THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom, or from another appropriately authorised independent financial adviser if you are in a territory outside the United Kingdom.

If you sell or transfer or have sold or otherwise transferred all of your Ordinary Shares, please forward this document, but not the personalised Form of Proxy, as soon as possible to the purchaser or transferee or to the bank, stockbroker or other agent through or to whom the sale or transfer was effected, for onward delivery to the purchaser or transferee. Any person (including, without limitation, custodians, nominees and trustees) who may have a contractual or legal obligation or may otherwise intend to forward this document to any jurisdiction outside the United Kingdom should seek appropriate advice before taking any action.

FLYBE GROUP PLC

(Incorporated in England and Wales under the Companies Act 1985 – No. 01373432)

Proposed Exchange of Arrival and Departure Slots at London Gatwick Airport

Circular to Shareholders

and

Notice of General Meeting

Your attention is drawn to the letter from Jim French CBE, the Chairman of Flybe Group plc, which is set out in Part 1 of this document and in which the Board of Flybe Group plc unanimously recommends that you vote in favour of the Resolution to be proposed at the General Meeting referred to below. You should read this document in its entirety and consider whether to vote in favour of the Resolution in light of the information contained in this document.

Capitalised terms have the meanings ascribed to them in Part 7 of this document.

A notice convening a General Meeting of Flybe Group plc to be held at 11.00 a.m. on 2 August 2013 at the Flybe Training Academy, Exeter International Airport, Exeter EX5 2LJ is set out at the end of this document.

A Form of Proxy for use at the General Meeting is enclosed. Whether or not you intend to attend the General Meeting in person, please complete, sign and return the accompanying Form of Proxy in accordance with the instructions printed on it as soon as possible but, in any event, so as to be received by the Registrar no later than 11.00 a.m. on 31 July 2013, being 48 hours before the time appointed for the holding of the General Meeting. If you hold your Ordinary Shares in uncertificated form (i.e. in CREST) you may appoint a proxy by completing and transmitting a CREST Proxy Instruction in accordance with the procedures set out in the CREST Manual so that it is received by the Registrar (under CREST participant ID RA10) by no later than 11.00 a.m. on 31 July 2013. Shareholders may also register the appointment of a proxy electronically by logging on to http://www.flybe-shares.com/, so that the appointment is received by the Registrar by no later than 11.00 a.m. on 31 July 2013. The time of receipt will be taken to be the time from which the Registrar is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST.

Completing and posting of the Form of Proxy or completing and transmitting a CREST Proxy Instruction will not prevent you from attending and voting in person at the General Meeting if you wish to do so.

No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representations must not be relied on as having been so authorised. The delivery of this document shall not, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this document or that the information in it is correct as of any subsequent time.

Espirito Santo Investment Bank which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for Flybe Group plc and for no one else in connection with the Exchange and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Exchange and will not be responsible to anyone other than Flybe Group plc for providing the protections afforded to clients of Espirito Santo Investment Bank or for affording advice in relation to the Exchange, the contents of this document or any transaction, arrangement or other matter referred to in this document.

For a discussion of certain risk factors which should be taken into account when considering whether to vote in favour of the Resolution, see Part 2 (Risk Factors) of this document.

CORPORATE DETAILS AND ADVISERS

Secretary:	Chris Simpson
Registered office:	Jack Walker House, Exeter International Airport, Devon EX5 2HL
Sponsor and financial adviser to the Company:	Execution Noble & Company Limited (which conducts its UK investment banking business as Espirito Santo Investment Bank) London Stock Exchange Building, 10 Paternoster Square, 3rd Floor, London EC4M 7AL
Solicitors to the Company:	Eversheds LLP Eversheds House, 70 Great Bridgewater Street, Manchester M1 5ES
Auditors to the Company:	Deloitte LLP Abbots House, Abbey Street, Reading RG1 3BD
Reporting accountants to the Company:	Deloitte LLP 2 Hardman Street, Manchester M60 2AT
Registrar:	Capita Registrars The Registry, 34 Beckenham Road, Kent BR3 4TU

Expected timetable of principal events 3
Part 1	Letter from the Chairman of Flybe Group plc	4
Part 2	Risk factors	13
Part 3	Summary of the Exchange Agreement	16
Part 4	Pro Forma Financial Information	20
Part 5	Valuation Report	24
Part 6	Additional information	29
Part 7	Definitions	51
Notice of General Meeting 57

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Announcement of the Exchange	23 May 2013
Latest time and date for receipt of forms of proxy	11.00 a.m. on 31 July 2013
General Meeting of Flybe Group plc	11.00 a.m. on 2 August 2013
Expected effective date of the Exchange	2 August 2013

Notes:

(1) Reference to times in this document are to London time unless otherwise stated.
(2) Each of the times and dates above is indicative only and may be subject to change, in which event details of the new times and dates will be notified to the FCA and where appropriate the Shareholders.

PART 1 LETTER FROM THE CHAIRMAN OF FLYBE GROUP PLC

(Incorporated and registered in England and Wales with registered number: 01373432)

Flybe Group plc Jack Walker House Exeter International Airport Exeter EX5 2HL

17 July 2013

Directors and Officers:

Executive

Jim French CBE	Chairman and Chief Executive Officer
Andrew Knuckey	Chief Financial Officer
Mark Chown	Director of Corporate Strategy
Mike Rutter	Managing Director Flybe Outsourcing Solutions
Andrew Strong	Managing Director Flybe UK

Non-executive

Charlie Scott	Deputy Chairman and Senior Independent Non-Executive Director

Alan Smith	Independent Non-Executive Director
David Longbottom	Independent Non-Executive Director
Peter Smith	Independent Non-Executive Director

Dear Shareholder

Proposed Exchange of Arrival and Departure Slots at London Gatwick Airport

and

Notice of General Meeting

1. Introduction

On 23 May 2013, the Company announced that Flybe Limited (a wholly owned subsidiary of the Company) (the "Transferor") had entered into a conditional agreement with easyJet Airline Company Limited (the "Transferee") (a wholly owned subsidiary of easyJet plc) ("easyJet") to exchange the Gatwick Slots for: (i) compensation payments totalling £20 million; and (ii) certain additional Slots (which will not have a value to the Group and which will not be used by the Group) (the "Exchange").

The consideration payable by the Transferee will be satisfied by: (i) an initial amount of £7.5 million paid on Completion (being the date on which the Transferee is notified that the Shareholders have approved the Exchange); (ii) £10 million to be paid in November 2013 after the Summer Slots are exchanged, to occur before the end of the November 2013 IATA Slot Conference; and (iii) the remaining £2.5 million to be paid in June 2014 after the Winter Slots are exchanged, to occur before the end of the June 2014 IATA Slot Conference.

Flybe Limited will continue to operate the Summer Slots until October 2013 under an arrangement with easyJet to ensure that the Summer Slots qualify for Historical Precedence by operating these Slots to at least the minimum level specified in this regard by the EU Slot Regulation. All rights in respect of the Winter Slots will be transferred by Flybe to easyJet at the June 2014 Slot Conference with those Slots being operated by Flybe for the period from 26 October 2013 to 29 March 2014.

After deduction of costs incurred by the Company in connection with the Exchange, estimated to be approximately £900,000 (comprising professional fees), the total net cash proceeds of the Exchange, including the deferred amounts described above, are expected to be approximately £19.1 million.

Owing to the size of the Exchange relative to the size of the Company, the Exchange constitutes a Class 1 transaction under the Listing Rules and is, therefore, conditional upon the approval of the Shareholders. The terms of the Exchange impose certain obligations on the Transferor, including operating the Gatwick Slots with sufficient frequency in order to maintain the rights to use them such that they may be transferred to the Transferee.

Further details of the Exchange are set out in Part 3 (Summary of the Exchange Agreement) of this document.

Your approval for the Exchange is being sought at a General Meeting of the Company to be held at the Flybe Training Academy, Exeter International Airport, Exeter EX5 2LJ on 2 August 2013 at 11.00 a.m. A notice of the General Meeting and of the Resolution to be considered at the General Meeting is set out at the end of this document. A summary of the action you should take is set out in Section 9 of this letter and on the Form of Proxy that accompanies this document.

The purpose of this document is to provide you with details of the Exchange and the effect of the Exchange on the Group, to explain why your Directors believe that the Exchange is in the best interests of the Group and its Shareholders as a whole and to seek your consent for the Exchange.

2. Information on the Group

Shareholders should read the whole of this document and not rely solely on the summarised financial information contained in this section.

Flybe operates scheduled and contract flying services in Europe and provides maintenance, repair and overhaul ("MRO") and training services primarily to the airline industry. The Group's schedule for the 2013 Summer Season comprises 209 routes between 35 UK and 71 European airports across 23 countries. The Group operates through two divisions:

Flybe UK

Flybe UK comprises all of the Group's scheduled UK based services and passenger operations. The core activities of the division comprise the provision of scheduled airline services both within the UK and from the UK to continental Europe.

Flybe Outsourcing Solutions

The Flybe Outsourcing Solutions business is a combination of the previous Flybe Europe and Aviation Support divisions, providing an integrated outsourcing offer to customers. The division comprises the Group's European contract flying, MRO and Flybe Training Academy businesses, supporting Flybe's UK and continental European Activities and serving third-party customers, including the provision of aircraft maintenance, repair and overhaul services.

The Group is headquartered in Exeter and the Company's shares are listed on the Premium Segment of the Official List and admitted to trading on the Main Market of the London Stock Exchange. As at the close of business on 15 July 2013 (being the latest practicable date prior to the publication of this document), its market capitalisation was £42,837,143.

The Group's revenue for the year ended 31 March 2013 was £614.3 million, Adjusted EBITDAR Before Restructuring was £66.6 million and Adjusted Loss Before Restructuring Costs was £32.7 million. As at 31 March 2013, the Group had net assets of £48.1 million and gross assets of £405.8 million. During the year ended 31 March 2013, the Group's average number of employees was 2,958.

Turnaround Plan

On 23 January 2013, alongside its Interim Management Statement, the Group released a "Delivery and Future Direction" announcement, setting out medium term per unit (seat) operating profit targets and a plan to return the Group to profitability in the 2013/14 Financial Year.

On 23 May 2013, the Group released an update on the progress of this turnaround plan together with details of additional savings and revenue enhancement opportunities targeted by the Group under the banner of "Making Flybe Fit to Compete" and the Group's refocused network strategy.

The Group's turnaround plan comprises four elements:

i. Stop the losses by reducing costs

The Group announced on 23 May 2013 that Phase 1 of the turnaround plan is now expected to deliver approximately £30 million of costs savings in the 2013/14 Financial Year, versus its original target of approximately £25 million.

The Group identified actions to further reduce costs and the Board anticipates that these additional actions should deliver approximately £10 million of additional cost savings in the 2013/14 Financial Year and approximately £19 million of additional cost savings in the 2014/15 Financial Year.

ii. Maximise the revenue earning potential of the network

The Board announced initiatives to generate additional revenues of approximately £2 million in the 2013/2014 Financial Year and approximately £4 million in the 2014/2015 Financial Year through a series of repositioning initiatives and enhancing ancillary revenue potential.

iii. Generate sufficient cash to fund transition without recourse to Shareholders

In addition to the Exchange for total gross consideration of £20 million, the Group also announced the deferral of 16 Embraer E175 aircraft deliveries, originally planned for 2014 and 2015, to dates between 2017 and 2019. These deferrals will give rise to a reduction in planned pre-delivery payment ("PDP") commitments of approximately £20 million over the period of November 2013 to January 2014. The Group also intends to divest itself of various other minor assets, comprising, amongst other things, surplus aircraft parts inventory, and expects to generate cash proceeds of approximately £5 million from these transactions.

iv. Restructure and rebalance the Group's network into a defensible core

The Board announced its intention to refocus its activities around a number of core defensible bases in order to build strong foundations for a long-term profitable future and restore its position in the UK and European regional flying market. For example, the Board intends to capitalise upon Southampton airport's excellent road and rail access by enhancing the Group's customer experience and maximising flying during peak leisure seasons in order to compete for traffic which currently uses London Heathrow and Gatwick airports.

3. Information on the Gatwick Slots

An airport Slot pair is a right to a specific arrival and departure time for an aircraft, including having access to the airport terminal. Under current regulations, Slots are not owned by airlines but are allocated by the airport Slot co-ordinator on request.

Under the EU Slot Regulation, airlines cannot sell Slots but are allowed to exchange Slots on a one for one basis with other airlines, with such exchanges accompanied by monetary compensation where market conditions are such that the Slots have a value. Where an airline wishes to acquire by exchange the Slots of another airline, it applies to the airport Slot co-ordinator for additional Slots to give in exchange, for the purposes of conducting the exchange only ("Junk Slots"). The Junk Slots cannot be operated by airlines, nor are they intended to be, because they are not at times of the day that make them operable as an arrival and departure pair. Therefore, Junk Slots do not have any commercial value, and are surrendered by the airline and returned to the Slot pool after the Slot exchange is completed.

Airlines that do not use each of their allocated Slots for at least 80 per cent. of the relevant Summer Season or Winter Season can lose the rights to those Slots. This is usually referred to in the industry as the "use it or lose it" rule.

Due to the nature of airlines' rights to Slots, there are no definitive accounting policies or regulations as to how Slots should be accounted for by airlines. Currently, best practice under IFRS is to account for Slots that have been acquired through financial compensation as a non-current intangible asset recorded on the balance sheet of an airline, whereas, if the operating rights have been built up through historical usage, such Slots are not normally recorded as assets and are not reported on the balance sheet. In the case of both historical and acquired slots, airlines do not own them but rather operate them as a right.

Flybe acquired six pairs of the Gatwick Slots from various airlines in 2007 and 2008 with a further seven pairs of Slots being acquired as part of its acquisition of BA Connect from British Airways in March 2007. The value ascribed on acquisition of the seven pairs of BA Connect Slots was based on the values paid for the six other pairs of Slots as these were recent and comparable in timings to the BA Connect Slots.

Flybe has therefore accounted for the 13 acquired pairs of Slots on its audited consolidated balance sheet as a non-current intangible asset with a combined value as at 31 March 2013 of £8.5 million. The remaining Slots being exchanged pursuant to the Exchange Agreement have been built up through historical usage and have no value attributed to them, as required by IFRS.

The Gatwick Slots are valued at an aggregate of £20 million as described in the valuation report prepared by Nyras which is set out in Part 5 of this document.

Flybe has reached a conditional agreement to transfer the Summer Slots and the Winter Slots to easyJet for cash consideration totalling £20 million. Flybe currently operates seven routes year-round into and from Gatwick – Belfast City, Guernsey, Inverness, the Isle of Man, Jersey, Newcastle and Newquay – and a Summer Season only route between Gatwick and Bergerac. In the financial year ended 31 March 2013, Flybe flew approximately 550,000 passengers on routes departing from Gatwick.

The Exchange involves:

IATA season	Days	Number of slot pairs
Summer	Monday to Friday	26
Summer	Saturday	22
Summer	Sunday	23
Winter	Monday, Sunday	22
Winter	Tuesday, Wednesday, Saturday	20
Winter	Thursday, Friday	24

The Summer Slots will continue to be operated by Flybe until the end of the current Summer Season on 26 October 2013 under an arrangement with the Transferee such that the Transferor operates the Summer Slots during the 2013 Summer Season and returns them to the Transferee at the end of that Summer Season, for a payment of £1 per month or part thereof. All of the Summer Slots will be transferred to easyJet at the November 2013 Slot Conference.

All rights in respect of the Winter Slots will be transferred by the Transferor to the Transferee at the June 2014 Slot Conference, with those Slots being operated by the Transferor for the period from 26 October 2013 to 29 March 2014.

4. Background to and reasons for the Exchange

The Group carried out a review of its performance on the Gatwick routes and concluded that it should withdraw from Gatwick in a controlled and timely way and seek to maximise the value of the Gatwick Slots. The Group approached a number of airlines which it considered would be most likely to have an interest in the Gatwick Slots. It signed Non Disclosure Agreements with four airlines and after a series of negotiations, reached agreement with easyJet on the terms described in this document.

The Exchange represents a significant step in the Group's restructuring strategy.

The costs incurred by Flybe in respect of airport charges at Gatwick have increased by 110 per cent. over the last five years. It is the view of the Board that the increase in charges, amongst other factors, including, over that period, increases in the level of Air Passenger Duty, has resulted in Flybe's services to and from Gatwick now being unsustainable.

The Exchange is conditional upon the passing of the Resolution set out in the notice of General Meeting at the end of this document. Completion of the Exchange is expected to take place upon receipt of the notification of the results of the General Meeting by easyJet.

A summary of the principal terms of the Exchange Agreement is set out in Part 3 of this document.

5. Financial effects of the Exchange and use of proceeds

The Cash Proceeds arising from the Exchange are expected to be approximately £19.1 million.

As a result of the Exchange, Flybe will receive an amount in cash which is significantly above the book value for the Gatwick Slots, thereby increasing Shareholders' funds. The Exchange also enables the Group to realise value for the Gatwick Slots which are currently being used by Flybe for routes on which it is not earning a satisfactory operating return on the assets deployed. As described in paragraph 3 above, Flybe will also receive a number of Junk Slots, in Exchange for the Gatwick Slots, which will not be used by the Group and will revert to Airport Co-ordination Limited ("ACL"), the Slot co-ordinator, in accordance with the terms of the Exchange Agreement.

The initial amount of £6.6 million of the Cash Proceeds of the Exchange will reduce the net indebtedness of the Group from approximately £66.3 million as at 31 March 2013 to approximately £59.7 million on a pro forma basis. Further cash payments are due following the exchange of the Summer Slots (£10 million to be received in November 2013) and the exchange of the Winter Slots (£2.5 million to be received in June 2014). They will strengthen the Group's balance sheet and provide working capital for the Group's activities. The Cash Proceeds will help finance the turnaround plan of the Group and help provide a source of funds for the day-to-day trading of the Group.

An unaudited pro forma statement of net assets of the Group as at 31 March 2013 is set out in Part 4 (Unaudited Pro Forma Statement of Net Assets of the Group) of this document, which has been prepared for illustrative purposes only as if the Exchange had been completed on that date. An independent valuation of the Gatwick Slots is set out in Part 5 of this document for Shareholders' information.

6. Current trading and prospects

On 21 June 2013, the Group announced its audited consolidated financial information for the year ended 31 March 2013 which contained the following commentary on the Group's current trading and prospects within the 'Outlook' section of the Chairman and Chief Executive Officer's statement:

"Flybe remains Europe's largest independent regional airline, flying over 200 routes from more than 100 airports across 23 countries, with a strong reputation and a standing amongst our peers that means we can do business with all the major airline groups in Europe. We continue to make real and measurable progress in Europe, with our contract flying business in particular being a stable, income-generating entity.

Much more importantly than being the largest independent regional airline, though, is our desire to become Europe's most profitable regional airline. The difficult decisions we took in Phases 1 and 2 of our Turnaround Plan represent significant steps in the right direction. Our choices with regard to cost savings, outsourcing, headcount reduction, aircraft delivery deferrals and the sale of our Gatwick slots demonstrate the resilience and singlemindedness of the management team to turnaround Flybe.

We expect to see considerable reductions in the cost base of the business in both this year and the next, thanks to the actions taken during the course of 2013 that are targeted to be complete later this year. The Group is now more strongly placed for the future."

The current trading and prospects of the Retained Business are consistent with the commentary in respect of the Group set out above.

7. Risk factors

You should consider fully the risk factors set out in Part 2 of this document.

8. General Meeting

In view of its size, the Exchange is conditional upon the approval of Shareholders in general meeting. Set out at the end of this document is a notice convening the General Meeting to be held at the Flybe Training Academy, Exeter International Airport, Exeter EX5 2LJ at 11.00 a.m. on 2 August 2013 at which the Resolution to approve the Exchange will be proposed.

9. Action to be taken

You will find enclosed with this document a Form of Proxy for use at the General Meeting. Whether or not you propose to attend the General Meeting in person, you are asked to complete the Form of Proxy and return it to the Registrar at the address which appears on page 2 of this document, so as to arrive as soon as possible, but in any event so as to be received no later than 11.00 a.m. on 31 July 2013. CREST members may also choose to utilise the CREST electronic proxy appointment service in accordance with the procedures set out in the notice of General Meeting at the end of this document.

Completion and return of a Form of Proxy will not preclude you from attending and voting at the General Meeting in person if you wish.

Votes can be cast electronically for the General Meeting. In order to cast your vote electronically you must visit http://www.flybe-shares.com/ and follow the instructions. To use this service you will need to log in to your share portal account or register for the share portal if you have not already done so. To register for the share portal you will need your Investor Code (IVC) which can be found on your share certificate. The use by members of the electronic proxy appointment service will be governed by the terms and conditions of use which appear on the website. Electronic proxies must be completed and lodged in accordance with the instructions on the website by no later than 48 hours before the time appointed for the meeting (or, in the case of an adjournment, no later than 48 hours before the time fixed for the holding of the adjourned meeting).

10. Additional Information

Your attention is drawn to the further information set out in Parts 3 to 6 of this document relating to the Group and to the Exchange.

11. Importance of the vote

If the Resolution is not passed, the Exchange will not proceed and the Group will not receive the net proceeds of the Exchange of approximately £19.1 million. In such circumstances, the Group would seek alternative means of generating further working capital.

The Board has considered the following actions:

the sale of the Gatwick Slots to another airline. Prior to agreeing a sale of the Gatwick slots with the Transferee, the Group discussed the sale of the Gatwick slots with a number of other airlines. The Directors believe that, should the Exchange not proceed, the sale of the Gatwick Slots to another airline, on materially similar terms to the Exchange, could be agreed within a period of three months;
the sale of other of the Group's assets. During March and April 2013, the Directors undertook a strategic assessment of the Group's assets in order to determine those assets that were non-core to its current operations or surplus to its current requirements, with a view to selling such assets in order to generate additional working capital. The Group has conditionally agreed the sale of certain of such assets for cash proceeds of approximately £1.6 million. The Directors anticipate that additional sales will be concluded within the current calendar year, and anticipate generating additional cash proceeds of up to £3.4 million from such sales;
further working capital management initiatives (with a focus on the active management of cash collection and the payment of creditors). The Board believes that it can implement such initiatives at short notice to respond to the anticipated requirements of the Group and:
other restructuring activities (including the consideration of further reductions in the Group's headcount). These are at an early stage of consideration by the Board.

The Directors are confident that, should the Exchange not proceed, the Group would be able to generate sufficient working capital through such alternative means.

Whilst the Directors have no current intention to do so, the Directors might also in the future seek to make an approach to the Company's shareholders in order to secure further equity investment, for example by way of a rights issue. The Directors might also consider seeking new equity investors.

If the Resolution was not passed and the Group was unable to generate further working capital as described above, in the period between February 2014 and the end of the 2013/2014 Financial Year: (i) the Group would risk breaching financial covenants that it has given in respect of its banking and aircraft financing arrangements, and (ii) the working capital available to the Group may be materially adversely affected, which might, as a consequence, adversely affect the ability of the Group to continue to operate.

It is important that Shareholders vote in favour of the Resolution in order that the Exchange can proceed.

12. Appointment of new CEO

On 3 July 2013, the Board announced the appointment of Mr Saad Hammad as Chief Executive Officer of the Group with effect from 1 August 2013. He will bring considerable airline, commercial and business transformation experience to Flybe.

Mr Hammad was engaged as Chief Commercial Officer of easyJet from October 2005 to April 2009. Between May 2011 and October 2012 he was a non-executive director of Air Berlin plc.

Mr Hammad is currently a Managing Director at the Gores Group, an operations-focused private equity firm, and has previously held positions in brand management, sales and marketing and retail at a number of companies, including Procter & Gamble and Thorn-EMI.

Mr Hammad will join the Flybe Board on 1 August 2013. He has had detailed discussions with me about the substantial progress we are making on the turnaround plan and has endorsed the actions taken by the Directors to date. He intends to build on this progress. I have also discussed Flybe's contingency plans, as set out in the Importance of the vote section above and he is supportive of these. I look forward to working with him.

I will become non-executive Chairman, also with effect from 1 August 2013.

13. Recommendation

The Board has received financial advice from Espirito Santo Investment Bank in relation to the Exchange. In providing its financial advice to the Board, Espirito Santo Investment Bank has relied on the Board's commercial assessment of the Exchange.

The Board considers the Exchange and the Resolution to be proposed at the General Meeting of the Company to be in the best interests of the Company and its Shareholders as a whole.

Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution set out in the notice of General Meeting at the end of this document, as the Directors have irrevocably undertaken to do in respect of their own beneficial holdings which amount to 5,151,600 Ordinary Shares (representing 6.7 per cent. of the existing issued ordinary share capital of the Company as at 15 July 2013, being the last practicable day prior to publication of this document). In addition, the Company has received an irrevocable undertaking to vote in favour of the Exchange from Rosedale Aviation Holdings Limited, in respect of its beneficial holding of 36,145,250 Ordinary Shares (representing 48.1 per cent. of the existing issued ordinary share capital of the Company as at 15 July 2013, being the last practicable day prior to publication of this document).

Yours sincerely

Jim French CBE Chairman and Chief Executive Officer

PART 2 RISK FACTORS

Shareholders should carefully consider all the information in this document including the risks described below. The Directors have identified these risks as the material risks relating to the Exchange, the new material risks to the Group as a result of the Exchange and the existing material risks to the Group which may be impacted by the Exchange.

Additional risks and uncertainties not presently known to the Directors, or that the Board considers immaterial, or that the Board considers material to the Group but will not be impacted by the Exchange, may also adversely affect the Group's business, results of operations or financial condition. If any or a combination of the following risks materialise, the Group's business, financial condition, operational performance and share price could be materially adversely affected. In such circumstances, the market price of the Ordinary Shares could decline and you may lose all or part of your investment.

Risks relating to the Exchange

Financial impact on the Group

The Exchange is conditional on the passing of the Resolution at the General Meeting.

The Board has considered the following actions:

the sale of the Gatwick Slots to another airline. Prior to agreeing a sale of the Gatwick slots with the Transferee, the Group discussed the sale of the Gatwick slots with a number of other airlines. The Directors believe that, should the Exchange not proceed, the sale of the Gatwick Slots to another airline, on materially similar terms to the Exchange, could be agreed within a period of three months;
the sale of other of the Group's assets. During March and April 2013, the Directors undertook a strategic assessment of the Group's assets in order to determine those assets that were non-core to its current operations or surplus to its current requirements, with a view to selling such assets in order to generate additional working capital. The Group has conditionally agreed the sale of certain of such assets for cash proceeds of approximately £1.6 million. The Directors anticipate that additional sales will be concluded within the current calendar year, and anticipate generating additional cash proceeds of up to £3.4 million from such sales;
further working capital management initiatives (with a focus on the active management of cash collection and the payment of creditors). The Board believes that it can implement such initiatives at short notice to respond to the anticipated requirements of the Group and:
other restructuring activities (including the consideration of further reductions in the Group's headcount). These are at an early stage of consideration by the Board.

The Directors are confident that, should the Exchange not proceed, the Group would be able to generate sufficient working capital through such alternative means.

The Retained Business may not realise the perceived benefits of the Exchange

The Exchange is not expected to result in a material disruption to the Group's operations, but the Retained Business will operate with reduced passenger capacity and will be dependent on the profitable performance of its remaining operations. Should the Retained Business' remaining operations generate losses, the Group's financial condition may be materially and adversely affected.

The Exchange could result in surplus aircraft and staff within the Retained Business. The ongoing success of the Retained Business depends partly on the ability of the Group to divest itself of surplus aircraft and staff, if any, without a material adverse impact on the Group's financial condition. The Retained Business may experience significant difficulties in achieving the anticipated benefits to the Group set out in Part 1 of this document (Letter from the Chairman of Flybe Group plc), or such benefits may not materialise.

Obligations under the Exchange Agreement

The Exchange Agreement contains certain warranties, indemnities and undertakings in favour of the Transferee which could result in the Retained Business incurring material liabilities and obligations to make payments to the Transferee which would not have arisen had the Exchange not taken place. Further details of such warranties, indemnities and undertakings are set out in Part 3 (Summary of the Exchange Agreement) of this document.

The Retained Business may experience changes to its business prior to Completion

Between the date of signing the Exchange Agreement and the proposed date of completion of the Exchange, events or developments may occur which may make the Exchange less attractive to the Group. Flybe Limited will, if the Resolution is passed, be obliged to complete the Exchange notwithstanding such events or developments which may have a material adverse effect on the Group's operations or financial condition.

Increased staff turnover

The Exchange may cause uncertainty amongst the Retained Business' staff, which may result in an increased level of staff turnover. As the Group is exposed to risks relating to a lack of appropriately experienced staff, such an increase may have a material negative impact on the Group's continuing operations and financial condition.

Loss of underlying assets

If the Exchange does not proceed, the Directors will need to consider ceasing that part of the Group's operations which utilises the Gatwick Slots. If the Group ceases to use the Gatwick Slots it will lose its rights to operate such Gatwick Slots under the EU Slot Regulation, and, as a consequence, some or all of the value in the Gatwick Slots will be lost. The Directors would therefore need to consider reducing or writing off the value of the Gatwick Slots, which had a net book value in the Group's balance sheet of £8.5 million as at 31 March 2013.

Risks relating to the Retained Business

The Exchange may damage the Group's reputation or brand

As part of its overall business model, the Group relies on its reputation and positive brand recognition, amongst other things, to attract customers. Damage to the Group's reputation or brand as a result of the Exchange, and the cessation of the Group's operations at Gatwick, could adversely impact the Group's ability to market its services and attract and retain customers, and could ultimately have a material adverse effect on the Group's business, results of operations, growth prospects and/or financial condition.

The Group's revenues may fall as a result of the Exchange

The Exchange involves the Group continuing to operate the Gatwick Slots following Completion until 29 March 2014, as described in Part 3 (Summary of the Exchange Agreement). As a result of consumer uncertainty, or other reasons, the revenue expected to be received by the Group as a result of its operation of the Gatwick Slots during such periods may not materialise, resulting in losses being incurred by the Group.

The Group's industrial relations may suffer as a result of the Exchange

Many of the Group's employees are represented by trade unions and the Group has voluntary recognition agreements in place with BALPA in respect of its pilots, UNITE in respect of its cabin crew and Prospect in respect of its engineers. The Group undertakes collective bargaining with such unions on a financial yearly basis. A consequence of the Exchange may be that a number of staff are reassigned or made redundant by the Group. Any such reassignments or redundancies could lead to a general deterioration in the Group's relationships with the unions, or could lead to strikes or other industrial action (or the threat of strikes or industrial action) which could damage the Group's reputation or cause passengers to book with the Group's competitors. A breakdown in the relationship with employee representative bodies, or the employees themselves, could lead to industrial action being taken which could in turn have a material adverse effect on the Group's business, results of operations, growth prospects and/or financial condition.

FORWARD-LOOKING STATEMENTS

This document contains "forward-looking statements" which are based on the beliefs, expectations and assumptions of the Directors and other members of Senior Management about the Group's businesses and the Exchange. Generally, words such as "may", "could", "will", "expect", "intend", "estimate", "anticipate", believe", "plan", "seek", "continue" or similar expressions identify forward-looking statements. These forward-looking statements are not guarantees of future performance, and although the Group believes that they are reasonable there can be no assurance that the expectations reflected in such forward-looking statements will prove to have been correct. Rather, they are based on current beliefs, expectations and assumptions and involve known and unknown risks and uncertainties, many of which are outside the control of the Group and are difficult to predict, that may cause actual results, performance or events to differ materially from those expressed or implied in such forward looking statements. Any forward-looking statement contained in this document based on past or current trends and/or activities of the Group should not be taken as a representation that such trends or activities will continue in the future. No statement in this document is intended to be a profit forecast or to imply that the earnings of the Group for the current year or future years will match or exceed the historical or published earnings of the Company. The Group expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein as a result of new information, future events or other information, except to the extent required by the Listing Rules, the Disclosure and Transparency Rules, the Prospectus Rules, the rules of the London Stock Exchange or by applicable law.

PART 3 SUMMARY OF THE EXCHANGE AGREEMENT

The following is a summary of the principal terms of the Exchange Agreement, which is available for inspection by the Shareholders in accordance with paragraph 13 of Part 6 of this document.

1. PARTIES AND STRUCTURE

The Exchange Agreement was entered into on 22 May 2013 between the Transferor and Transferee for the purposes of:

effecting the transfer of the Summer Slots and Winter Slots from the Transferor to the Transferee; and
allowing for the continued use of the Summer Slots by the Transferor for the remainder of the 2013 Summer Season.

All Slot transfers provided for under the Exchange Agreement will be effected by way of exchanges in compliance with the requirements of the EU Slot Regulation.

Following the Completion Date and payment of the Advance Payment (as defined below) by the Transferee to the Transferor, the Summer Slots will be transferred to the Transferee, and following registration of the Summer Slots in the Transferee's name with ACL, those Summer Slots will be immediately transferred back to the Transferor (the "First Summer Slots Exchange"), with the Transferee granting the Transferor permission to use the Summer Slots for the remainder of the 2013 Summer Season.

After completion of the 2013 Summer Season, and no later than the last day of the November 2013 Slot Conference, the Summer Slots will be permanently transferred from the Transferor to the Transferee (the "Final Slots Exchange").

The Transferor will operate the Winter Slots during the 2013/2014 Winter Season. After completion of the 2013/2014 Winter Season and no later than the end of the June 2014 Slot Conference, the Winter Slots will be permanently transferred from the Transferor to the Transferee (the "Winter Slots Exchange").

Following the Winter Slots Exchange all of the Gatwick Slots will have been transferred to the Transferee and registered in the Transferee's name with ACL, with the right to the use and disposal of the Gatwick Slots having vested in the Transferee.

Pursuant to the terms of the Exchange Agreement:

on the Completion Date, the Transferor will execute an irrevocable power of attorney in favour of the Transferee allowing the Transferee to effect the transfer of the Summer Slots to the Transferee in the event of the Transferor's default under the Exchange Agreement; and
on the Completion Date, the Transferor will issue a letter to ACL setting out the principal terms of the Exchange Agreement, notifying ACL of the Transferee's interests in the Gatwick Slots and authorising the Transferee's read only access to ACL's computer records for the purpose of monitoring the Transferor's use of the Summer Slots following the First Summer Slots Exchange; and
the Transferor will by 30 June 2013 agree to security documents which (inter alia) will assign to the Transferee any contract and the proceeds thereof for the sale of

any or all of the Gatwick Slots entered into between the Transferee and a third party in contravention of the terms of the Exchange Agreement.

Following Completion, the Transferee's use of the Gatwick Slots will be subject to various Slot use conditions as set out under the Exchange Agreement, including restrictions on the re-timing of the Gatwick Slots and a requirement to use the Gatwick Slots for more than 80 per cent. of the remainder of the 2013 Summer Season and the 2013/2014 Winter Season so as to preserve the Transferor's right under the EU Slot Regulation to have the Summer Slots and Winter Slots allocated to it by ACL for the next Summer Season and Winter Season respectively following the completion of the exchanges contemplated under the Exchange Agreement.

The Exchange Agreement:

is subject to standard confidentiality provisions;
provides for cooperation between the Transferee and Transferor in the event of (i) any litigation by a third party or (ii) any regulatory investigation in respect of the Gatwick Slots or the Exchanges contemplated by the Exchange Agreement; and
preserves the right for either Party to apply for any available injunctive relief in respect of the other Party's default of the Exchange Agreement.

2. CONSIDERATION

The total consideration payable by the Transferee to the Transferor for the sale of the Gatwick Slots is £20,000,000 (the "Total Consideration"), payable to the Transferee by telegraphic bank transfer in cleared and immediately available funds in the following tranches:

£7,500,000 payable on the Completion Date, or as soon as reasonably possible thereafter (the "Advance Payment");
£10,000,000 payable immediately upon ACL confirming that the Summer Slots have been transferred to the Transferee as part of the Final Slots Exchange (the "Second Payment"); and
£2,500,000 payable immediately upon confirmation from ACL that the Winter Slots have been transferred to the Transferee as part of the Winter Slots Exchange (the "Third Payment").

The Second Payment will be subject to a reduction where the Transferor considers that the operation of up to six pairs of Summer Slots is not economically viable and (at the Transferee's election) effects an early return of the relevant Summer Slots to the Transferee or returns them to ACL. In such circumstances a reduction of up to £475,200 will be applied to the Second Payment, depending on the number and class of Summer Slots involved.

If the Transferor fails to return some or all of the Summer Slots as required under the Exchange Agreement, the Transferor shall pay liquidated damages of:

£63,800 or £27,500 per unreturned daily Summer Slot on the basis of the predefined Slot values under the Exchange Agreement (save for those in respect of which the early return option described above applies); or
up to £10,000,000 in circumstances where the unreturned Summer Slots are of a sufficient number and class as prescribed in the Exchange Agreement (with such thresholds principally based on the timings and days of the week on which the unreturned Summer Slots fall). Such liquidated damages will be reduced by (i) any

amount paid by the Transferor to the Transferee in the exercise of the early return option described above and (ii) the proceeds of any sale of all or part of the Summer Slots to a third party in breach of the Exchange Agreement, which proceeds would be payable to the Transferee under the terms of the Exchange Agreement and the related security documents granting a charge over such sales proceeds.

The Transferee may demand the early return of the Summer Slots pursuant to its rights under the Exchange Agreement on the basis that (inter alia) the Transferor; has breached warranties or Slot use conditions in relation to the Summer Slots under the Exchange Agreement; is the subject of litigation in respect of the Summer Slots; ceases or threatens to cease its flying operations; or is subject to a bankruptcy event which could jeopardise the return of the Summer Slots to the Transferee. In such circumstances the Transferee's reasonable costs in operating the Summer Slots for the remainder of the Summer Season (net of any revenue generated through such operation) will be deducted from the Second Payment. The deduction of such costs is capped at the aggregate value of the Slots which are subject to an early return, with each having been ascribed a pre-defined value of either £63,800 or £27,500 under the Exchange Agreement.

The Transferee and Transferor consider the exchanges contemplated under the Exchange Agreement to be zero rated for VAT purposes. Should HM Revenue and Customs deem VAT to be payable, such VAT will be payable by the Transferee, subject to the Transferor having (inter alia) given the Transferee sufficient notice of such VAT liability pursuant to the terms of the Exchange Agreement.

Late payment of any sums due under the Exchange Agreement will be subject to interest at LIBOR plus four per cent.

3. CONDITIONS

The passing of the Resolution by the Transferor's Shareholders is a condition precedent to Completion.

The Winter Slots Exchange and payment of the Third Payment will not occur where the Summer Slots have not been registered with ACL in the name of the Transferee for the 2014 Summer Season and this is attributable to a breach by the Transferor of its obligations under the Exchange Agreement.

4. REPRESENTATIONS, WARRANTIES AND INDEMNITIES

On execution of the Exchange Agreement:

the Transferor and Transferee gave a number of representations and warranties including as to their financial solvency, the lack of litigation regarding any Slots which are to be transferred under the Exchange Agreement, the holding of necessary licences, certificates and permits and the taking of necessary corporate action to authorise the obligations created under the Exchange Agreement; and
the Transferor gave a number of representations and warranties including as to the allocation of the Summer Slots by ACL to the Transferor for its use during the 2013 Summer Season, its use of the Summer Slots for at least 80 per cent. of the time during the proportion of the Summer Season that had already expired at the time the Exchange Agreement was executed, the lack of any bankruptcy event affecting the Transferee and the accuracy of information provided to the Transferee's lawyers.

As at the time of each exchange of Slots provided for under the Exchange Agreement:

• the Transferor and Transferee will each give a number of representations and warranties, including as to their valid incorporation, that the Slots they are required to transfer as part of the relevant exchange are registered in their names with ACL and that they are entitled to use such Slots and implement the relevant Exchange, that they have not entered into any legally binding agreement with a third party in relation to such Slots and that no third party consent is required to transfer such Slots; and

• the Transferee will represent and warrant that it has not been subject to any bankruptcy event and that the security documents executed in the Transferee's favour remain in full force and effect.

The Transferee and Transferor will indemnify each other in respect of any breach of the representations and warranties given under the Exchange Agreement. That indemnity continues to apply for a period of 13 months following the Winter Slots Exchange.

5. TERMINATION

The Exchange Agreement may be terminated by the Transferee or Transferor in the event that the other party becomes subject to an event of bankruptcy, the other party's airline operating licence is or will imminently be revoked such that it is ineligible to have Slots allocated to it.

In the event that the Resolution is not passed by midnight on 16 August 2013, the Exchange Agreement will automatically terminate (subject to the survival of the usual contractual provisions including those dealing with confidentiality and indemnity).

In the event that there is a change of laws in respect of Slots such that the performance of the exchanges contemplated under the Exchange Agreement are impeded, the Transferee and Transferor will take necessary measures to achieve the objectives of the Exchange Agreement, including (as necessary) entering into any supplemental agreements and bringing forward in time certain obligations under the Exchange Agreement. If those options are not achievable, the Exchange Agreement will be subject to early termination.

6. GOVERNING LAW

The Exchange Agreement and the power of attorney executed by Flybe in favour of easyJet are governed by English law and subject to the exclusive jurisdiction of the English courts.

PART 4 PRO FORMA FINANCIAL INFORMATION

Set out below is a pro forma statement of consolidated net assets of the Group, as adjusted for the Exchange which has been prepared on the basis and assumptions set out below. The pro forma is for the purposes of illustration only and, because it addresses a hypothetical situation, does not represent the Retained Business's actual financial position or results.

	Consolidated Net		Consolidated
	Assets of the	Adjustment:	Pro Forma
	Group	Estimated	Net Assets of
	as at	Net	the Group as
	31 March	Proceeds of	at 31 March
	20131	the Exchange	20133
	£m	£m	£m
Non-current assets
Intangible assets	13.2	(8.5)4	4.7
Property, plant and equipment Joint ventures	165.4 13.2	– –	165.4 13.2
Other non-current assets	42.5	2.52	45.0
Restricted cash5	7.2	–	7.2
Deferred tax asset	4.6	–	4.6
Derivative financial instruments	–	–	–
	246.1	(6.0)	240.1
Current assets
Inventories	6.8	–	6.8
Trade and other receivables	87.8	10.02	97.8
Cash and cash equivalents5	23.3	6.62	29.9
Restricted cash5	24.2	–	24.2
Derivative financial instruments	5.7	–	5.7
Assets held for sale	11.9	–	11.9
	159.7	16.6	176.3
Total assets	405.8	10.6	416.4
Current liabilities
Trade and other payables	(97.9)	–	(97.9)
Deferred income	(63.2)	–	(63.2)
Borrowings5	(18.7)	–	(18.7)
Provisions	(26.9)	–	(26.9)
Derivative financial instruments	(1.5)	–	(1.5)
	(208.2)	–	(208.2)
Non-current liabilities
Borrowings5	(102.3)	–	(102.3)
Deferred tax liabilities	(2.6)	1.04	(1.6)
Provisions	(33.8)	–	(33.8)
Deferred income	(10.8)	–	(10.8)
Derivative financial instruments	–	–	–
	(149.5)	–	(148.5)
Total liabilities	(357.7)	1.0	(356.7)
Net assets	48.1	11.6	59.7

1 The consolidated net assets position of the Group as at 31 March 2013 has been extracted without material adjustment from the audited accounts for that year.
2 The estimated net proceeds of the Exchange receivable by the Group are calculated on the basis that the gross proceeds of the Exchange are £20.0 million of which £7.5 million is paid upon shareholder approval and fees and expenses arising from the Exchange are £0.9 million (net amount of £6.6 million). £10.0 million of the consideration is to be paid in November 2013 after the Summer Slots are exchanged (classified within trade and other receivables in current assets) and the remaining £2.5 million is to be paid in June 2014 after the Winter Slots are exchanged (classified within other non-current assets).
3 The pro forma financial information takes no account of the results of the Group for the period subsequent to 31 March 2013, or any other changes in its financial position in that period.
4 The adjustment to intangible assets represents the balance sheet carrying value of the Gatwick Slots which is derecognised following the Exchange. In addition, £1.0 million of deferred tax liabilities are no longer required and are released.
5 Net indebtedness includes cash and cash equivalents, restricted cash and borrowings and amounted to £(66.3) million at 31 March 2013. The pro forma indebtedness is £(59.7) million.

2 Hardman Street Manchester M3 3HF

The Board of Directors on behalf of Flybe Group plc Jack Walker House Exeter International Airport Exeter Devon EX5 2HL

Execution Noble & Co Limited, which conducts its UK investment banking business as Espirito Santo Investment Bank 10 Paternoster Square London EC4M 7AL

17 July 2013

Dear Sirs,

Flybe Group plc (the "Company")

We report on the pro forma financial information (the "Pro forma financial information") set out in Part 4 of the Class 1 circular dated 17 July (the "Investment Circular"), which has been prepared on the basis described, for illustrative purposes only, to provide information about how the transaction might have affected the financial information presented on the basis of the accounting policies adopted by the Company in preparing the financial statements for the period ended 31 March 2013. This report is required by Annex I item 20.2 of Commission Regulation (EC) No 809/2004 (the "Prospectus Directive Regulation") as applied by Listing Rule 13.3.3R and is given for the purpose of complying with that requirement and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company (the "Directors") to prepare the Pro forma financial information in accordance with Annex I item 20.2 and Annex II items 1 to 6 of the Prospectus Directive Regulation as applied by Listing Rule 13.3.3R.

It is our responsibility to form an opinion, in accordance with Annex I item 20.2 of the Prospectus Directive Regulation, as to the proper compilation of the Pro forma financial information and to report that opinion to you in accordance with Annex II item 7 of the Prospectus Directive Regulation as applied by Listing Rule 13.3.3R.

Save for any responsibility which we may have to those persons to whom this report is expressly addressed and which we may have to Ordinary Shareholders as a result of the inclusion of this report in the Investment Circular, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with Listing Rule 13.4.1R (6), consenting to its inclusion in the Investment Circular.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Basis of Opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the Directors.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of the Company.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards or practices.

Opinion

In our opinion:

(a) the Pro forma financial information has been properly compiled on the basis stated; and
(b) such basis is consistent with the accounting policies of the Company.

Yours faithfully

Deloitte LLP Chartered Accountants

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited ("DTTL"), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

PART 5 VALUATION REPORT

PRIVATE AND CONFIDENTIAL

17 July 2013

The Directors Flybe Group Plc ("Flybe", or the "Company") Jack Walker House Exeter International Airport Exeter EX25 2HL

The Directors Execution Noble & Co Limited, which conducts its UK investment banking business as Espirito Santo Investment Bank 10 Paternoster Square London EC4M 7AL

Dear Sirs

Valuation of Flybe's Arrival and Departure Slots at London Gatwick Airport

1. INTRODUCTION

In accordance with instructions received from Flybe, we have undertaken a valuation of Flybe's arrival and departure Slots at London Gatwick Airport (the "Slot Portfolio") in order to advise you of the Market Value (as defined below) of the Slot Portfolio as at the Valuation Date (as defined below).

We set out our valuation methodology and our conclusions in this letter (together with its appendix, the "Valuation Report").

2. DESCRIPTION OF THE SLOT PORTFOLIO

The Slot Portfolio comprises 26 pairs of weekday slots at London Gatwick Airport ("Gatwick") for the summer IATA season and an average of 22 pairs in the winter IATA season (although given the seasonal variation in capacity utilisation at Gatwick, this reflects relative levels of demand rather than infrastructural constraints). The Slot Portfolio represents approximately 8 per cent. of the total slots operated at Gatwick and is the third largest number of slots held by a single airline at Gatwick. Details of the particular slots forming the Slot Portfolio are included in Appendix 1 to this Valuation Report.

3. THE VALUER

Nyras is a leading adviser in UK aviation transactions and slot exchanges.

Nyras has advised on the exchanging of slots since 2007. In addition to Gatwick and London Heathrow Airport ("Heathrow"), Nyras has advised clients on obtaining slots at other UK airports and continental European airports. At Heathrow and Gatwick, Nyras has either valued or negotiated slot exchanges for a number of airlines which include: Lufthansa, SAS, Jet Airways, Qatar Airways, GB Airways, MEA, British Airways, Etihad, Continental/United Airlines and BMI.

In 2012, Nyras valued over 100 slot pairs for multiple airline clients including the portfolio of slots at Heathrow held by BMI for the purpose of the International Airlines Group takeover of BMI from Lufthansa. Nyras has also acted on the disposal of GB Airways to easyJet.

Nyras, and the signatory of the Valuation Report, are regulated by the Financial Conduct Authority to conduct transactions on behalf of its clients.

4. PURPOSE OF THE VALUATION

This Valuation Report has been prepared, and is required, for inclusion in Flybe's class 1 circular (the "Circular") which is to be published in connection with seeking Shareholders' approval to the exchange of the Slot Portfolio.

The effective date of the Valuation Report is 15 July 2013 (the "Valuation Date").

5. DISCLOSURES

5.1. Signatory

The principal signatory of this report has been carrying out consultancy services for Flybe since March 2013.

5.2. Nyras' relationship with Flybe

Other than this Valuation Report, and the consultancy services referred to above, Nyras has not carried out any valuation or other services on behalf of Flybe.

5.3. Independence from the Group

Nyras does not consider that any conflict of interest arises in preparing this Valuation Report and the Company, in respect of itself and its subsidiaries (the "Group"), has confirmed to us that it also considers this to be the case.

Nyras has no material interest in the Group or any of its assets.

6. MARKET VALUE

Market Value means the estimated amount for which a slot portfolio should exchange between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

7. THE SLOT MARKET

An airport slot pair is a right to a specific arrival and departure time for an aircraft, including having access to the airport terminal. Under current regulations, slots are not owned by airlines but are allocated by the airport Slot co-ordinator on request.

Airlines cannot sell slots but they are allowed to exchange slots, one for one, with other airlines with such exchanges accompanied by monetary compensation. The transferring airline must utilise the slots until they are able to be transferred, typically at the next IATA slot conference. Airlines that do not use each of their allocated slots at least 80 per cent. of the relevant season can lose the rights to those slots.

Slots only have value at congested airports where it is not possible to obtain the required slots from the airport Slot co-ordinator on request. Heathrow and Gatwick are two such congested airports where all slots at Heathrow are nearly 100 per cent. utilised and slots at Gatwick are nearly 100 per cent. utilised at peak times.

Slots are normally traded as a "pair" (one arrival and one departure) and for two IATA seasons (Winter and Summer). The transfers are usually conducted at or around the two IATA slot conferences in June (for the Winter season) and November (for the Summer season). Payments are typically made immediately after the transfer occurs.

8. DIFFERENT APPROACHES TO VALUING AIRPORT SLOTS

Due to the nature of airlines' rights to slots, there are no definitive accounting policies or regulations as to how the slots should be accounted for by airlines. Currently, best practice under IFRS is to account for slots that have been acquired through financial compensation as a non-current intangible asset recorded on the balance sheet of an airline, whereas, if the operating rights have been built up through historical usage, such slots are not normally recorded as assets and are not reported on the balance sheet. In the case of both historical and acquired slots, airlines do not own them but rather operate them as a right.

Individual slot values vary according to the availability of an appropriate timing to make a valuable slot pair, and also take into account the higher value of long haul slots over short haul ones. For example, an early morning arrival is more valuable if paired with a midmorning departure as this creates a "premium" long haul slot.

Whilst a slot portfolio can be 'mixed and matched' (pairing of individual slot timings to create the most attractive slot pairs) this is usually used to develop long haul slot pairs from a short haul slot portfolio. However, at Gatwick there is little long haul airline demand as the airport is primarily served by short haul carriers. Block trades, where a slot portfolio is sold in its entirety to one buyer, generally lead to higher valuations than individual slot pair sales as buyers perceive significant value from enhancing their position at a congested airport.

If this cannot be achieved, the portfolio is broken up and individual slot pairs sold to different buyers, often leading to lesser valuations.

At Gatwick, only "peak" time slots have value. "Non-peak" slots can be obtained relatively easily from the Slot co-ordinator and have no, or relatively little, value.

In addition, values of slot pairs are affected by the level of supply of slots for disposal and the limited numbers of potential acquirers interested at a point in time. Understanding the competitive dynamics between carriers at an airport is paramount in determining the value and this will vary according to the circumstances of the market at the time. It should also be noted that the analysis of past transactions can be misleading as a guide to the value of a slot portfolio given the fluctuations in the market and the availability of acquirers of slots.

9. CURRENT BALANCE SHEET VALUATION

As required by IFRS, Flybe accounts for the 13 pairs of slots within the Slot Portfolio that it has acquired through financial compensation on its audited consolidated balance sheet as a non-current intangible asset with a combined value of £8.5 million. The remaining slots within the Slot Portfolio whose operating rights have been built up through historical usage have no value attributed to them on Flybe's balance sheet. Therefore, the actual Market Value of the Slot Portfolio will differ from that of the actual audited consolidated balance sheet value under IFRS.

10. APPROACH TO VALUING THE FLYBE SLOT PORTFOLIO

In conducting this valuation, Nyras has drawn on its considerable knowledge and understanding of the UK aviation industry, and its airlines. Using its market expertise, Nyras identified those airlines which were the most likely buyers of the entire Slot Portfolio, comprising both incumbents and new entrants at Gatwick.

The valuation approach was to undertake an analysis that illustrated the impact of the Slot Portfolio being acquired by any of the target airlines and suggested the value to these airlines of securing the Slot Portfolio. Such a value was developed in terms of additional revenue that would derive from the Slot Portfolio and the potential impact of another airline utilising the slots.

A sensitivity analysis was developed that illustrated the substantial impact on the airlines of the disposal of the Slot Portfolio, and a range of factors that were airline dependent.

11. CONCLUSION

Having regard to the foregoing and Flybe's instructions, and based on our work, we are of the opinion that the purchase price agreed for the Slot Portfolio of £20 million (twenty million pounds) forms a true reflection of Market Value as at the date of this report, as defined herewith.

12. CONFIDENTIALITY AND PUBLICATION

The contents of this Valuation Report may be used only for the specific purpose to which they refer. Before this Valuation Report, or any part thereof, is reproduced or referred to, in any document, circular or statement, and before its contents, or any part thereof, are disclosed orally or otherwise to a third party, Nyras' written approval as to the form and context of such publication or disclosure must first be obtained, but may not be unreasonably withheld or delayed where it relates to the exchange of the Slot Portfolio. For the avoidance of doubt such approval is required whether or not Nyras is referred to by name and whether or not the contents of our Valuation Report are combined with others.

Yours faithfully

Richard Davey Chief Executive

APPENDIX 1: THE SLOT PORTFOLIO

Summer Slots: summary by hour

			Departures									Arrivals								Totals
GMT hour	1	2	3	4	5	6	7	GMT hour	1	2	3	4	5	6	7	GMT hour	1	2	3	4	5	6	7
06:00								06:00	1	1	1	1	1	1		06:00	1	1	1	1	1	1	0
07:00	5	5	5	5	5	4	2	07:00	6	6	6	6	6	6	4	07:00 11 11 11 11 11 10							6
08:00	2	2	2	2	2	3	3	08:00							3	08:00	2	2	2	2	2	3	6
09:00						1	2	09:00						1	1	09:00	0	0	0	0	0	2	3
10:00	2	2	2	2	2	2	1	10:00	3	3	3	3	3	2	1	10:00	5	5	5	5	5	4	2
11:00	2	2	2	2	2	1	2	11:00	1	1	1	1	1	1	1	11:00	3	3	3	3	3	2	3
12:00								12:00	1	1	1	1	1	2	1	12:00	1	1	1	1	1	2	1
13:00	1	1	1	1	1	2	1	13:00								13:00	1	1	1	1	1	2	1
14:00	1	1	1	1	1		1	14:00	5	5	5	5	5	1	3	14:00	6	6	6	6	6	1	4
15:00	6	6	6	6	6	3	3	15:00	2	2	2	2	2	2	1	15:00	8	8	8	8	8	5	4
16:00						1		16:00						1		16:00	0	0	0	0	0	2	0
17:00						1		17:00	2	2	2	2	2	3	2	17:00	2	2	2	2	2	4	2
18:00	5	5	5	5	5	3	5	18:00	5	5	5	5	5	2	5	18:00 10 10 10 10 10							5 10
19:00	2	2	2	2	2	1	3	19:00							1	19:00	2	2	2	2	2	1	4
Total 26 26 26 26 26 22 23								Total 26 26 26 26 26 22 23								Total 52 52 52 52 52 44 46

Winter Slots: summary by hour

			Departures									Arrivals								Totals
GMT hour 1		2	3	4	5	6	7	GMT hour 1		2	3	4	5	6	7	GMT hour 1		2	3	4	5	6	7
06:00								06:00								06:00	0	0	0	0	0	0	0
07:00								07:00	1	1	1	1	1	1		07:00	1	1	1	1	1	1	0
08:00	5	5	5	5	5	5	2	08:00	6	6	6	6	6	6	4	08:00 11 11 11 11 11 11							6
09:00	2	2	2	2	2	2	3	09:00							2	09:00	2	2	2	2	2	2	5
10:00							1	10:00								10:00	0	0	0	0	0	0	1
11:00	2	1	1	2	2	2	1	11:00	3	1	1	3	3	3	1	11:00	5	2	2	5	5	5	2
12:00	2	1		2	2	2	1	12:00	1	1		1	1	1	1	12:00	3	2	0	3	3	3	2
13:00							1	13:00						1	1	13:00	0	0	0	0	0	1	2
14:00						1	1	14:00							2	14:00	0	0	0	0	0	1	3
15:00	1	1	1	1	1		1	15:00	3	4	4	4	4	1	3	15:00	4	5	5	5	5	1	4
16:00	4	4	4	5	5	3	4	16:00	2	1	1	2	2	3	1	16:00	6	5	5	7	7	6	5
17:00						1		17:00								17:00	0	0	0	0	0	1	0
18:00								18:00	2	2	2	2	2	2	2	18:00	2	2	2	2	2	2	2
19:00	4	5	5	5	5	4	5	19:00	4	4	5	5	5	2	5	19:00	8		9 10 10 10				6 10
20:00	2	1	2	2	2		2	20:00								20:00	2	1	2	2	2	0	2
Total 22 20 20 24 24 20 22								Total 22 20 20 24 24 20 22								Total 44 40 40 48 48 40 44

PART 6 ADDITIONAL INFORMATION

1. RESPONSIBILITY

The Company and the Directors, whose names are set out in paragraph 3 below, accept responsibility for the information contained in this document. To the best of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

2. THE COMPANY

2.1 The Company was incorporated in England on 14 June 1978 under the name of Spacegrand Limited (with registered number 1373432) as a private company limited by shares. The Company was re-registered as a public company on 6 December 2010. The principal legislation under which the Company operates is the CA 2006 and regulations made under the CA 2006. The liability of the Company's members is limited.
2.2 The Company is domiciled in the United Kingdom with its registered office (and principal place of business and head office) at Jack Walker House, Exeter International Airport, Exeter EX5 2HL. The telephone number of the Company's registered office is 01392 366669.

3. DIRECTORS

The Directors of the Company and their respective functions are:

Name	Function
Jim French CBE	Chairman and Chief Executive Officer
Andrew Knuckey	Chief Financial Officer
Mark Chown	Director of Corporate Strategy
Mike Rutter	Managing Director Flybe Outsourcing Solutions
Andrew Strong	Managing Director Flybe UK
Charlie Scott	Deputy Chairman and Senior Non-executive Director
Alan Smith	Independent Non-executive Director
David Longbottom	Independent Non-executive Director
Peter Smith	Independent Non-executive Director

4. DIRECTORS' AND OTHERS' INTERESTS

4.1 The interests of the Directors, the Senior Management and persons connected with them (within the meaning of section 252 of the CA 2006) in the issued share capital of the Company (all of which are beneficial) as at the date of this document are as follows:

		Percentage
	Number of	of voting
Director	Ordinary Shares	rights
Jim French CBE	4,016,250	5.3
Mark Chown	376,725	0.5
Andrew Strong	224,875	0.3
Andrew Knuckey	223,125	0.3
Michael Rutter	224,125	0.3
Charlie Scott	12,500	n/a
Alan Smith	22,500	n/a
David Longbottom	12,500	n/a
Peter Smith	39,000	n/a
Simon Charles	75,000	n/a
Chris Simpson	224,125	0.3
Mark Elkins	37,500	n/a

4.2 The Directors and the Senior Management hold the following awards over Ordinary Shares pursuant to the PSP:

		Market Value of Ordinary
	Number of	Shares on
Name	Shares	Award Date	Earliest Vesting Date
		(£)
Jim French CBE	294,797	509,999	5 August 2014
Mark Chown	88,439	152,999	5 August 2014
Andrew Strong	173,410	299,999	5 August 2014
Andrew Knuckey	173,410	299,999	5 August 2014
Michael Rutter	173,410	299,999	5 August 2014
Simon Charles	61,317	106,078	5 August 2014
Chris Simpson	35,375	61,199	5 August 2014
Mark Elkins	61,317	106,078	5 August 2014

4.3 The Directors and the Senior Management hold the following awards over Ordinary Shares pursuant to the SIP Scheme:

		Market Value
		of Ordinary
	Number of	Shares on
Name	Shares	Award Date	Earliest Vesting Date
		(£)
Jim French CBE	100	295	21 January 2014
Mark Chown	100	295	21 January 2014
Andrew Strong	100	295	21 January 2014
Andrew Knuckey	100	295	21 January 2014
Michael Rutter	100	295	21 January 2014
Simon Charles	100	295	21 January 2014
Mark Elkins	100	295	21 January 2014

4.4 The Directors and the Senior Management hold the following awards over Ordinary Shares pursuant to the SAYE Scheme:

		Market Value of Ordinary
	Number of	Shares on
Name	Shares	Award Date	Earliest Vesting Date
		(£)
Mark Chown	790	1,280	5 August 2014
Andrew Strong	790	1,280	5 August 2014
Andrew Knuckey	790	1,280	5 August 2014
Michael Rutter	790	1,280	5 August 2014
Simon Charles	790	1,280	5 August 2014

4.5 Save as disclosed in paragraphs 4.1 to 4.4 of this Part 6 of the document, no Director or member of the Senior Management has any interest in the share capital or loan capital of the Company or any of its subsidiaries nor does any person connected with them (within the meaning of section 252 of the CA 2006) have any such interest, whether beneficial or non-beneficial.
4.6 In addition to the interests of Mr. French disclosed in paragraph 4.1 of this Part 6 of the document, insofar as is known to the Company, the following persons are interested in three per cent. or more of the Company's share capital or voting rights at 15 July 2013, being the latest practicable date prior to the publication of this document:

Number of	Percentage
Ordinary	of voting
Shares	rights
36,146,250	48.1
10,925,847	14.5
3,227,926	4.3
2,265,173	3.0

5. DIRECTORS' SERVICE CONTRACTS

Save as set out in this paragraph 5 of this Part 6 of the document, there are no service agreements in existence between any of the Directors and any member of the Group.

Executive Directors: service contracts

Jim French CBE, Andrew Knuckey, Mike Rutter, Andrew Strong and Mark Chown are each engaged under service agreements with the Company dated 9 December 2010, under which they are entitled to a base salary of £510,000, £300,000, £300,000, £300,000 and £153,000 per annum respectively. Each of the Executive Director's service agreements is terminable by either party on 12 months' notice.

Each of the Executive Directors is eligible to participate in the Company's employee share plans and, save for Mark Chown, to receive pension contributions in line with the Company's current policy, life assurance of up to four times salary and private medical expenses insurance for the benefit of the executive, his spouse/partner and dependent children in full time education.

Each of the Executive Directors' service agreements contains post-termination restrictive covenants which (among other restrictions) restrict the executive from competing with the Company for 12 months following the termination of his employment in any area/territory in which the executive worked or to which he was assigned during the 12 months prior to termination or, if earlier, the start of any period of garden leave.

The articles of association of the Company require each of the Directors to stand for election by Shareholders at the first annual general meeting of the Company following their appointment (if appointed by the Board) and in all cases by rotation every three years thereafter.

Senior Management: service contracts

Simon Charles, Mark Elkins and Chris Simpson are each engaged under service agreements with the Company under which they are entitled to a base salary of £132,600, £132,600 and £67,820 per annum respectively. Each of the Senior Manager's service agreements is terminable by either party on six months' notice.

Simon Charles and Mark Elkins are entitled to pension contributions in line with the Company's current policy. Each of the Senior Managers is eligible to participate in the Company's employee share plans, receives life assurance of up to four times salary and private medical expenses insurance for the benefit of the executive, his spouse/partner and dependent children in full time education.

Each of the Senior Managers' service agreements contains post-termination restrictive covenants which (among other restrictions) restrict the executive from competing with the Company for six months following the termination of his employment in any area/territory in which the executive worked or to which he was assigned during the six months prior to termination or, if earlier, the start of any period of garden leave.

Non-Executive directors: letters of appointment

Each of the Non-Executive Directors is engaged pursuant to an individual letter of appointment dated 3 May 2012, each of which is terminable by either party on six months' notice.

Charlie Scott is entitled to a fee of £40,000 per annum, plus an additional £8,000 per annum in respect of his role as chairman of a committee of the Board, and a further additional fee of £15,000 per annum in respect of his role as the senior independent Non-Executive Director.

Alan Smith, David Longbottom and Peter Smith are each entitled to fees of £40,000 per annum, plus an additional £8,000 per annum in respect of their roles as chairman of certain committees of the Board.

6. MATERIAL CONTRACTS

A. Retained Business

The following contracts, not being contracts entered into in the ordinary course of business, (i) have been entered into by the Retained Business during the two years preceding the date of this document and are or may be material or (ii) have been entered into by the Retained Business and which contain any provision under which any member of the Retained Business has an obligation or entitlement which is material to the Retained Business as at the date of this document:

6.1 Rosedale Relationship Agreement

A relationship agreement was entered into between the Company and Rosedale on 9 December 2010. The purpose of this agreement is to regulate aspects of the continuing relationship between the Company and Rosedale. The agreement contains, among other things, provisions relating to certain assurances from Rosedale to the Company to ensure that the Company is able to carry on its business independently of Rosedale and that all transactions between the Company and Rosedale are and will be conducted at arm's length and on a commercial basis. The Relationship Agreement permits Rosedale to appoint one person to the Board if Rosedale holds in excess of 15 per cent. of the Ordinary Shares, and two people to the Board if Rosedale holds in excess of 30 per cent. of the Ordinary Shares.

6.2 Loganair Franchise Agreement

Flybe Group plc, Flybe Limited and Loganair entered into a franchise agreement in December 2007 (effective from October 2008) under which Flybe granted Loganair a franchise along with a non-exclusive and non-assignable licence to use certain intellectual property rights of Flybe to enable Loganair to operate scheduled flights under the Flybe brand. Loganair pays a franchise fee of 2.5 per cent. of gross passenger revenue (excluding passenger service charges, security and fuel charge levies, air passenger duty and travel agency commission) for all routes in operation prior to the start of the IATA Winter season. In respect of any new routes commencing after the start of the IATA winter 2008 season, the franchise fee is 1.25 per cent. for the first year, 1.90 per cent. for the second year and 2.5 per cent. for subsequent years. During the term of the agreement, Flybe is prohibited from commencing or operating any air services on any route on which Loganair operates scheduled air services under the Flybe brand or licensing any other person to do so. Either party may terminate the agreement on six months notice. Loganair and the Company have also entered into various service agreements, the terms of which are contemporaneous with the Loganair Franchise Agreement. These govern various administrative and operational parts of the franchise arrangement, the provision by the Group of reservation, ticketing, the provision of information technology services, and the ability of passengers on Loganair operated franchise flights to participate in the Flybe frequent flyer programme.

6.3 Term Loan Facility with Barclays

This agreement is a facility letter dated 21 January 2008 between Barclays Bank plc ("Barclays") as lender and Flybe Limited as borrower, in respect of a term loan facility of £2,600,000. This facility was made available for a term of 10 years and is repayable in equal quarterly instalments of £65,000. The interest rate applicable to the facility is 1.06 per cent. over three month sterling LIBOR. The facility is stated to be for the purpose of acquiring the leasehold title to the property known as Hangar 1 at Exeter International Airport. The facility amount of £2,600,000 was drawn down on 1 March 2008 with a maturity date of 28 February 2018. The balance outstanding as of 30 April 2013 is £1.3 million.

6.4 BGI Facilities with Barclays

This agreement, comprised in two facility letters, each entered into between Barclays and Flybe Limited is in relation to the provision of bonds, guarantees and/or indemnities, as follows:

(a) a facility letter dated 24 May 2013 in respect of a facility of up to £6,000,000 for the purpose of issuing bonds, guarantees and/or indemnities. The fee for any obligations issued by Barclays under this facility letter is 2.55 per cent. per annum; and

(b) a facility Letter dated 24 May 2013 in respect of a facility of up to £5,000,000 for the purpose of issuing bonds, guarantees and/or indemnities. The fee for any obligations issued by Barclays under this facility letter is 2.55 per cent. per annum.

All of the above facilities are made available by Barclays on-demand, and as such Barclays may, in its sole discretion at any time, cancel its commitment and/or demand repayment of any amounts outstanding. The facility is available for a period of 12 months with a review due on 30 April 2014.

6.5 Cross Guarantees and Security with Barclays

The performance by Flybe Limited of its obligations under the facility and hedging documents referred to at paragraphs 6.3 and 6.4 above is guaranteed by the Company and its subsidiaries, pursuant to cross guarantees dated 19 February 2003 and 3 March 2010. In support of these guarantees, Barclays has the following items of security:

(a) debentures from Flybe Group plc, Flybe Limited, JEA Engineering (UK) Limited, Westcountry Aircraft Services (UK) Limited, Guide Leasing Limited, Iscavia Limited, Walker Aviation Leasing UK Limited, British Regional Airlines Limited, British Regional Airlines Group Limited, Flybe Leasing Limited and Flybe (IOM) Limited;
(b) a legal charge from Flybe Limited over the property known as Hangar 1 at Exeter International Airport;
(c) a charge over credit balances from Flybe Limited; and
(d) a deed of assignment in respect of a receivable owed by Flybe Limited to Jersey European Airways Limited.

6.6 Learning and Skills Council Funding Agreement

This agreement is a grant agreement dated 29 October 2009 entered into between Flybe Limited and the Learning and Skills Council in respect of a capital project grant towards the costs of developing a national training centre for the airline industry (the Flybe Training Academy). The grant of £4,261,704 is subject to various conditions and the council may be entitled to claw back the grant if these conditions are not observed. The conditions expire on 29 October 2019.

6.7 South West of England Regional Development Agency Funding Agreement

This agreement is a grant agreement dated 13 October 2009 between Flybe Limited and the South West of England Regional Development Agency in respect of a grant of £2,826,500 towards the development of the Flybe Training Academy. The grant is subject to various conditions and the agency may be entitled to claw back the grant if these conditions are not observed. The conditions expire on 1 October 2020.

6.8 Business Loan Agreement – Lloyds TSB Bank plc

A business loan agreement executed by Flybe Limited on 20 September 2012 between Lloyds TSB Bank plc ("Lloyds") as lender and Flybe Limited as borrower (as amended), in respect of a term loan facility of £3,229,000. This facility is repayable in equal quarterly instalments of £57,000 with a final balance repayment on 30 November 2016. The interest rate applicable to the facility is 3.25 per cent. over Lloyds' base rate (from time to time). The facility was made available for the purpose of funding the training academy at Exeter International Airport.

The performance by Flybe Limited of its obligations under the business loan agreement is secured by:

(a) a legal charge over the freehold land and buildings situated at the training academy; and
(b) a guarantee from Flybe Group plc.

6.9 Joint Venture Agreement with Finnair

On 30 June 2011 Flybe Holdings Limited ("Flybe Holdings") entered into a shareholders' agreement, governed by Finnish law, with Finnair Oyj ("Finnair") stating the terms of the ownership of Flybe Nordic AB ("Nordic"), a Swedish company. 60 per cent. of the shares in Nordic are owned by Flybe Holdings, and 40 per cent. are owned by Finnair. The shareholders' agreement does not expire, and each party has a right of first refusal in respect of the other's shares in the event of a proposed sale of such shares. No such sale may take place until the expiration of five years from the date of acquisition of Flybe Finland, or, if earlier, the expiration of two years from the date that Flybe Finland meets certain financial targets.

Nordic acquired Finnish Commuter Airlines Oy (now known as Flybe Finland Oy) ("Flybe Finland") from Finnair via a subsidiary company, Flybe Finland Oy, on 18 August 2011. Flybe's total investment in Nordic was limited to €23.6 million (£21.3 million). Flybe Finland owns 100 per cent. of Finnish Aircraft Maintenance Oy.

The board of Nordic consists of three representatives of the Group and two representatives of Finnair. The shareholders' agreement relating to Nordic contains provisions, which are standard in nature, which stipulate that certain matters require the unanimous consent of Nordic's shareholders. In the event that Flybe Holdings and Finnair cannot agree on a matter requiring unanimous consent, the agreement contains provisions to break any such deadlock, including a mechanism for the transfer of one party's shares to the other.

6.10 Purchased Traffic Agreement

A Purchased Traffic Agreement ("PTA") was signed between Flybe Finland and Finnair on 18 August 2011 under which six ATR 72 aircraft and two Embraer 170 aircraft are operated by Flybe Finland for Finnair, and a further ATR 72 aircraft is provided as a spare. 12 Embraer 190 aircraft were added to the arrangement with effect from 28 October 2012 by a supplementary agreement dated 11 October 2012. The PTA contains provisions allowing Finnair to increase or decrease the number of aircraft provided. The PTA was further amended on 31 January 2013 which (amongst other things) added Pulkova International Airport, St Petersburg, Russia to the list of destinations covered by the PTA.

Flybe Nordic and other members of the Group are party to a number of ancillary arrangements relating to the PTA which cover the provision of intellectual property and support services from the Group to Flybe Finland, and govern the use by Flybe Finland of flight codes and Slots.

The PTA has a series of expiry dates, tied to the expiry dates of the various leases of the aircraft. Flybe Finland has given indemnities to Finnair in respect of liabilities, damages and claims by reason of death or injury to any person or damage to property suffered by passengers and third parties arising out of or connected with the contract flights for Finnair.

6.11 Flybe Limited aircraft subject to German KG financing and lease structures

25 of the Q400 aircraft, with manufacturer's serial numbers 4113, 4114, 4118, 4120, 4126, 4136, 4139, 4155, 4157, 4179, 4197, 4201, 4206, 4216, 4220, 4221, 4224, 4229, 4230, 4233, 4237, 4251, 4257, 4259 and 4261, three Embraer E195 aircraft with manufacturer's serial numbers 184, 204, 213 and one Embraer E175 aircraft with manufacturer's serial number 355 (each, an "Aircraft") are leased to Flybe Limited using a German KG financing and leasing structure.

The partnership structure of a KG investment model involves a Kommanditgesellschaft ("KG") which is a limited partnership. Each KG investment vehicle is comprised of a limited liability company. The management companies, in some cases GOAL German Operating Aircraft Leasing GmbH & Co, KG and in other cases HEH Beteillgungsgesellschaft GmbH, act as non-recourse general partners to the KG, Private Investors act as the limited partners.

Each KG has purchased an Aircraft from Flybe Limited and leased it back to Flybe Limited for 10 years (with a two year extension option in the case of the HEH Q400 aircraft) under an operating lease. The purchase price of the Aircraft is financed partly by equity provided by the investors and partly by a bank loan. The investors' investments are placed shortly after the purchase. In the interim period the KG funds this element using an unsecured bridge loan. The bank loans in respect of the Aircraft have been provided by any one of, HSH Nordbank AG, Norddeutsche Landesbank Girozentrale, Export Development Canada ("EDC"), Bayerische Landesbank Girozentrale and DVB Bank SE, London Branch.

The bank loan which is used to finance the purchase of the Aircraft is typically secured by a first ranking mortgage over the Aircraft and a security assignment of claims under the operating lease as well as security over airframe warranties/Pratt & Whitney term cost plan agreement, the insurances and in some cases the provision by Flybe Limited of maintenance reserves.

The banks' recourse is (i) to Flybe Limited as primary credit counterparty during the term of lease, (ii) to the value of the Aircraft, and (iii) to the other securities.

Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of Flybe Limited under the operating leases entered into in respect of each Aircraft.

At the expiry of the lease term Flybe Limited has no right to continue leasing the Aircraft nor to take title to the Aircraft. Flybe Limited is obliged to redeliver the aircraft to the Lessor in the return condition set out in the lease. Flybe Limited has no interest in, nor exposure to, the residual value of the aircraft.

6.12 Flybe Limited aircraft subject to RASPRO Trust operating lease structure

Five of the Q400 aircraft (being aircraft with manufacturer's serial numbers 4094, 4095, 4098, 4103 and 4105) are leased to Flybe Limited until December 2017 from RASPRO Trust 2005, a Delaware statutory trust. Flybe Limited has granted an assignment of the insurances to the lessor and entered into an airframe warranty agreement with, amongst others, the lessor. Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of Flybe Limited under the operating leases entered into in respect of each aircraft.

At the expiry of the lease term Flybe Limited has no right to continue leasing the aircraft nor to take title to the aircraft. Flybe Limited is obliged to redeliver the aircraft to the Lessor in the return condition set out in the lease. Flybe Limited has no interest in, nor exposure to, the residual value of the aircraft.

6.13 Walker Aviation Leasing (UK) Limited aircraft financed by UT Finance Corporation and Lloyds Bank

Two of the Q400 aircraft are leased to Flybe Limited with lease terms expiring in 2015 or 2016, from Walker Aviation Leasing (UK) Limited ("WALL"), a wholly owned subsidiary of Flybe Group plc, being aircraft with manufacturer's serial numbers 4077 and 4093.

The aircraft bearing manufacturer's serial number 4077 is financed by UTF, the aircraft bearing manufacturer's serial number 4093 is financed by HBOS.

Flybe Limited has granted an assignment of the insurances to WALL, which is assigned to the respective security trustee, and entered into an airframe warranty agreement with, amongst others, WALL and the Security Trustee. WALL has granted a mortgage in favour of the respective Security Trustee in respect of each Aircraft. Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of WALL under the loans entered into in respect of each aircraft.

6.14 Flybe Limited operating leases with Nordic Aviation Capital A/S ("NAC")

Four of the Q400 aircraft are leased to Flybe Limited until November 2021 from NAC Aviation 2 Limited being aircraft with manufacturer's serial numbers 4242, 4248, 4253 and 4255. Flybe Limited has entered into an airframe warranty agreement with, amongst others, the lessor and provides maintenance reserves.

Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of Flybe Limited under the operating leases entered into in respect of each aircraft. The lessor's ownership of the Aircraft is partially financed by EDC. NAC has entered into payment guarantees to guarantee the obligations of NAC Aviation 2 Limited under the lease agreements and any related documents thereto.

6.15 Flybe Limited operating leases with Fly 108 Limited

Three of the Q400 aircraft are leased to Flybe Limited with lease terms expiring in 2017 or 2018 from Fly 108 Limited being aircraft with manufacturer's serial numbers 4180, 4185 and 4212. Flybe Limited has entered into an assignment of the insurances, an airframe warranty agreement with, amongst others, the lessor and an assignment of the Pratt & Whitney term cost plan in favour of the lessor. Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of Flybe Limited under the operating leases entered into in respect of each Aircraft. The lessor company is financed by FirstRand (Ireland) plc as a junior lender and by HSH Nordbank AG as senior lender and Norddeutsche Landesbank Girozentrale as senior lender and security trustee.

6.16 Flybe Limited operating lease with Turbo Leasing Limited

One of the Q400 aircraft is leased to Flybe Limited with the lease term expiring on 27 January 2018 from Turbo Leasing Limited being aircraft with manufacturer's serial number 4110. Flybe Limited has entered into an assignment of the insurances, an airframe warranty agreement with, amongst others, the lessor and an assignment of the Pratt & Whitney term cost plan in favour of the lessor. Flybe Group plc has entered into a payment guarantee to guarantee the payment obligations of Flybe Limited under the operating lease entered into in respect of the aircraft. The lessor company's ownership of the Aircraft is partially financed by HSH Nordbank AG.

6.17 Flybe Limited operating lease with A&L CF June (2) Limited

One of the Q400 aircraft is leased to Flybe Limited with a lease term expiring in April 2014 from A&L CF June (2) Limited having manufacturer's serial number 4089. Flybe Limited has entered into an assignment of the insurances, an airframe warranty agreement with, amongst others, the lessor, provides maintenance reserves (but not in respect of the engines) into a Flybe Limited bank account charged in favour of the lessor and an assignment of the Pratt & Whitney term cost plan in favour of the lessor. Flybe Group plc has entered into a payment guarantee to guarantee the payment obligations of Flybe Limited under the operating lease entered into in respect of the aircraft. The lessor company is financed by Santander UK plc.

6.18 Flybe Limited operating lease with Capital Bank Leasing 12 Limited

One of the Q400 aircraft is leased to Flybe Limited with a lease term expiring in May 2014 from Capital Bank Leasing 12 Limited being aircraft with manufacturer's serial number 4090. Flybe Limited has entered into an assignment of the insurances, an airframe warranty agreement with, amongst others, the lessor, provides maintenance reserves (but not in respect of the engines) into a Flybe Limited bank account charged in favour of the lessor and an assignment of the Pratt & Whitney term cost plan in favour of the lessor. Flybe Group plc has entered into a payment guarantee to guarantee the payment obligations of Flybe Limited under the operating lease entered into in respect of the aircraft. The lessor company is financed by HBoS plc.

6.19 Flybe Limited operating leases with BMBF (No 12) Limited

Three of the Q400 aircraft are leased to Flybe Limited with lease terms expiring in February and March 2014 from BMBF (No 12) Limited being aircraft with manufacturer's serial numbers 4085, 4087 and 4088 pursuant to a master operating lease agreement and separate lease supplements. Flybe Limited has entered into an assignment of the insurances, an airframe warranty agreement with, amongst others, the lessor, provides maintenance reserves (but not in respect of the engines) into a Flybe Limited bank account charged in favour of the lessor and an assignment of the Pratt & Whitney term cost plan in favour of the lessor. Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of Flybe Limited under the operating leases entered into in respect of each aircraft. The lessor company is financed by Barclays Bank PLC.

6.20 Financings in relation to 9 PW 150A spare engines

Four of the PW 150A spare engines are owned by Flybe Limited subject to a mortgage and further security arrangements with EDC being engines with serial numbers 0487, 0640, 0644 and 0645. The loans in respect of these engines are due to be fully repaid between December 2014 (in the case of 0640, 0644 & 0645) and September 2018 (in the case of 0487). Flybe Limited has granted EDC a mortgage over the engines as well as an assignment of the term cost plan with Pratt & Whitney. Flybe Group plc has entered into payment guarantees to guarantee the payment obligations of Flybe Limited under the loans entered into in respect of each engine.

Two of the PW 150A spare engines are owned by Flybe Limited subject to a mortgage and further security arrangements with Siemens Financial Services AB being engines with serial numbers 0053 and 0242. The loans in respect of these engines are due to be fully repaid in March 2018 and January 2019. Flybe Limited has granted Siemens Financial Services AB a mortgage over the engines.

One PW 150A engine is owned by Flybe Limited having been financed by Siemens Financial Services AB being an engine with serial number 0149. The loan in respect of this engine is due to be fully repaid at the end of March 2018.

Two of the PW 150A engines are owned by Walker Aviation Leasing (UK) Limited, a 100 per cent. subsidiary of Flybe Group plc, having been financed by Siemens Financial Services AB being engines with serial numbers 0025 and 0144. The loans in respect of those engines are due to be fully repaid at the end of March 2018. There is an intra group lease between Flybe Limited and Walker Aviation Leasing (UK) Limited.

6.21 Bombardier Q400 purchase agreement No. 606

The Bombardier Purchase Agreement no. 0606 dated May 2007 is in respect of 15 firm aircraft and 15 optional aircraft. The period of warranty cover for each delivered aircraft is for the following periods:

48 months from the delivery of the aircraft in respect of failure to conform to the specification and installation on the aircraft;
48 months from the delivery of the aircraft such Bombardier parts found to be defective in material or workmanship;
48 months from the delivery of the aircraft defects in such Bombardier parts relating to the design;
12 months from the delivery of the aircraft in relation to errors in such technical data; and
144 months from the delivery of the aircraft due to failure of any covered component – the Service Life Policy.

Bombardier agrees to maintain or cause to be maintained the capability to respond to Flybe Limited's technical inquiries, to conduct investigations concerning repetitive maintenance problems and to issue findings and recommend action thereon. This service shall be provided for as long as ten Q400 aircraft remain in commercial air transport service.

All the aircraft subject to this purchase agreement have been delivered to Flybe Limited.

6.22 Flybe Limited aircraft subject to GECAS operating lease structure

On 12 July 2006, Flybe Limited entered into an "Aircraft Lease Common Terms Agreement" with GE Commercial Aviation Services Limited ("GECAS"), pursuant to which it was agreed that Flybe Limited would assign to a GECAS subsidiary its right to purchase five new Embraer E195 LR aircraft from Embraer, following which they would be leased to Flybe Limited under 8-year operating leases.

Three of the aircraft were purchased by Celestial Aviation Trading 69 Limited and the other two were purchased by Celestial Aviation Trading 5 Limited. Both companies are incorporated in Ireland.

Each individual aircraft was leased to Flybe Limited pursuant to an "Aircraft Specific Lease Agreement" which incorporated the terms of the Aircraft Lease Common Terms Agreement.

Flybe Group plc was also a party to each Aircraft Specific Lease Agreement, accepting joint and several liability with Flybe Limited for the performance of Flybe Limited's obligations under the Aircraft Specific Lease Agreement.

The Aircraft Specific Lease Agreements in respect of the first two aircraft to be leased to Flybe Limited were novated to Aldus Portfolio Leasing Limited in March 2008.

Flybe Limited is required to pay a floating rate rent for the first three aircraft, monthly in advance and in US dollars. The rent is calculated on the basis of the prevailing six month US dollars LIBOR. For the fourth and fifth aircraft, the rent is fixed and is calculated by reference to a 6.5-year US dollars fixed interest rate swap. That rent is also payable monthly in advance and in US dollars.

Flybe Limited was required to provide a security deposit equal to three months' rent under each Aircraft Specific Lease Agreement. In lieu of paying cash, Flybe Limited provided standby letters of credit, issued by Barclays Bank plc. Flybe Limited is also required to pay maintenance reserves (characterised as supplemental rent) to each lessor, monthly in arrears. These are calculated to cover the cost of major airframe, engine, landing gear and APU maintenance and Flybe Limited is entitled to be reimbursed with the cost of such maintenance out of the accumulated reserves.

None of the Aircraft Specific Lease Agreements contains an extension or aircraft purchase option. At the end of each lease term, Flybe Limited is required to redeliver the aircraft to the lessor in compliance with a set of standard return conditions. Flybe Limited has no interest in, nor exposure to, the residual value of the aircraft.

6.23 Flybe Limited CF34-10E7 engines subject to GECAS operating lease structure

Flybe Limited entered into a sale and leaseback transaction with GECAS in March 2008 and December 2010, pursuant to which in each of those months Flybe Limited sold a CF34-10E7 spare engine to Celestial Aviation Trading 50 Limited, a subsidiary of GECAS, and leased it back under a 12-year (in the case of the 2008 engine) and an 8-year (in the case of the 2010 engine) operating lease. Celestial Aviation Trading 50 Limited is incorporated in Ireland.

The engines were leased by Celestial Aviation Trading 50 Limited to Flybe Limited pursuant to Engine Lease Agreements which incorporated the terms of an "Engine Lease Common Terms Agreement" between Flybe Limited and GECAS.

Flybe Group plc was also a party to the Engine Lease Agreements, accepting joint and several liability with Flybe Limited for the performance of Flybe Limited's obligations under it.

Flybe Limited is required to pay rent in US dollars monthly in advance.

Flybe Limited was required to provide a security deposit equal to two months' rent. Flybe Limited is also required to pay maintenance reserves (characterised as supplemental rent) to Celestial Aviation Trading 50 Limited, monthly in arrears. These are calculated to cover the cost of each engine's refurbishment and life-limited part replacement. Flybe Limited is entitled to be reimbursed with the cost of such refurbishment and replacement out of the accumulated reserves.

The Engine Lease Agreements do not contain an extension or purchase option. At the end of the lease term, Flybe Limited is required to redeliver the engine to the lessor in compliance with a set of detailed but industry standard return conditions. Flybe Limited has no interest in, nor exposure to, the residual value of the engine.

6.24 Flybe Limited aircraft subject to Allco operating lease structure

On 5 September 2007, Flybe Limited entered into a "Master Aircraft Operating Lease" with Allco Rentals (UK) Limited, pursuant to which it was agreed that Flybe Limited would assign to Allco Rentals (UK) Limited its right to purchase six of those aircraft from Embraer, following which each such aircraft would be sold by Allco Rentals (UK) Limited to a special purpose vehicle incorporated in the Cayman Islands which would then lease the aircraft back to Allco Rentals (UK) Limited, which would then sub-lease the aircraft to Flybe Limited under a 12 year operating lease.

Each aircraft was sub-leased to Flybe Limited by Allco Rentals (UK) Limited pursuant to an "Operating Lease Schedule". That Operating Lease Schedule, together with the Master Aircraft Operating Lease, constituted the sub-lease between Allco Rentals (UK) Limited and Flybe Limited.

Flybe Group plc was also a party to the Master Aircraft Operating Lease and to each Operating Lease Schedule, thereby accepting joint and several liability with Flybe Limited for the performance of Flybe Limited's obligations under each sub-lease.

Allco Finance Group provided a letter of comfort to Flybe Limited, undertaking, inter alia, to procure that certain parties to the overall structure, including each Cayman Island special purpose vehicle (as owner and head lessor), and Allco Rentals (UK) Limited (as sub-lessor) complied with their respective obligations under the transaction documents to which they were parties.

Flybe Limited is required to pay rent in respect of each aircraft quarterly in advance and in US dollars. For three of the aircraft, the quarterly rent is fixed and for the other three aircraft the rent is floating, linked to the three-month US dollars LIBOR, but with a smaller "hybrid fixed rate component".

Flybe Limited was required to provide a security deposit equal to an instalment of rent. Flybe Limited is also required to pay maintenance reserves monthly in arrears. Both the security deposit and the maintenance reserves are paid to, and held, by BTA Institutional Services Australia Limited, as security trustee. The maintenance reserves are calculated to cover the cost of major airframe, engine, landing gear and APU maintenance and Flybe Limited is entitled to be reimbursed with the cost of such maintenance out of the accumulated reserves.

Neither the Master Aircraft Operating Lease nor the Operating Lease Schedule contains a sub-lease extension or aircraft purchase option in favour of Flybe Limited. At the end of each sub-lease term, Flybe Limited is required to redeliver the aircraft to Allco Rentals (UK) Limited in compliance with a set of standard return conditions. There is also a financial adjustment mechanism pursuant to which Flybe Limited is obliged to make certain payments calculated by reference to the utilisation of the aircraft since new or (if applicable) since the last heavy check, shop visit or overhaul. Any remaining balance of the maintenance reserves is available to cover any sums payable by Flybe Limited pursuant to such mechanism and any final balance then remaining is payable to Flybe Limited. Flybe Limited has no interest in, nor exposure to, the residual value of the aircraft.

6.25 Embraer 195 LR Purchase Agreement DCT-017/05

Flybe Limited entered into the Purchase Agreement DCT-017/05 with Embraer on 12 June 2005. It provided for the purchase by Flybe Limited of 14 new Embraer 195 LR aircraft. The 14 aircraft have all been acquired and are in service with Flybe Limited.

In respect of the firmly ordered aircraft, Embraer has granted the following warranty package:

(a) freedom from defects in materials, workmanship, design and installation of parts manufactured by Embraer or its sub-contractors for 48 months from delivery of each aircraft;
(b) freedom from defects in operation, installation and conformity with specification of vendor parts (excluding Engines, APU and their accessories) for 36 months from delivery of each aircraft; and
(c) freedom from defects in materials, workmanship, manufacturing processes and design of spare parts or ground support equipment (excluding Engines, APU and their accessories) for 24 months from date of the relevant invoice.

In the event of a breach of these warranties, Flybe Limited is entitled to have the defective part repaired or replaced free of charge, with the warranty period being suspended in the meantime. Flybe Limited also has the right to perform warranty repairs in-house and receive a credit for the direct labour costs involved.

In addition, Embraer has granted a "Service Life Guarantee" which covers structural defects occurring within the first 30,000 cycles or 12 years (whichever is the earlier) in the main load-bearing elements of the fuselage, wings, pylon, empennage, landing gears and structural attachment fittings. In the event of any such defect, Embraer is obliged to provide a design remedy and corrective modification kit or replacement item, with the costs being shared on a sliding scale, with Embraer's share declining to zero by the end of the guarantee period.

Embraer has also provided a package of other guarantees relating to the aircraft's performance and maintenance, comprising "Performance and Weight Guarantees" (covering take-off, climb and landing performance, the take-off, landing and zero fuel weights, together with certain mission payloads and trip fuel burn), a "Basic and Structural Maintenance Direct Labour Guarantee" (covering the labour involved in carrying out certain airframe checks) and a "Dispatch Reliability Guarantee" (covering the cancellation or delay of a revenue flight due to a component failure or corrective action).

6.26 Embraer E175 STD Purchase Agreement COM0139-10

Flybe Limited entered into the Purchase Agreement COM0139-10 with Embraer on 19 July 2010. It provided for the purchase by Flybe Limited of 35 new Embraer 175 STD aircraft, with options to purchase another 65 and purchase rights in respect of a further 40. Flybe has the right, on giving sufficient notice and subject to availability, to convert any firm option or purchase right aircraft into other Embraer 190 STD or Embraer 195 STD aircraft. In addition, Flybe can request the conversion of any of the option or purchase right aircraft into new generation E-Jet family aircraft which may be certified by December 2020.

The first of the 35 firmly ordered aircraft was delivered in November 2011. The final firm aircraft is scheduled for delivery in December 2019. The 65 options are for deliveries between July 2015 and January 2022. To date, no options have been exercised. The first options lapse at the end of March 2014.

The price of each of the firm, option and purchase right aircraft is based in January 2010 US dollars. Flybe has agreed price escalation sharing with Embraer which controls any increase in price due to economic factors. If the price of an aircraft does escalate to a level unacceptable to Flybe, Flybe has the right to refuse delivery of that aircraft. In this event Embraer will return to Flybe any deposits paid against that aircraft.

Flybe has secured contractual commitments from Embraer to procure debt financing for the purchase of all of the 35 committed Embraer E175 aircraft deliveries. Under this contractual commitment with Embraer, if Embraer is not able to procure finance for the delivery of a particular aircraft by a specified date (which coincides with the delivery date of such aircraft), Flybe has the option (at its discretion) to terminate the delivery of that aircraft, or to defer delivery of such aircraft. If Embraer fails to procure the financing in respect of the delivery of a particular E175 aircraft, this default on the part of Embraer does not impact on the delivery or financing obligations agreed to by Embraer in respect of subsequent committed E175 aircraft deliveries.

The terms of the debt financing are to be in accordance with the OECD Aircraft Sector Understanding on Export Credits for Civil Aircraft (the "ASU"), save that Flybe has secured additional terms that cap the interest rate costs related to the lender's cost of funding. The debt financing is for 85 per cent. of the net aircraft price. The margin, based on Flybe's previous ASU financings, is likely to be less than 200 basis points. At Flybe's election, financing may be provided directly to Flybe (in order for Flybe to purchase the aircraft) or to a third party aircraft lessor nominated by Flybe who will purchase the aircraft and subsequently lease it back to Flybe under an operating lease structure.

In respect of the firmly ordered, option and purchase right aircraft, Embraer has granted (and will grant) the following warranty package:

(a) freedom from defects in materials, workmanship, design and installation of parts manufactured by Embraer or its sub-contractors for 48 months from delivery of each aircraft;
(b) freedom from defects in operation, installation and conformity with specification of vendor parts (excluding Engines, APU and their accessories) for 36 months from delivery of each aircraft; and
(c) freedom from defects in materials, workmanship, manufacturing processes and design of spare parts or ground support equipment (excluding Engines, APU and their accessories) for 24 months from the date of the relevant invoice.

In the event of a breach of these warranties, Flybe Limited is entitled to have the defective part repaired or replaced free of charge, with the warranty period being suspended in the meantime. Flybe Limited also has the right to perform warranty repairs in-house and to receive a credit for the direct labour costs involved.

In addition, Embraer has granted (and will grant) a "Service Life Guarantee" which covers structural defects occurring within the first 30,000 cycles or 12 years (whichever is the earlier) in the main load-bearing elements of the fuselage, wings, pylon, empennage, landing gears and structural attachment fittings. In the event of any such defect, Embraer is obliged to provide a design remedy and corrective modification kit or replacement item, with the costs being shared on a sliding scale, with Embraer's share declining to zero by the end of the guarantee period.

6.27 Flybe Limited E175 Export Credit Financing

Flybe Limited has obtained a committed secured finance facility from Banco Nacional De Desenvolvimento Economico e Social ("BNDES"), the Brazilian Export Credit Agency, under which Flybe Leasing Cayman 1 Limited ("Flybe Leasing") – a special purpose company incorporated in the Cayman Islands and owned by a charitable trust has entered into a funding agreement with, inter alia, BNDES. The facility can be used to finance any one or more of the first 20 E175 acquisitions. The Law Debenture Trust Corporation plc ("Law Debenture") has been appointed as security trustee and acts as mortgagee of the aircraft and mortgagee of the shares in Flybe Leasing.

The BNDES facility has so far been used to finance the acquisition of six new E175 aircraft, bearing manufacturer's airframe serial numbers 326, 327, 328, 329, 336 and 341. These aircraft were acquired between November 2011 and May 2012. They are owned by Flybe Leasing and leased to Flybe Limited. Flybe Limited has purchase options in respect of each of the aircraft. The manufacturers' airframe and engine warranties have been assigned by way of security to Law Debenture.

Flybe Group plc has provided guarantees in respect of the obligations of Flybe Limited under its leases with Flybe Leasing.

6.28 Flybe Limited aircraft subject to Aldus operating lease structure

In 2012 Flybe Limited entered into a Common Terms Agreement ("CTA") with Tiradentes Portfolio C Limited – a leasing company managed by Aldus Aviation. The terms of the CTA were largely the same as the novated E195 leases referred in 6.22 above.

Flybe Limited took delivery of Embraer E175 aircraft with manufacturer's serial numbers 344 and 351 in June 2012 and September 2012 respectively. These aircraft were purchased by an Aldus Aviation managed company and leased to Flybe Limited (as sub-sub-lessee) pursuant to an "Aircraft Specific Lease Agreement" which also incorporates the terms of the CTA.

Flybe Limited is required to pay a fixed rate rent for each aircraft, monthly in advance and in US dollars. Flybe Limited was required to provide a security deposit equal to three months' rent under each Aircraft Specific Lease Agreement. Flybe Limited is also required to pay maintenance reserves (characterised as supplemental rent) to each lessor, monthly in arrears. These are calculated to cover the cost of major airframe, engine, landing gear and APU maintenance and Flybe Limited is entitled to be reimbursed with the cost of such maintenance out of the accumulated reserves.

None of the Aircraft Specific Lease Agreements contains an extension or aircraft purchase option. At the end of each lease term, Flybe Limited is required to redeliver the aircraft to the lessor in compliance with a set of return conditions set out in the CTA. Flybe Limited has no interest in, nor exposure to, the residual value of the aircraft.

6.29 E175 Pre-Delivery Payment facility

In December 2012 (and as subsequently amended) Flybe Limited entered into a structured transaction in connection with a loan facility with Investec Bank plc for the financing of PDPs payable to Embraer in respect of four E175 aircraft. The amounts financed are 75 per cent. of the total PDPs payable for the first four E175 aircraft.

The transaction is structured with Fastnet Aviation 1 Limited being an orphan special purpose company ("SPC") incorporated in Ireland as (i) the party who enters into the PDP loan facility with Investec Bank plc and (ii) the beneficiary of a partial novation of the Flybe Limited-Embraer E175 purchase agreement. The partial novation will cover only the four subject aircraft on a progressive basis as and when PDP amounts due in respect of a particular aircraft are paid to Embraer using proceeds of the PDP loan facility.

The SPC assumes all of Flybe Limited's obligations under the novated purchase agreement in respect of a novated aircraft including the requirement to pay PDPs and the balance of the aircraft purchase price at delivery.

Flybe Limited guarantees the obligations of the SPC (the "Flybe Guarantee") and will ultimately have the obligation to take delivery of the aircraft and procure payment of the balance of the PDP loan facility and aircraft purchase price in respect of such delivered aircraft under an option agreement between the SPC and Flybe Limited.

Flybe Group plc has also entered into a guarantee to guarantee the payment and performance obligations of both (i) the SPC under the PDP loan facility and (ii) Flybe Limited under the Flybe Guarantee.

6.30 Flybe Limited two CF34-8E5G02 engines subject to GECAS operating lease structure

Flybe Limited entered into sale and leaseback transactions with GECAS in December 2011 and October 2012, pursuant to which Flybe Limited sold CF34- 8E5G02 engines (with msn 193842 and 193896 respectively) to Celestial Aviation Trading 100 Limited, an engine lessor managed by GECAS, and leased them back through operating leases. Celestial Aviation Trading 100 Limited is incorporated in Ireland.

Each of the engines are leased by Celestial Aviation Trading 100 Limited to Flybe Limited pursuant to an Engine Lease Agreement which incorporates the terms of an "Engine Lease Common Terms Agreement" entered into between Flybe Limited and GECAS in March 2008. The term of the leases are eight years in the case of the engine with msn 193842 and ten years in the case of the engine with msn 193896. Flybe Group plc is also a party to the Engine Lease Agreements, accepting joint and several liability with Flybe Limited for the performance of Flybe Limited's obligations under it. Under each Engine Lease Agreement Flybe Limited is required to pay a fixed rent. The rent is payable in US dollars monthly in advance.

Flybe Limited was required to provide a security deposit as set out in each Engine Lease Agreement. Flybe Limited is also required to pay maintenance reserves (characterised as supplemental rent) to Celestial Aviation Trading 100 Limited, monthly in arrears. These are calculated to cover the cost of each engine's refurbishment and life-limited part replacement. Flybe Limited is entitled to be reimbursed with the cost of such refurbishment and replacement out of the accumulated reserves.

The Engine Lease Agreements do not contain any purchase options. The Engine Lease Agreement for engine with msn 193842 contains an extension option whereby Flybe Limited has the right to extend the lease term from eight to ten years. The Engine Lease Agreement for engine with msn 193896 does not contain an extension option.

At the end of each lease term, Flybe Limited is required to redeliver the engine to the lessor in compliance with a set of detailed but industry standard return conditions. Flybe Limited has no interest in, nor exposure to, the residual value of the engines.

6.31 Slot Exchange Agreement

On 22 May 2013 Flybe Limited entered into the Exchange Agreement relating to the Gatwick Slots, the terms of which are summarised in Part 3 of this document.

B. Gatwick Slots

The following contracts, not being contracts entered into in the ordinary course of business, (i) have been entered into in respect of the Gatwick Slots during the two years preceding the date of this document and are or may be material or (ii) have been entered into in respect of the Gatwick Slots and which contain any provision under which any obligation or entitlement which is material to the Gatwick Slots remains outstanding as at the date of this document.

6.32 Assignment by way of security

On 28 June 2013, Flybe Limited entered into an assignment of receivables with easyJet Airline Company Limited (the "Assignment"). The Assignment secures the obligations of Flybe under the Exchange Agreement and was entered into in accordance with the terms of the Exchange Agreement. The Assignment relates to the proceeds of any transfer of the Summer Slots other than in accordance with the Exchange Agreement made by the Group to a third party. If Flybe transfers the Summer Slots, or any of them, to a third party in breach of the Exchange Agreement, the Assignment requires Flybe Limited to immediately pay the proceeds of any such transfer to easyJet. The Assignment is governed by English law.

7. RELATED PARTY TRANSACTIONS

The following related party transactions (which for these purposes are those set out in the standards adopted according to Regulation (EC) No 1606/2002) have either been entered into by the Group during the three financial years ended 31 March 2013 and the current financial year to date, or, where entered into prior to such financial years, there exist outstanding commitments in respect of such transactions:

7.1 during the 2010/11 Financial Year, such transactions are disclosed in accordance with the respective standard adopted according to Regulation (EC) No 1606/2002 in note 36 on page 88 of the Company's report and accounts for the year ended 31 March 2011 which is hereby incorporated by reference into this document;
7.2 during the 2011/12 Financial Year, such transactions are disclosed in accordance with the respective standard adopted according to Regulation (EC) No 1606/2002 in

note 37 on page 96 of the Company's report and accounts for the year ended 31 March 2012 which is hereby incorporated by reference into this document;

7.3 during the 2012/13 Financial Year, such transactions are disclosed in accordance with the respective standard adopted according to Regulation (EC) No 1606/2002 in note 37 on page 98 of the Company's report and accounts for the year ended 31 March 2013 which is hereby incorporated by reference into this document; and
7.4 between 31 March 2013 and 15 July 2013, being the latest practicable date prior to the date of this document:
7.4.1 the Group provided travel services to Preston Travel (CI) Limited which, together with Rosedale Aviation Holdings Limited, is a subsidiary of Rosedale (J.W.) Investments Limited. The amount charged by the Group for such services was £0.5 million. As at 15 July 2013, Preston Travel (CI) Limited owed the Group £0.3 million;
7.4.2 the Group provided management and other central services to Flybe Nordic AB, its 60 per cent. owned operation. The amount charged by the Group for such services was £1.5 million. As at 15 July 2013, Flybe Nordic AB owed the Group £0.9 million;
7.4.3 the Group provided revenue collection services to Flybe Finland Oy, a wholly owned subsidiary of Flybe Nordic AB. As at 15 July 2013, the Group owed £8.5 million to Flybe Finland in respect of revenue collected on its behalf;
7.4.4 the Group has purchased property services from Edenfield Investments Limited with a value of £0.1 million and from Downham Properties Limited for a value of £0.1 million. The transactions with Edenfield Investments Limited and Downham Properties Limited are disclosed although there is no holding or subsidiary company relationship between these two companies and Rosedale Aviation Holdings Limited. These two companies are owned and controlled by the EJ Walker 1964 settlement, established by the former wife of the late Mr. Jack Walker; this trust is separate for tax purposes from the Jack Walker Settlement which controls Rosedale Aviation Holdings Limited.

8. WORKING CAPITAL

In the opinion of the Company, taking into account the net proceeds of the Exchange, the working capital available to the Group is sufficient for its present requirements, that is for at least the next 12 months from the date of this document.

9. LITIGATION

A. Retained Business

Save as described below, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the previous 12 months preceding the date of this document which may have, or have had in the recent past significant effects on the Company or the Retained Business's financial position or profitability.

Flybe is, as at 15 July 2013, being the latest practicable date prior to the date of this document, the subject of claims by 474 pilots (comprising both current and former employees) in relation to the calculation of their holiday pay. Flybe is defending these proceedings and a defence has been lodged at the employment tribunal. The claims against Flybe have been stayed in the employment tribunal pending the outcome of a similar case being brought against British Airways (British Airways plc v Williams and others), it being anticipated that the outcome of the British Airways claim will form the basis of the decision in the claims against Flybe.

Initially, the Court of Appeal found in favour of British Airways in the case mentioned above. However, the claimants appealed the decision of the Court of Appeal to the Supreme Court. The Supreme Court neither upheld nor dismissed the appeal and instead referred various questions of interpretation of European law to the European Court of Justice ("ECJ"). Upon receiving a judgment from the ECJ, the Supreme Court ruled in favour of Williams and others in respect of certain elements of the case, and remitted the claims back to the employment tribunal to determine the appropriate payments to be made to the pilots.

The rulings in the British Airways case noted above do not provide detailed guidance in relation to the holiday pay claims outstanding against Flybe. It is likely that a payment will have to be made to the claimants.

The claim that has been brought against Flybe is stayed to allow the parties further time to explore settlement options. The employment tribunal has also offered the parties judicial mediation, in the event the ongoing settlement negotiations are unsuccessful.

No schedules of loss have been issued by the various claimants and consequently, as at the date of this document, the claims against Flybe remain unquantifiable.

B. Gatwick Slots

There are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) during the previous 12 months preceding the date of this document which may have, or have had in the recent past significant effects on the Gatwick Slots or the financial position or profitability of the Gatwick Slots.

10. SIGNIFICANT CHANGE

10.1 There has been no significant change in the financial or trading position of the Retained Business since 31 March 2013, the date to which the Group's most recent audited financial statements were prepared.
10.2 There has been no significant change in the value of the Gatwick Slots since the date of the valuation set out in Part 5 of this document.

11. GENERAL

11.1 Espirito Santo Investment Bank, 3rd Floor, 10 Paternoster Square, London EC4M 7AL, which is regulated by the Financial Conduct Authority, has given and has not withdrawn its written consent to the inclusion in this document of its name in the form and context in which it appears.
11.2 Deloitte LLP of 2 Hardman Street, Manchester M60 2AT has given and has not withdrawn its written consent to the inclusion in this document of its report and references thereto in the form and context in which they appear.
11.3 Nyras has given and has not withdrawn its written consent to the inclusion in this document of its name in the form and context in which it appears.

12. INFORMATION INCORPORATED BY REFERENCE

Information from the following documents has been incorporated into this document by reference:

Document containing information incorporated by reference	Section in which document is referred to
Note 36 on page 88 of the Flybe Annual Report and Accounts for the year ended 31 March 2011	Part 6 (Additional Information), paragraph 7.1 (Related Party Transactions)
Note 37 on page 96 of the Flybe Annual Report and Accounts for the year ended 31 March 2012	Part 6 (Additional Information), paragraph 7.2 (Related Party Transactions)
Note 37 on page 98 of the Flybe Annual Report and Accounts for the year ended 31 March 2013	Part 6 (Additional Information), paragraph 7.3 (Related Party Transactions)

These documents are available free of charge on the Flybe website www.flybe.com and are also available for inspection in accordance with paragraph 13 below.

Only those parts of the documents detailed above are incorporated by reference. No other parts of such documents are incorporated by reference and the information in such parts is either not relevant to Shareholders or is covered elsewhere in this document. Where documents incorporated by reference into this document incorporate further information or documents by reference, this further information is not incorporated by reference into this document.

13. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents may be inspected at the offices of Eversheds LLP, One Wood Street, London EC2V 7WS, during usual business hours on any weekday (excluding Saturdays, Sundays and public holidays) up to and including the date of the General Meeting:

13.1 the Articles;
13.2 the audited consolidated financial statements of the Group for the 2010/11 Financial Year, the 2011/12 Financial Year and the 2012/13 Financial Year;
13.3 the report prepared by Deloitte and included in Part 4 of this document;
13.4 the valuation report prepared by Nyras and included in Part 5 of this document;
13.5 the Directors' service agreements and letters of appointment described in paragraph 5 of this Part 6 of the document;
13.6 the Exchange Agreement;
13.7 the written consents referred to in paragraph 11 of this Part 6 of the document; and
13.8 this document.

Dated: 17 July 2013

PART 7 DEFINITIONS

In this document, the following words and expressions have the following meanings, unless the context otherwise requires:

"2010/11 Financial Year"	1 April 2010 to 31 March 2011
"2011/12 Financial Year"	1 April 2011 to 31 March 2012
"2012/13 Financial Year"	1 April 2012 to 31 March 2013
"2013/14 Financial Year"	1 April 2013 to 31 March 2014
"2014/15 Financial Year"	1 April 2014 to 31 March 2015
"ACL"	Airport Co-ordination Limited (in its capacity as airport co-ordinator for Gatwick)
"Adjusted EBITDAR Before Restructuring"	operating profit or loss before joint venture results after adding back restructuring and surplus capacity costs of £12.8 million, depreciation, amortisation and aircraft rental charges
"Adjusted Loss Before Restructuring Costs"	loss before tax and restructuring costs of £8.0 million
"Air France"	Societe Air France (a French joint stock company (Societe Anonyme) registered in France, with registered number 420495178 RCS Bobigny)
"Air Operator's Certificate"	An air operator's certificate issued by the CAA

"Air Passenger Duty" or "APD"	an excise duty which is charged by the UK government on the carriage of passengers flying from a United Kingdom airport
"Articles"	the articles of association of the Company
"BA Connect"	the legacy "BA Connect" business acquired by Flybe from British Airways in March 2007
"BALPA"	the British Airline Pilots Association, the union with its head office at 5 Heathrow Boulevard, 278 Bath Road, West Drayton, UB7 0DQ
"Board" or "Directors"	the board of directors of the Company from time to time, comprising, as at the date of this document, those persons whose names are set out in paragraph 3 of Part 5 of this document
"Bombardier"	Bombardier Inc. (a public quoted company registered in Canada, with CUSIP number 097751)
"British Airways" or "BA"	British Airways plc (a public limited company registered in England and Wales with registered number 01777777)

"Cash Proceeds"	the total cash proceeds of the Exchange (including deferred consideration payments) net of costs incurred by the Company in connection with the Exchange
"CAA" or "Civil Aviation Authority"	the UK Civil Aviation Authority
"Chief Officers"	the Group's Chief Executive Officer, Chief Financial Officer, Chief Commercial Officer and Chief Operating Officer (as identified in Part 6 "Additional Information" of this document)
"Codeshare"	an arrangement whereby multiple airlines sell seats on the same flights and multiple flight designators and flight numbers are used for the same flight
"Company"	Flybe Group plc
"Completion"	the completion of the Exchange in accordance with the terms of the Exchange Agreement
"Completion Date"	the date that Completion takes place in accordance with the terms of the Exchange Agreement
"CREST"	the relevant system (as defined in the Uncertified Securities Regulations 2001 (S.I. 2001 No. 3755)) operated by Euroclear
"Dealing Day"	a day on which the London Stock Exchange is open for the transaction of business
"Deloitte"	Deloitte LLP (a limited liability partnership registered in England and Wales with registered number OC303675)
"E145"	the series 145 aircraft manufactured by Embraer
"E175"	the series 175 aircraft manufactured by Embraer
"E195"	the series 195 aircraft manufactured by Embraer
"easyJet"	easyJet plc (a public limited company registered in England and Wales with registered number 03959649)
"EBITDAR"	the profit (or loss) before tax charge (or credit), interest (investment income, finance costs and other gains and losses), depreciation, amortisation and aircraft rental charges
"EBT"	the Flybe Employee Benefit Trust
"Embraer"	Empresa Brasileira de Aeronautica SA (a public limited company registered in Brazil, with ISIN number BREMBRACNOR 4)
"Espirito Santo Investment Bank"	Execution Noble & Company Limited (which conducts its UK investment banking business as Espírito Santo Investment Bank)
"Euroclear"	Euroclear UK & Ireland Limited (a private limited company registered in England and Wales with registered number 02878738)

"EU Slot Regulation"	EC Regulation 95/93 on common rules for the allocation of Slots at Community airports, as amended and supplemented from time to time
"Exchange"	the exchange of the Gatwick Slots in accordance with the terms of the Exchange Agreement
"Exchange Agreement"	the conditional agreement dated 22 May 2013 between the Transferor and the Transferee for the Exchange of the Gatwick Slots, described in more detail in Part 3 of this document
"Executive Directors"	Jim French CBE, Andrew Knuckey, Mike Rutter, Andrew Strong and Mark Chown, each an Executive Director
"Financial Conduct Authority" or "FCA"	the Financial Conduct Authority of the United Kingdom
"Flybe"	Flybe Group plc (a public limited company registered in England and Wales, with registered number 01373432)
"Flybe Group Limited Trust"	the Flybe Group Limited Employees' Share Ownership Trust
"Flybe Group Limited No.2 Trust"	the Flybe Group Limited Employees' Share Ownership (No.2) Trust
"Flybe Limited"	Flybe Limited (a private limited company registered in England and Wales, with registered number 02769768)
"Flybe (IOM) Limited"	BA Connect (IOM) Limited (a private limited company registered in the Isle of Man, with registered number 1042C)
"FSMA"	the Financial Services and Markets Act 2000

"Gatwick"	London Gatwick Airport
"Gatwick Slots"	the Summer Slots and the Winter Slots
"General Meeting"	the general meeting of the Company to be held for the purpose of approving, if thought fit, the Exchange
"Group"	the Company, its subsidiaries at the relevant time and, where the context shall require or permit, the Company; and "member of the Group" shall be construed accordingly
"Historical Precedence"	also known as 'grandfather rights' that is, the entitlement of an airline which has been allocated a Slot for a Summer Season and/or a Winter Season to be allocated the same Slot in the next equivalent Summer or Winter Season pursuant to the EU Slot Regulation
"IAG"	International Airlines Group, the Spanish registered holding company of BA and Iberia
"IATA"	International Air Transport Association

"ISIN"	International Securities Identification Number
"LIBOR"	London Interbank Offered Rate, being the rate at which an individual bank which contributes to the LIBOR calculation process could borrow funds, were it to do so by asking for and then accepting inter-bank offers in reasonable market size, just prior to 11.00 London time
"Listing Rules"	the listing rules of the FCA (as amended) made under section 73A of the FSMA
"Loganair"	Loganair Limited (a private company limited by shares registered in Scotland, with registered number SC170072)
"London Stock Exchange"	London Stock Exchange Group plc (a public limited company registered in England with registered number 5369106)
"Non-Executive Directors"	Charlie Scott, Alan Smith, David Longbottom and Peter Smith, each a Non-Executive Director
"Nyras"	Nyras Capital LLP, registered number OC304109
"Official List"	the official list maintained by the FCA under section 74(1) of FSMA for the purposes of Part VI of FSMA
"Ordinary Shares"	ordinary shares of 1 pence each in the capital of the Company
"PDP"	a pre delivery payment

"Pratt & Whitney"	the aircraft engine manufacturing division of United Technologies Corporation, a company registered in the United States of America
"Prospect"	an independent union for professionals, with over 122,000 members
"Prospectus Rules"	the prospectus rules of the FCA (as amended) made under section 73A of the FSMA
"PSP"	the Flybe Group plc Performance Share Plan 2010
"Registrar"	Capita Registrars Limited (a private limited company registered in England with registered number 2605568)
"Regulatory Information Service"	any of the services set out in schedule 12 of the Listing Rules
"Relationship Agreement"	the agreement dated 9 December 2010 between Rosedale and the Company under which Rosedale gives certain undertakings in relation to the independence of the Company
"Resolution"	the ordinary resolution as set out in the notice of General Meeting accompanying this document

	Slots), being the continuing businesses of the Group following the Exchange
"Rosedale"	Rosedale Aviation Holdings Limited (a private limited company registered in Jersey with registered number 45392)
"SAYE Scheme"	the Flybe Group plc Savings Related Share Scheme 2010
"Sector"	a flight between an originating airport and a destination airport, typically with no intervening stops
"Senior Management"	Simon Charles (Head of Human Resources), Mark Elkins (Head of Information Technology) and Chris Simpson (Company Secretary), each a "Senior Manager"
"Shareholders"	the holders of Ordinary Shares from time to time
"Shares"	shares in the capital of the Company
"SIP Scheme"	the Flybe Group plc Share Incentive Plan 2010
"SIP Trust"	the trust established for the purposes of the SIP Scheme
"Slot"	the permission given by ACL to use the full range of airport infrastructure necessary to operate an air service on a specific date and at a specific time for the purpose of landing or take-off
"Slot Conference"	a voluntary assembly of both IATA and non-IATA airlines worldwide to provide a forum for the allocation of slots at fully coordinated airports
"Summer Season"	the IATA summer season for the northern hemisphere as specified in the IATA Worldwide Slot Guidelines, commencing on the last Sunday in March and ending on the Saturday before the last Sunday in October
"Summer Slots"	the series of Slots operated by Flybe at Gatwick for the Summer Season forming part of the Gatwick Slots, as detailed in the Exchange Agreement
"The Plimsoll Line"	The Plimsoll Line Limited (a private limited company registered in England and Wales, with registered number 1967358 (being a subsidiary of BA))
"Transferee"	easyJet Airline Company Limited (a private limited company registered in England and Wales with registered number 03034606)
"Transferor"	Flybe Limited
"UK Listing Authority" or "UKLA"	the FSA, acting in its capacity as the competent authority for the purposes of Part VI of FSMA
"uncertificated" or "in uncertificated form"	in relation to Ordinary Shares, recorded on the relevant register as being held in uncertificated form in CREST and title to which may be transferred by means of CREST

"Uncertified Securities Regulations"	the Uncertified Securities Regulations 2001, SI 2001 no. 3755
"UNITE"	Unite, the union with its head office at 35 King Street, Covent Garden, London WC2E 8JG
"United Kingdom" or "UK"	the United Kingdom of Great Britain and Northern Ireland
"United States" or "USA" or "US"	the United States of America, its territories and possessions, any states of the United States and the District of Columbia
"Winter Season"	the IATA winter season for the northern hemisphere as specified in the IATA Worldwide Slot Guidelines, commencing on the last Sunday in October and ending on the Saturday before the last Sunday in March
"Winter Slots"	the series of Slots operated by Flybe at Gatwick for the Winter Season as detailed in the Exchange Agreement, or Slots which are substantially similar to those Slots, forming part of the Gatwick Slots

Flybe Group plc

(Registered in England No. 01373432)

NOTICE OF GENERAL MEETING

NOTICE IS HEREBY GIVEN that a general meeting of the Company will be held at the Flybe Training Academy, Exeter International Airport, Exeter EX5 2LJ at 11.00 a.m. on 2 August 2013 for the purpose of considering and, if thought fit, passing the following resolution, which will be proposed as an ordinary resolution:

THAT, the proposed exchange by the Company of its current arrival and departure slots at London Gatwick Airport (the "Exchange") pursuant to and on the terms and subject to the conditions contained in an agreement dated 22 May 2013 made between easyJet Airline Company Limited, as transferee and Flybe Limited, a wholly owned subsidiary of the Company as transferor as more particularly described in the circular to shareholders of the Company dated 17 July 2013 be and it is hereby approved with such revisions and amendments (including as to price) of a non-material nature as may be approved by the directors of the Company ("Directors") or any duly authorised committee thereof, and that all acts, agreements, arrangements and indemnities which the Directors or any such committee consider necessary or desirable for the purpose of or in connection with the Exchange be and they are hereby approved.

Dated: 17 July 2013

Registered Office: By order of the Board Jack Walker House Exeter International Airport Chris Simpson Exeter EX5 2HL Secretary

Notes:

1. Any member entitled to attend and vote at the above meeting is entitled to appoint one or more proxies (who need not be a member of the Company) to attend and to vote instead of the member. Completion and return of a Form of Proxy will not preclude a member from attending and voting at the meeting in person, should he subsequently decide to do so.
1. The right to appoint a proxy does not apply to persons whose shares are held on their behalf by another person and who have been nominated to receive communications from the company in accordance with section 146 of the Companies Act 2006 ("nominated persons"). Nominated persons may have a right under an agreement with the registered shareholder who holds the shares on their behalf to be appointed (or to have someone else appointed) as a proxy. Alternatively, if nominated persons do not have such a right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the person holding the shares as to the exercise of voting rights.
1. In order to be valid, any Form of Proxy and a power of attorney or other authority under which it is signed, or a notarially certified or office copy of such power or authority, in order to be valid, must reach, by post, the Company's Registrars, Capita Registrars, PXS, Beckenham Road, Beckenham, Kent, BR3 4TU or electronically at www.flybe-shares.com not less than 48 hours (excluding any part of a day which is a nonworking day) before the time of the meeting or of any adjournment of the meeting.
1. Any member attending the general meeting is entitled, pursuant to section 319A of the Companies Act 2006 to ask any question relating to the business being dealt with at the meeting. The Company will answer any such questions unless (i) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; or (ii) the answer has already been given on a website in the form of an answer to a question; or (iii) it is undesirable in the interests of the company or the good order of the meeting that the question be answered.
1. From the date of this notice and for the following two years the following information will be available on the Company's website and can be accessed at www.flybe.com/corporate/investors:
(i) the matters set out in this notice of meeting;
(ii) the total numbers of shares in the Company and shares of each class, in respect of which members are entitled to exercise voting rights at the meeting; and
(iii) the totals of the voting rights that members are entitled to exercise at the meeting in respect of the shares of each class.

Any members' statements, members' resolutions and members' matters of business received by the Company after the date of this notice will be added to the information already available on the website as soon as reasonably practicable and will also be made available for the following two years.

1. A form to be used for appointing a proxy or proxies for this meeting to vote on your behalf accompanies this notice.
1. In order to attend and vote at this meeting you must comply with the procedures set out in notes 8, 9 and 10 by the dates specified in those notes.
1. Votes can be cast electronically for this meeting. In order to cast your vote you must visit www.flybeshares.com and follow the instructions. To use this service you will need to log in to your share portal account or register for the share portal if you have not already done so. To register for the share portal you will need your Investor Code (IVC) which can be found on your share certificate. The use by members of the electronic proxy appointment service will be governed by the terms and conditions of use which appear on the website. Electronic proxies must be completed and a lodged in accordance with the instructions on the website by no later than 48 hours before the time appointed for the meeting (or, in the case of an adjournment, not later than 48 hours before the time fixed for the holding of the adjourned meeting.
1. To appoint a proxy or to give or amend an instruction to a previously appointed proxy via the CREST system, the CREST message must be received by the issuer's agent RA10 by 11.00 a.m. on 31 July 2013. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer's agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST Personal Members or other CREST sponsored members, and those CREST Members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST Manual. We may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001. In any case your proxy form must be received by the company's registrars no later than 11.00 a.m. on 31 July 2013.
1. The right of members to vote at the meeting is determined by reference to the register of members. As permitted by section 360B(3) of the Companies Act 2006 and Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders (including those who hold shares in uncertificated form) must be entered on the Company's share register at 6.00 p.m. on 31 July 2013 in order to be entitled to attend and vote at the meeting. Such shareholders may only cast votes in respect of shares held at such time. Changes to entries on the relevant register after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting.
1. The total number of ordinary shares of £0.01 in issue as at 15 July 2013, the latest practicable date before printing this document was 75,152,881 ordinary shares and the total level of voting rights was 75,152,881, none of which were attached to shares held in treasury by the Company.

AI assistant

YU GROUP PLC — AGM Information 2013

8034_rns_2013-07-17_b1d05dbf-d3ff-4787-bf72-62f9c7369f16.pdf

FLYBE GROUP PLC

Proposed Exchange of Arrival and Departure Slots at London Gatwick Airport

Circular to Shareholders

Notice of General Meeting

Completing and posting of the Form of Proxy or completing and transmitting a CREST Proxy Instruction will not prevent you from attending and voting in person at the General Meeting if you wish to do so.

CORPORATE DETAILS AND ADVISERS

CONTENTS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Notes:

PART 1

LETTER FROM THE CHAIRMAN OF FLYBE GROUP PLC

Directors and Officers:

Executive

Non-executive

Proposed Exchange of Arrival and Departure Slots at London Gatwick Airport

Notice of General Meeting

1. Introduction

2. Information on the Group

Shareholders should read the whole of this document and not rely solely on the summarised financial information contained in this section.

Flybe UK

Flybe Outsourcing Solutions

Turnaround Plan

i. Stop the losses by reducing costs

iv. Restructure and rebalance the Group's network into a defensible core

3. Information on the Gatwick Slots

4. Background to and reasons for the Exchange

5. Financial effects of the Exchange and use of proceeds

6. Current trading and prospects

7. Risk factors

8. General Meeting

9. Action to be taken

10. Additional Information

11. Importance of the vote

12. Appointment of new CEO

13. Recommendation

PART 2

RISK FACTORS

Risks relating to the Exchange

Financial impact on the Group

The Retained Business may not realise the perceived benefits of the Exchange

Obligations under the Exchange Agreement

The Retained Business may experience changes to its business prior to Completion

Increased staff turnover

Loss of underlying assets

Risks relating to the Retained Business

The Exchange may damage the Group's reputation or brand

The Group's revenues may fall as a result of the Exchange

The Group's industrial relations may suffer as a result of the Exchange

FORWARD-LOOKING STATEMENTS

PART 3

SUMMARY OF THE EXCHANGE AGREEMENT

1. PARTIES AND STRUCTURE

2. CONSIDERATION

3. CONDITIONS

4. REPRESENTATIONS, WARRANTIES AND INDEMNITIES

5. TERMINATION

6. GOVERNING LAW

PART 4

PRO FORMA FINANCIAL INFORMATION

Flybe Group plc (the "Company")

Responsibilities

Basis of Opinion

Opinion

PART 5

VALUATION REPORT

PRIVATE AND CONFIDENTIAL

Valuation of Flybe's Arrival and Departure Slots at London Gatwick Airport

1. INTRODUCTION

2. DESCRIPTION OF THE SLOT PORTFOLIO

3. THE VALUER

4. PURPOSE OF THE VALUATION

5. DISCLOSURES

5.1. Signatory

5.2. Nyras' relationship with Flybe

5.3. Independence from the Group

6. MARKET VALUE

7. THE SLOT MARKET

YU GROUP PLC AGM Information 2013