Virgin Australia Entitlement Offer Presentation · Entitlement Offer 351 Reduce net debt and general corporate purposes 348 Transaction costs 3 Total 351 Total 351 • Proceeds used

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Virgin Australia Entitlement Offer Presentation 14 November 2013

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NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

Important notice and disclaimer

1

This investor presentation (Presentation) has been prepared by Virgin Australia Holdings Limited (ABN 54 100 686 226) (Virgin Australia). This Presentation has been prepared in

relation to a pro rata accelerated non-renounceable entitlement offer (Entitlement Offer) of new fully paid ordinary shares in Virgin Australia (New Shares) to be made under section

708AA of the Corporations Act 2001 (Cth) (Corporations Act) as modified by Australian Securities and Investments Commission (ASIC) Class Order 08/35. This Presentation is not a

prospectus, product disclosure statement or other offering document under Australian law and has not been, nor is it required to be, lodged with ASIC. This presentation has been

prepared in Australia and may not be released or distributed in the United States. By accepting, accessing or reviewing this Presentation, or attending any presentation or briefing in

relation to the Entitlement Offer, you acknowledge and agree to be bound by the following conditions.

Summary Information

This Presentation contains summary information about Virgin Australia and its activities which is current as at the date of this Presentation. The information in this Presentation is of a

general nature and does not purport to be complete nor does it contain all the information which a prospective investor may require in evaluating a possible investment in Virgin

Australia or that would be required in a prospectus or product disclosure statement prepared in accordance with the requirements of the Corporations Act. This Presentation should be

read in conjunction with Virgin Australia’s other periodic and continuous disclosure announcements lodged with the ASX, which are available at www.asx.com.au. None of Virgin

Australia, its related bodies corporate and their respective directors, employees, officers and advisers (Virgin Australia Group) give any representations or warranties in relation to the

accuracy or completeness of this Presentation. Information in this Presentation remains subject to change without notice. Virgin Australia is not responsible for providing updated

information to any prospective investor.

Not financial product advice

This Presentation is not financial product or investment advice, a recommendation to acquire New Shares or accounting, legal or tax advice. It has been prepared without taking into

account the objectives, financial or tax situation or needs of any individual. Before making an investment decision, prospective investors should consider the appropriateness of the

information having regard to their own objectives, financial and tax situation and needs and seek legal and taxation advice appropriate for their jurisdiction. Virgin Australia is not

licensed to provide financial product advice in respect of an investment in New Shares. Cooling off rights do not apply to the acquisition of New Shares.

Risks

An investment in Virgin Australia is subject to known and unknown risks, including, but not limited to those summarised under “Key risks” in this Presentation. Virgin Australia does not

guarantee a particular rate of return or the performance of Virgin Australia. Investors should have regard to the risks outlined in this Presentation when making their investment

decision.

Financial Data

All dollar values are in Australian dollars (A$ or AUD) unless otherwise stated. Investors should note that this Presentation contains pro forma financial information. The pro forma

financial information has been prepared by Virgin Australia in accordance with the measurement and recognition requirements, but not the disclosure requirements, of applicable

accounting standards and other mandatory reporting requirements in Australia.

Past performance

Past performance information provided in this Presentation is for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

Future performance

This Presentation contains certain “forward-looking statements”. Forward-looking statements can generally be identified by the use of forward-looking words such as, “expect”,

“anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” “outlook”, “guidance” and other similar expressions within

the meaning of securities laws of applicable jurisdictions and may include, but are not limited to, the outcome and effects of the Entitlement Offer, the use of proceeds and the financial

and operating performance of Virgin Australia. The forward-looking statements contained in this Presentation involve significant elements of subjective judgement and assumptions as

to future events which may or may not be correct.

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You are cautioned not to place undue reliance on forward‐looking statements as actual outcomes may differ materially from forward‐looking statements. Forward‐looking

statements, opinions and estimates provided in this Presentation are not guarantees or predictions of future performance and necessarily involve uncertainties, assumptions,

contingencies and other factors and unknown risks, many of which are outside the control of Virgin Australia. Such factors may cause the actual results or performance of Virgin

Australia to be materially different from any future results or performance expressed or implied by such forward‐looking statements. Forward‐looking statements including

projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance.

They should not be taken as implying that the assumptions on which the projections have been prepared are correct or exhaustive. Any forward‐looking statements speak only as

of the date of this Presentation.

Virgin Australia Group disclaims any responsibility for the accuracy or completeness of any forward‐looking statements. Virgin Australia Group disclaims any intent or obligation to

update publicly any forward‐looking statements to reflect any change in Virgin Australia’s financial condition, status or affairs or any change in the events, conditions or

circumstances on which a statement is based, except as required by law.

Not an offer

Nothing in this Presentation should be considered as a solicitation, offer or invitation in any place where, or to any person to whom, it would not be lawful to make such an offer or

invitation. No action has been taken to register the New Shares, or otherwise permit a public offering of shares, in any jurisdiction outside of Australia and New Zealand. The

distribution of this Presentation outside Australia and New Zealand may be restricted by law. See Appendix B – International Entitlement Offer Restrictions. Any failure to comply

with such restrictions may constitute a violation of applicable securities laws.

This Presentation does not and will not form part of any contract for the acquisition of shares.

This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities in the United States. Any securities described in this presentation have not

been, and will not be, registered under the US Securities Act of 1933 (the Securities Act) or the securities laws of any state or other jurisdiction of the United States and are

being offered and sold only in transactions outside the United States in reliance on Regulation 5 under the Securities Act or pursuant to an applicable exemption. Accordingly, the

New Shares may not be offered or sold, directly or indirectly, in the United States, or for the account or benefit of any person in the United States, except in transactions exempt

from, or not subject to, the registration of the US Securities Act and any other applicable US state securities laws.

Virgin Australia reserves the right to withdraw, or vary the timetable for, the Entitlement Offer at any time.

Non-GAAP measures

You should also be aware that certain financial data included in this Presentation are “non-GAAP financial measures” under Regulation G under the US Securities Exchange Act

of 1934, including any “underlying financial metrics”, “EBIT”, “EBITDA”, "Net Tangible Assets ($ / share)" or gearing ratios. The disclosure of such non-GAAP financial measures

in the manner included in this Presentation would not be permissible in a registration statement under the Securities Act. These non-GAAP financial measures do not have a

standardised meaning prescribed by AIFRS and, therefore, may not be comparable to similarly titled measures presented by other entities, nor should they be construed as an

alternative to other financial measures determined in accordance with AIFRS. Although Virgin Australia believes these non-GAAP financial measures provide useful information

to users in measuring the financial performance and condition of its business for the reasons set out in this Presentation, you are cautioned not to place undue reliance on any

non-GAAP financial measures and ratios included in this Presentation.

Important notice and disclaimer (cont’d)

2

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Important notice and disclaimer (cont’d)

3

Disclaimer

None of the underwriters nor any of their or Virgin Australia’s advisers or any of their respective affiliates, related bodies corporate, directors, officers, partners, employees,

representatives or agents have authorised, permitted or caused the issue, lodgement, submission, dispatch or provision of this Presentation and none of them make or purport to

make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by them.

Virgin Australia, the underwriters and their respective affiliates, related bodies corporate, directors, officers, partners, employees, representatives and agents, to the maximum

extent permitted by law, expressly disclaim all liabilities, including, without limitation, liability for negligence in respect of, make no representations regarding, and take no

responsibility for, any part of this Presentation and make no representation or warranty, express or implied, as to the currency, accuracy, reliability or completeness of information

in this Presentation.

Disclosure

The underwriters, together with their affiliates, are full service financial institutions engaged in various activities, which may include trading, financing, financial advisory,

investment management, investment research, principal investment, hedging, market making, margin lending, brokerage and other financial and non‐financial activities and

services including for which they have received or may receive customary fees and expenses. UBS AG, Australia Branch (UBS) and Goldman Sachs Australia Pty Ltd (Goldman

Sachs), in conjunction with their affiliates, are acting as lead managers, bookrunners and underwriters to the pro-rata, accelerated and non-renounceable entitlement offer of

securities by Virgin Australia (ASX:VAH). UBS and Goldman Sachs and/ or its affiliates may receive fees and customary expenses for acting in this capacity.

In the ordinary course of their various business activities, the underwriters and their affiliates may purchase, sell or hold a broad array of investments and actively trade or effect

transactions in equity, debt and other securities, derivatives, loans, commodities, currencies, credit default swaps and/ or other financial instruments for their own account and for

the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/ or instruments of Virgin Australia, its related entities

and/or persons and entities with relationships with Virgin Australia and/ or its related entities. Goldman Sachs and/ or its affiliates act as a counterparty to Virgin Australia and/ or

its related entities on forward oil and foreign currency hedging contracts. The underwriters and/ or their affiliates, or their respective officers, employees, consultants or agents

may, from time to time, have long or short positions in, buy or sell (on a principal basis or otherwise), and may act as market makers in, the securities or derivatives, or serve as a

director of any entities mentioned herein. Goldman Sachs and/ or its affiliates currently hold and/or may in the future hold equity, debt and/ or related derivative securities of Virgin

Australia and/ or its related entities.

None of the underwriters nor any of their related bodies corporate and affiliates, nor any of their respective directors, officers, partners, employees, representatives or agents

make any recommendations as to whether you or your related parties should participate in the Entitlement Offer, nor do they make any representations or warranties to you (or

other statements upon which you may rely) concerning this Entitlement Offer or any such information. The engagement of the underwriters by Virgin Australia is not intended to

and does not create any agency, custodial, fiduciary or other legal relationship between the underwriters and any shareholder or other investor.

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• Virgin Australia is raising approximately $350 million through a fully underwritten pro rata accelerated

non-renounceable entitlement offer ("Entitlement Offer")

• The equity raising is designed to strengthen Virgin Australia’s balance sheet as we mature the

business

• Entitlements are offered on a 5 for 14 basis at A$0.38 per share (approximately 925 million new

ordinary shares ("New Shares") ) to eligible shareholders

• Virgin Australia's major shareholders and strategic partners are supportive of the Entitlement Offer

and will be taking up their entitlements as well as, where applicable, providing a sub-underwrite or

increasing their economic exposure via cash settled derivatives

– Eligible Retail Shareholders will have the opportunity to apply for additional New Shares beyond

their entitlement subject to certain limitations. Details of this and further aspects of the

Entitlement Offer are explained on pages 22-281

Entitlement offer

4 1 Unless Eligible Retail Shareholders are a related party of Virgin Australia

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Overview of Virgin Australia 1

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• Virgin Australia launched in 2000 and established itself as a contemporary low cost airline, with a

reputation for exceptional customer service

• In July 2010, Virgin Australia launched the Game Change Program, a strategy to reposition the

airline as a premium carrier

• Today, the Virgin Australia group:

– Operates a modern fleet of over 140¹ aircraft

– Employs more than 9,200 people

– Flies a route network of 45 Australian and 16 international destinations

– Connects customers to approximately 460 destinations through alliance partnerships

– Has a market capitalisation of approximately A$1.05bn²

Overview of Virgin Australia

6 1 Includes Tiger Airways Australia Pty Limited (Tigerair Australia) aircraft. 2 As at 13 November 2013.

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Evolution of Virgin Australia

7

2000 2003 2005 2007 2009 2010 2011 2012 2013

Virgin Australia

(previously Virgin

Blue) established

by the Virgin Group

as a low cost

carrier

Launched

Velocity

Rewards

IPO listed on

Australian Stock

Exchange

Established

international

airline,

“V Australia”

Appointment of John

Borghetti as CEO

Announced

Etihad

partnership

Number of aircraft

in operation

2 50 144 81

Renamed and

rebranded to “Virgin

Australia”

Announcement of next

phase of the “Game

Change Program”:

“Game On”

Completed

100%

Skywest

acquisition

Virgin Australia has evolved from a domestic focused low cost carrier in the early 2000’s to a premium service

provider across all key market segments

Established codeshare

agreement with Hawaiian

airlines Announcement of

“Game Change

Program”

Announced

partnership with

Singapore

Airlines

Announced Air

NZ Alliance

Initial stake

acquired by Air

New Zealand,

today hold

22.9%1

Initial stake

acquired by

Etihad, today

hold 19.9%1

Completed

60% Tigerair

Australia

acquisition

Initial stake

acquired by

Singapore

Airlines, today

hold 19.8%1

Established trans-Pacific

alliance with Delta

Airways

102 87 93

1 Pre-Entitlement Offer Holding

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• Effective competitor in all key segments of the Australian market

• Strong brand with a competitive product and service offering

• Maintained a low cost base

• Strong and supportive shareholder base

• Established a strategic platform to drive future growth

Virgin Australia has undertaken a major transformation

over the last three years

8

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International

Domestic Corporate

Domestic Leisure

Regional & Charter

Budget

Loyalty

Virgin Australia is now an effective competitor in all key

segments

9

Virgin Australia

(Today)

Virgin Blue

(2010)

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Australian domestic passenger numbers have declined on

only two occasions in the past two decades

10 Source: Bureau of Infrastructure, Transport and Regional Economics (BITRE)

Year on year growth of Australia domestic passengers

(calendar years 1992 – 2012)


4.0%

6.1%

11.6%

7.0%

3.9%

(1.3)%

0.9%

3.5%

5.2%

1.9%

(1.3)%

12.2%

14.5%

8.3%

7.0% 6.5%

7.9%

0.5%

6.6%

0.1%

4.5%

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

2001:

September 11

attacks

2009:

Global financial

crisis

1997:

Asian financial

crisis

2011:

Queensland

floods

2002:

Ansett

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Note: ATI anti-trust immunity.

¹ Does not include all Delta destinations.

² Does not include all New Zealand domestic destinations.

Virgin Australia now offers approximately 460 destinations

through large bilateral network including four joint ventures

11

Honolulu

Cincinnati

Atlanta

Tampa

Ottawa

Detroit

New Orleans

Raleigh

Columbus Indianapolis

Kona

Lihue Kahului

Miami

Philadelphia

Houston

Memphis

Minneapolis

Salt Lake City

Sacramento

Cancun

Guadalajara

Puerto Vallarta

San Diego

Baltimore

Phoenix

Johannesburg

New York

Boston

San Francisco

Orlando

Fort Lauderdale

Washington

Seattle London

To / from

LON

To / from

US

Toronto

Las Vegas

Dallas Hong Kong

Portland

Singapore

Athens

Brussels

Paris

Moscow

Dublin

Frankfurt

Geneva

Munich

Milan Istanbul

Larnaca

London

Manchester Minsk

Casablanca

Cairo

Abu Dhabi

Muscat

Tehran

Kuwait

Doha

Riyadh Jeddah

Bahrain Damman

Amman Beirut

Damascus

Khartoum

Almaty

To / from

AUH

To / from

US

Astana

Karachi

Lahore

Islamabad

Peshawar

Chicago

Alexandria

Baghdad

Erbil

Nairobi Kuala Lumpur

Langkawi Colombo

Kathmandu

Osaka

Tokyo Beijing

Hyderabad Mumbai

Thiruvananthapuram

Penang

Kota Kinabalu Brunei

Kuching

Phnom Penh Siem Reap

Balikpapan

Davao

Ho Chi Minh

City

Lombok

Manado

Medan Pekanbaru

Nagoya

Jakarta

Phuket Yangon

Ahmedabad

Male

Kochi Coimbatore

Bengaluru

Kolkata

Delhi

Chennai

Kunming Xiamen Taipei

Chengdu Chongqing

Hong Kong

Fukuoka

Seoul

Manila Cebu

Shanghai

Shenzen Guangzhou

Surabaya Solo City

Palembang

Bangkok Chiang Mai

Dhaka

Da Nang Hanoi

Cape Town

Amsterdam

Copenhagen

Zurich

Barcelona Rome

Cairns

Gold Coast

Rotorua

Sunshine

Coast

Auckland Hamilton

Wellington

Christchurch

Dunedin Queenstown

Melbourne

Brisbane

Los Angeles

Cairns

Port Moresby Denpasar

Honiara Port

Vila Nadi

Rarotonga

Apia

Nuku’alofa

Perth

Adelaide

Abu Dhabi

Sydney

Darwin

Virgin Australia

Virgin Atlantic

Virgin America

Hawaiian

Etihad

Air NZ2

Delta1

Singapore / Silk

Route network and

destinations

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Source: AMR Research, Nunwood Research July 2013, Australian Financial Review

• 99% brand awareness

• 92% brand familiarity with Australian

consumers

• 83% brand consideration

• Key brand values:

– Takes an innovative approach to doing

business

– A brand on its way up

– Shakes things up for benefit of its customers

Brand with strong customer recognition and corporate

reputation

12

Most Respected Companies of 2013 (Australia)

Ranking Company

1 Wesfarmers

2 Apple

3 Virgin Australia

4 Samsung

Virgin Australia has the strongest reputation of Australian

and New Zealand based airlines

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AFR – third place in “Most Respected Companies of 2013”

Roy Morgan – ‘Domestic airline of the Year’

Skytrax World Airline Awards – ‘Best Airline’ and ‘Best Staff

Service’ for Asia Pacific

Freddie Awards – ‘Best Airline Loyalty Program’ for Asia Pacific

CSIA Australia Service Excellence Awards – ‘National

Customer Service Team of the Year’

Superior product positioning enhances guest experience

13

Business Class Economy Class In-Flight Entertainment Luke Mangan Catering Departure Lounge

Superior product positioning

Awards in FY13 & FY14

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NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES Source: Company filings

Velocity Frequent Flyer program is a key value driver

• Continuing to strengthen and mature the

business to optimise for ongoing future growth

• Strong growth on key performance metrics

• Received numerous awards in FY13:

− Freddie Awards – “Best Airline Loyalty

Program”, “Best Redemption Availability” and

“Best Elite Program” for Asia Pacific

− Australia Business Traveller Awards – “Best

Frequent Flyer Program”

− Recognised at Airline Business/Global Flight

“Loyalty Innovation Awards”

Velocity membership base

(millions of members)

14 14

2.1

2.5

3.2

3.7

FY10 FY11 FY12 FY13

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Continuing cost disciplines to maintain low cost base in all

segments even during a period of significant transformation

• Strong cost performance in FY13, underlying CASK1 (excl. fuel) approximately equal to FY12

• Business efficiency program on track – over A$60m of productivity gains in FY13

• Key focus on maintaining business efficiency:

– Group fleet and network optimisation

– Workforce productivity and effectiveness

– IT architecture, systems and processes

– Group procurement leveraging scale

15 ¹ Underlying Cost per Available Seat Kilometre (CASK) estimates based on Revenue less Segment Underlying EBIT (excluding Skywest).

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Source: Company Filings, Qantas Annual reports

¹ Virgin Australia mainline excludes charter operations and other services. The Qantas Group’s scheduled passenger excludes dedicated freighters and Network Aviation

fleet.

Young, modern and fuel efficient fleet

• Virgin Australia’s core mainline average fleet age approximately half that of competitor’s fleet1

• Young fleet drives superior efficiencies and cost position

• New aircraft provide better proposition for customer experience

16

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Fleet overview

17

Jun 2010 Jun 2013

Virgin Australia – mainline

E170 6 -

E190 15 18

B737-700 21 3

B737-800 41 70

A330-200 - 6

B777-300ER 4 5

ATR-72 - 11

Mainline average fleet age 4.7 years 4.2 years

Charter operations and other services

A320 - 2

F100 - 10

F50 - 8

Tigerair Australia

A320 - 11

Total fleet 87 144

Note: Figures as at 30 June 2010 & 2013.

Virgin Australia’s core fleet is centred around the B737-800, which comprises over 60% of the mainline fleet

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22.9% 10.0% 19.9% 19.8%

60%

Note: Shareholding percentages as at 13 November 2013. 18

Tiger Airways

Holdings

(Singapore)

32.7%

40%

Virgin Australia has a strong shareholder base, comprising four large strategic partners who

collectively own approximately 73% of issued share capital

Australia

Strong Shareholder Support

Virgin Australia Board intends to work with airline shareholders for future board representation with

appropriate protocols

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FY13 year in review

• Fast tracked major restructuring and transformation program including major product initiatives to

position Virgin Australia for future growth

• Strong cost discipline maintained despite major transformation

• Implemented SabreSonic reservation system driving transition to global ticketing environment and

single airline designator

• Completed strategic acquisitions of 100% of Skywest and 60% of Tigerair Australia1

• Delivered on key targets of the next phase of the Game Change Program

1 Acquisition of Tigerair Australia completed on 8 July 2013 19

Given the ongoing uncertain economic environment, competitive pressures and market volatility,

Virgin Australia is unable to provide profit guidance for FY14 at this time

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20 20

Achievement Funded by Virgin Australia's Balance

Sheet

Enhanced On Board Product & Service - Business class,

upgraded meal offering, Domestic wide-body

Improved Ground Product & Service - upgraded and new

lounges, terminal improvements

New systems – switch to ticketed environment and

single designator

Built a virtual global network through alliances

Restructured the market through acquisition driven

growth

Funded through Singapore & Skywest issue

Established market position amid aggressive competition

Transformation has primarily been balance sheet funded

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Completed year 3 of 5 year plan

21

• Formulate Game

Change strategic

plan and

commence

implementation

Plan & implement

FY11

• Conclude roll out

of Game Change

strategic plan and

begin benefits

realisation from

H2 FY12

Reposition

FY12

• Build upon

strategic re-

positioning on a

strengthened

domestic market

position and

commence Game

On phase

Lead & leverage

• Drive future

earnings growth

through Game On

phase

Growth

FY14

• Continue

sustainable and

resilient earnings

growth

Sustainability

FY15

FY13

“Game Change” “Game On”

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Entitlement Offer 2

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• In October 2013, Virgin Australia issued approximately US$800 million of Enhanced Equipment

Notes, improving its debt structure and increasing liquidity and available cash

• Equity raising of approximately $350 million will

– De-gear Virgin Australia’s balance sheet

– Improve liquidity

Rationale for Entitlement Offer

23

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Entitlement Offer overview

24

Offer summary

Offer size and structure 5 for 14 pro rata accelerated non-renounceable entitlement offer of ordinary shares in Virgin Australia to

eligible shareholders to raise approximately $350 million

Approximately 925 million new Virgin Australia ordinary shares to be issued

Offer price $0.38 per share

Underwriting Fully underwritten

Institutional Offer Institutional Entitlement Offer open to eligible institutional shareholders on 14 November 2013

Retail Offer Retail Entitlement Offer open to eligible retail shareholders from 9am (Sydney time) 25 November 2013 to

5pm (Sydney time) 9 December 2013

Retail oversubscriptions Eligible retail shareholders who take up their entitlements in full may also apply for additional New Shares

beyond their Entitlement up to 40% of their Entitlement, subject to the limitations and scale-back discretion

detailed in the Retail Offer Booklet (Additional New Shares)

Major shareholder support Air New Zealand has committed to take up its Entitlement and will provide a sub-underwrite for up to

25.5% of the post Entitlement Offer issued share capital

Etihad Airways has committed to take up its Entitlement and will enter into an agreement that may result

in an increase in its economic exposure of up to 22.2% of the post Entitlement Offer issued share capital

Singapore Airlines has committed to its Entitlement and will enter into an agreement that may result in an

increase in its economic exposure of up to 22.1% of the post Entitlement Offer issued share capital

Virgin Group: has committed to take up its Entitlement and remain a 10% shareholder

Ranking New Shares will rank equally with existing shares from the date of allotment

Record date 19 November 2013

Use of proceeds Net proceeds will be used to enhance Virgin Australia’s liquidity position and for general corporate

purposes

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Sources and uses

25

Sources A$m Uses A$m

Entitlement Offer 351 Reduce net debt and general corporate

purposes

348

Transaction costs 3

Total 351 Total 351

• Proceeds used to reduce net debt and for general corporate purposes

• In conjunction with the Entitlement Offer, VAH intends to terminate the undrawn $90 million

unsecured airline investors’ term loan facility

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Pro forma statement of financial position

26

12 months ended

30 June 2013 (A$m)

Pre

Entitlement Offer

Pro forma for

Entitlement Offer

Current assets

Cash and cash equivalents 580.5 928.5

Other current assets 390.4 390.4

Non current assets

Property, plant and equipment 3,005.2 3,005.2

Other non-current assets 449.9 449.9

Total assets 4,426.0 4,774.0

Current liabilities

Trade and other payables 580.4 580.4

Borrowings 373.5 373.5

Other current liabilities 839.2 839.2

Non-current liabilities

Borrowings 1,516.4 1,516.4

Other non-current liabilities 76.4 76.4

Total liabilities 3,385.9 3,385.9

Equity 1,040.1 1,388.1

Note:

1 Assumes approximately $3m in transaction costs

Other post-balance sheet events

(not reflected in pro-forma

statement of financial position):

• Completion payment for acquisition of 60%

of Tigerair Australia and associated PDP

commitments

• Debt amortisation and the repayment of

short-term debt facilities

• Capital expenditure

• Gross proceeds of US$797m from

Enhanced Equipment Notes used to

refinance existing debt facilities

Not indicative of trading since 1 July 2013

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Offer timetable

27

Event Date

Trading halt 14 November

Institutional Entitlement Offer 14 November

Trading halt lifted 15 November

Record date (7:00pm Sydney time) 19 November

Retail Entitlement Offer opens 25 November

Settlement of Institutional Entitlement Offer 28 November

Issue of New Shares under the Institutional Entitlement Offer

Normal trading of New Shares issued under the Institutional Entitlement Offer commences

29 November

Retail Entitlement Offer closes (5:00pm Sydney time) 9 December

Issue of New Shares under the Retail Entitlement Offer 17 December

Normal trading of New Shares issued under the Retail Entitlement Offer commences 18 December

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Summary of key risks

28

• The Entitlement Offer is subject to a number of risks including:

– Risks associated with the Virgin Australia business, such as:

o Negative impact of competition on margins, including aggressive pricing and capacity

behaviour

o Adverse safety or security incident

o Significant increase in the price of fuel

o Depreciation of the Australian Dollar

o Poor performance

o Loss of strategic alliances and partnerships

– Risks associated with an investment in equity capital, such as those relating to general

economic and market factors, commodity prices and government changes

• See Appendix A for further details of key risks

28 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

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Appendix A: Key risks

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Key risks

30

The airline industry is extremely competitive and Virgin Australia faces competition from other airlines as well as from alternative means of transportation.

The airline industry is extremely competitive and Virgin Australia competes with a number of other airlines on almost all of its routes. Competitive intensity varies across different

routes depending on the number and nature of competitors operating on any route, the applicable regulatory environment and associated barriers to entry, such as operating

licenses, capital requirements, infrastructure availability and the availability of take-off and landing slots.

Virgin Australia may face increased competition as a result of the expansion of existing airlines, the consolidation or formation of alliances between airlines and new airlines

potentially entering the market. Virgin Australia may also continue to face increasing competition from other modes of transportation, including road and rail travel, as transport

infrastructure facilities improve.

Some of Virgin Australia’s international competitor airlines have access to larger and less expensive sources of funding which enable them to become more competitive. In

addition, the Australian domestic aviation market is dominated by Australia’s largest airline, the Qantas Group. The Qantas Group has an established market position in all market

segments of the Australian domestic aviation market, including domestic corporate (premium offering), domestic leisure, budget (low cost offering) and regional Regular

Passenger Transport (“RPT”) and charter/fly-in fly-out (“FIFO” )services. The Qantas Group also has an established market position in the international aviation market and is able

to leverage alliances and partnerships with a number of international airline partners.

To the extent Virgin Australia is unable to effectively compete with its peers, it would have a material adverse effect on Virgin Australia’s operating and financial results.

Virgin Australia could be subject to substantial increases in the incidence of deeply discounted promotional fares and corporate discounting by its competitors.

Virgin Australia operates in many markets characterised by high levels of price competition. Virgin Australia faces increased revenue risk as a result of the competitive nature of

the airline industry. Aggressive pricing or capacity increases by Virgin Australia’s competitors in domestic and international aviation markets can affect Virgin Australia’s revenue

and yield performance. As the airline industry is characterised by low profit margins and high fixed costs, a decision to match competitors’ fares to maintain passenger traffic may

result in reduced yields which, in turn, may have a significant effect on Virgin Australia’s operating and financial results. As the costs of operating any particular flight do not vary

significantly with the number of passengers carried, a relatively small change in the number of passengers or in fare pricing or traffic mix may have a material adverse effect on

Virgin Australia’s operating and financial results.

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Key risks

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Virgin Australia is exposed to the risk of losses from major safety or security incidents.

The occurrence of or failure to prevent or respond to a major safety or security incident relating to Virgin Australia or Tigerair Australia, could have a material adverse effect on

Virgin Australia’s reputation, operations and financial performance. Losses associated with these types of incidents may involve not only the costs associated with the repair or

replacement of damaged or lost aircraft and their temporary or permanent loss from service, but also claims by affected passengers, owners of the aircraft and third parties or loss

of reputation which would negatively impact future revenue generating capability. Although Virgin Australia maintains liability insurance, there can be no assurance that Virgin

Australia’s insurance coverage will be sufficient to cover all such losses. Further, if the Australian or relevant international aviation safety regulatory bodies determine that Virgin

Australia or Tigerair Australia could not operate its services safely as a result of a safety or security incident, Virgin Australia or Tigerair Australia could lose its regulatory approval

or operational licenses which, in an extreme case, could result in the grounding of the Virgin Australia fleet or the Tigerair Australia fleet.

An aircraft accident or any security or safety related incident involving a partner airline with which Virgin Australia has a codeshare arrangement might be associated with Virgin

Australia by the public, and could potentially cause Virgin Australia to suffer reputational damage (and associated losses), even if none of its aircraft are involved. Further, aircraft

accidents or similar incidents involving another airline could impact general passenger confidence and lead to a reduced demand for air travel, which in turn could adversely

impact Virgin Australia, particularly if the accident or incident involved an aircraft type used by Virgin Australia. Failure to prevent or respond effectively to a major safety or

security incident could have a material adverse effect on Virgin Australia’s financial and operating performance.

Virgin Australia is exposed to operational disruptions due to maintenance of its fleet, security incidents or other events.

Virgin Australia’s business is highly dependent upon its ability to operate without interruption at a number of core airports. Delays or disruptions in service at any of these airports,

including those due to security or other incidents, weather conditions, the unavailability of sufficient personnel or resources, or other causes beyond the control of Virgin Australia,

such as industrial action by workers not employed by Virgin Australia, including baggage handlers, security or customs personnel or air traffic controllers, could have a material

adverse effect on Virgin Australia, its business, results of operations and financial condition. Such events may also give rise to claims against Virgin Australia.

Virgin Australia’s fleet requires both regularly scheduled maintenance work and also, from time to time, unscheduled maintenance work, which may cause operational disruption.

On occasion, airframe manufacturers or regulatory authorities, or both may require mandatory or recommended modifications to be made across a particular fleet which may

necessitate the temporary grounding of a particular type of aircraft. There is also the possibility that a particular aircraft type may be grounded by regulatory authorities pending

investigation into actual or perceived defects or safety issues. This may cause operational disruption to and impose significant costs on Virgin Australia, especially if the

modifications are required on an aircraft type on which Virgin Australia is highly dependent.

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Key risks

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Virgin Australia is dependent on uninterrupted operation of its processing systems, including SabreSonic, and any failure of critical information technology systems

could have a material adverse effect on its business.

Virgin Australia relies heavily on technology, including computer and telecommunications equipment and software and internet-based systems, to operate its business, generate

revenues and reduce costs. Virgin Australia’s ability to manage ticket sales, receive and process reservations, manage its network and perform other critical business operations

is dependent on the efficient and uninterrupted operation of computer, internet and communication systems, including the SabreSonic online reservation and ticketing system. The

failure of SabreSonic or another system on which Virgin Australia is substantially dependent would have a material adverse effect on Virgin Australia’s business and operations.

In addition, computer and communications technology systems and associated infrastructure may be vulnerable to disruption, power outages, acts of sabotage, computer viruses,

fires and other events. While Virgin Australia invests in technology initiatives, including security initiatives and disaster recovery plans, these measures may not be adequate or

implemented properly and there can be no assurance of efficient and uninterrupted operation of these systems and associated infrastructure.

Any such technology systems failure, disruption or misuse, whether by Virgin Australia or a third party could adversely affect Virgin Australia’s operations and have a material

adverse effect on its financial condition and results of operations.

Virgin Australia is exposed to global economic conditions.

Virgin Australia’s operating results are sensitive to global economic conditions. Demand for air travel depends on general global and regional economic conditions, employment

levels, consumer and business confidence and the availability of consumer credit. Economic conditions may also impact Virgin Australia’s operating costs, fuel costs and the cost

and availability of capital and supplies required by Virgin Australia. In addition, due to the long lead-times associated with purchasing aircraft, changes in economic conditions may

result in Virgin Australia having either too much or too little capacity at the time future aircraft orders are delivered.

Airline fares and passenger demand have fluctuated significantly in the past and may fluctuate significantly in the future. Generally, the airline industry tends to experience

significant adverse financial results during economic downturns, as passengers often choose to reduce their travel or reduce the price they are willing to pay for travel during such

times. Depressed economic conditions, whether in Australia, in other areas serviced by Virgin Australia or elsewhere throughout the world, may therefore have a material adverse

effect on Virgin Australia’s financial and operating performance.

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Key risks

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Geopolitical conditions, including terrorist attacks and military conflicts, could have an adverse impact on Virgin Australia’s business.

The airline industry is exposed to political instability. Local, regional and international political conditions in markets served by Virgin Australia could affect its business. In addition,

the occurrence of terrorist attacks, attempted terrorist attacks (whether domestic or international and whether involving Virgin Australia or another airline or no airline at all) or

military conflicts worldwide could adversely affect Virgin Australia. The adverse consequences of terrorist attacks, and the threat of such attacks, include limitations on the

availability or amount of insurance coverage, increases in premiums and increased costs associated with security precautions. Further, increasingly restrictive security

precautions, such as those relating to the content of carry-on baggage, passenger identification requirements and passenger screening procedures, could also have a material

adverse effect on passenger demand for air travel generally. Any resulting reduction in passenger revenues or increases in costs or both would have a material adverse effect on

Virgin Australia’s financial and operating performance.

Virgin Australia is dependent on the strength of its brands.

Virgin Australia licenses certain brands from the Virgin Group, including “Virgin Australia”. Virgin Australia’s brands have significant commercial value and damage to these brands

would impact Virgin Australia’s business as Virgin Australia relies on its brands’ positive recognition to help attract and retain passengers, employees and investors both

domestically and internationally. The strong reputation of the Virgin brand is not under Virgin Australia’s control and can be adversely affected by the actions of members of the

Virgin Group or other licensees that are not affiliated with or controlled by Virgin Australia. In addition, due to the high profile of the Virgin brand internationally, Virgin Australia is

susceptible to negative or inaccurate commentary on the Virgin brand or organisations associated with the international Virgin brand, which may, in turn, harm Virgin Australia’s

image and reputation. Losing the right to use the Virgin brand, being required to modify its use of the Virgin brand, a change in the perception of the Virgin brand or damage to the

Virgin brand would have a material adverse effect on Virgin Australia’s business.

In addition, Virgin Australia’s ability to expand its operations under the Virgin brand to include new non-domestic destinations is, in some circumstances, subject to Virgin Group

consent, which may place limitations on future expansion plans.

Virgin Australia faces risks that its strategic alliances may not be reauthorised or deliver the anticipated results.

The development and maintenance of alliances and other strategic relationships is critical to Virgin Australia’s business and strategy. Virgin Australia has key strategic alliances

with Air New Zealand, Delta Air Lines, Etihad Airways and Singapore Airlines. These strategic alliances are complemented by key partnerships with, among others, Hawaiian

Airlines, Virgin Atlantic and Virgin America. Through these strategic alliances and partnerships, Virgin Australia’s passengers have greater access to a virtual international network

with increased options for routes available to them, stop-overs and fare types, greater access to airport lounges and opportunities to earn frequent flyer points. Further,

cooperation with strategic alliance partners on scheduling and pricing is possible only in prescribed circumstances and in accordance with anti-trust immunity.

Virgin Australia’s strategic alliances with Air New Zealand, Delta Air Lines, Etihad Airways and Singapore Airlines require ongoing authorisation from the ACCC and the equivalent

regulator in the home country of the strategic alliance partner. Authorisation is typically granted for between three and five years. The authorisation process is public and can take

a significant amount of time (each previous alliance authorisation has taken approximately six months or longer to be approved). There is a risk that the ACCC or the equivalent

regulator in the home country of each strategic alliance partner or both may choose not to reauthorise a key strategic alliance for a number of reasons, including if aviation market

conditions have changed since the previous authorisation was granted. It is also possible that the ACCC or such regulator will impose new or additional conditions on a

partnership or alliance in connection with reauthorisation which can add additional costs and operational burdens on Virgin Australia’s business. For example, the Air New

Zealand authorisation is conditional on compliance with obligations concerning a number of routes between Australia and New Zealand.

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Key risks

34

Virgin Australia faces risks that its strategic alliances may not be reauthorised or deliver the anticipated results (cont)

In addition, because Virgin Australia’s alliances with Delta Air Lines and Air New Zealand are revenue sharing joint ventures, a loss of one of these alliances would have a direct

and adverse effect on Virgin Australia’s revenues.

Should one or more of Virgin Australia’s strategic alliances or key partnerships be terminated, or should an alliance not be reauthorised by the ACCC or the equivalent regulator in

the home country of each strategic alliance partner, the termination or unsuccessful reauthorisation could have a material adverse effect on Virgin Australia’s business, results of

operations, financial condition and prospects. Further, no assurance can be given that Virgin Australia’s alliances or partner airlines will perform in line, from an operational

perspective, with Virgin Australia, which could result in a significant variation in the amount of transfer payments or receipts payable by or to Virgin Australia, and, in turn, could

adversely affect Virgin Australia’s results of operations and financial condition.

Epidemics, pandemics, severe weather conditions, natural disasters or other “Acts of God” can materially adversely affect Virgin Australia’s operations and the

demand for air travel.

External events may cause a significant network disruption to the airline industry. Epidemics and pandemics (such as avian influenza and Severe Acute Respiratory Syndrome

(“SARS”) type viruses), natural disasters (such as volcanic ash, floods and earthquakes), severe weather conditions or other “Acts of God” (whether on a regional or global scale)

could have a material adverse effect on the airline industry, resulting in substantial reductions in or cancellations of bookings and flights in the affected region and, more generally,

reducing overall demand for Virgin Australia’s services. For example, a significant number of Virgin Australia’s operations involve flights to and from Queensland, the tropical

cyclone and associated wide spread flooding that affected Queensland from the end of December 2010 through January 2011 significantly impacted Virgin Australia’s domestic

operations and revenues. The 2003 outbreak of SARS was linked to air travel early in its development and had a severe impact on the aviation industry, as evidenced by a sharp

reduction in passenger bookings, cancellation of many flights and employee layoffs.

If external events were to weaken the demand for air travel or materially affect airline operations for a period of time, it could have a material adverse effect on Virgin Australia’s

financial and operating performance for the relevant financial year. This is especially the case because the occurrence and timing of such events, together with the reaction of

aviation authorities to such events, cannot be predicted or controlled by Virgin Australia.

Virgin Australia’s business is subject to large liability claims for serious personal injury or death arising out of accidents or disasters.

Due to the nature of its core operating business, Virgin Australia may be subject to liability claims arising out of accidents or disasters involving aircraft on which Virgin Australia’s

passengers and staff are traveling or at facilities operated by Virgin Australia. An accident or other incident involving aircraft belonging to Virgin Australia or otherwise associated

with the Virgin Australia brand, such as codeshare flights, could involve significant potential claims by injured passengers or others for personal injury, death or damage to

property in addition to the cost of the repair or replacement of damaged aircraft and its consequential temporary or permanent loss from service. While Virgin Australia’s liability is

capped in some instances by applicable legislation and Virgin Australia maintains insurance to mitigate risks associated with these types of liability claims, there can be no

assurance that Virgin Australia’s insurance coverage will be sufficient to cover one or more large claims and any shortfall may be material and could have a material adverse

effect on Virgin Australia’s financial condition and results of operations.Additionally, even if fully insured against liability claims associated with any particular incident, if the

incident involves an aircraft operated by, or on behalf of, Virgin Australia, it could cause a public perception that the Virgin Australia brand is less safe or reliable than other

airlines, which would harm Virgin Australia’s reputation and business and, in turn, could have a material adverse effect on Virgin Australia’s financial condition and results of

operations.

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Key risks

35

Virgin Australia is exposed to risks associated with aviation fuel price trends.

Fuel costs constitute the largest percentage of the total operating costs of Virgin Australia. Aviation fuel has been, and is expected to remain, subject to significant price volatility.

Prices for aviation fuel are strongly correlated to the price of petroleum and are influenced by a number of factors, including political events, war or the threat of war and the

impact on pricing of the coordinated supply decisions of the Organization of Petroleum Exporting Countries producer cartel. As a result, volatility in the price of oil and petroleum

products can have a material impact on Virgin Australia’s operating results. For each of the financial years ended June 30, 2013 and June 30, 2012, fuel and oil costs amounted

to 27% of Virgin Australia’s net operating expenses. Based on market conditions and Virgin Australia’s hedging profile as of June 30, 2013, Virgin Australia estimates that an

increase in the price of kerosene by A$10 per metric ton from June 30, 2013 would have the effect of increasing Virgin Australia’s operating expenditure by approximately A$3

million for the 2014 financial year, after taking into account hedging transactions and the quantity of fuel expected to be consumed. These price risks are partially hedged through

the purchase of oil derivatives in forward markets which can generate a profit or a loss. However, no assurance can be given that the hedging strategy that Virgin Australia

chooses to employ will be effective. In addition, although Virgin Australia seeks to pass on at least a portion of the cost of increased fuel prices to its customers it is not always

able to do so.

If Virgin Australia is exposed to significant price volatility or increases in prices for aviation fuel or both, there can be no assurance that Virgin Australia’s hedging practices will

effectively protect against these price risks or that any increases will be partially or fully offset by passing portions of these costs on to passengers (including through fuel

surcharges) and/or by cost reductions, nor can Virgin Australia predict the movement of either short or long-term aviation fuel prices. To the extent Virgin Australia is unable to

effectively hedge or offset these price risks, they could have a material adverse effect on Virgin Australia’s financial performance.

Due to the capital intensive nature of the airline industry, Virgin Australia has incurred substantial indebtedness.

The airline industry is capital intensive and, as a result, Virgin Australia has incurred indebtedness and capital commitments (primarily with respect to aircraft) to finance its

material capital expenditure requirements. As a consequence, a substantial portion of existing borrowings is secured on Virgin Australia’s assets. At June 30, 2013, Virgin

Australia and its subsidiaries had current and non-current interest bearing liabilities of A$1,889.9 million (Noting this is pre the issue of the Enhanced Equipment Notes in

November). Virgin Australia’s indebtedness could have important consequences. For example, it could reduce Virgin Australia’s ability to grow its business through capital

expenditures and acquisitions, reduce working capital, limit Virgin Australia’s flexibility in planning for, or reacting to, changes in its business industry or the general economy,

place Virgin Australia at a disadvantage compared to its competitors that have less debt and limit Virgin Australia’s ability to borrow additional funds or pay down existing debt.

Any of the foregoing could have a material adverse effect on Virgin Australia’s business, financial condition and results of operations.

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Key risks

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Virgin Australia has substantial future financing needs and may not be able to obtain sufficient funds on a timely basis and on acceptable terms or at all to provide

adequate liquidity and to finance necessary operating and capital expenditures.

Virgin Australia has substantial future financing needs. Virgin Australia’s ability to finance ongoing operations, committed aircraft orders and future fleet growth plans are

vulnerable to various factors including financial market conditions. A failure to obtain adequate financing to meet necessary operating and capital expenditures would have a

material adverse effect on Virgin Australia’s financial condition and results of operations.

Virgin Australia faces a number of challenges in its business that are common within the airline industry, including in relation to economic conditions, foreign exchange rates,

increased competition from domestic and international carriers, labour issues, volatile fuel prices and contractual covenants to maintain deposit cash collateral with third parties. In

addition, Virgin Australia has significant fixed financial obligations, including commitments to purchase aircraft. Its ability to meet these commitments will be contingent on its

operating performance, cash flow and ability to source capital on commercially acceptable terms. Virgin Australia’s liquidity may be adversely impacted by these and other factors

and the other risks identified in this presentation. As part of Virgin Australia’s efforts to meet such challenges and to support its business strategy, significant liquidity and

significant operating and capital expenditures are and will in the future be required. There can be no assurance that Virgin Australia will continue to be able to obtain on a timely

basis sufficient funds on terms acceptable to Virgin Australia to provide adequate liquidity and to finance the operating and capital expenditures necessary to its ongoing

operations and to support its business strategy if cash flows from operations and cash on hand are insufficient.

Increases in insurance costs or a reduction in insurance coverage could have an adverse effect on Virgin Australia’s business.

Virgin Australia insures its aircraft fleet according to the practices followed by other major airline carriers and in accordance with applicable legislation regarding the payment of

compensation. However, Virgin Australia’s ability to secure the desired policies or policies required under its various aircraft financings or leasing obligations is dependent on the

availability of such insurance policies. These policies must be renewed at regular intervals and may be subject to renewal on less favourable terms. In addition, these policies

stipulate a number of exclusions and conditions under which the insurers may terminate policies or deny coverage.

The airline industry is exposed to the risk that in the future insurance coverage for aviation related risks will become too expensive or too difficult to obtain. For example, future

terrorist attacks or acts of sabotage, especially if they were to be directed against air traffic, or the occurrence of other incidents such as a natural or man-made disaster, could

result in insurance coverage for aviation risks becoming more expensive or certain risks becoming uninsurable or both.

There can be no assurance that the amount of insurance coverage, if any, available to Virgin Australia, especially upon the occurrence of a man-made or natural disaster,

including the loss of one or more of Virgin Australia’s aircraft for any reason, would be adequate to cover the resulting losses. Any shortfall may be material and could have an

adverse effect on Virgin Australia’s financial condition and results of operation.

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Key risks

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Virgin Australia is subject to extensive regulation of both its aviation and broader business activities.

Airlines are subject to extensive regulatory requirements. Virgin Australia is subject not only to Australian law and regulation, but also to the laws and regulations of other

countries, international organisations and international, bilateral and multilateral treaties. The scope of such laws and regulations include, among other things, infrastructure issues

relating to slot capacity and traffic rights, the environment (including noise abatement, security requirements and carbon emissions), safety, licensing, competition, passenger

protection, privacy and tax.

Additional laws, regulations, taxes and airport rates and charges, including significant increases in air passenger duties, proposed or established from time to time could

significantly increase the cost of airline operations or reduce revenues by, among other things, reducing demand for air travel. For example, changes in flight duty and rest

requirement rules or the minimum required flight crew to passenger ratios could cause Virgin Australia to incur a material increase in employment related costs. Virgin Australia

cannot fully anticipate all regulatory changes that may be made in the future, nor the possible adverse impact of such changes. Virgin Australia’s ability to comply with such

regulations is key to maintaining its operational and financial performance. If Virgin Australia is unable to fully comply with future regulations, or the cost of compliance with new

regulations is significant and Virgin Australia is unable to pass such costs on to its passengers, it could have a material adverse effect on Virgin Australia’s financial and operating

performance.

Virgin Australia may be exposed to risks associated with climate change regulation.

Various international, national and regional regulatory approaches are being taken to address climate change. Current Australian federal legislation, for example, has established

an emissions trading framework that currently imposes a fixed price on carbon emissions generated domestically by large Australian emitters, including Virgin Australia. The

carbon price is fixed at A$24.15 per metric ton of emitted CO2 for the 2013/14 financial year and A$25.40 per metric ton of emitted CO2 in 2014/15 before moving to a floating

price set by the market in 2015/16.

The price is anticipated to drop when the carbon price moves to a floating price; however, as the price is set by the market, it may fluctuate significantly and increase over time,

which may have a material adverse effect on Virgin Australia’s financial condition and operating results. The recently elected Australian Coalition government has proposed to

repeal the existing emissions trading framework and instead pursue a Direct Action (“Direct Action”) approach. Although only limited details have been released on how Direct

Action would work, it would include using public funds to purchase emissions abatement at tender and potentially imposing “business as usual” baselines and penalties for

exceeding them on emitters. There can be no assurance that the Australian Coalition government will be able to effect the repeal of the existing emissions trading framework or

implement Direct Action, or as to what the timing and final details and terms of the Direct Action plan will be, including how it might apply to the aviation industry.

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Key risks

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Virgin Australia may be exposed to risks associated with climate change regulation. (cont.)

Internationally, the International Civil Aviation Organiation (“ICAO”) is overseeing efforts to address greenhouse gas emissions from international aviation. In the event an

international emissions trading scheme or a carbon offsetting scheme for airlines is introduced, Virgin Australia may be liable for additional costs in relation to its carbon emissions

for all international flights which, at present, cannot be accurately assessed.

Climate change regulation in Australia or other countries and regions may limit Virgin Australia’s operational flexibility and increase costs. In addition, passenger attitudes

regarding environmental and climate issues may also change, which may lead to a reduced demand for air travel, including if ticket prices are increased by such regulation. These

risks associated with climate change regulation could have a material adverse effect on Virgin Australia’s financial condition and results of operations.

Virgin Australia is exposed to macroeconomic factors and governmental policy changes or decisions, which could have an adverse impact on its business.

Macroeconomic decisions and other government policy changes may impact taxes, duties, superannuation levies or other charges to which Virgin Australia is subject which could

have a material adverse effect on its financial condition and results of operations. Examples include the Australian carbon price and potential alternative Direct Action approach,

and changes to legislated curfews that restrict operations at some airports during certain times to provide noise relief to residents surrounding the relevant airports. Australian

federal legislation, for example, currently limits take-offs and landings at the Sydney Airport between 11pm and 6am by restricting passenger jet flights from operating during this

time.

Certain markets in which Virgin Australia operates are subject to government regulation controlling capacity or restricting market entry or both. For example, capacity is limited

under the Australian-Indonesian bilateral air services agreement and some domestic intrastate routes have market entry restrictions. Relaxation of such restrictions, while creating

growth opportunities for Virgin Australia, could increase competition and therefore have a negative impact on its margins and result in a material adverse effect on its financial

condition and results of operations. Furthermore, Virgin Australia’s ability to enter new markets and manage its growth strategy may be impeded as a result of government

regulations that restrict Virgin Australia’s entry into new markets.

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The airline industry relies upon and is exposed to national and international infrastructure development.

Virgin Australia is dependent on and may be affected by infrastructure decisions or changes in infrastructure policy by governments, regulators or other entities outside its control.

For example, in June 2013, Brisbane Airport Corporation Pty Ltd (“BAC”), the owner of the Brisbane Airport, and Virgin Australia reached an agreement to enhance Virgin

Australia’s facilities at the Brisbane Airport. The agreement contemplates, among other things, a series of major upgrades to the Virgin Australia-leased area at the domestic

terminal, ongoing runway access for the next 10 years, support for the development of the new parallel runway and the purchase by BAC and lease-back to Virgin Australia of the

maintenance hangar used by Virgin Australia. If construction of the new parallel runway is delayed or does not occur at all or if other necessary infrastructure changes are not

completed at this airport, Virgin Australia’s future operations at the Brisbane Airport may be disrupted, which could have a material adverse effect on Virgin Australia’s financial

condition and results of operations. In addition, if the governing bodies of other airports important to Virgin Australia’s operations do not make appropriate infrastructure decisions

when needed, it could have a material adverse effect on Virgin Australia’s ability to operate at that airport and thereby its financial and operating performance.

Virgin Australia’s operating results historically fluctuate due to seasonality and other factors associated with the airline industry.

Virgin Australia has historically experienced greater demand for its services in the second half of the calendar year and lower demand in the first half of the calendar year. This

demand pattern is principally a result of the greater number of peak leisure travel periods occurring during the second half of the calendar year and traditionally lower business-

related travel in January. Virgin Australia has substantial fixed costs that do not meaningfully fluctuate with passenger demand in the short term.

Slot allocations can affect the competitiveness and financial condition of airlines.

Slot allocations can affect the competitiveness and financial condition of airlines. Airport slots are rights allocated to an entity by an airport, government agency or other agency

granting the slot user the right to schedule a landing or departure during a specific time period. Slot allocations are based on a number of factors and for many airports, airlines

are required to participate in an application process to secure slot allocations at the particular airport. While the International Air Transport Association (“IATA”) has established

best industry practice guidelines (based on such criteria as environmental issues and the appropriate use of slots) and a policy for worldwide application in relation to slot

allocation and coordination, local regulation and legislation will override IATA’s procedures if such regulation or legislation exists. Virgin Australia operates at a number of

congested and slot constrained airports, including some of the most important airports to its operations such as Sydney, Brisbane, Perth and Denpasar. A failure of Virgin

Australia to secure slots for current and future flights will affect its ability to add additional flights to its existing schedules at the relevant airports and could lead to changes in flight

schedules or reduced aircraft utilisation, which in turn could have a material adverse affect on Virgin Australia’s operating and financial performance.

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Airport, transit and landing fees, along with charges and the costs that an airline must pay to ensure it has access to airports and air navigation and related services

may increase.

Virgin Australia is exposed to increases in airport, transit and landing fees, along with changes in air security policies, air traffic security costs and airport common use

infrastructure upgrades. Airport, transit and landing fees and security charges or initiatives represent a significant operating cost to Virgin Australia.

Australia’s major airports are privatised, and airport operators hold significant power in negotiating prices for airport services with airlines under the Australian government’s

approach to price monitoring. With airport charges representing one of Virgin Australia’s largest expenditures, there is a risk that Virgin Australia’s cost base will be negatively

impacted in the future under the current regulatory regime. If Virgin Australia is unable to pass on any increases in charges, fees or other costs to its passengers, it could have a

material adverse effect on Virgin Australia’s business and financial and operating performance.

Virgin Australia may be exposed to the loss of key airport capacity.

Virgin Australia is exposed to the loss of capacity at its core airports, including the Brisbane, Sydney and Melbourne airports, and at other airports where it flies to and from.

Factors affecting such capacity, on either a short or long-term basis, could have a material adverse effect on Virgin Australia’s financial condition and results of operations.

The complete or partial loss or temporary closure of any terminal or other substantial facilities at Virgin Australia’s core airports—for instance due to fire, collapse of the building,

major air crash at the site, a terrorist or similar security incident, significant construction or labour strikes—would result in the disruption of Virgin Australia’s operations and could

have a material adverse effect on Virgin Australia and its partners’ business, financial condition and results of operations.

Virgin Australia cannot expand its operations into new markets as easily as other airlines.

Virgin Australia cannot expand its operations into new markets as easily as some other airlines because of some restrictions imposed on it by brand and other agreements

entered into with the Virgin Group and other partner or affiliated airlines.

The trademark licenses for Virgin Australia’s business limit the trade marks which may be used by Virgin Australia domestically and internationally. The trademark licenses and

certain other agreements also place some restrictions on the domestic and international routes which may be flown by Virgin Australia, as well as the provision of other air

transport services if the prior consent from the other party is not secured. To the extent Virgin Australia is unable to secure consent and expand its operations relative to its

competitors, it could have an adverse effect on future revenue generation and the growth of Virgin Australia’s business.

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Key risks

41

Virgin Australia is dependent on its employees, many of whom are unionised, and Virgin Australia may not be able to maintain labour costs at sustainable levels.

Employee costs represent the second largest cost component of Virgin Australia’s business. Several unions represent many of Virgin Australia’s staff members, which has the

potential to cause industrial disruption to Virgin Australia’s business operations. Collective bargaining through unions over renewal of employee terms and conditions takes place

on a regular basis, often with multiple negotiations occurring at any one time. Labour conflicts or a breakdown in the bargaining process with Virgin Australia’s employees,

including flight crew and ground operations employees, or workers not employed by Virgin Australia, including baggage handlers, could disrupt operations and adversely affect

Virgin Australia’s business performance. Further, the increase in labour costs as a result of enterprise bargaining or union action could have an adverse effect on Virgin Australia’s

financial condition and results of operations.

Virgin Australia is exposed to operational disruptions as a result of labour conflicts and industrial action.

Unions are increasingly relying on safety as a basis for taking either industrial action or as a cause of action in other industrial disputes including, for example, breach of general

protection provisions. There can be no assurance, either during the bargaining process or at any other time, that Virgin Australia will not experience strikes or other industrial

action. Any drawn out industrial dispute which involves the prospect of industrial action could have a material adverse effect on Virgin Australia’s reputation and cause passengers

to book with its competitors. In addition, by raising safety as an issue in industrial disputes, unions increase Virgin Australia’s exposure to reputational damage. Further, the impact

of an increase in labour costs for any reason, including as a result of enterprise bargaining or union action, could have a material adverse effect on Virgin Australia’s financial

condition and results of operations.

Furthermore, strikes or other industrial action associated with Virgin Australia’s strategic alliances could negatively reflect on Virgin Australia to the extent that passengers booked

on Virgin Australia’s codeshare or partner’s flights are affected by such strikes.

Any labour dispute or work stoppage, including the threat of any labour dispute or work stoppage as a result of union action or otherwise, could have a material adverse effect on

Virgin Australia’s financial condition and results of operations.

Virgin Australia is dependent on its executive officers and other key employees and could be materially adversely affected by substantial turnover.

Virgin Australia is dependent on the experience and industry knowledge of its executive officers and other key employees to execute its strategy, including the Game Change

Program and Game On Strategies. If Virgin Australia were to experience a substantial turnover in its leadership or other key employees, Virgin Australia’s business, financial

condition and results of operations could be materially adversely affected. Additionally, Virgin Australia depends on its ability to attract and retain qualified key personnel with

specified skill sets. No assurance can be given that it will be able to attract and retain such individuals as needed in the future.

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Key risks

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Virgin Australia is dependent on key suppliers and service providers.

Virgin Australia is dependent upon its ability to source, on favourable commercial terms, sufficient quantities and quality of plant, equipment, goods and services in a timely

manner. These include plant, equipment, goods and services available at airports or from airport authorities or otherwise required for Virgin Australia’s operations, such as fuel,

aircraft and related parts, aircraft maintenance services and IT and software products and services. This risk is increased in situations where there is a limited number of

suppliers. For example Virgin Australia is dependent on The Boeing Company and Airbus S.A.S. as its primary suppliers for aircraft and aircraft-related items. The failure, refusal

or inability of a supplier to provide plant, equipment, goods or services may arise as a result of a wide range of causes, which may be beyond Virgin Australia’s control. Any failure

or inability of Virgin Australia to successfully source plant, equipment, goods and services, including by reason of a failure, refusal or inability of a supplier or service provider to

source goods and services on terms and pricing and within the timeframes and quality and pricing levels acceptable to Virgin Australia, could have a material adverse effect on

Virgin Australia’s business, financial condition and results of operations.

Virgin Australia is dependent on a number of other third parties for certain principal material business needs and services including aircraft manufacturers, airport operators,

airport authorities, aircraft lessors, airframe and engine manufacturers, aircraft fuel providers, aircraft maintenance providers, software and IT service providers, global distribution

systems, credit card companies, air traffic controllers, ground handlers, caterers, security personnel, check-in staff, call centre services, baggage handlers and distributors and

other general airport services. If these third parties are unable for any reason to continue to supply goods and services on terms acceptable to Virgin Australia, Virgin Australia

may not be able to replace such third parties immediately or may be required to directly provide such goods and services. In addition, Virgin Australia may be unable to source

alternative equivalent plant, equipment, goods and services in a timely manner due to the specialised nature of the supply or market. If one or more of these third party services

were restricted or temporarily unavailable as a result of events such as strikes or technical problems or were permanently unavailable or only available on un-commercial terms, or

a service provider failed to provide services to the standard expected by Virgin Australia, or if lessors and airframe and engine manufacturers were to delay delivery of aircraft,

make scheduled deliveries of aircraft late, or deliver goods which do not meet the standards and specifications contracted for, it could have a material adverse effect on Virgin

Australia’s business, reputation, financial condition and results of operations.

Virgin Australia is exposed to credit risk of counterparties.

Virgin Australia is exposed to credit risk to the extent of non-performance by its counterparties to financial assets receivables. Treasury activities, including money market

deposits, fuel hedging and foreign currency transactions, could lead to a concentration of different credit risks on the same counterparty. Virgin Australia is also exposed to credit

risk to the extent of non-performance by its insurance counterparties.

Failure of any of Virgin Australia’s counterparties, including aircraft manufacturers and aircraft lessors to whom deposits and prepayments have been made, could have a material

adverse effect on Virgin Australia’s financial condition and results of operations.

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Key risks

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Virgin Australia is exposed to interest rate fluctuations

Virgin Australia is exposed to increases in interest rates when its floating rate debt in a particular currency exceeds floating rate cash deposits in that currency or when its floating

rate cash deposits in a particular currency exceed floating rate debt in that currency. As of June 30, 2013, 48% of Virgin Australia’s gross debt was fixed rate and 52% was

floating rate. Of the floating rate debt, 59% was denominated in Australian dollars, 40% was denominated in U.S dollars and 1% was denominated in New Zealand dollars. As

such, Virgin Australia is exposed to fluctuations in interest rates.

Fluctuations in currency exchange rates could have a material adverse effect on Virgin Australia’s financial condition and results of operations.

Virgin Australia is exposed to currency risk on revenue, purchases and borrowings that are denominated in a currency other than the Australian dollar. Virgin Australia undertakes

transactions in a number of foreign currencies, the most material of which are transactions denominated in U.S. dollars, including the purchase of fuel, aircraft, aircraft lease

payments and the sale of airline passenger revenue.

In order to protect against currency risk, Virgin Australia enters into Australian dollar denominated fuel contracts as well as forward exchange contracts and option contracts to

purchase currencies, other than Australian dollars, and sell Australian dollars. These contracts are hedging highly probable forecasted purchases for the ensuing financial periods.

The contracts are timed to mature when the operating expenses or capital expenditures are expected to be incurred. Realised gains or losses on these contracts arise due to

differences between the actual spot rates on settlement, the forward rates of the derivative contracts and the cost of option premiums paid. There can be no assurance that Virgin

Australia’s hedging practices will effectively protect Virgin Australia against currency risk. To the extent Virgin Australia is unable to protect against currency risk, it could have a

material adverse effect on Virgin Australia’s financial condition and results of operations. In addition, the translation of foreign currency debt on Virgin Australia’s balance sheet

can, to the extent it is not offset against foreign currency assets, lead to substantial movements in the Australian Dollar value of debt and a resultant movement in reserves, which

could also have a material adverse effect on Virgin Australia’s financial condition and results of operations.

Virgin Australia’s reported financial position and results will be affected by changes in financial reporting requirements.

There is a risk that changes to accounting standards could have an impact on Virgin Australia’s accounting policies, financial position or its performance. For example, the AASB

has released an exposure draft of a new lease accounting standard. This standard proposes that a lessee would recognise assets and liabilities for leases with a maximum

possible term of more than 12 months as a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. If adopted in

its proposed form, this standard would require Virgin Australia to recognise aircraft and property assets, currently accounted for as operating leases, on its balance sheet unless

the maximum possible lease term is no more than 12 months. This could have a material adverse effect on Virgin Australia’s financial condition and results of operations and

financial metrics.

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Key risks

44

Virgin Australia’s management information reporting resources face significant demands from its rapid expansion and changes in strategy.

Virgin Australia’s rapid expansion and changes in strategy, including the implementation of the Game Change Program and Game On, have placed and may continue to place

significant demands on management information resources and financial and internal controls systems. Effective management of Virgin Australia’s growth will require, among

other things, continued development and appropriate resourcing of its management information reporting systems and financial and internal controls. If Virgin Australia fails to

successfully manage these aspects of its growth, this could have a material adverse effect on its financial condition.

Skywest may not be successfully integrated into Virgin Australia’s business and Virgin Australia may not realise anticipated benefits from the acquisition of Skywest

and its interest in Tigerair Australia.

Virgin Australia’s acquisition of Skywest in April 2013 involved the combination of businesses that historically operated as independent companies in separate sectors of the

Australian domestic aviation market. As a result, Virgin Australia has and will continue to undertake significant efforts to integrate Skywest into the Virgin Australia Group. The time

and costs associated with this integration process may exceed the anticipated benefits of the acquisition, such as realising synergies through shared functions, including

procurement and expansion into the FIFO market. Other potential difficulties Virgin Australia may encounter as part of the continued integration process include, among other

things, the challenge of integrating the workforces of the two companies while maintaining focus on providing consistent, high quality customer service and running an efficient

operation; disruption of, or the loss of, momentum in the ongoing business of Virgin Australia or Skywest; potential unknown liabilities or liabilities that are significantly larger than

Virgin Australia anticipated; and unforeseen increased expenses and delays associated with completing the integration of Skywest. Virgin Australia acquired a 60% interest in

Tigerair Australia in July 2013. While Tigerair Australia will continue to operate as a separate airline and will not be rebranded to Virgin Australia’s branding, the acquisition is

anticipated to enable Virgin Australia to compete in the budget travel market segment in Australia. If the partnership with Tigerair Australia does not fully or partially deliver the

anticipated benefits from the acquisition, including synergies through shared functions and a stronger presence in the budget travel market segment in Australia, or such benefits

are delayed, the costs associated with the acquisition may exceed the anticipated benefits.

If the expected benefits of the acquisition of Skywest or the acquisition of 60% of Tigerair Australia are not realised fully or at all, or take longer to, or are more expensive to,

realise than expected, it may have a material adverse effect on Virgin Australia’s business strategy, financial condition and results of operations

Virgin Australia is exposed to liquidity risks associated with credit card processing service providers.

Virgin Australia has agreements with companies that process customer credit card transactions for the sale of air travel and other services. Some of these agreements allow the

processing companies, under certain conditions, to hold an amount of Virgin Australia’s cash (referred to as a “holdback”) equal to some or all of the advance ticket sales that

have been processed by that company, but for which Virgin Australia has not yet provided the air transportation. These holdback requirements can be modified at the discretion of

the processing companies upon the occurrence of specific events, including material adverse changes in Virgin Australia’s financial condition. An increase in the current holdback

requirements could have an adverse effect on Virgin Australia’s financial condition and results of operations.

.

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Key risks

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Virgin Australia faces risks that future acquisitions may be blocked by the ACCC or that undertakings may be required.

Any future acquisitions by Virgin Australia of a competitor or potential competitor’s operations related to Australia will likely require merger clearance from the ACCC. There is a

risk that the ACCC will oppose any such acquisition or will require Virgin Australia to provide court enforceable undertakings (which may include a requirement to divest certain

parts of its business) in order to approve the acquisition. Even if the acquisition is approved by the ACCC there is a risk that delay caused by seeking approval may jeopardise the

acquisition.

Virgin Australia’s strategic direction may be altered if it is acquired or a change of control occurs.

A number of international airlines hold large shareholdings in Virgin Australia. These shareholders may increase, including as a result of the Entitlement Offer. If one or more of

these shareholders, or any other person or company, acquires Virgin Australia or increases its shareholdings to initiate a change of control of Virgin Australia, Virgin Australia may

be required to unwind a number of its strategic alliances or amend or terminate material contracts relating to its business operations. Such an acquisition or increase in

shareholding could have a material adverse effect on Virgin Australia’s strategic direction, financial condition and results of operations.

Virgin Australia faces risks from legal and arbitration proceedings.

From time to time, Virgin Australia is involved in lawsuits and claims, the majority of which arise as a consequence of the normal course of its business and out of its relationships

with employees, staff, public bodies, passengers and suppliers, as well as out of industrial activities.

The results of such lawsuits and claims can be uncertain and cannot therefore be precisely determined. No assurance can be given that any provisions made in relation to any

ongoing investigations, legal and/or arbitration proceedings will be sufficient should any of the investigations or proceedings have a negative outcome for Virgin Australia. A

negative outcome in any investigation or claim could have a material adverse effect on Virgin Australia’s financial condition and results of operations.

There are general risks associated with investments in equity capital.

The trading price of shares in Virgin Australia may fluctuate with movements in equity capital markets in Australia and internationally. This may result in the market price for the

New Shares being less or more than the offer price. Generally applicable factors which may affect the market price of shares include: general movements in Australian and

international stock markets; investor sentiment; Australian and international economic conditions and outlook, changes in interest rates and the rate of inflation; changes in

government regulation and policies; announcement of new technologies; and geo-political instability, including international hostilities and acts of terrorism. No assurances can be

given that the New Shares will trade at or above the offer price. None of Virgin Australia, its Board or any other person guarantees the market performance of the New Shares.

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Appendix B: International Entitlement Offer Restrictions

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International Entitlement Offer Restrictions

47

This document does not constitute an offer of new ordinary shares in Virgin Australia (New Shares) of the Company in any jurisdiction in which it would be unlawful. New Shares may

not be offered or sold in any country outside Australia except to the extent permitted below.

British Virgin Islands

The New Shares may not be offered in the British Virgin Islands unless Virgin Australia, or the person offering the New Shares on its behalf is licensed to carry on business in the

British Virgin Islands. Virgin Australia is not licensed to carry on business in the British Virgin Islands. The New Shares may be offered to British Virgin Islands business companies from

outside the British Virgin Islands without restriction.

Hong Kong

WARNING: This document has not been, and will not be, registered as a prospectus under the Companies Ordinance (Cap. 32) of Hong Kong (the "Companies Ordinance"), nor has it

been authorised by the Securities and Futures Commission in Hong Kong pursuant to the Securities and Futures Ordinance (Cap. 571) of the Laws of Hong Kong (the "SFO"). No

action has been taken in Hong Kong to authorise or register this document or to permit the distribution of this document or any documents issued in connection with it. Accordingly, the

New Shares have not been and will not be offered or sold in Hong Kong other than to "professional investors" (as defined in the SFO).

No advertisement, invitation or document relating to the New Shares has been or will be issued, or has been or will be in the possession of any person for the purpose of issue, in Hong

Kong or elsewhere that is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of

Hong Kong) other than with respect to New Shares that are or are intended to be disposed of only to persons outside Hong Kong or only to professional investors (as defined in the

SFO and any rules made under that ordinance). No person allotted New Shares may sell, or offer to sell, such securities in circumstances that amount to an offer to the public in Hong

Kong within six months following the date of issue of such securities.

The contents of this document have not been reviewed by any Hong Kong regulatory authority. You are advised to exercise caution in relation to the offer. If you are in doubt about any

contents of this document, you should obtain independent professional advice.

New Zealand

This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Securities Act 1978 (New Zealand).

The New Shares in the entitlement offer are not being offered or sold to the public in New Zealand other than to existing shareholders of Virgin Australia with registered addresses in

New Zealand to whom the offer of New Shares is being made in reliance on the Securities Act (Overseas Companies) Exemption Notice 2013 (New Zealand).

Other than in the entitlement offer, New Shares may be offered and sold in New Zealand only to:

• persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money; or

• persons who are each required to (i) pay a minimum subscription price of at least NZ$500,000 for the securities before allotment or (ii) have previously paid a minimum subscription

price of at least NZ$500,000 for securities of Virgin Australia (initial securities) in a single transaction before the allotment of such initial securities and such allotment was not

more than 18 months prior to the date of this document.

Norway

This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007. Accordingly, this

document shall not be deemed to constitute an offer to the public in Norway within the meaning of the Norwegian Securities Trading Act of 2007.

The New Shares may not be offered or sold, directly or indirectly, in Norway except to "professional clients" (as defined in Norwegian Securities Regulation of 29 June 2007 no. 876

and including non-professional clients having met the criteria for being deemed to be professional and for which an investment firm has waived the protection as non-professional in

accordance with the procedures in this regulation).

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48

Singapore

This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in Singapore with the Monetary Authority of

Singapore. Accordingly, this document and any other document or materials in connection with the offer or sale, or invitation for subscription or purchase, of New Shares, may not be

issued, circulated or distributed, nor may the New Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to

persons in Singapore except pursuant to and in accordance with exemptions in Subdivision (4) Division 1, Part XIII of the Securities and Futures Act, Chapter 289 of Singapore (the

"SFA"), or as otherwise pursuant to, and in accordance with the conditions of any other applicable provisions of the SFA.

This document has been given to you on the basis that you are (i) an existing holder of Virgin Australia’s shares, (ii) an "institutional investor" (as defined in the SFA) or (iii) a "relevant

person" (as defined in section 275(2) of the SFA). In the event that you are not an investor falling within any of the categories set out above, please return this document immediately.

You may not forward or circulate this document to any other person in Singapore.

Any offer is not made to you with a view to the New Shares being subsequently offered for sale to any other party. There are on-sale restrictions in Singapore that may be applicable to

investors who acquire New Shares. As such, investors are advised to acquaint themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.

Switzerland

The New Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in

Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or

the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland.

Neither this document nor any other offering or marketing material relating to the New Shares may be publicly distributed or otherwise made publicly available in Switzerland. The New

Shares will only be offered to regulated financial intermediaries such as banks, securities dealers, insurance institutions and fund management companies as well as institutional

investors with professional treasury operations.

Neither this document nor any other offering or marketing material relating to the New Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular,

this document will not be filed with, and the offer of New Shares will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).

This document is personal to the recipient only and not for general circulation in Switzerland.

United Arab Emirates

Neither this document nor the New Shares have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates, the Emirates Securities and

Commodities Authority or any other governmental authority in the United Arab Emirates, nor has Virgin Australia received authorisation or licensing from the Central Bank of the United

Arab Emirates, the Emirates Securities and Commodities Authority or any other governmental authority in the United Arab Emirates to market or sell the New Shares within the United

Arab Emirates. No marketing of any financial products or services may be made from within the United Arab Emirates and no subscription to any financial products or services may be

consummated within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the New Shares,

including the receipt of applications and/or the allotment or redemption of New Shares, may be rendered within the United Arab Emirates by Virgin Australia.

No offer or invitation to subscribe for New Shares is valid in, or permitted from any person in, the Dubai International Financial Centre.

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49

United Kingdom

Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no

prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended ("FSMA")) has been published or is intended to be published in respect of

the New Shares. This document is issued on a confidential basis to "qualified investors" (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the New Shares may

not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication

of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients

to any other person in the United Kingdom.

Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the New Shares has only been

communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA

does not apply to Virgin Australia.

In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article

19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 ("FPO"), (ii) who fall within the categories of persons referred to in

Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together "relevant persons").

The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who

is not a relevant person should not act or rely on this document or any of its contents.

United States

This document may not be released or distributed in the United States. This document does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United

States. Any securities described in this document have not been, and will not be, registered under the US Securities Act of 1933 and may not be offered or sold in the United States

except in transactions exempt from, or not subject to, the registration requirements under the US Securities Act and applicable US state securities laws.

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Appendix C: Arrangements with major shareholders

and potential control implications

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Arrangements with major shareholders

51

Major shareholder Arrangements

Air New Zealand Air New Zealand was a 22.9% shareholder prior to the announcement of the Entitlement Offer and has committed

to:

• Take up its Entitlement in full, equating to $80.5 million, or approximately 211.9 million New Shares; and

• Sub-underwrite the Entitlement Offer for a further $35.2 million, or approximately 92.5 million New Shares.

Following completion of the Offer, Air New Zealand's relevant interest in Virgin Australia will be no less than

22.9%, and will not exceed 25.5%

Etihad Airways Etihad Airways was a 19.9% shareholder prior to the announcement of the Entitlement Offer and has committed

to:


• Enter into a cash settled derivative that may result in an increase in its economic exposure to Virgin Australia

by a further $30.5 million.1

Following completion of the Offer, Etihad Airways' relevant interest in Virgin Australia will be no less than 19.9%,

and its aggregate economic exposure will not exceed 22.2%

Singapore Airlines Singapore Airlines was a 19.8% shareholder prior to the announcement of the Entitlement Offer and has

committed to:


• Enter into a cash settled derivative that may result in an increase in its economic exposure to Virgin Australia

by a further $30.4 million.1

Following completion of the Offer, Singapore Airlines' relevant interest in Virgin Australia will be no less than

19.8% and its aggregate economic exposure will not exceed 22.1%

Virgin Group Virgin Group was a 10.0% shareholder prior to the announcement of the Entitlement Offer and has committed to

take up its Entitlement in full, equating to $35.1 million, or approximately 92.5 million New Shares

Note: 1 Etihad Airways and Singapore Airlines have committed to increase their economic exposure to Virgin Australia through the cash settled derivatives referred to above

while they seek to obtain any necessary regulatory approvals, including the Foreign Investment Review Board, to increase their shareholding in Virgin Australia.

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Potential control implications

52

• The potential effect the Entitlement Offer will have on the control of Virgin Australia, and the consequences of that effect, will depend on a

number of factors, including investor demand from existing shareholders. The primary consequences are that:

– If all Eligible Shareholders take up their Entitlements to New Shares, the Entitlement Offer would have no immediate effect on the

control of Virgin Australia because the Eligible Shareholders would continue to hold the same percentage interest in Virgin Australia;

or

– If some Eligible Shareholders do not take up their full Entitlement, such shareholders’ control would be diluted relative to those who

did take up their full Entitlement (and potentially also applied for Additional New Shares through the Institutional or Retail

Oversubscription Facilities).

• New Shares that cannot be taken up by Excluded Shareholders and New Shares that are not taken up by Eligible Shareholders will:

– First be used to satisfy valid Applications for Additional New Shares under the Institutional or Retail Oversubscription Facilities,

subject to scale back; and

– If not taken up under the Oversubscription Facilities, may ultimately be placed to the Underwriters and, by extension, one or more

sub-underwriters.

Major shareholder Prior to the announcement

Following the completion of the Entitlement Offer

Relevant interest

Aggregate economic exposure (relevant

interest + economic exposure)

Air New Zealand 22.9%

No less than 22.9%,

and will not exceed 25.5%

No less than 22.9%, and will not exceed

25.5%

Etihad Airways 19.9%

No less than 19.9% Will not exceed 22.2%

Singapore Airlines 19.8% No less than 19.8%

Will not exceed 22.1%

Virgin Group 10.0% 10.0%

10.0%

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Documents

Virgin Australia Entitlement Offer Presentation · Entitlement Offer 351 Reduce net debt and general corporate purposes 348 Transaction costs 3 Total 351 Total 351 • Proceeds used