
Financial Services Act; (b) promptly file with the relevant depository, prior to or concurrently with the deposit
of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in
which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta
sostitutiva. Such statement, which is not requested for international bodies or entities set up in accordance
with international agreements which have entered into force in Italy nor in case of foreign Central Banks or
entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements
set forth by Ministerial Decree of 12 December 2001, as subsequently amended; (c) the banks or brokers
mentioned above receive all necessary information to identify the non-resident beneficial owner of the
deposited debt securities, and all necessary information in order to determine the amount of interest that such
beneficial owner is entitled to receive. Failure of a non-Italian resident Noteholder to comply promptly with
the mentioned procedures set forth in Decree no. 239 and in the relevant implementation rules will result in
the application of imposta sostitutiva on interest, premium and other income payments to a non-resident
Noteholder.
The imposta sostitutiva will be applicable at the rate of 26 per cent. (or at the reduced rate provided for by the
applicable double tax treaty, if any) to interest, premium and other income paid to Noteholders who are
(a) resident, for tax purposes, in countries which do not allow for a satisfactory exchange of information with
Italy or (b) otherwise not eligible for the exemption from imposta sostitutiva.
Capital gains
Italian resident Noteholders
Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income
(and, in certain circumstances, depending on the “status” of the Noteholder, also as part of the net value of the
production for IRAP purposes) if realised by an Italian company or a similar commercial entity (including the
Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident
individuals engaged in an entrepreneurial activity to which the Notes are connected.
Where an Italian resident Noteholder is (a) an individual holding the Notes not in connection with an
entrepreneurial activity, (b) a non-commercial partnership, (c) a non-commercial private or public institution,
any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an
imposta sostitutiva, levied at the current rate of 26 per cent. Noteholders may set off losses with gains.
In respect of the application of imposta sostitutiva, taxpayers may opt for one of the three regimes described
below.
Under the tax declaration regime (regime della dichiarazione), which is the default regime for Italian resident
individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta
sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains, net of any incurred
capital loss, realised by the Italian resident individual Noteholder holding the Notes not in connection with an
EMEA 100217621 v16
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entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year.
Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate
the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax
return and pay imposta sostitutiva on such gains together with any balance income tax due for such year.
Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four
succeeding tax years.
As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in
connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains
realised on each sale or redemption of the Notes (the risparmio amministrato regime). Such separate taxation
of capital gains is allowed subject to (a) the Notes being deposited with Italian banks, SIMs or certain
authorised financial intermediaries and (b) an express election for the risparmio amministrato regime being
timely made in writing by the relevant Noteholder. The depository is responsible for accounting for imposta
sostitutiva in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of
capital gains realised upon the revocation of its mandate), net of any incurred capital loss, and is required to
pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding
amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this
purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a
capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities
management, in the same tax year or in the following tax years up to the fourth. Under the risparmio
amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return.
Any capital gains realised by Italian resident individuals holding the Notes not in connection with an
entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to
an authorised intermediary and have opted for the so-called “risparmio gestito” regime will be included in the
computation of the annual increase in value of the managed assets accrued, even if not realised, at year end,
subject to a 26 per cent. substitute tax, to be paid by the managing authorised intermediary. Under the
risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward
against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the
risparmio gestito regime, the Noteholder is not required to declare the capital gains realised in the annual tax
return.
Any capital gains realised by a Noteholder who is a Real Estate Fund or any Italian real estate SICAF to
which the provisions of Decree 351, as subsequently amended, apply will be subject neither to imposta
sostitutiva nor to any other income tax at the level of the real estate investment fund.
Any capital gains realised by a Noteholder who is Fund, a SICAF or a SICAV will be included in the
management results of the Fund, the SICAF or the SICAV. Such result will not be subject to taxation at the
level of the Fund, the SICAF or the SICAV, but subsequent distributions in favour of unitholders of
shareholders may be subject to the Collective Investment Fund Tax.
Any capital gains realised by a Noteholder who is an Italian Pension Fund will be included in the result of the
relevant portfolio accrued at the end of the tax period, to be subject to the 20 per cent. substitute tax (as
increased by Finance Act 2015, which, however, provides for certain adjustments for fiscal year 2014).
Non-Italian resident Noteholders
Capital gains realised by non-Italian-resident Noteholders, not having a permanent establishment in Italy to
which the Notes are connected, from the sale or redemption of Notes issued by an Italian resident issuer,
which are traded on regulated markets (and, in certain cases, subject to filing of required documentation) are
neither subject to the imposta sostitutiva nor to any other Italian income tax.
Capital gains realised by non-Italian resident Noteholders, not having a permanent establishment in Italy to
which the Notes are connected, from the sale or redemption of Notes not traded on regulated markets are not
subject to the imposta sostitutiva, provided that the effective beneficiary: (a) is resident in a country which
allows for a satisfactory exchange of information with Italy; or (b) is an international entity or body set up in
accordance with international agreements which have entered into force in Italy; or (c) is a Central Bank or an
entity which manages, inter alia, the official reserves of a foreign State; or (d) is an institutional investor
which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it
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does not possess the status of taxpayer in its own country of residence. The list of countries which allow for
an exchange of information with Italy should be amended as pointed out above.
If none of the conditions above is met, capital gains realised by non-Italian resident Noteholders from the sale
or redemption of Notes not traded on regulated markets are subject to the imposta sostitutiva at the current rate
of 26 per cent. On the contrary, should the Notes be traded on regulated markets, capital gains realized by
non-Italian resident Noteholders would not be subject to Italian taxation.
In any event, non-Italian resident individuals or entities without a permanent establishment in Italy to which
the Notes are connected that may benefit from a double taxation treaty with Italy providing that capital gains
realised upon the sale or redemption of Notes are to be taxed only in the country of tax residence of the
recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon the sale or
redemption of Notes.
Inheritance and gift taxes
Pursuant to Law Decree No. 262 of 3 October 2006, converted into Law No. 286 of 24 November 2006, as
subsequently amended, the transfers of any valuable asset (including shares, notes or other securities) as a
result of death or donation are taxed as follows:
(i)
transfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance
and gift tax applied at a rate of 4 per cent. on the value of the inheritance or the gift exceeding, for
each beneficiary, €1 million;
(ii)
transfers in favour of relatives to the fourth degree or relatives-in-law to the third degree are subject to
an inheritance and gift tax at a rate of 6 per cent. on the entire value of the inheritance or the gift.
Transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the
value of the inheritance or the gift exceeding, for each beneficiary, €100,000; and
(iii)
any other transfer is, in principle, subject to an inheritance and gift tax applied at a rate of 8 per cent.
on the entire value of the inheritance or the gift.
If the transfer is made in favour of persons with severe disabilities, the tax is levied at the rate mentioned
above in (i), (ii) and (iii) on the value exceeding, for each beneficiary, €1.5 million.
Transfer tax
Following the repeal of the Italian transfer tax, contracts relating to the transfer of securities are subject to the
following registration tax: (a) public deeds and notarised deeds are subject to fixed registration tax at a rate of
€200; (b) private deeds are subject to registration tax only in the case of voluntary registration.
Stamp duty
Pursuant to Article 19(1) of Decree No. 201 of 6 December 2011 (“Decree 201”), a proportional stamp duty
applies on an annual basis to the periodic reporting communications sent by financial intermediaries to their
clients for the Notes deposited in Italy. The stamp duty applies at a rate of 0.2 per cent. and cannot exceed
€14,000, for taxpayers different from individuals; this stamp duty is determined on the basis of the market
value or – if no market value figure is available – the nominal value or redemption amount of the Notes held.
Based on the wording of the law and the implementing decree issued by the Italian Ministry of Economy on
24 May 2012, the stamp duty applies to any investor who is a client (as defined in the regulations issued by
the Bank of Italy on 20 June 2012) of an entity that exercises in any form a banking, financial or insurance
activity within the Italian territory. The communication is deemed to be sent to the customers at least once a
year, even for instruments for which it is not mandatory.
Wealth Tax on securities deposited abroad
Pursuant to Article 19(18) of Decree 201, Italian resident individuals holding the Notes outside the Italian
territory are required to pay an additional tax at a rate of 0.2 per cent.
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This tax is calculated on the market value of the Notes at the end of the relevant year or – if no market value
figure is available – the nominal value or the redemption value of such financial assets held outside the Italian
territory. Taxpayers are entitled to an Italian tax credit equivalent to the amount of wealth taxes paid in the
State where the financial assets are held (up to an amount equal to the Italian wealth tax due).
EU Savings Directive
Under Council Directive 2003/48/EC on the taxation of savings income (the “Directive”), Member States are
required to provide to the tax authorities of other Member States details of certain payments of interest or
similar income paid or secured by a person established in a Member State to or for the benefit of an individual
resident in another Member State or certain limited types of entities established in another Member State.
On 24 March 2014, the Council of the European Union adopted a Council Directive amending and broadening
the scope of the requirements described above. Member States are required to apply these new requirements
from 1 January 2017. The changes will expand the range of payments covered by the Directive, in particular
to include additional types of income payable on securities. The Directive will also expand the circumstances
in which payments that indirectly benefit an individual resident in a Member State must be reported. This
approach will apply to payments made to, or secured for, persons, entities or legal arrangements (including
trusts) where certain conditions are satisfied, and may in some cases apply where the person, entity or
arrangement is established or effectively managed outside of the European Union.
For a transitional period, Austria is required (unless during that period it elects otherwise) to operate a
withholding system in relation to such payments. The changes referred to above will broaden the types of
payments subject to withholding in those Member States which still operate a withholding system when they
are implemented.
The end of the transitional period is dependent upon the conclusion of certain other agreements relating to
information exchange with certain other countries. A number of non-EU countries and territories including
Switzerland have adopted similar measures (a withholding system in the case of Switzerland).
Implementation in Italy of the Directive
Italy has implemented the Directive through Legislative Decree No. 84 of 18 April 2005 (“Decree 84”).
Under Decree 84, subject to a number of important conditions being met, in the case of interest paid to
individuals which qualify as beneficial owners of the interest payment and are resident for tax purposes in
another Member State, Italian qualified paying agents shall report to the Italian tax authorities details of the
relevant payments and personal information on the individual beneficial owner and shall not apply the
withholding tax. Such information is transmitted by the Italian tax authorities to the competent foreign tax
authorities of the State of residence of the beneficial owner. Prospective purchasers of the Notes are however
advised to consult their own tax advisers in order to better evaluate Italian tax consequences connected to the
application of the Savings Directive.
The Proposed Financial Transactions Tax (“FTT”)
The European Commission has published a proposal for a Directive for a common FTT in Belgium, Germany,
Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member
States”).
The proposed FTT has very broad scope and could, if introduced in its current form, apply to certain dealings
in the Notes (including secondary market transactions) in certain circumstances.
Under current proposals the FTT could apply in certain circumstances to persons both within and outside of
the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one
party is a financial institution, and at least one party is established in a participating Member State. A
financial institution may be, or be deemed to be, “established” in a participating Member State in a broad
range of circumstances, including (a) by transacting with a person established in a participating Member State
or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State.
The FTT proposal remains subject to negotiation between the participating Member States and is the subject
of legal challenge. It may therefore be altered prior to any implementation, the timing of which remains
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unclear. Additional EU Member States may decide to participate. Prospective holders of the Notes are
advised to seek their own professional advice in relation to the FTT.
FATCA
Whilst the Notes are in global form and held within Euroclear or Clearstream, Luxembourg (together, the
“ICSDs”), it is expected that FATCA will not affect the amount of any payments made under, or in respect of,
the Notes by the Issuer, any Paying Agent and the common safekeeper, given that each of the entities in the
payment chain between the Issuer and the participants in the ICSDs is a major financial institution whose
business is dependent on compliance with FATCA and that any alternative approach introduced under an
intergovernmental agreement will be unlikely to affect the securities. The documentation expressly
contemplates the possibility that the securities may go into definitive form and therefore that they may be
taken out of the ICSDs. If this were to happen, then a non-FATCA compliant holder could be subject to
withholding. However, definitive notes will only be printed in remote circumstances.
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SUBSCRIPTION AND SALE
The Sole Underwriter has, in a subscription agreement dated 28 July 2015 (the “Subscription Agreement”)
made between the Issuer and the Sole Underwriter and upon the terms and subject to the conditions contained
therein, agreed to subscribe for the Notes. The Issuer has also agreed to pay certain combined commissions to
the Sole Underwriter as set out therein and reimburse the Sole Underwriter for certain of its expenses incurred
in connection with the issue of the Notes. The Subscription Agreement provides that the obligations of the
Sole Underwriter are subject to certain conditions precedent, and the Subscription Agreement may be
terminated in certain circumstances prior to payment for sale of the Notes being made to the Issuer.
United Kingdom
The Sole Underwriter has further represented, warranted and undertaken that:
(a)
it has only communicated or caused to be communicated and will only communicate or cause to be
communicated an invitation or inducement to engage in investment activity (within the meaning of
Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in
connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA
does not apply to the Issuer; and
(b)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything
done by it in relation to the Notes in, from or otherwise involving the United Kingdom.
United States of America
The Notes have not been and will not be registered under the Securities Act and may not be offered or sold
within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions
exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the
meanings given to them by Regulation S.
The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the
United States or its possessions or to a United States person, except in certain transactions permitted by
U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States
Internal Revenue Code and regulations thereunder.
The Sole Underwriter has agreed that, except as permitted by the Subscription Agreement, it will not offer,
sell or deliver the Notes, (a) as part of their distribution at any time or (b) otherwise, until 40 days after the
later of the commencement of the offering and the issue date of the Notes, within the UnitedStates or to, or for
the account or benefit of, U.S. persons, and that it will have sent to each dealer to which it sells Notes during
the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and
sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons.
In addition, until 40 days after commencement of the offering, an offer or sale of Notes within the
United States by a dealer (whether or not participating in the offering) may violate the registration
requirements of the Securities Act.
Republic of Italy
The offering of the Notes has not been cleared by CONSOB pursuant to Italian securities legislation.
Accordingly, no Notes may be offered, sold or delivered, directly or indirectly, nor may copies of the
Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except:
(a)
to qualified investors (investitori qualificati), as defined in Article 26, paragraph 1(d) of CONSOB
Regulation No. 16190 of 29 October 2007, as amended (“CONSOB Regulation No. 16190”)
pursuant to Article 34-ter, first paragraph, letter b), of CONSOB Regulation No. 11971 of 14 May
1999, as amended (“CONSOB Regulation No. 11971”) and Article 100 of the Legislative Decree
No. 58 of 24 February 1998, as amended (the “Italian Financial Act”), each as amended from time to
time; or
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(b)
in other circumstances which are exempted from the rules on public offerings, pursuant to Article 100
of the Italian Financial Act and its implementing CONSOB Regulations including CONSOB
Regulation No. 11971.
Any such offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document
relating to the Notes in the Republic of Italy must be in compliance with the selling restrictions under (a) and
(b) above and must be:
(a)
made by investment firms, banks or financial intermediaries permitted to conduct such activities in the
Republic of Italy in accordance with the relevant provisions of the Italian Financial Act, CONSOB
Regulation No. 16190 of 29 October 2007 and Legislative Decree No. 385 of 1 September 1993, in
each case as amended from time to time (the “Banking Act”) and any other applicable laws or
regulation;
(b)
in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of
Italy, as amended, pursuant to which the Bank of Italy may request information on the offering or
issue of securities in Italy or by Italian persons outside of Italy; and
(c)
in compliance with any other applicable laws and regulations or requirement imposed by CONSOB,
the Bank of Italy or any other Italian authority.
General
The Sole Underwriter has represented, warranted and agreed that it has complied and will comply with all
applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers
Notes or possesses, distributes or publishes this Prospectus or any other offering material relating to the Notes.
Persons into whose hands this Prospectus comes are required by the Issuer and the Sole Underwriter to
comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer,
sell or deliver Notes or possess, distribute or publish this Prospectus or any other offering material relating to
the Notes, in all cases at their own expense.
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GENERAL INFORMATION
Authorisation
1.
The creation and issue of the Notes have been authorised by a resolution of the Board of Directors of
the Issuer dated 25 June 2015.
Listing and Admission to Trading
2.
Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official
List and to be admitted to trading on the Main Securities Market. The total expenses related to the
admission of the Notes to trading on the Irish Stock Exchange’s regulated market are expected to
amount to approximately €6,891.20.
3.
Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in
relation to the Notes and is not itself seeking admission of the Notes to the Official List of the Irish
Stock Exchange or to trading on the Main Securities Market for the purposes of the Prospectus
Directive.
Legal and Arbitration Proceedings
4.
There are no governmental, legal or arbitration proceedings, (including any such proceedings which
are pending or threatened, of which the Issuer is aware), which may have, or have had during the
12 months prior to the date of this Prospectus, a significant effect on the financial position or
profitability of the Issuer and the Alitalia Group.
Significant/Material Change
5.
There has been no significant change in the financial or trading position of the Issuer or the Alitalia
Group and no material adverse change in the prospects of the Issuer or the Alitalia Group since
31 March 2015.
Auditors
6.
2013 and 2014 have been audited by Deloitte & Touche S.p.A., which are registered under
No. 132587 in the Single Register of Legal Auditors at the Ministry of Economy and Finance
(Registro Unico dei Revisori Legali presso il Ministero dell’Economia e delle Finanze), State General
Accounting (Ragioneria Generale dello Stato). Deloitte & Touche S.p.A. are also members of
ASSIREVI, the Italian association of auditing firms.
Documents on Display
7.
Physical or electronic copies of the following documents (together, where appropriate, with English
translations thereof) may be inspected during normal business hours at the offices of the Principal
Paying Agent at 33, rue de Gasperich, Howald – Hesperange, L – 2085 Luxembourg, Grand Duchy of
Luxembourg for 12 months from the date of this Prospectus:
(a)
the By-laws (statuto) of the Issuer;
(b)
this Prospectus;
(c)
the Trust Deed;
(d)
the Paying Agency Agreement;
(e)
CAI’s audited consolidated annual financial statements as at and for the years ended
31 December 2013 and 2014;
(f)
Issuer’s unaudited annual financial statements as at and for the year ended 31 December
2014; and
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(g)
Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March
2015, in respect of which a limited review has been performed by Deloitte & Touche S.p.A.
Clearing Systems
8.
The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The
ISIN is XS1263964576 and the common code is 126396457. The address of Euroclear is 1 Boulevard
du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42
Avenue JF Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg.
Potential Conflicts of Interest
9.
The Sole Underwriter and its affiliates have engaged, and may in the future engage, in investment
banking and/or commercial banking transactions (including, without limitation, the provision of loan
facilities) with, and may perform services to the Issuer and its affiliates in the ordinary course of
business.
10.
In addition, in the ordinary course of their business activities, the Sole Underwriter and its affiliates
may make or hold a broad array of investments and actively trade debt and equity securities (or
related derivative securities) and financial instruments (including bank loans) for their own account
and for the accounts of their customers. Such investments and securities activities may involve
securities and/or instruments of the Issuer or the Issuer’s affiliates or any entity related to the Notes.
To the extent the Sole Underwriter and/or its affiliates have or may have a lending relationship with
the Issuer, they may routinely hedge their credit exposure to the Issuer in a manner consistent with
their customary risk management policies such as by entering into transactions which consist of either
the purchase of credit default swaps or the creation of short positions in the Issuer’s securities,
including potentially the Notes offered hereby. Any such short positions could adversely affect future
trading prices of the Notes offered hereby. The Sole Underwriter and its affiliates may also make
investment recommendations and/or publish or express independent research views in respect of such
securities or financial instruments and may hold, or recommend to clients that they acquire, long
and/or short positions in such securities and instruments. For the avoidance of doubt, the term
“affiliates” includes also parent companies. Furthermore, as Sole Underwriter, Morgan Stanley & Co.
International plc will receive commissions (as further described in “Subscription and Sale”).
Yield
11.
On the basis of the issue price of the Notes of 100 per cent. of their principal amount, the gross real
yield of the Notes is 5.250 per cent. on an annual basis.
Legend Concerning US Persons
12.
The Notes and any Coupons appertaining thereto will bear a legend to the following effect: “Any
United States person who holds this obligation will be subject to limitations under the United States
income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal
Revenue Code”.
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INDEX TO THE ISSUER’S UNAUDITED FINANCIAL STATEMENTS AS AT AND FOR THE
YEAR ENDED 31 DECEMBER 2014
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Issuer’s Balance Sheet as at and for the year ended 31 December 2014
A)
B)
I
1)
2)
3)
4)
5)
6)
7)
ASSETS
UNPAID SUBSCRIBED CAPITAL DUE FROM SHAREHOLDERS
NON-CURRENT ASSETS
INTANGIBLE ASSETS
. Start-up and expansion costs
. Research, development and advertising costs
. Industrial patents and other intellectual property rights
. Concessions, licences, trademarks and similar rights
. Goodwill
. Intangible assets under construction and advances
. Other
31 December 2014
-
-
II TANGIBLE ASSETS
1)
. Land and buildings
2)
. Plant and machinery:
3)
. Industrial and commercial equipment
4)
. Other assets
5)
. Tangible assets under construction and advances
-
III FINANCIAL ASSETS
1)
. Investments
2)
. Receivables:
3)
. Other financial assets
-
Total non-current assets
C)
CURRENT ASSETS
I INVENTORIES
1)
. Technical and other consumable materials
II RECEIVABLES
1)
. Due from customers
2)
. Due from subsidiaries
3)
. Due from associates
4)
. Due from parents
4bis) . Tax assets
4ter) . Deferred tax assets
5)
. Due from others (*)
244
70.000.000
70.000.244
III SECURITIES HELD FOR TRADING
IV CASH AND CASH EQUIVALENTS
1)
. Bank and post office deposits
2)
. Cheques
3)
. Cash and other valuables in hand
319.751.461
319.751.461
389.751.705
Total current assets
D)
-
ACCRUED INCOME AND PREPAID EXPENSES
389.751.705
TOTAL ASSETS
________________________________________
(*) amounts falling due within 12 months
(**) amounts falling due within 12 months
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Issuer’s Balance Sheet as at and for the year ended 31 December 2014 (cont’d)
LIABILITIES AND EQUITY
A)
EQUITY
I
II
III
IV
V
VII
. SHARE CAPITAL
. SHARE PREMIUM RESERVE
. REVALUATION RESERVE
. LEGAL RESERVE
. STATUTORY RESERVE
. OTHER RESERVES
1.- Shareholders' capital contributions
2.- Loss coverage reserve
31 December 2014
50.000
-
-
-
VIII RETAINED EARNINGS/(ACCUMULATED LOSSES)
IX
. NET PROFIT/(LOSS) FOR THE PERIOD
Losses covered during the year
Total Equity
B)
1)
2)
3)
4)
(212.148)
PROVISIONS FOR RISKS AND CHARGES
. Pensions and similar obligations
. Tax liabilities including deferred taxes
. Other:
. Capital increase
Total provisions for risks and charges
C)
PROVISIONS FOR POST-EMPLOYMENT BENEFITS
D)
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
14)
PAYABLES
. Bond issues
. Convertible bonds
. Shareholder loans
. Bank borrowings
. Other borrowings (*)
. Down-payments
. Trade payables
. Debt securities
. Due to subsidiaries
. Due to associates
. Due to parents (*)
. Tax liabilities
. Social security contributions payable
. Other payables:
Total liabilities
E)
(262.148)
-
387.500.000
387.500.000
24.968
2.401.440
37.445
2.463.853
ACCRUED EXPENSES AND DEFERRED INCOME
-
389.751.705
TOTAL LIABILITIES AND EQUITY
________________________________________
(*) amounts falling due within 12 months
(**) amounts falling due within 12 months
EMEA 100217621 v16
73
Issuer’s Income Statement as at and for the year ended 31 December 2014
2014
A) VALUE OF PRODUCTION
1. - Revenue from sales and services
2. - Changes in inventories of materials for work in progress
3. - Changes in contract work in progress
4. - Increases in self-constructed assets
5. - Other revenue and income
Total value of production
B) PRODUCTION COSTS
6. - technical materials, fuel, other consumables and goods for resale
7. - services
8. - lease expense
9. - staff costs
10. - Amortization, depreciation and impairments
11. - Changes in inventories of technical materials, consumables and goods for resale
12. - Provisions for risks
13. - Other provisions
14. - Sundry operating costs
Total production costs
Difference between value of production and production costs
C) FINANCIAL INCOME/(EXPENSES)
15. - Income from investments
16. - Other financial income
17. - Interest and other financial charges
17bis.- foreign exchange gains/(losses)
(262.705)
(380)
(263.085)
(263.085)
0
937
Total financial income/(expenses)
937
D) ADJUSTMENTS TO VALUE OF FINANCIAL ASSETS
18. - Revaluations
19. - Impairments
Total adjustments
0
E) EXTRAORDINARY INCOME/(EXPENSES)
20. - Income
21. - Expenses
Total extraordinary items
(262.148)
Income before taxes
22. - Income tax expense for the period
23. - Net profit/(loss) for the period
EMEA 100217621 v16
0
(262.148)
74
Issuer’s Cash Flow Statement as at and for the year ended 31 December 2014
31/12/2014
A)
B)
C)
Cash flows from (for) operating activities
Net profit/(Loss) for the period
Income tax expense
Interest expense/interest income
(Gains)/Losses on disposal of assets
1.
Profit/(Loss) for the period before taxes, interest, dividends and gains/losses on disposals
Adjustments for non-cash items without a matching entry in net working capital
Provisions
Amortization and depreciation of non-current assets
Impairments
Other adjustments for non-cash items
Total adjustments for non-cash items
2.
Cash flow before changes in net working capital
Changes in net working capital
Decrease/(increase) in inventories
Decrease/(increase) in trade receivables
increase/(Decrease) in trade payables
Decrease/(increase) in accrued income and prepaid expenses
increase/(Decrease) accrued expenses and deferred income
Other changes in net working capital
Total changes in net working capital
3.
Cash flow after changes in net working capital
Other adjustments
Interest received/(paid)
(Income tax paid)
Dividends received
(Use of provisions)
Total other adjustments
4.
Cash flow after other adjustments
Cash flow from (for) operating activities (A)
Cash flows from (for) investing activities
Tangible assets
Additions
Proceeds from disposals
Intangible assets
(Additions)
Non-current financial assets
(Additions)
Current financial assets
(Additions)
Cash flow from (for) investing activities (B)
Cash flows from (for) financing activities
Debt
Increase/(decrease) in short-term bank borrowings
New borrowings
Repayment of borrowings
Equity
Issue of new shares for payment
Sale (purchase) of treasury shares
Dividends (and interim dividends) paid
Cash flow from (for) financing activities (C)
Increase/(decrease) in cash and cash equivalents (A ± B ± C)
Cash and cash equivalents at 1 January 2014
Cash and cash equivalents at 31 December 2014
EMEA 100217621 v16
(262)
(262)
387.500
387.500
387.238
25
(67.562)
(67.537)
319.701
0
0
319.701
0
50
50
319.751
0
319.751
75
REGISTERED OFFICE OF THE ISSUER
Alitalia – Società Aerea Italiana S.p.A.
Via A. Nassetti
Pal. Alfa S.N.C.
00054 Fiumicino (Rome)
Italy
TRUSTEE
BNP Paribas Trust Corporation UK Limited
55 Moorgate
London EC2R 6PA
United Kingdom
SOLE UNDERWRITER
Morgan Stanley & Co. International plc
25 Cabot Square
Canary Wharf
London El4 4QA
United Kingdom
PRINCIPAL PAYING AGENT
BNP Paribas Securities Services, Luxembourg Branch
33, rue de Gasperich
Howald - Hesperange
L-2085 Luxembourg
Grand Duchy of Luxembourg
LISTING AGENT
Arthur Cox Listing Services Limited
Earlsfort Centre Earlsfort Terrace
Dublin 2
Ireland
LEGAL ADVISERS
To the Issuer as to Italian law:
To the Sole Underwriter as to
English and Italian law:
To the Trustee as to English law:
DLA Piper Italy
Via Gabrio Casati, 1
Milan 20123
Italy
White & Case (Europe) LLP
Piazza Diaz, 1
20123 Milan
Italy
White & Case LLP
5 Old Broad Street
London EC2N 1DW
United Kingdom
AUDITORS TO THE ISSUER
Deloitte & Touche S.p.A.
Via Tortona, 25
Milan 20144
Italy
EMEA 100217621 v16
76

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