NOT FOR DISTRIBUTION IN THE UNITED STATES

Alitalia – Società Aerea Italiana S.p.A. (incorporated with limited liability under the laws of the Republic of Italy) €375,000,000 5.250 per cent. Notes due 30 July 2020 The issue price of the €375,000,000 5.250 per cent. Notes due 30 July 2020 (the “Notes”) of Alitalia – Società Aerea Italiana S.p.A. (the “Issuer” or “Alitalia”) is 100 per cent. of their principal amount. Unless previously redeemed or cancelled, the Notes will be redeemed at their principal amount on 30 July 2020. The Notes are subject to redemption, in whole but not in part, at their principal amount, plus interest, if any, to the date fixed for redemption in the event of certain changes affecting taxation in the Republic of Italy and at the option of the Issuer at any time at an amount calculated on a “make-whole” basis. In addition, the holder of a Note may, by the exercise of the relevant option, require the Issuer to redeem or, at the Issuer’s option, purchase such Note at 100 per cent. of its principal amount together with accrued and unpaid interest (if any) to (but excluding) the Put Date upon the occurrence of a Change of Control (each as defined below). See “Terms and Conditions of the Notes — Redemption and Purchase”. The Notes will bear interest from (and including) 30 July 2015 (the “Issue Date”) at the rate of 5.250 per cent. per annum. Interest on the Notes will be payable annually in arrear on 30 July in each year. Payments on the Notes will be made in Euro without deduction for or on account of taxes imposed or levied by the Republic of Italy to the extent described under “Terms and Conditions of the Notes – Taxation”. The Notes will constitute senior, unsecured obligations of the Issuer which will at all times rank pari passu among themselves and at least pari passu with all other present and future unsecured obligations of the Issuer, save for certain mandatory exceptions of applicable law. The prospectus (the “Prospectus”) has been approved by the Central Bank of Ireland (the “Central Bank”), as competent authority under Directive 2003/71/EC, as amended (including by Directive 2010/73/EU, to the extent that such amendments have been implemented in a relevant member state of the European Economic Area) (the “Prospectus Directive”). The Central Bank only approves this Prospectus as meeting the requirements imposed under Irish and EU law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange plc (the “Irish Stock Exchange”) for the Notes to be admitted to the official list of the Irish Stock Exchange (the “Official List”) and trading on its regulated market (“Main Securities Market”). The Main Securities Market is a regulated market for the purposes of Directive 2004/39/EC. Such approval relates only to the Notes which are to be admitted to trading on the Main Securities Market or other regulated markets for the purposes of Directive 2004/39/EC or which are to be offered to the public in any member state of the European Economic Area. This Prospectus is available for viewing on the website of the Irish Stock Exchange. This Prospectus is a prospectus for the purposes of Article 5.3 of the Prospectus Directive. The Notes have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the “Securities Act”) and are subject to United States tax law requirements. The Notes are being offered outside the United States by the Sole Underwriter (as defined below) in accordance with Regulation S under the Securities Act (“Regulation S”), and may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. For a description of certain restrictions on transfers of the Notes, see “Subscription and Sale”. Investing in the Notes involves risks. See “Risk Factors” beginning on page 1 of this Prospectus for a discussion of certain risks prospective investors should consider in connection with any investment in the Notes. The Notes will be in bearer form in the denomination of €100,000 each and, for so long as the Notes are represented by a Global Note (as defined below) and Euroclear Bank SA/NV (“Euroclear”) and Clearstream Banking, société anonyme (“Clearstream, Luxembourg”) (or other relevant clearing system) allow, in denominations of €1,000 in excess of €100,000, up to and including €199,000. The Notes will initially be in the form of a temporary global note (the “Temporary Global Note”), without interest coupons, which will be deposited on or around the Issue Date with a common safekeeper for Euroclear and Clearstream, Luxembourg. The Temporary Global Note will be exchangeable, in whole or in part, for interests in a permanent global note (the “Permanent Global Note”, and together with the Temporary Global Note, each a “Global Note”), without interest coupons, not earlier than 40 days after the Issue Date upon certification as to non-U.S. beneficial ownership. Interest payments in respect of the Notes cannot be collected without such certification of non U.S. beneficial ownership. The Permanent Global Note will be exchangeable in certain limited circumstances in whole, but not in part, for Notes in definitive form in principal amounts equal to €100,000 and integral multiples of €1,000 in excess thereof, up to and including €199,000, each with interest coupons attached. No Notes in definitive form will be issued with a denomination above €199,000. See “Overview of Provisions Relating to the Notes in Global Form”. SOLE UNDERWRITER Morgan Stanley Prospectus dated 28 July 2015

EMEA 100217621 v16

IMPORTANT NOTICES This document comprises a prospectus for the purposes of Article 5.4 of the Prospectus Directive and for the purpose of giving information with regard to the Issuer, the Issuer and its subsidiaries and affiliates taken as a whole (the “Group” or the “Alitalia Group”) and the Notes which according to the particular nature of the Issuer and the Notes, is necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and losses and prospects of the Issuer. The Issuer accepts responsibility for the information contained in this Prospectus. To the best of the knowledge of the Issuer (which has taken all reasonable care to ensure that such is the case), the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the import of such information. The Issuer has confirmed to Morgan Stanley & Co. International plc (the “Sole Underwriter”) that this Prospectus contains or incorporates all information regarding the Issuer, the Group and the Notes which is (in the context of the issue and offering of the Notes) material; such information is true and accurate in all material respects and is not misleading in any material respect; any opinions, predictions or intentions expressed in this Prospectus on the part of the Issuer or the Group are honestly held or made and are not misleading in any material respect; this Prospectus does not omit to state any material fact necessary to make such information, opinions, predictions or intentions (in such context) not misleading in any material respect; and all proper enquiries have been made to ascertain and to verify the foregoing. No representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by the Sole Underwriter, BNP Paribas Trust Corporation UK Limited as trustee (the “Trustee”) or BNP Paribas Securities Services, Luxembourg Branch as principal paying agent (the “Principal Paying Agent”) as to the accuracy or completeness of the information contained in this Prospectus or any other information provided by the Issuer in connection with the Notes or their distribution. This Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see “Financial Information Relating to CAI and the Issuer — Issuer’s and CAI’s information incorporated by reference”). This Prospectus should be read and construed on the basis that such documents are incorporated in and form part of this Prospectus. Investors should rely only on the information contained in this Prospectus. The Issuer has not authorised anyone to provide investors with different information. None of the Sole Underwriter or the Issuer is making any offer of the Notes in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this Prospectus is accurate as of any date other than the date on the cover of this Prospectus regardless of the time of delivery of this Prospectus or of any sale of the Notes. The Issuer has not authorised the making or provision of any representation or information regarding the Issuer or the Notes other than as contained in this Prospectus or as approved for such purpose by the Issuer. Any such representation or information should not be relied upon as having been authorised by the Issuer or the Sole Underwriter. Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any circumstances create any implication that the information contained herein concerning the Issuer and/or its Group is correct at any time subsequent to the date hereof or that any other information supplied in connection with the offering of the Notes is correct as of any time subsequent to the date indicated in the document containing the same or that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer and/or its Group since the date of this Prospectus. Neither this Prospectus nor any other information supplied in connection with the offering, sale or delivery of any Note (a) is intended to provide the basis of any credit or other evaluation or (b) should be considered as a recommendation by the Issuer or the Sole Underwriter that any recipient of this Prospectus should purchase any Note. Each investor contemplating purchasing any Note should make its own independent investigation of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and the Group. Neither this Prospectus nor any other information supplied in connection with the issue of the Notes constitutes an offer or invitation by or on behalf of the Issuer or the Sole Underwriter to any person to subscribe for or to purchase any Notes. EMEA 100217621 v16

This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Notes. Each recipient of this Prospectus shall be taken to have made its own investigation and appraisal of the condition (financial or otherwise) of the Issuer and the Group and of the rights attaching to the Notes. The distribution of this Prospectus and the offering, sale and delivery of Notes in certain jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are required by the Issuer and the Sole Underwriter to inform themselves about and to observe any such restrictions. For a description of certain restrictions on offers, sales and deliveries of Notes and on distribution of this Prospectus and other offering material relating to the Notes, see “Subscription and Sale”. In particular, the Notes have not been, and will not be, registered under the Securities Act and are subject to United States tax law requirements. Subject to certain exceptions, Notes may not be offered, sold or delivered within the United States or to U.S. persons. In this Prospectus, unless otherwise specified, references to a “Member State” are references to a Member State of the European Economic Area and references to “€”, “EUR” or “Euro” are to the currency introduced at the start of the third stage of European economic and monetary union, and as defined in Article 2 of Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the euro, as amended. References to “billions” are to thousands of millions. This Prospectus is drawn up in the English language. In case there is any discrepancy between the English text and the Italian text, the English text stands approved for the purposes of approval under the Prospectus Directive. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. In compliance with the requirements of the Irish Stock Exchange, this Prospectus is available on the website of the Irish Stock Exchange (www.ise.ie). Forward-looking statements This Prospectus may contain forward-looking statements, including (without limitation) statements identified by the use of terminology such as “anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” or similar words. These statements are based on the Issuer’s current expectations and projections about future events and involve substantial uncertainties. All statements, other than statements of historical facts, contained herein regarding the Issuer’s strategy, goals, plans, future financial position, projected revenues and costs or prospects are forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties, some of which cannot be predicted or quantified. Future events or actual results could differ materially from those set forth in, contemplated by or underlying forward-looking statements. The Issuer does not undertake any obligation to publicly update or revise any forward-looking statements. Stabilisation In connection with the issue of the Notes, Morgan Stanley & Co. International plc. (the “Stabilising Manager”) (or any person acting for the Stabilising Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there can be no assurance that the Stabilising Manager (or any person acting on its behalf) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if begun, may be discontinued at any time, but must end no later than the earlier of thirty (30) days after the issue date of the Notes or sixty (60) days after the date of allotment of the Notes. Such stabilising shall be in compliance with all applicable laws, regulations and rules.

EMEA 100217621 v16

Market share information and statistics This Prospectus contains statements regarding the Issuer’s industry and its relative competitive position in the industry that are not based on published statistical data or information obtained from independent third parties, but are based on the Issuer’s experience and its own investigation of market conditions, including its own elaborations of such published statistical or third-party data. Although the Issuer’s estimates are based on information obtained from its customers, sales force, trade and business organisations, market survey agencies and consultants, government authorities and associations in its industry which it believes to be reliable, there is no assurance that any of these assumptions are accurate or correctly reflect the Issuer’s position in the industry. None of the Issuer’s internal surveys or information have been verified by independent sources.

EMEA 100217621 v16

TABLE OF CONTENTS Page RISK FACTORS ................................................................................................................................................. 1 FINANCIAL INFORMATION RELATING TO CAI AND THE ISSUER .................................................... 17 TERMS AND CONDITIONS OF THE NOTES .............................................................................................. 19 OVERVIEW OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ................................... 35 USE OF PROCEEDS ........................................................................................................................................ 37 DESCRIPTION OF THE ISSUER.................................................................................................................... 38 SHAREHOLDERS............................................................................................................................................ 49 REGULATORY ENVIRONMENT .................................................................................................................. 50 MANAGEMENT .............................................................................................................................................. 54 TAXATION ...................................................................................................................................................... 60 SUBSCRIPTION AND SALE .......................................................................................................................... 67 GENERAL INFORMATION............................................................................................................................ 69 INDEX TO THE ISSUER’S UNAUDITED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2014 ............................................................................................................. 71

EMEA 100217621 v16

(i)

RISK FACTORS Before deciding to purchase the Notes, investors should carefully review and consider the following risk factors and the other information contained in this Prospectus or any supplement to this Prospectus. The Issuer believes that the following factors may affect its ability to fulfil its obligations under the Notes. Should one or more of the risks described below materialise, this may have a material adverse effect on the business, financial condition and results of operations of the Issuer and/or the Group. In particular, it could significantly and adversely affect the Issuer’s ability to pay interest or repay the principal on the Notes. As a result, the market value of the Notes may deteriorate and the holders of the Notes (the “Noteholders”) could lose part or all of their investments. All of these factors are contingencies which may or may not occur, and the Issuer is not in a position to express a view on the likelihood of any such contingency occurring. In addition, factors which are material for the purpose of assessing the market risks associated with the Notes are described below. The order in which the risks are presented does not reflect the likelihood of their occurrence of the magnitude or significance of the individual risk. In addition, investors should be aware that the risks described might combine and thus intensify one another. The Issuer believes that the factors described below represent the principal risks inherent in investing in the Notes, but the inability of the Issuer to pay interest, principal or other amounts on or in connection with the Notes may occur for other reasons which may not be considered significant risks by the Issuer based on information currently available to the Issuer or which it may not currently be able to anticipate. Prospective investors should also read the detailed information set out elsewhere in this Prospectus and reach their own views prior to making any investment decision. An investment in the Notes is only suitable for investors who are in a position to fully assess the risks relating to such an investment and who have sufficient financial means to absorb any potential loss stemming therefrom. RISKS RELATING TO THE AIRLINE INDUSTRY General economic conditions could have an adverse impact on the Group’s business. The Group’s revenue is highly sensitive to economic conditions in the markets in which the Group operates. The Group derives approximately 30% of revenues on routes within Italy and minor revenues on routes to Spain and Greece, each of which have experienced some form of economic hardship in the recent past. Demand for air travel and ground services depends on economic conditions, employment levels, consumer and business confidence and the availability of consumer and business credit. The airline industry in general tends to experience significant adverse financial results during economic downturns as leisure travellers often choose to reduce their transportation or reduce the price they pay for such transportation. Businesses also usually reduce the volume of their business travel, either due to cost-saving measures or as a result of decreased business activity requiring travel. In addition, premium services could become less desirable during a significant downturn, which could disproportionately affect the Group’s revenues. Further, an economic downturn tends to result in a decrease in air cargo revenue, as international trade decreases and businesses look to run down their inventories and send freight by more economical routes. The impact of an economic downturn might also induce governments to unilaterally grant subsidies or other public aid to the Group’s competitors, which could distort the markets and harm the Group’s competitive position. Any materialisation of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The airline industry is highly competitive and the Group faces competition from other airlines as well as from alternative means of transportation. The Group operates in a highly competitive market, in which it competes with other airlines and relies on positive brand recognition, amongst other factors, to attract and retain customers. Competition is affected by factors including fares, routes and frequency of flights, the geographical location of hub airports used by other airlines, reputation, safety record, reliability and/or punctuality, range and quality of passenger services EMEA 100217621 v16

1

provided and type and age of aircraft. The Group’s competitors include low-cost carriers, legacy airlines, other established commercial and charter airlines, ground handling service providers, travel conglomerates with integrated airlines and new airlines entering the market. Due to existing overcapacity in the airline industry, competition is expected to increase further. As a consequence, competition across full-service carriers will intensify and the latter will also come under increased pressure from low cost carriers, which in turn will struggle differentiating solely on the basis of low fares (due to higher costs) and will therefore seek to improve their offering and/or enter certain markets traditionally catered for by full service carriers only (for example, business travel). The Group’s competitors may seek to protect or gain market share through fare-matching or price-discounting or by offering more attractive flight schedules or services. Certain competitors may also be able to offer lower fares, for example by providing passengers with fewer services or using financial resources which are unavailable to the Group. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Severe weather conditions could have an adverse effect on the Group’s business. Severe weather conditions may result in substantial additional costs or loss of revenue for the Group. Inclement weather can lead to flight delays and cancellations, aircraft de-icing, additional heating for cabins and increased fuel consumption due to cold weather. Any materialisation of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Natural or man-made disasters, epidemics and pandemics could have an adverse effect on airline operations and demand for air travel. Any activity from volcanoes, or other natural or man-made disasters, in particular if such disasters occur in the airspace or regions in which the Group operates or at or in proximity to any of the Group’s major flight destinations, could result in substantial reductions in, and/or cancellations of, bookings and flights not only to the affected region but also more generally, thereby reducing overall demand for the Group’s services. Insurance coverage for such risks may not be available on commercially acceptable terms or at all. The outbreak of epidemics and pandemics such as “severe acute respiratory syndrome”, “Middle East respiratory syndrome”, avian flu, swine flu, Ebola or other diseases could also weaken the demand for air travel and materially adversely affect airline operations. Any of the above risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Terrorist attacks, military, civil and political conflicts could have an adverse effect on airline operations. The terrorist attacks of 11 September 2001 and other attempted terrorist attacks since that date involving commercial aircraft severely and adversely impacted the prospects of the airline industry, resulting in reduced demand for air travel and higher security costs for airlines. In addition, in the immediate aftermath of the terrorist attacks of 11 September 2001, insurers either stopped providing coverage against certain risks relating to acts of war and other hostilities or substantially increased premiums for renewed coverage, while at the same time greatly reducing the amount of coverage provided. Furthermore, the political upheavals in North Africa, the Middle East and the ongoing Ukrainian conflict, where in July 2014 a commercial aircraft flying over Ukraine was shot down with significant loss of life, adversely affect flight bookings in and around those regions. The occurrence of further terrorist attacks, acts of sabotage, new military, civil and political conflicts or the expansion of existing conflicts or similar events, especially if they are directed against air traffic or occur in markets that are significant to the Group, or if they affect a relatively high proportion of the overall volume of air traffic generally or crude oil prices (and therefore prices for aviation fuel), could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group is exposed to the risk of losses from aircraft crashes or similar incidents. An aircraft accident or incident could result in significant loss for the Group and give rise to costs related to the repair or replacement of a damaged aircraft and its temporary or permanent loss from service, and claims EMEA 100217621 v16

2

from injured passengers and dependents of deceased passengers. Even if the Group’s insurance coverage were adequate in the event such circumstances arise, any such event could cause a substantial increase in its insurance premiums. In addition, Regulation (EC) No. 2027/97, as amended by Regulation (EC) No. 889/2002, which governs airline carriers’ liability towards passengers, has increased the potential exposure of airlines to civil liability. Although the Group has extended its insurance coverage to meet the requirements of the above regulation, no assurance can be given that laws, regulations or policies will not be applied or amended in the future in a manner that could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Any materialisation of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Aircraft accidents could have an adverse impact on the Group’s reputation. Any aircraft accident or incident involving the Group could create a public perception that it is less safe or reliable than other airlines and cause passengers or cargo customers to lose confidence in the Group and switch to other airlines or other means of transportation. Passengers or cargo customers could also lose confidence in the Group if another airline were to suffer such loss or damage. This could have a material adverse effect on the Group’s business, financial condition and results of operations. The airline industry is characterised by high operational and regulatory costs. The airline industry is generally characterised by high fixed costs, low margins and highly volatile revenues. Each flight is subject to fixed operating costs, including costs for the use of airport infrastructure and services, take-off, landing and air traffic control fees as well as other air traffic charges, maintenance, financing, lease and fuel costs, depreciation expenses, insurance and labour costs. By contrast, the revenues generated by each flight are variable and are directly related to the number of passengers or cargo carried and, in the case of passengers, the fare structure of the flight. Accordingly, a change in the number of passengers, cargo or in average fares could have a negative effect on the Group’s business, financial condition and results of operations. In addition, changes to the regulatory framework in which the Group operates, particularly as regards tax, safety and environmental regulations, and to other costs inherent in the airline industry, including aviation fuel, aviation insurance and cost of access to capital or financing, could result in the Group’s activities being subject to significantly higher costs. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Any breach of applicable rules could materially affect the Group’s ability to continue to operate commercial passenger and cargo air transport services and in particular lead to operating licences and air traffic rights being suspended or revoked. The Group is authorised to operate by virtue of operating licences and air carrier certificates which are subject to the Group’s ongoing compliance with currently applicable and future statutes, rules and regulations imposed by governments and other authorities. National, EU and international regulations, as well as bilateral and multilateral treaties between Italy, EU member states and the EU on the one hand, and other states on the other, govern airline operations and impose requirements on airline carriers. In particular, these multilateral and bilateral agreements impose restrictions on the allocation of traffic rights which are necessary for passenger and cargo airlines operating international commercial airline services in order to land in, take off from and fly over states. If a competent authority that has issued an operating licence to the Group should come to the conclusion that the Group no longer satisfies the relevant requirements to hold such licence, including ownership and control requirements, it could take measures that could result in the loss of traffic rights and the suspension or revocation of the operating licence. Amendments of existing statutes, rules, regulations and treaties or any changes in their interpretation, the conclusion of new treaties or the breakdown of treaty negotiations, as well as the introduction of new regulatory requirements or the extension of existing requirements, could also result in significant operational costs for the Group and limit its flexibility and ability to respond to market conditions, competition or changes EMEA 100217621 v16

3

to its cost structure. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group’s access to airports could be limited by slot allocations and restrictions imposed by legislators or regulatory authorities. Air traffic is limited by the airport infrastructure and by the number of slots available for aircraft arrivals and departures at a particular airport. A slot represents the authorisation to take off and land at a particular time during a specified scheduling period. Within the EU, slots are assigned to airlines in accordance with Council Regulation (EEC) No 95/93 of 18 January 1993, as amended by Regulation (EC) No 545/2009 of the European Parliament and of the Council of 18 June 2009. Established airlines have priority rights (known as “grandfather rights”) to particular slots at certain airports. In addition, a number of major European airports and other major international airports are currently operating at close to their full capacity, meaning that there is limited capacity to operate at these airports. Should slot coordinators or other authorities in charge of allocating time slots at airports not offer sufficient slots to the Group at the times it needs them or on acceptable terms, the Group may be unable to expand its activities or obtain more favourable slots and may be forced to restrict the use of its aircraft. In addition, the rules governing the use of slots provide that the right of use may expire if the slots are unused either temporarily or in the long term. Therefore, should the Group fail to use the slots it has been allocated, whether for technical or commercial reasons, it could potentially lose the right to use these slots. Legislators or regulatory authorities may impose additional operating restrictions at airports, such as landing and take-off curfews, limits on aircraft noise and emission levels, mandatory flight paths, runway restrictions and limits on the number of average daily departures. Such restrictions may limit the ability of the Group to provide or increase services at such airports and may result in loss of revenue and/or additional costs. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Airport, transit, landing and air traffic control fees, security charges and the costs airlines must pay to ensure air traffic security may continue to increase. Airport, transit, landing and air traffic control fees, security charges and the costs airlines must pay to ensure air traffic security, as well as costs for ground handling services, such as maintenance, fuel and oil services, baggage and freight handling, passenger check-in and surface transport at the airport, represent a significant portion of the operating costs of the Group. Any fees imposed by an airport to third party ground handling operators may further increase such costs, which could affect the fares that the Group must charge to its passengers or cargo customers in order to operate cost-effectively. Future events or developments, such as terrorist acts or other conflicts, could also result in more stringent security regulations being imposed on air traffic, which could also result in an increase in the Group’s operating costs. If the Group is unable to pass on increases in fees, charges or other costs to its customers, such increases could have a material adverse effect on its business, financial condition and/or results of operations. The Group is dependent on third parties to provide certain services and facilities and is exposed to the risk of failure of third party service and facility providers. In order to operate its business, the Group is dependent on the provision of services by third parties, including air traffic controllers, airport authorities and operators, security personnel, towing and pushback vehicle drivers, passenger transporters, operators of booking systems and call centres, caterers, check-in staff and baggage-handling and fuel service providers, contractors that perform aircraft and engine maintenance and provide customer services and wet lessors (see also “— The Group is exposed to the risk of failure of wet lessors”). If any third party services or facilities on which the Group depends in order to operate its business are restricted, temporarily suspended (for example, as a result of technical problems, strikes or insolvency of the relevant service provider), terminated or become unavailable on commercially acceptable terms, this could have a material adverse effect on the Group’s business, financial condition and/or results of operations. Any termination or expiry of contracts entered into by the Group with third-party service or facility providers and any inability to negotiate and enter into replacement contracts with other third-party service or facility EMEA 100217621 v16

4

providers on similar commercial terms, or any inability to enter into such contracts in any new markets the Group accesses, could also have a material adverse effect on the Group’s business, financial condition and/or results of operations. In addition, the efficiency, timeliness and quality of the services provided pursuant to these contracts by third-party providers are beyond the Group’s direct control. In order to be able to provide catering services, the Group relies on suppliers of products, services and raw materials. If supplies fail to meet certain quality, quantity and other specifications, the Group could become subject to claims and other liabilities and its relationship with customers could suffer as a result. Furthermore, if a supplier for any reason is not able, or becomes unwilling, to supply the Group with the products or services it requires, the Group would need to find a new supplier, which may be time consuming and costly. There can be no assurance that the Group would be able to obtain alternative products and services from different suppliers of an acceptable quality or standard or on commercially acceptable terms, which could also affect its relationship with customers and reputation. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group’s revenues are subject to seasonal fluctuations. Demand for the Group’s passenger and cargo air transport and ground handling services fluctuates during the course of the year, and as a result the levels of the Group’s aircraft utilisation rate and profitability also fluctuate. Demand is normally higher in summer from May to October and during the Christmas holidays and lower in winter from November to April (excluding the Christmas holidays). The occurrence of any flight cancellations or other factors that could adversely affect aircraft utilisation, especially during peak seasons and periods, could have a materially adverse effect on the Group’s business, financial condition and/or results of operations. The Group is exposed to the risk of failure of wet lessors. The Group has entered, and may enter in the future, into wet lease agreements pursuant to which other airline carriers (“wet lessors”) grant wet leases (i.e. leases of aircraft with personnel) of aircraft to the Group. In turn, the Group grants to the same wet lessors dry leases (i.e. leases of aircraft without personnel) of aircraft leased to the Group under the wet leases. In the event of default by, or insolvency of, a wet lessor, the Group may be exposed to the risk of not receiving from the relevant wet lessor passenger transport services pursuant to the wet lease and, nevertheless, of having to comply with its obligations under the dry lease without however receiving any income from the dry lessor. Any materialisation of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. RISKS RELATING TO THE GROUP The Group’s success and ability to maintain sufficient liquidity depends on its ability to achieve its global business strategy. The Group’s future growth, profitability and cash flows depend on its ability to successfully implement its global business strategies (see “Description of the Issuer — Strategies”). There can be no assurance that the Issuer can successfully achieve any or all of its strategic initiatives in the manner or time period that it expects. Further, achieving these objectives will require investments which may result in short-term costs without generating any current net revenues and, therefore, may be dilutive to the Group’s earnings, at least in the short term. Moreover, if the Group’s strategic initiatives do not generate the expected benefits in a timely manner, the Group may face significant liquidity pressures in the medium term and throughout the implementation period of the strategic initiatives as a result of the associated investments required. The Group cannot give any assurance that it will realise, in full or in part, the anticipated strategic benefits it expects its strategies will achieve. The failure to realise those benefits could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group may incur additional indebtedness for the financing of new aircraft. The financing of new and existing aircraft has increased in the past, and may further increase, the total amount of the Group’s outstanding debt and the payments that it is obliged to make to service such debt. The ability of the Group to generate sufficient cash flow to service such debt in the long term will depend on its future EMEA 100217621 v16

5

financial performance, which will be affected by a range of economic, competitive and business factors, many of which are beyond its control. Any future orders of additional aircraft could further increase the Group’s indebtedness and impact the terms on which it is able to secure financing. The Group’s ability to borrow, enter into sale and leaseback arrangements on commercially acceptable terms, refinance existing debt or raise additional debt, obtain payment and credit card services (including debt collection services) and enter into fuel, currency, interest rate and other hedging agreements with suitable counterparties depends on a number of factors, including prevailing interest rates, capital markets conditions and the Group’s credit profile. There can be no assurance that the Group’s access to the debt markets will not become more difficult, expensive or even impossible in the future (including due to new or additional collateral requirements). This could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group’s debt facilities require it to comply with specified financial covenants that may restrict its current and future operations and limit its flexibility and ability to respond to changes or take certain actions. The Group’s business remains dependent on financing, and its debt agreements contain restrictive covenants. There can be no assurance that these covenants will not constrain the Group’s ability to raise additional financing in the future, which could delay or prevent the implementation of the Issuer’s plans and have a material adverse effect on its business, financial condition and/or results of operations. The Group faces risks in connection with its strategic alliances and joint ventures. The Group is a member of the SkyTeam alliance, a brand marketing and services alliance between 20 worldwide airlines, and a party to the transatlantic joint venture with Air France, KLM and Delta Airlines (the “Joint Venture”). No assurance can be given that the SkyTeam alliance or the Joint Venture entered into by the Group will not lose member airlines, whether as a result of one or more member airlines terminating their membership or joint ventures or having their membership suspended. Furthermore, no assurance can be given that the SkyTeam alliance or the Joint Venture will be able to attract the new members it may need to be successful in the future. In addition, the success of the SkyTeam alliance and the Joint Venture depends in part on the actions, brands and strategic plans of other airlines over which the Group has little control. If the SkyTeam alliance or the Joint Venture were to lose their appeal as a result of changes in its membership or the actions of a member or if the SkyTeam alliance or the Joint Venture were to dissolve, this could negatively affect, among other things, the network of flights that the Group is able to offer its customers in the absence of an alternative solution. Should a member or party leave the SkyTeam alliance or the Joint Venture or fail to meet its obligations thereunder, this could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group is exposed to the risk of flight delays and cancellations due to its high aircraft utilisation rates. The Group’s business model is characterised by high aircraft utilisation rates to maximise revenues. High aircraft utilisation rates are achieved by keeping the number of “block hours”, i.e. the hours from take-off to landing, including taxi time, as high as possible to enable operators to fly more hours on average each day. High block hours are achieved by reducing turnaround time at airports, including the amount of ground time for loading and unloading, cleaning, refuelling, crew changes and necessary maintenance. As a result of its high aircraft utilisation, the Group is exposed to, and may be adversely affected by, the risk of delays and flight cancellations caused by various factors, many of which may be beyond its control, including air traffic congestion, air traffic control problems, processing delays on the ground, adverse weather conditions, industrial action by air traffic controllers, delays or non-performance by third-party service providers and unscheduled maintenance, increased security measures or breaches of security, international or domestic conflicts, terrorist activity or other changes in business conditions. A delay or cancellation of one flight could result in delays or cancellations to subsequent flights. If the Group’s flights become subject to regular or severe delays or cancellations, its reputation may suffer as a consequence and its customers may choose to fly with other airlines in the future. The Group could also be required to refund and provide assistance to passengers for flight delays (see “— Passenger rights and compensation could cause significant costs for the Group”). EMEA 100217621 v16

6

Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group is dependent on good relations with its employees and unions. The Group is dependent on qualified personnel, including pilots (who from time to time are in short supply in the aviation industry), cabin crew and employees with qualifications in aircraft maintenance, information technology and sales. There can be no assurance that the Group will be able to retain employees in key positions or recruit a sufficient number of new employees with appropriate technical qualifications to compensate for the loss of employees or to accommodate its future growth, and, in certain cases, the Group may have to invest significant amounts of time in recruiting and training new pilots and other personnel. In addition, the Group’s workforce is partially unionised and covered by collective bargaining agreements that regulate work conditions and remuneration. These collective bargaining agreements are from time to time subject to renegotiation with the unions or unions may try to enter into new agreements which are more costly for the Group or its labour suppliers, resulting in higher direct or indirect labour cost. Furthermore, changes in law relating to salaries of airline employees and collective bargaining agreements may result in higher costs for the Group. As a result, the Group may have to increase salaries or face strikes by its employees or other industrial action. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group depends on the uninterrupted operation of its own and third-party automated systems and technology. The ability of the Group to generate bookings, manage ticket sales, receive and process reservations and payments, manage its traffic network, perform flight operations and engage in other critical business tasks is dependent on the efficient and uninterrupted operation of its computer and communication systems, including backup facilities for a breakdown of the Group’s operation control centres, as well as systems used by third parties conducting business with the Group. For instance, the Group uses tablet PCs in the cockpits of its aircraft to replace paper documents such as flight maps, manuals and other documents which operate on the basis of individualised software and related complex IT infrastructure for the exchange of data. In the event that this system fails, the operation of the Group’s fleet may be suspended. Computer and communication systems are vulnerable to disruptions, damage, power outages, acts of terrorism or sabotage, computer viruses, fires and other events and programming errors, and there can be no assurance that systems used by the Group or third parties, including revenue management systems, and by the Group’s sales partners, such as the Group’s booking system and reservation systems of travel agencies, will operate efficiently and without interruption. Any disruption to the computer and communication systems used by the Group or third parties conducting business with it, particularly if such disruption persists, could significantly impair the Group’s ability to operate efficiently and could have a material adverse effect on its business, financial condition and/or results of operations. The Group is exposed to risks associated with fluctuations in aviation fuel prices. In addition, the existing tax exemption for aviation fuel in the EU could be repealed or amended. The operating results of the Group’s passenger and cargo airline businesses are significantly impacted by changes in the price of aviation fuel, which is very volatile and fluctuates depending on the levels of supply and demand. If due to political developments, general economic conditions or other circumstances prices for aviation fuel increase, this could have a material adverse effect on the Group’s business, financial condition and/or results of operations. In addition, any fall in fuel prices could lead to increased pressure on prices and greater competition and may affect the Group’s ability to hedge adequately. Over the past few years there have been discussions both at the EU executive level and within EU Member States about whether the existing tax exemptions for aviation fuel should be reviewed. There can be no assurance that the current tax exemptions for aviation fuel will not be repealed or amended. The elimination or reduction of current tax exemptions for aviation fuel in the EU would lead to a substantial increase in the Group’s aviation fuel costs, which could have a material adverse effect on the Group’s business, financial condition and/or results of operations.

EMEA 100217621 v16

7

The Group is exposed to risks associated with fluctuations in interest rates and currency exchange rates. The Group’s aviation fuel payment obligations and a substantial portion of its aircraft operating lease and maintenance, repair and overhaul payment obligations, debt-service obligations and underlying financial liabilities are denominated in U.S. dollars. As a result, the Group is particularly vulnerable to fluctuations in currency exchange rates of countries in which the Group operates against the U.S. dollar. As the exchange rate between, in particular, the euro and the U.S. dollar is likely to continue to fluctuate in the future, there can be no assurance that fluctuations in exchange rates will not materially adversely affect the Group’s results of operations and financial condition in the future. In addition, the Group is exposed to the risk of interest rate fluctuation, in particular arising under its financial indebtedness. This varies according to the fixed or floating interest rate structure in place. As at 30 April 2015, 1.24% of the Group’s financial debt (consisting of €342 million) carried a fixed rate of interest whereas 98.76% of the Group’s financial debt carried a floating rate of interest. While the Group uses hedging instruments to mitigate these risks, these may not fully protect it against the adverse effects of fuel price increases or fluctuations in interest or currency exchange rates, largely because the Group only hedges against a margin of fluctuation. Hedging also reduces the Group’s ability to benefit from any fuel price decreases or any favourable exchange or interest rate developments. The Group’s assumptions and estimates regarding the future developments of aviation fuel prices, currency exchange rates and interest rates, and any risk-avoidance or risk-tolerance criteria selected by it, will have a substantial impact on the success of its hedging policy. The Group’s business, financial condition and results of operations could be materially adversely affected if its hedging policy is ultimately unsuccessful. The Group’s route planning is subject to uncertainty and investments in new routes may not be successful. The Group is implementing a number of new routes as part of its strategy. When the Group starts operating a new route, its passenger load factors initially tend to be lower than those on its established routes and its advertising and other promotional costs tend to be higher. As a result, new routes may require a substantial amount of investment and may initially generate losses. Customers may also make less use of new routes or additional capacity on existing routes than the Group may have predicted. In addition, if the Group operates a new route it may experience more competition than expected, or competition on that route may exceed the Group’s expectations in other ways. Should the Group be unable to assess demand, capacity and fares correctly on new routes, this could have a material adverse effect on its business, financial condition and/or results of operations. From time to time the Group may be involved in disputes. At the date of this Prospectus, the Issuer and other Group companies are parties to a limited number of legal disputes arising in the ordinary course of their activities (see “Description of the Issuer — Litigation”). There can be no assurance that the Group will not become subject to additional legal proceedings, or that it would not need to be indemnified by CAI, in relation to the liabilities of CAI (see “Description of the Issuer — Ring-fencing of CAI’s financial indebtedness and liabilities”). The Group monitors the development of legal disputes and proceedings, also with the help of external advisers and, where necessary, will record provisions considered appropriate in light of the circumstances following a prudent analysis of each dispute and the risks concerned. The evaluation of risks is, however, subjective and necessarily involves estimations of potential liabilities. There can therefore be no assurance that the ultimate outcome of these disputes will not have a material adverse impact on the Group’s business, financial condition and/or results of operations. RISKS RELATING TO REGULATION Passenger rights and compensation could result in significant cost for the Group. A number of jurisdictions have implemented rules on passenger rights, obliging airlines to provide assistance and care, as well as re-routing or reimbursement to passengers in cases of flight disruptions, delays or denied boarding. In addition, airlines have to compensate passengers in certain cases. For instance, the European Union has passed legislation for compensating airline passengers who have been denied boarding or whose flight has been cancelled or subject to delays (Regulation (EC) No 261/2004).

EMEA 100217621 v16

8

Such legislation, which came into force in February 2005, imposes, amongst others, fixed levels of compensation to be paid to passengers in the event of cancellation, except when the airline can prove that such cancellation was caused by extraordinary circumstances and could not have been avoided even if all reasonable measures had been taken. The European Court of Justice (“ECJ”) has extended the right of passengers to receive monetary compensation to cases where passengers whose flights are delayed reach their final destination three hours or more after the originally scheduled arrival time. Passengers subject to long delays (ranging from two hours or more to four hours or more, depending on the flight distance) are also entitled to “assistance” free of charge, including meals, refreshments and telephone calls, as well as hotel accommodation if the delay extends overnight. For delays of at least five hours, the airline is also required to offer the option of a refund of the cost of the ticket and, if the passenger has already completed part of the journey, a return flight to the initial point of departure. Regulation (EC) No 261/2004 generally applies to all passengers departing from an airport located in the territory of an EU Member State, irrespective of whether the airline is licenced by a Member State of the EU, and, if the airline is licenced by a Member State of the EU, also to all passengers departing from an airport outside the EU to a destination within the EU. As a result, cancellation and delay of flights may lead to a significant financial burden for airlines which are licenced by an EU Member State or which operate in the EU. A proposal for revision of Regulation (EC) No 261/2004, which is currently in the legislative process, has been advanced which is aimed at strengthening and extending passenger rights to obtain compensation in case flights are delayed or passengers are stranded upon the bankruptcy of an airline, as well as passenger rights in connection with luggage. With respect to the additional passenger rights in case of delayed or rescheduled flights, the proposed revised rules provide, among others, that airlines may refuse to pay compensation only on the basis of an exhaustive list of defined extraordinary circumstances. Furthermore, passengers who have a return ticket may not be denied boarding at the return journey if they did not use their ticket for the outward journey. As a result of the regulatory and legislative framework in which they operate, airlines registered in an EU Member State or which operate in the EU, including the Group, may incur significant increases in costs in the future in connection with cancelled or delayed flights. This could have a material adverse effect on the Group’s business, financial condition and results of operations. The Group is subject to regulatory measures restricting the emission of greenhouse gases, which in the future could restrict airline operation and increase costs. Pursuant to the United Nations Framework Convention on Climate Change and the Kyoto Protocol, the parties thereto have undertaken to control and reduce the emission of greenhouse gases. In order to meet its obligations under international law, the EU enacted the EU emissions trading system (“ETS”) by Directive 2003/87/EC in 2003, which applied from 1 January 2005. Directive 2008/101/EC (the “Directive”) amending Directive 2003/87/EC extended the scope of the ETS to aviation activities. From 1 January 2012, all flights arriving at or departing from airports situated in the territory of an EU Member State are generally covered by the ETS. The aircraft operators, as defined in the Directive, are listed in Regulation (EC) No 748/2009, as subsequently amended. The Directive has been implemented into Italian law by way of Legislative Decree no. 257 dated 30 December 2010. Under the Directive, each aircraft operator must surrender a number of allowances equal to the total emissions produced, duly notified and certified during the preceding calendar year from its aviation activities by 30 April each year. Administrative sanctions (up to the interdiction at European level) apply to air carriers in breach of such obligations. For each year of the current trading period (2013-2020), this quantity is reduced to the equivalent of 95% of the historical aviation emissions. As a consequence of the reduction of the total quantity of allowances, the number of allowances to be allocated free of charge to aircraft operators (in the current trading period 82% of all allowances allocated, with 3% being held in a special reserve for fast growing aircraft operators and new entrants in the market) will be equally reduced. The applicable reference parameter for the allocation of allowances free of charge for the period from 1 January 2013 to 31 December 2020 is of 0,000642186914222035 allowances per ton-kilometre. The percentage of allowances auctioned in the current trading period is equal to 15% of all allowances allocated. In order to tackle the structural supply-demand imbalances, which are expected to continue, the Environment Commission of the European Parliament has EMEA 100217621 v16

9

approved the introduction of a market stability reserve relating to all carbon markets, which should be established in 2018 and should be operational from 1 January 2019. The relevant agreement should be voted on in July 2015. The reserve will function by triggering adjustments to annual auction volumes. In addition to affecting EU airlines, the ETS in general affects non-EU airlines on their flights arriving in or departing from the EU. A number of non-EU countries, including China, India, Russia, the United States, are opposed to the inclusion of their aircraft operators in the ETS. For example, in 2010 the Air Transport Association of America (ATA) unsuccessfully challenged the validity of the Directive, with the European Court of Justice concluding on 21 December 2011 that there were no elements affecting the validity of the Directive. For the period between 2012 and 2016, the ETS generally only applies to flights between airports in the European Economic Area (EEA). In view of the resolution of the International Civil Aviation Organization (ICAO) adopted on 4 October 2013, containing the consolidated statement of continuing policies and practices related to environmental protection, the European Parliament and the Council adopted Regulation (EC) No. 421/2014, which came into force on 30 April 2014 and applies to the period from 1 January 2013 to 31 December 2016. Such regulation amended the Directive in view of the implementation by 2020 of an international agreement applying a single global market-based measure to international aviation emissions. On the basis of the decisions made by the Assembly of ICAO to be held in 2016, the EU will need to review the EU ETS scheme. At present, it is uncertain that the conflict between non-EU countries and the European Union over the ETS will be successfully resolved in the course of the discussions being held within the framework of ICAO. If it is not successfully resolved, these countries may impose trade and other sanctions against the European Union and EU airlines. These and other non-EU countries, as well as the EU, could also enact additional regulations concerning the emission of greenhouse gases that could restrict airline operation and increase costs. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group is subject to extensive government fees and taxation. The Group is subject to extensive government fees and taxation that negatively impact its operating profits. Although these taxes are not operating expenses, they represent an additional cost for the Group’s customers. Proposals are frequently made to raise taxes, fees, and charges imposed on airlines and their passengers. Increases in such taxes, fees and charges could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group is exposed to the risk of unfavourable changes to tax, regulatory and administrative laws in the jurisdictions in which it operates. The Group operates in various jurisdictions in the Middle East, Europe and Asia and is subject to tax in respect of certain overseas hubs in which it operates. The Group benefits from tax exemptions in most of these jurisdictions pursuant to double taxation agreements and airline reciprocal arrangements. The laws (or the interpretations thereof) or practices relating to taxation (including the current position as to double taxation, withholding taxes, interest deductibility and tax concessions in certain operations), foreign exchange or otherwise in these jurisdictions may change. Any such unfavourable change to tax, regulatory and administrative laws could have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group is exposed to the risk of unfavourable changes to legislation relating to the social security and pensions reform in Italy. Changes to legislation relating to the social security and pensions reform in Italy (the pensions reform is still in the preliminary phases of implementation) represent an element of high risk due to the repercussions they could cause in terms of their impact on the policies planned for the reorganisation and the restructuring of the Group. Such repercussions could, in the future, have a material adverse effect on the Group’s business, financial condition and/or results of operations. The Group may be exposed to food and product safety issues and related liability claims and is subject to government regulation relating to food safety. The Group serves food to its customers as part of its on-board catering services. The preparation of food is a sensitive process and exposes the Group to possible food safety liability claims and issues, such as for food EMEA 100217621 v16

10

poisoning. Existing food safety controls and procedures applied by the Group may prove inadequate. Furthermore, other, internal or external, events, such as a wilful or accidental third-party contamination or tampering may occur. For example, a third-party may tamper with or contaminate food, or fail to prepare food in accordance with special meal preparation requirements and standards, such as those for halal, kosher or other special meals for people with allergies or other dietary requirements. In addition, the Group is exposed to possible product liability claims and issues in connection with other product offerings such as contact and comfort items. For example, plastic items may have sharp edges or may include toxic colours if they are not made to the appropriate standards and could cause harm to the end user, and in some cases the Group may need to withdraw or recall a product batch. Any such event, or any negative press surrounding such event, may harm the Group’s relationship with customers or reputation. This may limit the Group’s ability to renew contracts on acceptable terms or at all and/or to obtain new business. In addition, the laws and regulations governing the food industry have become increasingly complex across a number of jurisdictions and areas, including, among others, food safety, labour, employment, immigration, security and safety, health and safety, competition and antitrust, consumer protection and the environment. Even where the Group has proper controls and procedures in place, implementation of these controls and procedures, and proper reporting on a local or group wide basis may not be adequate and could cause the Group to fail to comply with such laws or regulations. Any failure or suspected failure to comply with any of these regulations may result in increased regulatory scrutiny by means of inquiries or investigations, liability claims or sanctions and increased costs of compliance for, among other things, employee screening, and increased insurance costs. The Group could also be subject to governmental and private civil remedies, including fines, penalties, damages, injunctions, disciplinary actions, recalls or seizures and loss of licences, as well as potential criminal sanctions. Any regulatory sanctions or threat of sanction could also attract adverse media attention, adversely affect the Group’s reputation and require the attention of management to the detriment of operations or otherwise limit business operations. Any of these risks could have a material adverse effect on the Group’s business, financial condition and/or results of operations. RISKS RELATING TO THE NOTES The Notes are not rated. Neither the Notes nor the long-term debt of the Issuer are rated. To the extent that any credit rating agencies assign credit ratings to the Notes, such ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A rating or the absence of a rating is not a recommendation to buy, sell or hold securities. There is no active trading market for the Notes. The Notes are new securities which may not be widely distributed and for which there is currently no active trading market. If the Notes are traded after their initial issuance, they may trade at a discount to their initial offering price, depending upon prevailing interest rates, the market for similar securities, general economic conditions and the financial condition of the Issuer and the Group. Although application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and admitted to trading on the Main Securities Market, there is no assurance that such application will be accepted or that an active trading market will develop. Accordingly, there is no assurance as to the development or liquidity of any trading market for the Notes. The Notes are fixed rate securities and are vulnerable to fluctuations in market interest rates. The Notes will carry fixed interest. A holder of a security with a fixed interest rate is exposed to the risk that the price of such security falls as a result of changes in the current interest rate on the capital market (the “Market Interest Rate”). While the nominal interest rate of a security with a fixed interest rate is fixed during the life of such security or during a certain period of time, the Market Interest Rate typically changes on a daily basis. As the Market Interest Rate changes, the price of such security changes in the opposite direction. If the Market Interest Rate increases, the price of such security typically falls, until the yield of such security is approximately equal to the Market Interest Rate. Conversely, if the Market Interest Rate falls, the price of a security with a fixed interest rate typically increases, until the yield of such security is approximately equal to the Market Interest Rate. Investors should be aware that movements of the Market Interest Rate could adversely affect the market price of the Notes. EMEA 100217621 v16

11

The Notes may not be a suitable investment for all investors. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (a)

have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained in this Prospectus or any applicable supplement;

(b)

have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

(c)

have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including where the currency for principal or interest payments is different from the potential investor’s currency;

(d)

understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and

(e)

be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.

The Notes may be redeemed prior to maturity. In the event that the Issuer would be obliged to increase the amounts payable in respect of any Notes due to any withholding or deduction for or on account of, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or on behalf of the Republic of Italy or any political subdivision thereof or any authority therein or thereof having the power to tax, the Issuer may redeem all outstanding Notes in accordance with the Conditions. The Notes are subject to optional redemption by the Issuer. An optional redemption feature is likely to limit the market value of Notes. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time. Change of Control. Upon the occurrence of a Change of Control (as defined in the “Terms and Conditions of the Notes”), as set out in Condition 7(c) (Redemption and Purchase – Redemption at the option of Noteholders upon a Change of Control), under certain circumstances the Noteholders will have the right to require the Issuer to redeem all outstanding Notes at 100 per cent. of their principal amount together with interest accrued up to but excluding the Put Date (as defined in the “Terms and Conditions of the Notes”). However, it is possible that the Issuer will not have sufficient funds at the time of the Change of Control to make the required redemption of Notes. If there are not sufficient funds for the redemption, Noteholders may receive less than the principal amount of the Notes should they elect to exercise such right. Furthermore, if such provisions were exercised by the Noteholders, this might adversely affect the Issuer’s financial position. Because the Global Notes are held by or on behalf of Euroclear and Clearstream, Luxembourg, investors will have to rely on their procedures for transfer, payment and communication with the Issuer. The Notes will be represented by the Global Notes except in certain limited circumstances described in the Permanent Global Note. The Global Notes will be deposited with a common safekeeper for Euroclear and EMEA 100217621 v16

12

Clearstream, Luxembourg. Except in certain limited circumstances described in the Permanent Global Note, investors will not be entitled to receive definitive Notes. Euroclear and Clearstream, Luxembourg will maintain records of the beneficial interests in the Global Notes. While the Notes are represented by the Global Notes, investors will be able to trade their beneficial interests only through Euroclear and Clearstream, Luxembourg. The Issuer will discharge its payment obligations under the Notes by making payments to or to the order of the common safekeeper for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of a beneficial interest in a Global Note must rely on the procedures of Euroclear and Clearstream, Luxembourg to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Notes. Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of the Notes. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. Minimum denomination. As the Notes have a denomination consisting of the minimum denomination plus a higher integral multiple of another smaller amount, it is possible that the Notes may be traded in amounts in excess of €100,000 (or its equivalent) that are not integral multiples of €100,000 (or its equivalent). In such case a Noteholder who, as a result of trading such amounts, holds a principal amount of less than the minimum denomination will not receive a Definitive Note in respect of such holding (should Definitive Notes be printed) and would need to purchase a principal amount of Notes such that its holding amounts to the minimum denomination. Payments in respect of the Notes may in certain circumstances be made subject to withholding or deduction of tax. All payments in respect of Notes will be made free and clear of withholding or deduction of Italian taxation, unless the withholding or deduction is required by law. In that event, the Issuer will pay such additional amounts as will result in the Noteholders receiving such amounts as they would have received in respect of such Notes had no such withholding or deduction been required. The Issuer’s obligation to gross up is, however, subject to a number of exceptions, including withholding or deduction of: (a)

imposta sostitutiva (Italian substitute tax), pursuant to Italian Legislative Decree No. 239 of 1 April 1996 (“Decree No. 239”); and

(b)

withholding tax operated in certain EU Member States pursuant to European Council Directive 2003/48/EC regarding the taxation of savings income (the “EU Savings Directive”) and similar measures agreed with the European Union by certain non-EU countries and territories,

a brief description of which is set out below. Prospective purchasers of Notes should consult their tax advisers as to the overall tax consequences of acquiring, holding and disposing of Notes and receiving payments of interest, principal and/or other amounts under the Notes, including in particular the effect of any state, regional or local tax laws of any country or territory. See also the section headed “Taxation” below. Imposta sostitutiva Imposta sostitutiva (Italian substitute tax) is applied to payments of interest and other income (including the difference between the redemption amount and the issue price) at a rate of 26 per cent. to (a) certain Italian resident Noteholders and (b) non-Italian resident Noteholders who have not filed in due time with the relevant depository a declaration (autocertificazione) stating, inter alia, that he or she is resident for tax purposes in a country which allows for an adequate exchange of information with the Italian tax authorities. EU Savings Directive Under the EU Savings Directive each Member State is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a paying agent (within the EMEA 100217621 v16

13

meaning of the EU Savings Directive) within its jurisdiction to, or collected by such a paying agent (within the meaning of the EU Savings Directive) for, an individual resident or certain limited types of entity established in that other Member State. On 24 March 2014, the Council of the European Union adopted a Council Directive amending and broadening the scope of the requirements described above. Member States are required to apply these new requirements from 1 January 2017. The changes will expand the range of payments covered by the Directive, in particular to include additional types of income payable on securities. The Directive will also expand the circumstances in which payments that indirectly benefit an individual resident in a Member State must be reported. This approach will apply to payments made to, or secured for, persons, entities or legal arrangements (including trusts) where certain conditions are satisfied, and may in some cases apply where the person, entity or arrangement is established or effectively managed outside of the European Union. For a transitional period, Austria may instead apply a withholding system in relation to such payments. The changes referred to above will broaden the types of payments subject to withholding in those Member States which still operate a withholding system when they are implemented. The end of the transitional period is dependent upon the conclusion of certain agreements relating to the exchange of information on such payments with certain non-EU countries. A number of non-EU countries and certain dependent or associated territories of certain Member States (including Switzerland), have adopted similar measures (either provision of information or transitional withholding) in relation to payments made by a paying agent (within the meaning of the EU Savings Directive) within its jurisdiction to or collected by such a paying agent (within the meaning of the EU Savings Directive) for, an individual resident or certain limited types of entity established in a Member State. In addition, the Member States have entered into provision of information or transitional withholding arrangements with certain of those dependent or associated territories in relation to payments made by a person in a Member State to, or collected by such a person for, an individual resident or certain limited types of entity established in one of those territories. If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Notes as a result of the imposition of such withholding tax. The Issuer is required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the EU Savings Directive. For further information on the EU Savings Directive, see the section headed “Taxation” below. Investors may be affected by changes of law or administrative practice. The terms and conditions of the Notes are based on English law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to English law and/or Italian law (where applicable) or administrative practice after the date of this Prospectus. The modification provisions may bind minority Noteholders. The terms and conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. FATCA Whilst the Notes are in global form and held within Euroclear and Clearstream, Luxembourg (together, the “ICSDs”), in all but the most remote circumstances, it is not expected that the provisions of Sections 1471 to 1474 of the U.S. Internal Revenue Code of 1986, or any regulations thereunder or official interpretations thereof, or an intergovernmental agreement between the United States and another jurisdiction facilitation the implementation thereof (or any law implementing such intergovernmental agreement) (“FATCA”) will affect the amount of any payment received by the ICSDs (see “Taxation — FATCA”).

EMEA 100217621 v16

14

However, FATCA may affect payments made to custodians or intermediaries in the subsequent payment chain leading to the ultimate investor if any such custodian or intermediary generally is unable to receive payments free of FATCA withholding. It also may affect payment to any ultimate investor that is a financial institution that is not entitled to receive payments free of withholding under FATCA, or an ultimate investor that fails to provide its broker (or other custodian or intermediary from which it receives payment) with any information, forms, other documentation or consents that may be necessary for the payments to be made free of FATCA withholding. Investors should choose the custodians or intermediaries with care (to ensure each is compliant with FATCA or other laws or agreements related to FATCA), provide each custodian or intermediary with any information, forms, other documentation or consents that may be necessary for such custodian or intermediary to make a payment free of FATCA withholding. Investors should consult their own tax adviser to obtain a more detailed explanation of FATCA and how FATCA may affect them. The Issuer’s obligations under the Notes are discharged once it has paid the common safekeeper for the ICSDs and the Issuer has therefore no responsibility for any amount thereafter transmitted through the ICSDs and custodians or intermediaries. Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk: The Notes are exposed to the risks related to the secondary market generally. The Notes may have no established trading market when issued and one may never develop. If a market does develop, it may not be very liquid and, consequently, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. Illiquidity may have a severely adverse effect on the market value of the Notes. The market value of the Notes may also be significantly affected by factors such as variations in the Group’s annual and interim results of operations, news announcements or changes in general market conditions. In addition, broad market fluctuations and general economic and political conditions may adversely affect the market value of the Notes, regardless of the actual performance of the Group. The Notes may be delisted in the future. Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and admitted to trading on the Main Securities Market. The Notes may subsequently be delisted despite the best efforts of the Issuer to maintain such listing and, although no assurance is made as to the liquidity of the Notes as a result of listing, any delisting of the Notes may have a material effect on a Noteholder’s ability to resell the Notes on the secondary market. Legal investment considerations may restrict certain investments. The investment activities of certain investors are subject to legal investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent (a) Notes are legal investments for it, (b) Notes can be used as collateral for various types of borrowing and (c) other restrictions apply to the purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable risk-based capital or similar rules. Exchange rate risks and exchange controls. The Issuer will pay principal and interest on the Notes in Euro. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the “Investor’s Currency”) other than Euro. These include the risk that exchange rates may change significantly (including changes due to devaluation of the Euro or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the Euro would decrease (a) the Investor’s Currency-equivalent yield on the Notes, (b) the Investor’s Currency-equivalent value of the principal payable on the Notes and (c) the Investor’s Currency-equivalent market value of the Notes.

EMEA 100217621 v16

15

In addition, government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

EMEA 100217621 v16

16

FINANCIAL INFORMATION RELATING TO CAI AND THE ISSUER Issuer’s and CAI’s information incorporated by reference This Prospectus should be read and construed in conjunction with: •

the consolidated balance sheet and consolidated income statement of the Issuer as at and for the quarter ended 31 March 2015, derived from the Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March 2015, together with the accompanying notes, prepared in accordance with Italian Accounting Standard OIC 30 and approved by the Issuer’s board of directors, in respect of which a limited review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”, has been performed by Deloitte & Touche S.p.A.; and

•

the audited consolidated annual financial statements of Compagnia Aerea Italiana S.p.A. (“CAI”, previously called Alitalia - Compagnia Aerea Italiana S.p.A.), which indirectly holds 51% of the Issuer’s share capital and previously operated the going concern relating to the air carrier business (the “Going Concern”) which was contributed to the Issuer with effect from 1 January 2015 (see “Description of the Issuer — History”), as at and for the years ended 31 December 2013 and 2014, together in each case with the accompanying notes. Such information does not include the financial information or results of the Issuer. CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2013 and 2014 have been prepared in accordance with Italian GAAP. These relate to an entity which is entirely separate from the Issuer, having a different business organisation and financial position (see “Description of the Issuer ─ Ring fencing of CAI’s indebtedness and liabilities”).

Such documents are incorporated into, and form part of, this Prospectus, save that (a) any statement contained therein shall be modified or superseded for the purpose of this Prospectus to the extent that a statement herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise), and (b) any information contained in the aforementioned financial statements, but not included in the tables set out below, is not incorporated by reference in this Prospectus because such information is either not relevant for investors or is covered elsewhere in this Prospectus, and should be read for information purposes only. In this section, references to pages refer to the English versions of the relevant documentation. This Prospectus is drawn up in the English language. In case there is any discrepancy between the English text and the Italian text, the English text stands approved for the purposes of approval under the Prospectus Directive. The following tables show where the information incorporated by reference in this Prospectus can be found in the above-mentioned documents: •

Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March 2015: Balance Sheet ....................................................................................... Income Statement ................................................................................. Notes to the Financial Statements ........................................................ Independent Auditors’ Report...............................................................

•

Pages 51 to 52 Page 53 Pages 55 to 95 Front page

CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2014: Balance Sheet ....................................................................................... Income Statement ................................................................................. Cash Flow Statement ............................................................................ Notes to the Financial Statements ........................................................ Independent Auditors’ Report...............................................................

EMEA 100217621 v16

17

Pages 125 to 126 Page 128 Page 179 Pages 130 to 213 Front pages

•

CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2013: Balance Sheet ....................................................................................... Income Statement ................................................................................. Cash Flow Statement ............................................................................ Notes to the Financial Statements ........................................................ Independent Auditors’ Report...............................................................

Pages 99 to 100 Page 102 Page 42 Pages 103 to 182 Front pages

Copies of documents incorporated by reference in this Prospectus have been filed with the Central Bank and are published on the website of the Irish Stock Exchange (www.ise.ie). In particular, the following documents are available to the public on the following links: •

Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March 2015: http://www.ise.ie/debt_documents/2015%20Q1%20financial%20statements(17870522_1)_569978f8fb80-4ecb-b744-94d393597d12.PDF?v=2462015

•

CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2014: http://www.ise.ie/debt_documents/2014%20Audited%20Financial%20Statements(17526701_1)_07a2ff ae-f0cb-40e2-b100-d3a4f546b3b1.PDF?v=2462015

•

CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2013: http://www.ise.ie/debt_documents/2013%20Audited%20Financial%20Statements(17526709_1)_adecd2 1c-e54c-4e30-bcf2-2dccc8207260.PDF?v=2462015

Any websites referred to in this Prospectus are for information purposes only and do not form part of this Prospectus. Issuer’s unaudited financial statements as at and for the year ended 31 December 2014 appended to this Prospectus The “Index to the Issuer’s Financial Statements” included in this Prospectus contains the balance sheet, income statement and cash flow statement of the Issuer as at and for the year ended 31 December 2014, which is derived from and should be read in conjunction with, and is qualified in its entirety by reference to the Issuer’s unaudited financial statements as at and for the year ended 31 December 2014 prepared in accordance with Italian GAAP and approved by the Issuer’s board of directors. Future financial statements The audited consolidated financial statements of the Issuer and its subsidiaries as at and for the year ended 31 December 2015 will be prepared in accordance with IFRS, together with a reconciliation to show differences between the IFRS figures and their Italian GAAP equivalents. Future audited consolidated financial statements and unaudited interim consolidated financial information of the Issuer thereafter will be prepared in accordance with IFRS only. Measures The financial information contained in this Prospectus, in particular that relating to the years ended 31 December 2013 and 2014 for CAI, includes certain measures normally used to evaluate the Group’s economic and financial performance. These measures are not identified as accounting measures under IFRS or Italian GAAP and therefore undue reliance should not be placed on such measures.

EMEA 100217621 v16

18

TERMS AND CONDITIONS OF THE NOTES The issue of the Notes was authorised by a resolution of the Board of Directors of Alitalia - Società Aerea Italiana S.p.A. (the “Issuer”, which expression shall include any Person substituted in place of the Issuer in accordance with Condition 13(d) (Substitution) or any permitted successor(s) or assignee(s)) passed on 25 June 2015. The Notes are constituted by a trust deed (the “Trust Deed”) dated 30 July 2015 between the Issuer and BNP Paribas Trust Corporation UK Limited (the “Trustee” which expression shall include all Persons for the time being the trustee or trustees under the Trust Deed) as trustee for the holders of the Notes (the “Noteholders”). These terms and conditions (the “Conditions”) include summaries of, and are subject to, the detailed provisions of the Trust Deed, which includes the form of the Notes and the coupons relating to them (the “Coupons”). Copies of the Trust Deed and of the Paying Agency Agreement (the “Paying Agency Agreement”) dated 30 July 2015 relating to the Notes between the Issuer, the Trustee and the initial principal paying agent and the other paying agents named in it, are available for inspection during usual business hours at the specified offices of the principal paying agent for the time being (the “Principal Paying Agent”) and the other paying agents for the time being (the “Paying Agents”, which expression shall include the Principal Paying Agent). The Noteholders and the holders of the Coupons (whether or not attached to the relevant Notes) (the “Couponholders”) are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions applicable to them of the Paying Agency Agreement. 1.

Definitions and Interpretation

(a)

Definitions: in these Conditions:

“2014 Accounting Principles” means the Accounting Principles as applied by the Issuer in the audited consolidated financial statements of the Issuer for the financial year ended 31 December 2014. “Accounting Principles” means generally accepted accounting principles in Italy, including IFRS. “Acting in Concert” means a group of Persons who, pursuant to an agreement or understanding, actively cooperate through the acquisition or holding of Equity Interests of an entity by any of them, either directly or indirectly, for the purposes of obtaining or consolidating control of the Issuer. “Auditors” means (i) one of PricewaterhouseCoopers S.p.A., Ernst & Young S.p.A., KPMG S.p.A. or Deloitte & Touche S.p.A. or (ii) any other reputable firm of auditors of international standing appointed by the Issuer. “Board of Directors” means the board of directors of the Issuer. “Capital Stock” means: (i)

in the case of a corporation, corporate stock;

(ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (iii) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or membership interests; and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into Capital Stock, whether or not such debt securities include any right of participation with Capital Stock. “Cash” means, on a consolidated basis, any available cash at bank and marketable debt obligations which have a credit rating of at least A/A-2 by S&P or equivalent and are in any case available on demand to meet the financial obligations of the Group, which shall be taken into account only with respect to the mark to market value.

EMEA 100217621 v16

19

A “Change of Control” shall be deemed to occur each time that any Person or Persons Acting in Concert or any Person or Persons acting on behalf of any such Person(s) (other than a Permitted Holder, acting directly or indirectly), at any time, whether directly or indirectly, acquires the control of the Issuer pursuant to Article 2359 paragraphs (1) and (2) of the Italian Civil Code. “Cure” means any remedial action that will allow the Issuer to cure a breach of Condition 4(b) or Condition 5(a). “Cure Amount” means the amount, in cash or non-cash consideration, excluding a revaluation of assets, that derives from any remedial action that is applied as part of a Cure, such amount to be certified by an independent investment bank. “Debt” means, on a consolidated basis, any indebtedness in relation to: (i)

any loan or facility of any kind (including, by way of example, bank overdrafts);

(ii) any notes, debt instrument of any nature, redeemable and preferred shares, or option or agreement according to which the Issuer and/or its Subsidiaries shall, upon third parties’ requests, redeem or purchase their own or third parties’ instruments or similar financial instruments, provided that such shares, options or agreements are treated as financial indebtedness pursuant to the applicable Accounting Principles; (iii) any receivable, including future, assigned or discounted receivables with recourse (“pro solvendo”), including in relation to any factoring arrangements entered into in the ordinary course of business and any securitisation of receivables; (iv)

any agreements treated as financial lease agreements pursuant to the applicable Accounting Principles;

(v) any cost and expense related to purchases in respect of the supply of assets or services, to the extent that the relevant amounts shall be paid: (a)

on or later than 180 (one hundred and eighty) days, in relation to aircraft; and

(b) on or later than 270 (two hundred and seventy) days after the date of supply, in relation to any assets (other than aircraft) or services, and such delayed payments mainly constitute a financing facility; (vi) any transaction related to financial instruments (other than derivatives, but without prejudice to paragraph (x) below), as defined according to Legislative Decree no. 58/1998 (as subsequently amended); (vii) any transaction (including, by way of example, forward sale and purchase transactions) which, pursuant to the applicable Accounting Principles, shall be treated as having the same economic effect as financial indebtedness or as being comparable to loans or financing (including, by way of example, any financing related to the purchase of an asset); (viii) any amount due as a consequence of enforcement of any acceptance or backing (“avalli”) of bills, indemnity obligation, recourse or reimbursement obligation related to any security of any kind, surety, letter of credit or any similar instrument issued by a bank or a financial intermediary, other than those provided by law or regulation; (ix) any amount due as a consequence of enforcement of any personal guarantee or indemnity obligation or any other act aimed at securing third parties against financial losses, including any Guarantee; and (x) any amount due under derivative transactions of any kind (“derivati”) (including, in the event of expiry or termination or close out of that derivative transaction, the marked-to-market value of such derivative transactions). For the avoidance of doubt, any present or future indebtedness falling within paragraph (ii) of the definition of “Equity” shall not constitute Debt.

EMEA 100217621 v16

20

“EBITDAR” means earnings before tax, any material items of an unusual or non recurring nature which represent gains or losses, financial gains and charges, adjustments of the value of financial assets, depreciation and amortisation of tangible and intangible assets and aircraft rent on a consolidated basis. “Equity” means, with respect to the consolidated financial statements of the Issuer, the aggregate of (i) the amount related to the items referred to in the section Stato Patrimoniale – Passivo letter (A) (Patrimonio Netto), under article 2424 of the Italian civil code or any equivalent items under IFRS and (ii) any present or future indebtedness which (x) is subordinated (with respect to both principal and interest) to the Notes, (y) has a maturity date falling not earlier than 6 months after the Maturity Date and (z) is provided by the shareholders of the Issuer and/or companies controlled, directly or indirectly, by, or under common control of, Etihad Airways P.S.J.C. or companies controlled, directly or indirectly by any controlling company of Etihad Airways P.S.J.C. “Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). “Euro” means the lawful currency of the member states of the European Union that participate in the third stage of the European Economic and Monetary Union. “Extraordinary Resolution” has the meaning set out in the Trust Deed. “Financial Year” means the annual accounting period of the Group ending on 31 December in each year. “Group” means the Issuer and its Subsidiaries from time to time. “Guarantee” means any guarantee, indemnity, undertaking to hold any party indemnified and harmless (“manleva”), bond (“fideiussione”), autonomous guarantee and/or first demand guarantee (including any “credito documentario”, “avallo”, advance bond, bid bond, payment bond, retention bond, performance bond, letter of credit bank and/or insurance guarantees) and/or any other guarantee. “Hedging Obligations” means, with respect to any Person, the obligations of such Person under currency exchange, interest rate, energy price or commodity swap, cap and collar agreements, and other similar or like agreements or arrangements. “IFRS” means International Financial Reporting Standards as endorsed by the European Union and in effect on the date of any calculation or determination required hereunder. An “Insolvency Event” will have occurred in respect of the Issuer or any of its Material Subsidiaries if: (i) any one of them becomes subject to any applicable bankruptcy, liquidation, administration, receivership, insolvency, composition or restructuring (including, without limitation, fallimento, liquidazione coatta amministrativa, concordato preventivo and amministrazione straordinaria, each such expression bearing the meaning ascribed to it by the laws of the Republic of Italy, and including also any equivalent or analogous proceedings under the law of the jurisdiction in which it is deemed to carry on business) or similar proceedings; (ii) an application for the commencement of any of the proceedings under (i) above is made in respect of or by any one of them or the same proceedings are otherwise initiated against any one of them or notice is given of intention to appoint an administrator in relation to any one of them unless (A) the commencement of such proceedings is being disputed in good faith with a reasonable prospect of success as confirmed by an opinion of independent legal advisers of recognised standing or (B) such proceedings are discharged or stayed within 90 days; (iii) any one of them takes any action for a re-adjustment or deferral of any of its payment obligations, or makes a general assignment or an arrangement or composition with or for the benefit of its creditors, or is granted by a competent court a moratorium, in each case in respect of all or a substantial part of its Debt, or applies for a suspension of payments in relation to all or a substantial part of its Debt; or (iv) an order is made or an effective resolution is passed for the winding-up, liquidation, administration or dissolution in any form of any one of them (except a winding-up for the purposes of or pursuant to Permitted EMEA 100217621 v16

21

Reorganisation) or any of the events under article 2484 of the Italian civil code occurs with respect to any one of them. “Insolvent” means that the Issuer or any of its Material Subsidiaries is, or is deemed for the purposes of any applicable law to be, unable to pay its debts, taken as a whole, as they fall due or is insolvent. “Interpolated Mid Swap Rate” means the interpolation between the two Reference Mid Swap Rates for a term equal to the Remaining Life taken at 3.00 pm (London time) on the date which is two Business Days prior to the dispatch of the notice of redemption to Noteholders under Condition 7(d). “Issue Date” means the date of issue of the Notes. “Material Subsidiary” means, at any time, any Subsidiary of the Issuer: (i) whose gross revenues (consolidated in the case of a Subsidiary of the Issuer which itself has Subsidiaries) or whose total net assets (consolidated in the case of a Subsidiary of the Issuer which itself has Subsidiaries) represent not less than ten per cent. of the consolidated gross revenues (excluding intra-group items), or, as the case may be, the consolidated total net assets of the Group, all as calculated respectively by reference to the latest financial statements (consolidated or, as the case may be, unconsolidated) of the Subsidiary of the Issuer and the then latest audited consolidated financial statements of the Issuer; provided that in the case of a Subsidiary of the Issuer acquired after the end of the financial period to which the then latest audited consolidated financial statements of the Issuer relate for the purpose of applying each of the foregoing tests, the reference to the Issuer’s latest audited consolidated financial statements shall be deemed to be a reference to such financial statements as if such Subsidiary of the Issuer had been shown therein by reference to its then latest relevant financial statements, adjusted as deemed appropriate by the Auditors for the time being after consultation with the Issuer; or (ii) to which is transferred all or Substantially All of the business, undertaking and assets of another Subsidiary of the Issuer which immediately prior to such transfer is a Material Subsidiary, whereupon (a) in the case of a transfer by a Material Subsidiary, the transferor Material Subsidiary shall immediately cease to be a Material Subsidiary and (b) the transferee Subsidiary of the Issuer shall immediately become a Material Subsidiary, provided that on or after the date on which the relevant financial statements for the financial period current at the date of such transfer are published, whether such transferor Subsidiary of the Issuer or such transferee Subsidiary of the Issuer is or is not a Material Subsidiary shall be determined pursuant to the provisions of sub-paragraph (i) above. A report by a director or other authorised signatory of the Issuer that in its opinion (making such adjustments (if any) as they shall deem appropriate) a Subsidiary of the Issuer is or is not or was or was not at any particular time or during any particular period a Material Subsidiary shall, in the absence of manifest error, be conclusive and binding on the Issuer, the Trustee and the Noteholders. “Net Financial Position” means, on a consolidated basis, the sum of Debt and Cash. “Net Total Assets” means, on any given date, the aggregate value of the Group’s aircraft, aircraft equipment and ground operations assets (including equipment, takeoff and landing slots and related tangible assets), inventory, brand, maintenance reserves and cash as shown in the latest audited annual consolidated financial statements of the Issuer. “Permitted Encumbrance” means any Security Interest on aircraft, aircraft equipment or ground operations assets (including equipment, takeoff and landing slots and related tangible assets) or lease receivables in respect of aircraft or aircraft equipment of the Issuer or any Subsidiary of the Issuer (including by means of special purpose entities owning aircraft or aircraft equipment), or any Security Interest relating to factoring in the ordinary course of business, credit support arrangements in relation to Hedging Obligations or the securitisation of receivables. “Permitted Holder” means Intesa Sanpaolo S.p.A., Poste Italiane S.p.A., UniCredit S.p.A. and Etihad Investment Holding Company LLC, or any of their successors or assigns. “Permitted Indebtedness” means, as of the relevant Reference Date, that:

EMEA 100217621 v16

22

(i)

the Total Debt is not higher than 60 per cent. of the Net Total Assets; and

(ii)

the Secured Debt is not higher than 30 per cent. of the Net Total Assets,

in each case, determined in accordance with the relevant consolidated financial statements of the Issuer and in accordance with the 2014 Accounting Principles. “Permitted Reorganisation” means: (i)

in relation to any Material Subsidiary: (A) any: (1) “fusione” or “scissione” (such expressions bearing the meanings ascribed to them by the laws of the Republic of Italy) or any other, amalgamation, reorganisation, merger, consolidation, demerger (whether in whole or in part) or other similar arrangement; or (2) contribution in kind, conveyance, sale, assignment, transfer, lease of, or any kind of disposal of all or any of its assets or its going concern; or (3) purchase or exchange of its assets or its going concern, whether or not effected through a capital increase subscribed and paid up by means of a contribution in kind; or (4) lease of its assets or its going concern, whereby all or Substantially All of its assets and undertaking (as evidenced in its latest audited financial statements (consolidated, if available)) are transferred, sold contributed, assigned or otherwise vested in (x) the Issuer, (y) any Subsidiary or Subsidiaries of the Issuer and/or (z) any Subsidiary or Subsidiaries of a Material Subsidiary; or (B) a sale, demerger, contribution or other disposal of all or Substantially All of the relevant Material Subsidiary’s assets (as evidenced in its latest audited financial statements (consolidated, if available)) whilst solvent to any Person for cash on commercial arm’s length terms; and

(ii)

in relation to the Issuer, any: (1) “fusione” or “scissione” (such expressions bearing the meanings ascribed to them by the laws of the Republic of Italy) or any other, amalgamation, reorganisation, merger, consolidation, demerger (whether in whole or in part) or other similar arrangement; or (2) contribution in kind, conveyance, sale, assignment, transfer, lease of, or any kind of disposal of all or any of its assets or its going concern; or (3) purchase or exchange of its assets or its going concern, whether or not effected through a capital increase subscribed and paid up by means of a contribution in kind; or (4) lease of its assets or its going concern, whereby all or Substantially All of its assets and undertaking (as evidenced in its latest audited consolidated financial statements) are transferred, sold contributed, assigned or otherwise vested in a single body corporates which assume(s) or maintain(s) (as the case may be) the liability as principal debtor in respect of the Notes.

“Reference Date” means 31 December of each year, starting from 31 December 2016. “Reference Mid Swap Rates” means two rates each calculated as the average of the bid and ask reported by Intercapital Brokers (now ICAP plc) as published on the Thomson Reuters screen ICAPEURO (or such other page or service as may replace such page for the purposes of displaying such rate) for a 6 month Euribor swapped to fixed rate, one with a tenor rounding down and one with a tenor rounding up to the nearest whole year remaining until the Maturity Date of the Notes.

EMEA 100217621 v16

23

“Relevant Debt” means any Debt which is in the form of, or represented or evidenced by, bonds, notes, debentures, loan stock or other securities which for the time being are, or are intended to be or capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market. For the avoidance of doubt, Relevant Debt shall not include any Hedging Obligation. “Relevant Jurisdiction” means the Republic of Italy or any authority thereof or therein having power to tax or any other jurisdiction or any authority thereof or therein having power to tax to which the Issuer becomes subject in respect of payments made by it of principal and interest on the Notes and Coupons. “Remaining Life” means from any date the number of years remaining until the Maturity Date, rounded down to three decimal places. “Reporting Date” means a date falling no later than 30 days after the approval by the Board of Directors of the Issuer’s audited annual consolidated financial statements, and in any event which is no later than 180 days after the relevant Reference Date, provided that (in relation to Condition 5(b)(ii) only) the first Reporting Date shall be the date falling no later than 30 days after the approval by the Board of Directors of the Issuer’s audited annual consolidated financial statements as of and for the period ended 31 December 2016, and in any event no later than 180 days after 31 December 2016. “Secured Debt” means the portion of Total Debt at the relevant Reference Date that is secured by a Security Interest on any asset of any member of the Group. “Security Interest” means any mortgage, charge, pledge, lien or other security interest including, without limitation, anything analogous to any of the foregoing under the laws of any applicable jurisdiction. ‘‘S&P’’ means Standard & Poor’s Rating Services, a division of The McGraw Hill Companies, Inc. or any successor thereto from time to time. “Subsidiary” means in relation to any company, corporation or legal entity (excluding, for the avoidance of doubt, any consortium pursuant to article 2602 of the Italian civil code) (a “holding company”), any company, corporation or legal entity (excluding, for the avoidance of doubt, any consortium pursuant to article 2602 of the Italian civil code) which is controlled, directly or indirectly, by the holding company pursuant to article 2359, paragraph 1, No. 1 and 2, of the Italian civil code. “Substantially All” shall mean a part of the whole which accounts for eighty per cent. (80%) or more. “TARGET Settlement Day” means any day on which the TARGET system is open. “TARGET System” means the Trans-European Automated Real-Time Gross Settlement Express Transfer (known as TARGET2) System which was launched on 19 November 2007 or any successor thereto. “Total Debt” means, on any given date, the aggregate amount of all Debt of the Group as shown in the latest audited annual consolidated financial statements of the Issuer. (b)

Interpretation: in these Conditions:

(i) “business day” means a day on which commercial banks and foreign exchange markets are open in the relevant city and which is a TARGET Settlement Day; (ii) “Person” means any individual, company, corporation, firm, partnership, joint venture, association, organisation, state or agency of a state or other entity, whether or not having separate legal personality; (iii) “Relevant Date” means whichever is the later of (i) the date on which a payment first becomes due; and (ii) if the full amount payable has not been received by the Principal Paying Agent or the Trustee on or prior to such due date, the date on which, the full amount having been so received, notice to that effect shall have been given to the Noteholders; (iv) any reference in these Conditions to principal and/or interest shall be deemed to include any additional amounts which may be payable under Condition 9 (Taxation) or any undertaking given in addition to or substitution for such amounts under the Trust Deed; and

EMEA 100217621 v16

24

(v) any reference in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to Condition 16 (Further Issues) and forming a single series with the Notes. 2.

Form, Denomination and Title

a) Form and denomination: The Notes are serially numbered and in bearer form in the denomination of €100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000, each with Coupons attached on issue. No definitive Notes will be issued with a denomination above €199,000. b) Title: Title to the Notes and Coupons passes by delivery. The holder of any Note or Coupon will (except as otherwise required by law) be treated as its absolute owner for all purposes (whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing on it, or its theft or loss) and no Person will be liable for so treating the holder. 3.

Status

The Notes and Coupons constitute (subject to Condition 4 (Negative Pledge and Permitted Indebtedness)) senior unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Notes and the Coupons shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4 (Negative Pledge and Permitted Indebtedness), at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations. 4.

Negative Pledge and Permitted Indebtedness

So long as any Note or Coupon remains outstanding (as defined in the Trust Deed): a) the Issuer will not, and will ensure that none of its Material Subsidiaries will, create, or permit to subsist, any Security Interest (other than a Permitted Encumbrance) upon the whole or any part of its present or future undertaking, assets or revenues to secure any Relevant Debt or to secure any guarantee or indemnity in respect of any Relevant Debt, without at the same time or prior thereto according to the Notes and the Coupons the same Security Interest as is created or subsisting to secure any such Relevant Debt, guarantee or indemnity or such other Security Interest as either (i) the Trustee shall in its absolute discretion deem not materially less beneficial to the interest of the Noteholders; or (ii) shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Noteholders; and b) subject to Condition 5(c), the Issuer shall ensure that it remains in compliance with the thresholds specified in the definition of “Permitted Indebtedness”. 5.

Covenants

a) Financial Covenants: So long as any of the Notes remain outstanding (as defined in the Trust Deed), and subject to Condition 5(c) below, the Issuer shall ensure that as at each Reference Date: (i)

the ratio of Net Financial Position to EBITDAR is lower than 1.0:1; and

(ii)

the ratio of Debt to Equity is lower than 1.5:1.0,

in each case, determined in accordance with the relevant consolidated financial statements of the Issuer and in accordance with the 2014 Accounting Principles (together, the “Original Financial Covenants”), save that when the Issuer adopts IFRS as its Accounting Principles, the above ratios will be recalculated as follows. If in respect of a Reference Date, the relevant determination would result in a ratio which, when multiplied by a factor of 1.3, is: (i)

lower than that which would have been obtained under the Original Financial Covenants, then the Original Financial Covenants shall remain unchanged;

EMEA 100217621 v16

25

(ii)

higher than that which would have been obtained under the Original Financial Covenants, the Original Financial Covenants applicable thereafter shall be multiplied by 1.3 (the “New Financial Covenants”), and from the next following Reference Date the New Financial Covenants shall apply mutatis mutandis.

b) Compliance Certificate: On or prior to each Reporting Date, the Issuer will deliver to the Trustee (i) its latest audited annual consolidated financial statements and (ii) a certificate, signed by the Chief Financial Officer of the Issuer, containing (a) the formulae for the calculation of the Original Financial Covenants or the New Financial Covenants, as the case may be, and the Permitted Indebtedness and (b) a statement as to the correctness of such formulae and confirming that it has complied with the Original Financial Covenants or the New Financial Covenants, as the case may be, and the thresholds specified in the definition of Permitted Indebtedness or, if it has not complied with such obligations as of the Reference Date, it shall set forth in reasonable detail the manner in which a Cure has been adopted and it shall provide all the relevant documentation required under the definition of Cure Amount in order to show that the Cure Amount has been effective pursuant to Condition 5(c) or the reasons for its non-compliance, as the case may be (a “Compliance Certificate”). For the avoidance of doubt, the Trustee shall have no duty to investigate or monitor compliance by the Issuer with the Original Financial Covenants or the New Financial Covenants or the Permitted Indebtedness, including if and when a Cure has been effected, and can rely without liability and without further enquiry on the Issuer’s Compliance Certificate as to its compliance or non-compliance as aforementioned. c)

Cure Process:

(i) No default under the Original Financial Covenants or the New Financial Covenants or the definition of Permitted Indebtedness shall occur if, on a date (the “Cure Date”) prior to the date of delivery of the relevant Compliance Certificate, the Issuer (at its sole discretion and without assuming any obligation in respect thereof on its behalf or on behalf of its shareholders or other third parties) procures that a Cure is effected in accordance with paragraph (ii) below (a “Cure Right”) such that, after taking into account the Cure, the relevant obligation is not breached. (ii) A Cure Amount shall be deemed to have been received on the last day of the relevant Financial Year, such that EBITDAR, Equity or Net Total Assets shall be increased by the amount of the Cure Amount or Debt, Net Financial Position, Secured Debt or Total Debt, as the case may be, shall be reduced by the amount of the Cure Amount (without double counting) and the relevant ratio shall be recalculated accordingly, to determine whether the Cure Amount is sufficient to prevent a breach of the relevant obligation. (iii)

There shall be no limit on the amount of any Cure Amount.

6.

Interest

The Notes bear interest from and including the Issue Date at the rate of 5.250 per cent. per annum, payable annually in arrear on 30 July in each year (each an “Interest Payment Date”). Each Note will cease to bear interest from and including the due date for redemption unless, upon due presentation, payment of principal is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Note up to that day are received by or on behalf of the relevant holder, and (b) the day which is seven days after the Trustee or the Principal Paying Agent has notified Noteholders of receipt of all sums due in respect of all the Notes up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant holders under these Conditions). Where interest is to be calculated in respect of a period which is equal to or shorter than an Interest Period (as defined below), the day-count fraction used will be the number of days in the relevant period, from and including the date from which interest begins to accrue to but excluding the date on which it falls due, divided by the number of days in the Interest Period in which the relevant period falls (including the first such day but excluding the last). EMEA 100217621 v16

26

In these Conditions, the period beginning on and including the Issue Date and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an “Interest Period”. Interest in respect of any Note shall be calculated per €1,000 in principal amount of the Notes (the “Calculation Amount”). The amount of interest payable per Calculation Amount for any period shall be equal to the product of 5.250 per cent., the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards). 7.

Redemption and Purchase

a) Final redemption: Unless previously redeemed, or purchased and cancelled, the Notes will be redeemed at their principal amount on 30 July 2020 (the “Maturity Date”). The Notes may not be redeemed at the option of the Issuer other than in accordance with this Condition 7 (Redemption and Purchase). b) Redemption for taxation reasons: The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (which notice shall be irrevocable), at their principal amount, (together with interest accrued to the date fixed for redemption), if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that it has or will become obliged to pay additional amounts as provided or referred to in this Condition 7 (Redemption and Purchase) as a result of any change in, or amendment to, the laws or regulations of the Republic of Italy or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the Issue Date, and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition 7(b), the Issuer shall deliver to the Trustee (a) a certificate signed by a duly authorised director of the Issuer stating that the obligation referred to in (i) above cannot be avoided by the Issuer taking reasonable measures available to it and (b) an opinion of independent legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment and the Trustee shall be entitled to accept such certificate and legal opinion as sufficient evidence of the satisfaction of the condition precedent set out in (ii) above, in which event it shall be conclusive and binding on the Noteholders and the Couponholders. c) Redemption at the option of the Noteholders upon the Occurrence of a Change of Control: If a Change of Control occurs, the holder of each Note, excluding any holder of a Note who solely or Acting in Concert exercises control of the Issuer pursuant to Article 2359 paragraphs (1) and (2) of the Italian Civil Code, will have the option (a “Put Option”) (unless prior to the giving of the relevant Put Event Notice (as defined below) the Issuer has given notice of redemption under Condition 7(b) above) to require the Issuer to redeem or, at the Issuer’s option, purchase (or procure the purchase of) that Note on the Put Date (as defined below) at its principal amount then outstanding together with interest accrued to (but excluding) the Put Date. Promptly upon the Issuer becoming aware that a Change of Control has occurred, and in any event within 14 days after becoming aware of the occurrence of such Change of Control, the Issuer shall give notice (a “Put Event Notice”) to the Noteholders in accordance with Condition 17 (Notices) specifying the nature of the Put Event and the procedure for exercising the Put Option. To exercise the Put Option, the holder of a Note must deliver such Note to the specified office of any Paying Agent at any time during normal business hours of such Paying Agent falling within the period (the “Put Period”) of 30 days after the date on which a Put Event Notice is given, accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a “Put Notice”). The Note should be delivered together with all Coupons appertaining thereto maturing after the date which is seven days after the expiration of the Put Period (the “Put Date”), EMEA 100217621 v16

27

failing which the Paying Agent will require payment from or on behalf of the Noteholder of an amount equal to the face value of any missing such Coupon. Any amount so paid will be reimbursed to the Noteholder against presentation and surrender of the relevant missing Coupon (or any replacement therefor issued pursuant to Condition 12 (Replacement of Notes and Coupons)) at any time after such payment, but before the expiry of the period of five years from the date on which such Coupon would have become due, but not thereafter. The Paying Agent to which such Note and Put Notice are delivered will issue to the Noteholder concerned a non-transferable receipt in respect of the Note so delivered. Payment in respect of any Note so delivered will be made, if the holder duly specified a bank account in the Put Notice to which payment is to be made, on the Put Date by transfer to that bank account and, in every other case, on or after the Put Date against presentation and surrender or (as the case may be) endorsement of such receipt at the specified office of any Paying Agent. A Put Notice, once given, shall be irrevocable. For the purposes of these Conditions, receipts issued pursuant to this Condition 7(c) shall be treated as if they were Notes. The Issuer shall redeem or purchase (or procure the purchase of) the relevant Notes on the Put Date unless previously redeemed (or purchased) and cancelled. If 85 per cent. or more in principal amount of the Notes then outstanding have been redeemed or purchased pursuant to this Condition 7(c), the Issuer may, on giving not less than 30 nor more than 60 days’ notice to the Noteholders (such notice being given within 30 days after the Put Date), redeem or purchase (or procure the purchase of), at its option, all but not some only of the remaining outstanding Notes at their principal amount, together with interest accrued to (but excluding) the date fixed for such redemption or purchase. The Trustee is under no obligation to ascertain whether a Change of Control or any event which could lead to the occurrence of or could constitute a Change of Control has occurred and, until it shall have actual knowledge or notice pursuant to the Trust Deed to the contrary, the Trustee may assume that no Change of Control or other such event has occurred. d) Redemption at the option of the Issuer: Unless a Put Event Notice has been given pursuant to Condition 7(c) above, the Issuer may, at any time, on giving not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition 17 (Notices) (which notice shall be irrevocable and shall specify the date fixed for redemption (the “Optional Redemption Date”)), redeem all, but not some only, of the Notes at a redemption price per Note equal to the higher of the following, in each case together with interest accrued to but excluding the Optional Redemption Date: (i)

100 per cent. of the principal amount outstanding of the Note; and

(ii)

the sum of the then current values of the remaining scheduled payments of principal and interest (not including any interest accrued on the Notes to, but excluding, the Optional Redemption Date) discounted to the Optional Redemption Date on an annual basis (based on the Actual/Actual ICMA day count fraction) at a rate equal to the Interpolated Mid Swap Rate plus 0.50 per cent. in respect of the number of years to the maturity of the Notes calculated by the Issuer.

e) No other redemption: The Issuer shall not be entitled to redeem the Notes otherwise than as provided in Conditions 7(a), 7(b), 7(c) and 7(d) above. f) Notice of redemption: All Notes in respect of which any notice of redemption is given under this Condition shall be redeemed on the date specified in such notice in accordance with this Condition. g) Purchase: The Issuer and its Subsidiaries may at any time purchase Notes in the open market or otherwise at any price (provided that, if they should be cancelled under Condition 7(h) below, they are purchased together with all unmatured Coupons relating to them). The Notes so purchased, while held by or on behalf of the Issuer or any such Subsidiary of the Issuer, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of these Conditions and the Trust Deed. Such Notes may be held, reissued, resold, or at the option of the Issuer, surrendered to the Paying Agent for cancellation. EMEA 100217621 v16

28

h) Cancellation: All Notes redeemed or purchased by or on behalf of the Issuer and any of its Subsidiaries (together with any unmatured Coupons attached to or surrendered with them) according to Condition 7(g) may - in the Issuer’s sole discretion - be surrendered for cancellation. Such cancelled Notes may not be re-issued or resold and the obligation of the Issuer in respect of any such Notes shall be discharged. For the avoidance of doubt the Issuer shall not be entitled to vote in respect of any uncancelled Notes purchased and held by it. 8.

Payments

a) Method of Payment: Payments of principal and interest will be made against presentation and surrender (or, in the case of a partial payment, endorsement) of Notes or the appropriate Coupons (as the case may be) at the specified office of any Paying Agent by transfer to a Euro account maintained by the payee with a bank in a city in which banks have access to the TARGET System. Payments of interest due in respect of any Note other than on presentation and surrender of matured Coupons shall be made only against presentation and either surrender or endorsement (as appropriate) of the relevant Note. b) Payments subject to laws: All payments are subject in all cases to any applicable fiscal or other laws and regulations in the place of payment, but without prejudice to the provisions of this Condition 8 (Payments). No commissions or expenses shall be charged to the Noteholders or Couponholders in respect of such payments. c) Surrender of unmatured Coupons: Each Note should be presented for redemption together with all unmatured Coupons relating to it, failing which the amount of any such missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the amount of such missing unmatured Coupon which the sum of principal so paid bears to the total principal amount due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relevant missing Coupon not later than ten years after the Relevant Date for the relevant payment of principal in respect of the relevant Note. d) Payments on business days: A Note or Coupon may only be presented for payment on a day which is a business day in the place of presentation and, in the case of payment by credit or transfer to a Euro account as described above, is a TARGET Settlement Day. No further interest or other payment will be made as a consequence of the day on which the relevant Note or Coupon may be presented for payment under this Condition 8 (Payments) falling after the due date. e) Paying Agents: The initial Paying Agents and their initial specified offices are listed in the Paying Agency Agreement. The Issuer reserves the right at any time with the approval of the Trustee to vary or terminate the appointment of any Paying Agent and appoint additional or other Paying Agents, provided that it will maintain (i) a Principal Paying Agent, (ii) Paying Agents having specified offices in at least two major European cities approved by the Trustee and (iii) a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to any law implementing European Council Directive 2003/48/EC or any other Directive implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000. 9.

Taxation

All payments of principal and interest by or on behalf of the Issuer in respect of the Notes and the Coupons shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the Republic of Italy or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law. In that event the Issuer shall pay such additional amounts as will result in receipt by the Noteholders and the Couponholders of such amounts as would have been received by them had no such withholding or

EMEA 100217621 v16

29

deduction been required, except that no such additional amounts shall be payable in respect of any Note or Coupon: a)

in relation to any estate, inheritance, gift, sales, transfer or similar taxes; or

b)

presented for payment in the Republic of Italy; or

c) presented for payment by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Note or Coupon by reason of his having some connection with any Relevant Jurisdiction other than the mere holding of the Note or Coupon; or d) presented for payment by, or on behalf of, a holder who is entitled to avoid such withholding or deduction in respect of the Note or Coupon by making a declaration or any other statement to the relevant tax authority, including, but not limited to, a declaration of residence or non-residence or other similar claim for exemption; or e) in the event of payment to a non-Italian resident legal entity or a non-Italian resident individual, to the extent that interest or other amounts are paid to a non-Italian resident legal entity or a non-Italian resident individual which is resident in a country which does not allow for a satisfactory exchange of information with the Italian authorities; or f) in all circumstances in which the procedures to obtain an exemption from imposta sostitutiva or any alternative future system of deduction or withholding set forth in Legislative Decree No. 239 of 1 April 1996, as amended, have not been met or complied with, except where such procedures have not been met or complied with due to the actions or omissions of the Issuer or its agents, and any taxes due pursuant to Legislative Decree No. 461 of 21 November 1997; or g) presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the European Union; or h) presented for payment more than 30 days after the Relevant Date except to the extent that the holder of it would have been entitled to such additional amounts on presenting such Note or Coupon for payment on the last day of such period of 30 days; or i) presented for payment where such withholding or deduction is required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive; or j) in relation to any taxes imposed pursuant to Sections 1471 to 1474 of the US Internal Revenue Code of 1986 including any implementing regulations and intergovernmental agreements related thereto; or k) 10.

any combination of items a) through j) above. Events of Default

If any of the following events occurs the Trustee at its discretion may, and if so requested by holders of not less than one-fourth in principal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution shall (subject in each case to the Trustee being indemnified and/or secured and/or prefunded to its satisfaction), give written notice to the Issuer that the Notes are, and they shall immediately become, due and payable at their principal amount together (if applicable) with accrued interest: a) Non-Payment: the Issuer fails to pay the principal of or any interest on any of the Notes when due and such failure continues for a period of 14 days; or

EMEA 100217621 v16

30

b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its other obligations in the Notes or the Trust Deed, including the Original Financial Covenants or the New Financial Covenants or the Permitted Indebtedness, which default is incapable of remedy or (other than in respect of the Original Financial Covenants or the New Financial Covenants or the Permitted Indebtedness provisions, to which the 30 day grace period shall not apply), if in the opinion of the Trustee capable of remedy, is not remedied within 30 days after notice of such default shall have been given to the Issuer by the Trustee; or c) Cross-Default: (i) any other present or future Debt of the Issuer or any of its Material Subsidiaries for or in respect of moneys borrowed or raised becomes due and payable prior to its stated maturity by reason of any actual default, event of default or the like (howsoever described), or (ii) any such Debt is not paid when due or, as the case may be, within any originally applicable grace period, or (iii) the Issuer or any of its Material Subsidiaries fails to pay when due any amount payable by it under any present or future Guarantee for, or indemnity in respect of, any moneys borrowed or raised, provided that the aggregate amount of the relevant Debt, Guarantees and indemnities under (i), (ii) and (iii) above in respect of which one or more of the events mentioned above have occurred equals or exceeds €35,000,000 or its equivalent; or d) Enforcement Proceedings: an enforceable and/or temporarily enforceable final or provisional judgment or order is taken or passed (including, without limitation, injunction orders, attachments, precautionary measures or urgent measures) on or against a part of the property, assets or revenues of the Group whose value equals or exceeds €35,000,000 or its equivalent and is not discharged or stayed within 60 days after the date(s) thereof or, if later, the date therein specified for payment; or e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future (other than any Permitted Encumbrances) created or assumed by the Issuer or any of its Material Subsidiaries having an aggregate value of at least €35,000,000 or its equivalent becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar Person) unless discharged or stayed within 60 days; or f) Insolvency: an Insolvency Event occurs in relation to the Issuer or any of its Material Subsidiaries (other than for the purposes of, or pursuant to, a Permitted Reorganisation) or the Issuer or any of its Material Subsidiaries becomes Insolvent; or g) Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution of the Issuer or any of its Material Subsidiaries (other than for the purposes of, or pursuant to, a Permitted Reorganisation); or h) Cessation of business: the Issuer or any of its Material Subsidiaries ceases to carry on all or Substantially All of the business then being conducted by the Issuer or the Group taken as a whole (calculated on the basis of the Group’s consolidated total assets) otherwise than as a result of a Permitted Reorganisation; or i) Operating rights: loss by the Issuer or any other member of the Group which from time to time holds the air operator’s certificate (currently held by the Issuer issued by the Italian Civil Aviation Authority (Ente Nazionale per l’Aviazione Civile), or any successor body) of such certificate, except where such a certificate is within 30 days of the date of such loss issued to another member of the Group; or j) Nationalisation: any step is taken by any Person with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all or a material part of the assets of the Issuer or any of its Subsidiaries; or k) Illegality: it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Notes or the Trust Deed; or

EMEA 100217621 v16

31

l) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in Conditions 10(d), 10(e), 10(f) and 10(g) above. 11.

Prescription

Claims in respect of principal and interest will become void unless presentation for payment is made as required by Condition 6 (Interest) within a period of ten years in the case of principal and five years in the case of interest from the appropriate Relevant Date. 12.

Replacement of Notes and Coupons

If any Note or Coupon is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Principal Paying Agent subject to all applicable laws and stock exchange or other relevant authority requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Notes or Coupons must be surrendered before replacements will be issued. 13.

Meetings of Noteholders, Modification, Waiver and Substitution

a) Meetings of Noteholders: The Trust Deed contains, inter alia, provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including, inter alia, provisions governing the passing of resolutions by Noteholders and the modification of any provisions of these Conditions or any relevant provisions of the Trust Deed. All meetings of holders of Notes will be held in accordance with applicable provisions of Italian law in force at the time. In accordance with Article 2415 of the Italian civil code, the meeting of Noteholders is empowered to resolve upon the following matters: (i) the appointment and revocation of a joint representative (rappresentante comune) of the Noteholders, having the powers and duties set out in Article 2418 of the Italian civil code; (ii) any amendment to these Conditions; (iii) motions for composition with creditors (concordato) of the Issuer; (iv) establishment of a fund for the expenses necessary for the protection of the common interests of the Noteholders and the related statements of account; and (v) on any other matter of common interest to the Noteholders. Such a meeting may be convened by the Board of Directors of the Issuer, by the joint representative of the Noteholders or, subject to any mandatory provisions of Italian law, the Trustee (subject to it being indemnified and/or secured and /or prefunded to its satisfaction) when the Board of Directors, the joint representative or, subject to any mandatory provisions of Italian law, the Trustee, as the case may be, deems it necessary or appropriate, and such a meeting shall be convened when a request is made by the Noteholders holding not less than one-twentieth in principal amount of the Notes for the time being outstanding, in each case in accordance with Article 2415 of the Italian civil code. According to the Italian civil code, the vote required to pass a resolution by the Noteholders’ meeting will be (a) in the case of the first meeting, one or more Persons that hold or represent holders of more than one half of the aggregate principal amount of the outstanding Notes, and (b) in the case of the second and any further adjourned meeting, one or more Persons that hold or represent holders of at least two-thirds of the aggregate principal amount of the outstanding Notes so present or represented at such meeting. Any such second or further adjourned meeting will be validly held if there are one or more Persons present that hold or represent holders of more than one-third of the aggregate principal amount of the outstanding Notes; provided, however, that the Issuer’s by-laws may provide for a higher quorum (to the extent permitted under Italian law). If the business of such meeting includes consideration of any matter provided under Article 2415 paragraph 1, item 2 of the Italian civil code, such resolution may only be approved at any meeting by a resolution passed at a meeting of holders of the Notes by one or more Persons present that hold or represent holders of not less than one-half of the aggregate principal amount of the outstanding Notes, unless a different majority is required pursuant to Article 2369, paragraph 3 of the Italian civil code. The Notes shall not entitle the Issuer to participate and vote in the Noteholders’ meetings. Directors and statutory auditors of the Issuer shall be entitled to attend the Noteholders’ meetings. The resolutions validly adopted in meetings are binding on Noteholders whether present or not.

EMEA 100217621 v16

32

In the event the Noteholders’ meeting fails to appoint a joint representative (rappresentante comune), such appointment may be made at the request of any Noteholder or at the request of the Board of Directors of the Issuer by the president of the court of the venue where the registered office of the Issuer is located. Any meeting shall be held on a date and at a time and place approved by the Trustee. b) Modification and Waiver: The Trustee may agree, without the consent of the Noteholders or Couponholders, to (i) any modification of any of the provisions of the Trust Deed that is of a formal, minor or technical nature or is made to correct a manifest error, and (ii) any other modification (except as mentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach, of any of the provisions of the Trust Deed that is in the opinion of the Trustee not materially prejudicial to the interests of the Noteholders. Any such modification, authorisation or waiver shall be binding on the Noteholders and the Couponholders and, if the Trustee so requires, such modification shall be notified to the Noteholders as soon as practicable. Any modification or waiver should be subject to such terms and conditions (if any) as the Trustee may determine. c) Entitlement of the Trustee: In connection with the exercise of its functions (including but not limited to those referred to in this Condition) the Trustee shall have regard to the interests of the Noteholders as a class and shall not have regard to the consequences of such exercise for individual Noteholders or Couponholders and the Trustee shall not be entitled to require, nor shall any Noteholder or Couponholder be entitled to claim, from the Issuer any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders or Couponholders. d) Substitution: The Trust Deed contains provisions permitting the Trustee to agree in circumstances including, but not limited to circumstances which would constitute a Permitted Reorganisation, subject to such other conditions as the Trustee may in its absolute discretion require, but without the consent of the Noteholders or the Couponholders, to the substitution of the Issuer’s successor, transferee or assignee or any Subsidiary of the Issuer or its successor, transferee or assignee in place of the Issuer, or of any previous substituted Person, as principal debtor under the Trust Deed and the Notes. In the case of such a substitution, the Trustee may agree, without the consent of the Noteholders or the Couponholders, to a change of the law governing the Notes, the Coupons, the Talons and/or the Trust Deed provided that such change of the law governing the Notes would not in the opinion of the Trustee be materially prejudicial to the interests of the Noteholders. In addition, notice of any such substitution shall be given to the Irish Stock Exchange and published in accordance with Condition 17 (Notices). 14.

Enforcement

At any time after the Notes become due and payable, the Trustee may, at its discretion and without further notice, institute such actions, steps or proceedings against the Issuer as it may think fit to enforce the terms of the Trust Deed, the Notes and the Coupons, but it need not take any such actions, steps or proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholders holding at least one-fifth in principal amount of the Notes outstanding, and (b) it shall have been indemnified and/or secured and/or prefunded to its satisfaction. No Noteholder or Couponholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing. 15.

Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer and any entity related to the Issuer without accounting for any profit. The Trustee may rely without liability to Noteholders or Couponholders on a report, confirmation or certificate or any advice of any accountants, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any EMEA 100217621 v16

33

engagement letter relating thereto entered into by the Trustee or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such report, confirmation or certificate or advice and such report, confirmation or certificate or advice shall be binding on the Issuer, the Trustee and the Noteholders. 16.

Further Issues

The Issuer may from time to time without the consent of the Noteholders or Couponholders create and issue further securities either having the same terms and conditions as the Notes in all respects (or in all respects except for the first payment of interest on them) and so that such further issue shall be consolidated and form a single series with the outstanding securities of any series (including the Notes) or upon such terms as the Issuer may determine at the time of their issue. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Notes. Any further securities forming a single series with the outstanding securities of any series (including the Notes) constituted by the Trust Deed or any deed supplemental to it shall, and any other securities may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. 17.

Notices

Notices to the Noteholders shall be valid if published in a leading English language daily newspaper (which is expected to be the Financial Times) and, so long as the Notes are admitted to trading on the Irish Stock Exchange and it is a requirement of applicable law or regulations, a leading newspaper having general circulation in the Republic of Ireland or published on the website of the Irish Stock Exchange (www.ise.ie) or in either case, if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe. Any such notice shall be deemed to have been given on the date of first publication (or if required to be published in more than one newspaper, on the first date on which publication shall have been made in all the required newspapers). Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the Noteholders in accordance with this Condition. 18.

Contracts (Rights of Third Parties) Act 1999

No Person shall have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999. 19.

Governing Law

a) Governing Law: The Trust Deed, the Notes and the Coupons and any non-contractual obligations arising out of or in connection with them are governed by and shall be construed in accordance with English law. Condition 13(a) and the provisions of Schedule 3 of the Trust Deed which relate to the convening of meetings of Noteholders and the appointment of a Noteholders’ representative are subject to compliance with Italian law. b) Jurisdiction: The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with the Notes or the Coupons and accordingly any legal action or proceedings arising out of or in connection with the Notes or the Coupons (“Proceedings”) may be brought in such courts. Pursuant to the Trust Deed, the Issuer has irrevocably submitted to the jurisdiction of such courts. c) Agent for Service of Process: Pursuant to the Trust Deed, the Issuer has irrevocably appointed an agent in England to receive service of process in any Proceedings in England based on any of the Notes or the Coupons.

EMEA 100217621 v16

34

OVERVIEW OF PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM The Notes will initially be in the form of a Temporary Global Note which will be deposited on or around the Issue Date with a common safekeeper for Euroclear and Clearstream, Luxembourg. The Notes will be issued in new global note (“NGN”) form. On 13 June 2006, the European Central Bank (the “ECB”) announced that Notes in NGN form are in compliance with the “Standards for the use of EU securities settlement systems in ESCB credit operations” of the central banking system for the euro (the “Eurosystem”), provided that certain other criteria are fulfilled. At the same time the ECB also announced that arrangements for Notes in NGN form will be offered by Euroclear and Clearstream, Luxembourg as of 30 June 2006 and that debt securities in global bearer form issued through Euroclear and Clearstream, Luxembourg after 31 December 2006, will only be eligible as collateral for Eurosystem operations if the NGN form is used. The Notes are intended to be held in a manner which would allow Eurosystem eligibility – that is, in a manner which would allow the Notes to be recognised as eligible collateral for Eurosystem monetary policy and intra-day credit operations by the Eurosystem either upon issue or at any or all times during their life. Such recognition will depend upon satisfaction of the Eurosystem eligibility criteria. As at the date of this Prospectus, one of the Eurosystem eligibility criteria for debt securities is an investment grade rating and, accordingly, as the Notes are unrated, they are not currently expected to satisfy the requirements for Eurosystem eligibility. The Temporary Global Note will be exchangeable in whole or in part for interests in the Permanent Global Note not earlier than 40 days after the Issue Date upon certification as to non-U.S. beneficial ownership. No payments will be made under the Temporary Global Note unless exchange for interests in the Permanent Global Note is improperly withheld or refused. In addition, interest payments in respect of the Notes cannot be collected without such certification of non-U.S. beneficial ownership. The Permanent Global Note will become exchangeable in whole, but not in part, for Notes in definitive form (“Definitive Notes”) in the denomination of €100,000 each and integral multiples of €1,000 in excess thereof, up to and including €199,000 each, at the request of the bearer of the Permanent Global Note against presentation and surrender of the Permanent Global Note to the Paying Agent if either of the following events (each, an “Exchange Event”) occurs: (a) Euroclear or Clearstream, Luxembourg is closed for business for a continuous period of 14 days (other than by reason of legal holidays) or announces an intention permanently to cease business or (b) any of the circumstances described in Condition 10 (Events of Default). So long as the Notes are represented by a Global Note and the relevant clearing system(s) so permit, the Notes will be tradeable only in the minimum authorised denomination of €100,000 and higher integral multiples of €1,000, notwithstanding that no Definitive Notes will be issued with a denomination above €199,000. Whenever the Permanent Global Note is to be exchanged for Definitive Notes, the Issuer shall procure the prompt delivery (free of charge to the bearer) of such Definitive Notes, duly authenticated and with Coupons attached, in an aggregate principal amount equal to the principal amount of the Permanent Global Note to the bearer of the Permanent Global Note against the surrender of the Permanent Global Note to or to the order of the Paying Agent within 30 days of the occurrence of the relevant Exchange Event. In addition, the Temporary Global Note and the Permanent Global Note will contain provisions which modify the Conditions as they apply to the Temporary Global Note and the Permanent Global Note. The following is a summary of certain of those provisions: Payments All payments in respect of the Temporary Global Note and the Permanent Global Note will be made against presentation and (in the case of payment of principal in full with all interest accrued thereon) surrender of the Temporary Global Note or (as the case may be) the Permanent Global Note to or to the order of the Paying Agent and will be effective to satisfy and discharge the corresponding liabilities of the Issuer in respect of the Notes. On each occasion on which a payment of principal or interest is made in respect of the Temporary Global Note or (as the case may be) the Permanent Global Note, the Issuer shall procure that the payment is entered pro rata in the records of Euroclear and Clearstream, Luxembourg. EMEA 100217621 v16

35

Payments on business days In the case of all payments made in respect of the Temporary Global Note and the Permanent Global Note “business day” means any day on which the TARGET System is open. Exercise of put option In order to exercise the option contained in Condition 7(d) (Redemption at the option of Noteholders upon a Change of Control) the bearer of the Permanent Global Note must, within the period specified in the Conditions for the deposit of the relevant Note and put notice, give written notice of such exercise to the Paying Agent specifying the principal amount of Notes in respect of which such option is being exercised. Any such notice will be irrevocable and may not be withdrawn. Notices Notwithstanding Condition 17 (Notices), while all the Notes are represented by the Permanent Global Note (or, as the case may be, by the Permanent Global Note and/or the Temporary Global Note) and the Permanent Global Note is (or, as the case may be, the Permanent Global Note and/or the Temporary Global Note are) deposited with a common safekeeper for Euroclear and Clearstream, Luxembourg, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and Clearstream, Luxembourg and, in any case, such notices shall be deemed to have been given to the Noteholders in accordance with Condition 17 (Notices) on the date of delivery to Euroclear and Clearstream, Luxembourg, except that, for so long as such Notes are admitted to trading on the Irish Stock Exchange and it is a requirement of applicable law or regulations, such notices shall be filed with the Companies Announcement Office of the Irish Stock Exchange.

EMEA 100217621 v16

36

USE OF PROCEEDS The net proceeds of the issue of the Notes will be used for general corporate purposes, including, without limitation, the acquisition and financing (including, without limitation, any leasing transaction), renegotiations and/or refinancing of aircraft and related parts carried out in compliance with the business plan.

EMEA 100217621 v16

37

DESCRIPTION OF THE ISSUER Overview Alitalia – Società Aerea Italiana S.p.A. is a company limited by shares (società per azioni) incorporated under Italian law on 24 September 2014, with termination date on 31 December 2050. Its registered office and principal place of business is at Fiumicino (Rome), via A. Nassetti, Pal. Alfa, 00054 and it is registered with the Companies’ Register of Rome under registration number 13029381004. The Issuer may be contacted by telephone on +39 0665631 and by email at the following certified email address: [email protected]. The Issuer commenced operations on 1 January 2015, following the contribution by CAI of the Going Concern to the Issuer. The Issuer is the parent company and main operating entity of the group (the “Group”). The Group generates most of its revenues from its air carrier business, which consists of passenger operations both in Europe and internationally. The Group’s hub is Aeroporto Internazionale Leonardo da Vinci in Rome, also known as Rome-Fiumicino airport (“Fiumicino”). The Group maintains a well-balanced and extensive route network both directly and through alliances and codeshare arrangements, flying to 339 destinations in 108 countries as of 30 April 2015. The Group currently operates regularly scheduled flights to 28 airports in Italy, 54 airports in Europe and serves 36 destinations in 34 countries and regions outside Europe. The Group is a party to the Joint Venture and coordinates flights and shares revenues and costs in respect of its transatlantic route network with the Joint Venture parties. In addition, the Group is a member of the SkyTeam alliance, a global airline alliance which includes 20 members and serves 1,052 destinations. The following table shows selected consolidated financial and operating data relating to CAI for the years ended 31 December 2013 and 2014 and relating to the Issuer for the quarter ended 31 March 2015: 31 March 2015(*) (€) Financial data: Revenue (millions)..................................................................... EBITDAR(millions)(2) ............................................................... Long-term debt (millions) .......................................................... Total Assets (millions) ............................................................... Net Debt (millions) .................................................................... Financial metrics are prepared under Italian GAAP

590 (83) 131 2,735 66 31 March 2015

Operating data: Operating fleet (aircraft) ............................................................ Flights ........................................................................................ Destinations ............................................................................... Capacity (thousands of seats)..................................................... Passengers (thousands) .............................................................. ASKs (billions)(3) ....................................................................... RPKs (billions)(4) ....................................................................... Seat load factor (5) ...................................................................... Passenger block hours (6) ............................................................

118 46,980 104 6,572 4,554 9.2 6.7 72.5% 91,059

31 December 2014 (audited)(1)(€) 3,181 124 398 2,595 269 31 December 2014

125 214,187 104 31,021 22,445 44.8 34.0 75.9% 420,818

31 December 2013 (audited)(1)(€) 3,406 172 492 2,471 925 31 December 2013

129 217,309 99 32,183 22,688 45.6 34.1 74.8% 432,519

______________________

Note: (*) Limited review in accordance with International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”, performed by Deloitte & Touche S.p.A. (1) The term “audited” is referred only to financial data included in consolidated financial statements of CAI, which are “Revenue”, “Long Term Debt” and “Total Assets”. (2) Earnings before interest, tax, depreciation, amortisation and rent. EBITDAR and similar measures are calculated and used differently by different companies and, therefore, should not be relied upon for the purpose of comparing companies who use this metric. EBITDAR does not include the EMEA 100217621 v16

38

(3)

(4)

(5) (6)

profits deriving from the disposal of Alitalia Loyalty S.p.A. as well as certain expenses which are considered extraordinary items under the Italian GAAP accounting principles adopted in the preparation of the interim financial statements as at and for the quarter ended 31 March 2015. ASKs, or available seat kilometres, are the number of seats available for sale multiplied by the number of kilometres flown (only scheduled flights). RPKs, or revenue passenger kilometres, are the average number of passengers multiplied by the number of kilometres flown (only scheduled flights). The seat load factor is the ratio of RPK to ASK. A block hour is defined as the flight time plus any taxi time at origin and destination.

History The Issuer commenced operations on 1 January 2015, following completion of the transaction (the “Transaction”) involving the Issuer’s indirect shareholders CAI and Etihad Airways P.S.J.C. (“Etihad Airways”). The Transaction involved the following main steps: (i)

pursuant to a deed of contribution dated 22 December 2014 entered into between CAI and the Issuer (the “Deed of Contribution”), CAI made a contribution by way of a bulk transfer to the Issuer of the Going Concern, including all of its fleet, employees, trademark, cash and contracts, in order to make an in-kind subscription to the Issuer’s capital increase of €403.3 million. CAI received a 51% equity stake in the Issuer in exchange for its contribution of the Going Concern, which it contributed to its wholly owned subsidiary MidCo S.p.A. on 23 December 2014; and

(ii)

Etihad Airways’ wholly owned subsidiary Etihad Investment Holding Company LLC (“EIHC”) subscribed to an additional capital increase of the Issuer by injecting Euro €387.5 million in cash and received a 49% equity stake in the Issuer in exchange for this investment. Etihad Airways also acquired, through its controlled subsidiary Global Loyalty Company LLC, a 75% stake in Alitalia Loyalty S.p.A. (in which the remaining 25% of the share capital is held by the Issuer, and which operates the “MilleMiglia” frequent flyer programme (“MilleMiglia”)) for €112.5 million and committed to acquire in 2016 5 pairs of slots at London Heathrow airport valued at €60 million, to be leased back to the Issuer on an arm’s length basis.

As a result of the Transaction, CAI indirectly holds (through its wholly owned subsidiary MidCo S.p.A.) 51% of the Issuer’s share capital and Etihad Airways indirectly holds (through EIHC) the remaining 49%. Ring-fencing of CAI’s financial indebtedness and liabilities Pursuant to the Deed of Contribution, in the context of the Transaction CAI retained all of its outstanding financial indebtedness not related to aircraft financing and leasing, amounting to €531 million in total, and certain additional liabilities and litigation exposures (whether pending, potential or undisclosed) not relating to the Going Concern (the “Retained Liabilities”). The Retained Liabilities were explicitly excluded from the Going Concern and, accordingly, the Going Concern is ring-fenced against the Retained Liabilities pursuant to Italian Law. In addition, CAI agreed to indemnify the Issuer in the unlikely event that the Issuer should be liable for the Retained Liabilities. In the context of the Transaction, CAI's financial indebtedness was restructured through an out of court agreement with the relevant creditors (i.e. Italian banks that are shareholders of CAI and, indirectly, the Issuer). Corporate Structure The chart below shows the Group structure as at the date of this Prospectus:

EMEA 100217621 v16

39

CAI and CAI-controlled entities. EIHC and EIHC-controlled entities. Non-controlling investments.

The Issuer The Issuer is the main operating entity of the Group. Principal Subsidiaries Alitalia CityLiner S.p.A. ("CityLiner”) CityLiner operates short haul domestic and international routes with low passenger volumes (for example, between Milan Linate airport (“Linate”) and London City airport) using regional airliners and carries passengers from minor airports to the Group's hub Fiumicino. CityLiner holds a separate air operator certificate (“AOC”) from the AOC held by the Issuer. Challey Limited Challey Limited is the sub-holding company of the Group’s Irish-registered special purpose vehicles (the “Challey Entities”) which hold the Group’s fleet. Strategic Alliances/Cooperation Etihad Airways The Group expects to benefit from network and operational synergies with Etihad Airways and Etihad Airways’ airline partners. Network synergies will allow the Group to increase the number of destinations served by it and access new markets, through the combination of the Group’s flight networks with those of Etihad Airways and Etihad Airways’ equity partners. Operational synergies include the benefit of increased economies of scale of Etihad Airways and Etihad Airways’ airline partners, particularly in relation to their strategic relationships with suppliers and lessors. Thanks to such synergies, through specific arrangements with Etihad Airways the Group has already achieved a reduction in the costs incurred in respect of aircraft leases, the procurement of equipment for aircraft retrofits and the purchase of IT systems and technologies that will allow the Group to benefit from Etihad Airways’ distribution, revenue management and operational platforms. The Group will collaborate with Etihad Airways and Etihad Airways’ airline partners by providing certain services, including training to pilots employed by Etihad Airways’ partner airlines (for example, training to

EMEA 100217621 v16

40

130 pilots employed by Air Berlin in 2015) as well as ground handling services (for example, to Air Serbia and Aer Lingus). SkyTeam Alliance The Group is a member of the SkyTeam alliance with Aeroflot, Aerolíneas Argentinas, Aeromexico, Air Europa, Air France, China Airlines, China Eastern Airlines, China Southern Airlines, Czech Airlines, Delta Air Lines, Garuda Indonesia, Kenya Airways, KLM Royal Dutch Airlines, Korean Air, Middle East Airlines, Saudia, Tarom, Vietnam Airlines and Xiamen Airlines, collectively serving 1,052 destinations. The SkyTeam alliance provides technology platforms and aligns standards, ensuring a seamless and consistent delivery of service across the globe. The SkyTeam alliance is designed to integrate the Group’s customer propositions. Air France-KLM and Delta Airlines The Group is a party to the Joint Venture. The Joint Venture allows pooling and sharing of certain revenues and costs, expanded codeshare arrangements, reciprocal arrangements for frequent flyer programmes and cooperation in other areas. The Joint Venture parties are also able to provide customers with a greater choice of routes and departure times. Under the Joint Venture, each airline collects the revenue from the flights that it operates regardless of which airline the customer used to book the flight, and then makes a balancing transfer payment (or receipt) to share the overall revenue and relevant costs in the agreed proportions. Partnership with Air France-KLM The Issuer has announced that in January 2017 it will not renew the partnership agreement and ancillary agreements entered into with Air France-KLM, which govern passenger services operated by these airlines (in particular, the coordination of flights and the sharing of revenues and costs) in respect of the routes from Italy (Milan and Rome) to Paris and Amsterdam and the marketing and sale of the Group’s cargo belly services undertaken by Air France-KLM. Codeshare Agreements Codeshare agreements allow airlines operating as “marketing carriers” to sell tickets on flights operated by other airlines, so-called “operating carriers”, coded with the marketing carriers’ flight number. Operating carriers will also sell seats on the same flights, coded with their own flight number. This means that flights operated under codeshare agreements by operating carriers are also included within the relevant marketing carriers’ networks. An operating carrier is entitled to the proceeds of tickets sold both by it and the marketing carrier on the routes it operates, net of the marketing carrier’s commission. The Group has codeshare agreements with a number of airlines, some of which are also members of the SkyTeam alliance, covering codesharing, links between frequent flyer programmes and various other activities. The Group offers codeshare services on selected routes with most SkyTeam member airlines as well as on routes with Etihad Airways and Etihad Airways’ equity partners, in particular Air Berlin and Etihad Regional. Strategies The Group has developed a three-year business plan based on reorganising its business and rebuilding its customer proposition by optimising its strengths, in order to create a sustainable and profitable business and strengthen its competitive position. The Group’s brand, aircraft livery and visual identity have been upgraded and repositioned in order to create a single brand for Italy and abroad which works across all communication phases and platforms. The Group will also leverage the “Made in Italy” brand and key assets, with respect to high quality and style of the products and the level of service offered, in order to enhance guest experience. In addition, a new customer division has been created encompassing in-flight service, customer excellence training, performance management and recruitment. The key objective of this new division is to develop a customer-focused culture enhancing personnel’s skills and defining a customer strategy to allow the Group to compete more effectively in the domestic, international and intercontinental markets and, in particular, to regain its leading position in the Italian market. The Group intends to achieve its business plan through the following key strategies: EMEA 100217621 v16

41

Network The Group has already exited a number of non-performing short-haul point to point and bypass routes, optimised the size of its narrowbody fleet and reshaped its network by optimising its connectivity and links to Etihad Airways’ and Etihad Airways’ equity partners’ networks. The Group is planning on investing in selected long-haul routes from Fiumicino and Milano Malpensa airport (“Malpensa”) as well as introducing new connections between other Italian cities and Abu Dhabi. According to its business plan, the Group’s domestic, international and intercontinental operations will be organised as follows: •

Domestic: while loss making routes and flights are reduced, Fiumicino will remain the Group’s longhaul hub. Measures will be implemented to enable more effective competition against competing low cost carriers while more focus will be placed on connecting traffic feeding the hub, thus avoiding competition from low cost carriers. The Group’s operations at Linate will be improved, especially in respect of international routes, in order to leverage the airport’s proximity to Milan.

•

International: the Group will focus on Fiumicino as its long-haul hub in order to serve the Rome catchment and connect domestic networks. The Group will serve the Milan catchment through Linate, from where it will operate new European routes, and will also leverage joint routes operated from Fiumicino and Linate. The Group has also provided Air Berlin with additional flights from Linate so that they can jointly build a competitive proposition on the high value Italy – Germany market.

•

Intercontinental: the Group will focus on the development of Fiumicino as its prime long-haul hub and improve Northern Italian services from Malpensa and Venice Marco Polo airports on a strategic point to point basis.

Strategic mix of destinations served The Group serves a mixture of airports in, or in close proximity to, major European and international cities as well as airports in tourist destinations in order to satisfy both business and leisure travellers, and will continue to constantly review its network in order to strategically allocate capacity to routes which provide optimal profitability. The Group’s cooperation with Etihad Airways and Etihad Airways’ equity partners will lead to an increase in the number of destinations served by the Group. By combining its flight networks with those of Etihad Airways and Etihad Airways’ equity partners, the Group expects to be able to increase the number of flights it operates and to serve destinations in over 40 markets where it has not previously operated, in Central, East and South Africa, South-East Asia, central and southern China and Australia. The Group intends to take advantage of Etihad Airways’ Abu Dhabi hub as a connection point to the Southeast and Australasia and has introduced new long-haul flights to this strategic hub from Fiumicino, Malpensa and Venice Marco Polo airport, with associated benefits from Etihad Airways’ customer bases. Positioning the Group as a full service carrier for premium passengers The Group is continuing to promote its brand image as a full service carrier. The Group’s network is designed to offer the most convenient proposition to its high value customers with an unrivalled scale of direct services to key global cities from its hub Fiumicino. In addition, the Group will use its quality of service, flight frequency and on-time performance to position itself as a “premium service airline” and maintain its stronghold on its targeted routes. The Group also invests in competitive onboard products and optimises its mix of traffic, passenger yields and load factors. The Group will continue to make full use of MilleMiglia in developing its business and will seek to continue to increase the number of members in this programme.

EMEA 100217621 v16

42

Maintaining a cost-efficient structure The Group will continue to monitor its costs closely, in particular: •

Aircraft operating expenses Taking into account lease payments and maintenance expenses, the Group monitors the average age of its aircraft with the aim of maintaining an optimal composition of new and older aircraft. The Group will continue to closely monitor the operating expenses of its aircraft and make any required aircraft replacements and adjustments.

•

Airport costs The Group will continue to target airports with large catchment areas in order to serve potentially large passenger volumes. The Group also expects to benefit from Etihad Airways’ economies of scale by being able to negotiate favourable terms with airport operators as well as with other ground service providers used by Etihad Airways.

•

Personnel costs The Group will continue to closely monitor its personnel costs.

•

Customer service costs The Group intends to reinvest in the customer experience in order to provide passengers with a comfortable travel experience at competitive prices. The Group’s aim is to limit costs while driving a return on its investment, in particular by closely monitoring the results of costs incurred in providing additional services (such as high quality food and drink). The Group will continue to provide additional services, or will introduce new services, where the cost of providing such services is outweighed by an increase in the demand for the Group’s flights and customer satisfaction.

Providing complete coverage for Expo 2015 According to the Issuer’s management’s estimate, the Group and Etihad Airways are the official global airline carriers of Expo 2015, the universal exhibition currently being hosted in Milan until 31 October 2015 under the theme “feeding the planet, energy for life”. According to the Issuer’s management’s estimate, an estimated 20 million visitors are expected to visit Expo 2015, with more than a third travelling by plane. The Group will provide complete coverage for Expo 2015, and to this end has started operating flights between Milan and Abu Dhabi in order to connect its flights with Etihad Airways’ services throughout the Middle East and in India, Southeast Asia and Africa. Business operations The Group’s core business is the air carrier business, which accounted for more than 85% per cent. of the Group’s total revenues as at 30 April 2015. The Group also generates revenues from MilleMiglia, on board sales of duty free merchandise and other ancillary revenue streams. Air Carrier Business As at 30 April 2015, the Group flew to 339 destinations in 108 countries worldwide. During the year ended 31 December 2014, the Group carried 22.4 million passengers. The Group offers its customers a broad range of services for domestic (European) and international short-haul and long-haul flights, and serves a large geographical area. The number of principal destinations served by the Group is as follows: the Americas (9); Europe (54); Africa (7); the Middle East and South Asia (5); and Asia Pacific (3). Long-haul Passenger Operations The Group has an extensive international route network. It currently operates flights directly connecting Fiumicino and Malpensa to 13 long-haul destinations and, through Etihad Airways’ Abu Dhabi hub, also to EMEA 100217621 v16

43

destinations served by Etihad Airways and Etihad Airways’ equity partners. The Group serves 34 countries and regions and over 36 destinations outside Europe. The Group’s international network covers 7 geographical regions: North America, Latin America, the Middle East, South Asia, North Africa, Asia Pacific and Eastern Europe. The Group focuses on long-haul routes with high traffic volumes where it has an established position. In accordance with its business plan, the Group will continue to review its routes on the basis of a profitability analysis of each route in order to improve its network and enable passengers to connect more conveniently to and from Rome. Short-haul Passenger Operations The Group has an extensive short-haul route network across Italy and Europe. It currently operates flights connecting Italy to 29 European destinations. Including codeshare flights operated by its partner airlines, the Group serves 24 European countries and regions and 100 destinations. The Group’s Fiumicino hub and Linate enable the Group to link European cities with other major international cities, increasing the availability of connections to and from regional cities in Europe and Italy. The Group expects to increase the number of flights on some routes between Fiumicino and Linate and destinations in Europe. This development of the short-haul network out of Fiumicino and Linate will be primarily focused on improving connectivity to the Group’s long-haul operation. The Group also aims to improve its connection network within Europe by enhancing existing partnerships with airlines. Other businesses In addition to its air carrier business, the Group has a number of other businesses that provide it with additional revenues. These include the Group’s: •

ground handling services;

•

maintenance services;

•

revenue streams from sales of duty free merchandise which are purchased on board; and

•

other ancillary revenue streams from travel insurance, car hire and accommodation services booked through its website and at its service centres, the sale of advertising space in the Group’s on board magazine and third party pilot training programmes offered by it.

Ground handling services The Group provides ground handling services at Fiumicino, Linate and Reggio Calabria airport. Such services include, inter alia, passenger and baggage handling, catering and aircraft cleaning and de-icing. In all other airports, the Group uses third-party service providers available onsite or airport operators, which have received adequate training on the Group’s equipment and procedures and are regularly audited by the Group. In order to avoid duplication of costs and operate more efficiently, the Group and its airline partners are discussing the potential implementation of a system which would involve using a joint ground handling service provider, where at least two of them operate at the same airport. Services to be provided by such joint ground handling service provider, which would receive training on the Group’s equipment, would include, inter alia, check-in, catering, baggage-handling and aircraft de-icing services. Training The Group operates flight training facilities for its own pilots as well as third parties at its training academy in Rome, where it operates B777, A320 and A330 flight simulators and offers a range of simulated aircraft types and type-related courses, covering narrow-body as well as wide-body commercial aircraft. The Group’s pilots must complete the simulator training programme twice a year. MilleMiglia MilleMiglia builds customer loyalty by offering awards and services to programme participants. Members earn mileage credit for flights operated by the Group, airlines in SkyTeam and certain other airlines that EMEA 100217621 v16

44

participate in the programme. Miles can also be earned by purchasing the goods and services of the Group’s network of non-airline partners, such as credit card issuers, retail merchants, hotels and car rental companies. Mileage credits can be redeemed towards both travel and non-travel awards. As at 31 March 2015, there were 4,662,334 active members in MilleMiglia. As a result of the Transaction, Alitalia Loyalty S.p.A. (the company which operates MilleMiglia) is now majority controlled and owned by Etihad Airways’ wholly owned subsidiary Global Loyalty Company LLC. Fleet The Group is committed to operating a modern fleet and places significant emphasis on low-fuel consumption and noise emissions and minimising environmental impact. As of 30 April 2015, the Group operated a total of 22 wide-body aircraft and 109 narrow-body aircraft. Of these aircraft, 87 were leased under operating leases, one was leased under finance leases and 43 were owned by the Group, as shown in the following table:

Number Aircraft model E190................................................................................................................. E175................................................................................................................. A319 ................................................................................................................ A320 ................................................................................................................ A321 ................................................................................................................ A330-200 ......................................................................................................... B777-200ER .................................................................................................... Total ................................................................................................................

As of 30 April 2015 Of which: Of which: Operating Finance Lease Lease

5 15 22 52 15 12 10 131

5 15 10 32 9 12 4 87

1

1

Of which: Owned

12 19 6 6 43

The Group operates the aircraft previously belonging to CAI which, with an average age of 8.5 years as of 30 April 2015, according to the Issuer’s management’s estimate, is one of the youngest operating fleets in Europe. Fleet Plan The Group, after the phase-out of 14 narrow-body aircraft (see “— Financing Arrangements”), the phase-in of two A330-200 and the purchase from lessors of four ERJ and one A330 already operated by the Group, at the end of 2015 will operate with a fleet comprising 120 aircraft in total, as shown in the following table:

Aircraft model E190................................................................................................................. E175................................................................................................................. A319 ................................................................................................................ A320 ................................................................................................................ A321 ................................................................................................................ A330-200 ......................................................................................................... B777-200ER .................................................................................................... Total ................................................................................................................

Number 5 15 22 42 12 14 10 120

As of 31 December 2015 Of which: Of which: Operating Finance Lease Lease 3 13 10 31 1 7 13 4 81 1

Of which: Owned 2 2 12 10 5 1 6 38

Following implementation of the above plan, the average age of the fleet will be of 8.9 years. Based on its current Business Plan 2015-18, the Group foresees the following phase-ins: Aircraft model A320 ................................................................................................................ A330-200 ......................................................................................................... B777-200ER .................................................................................................... Total.................................................................................................................

EMEA 100217621 v16

45

2016 1 1 2

2017 1 1 1 3

2018 1 1 1 3

Total ‘16‘18 3 2 3 8

The Group benefits in part from being able to combine its own aircraft orders with those of Etihad Airways. The decision to lease or buy the aircraft will be made according to market conditions and network plans. Leases The Group has entered, and may enter in the future, into wet lease agreements pursuant to which other airline carriers (“wet lessors”) grant wet leases (i.e. leases of aircraft with crew) of aircraft to the Group. In turn, the Group grants to the same wet lessors dry leases (i.e. leases of aircraft without crew) of aircraft leased to the Group under the wet leases. Operational Centres and Services Operational Centres Italy The Group’s principal place of business is Fiumicino. The Group also operates from Linate and Malpensa. Offices, maintenance hangars, storage and other support facilities used by the Group at Fiumicino, Linate, Malpensa and other Italian airports are either owned by the Group or leased to the Group from the respective airport owners. In addition, the Group occupies space and airport desks under lease or licence in airports throughout Italy. Overseas At other overseas airports, the Group generally obtains premises on a short-term basis from the relevant authorities. Operational Services At Fiumicino, the Group provides most of the operational services it requires for handling passengers and cargo. At other Italian airports and at overseas airports, the Group subcontracts the provision of the majority of its ground handling requirements. Runway, ramp and terminal facilities are provided by airport operators that charge airlines for the use of these facilities, principally through landing, parking and passenger charges. Navigation services are provided to the aircraft by countries through whose airspace they fly or by international bodies. Navigation charges are generally based on distance flown and weight of aircraft. Sales and Marketing The Group sells seats on its flights through all major distribution channels, which include its own and third parties’ websites, its 24-hour service centre, airport ticket offices, charter and package tour operators and travel agencies. The Group seeks to promote its business and brand through a cohesive strategy covering public relations, sponsorships, events and advertising. For example, the Group has set up a pavilion inside the Expo 2015 where, alongside Etihad Airways, it carries out a marketing campaign to maximise its visibility by providing personalised Expo 2015 livery and on-board and ground communication. Financing Arrangements The Group’s debt as of 30 April 2015 amounted to €342 million, which was split between €261 long term aircraft financings/capital lease liabilities and €81 million short term debt relating to the purchase of 4 Embraer from a lessor in May 2015 (which the Group intends to replace in the short term with a term loan). €242 million of the long term debt relates to the Challey Entities and is secured on 31 aircraft owned by the various Challey Entities. The following table shows the allocation of secured third party debt to the Challey Entities as of 30 April 2015:

EMEA 100217621 v16

46

Secured Aircraft

Debt 8.5 million 20.7 million 11 million 22.3 million 11.1 million 11.5 million 11 million 146.1 million

APC1 Ltd ........................................................................................................................... APC4 Ltd. .......................................................................................................................... APC5 Ltd ........................................................................................................................... APC6 Ltd ........................................................................................................................... APC7 Ltd ........................................................................................................................... APC8 Ltd ........................................................................................................................... APC9 Ltd ........................................................................................................................... APC12 Ltd .........................................................................................................................

1 2 1 2 1 1 1 22

Agreements have been entered into for the disposal of 14 aircraft owned by the Challey Entities during the course of 2015. As at 30 April 2015, 5 of these aircraft had already been delivered, with the remaining 9 expected to be delivered before year end. Following the disposals, the Challey Entities’ outstanding indebtedness will amount to €154 million, secured on 22 aircraft owned by APC1 Ltd and APC12 Ltd. The following table shows the Group’s long term debt amortisation on a consolidated basis before and after the sale of the 14 aircraft: Outstanding as of 30 April 2015

Until 31 December 2015

€261 million

€128 million

€86 million

€45 million

€2 million

€88 million

€88 million

€0 million

€0 million

€0 million

€173 million

€40 million

€86 million

€45 million

€2 million

Total debt ............................ Related to aircraft in phase out ....................................... Total debt after aircraft phase out .............................

2016

2017

2018

The Challey Entities recently reached an agreement with their principal lender for the extension of their repayment plan relating to €146 million of its outstanding indebtedness as at 30 April 2015 to December 2022, which will substantially improve the financial profile of the Group as foreseen in its 2015-2022 business plan. The following table shows the Group’s revised repayment plan: as of 30 April 2015

until 31 December 2015

Total ...................... €261 million €106 million Related to aircraft in phase out ......................... €88 million €88 million Total debt after aircraft phase out ......................... €173 million €18 million

2016

2017

2018

2019

2020

2021

2022

€31 million

€23 million

€22 million €19 million

€19 million

€19 million

€22 million

€31 million

€23 million

€22 million €19 million

€19 million

€19 million

€22 million

In addition, the Issuer has entered into a €200 million working capital revolving facility agreement and a €100 million factoring facility agreement, both of which are committed for 5 years (until 31 December 2019). Guarantees As of 30 April 2015, the Group granted guarantees, through major Italian banks, in favour of strategic counterparts amounting to €132.4 million in total (approximately 67% to fuel suppliers and the remainder to handlers, lessors and local authorities). Safety The Group’s commitment to safety is the primary priority of its management and employees. Aircraft maintenance, repair and overhaul are critical to the safety and comfort of the Group’s passengers, the efficient use of its aircraft and the optimisation of its fleet utilisation. All aircraft and engines undergo regular inspections and maintenance in accordance with the schedules recommended by manufacturers or approved by aviation authorities.

EMEA 100217621 v16

47

All of the Group’s pilots and aircraft are licensed for flight in accordance with the minimum European Aviation Safety Regulations. This licensing requires special training and is subject to a strict oversight programme. The Group’s training programmes are oriented towards preventing accidents and cover all aspects of flight operations. The Group’s crew members are required to undergo training programme in air and ground safety when they are hired and are tested regularly over the course of their employment. As part of the integration process with Etihad Airways, the Group will need to adopt and provide safety performance indicators and statistics, in accordance with Etihad Airways’ oversight concept. A process will also be undertaken to align audit plans, including all common outstations. Additional support will come from flight data monitoring alignment and safety investigation support, which will be achieved through system sharing. Information and Communication Technology The Group makes extensive use of information and communication technology systems and works together with third-party providers of information and communication technology and similar services, as well as using internally developed software. Competition The Group’s major competitors on domestic routes are EasyJet and Ryanair, with Vueling also increasing its presence on the market. On European routes, the Group’s competitors include Lufthansa, Swiss Austrian and Iberia. On intercontinental routes, the Group mainly competes with Qatar and Turkish Airways on flights to the Middle and Far East and with American Airlines, LATAM and Iberia and the STAR grouping of Lufthansa, United and Swiss on flights to North and South America. Intellectual Property The Group owns a number of intellectual property rights. Its main intellectual property rights are its name and logo. The Group believes that its various patents, including those relating to its online booking system, aircraft seating design, licenses, technical assistance agreements and cross license agreements, are important to its business. Insurance The Group currently maintains passenger liability insurance, employer liability insurance, aircraft insurance for aircraft loss or damage, insurance for pilots’ loss of licence and other business insurance in amounts per occurrence that are consistent with industry standards and that meet the requirements, particularly with respect to its minimum coverage obligations, under Italian law and international air transport treaties. Litigation No member of the Group is currently party to any governmental, legal or arbitration proceedings which, if adversely determined, could have a material adverse effect on the Issuer’s business, financial conditions, results of operations or prospects. The Group is a defendant in a number of minor legal proceedings mainly relating to its air carrier business (for example, passenger claims for cancellation or lost/damaged baggage), which are incidental to its business activities and which the Issuer does not consider to be material, such as pending, threatened or potential passenger or customer claims. Employees As of 30 April 2015, the Group had 11,526 employees, of which approximately 53% belonged to unions.

EMEA 100217621 v16

48

SHAREHOLDERS The following table sets forth certain information with respect to the Issuer’s direct shareholders: Number of shares Shareholders MidCo S.p.A.(1) ....................................................................................................................... Etihad Investment Holding Company LLC (3) ........................................................................ Total .......................................................................................................................................

52,583,614 (2) 50,521,512 (4) 103,105,126

% 51 49 100%

____________ Note: (1) This entity is wholly owned by CAI. (2) Share class: ordinary shares. (3) This entity is wholly owned by Etihad Airways. (4) Share class: special category B shares.

Corporate governance Corporate governance rules for Italian non-listed companies, such as the Issuer, are provided in the Italian Civil Code. Italian corporate governance rules are designed to prevent the risk of abusive exercise of control of controlling shareholders.

EMEA 100217621 v16

49

REGULATORY ENVIRONMENT The air transport industry has historically been subject to significant governmental regulation both internationally and domestically. The Issuer is an air carrier licensed by the Italian civil aviation authority “Ente Nazionale per l’Aviazione Civile” (“ENAC”). Therefore, the regulatory framework in Italy and in the EU is of particular importance to the Group’s operations. The international regulatory framework The regulatory system for international air transport is based upon the general principle that each state has sovereignty over its territory and its air space and has the right to control the operation of air services over its territory. International air transport rights are based primarily on traffic rights, i.e. rights to overfly a certain territory or to land at a specific destination, granted by individual states to other states in bilateral air service or air traffic agreements. In turn, states grant the rights they have been granted in bilateral agreements to the eligible air carriers. In some cases, traffic rights are granted directly to air carries through horizontal and multilateral agreements. Non-scheduled flights, such as charter flights, are subject to restrictions imposed by individual states. Air carriers generally obtain traffic rights for non-scheduled flights from the relevant foreign states. The International Civil Aviation Organization (“ICAO”), a specialised agency of the United Nations, has developed standards and recommended practices covering a wide range of matters, including aircraft operations, personnel licensing, security, accident investigations, navigation services, airport design and operation and environmental protection. Italy is a member of ICAO. The International Air Transport Association (“IATA”), the international trade organisation of airlines with 240 members, provides a forum for the coordination of fares on international routes and for international cooperation in areas such as technical safety, security, navigation services, flight operations and the development of communication standards and administrative procedures. Bilateral agreements and EU multilateral air transport agreements Italy is currently a party to approximately 105 bilateral air traffic agreements. These agreements regulate the designation of airlines and points of call for the operation on specified routes, airline capacity, for passenger and cargo services, operational flexibilities and fare-approval procedures. In addition, the EU and EU member states have concluded air transport agreements, amongst others, with the United States, Canada, Switzerland, Iceland, Norway, Morocco, Georgia, Jordan, Moldova, the states of Western Balkans (Albania, Bosnia and Herzegovina, the former Yugoslav Republic of Macedonia, Montenegro, Serbia and United Nations Interim Administration Mission in Kosovo (UNMIK)) and Israel. Further agreements (for example with Brazil) are under negotiation or awaiting signature. On the basis of these agreements, contracting states grant to designated airlines the right to operate scheduled passenger and air-freight services on specified routes between those states. Most bilateral agreements, including the Air Transport Agreement between the EU, EU member states and the United States, require that airlines must be able to demonstrate majority or substantial ownership and control by nationals of their home state or an EU member state. If, at any time, the Issuer were to no longer be majority owned or controlled by Italian citizens or corporations, or, where the relevant agreement requires majority ownership and control by EU nationals, EU citizens and corporations, the contracting states to the relevant bilateral or multilateral agreements could deny the Issuer traffic rights under such agreements. The Issuer’s articles of association contain provisions which would allow the Issuer to obtain information from its shareholders, refuse to register transfers of its shares or interests in its shares and to force the sale of its shares or interests in its shares by non-EU persons or non-Italian persons (as applicable), should the Issuer’s air traffic rights and air transport licence (“ATL”) be jeopardised. European Union Historically, air traffic between EU member states was regulated by bilateral air traffic agreements. This bilateral regime was progressively liberalised through regulations aimed at establishing common rules for the licensing of air carriers within the EU and permitting EU-licensed air carriers to freely operate services EMEA 100217621 v16

50

between points within the EU. In order to qualify for an EU licence, Article 4 of Regulation (EC) No. 1008/2008 of the European Parliament and of the Council of 24 September 2008 (“Regulation 1008/2008”) requires airlines to have their principal place of business in an EU member state, be principally engaged in air transport activities, be, directly or indirectly, at least 50% owned and effectively controlled by an EU member state and/or nationals of an EU member state and to have persons of good repute as managers. Pursuant to Article 8, Paragraph 1 of Regulation 1008/2008 airlines must be able to demonstrate to the competent licensing authority that they meet the requirements for a licence at all times. The Issuer’s articles of association contain provisions which allow it to ensure compliance with these requirements at all times. Access to traffic routes was initially liberalised by Council Regulation (EEC) No. 2408/92 and, most recently, by Regulation 1008/2008. In 1995, the European Economic Area Agreement extended the air traffic regulation regime to countries which were not EU member states, such as Norway, Iceland and Liechtenstein. Secondary EU aviation legislation also applies to a large extent to Switzerland pursuant to the EU-Switzerland Aviation Agreement of 2002 and following the decisions by the Joint Community/Switzerland Air Transport Committee set up under thereunder. Pursuant to Article 15, Paragraphs 1 and 2 of Regulation 1008/2008, no permit or authorisation by an EU member state is required for the operation of intra-community air services by EU licensed air carriers. The Issuer is, therefore, allowed to exercise traffic rights within the European Economic Area to any destination for both scheduled and chartered flights. Pursuant to Regulation 1008/2008, EU member states may restrict capacity on air traffic routes to distribute traffic more evenly between airports, to respond to sudden unavoidable and unforeseeable problems or for environmental reasons. Such restrictions must not be discriminatory and are subject to review by the European Commission prior to, or, in the case of sudden problems, immediately after their implementation. Regulatory requirements Traffic rights and Operating Permits The Issuer, as all other airlines, must obtain traffic rights to operate passenger and all cargo services. The Issuer has traffic rights in respect of all the routes it currently operates. To operate scheduled and non-scheduled international air services, the Issuer is required to hold an AOC and an ATL, which are granted and subject to any conditions imposed by ENAC. ENAC also issues operating specifications for each aircraft type operated by the Group. Upon completion of the Transaction, CAI’s AOC and ATL were transferred to the Issuer. For its international scheduled and non-scheduled operations, the Group must also obtain slots at airports and overflying clearances in order to operate on international routes. The Group must apply for designation to operate in a country that has a bilateral agreement in place with Italy. The Issuer is a designated carrier in all countries in which it operates. Slot allocation In order to take off from and land at airports, air carriers need airport slots. A slot represents a general authorisation to take off and land at a specific airport at a particular time during a specified time period. Slot allocation at primary airports, including Italian airports, is governed by Council Regulation (EEC) No. 95/93 of 18 January 1993 (“Regulation 95/93”), recently amended by Regulation (EC) No. 545/2009 of the European Parliament and of the Council of 18 June 2009. Under Regulation 95/93, an airport coordinator distributes slots for each flight schedule period. If the number of applications exceeds the number of available slots, priority is given to the carriers that held the relevant slots in the previous flight schedule period and used such slots at least 80% of the time. If a carrier fails to meet the usage threshold, it may lose the relevant slot and the slot may be allocated to a slot pool for assignment to other carriers. However, if an air carrier has failed to use a slot for exceptional reasons (e.g. due to unforeseen and unavoidable circumstances outside the air carrier’s control), the air carrier may be entitled to retain the slot. EMEA 100217621 v16

51

In 2004 certain amendments were made to Regulation 95/93 to improve slot utilisation procedures, access to slots for new entrants and services to regional airports. The amended regulation also sets forth criteria, including environmental criteria, to be used in allocating slots, and provides for independence of airport slot coordinators and judicial review of their decisions. Airport slot coordinators were given the right to revoke single slots or a series of slots for the remainder of a flight schedule period as a sanction against slot operators that engage in abusive market practices. While air carriers may exchange slots with each other under certain conditions, it is still uncertain whether Regulation 95/93 permits the commercial trading of slots. However, in 2008, the European Commission indicated, in a communication on the application of Regulation 95/93, that it will not take action against the practice of exchanging slots for monetary and other consideration (so-called “secondary trading”), provided that such exchanges take place in a transparent manner. The European Commission is currently working on another revision of Regulation 95/93 related to slot allocation to improve optimal use of airport capacity and infrastructure, enhance competitiveness of operators and improve environmental performance of airports and air transport. On 1 December 2011, the European Commission published a proposal for the recasting of Regulation 95/93. In particular, under this proposal, airlines would be expressly allowed to trade slots at EU airports with each other in a transparent way. At the same time, priority for the allocation of slots for the next corresponding flight schedule season would only be given to carriers that have used at least 85% (instead of 80%) of the allocated series of slots. The proposal is currently in the legislative process. Airport and air traffic control charges Airport operators currently charge fees for incoming and outgoing flights on the basis of a number of criteria. The EU passed Directive 2009/12/EC (“Directive 2009/12”) with a view to setting common principles for the levying of airport charges at European airports. Directive 2009/12 provides for non-discriminatory pricing while allowing for the structuring of airport charges for issues of public and general interest, including environmental issues. Directive 2009/12 was implemented in Italy in 2012 by Legislative Decree no. 1/2012, converted into law no. 27/2012 (articles 71-81). Moreover, the so-called Single European Sky Regulations set forth in Council Regulations (EC) No. 549/2004, 550/2004, 551/2004 and 552/2004, as revised and extended by Regulation (EC) No 1070/2009, harmonised the legal framework for air traffic control services in Europe. Measures for the development of a common scheme for charges related to air navigation services were laid down in Commission Regulation (EC) No. 1794/2006, as amended by Commission Regulation (EU) No. 1191/2010 of 16 December 2010. Except for the charges of the European Organisation for the Safety of Air Navigation (Eurocontrol), national legislation applies to charges for air navigation services. The European Commission has promulgated Commission Regulation (EU) No. 691/2010 (“Regulation 691/2010”) laying down a performance scheme for air navigation services and network functions. Regulation 691/2010 requires the European Commission to adopt EU-wide performance targets and national supervisory authorities to adopt performance plans. Performance plans drawn up by national supervisory authorities must contain targets consistent with the EU performance targets. These performance targets have been set by Commission Decision 2011/121/EU of 21 February 2011. Environmental issues The Group is subject to regulations concerning substance and noise emissions from its aircraft or its technical maintenance facilities, which may become more stringent over time and restrict its ability to use certain airports. The Group is presently not aware of any environmental problems, whether caused by its aircraft or by any other of its operations that could have a material effect on its business. Security Under Article 13 of Council Regulation (EC) No. 300/2008 of 11 March 2008 on common rules in the field of civil aviation security, which repealed Regulation (EC) No 2320/2002, an air carrier is required to demonstrate that it has implemented certain security measures set out in a security programme approved by ENAC.

EMEA 100217621 v16

52

The Issuer believes that it is in compliance with the rules set out in its security programme, which has been approved by ENAC. Passenger compensation and Montreal Convention liability regime In 2004 the EU passed legislation for compensating airline passengers who have been denied boarding or whose flight has been cancelled or subject to delays (Regulation (EC) No. 261/2004 (“Regulation 261/2004”)). Regulation 261/2004, which came into force in February 2005, imposes fixed levels of compensation to be paid to passengers in the event of cancelled flights, except in particular where the airline can prove that such a cancellation is caused by extraordinary circumstances, such as weather, air-traffic control delays or safety issues. Passengers whose flight has been cancelled or is subject to long delays (two hours or more for short-haul flights) are also entitled to “assistance” including meals, drinks and telephone calls, as well as hotel accommodation if the delay extends overnight. For delays of at least five hours, the airline is also required to offer the option of a refund of the cost of the ticket and, if the passenger has already completed part of the journey, a return flight to the first point of departure. On 5 February 2014, the European Parliament voted, in its first reading, on a new draft regulation relating to passenger rights, which was published by the European Commission on 13 March 2013. Such new draft regulation is designed to strengthen and extend passenger rights to obtain compensation in case flights are delayed or passengers are stranded upon the bankruptcy of an airline as well as passenger rights in connection with the loss of or damage to luggage. The Sturgeon judgment of the European Court of Justice (“ECJ”) of 19 November 2009 in Joined Cases C402/07 and C-432/07 reinterpreted Regulation 261/2004 to include an obligation on airlines to pay compensation of an amount comprised between €250 and €600 for flight delays exceeding three hours. The Sturgeon judgment was confirmed by the ECJ’s judgment of 23 October 2012 in Joined Cases C-581/10 and C-629/10. The financial consequences of the Sturgeon decision are significant. In 2013, the ECJ confirmed that the extraordinary circumstances defence only applies to the obligation to pay compensation, and does not exempt the air carrier from the obligation to provide assistance (judgment of 31 January 2013, Case C-12/11). It further held that Regulation 261/2004 does not provide a defence in case of “particularly extraordinary” events going beyond “extraordinary circumstances”, which would exempt the air carrier from its obligation to provide assistance. In addition, no time or monetary limitations generally apply to such obligation. Should the air carrier fail to comply with its obligation to provide assistance, any compensation claimed by a passenger will, however, be limited to an amount which, in light of the specific circumstances of each case, is proved to be necessary, appropriate and reasonable to make up for the shortcomings of the air carrier. The Montreal Convention on the Unification of Certain Rules for International Air Carriage was adopted in May 1999. The Convention consolidated, updated and replaced all previous agreements on air carrier liability, including the 1929 Warsaw Convention vis-à-vis those countries that have also ratified the Montreal Convention, including Italy. The Montreal Convention came into force in all EU Member States on 28 June 2004, and was implemented in Italy by Law no. 12 on 10 January 2004. Passengers may generally claim up to 1,131 Special Drawing Rights (SDRs) for lost, damaged or delayed luggage. Conversely, the previous weight-based compensation system under the 1929 Warsaw Convention continues to apply to cargo. In the event of a passenger’s death or bodily injury the Montreal Convention imposes strict carrier liability for damage of up to 113,100 SDRs for each passenger, while the carrier’s liability for damage caused by delay in the transport of passengers is limited to 4,694 SDRs for each passenger. The Group maintains insurance at standard industry levels in relation to any compensation or damage it is required to pay pursuant to the Montreal Convention. Under Regulation (EC) No 2027/97 (as amended by Regulation (EC) No 889/2002) the rules of the Montreal Convention apply to all flights, whether domestic or international, operated by EU air carriers.

EMEA 100217621 v16

53

MANAGEMENT Board of Directors The Issuer’s board of directors is composed of nine members, who were appointed by the shareholders’ meeting held on 4 December 2014. Such appointment was confirmed by the shareholders’ meeting held on 5 May 2015 for a period expiring on the date of the shareholders’ meeting held to approve the financial statements for the year ended 31 December 2017. The following table sets forth the names, positions and main activities outside of the Group of the members of the Issuer’s board of directors: Name Mr. Luca Cordero di Montezemolo .................

Position Chairman of the board of directors; chairman of the review committee

Main activities outside of Group Chairman of: Charme Management S.r.l., Montezemolo & Partners SGR S.p.A., CAI., MDP Holding Uno S.r.l., MDP Holding Due S.r.l., MDP Holding Tre S.r.l. and MDP Holding Quattro S.r.l. Vice Chairman of Unicredit S.p.A. Board member of: Coesia S.p.A., Tod’s S.p.A., NTV S.p.A. and Poltrona Frau S.p.A. Sole shareholder of Agricola Fungarino S.r.l.

Mr. James Reginald Hogan ............................

Vice Chairman of the board of directors; member of the review committee

Azienda

President and Chief Executive Officer of Etihad Airways. Vice Chairman of: Air Berlin and Jet Airways, the executive committee of the World Travel and Tourism Council (WTTC). Board member of Virgin Australia. Member of the International Air Transport Association (IATA) board of governors.

Mr. Roberto Colaninno

Honorary Chairman; member of the related party committee

Sole director of: Immobiliare Rippa S.r.l. and Colaninno Roberto e Schiavetti Oretta. Chairman and Chief Executive Officer of Piaggio & C. S.p.A. Chairman of: Omniaholding S.p.A., Omniainvest S.p.A. and IMMSI S.p.A. Board member of: RCN Finanziaria S.p.A. and Intermarine S.p.A.

Mr. Silvano Cassano ......

Chief Executive Officer; member of the review committee

No activity outside the Group.

Mr. James Denis Rigney

Board member; member of the review committee, related party committee and

Chief Financial Officer of Etihad Airways.

EMEA 100217621 v16

54

internal audit committee

Board member of: Airberlin; Air Serbia and Jet Airways. Member of the finance committee of the International Air Transport Association.

Mr. Giovanni Bisignani

Board member; chairman of the nomination and remuneration committee; member of the related party committee and internal audit committee

Board member of: Safran and Air Castle.

Mr. Jean Pierre Mustier

Board member; member of the nomination and remuneration committee and internal audit committee

No activity outside the Group.

Mr. Paolo Andrea Colombo ........................

Board member; chairman of the related party committee

Chairman of: Saipem S.p.A. and Colombo & Associati S.r.l. Board member of Ceresio SIM S.p.A. Chairman of the board of statutory auditors of GE Capital Interbanca S.p.A. Member of the board of statutory auditors of: S.A.C.B.O. S.p.A., Humanitas Mirasole S.p.A., Massimo Moratti S.a.p.A. and Gian Marco Moratti S.a.p.A. Shareholder and board member of: Immobiliare Villair S.S and L’Uliveto di Vendicari S.S.

Mrs. Antonella Mansi

Board member; chairman of the internal audit committee

Sole director of Retindustria S.r.l. Chairman of: Aedificatio S.p.A. and S.I.P.I. S.p.A. Board member of: Hadri Tanks S.r.l., Sol.Bat. S.r.l., Loran S.r.l. and Sol S.p.A. Chief Executive Officer of Nuova Solmine S.p.A.

The business address of each member of the Issuer’s board of directors is the Issuer’s registered office. Board of Statutory Auditors The Issuer’s board of statutory auditors is composed of five members, who were appointed by the shareholders’ meeting held on 4 December 2014. Such appointment was confirmed by the shareholders’ meeting held on 5 May 2015 for a period expiring on the date of the shareholders’ meeting held to approve the financial statements for the year ended 31 December 2017. The following table sets forth the names, positions and main activities outside of the Group of the members of the Issuer’s board of statutory auditors: Name Position Mr. Corrado Gatti .............................................. Chairman

EMEA 100217621 v16

55

Main activities outside of Group Insolvency trustee (curatore fallimentare) of: S.I.M.E.R. 84

S.r.l., Abdrabo Mousa Sherif Hussein, Coseete S.r.l. in liquidazione, CFN Centralinista S.r.l. unipersonale in liquidazione, Forservices 2 S.r.l., Micros Agency S.r.l., Onea S.r.l., La Fornacella S.r.l., Italian Bus Travel S.r.l. in liquidazione and Revi S.r.l., I Legionari S.r.l. Board member of: Banca di Credito Cooperativo di Roma S.C., Ferretti International Holding S.p.A., Ferretti S.p.A. (Deputy Chairman) and Total Energy Advisor S.r.l. Chairman of the board of statutory auditors of: Acea ATO 2 S.p.A., Armonia SGR S.p.A., Atlantia S.p.A. and Finmeccanica Global Services S.p.A. Member of the board of statutory auditors of: Acea S.p.A., C-Zone S.p.A. in liquidazione, CQS Holding S.r.l. in liquidazione, KTESIOS Holding S.p.A. in liquidazione and LKTS S.p.A. in liquidazione. Mr. Gianluca Ponzellini..................................... Auditor

Chairman of the board of statutory auditors of: Banca IMI S.p.A., Arcadiana S.r.l., Pi S.p.A., Spaim S.r.l., Spagnoli S.p.A., De Longhi S.p.A., De Longhi Capital Services S.r.l. and De Longhi Appliances S.r.l. Chairman of: Metodo S.r.l. Member of the board of statutory auditors of: GS S.p.A., Caretti & Associati S.p.A., Telecom Italia S.p.A. and Carrefour Italia S.p.A. Alternate auditor of: F.lli Fontana S.r.l., Ital Press Holding S.p.A., Iper Orio S.p.A., Colombano S.p.A. and Fedrigoni S.p.A. Shareholder and board member of: La Brabbia – S.a.s. di Maurizio Ponzellini & C. and Campo P. società Agricola S.S.

EMEA 100217621 v16

56

Mr. Alessandro Cortesi ......................................

Auditor

Board member of: Conbipel S.p.A., O.E.B. S.r.l. and Brugola O.E.B. Industriale S.r.l. Member of the board of statutory auditors of: BCC Risparmio & Previdenza S.g.r.p.A., Adhesive Based Chemicals S.r.l., I.C.F. S.p.A., NMS Group S.r.l., GC3 S.p.A., PPG Univer S.p.A. and Takeda Italia S.p.A. Board S.p.A.

Mr. Giovanni Ghelfi ..........................................

Alternate Auditor

member

of:

Mascioni

Insolvency trustee (curatore fallimentare) of: P.F.M. Studio S.r.l., Edizioni Media 60 Group S.r.l., Freight Express S.r.l. in liquidazione, INN Plast S.r.l., G.N.S. S.r.l. in liquidazione, Showcenter S.r.l. in liquidazione, Grafiche P.B. S.r.l., Service Consulting S.r.l., Venere costruzioni S.r.l., MCB Markwins Classic Brands Italy S.r.l. in liquidazione, El. Ind. S.r.l., Edilmaren S.r.l. in liquidazione, Uniglobe Filiali Italia S.r.l. and Castello S.r.l. Judicial commissioner (commissario giudiziale) of: Fineco S.r.l. in liquidazione. Member of the board of statutory auditors of: Immobiliare Lavinia S.r.l., Immobiliare Pioppella S.r.l. and Immobiliare Rondò S.p.A. Chairman of the board of statutory auditors of: Lombarda Calcestruzzi S.r.l.

Mr. Maurizio Longhi ......................................... Alternate Auditor

EMEA 100217621 v16

57

Insolvency trustee (curatore fallimentare) of: Revere S.r.l. in liquidazione, Ceramica Eos in liquidazione, U.S. Viterbese Calcio ’90, Immobiliare Futura 87 S.r.l., Canard Store S.a.s. di Assogna Valter e C., Pegaso 2003 S.r.l., Hotel Costiera S.a.s. di Krajniak Karolina & C., Bellini Vittorio (Tribunale Viterbo RF 1705/01), Perazzoni Ivano (Tribunale Viterbo RG Fall.

18/11), RE.C.I.T. SpA (Tribunale Viterbo RF 1421/96) and Storri Valentino (Tribunale Viterbo RG Fall. 25/10). Judicial commissioner (commissario giudiziale) of: Travaglini Cementi Armati Vibrati S.p.A., Travaglini S.r.l. and Chiavarino S.n.c. Vice chairman and director of: Sinergia – Sistema di servizi S.c.a r.l. Vice-president, deputy chairman, member of the executive committee. Director of Banca di Credito Cooperativo di Roma S.C. Sole auditor of: Federazione delle Banche di Credito Cooperativo del Lazio, Umbria e Sardegna S.C. Chairman of the board of statutory auditors of: MOA S.C. and Banca per lo Sviluppo della Cooperazione di Credito. The business address of each member of the board of statutory auditors is the Issuer’s registered office. Senior Management The following table sets forth the names, positions and main activities outside of the Group of the Issuer’s senior managers: Name Mr. Antonio Cuccuini Mr. Duncan Naysmith Mr. John Shepley Mr. Ariodante Valeri Mr. Giancarlo Schisano

Position Chief People & Performance Officer Chief Financial Officer Chief Planning Strategist Chief Commercial Officer Chief Operations Officer

Mrs. Aubrey Tiedt

Chief Customer Officer

Main activities outside of Group No activity outside the Group. No activity outside the Group. No activity outside the Group. No activity outside the Group. Board member of AMS Holding S.r.l. (in which the Issuer holds 15% of the share capital). No activity outside the Group.

Conflicts of Interest and Related Party Transactions Certain of the Issuer’s board members and statutory auditors also hold management positions with the Issuer’s direct and indirect shareholders and other related parties. In order to prevent potential conflicts of interest between the duties of the members of the Issuer’s board of directors, board of statutory auditors and senior management and their private interests or other duties, pursuant to article 13, paragraph 12, of the Issuer’s EMEA 100217621 v16

58

bylaws, related party transactions are subject to the prior assessment and non-binding recommendations of a related-party transaction committee. The Issuer’s regulation governing transactions with related parties is a key component of its governance and is aimed at preventing conflicts of interests and ensuring that any transactions entered into by the Issuer with related parties (which include the Issuer’s direct and indirect shareholders, board members, statutory auditors and key managers, as well as any companies in which the Issuer’s directors, statutory auditors and key managers hold more than 20% of the share capital) are transparent and fair from both a substantial and a procedural point of view.

EMEA 100217621 v16

59

TAXATION Republic of Italy The statements herein regarding Italian taxation summarise the principal Italian tax consequences of the purchase, the ownership, the redemption and the disposal of the Notes. This is a general summary that does not apply to certain categories of investors and does not purport to be a comprehensive description of all the tax considerations which may be relevant to a decision to purchase, own or dispose of the Notes. It does not discuss every aspect of Italian taxation that may be relevant to a Noteholder if such Noteholder is subject to special circumstances or if such Noteholder is subject to special treatment under applicable law. This summary also assumes that the Issuer is resident in the Republic of Italy for tax purposes, is structured and conducts its business in the manner outlined in this Prospectus. Changes in the Issuer’s organisational structure, tax residence or the manner in which it conducts its business may invalidate this summary. This summary also assumes that each transaction with respect to the Notes is at arm’s length. Where in this summary English terms and expressions are used to refer to Italian concepts, the meaning to be attributed to such terms and expressions shall be the meaning to be attributed to the equivalent Italian concepts under Italian tax law. The statements herein regarding taxation are based on the laws in force in the Republic of Italy as of the date of this Prospectus and are subject to any changes in law occurring after such date, which changes could be made on a retroactive basis. The Issuer will not update this summary to reflect changes in laws and if such a change occurs the information in this summary could become invalid. Prospective purchasers of the Notes are advised to consult their own tax advisers concerning the overall tax consequences under Italian tax law, under the tax laws of the country in which they are resident for tax purposes and of any other potentially relevant jurisdiction of acquiring, holding and disposing of the Notes and receiving payments of interest, principal and/or other amounts under the Notes, including in particular the effect of any state, regional or local tax laws. Tax treatment of Notes Legislative Decree No. 239 of 1 April 1996, as subsequently amended (“Decree 239”), provides for the applicable regime with respect to, inter alia, the tax treatment of interest, premium and other income (including the difference between the redemption amount and the issue price) from notes issued by Italian joint stock companies (società per azioni) with shares traded on a regulated market of EU Member States or EEA Member States granting for an adequate exchange of information with Italy. For this purpose, bonds (obbligazioni) or debentures similar to bonds (titoli similari alle obbligazioni) are securities that incorporate an unconditional obligation to pay, at redemption, an amount not lower than their nominal value and which do not grant the holder any direct or indirect right of participation to (or control of) management of the issuer. Italian resident Noteholders Where an Italian resident Noteholder is (a) an individual not engaged in an entrepreneurial activity to which the Notes are connected (unless he has opted for the application of the risparmio gestito regime – see under section “Tax treatment of the Notes – Capital Gains” below); (b) a non-commercial partnership; (c) a non-commercial private or public institution; or (d) an investor exempt from Italian corporate income taxation, interest, premium and other income relating to the Notes, are subject to a withholding tax, referred to as imposta sostitutiva, levied at the rate of 26 per cent. In the event that the Noteholders described under (a) and (c) above are engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva applies as a provisional tax. An Italian resident individual Noteholder not engaged in an entrepreneurial activity who has opted for the so-called risparmio gestito is subject to a 26 per cent. annual substitute tax on the increase in value of the managed assets accrued at the end of each tax year (which increase would include interest, premium and other income accrued on the Notes). The substitute tax is applied on behalf of the taxpayer by the managing authorised intermediary. For more information, see also “Tax treatment of the Notes — Capital Gains”.

EMEA 100217621 v16

60

Where an Italian resident Noteholder is a company or similar commercial entity, a commercial partnership, or a permanent establishment in Italy of a foreign company to which the Notes are effectively connected, and the Notes are deposited with an authorised intermediary, interest, premium and other income from the Notes will not be subject to imposta sostitutiva, but must be included in the relevant Noteholder’s income tax return and are therefore subject to general Italian corporate taxation (and, in certain circumstances, depending on the “status” of the Noteholder, also to the regional tax on productive activities (“IRAP”)). Where an Italian resident Noteholder is an individual engaged in an entrepreneurial activity to which the Notes are connected, interests, premium and other income relating to the Notes, are subject to imposta sostitutiva and will be included its relevant income tax return. As a consequence, interests, premium and other income will be subject to the ordinary income tax and the imposta sostitutiva may be recovered as a deduction from the income tax due. Under the current regime provided by Law Decree No. 351 of 25 September 2001, as amended and supplemented, converted into Law No. 410 of 23 November 2001 (“Decree 351”), as clarified by the Italian tax authorities through – among others – Circular No. 47/E of 8 August 2003 and Circular No. 11/E of 28 March 2012, Italian real estate funds (complying with the definition as amended pursuant to Law Decree No. 78 of 31 May 2010, converted into Law n. 122 of 30 July 2010) created under Article 37 of the Consolidated Financial Act and Article 14-bis of Law No. 86 of 25 January 1994 (“Real Estate Funds”) are not subject to imposta sostitutiva. Pursuant to Art. 9 of Legislative Decree No. 44 of 4 March 2014, the same regime is applicable to Italian real estate SICAFs qualified as such from a civil law perspective. If the Noteholder is an open-ended or closed-ended investment fund (the “Fund”), a SICAV (an Italian investment company with variable capital), or a SICAF (an Italian investment company with fixed share capital) established in Italy and either (i) the Fund, SICAV or SICAF or (ii) their manager is subject to the supervision of a regulatory authority, and the relevant Notes are held by an authorised intermediary, interest, premium and other income accrued during the holding period on such Notes will not be subject to imposta sostitutiva, but must be included in the management results of the Fund, of the SICAV or of the SICAF. The Fund, SICAV or SICAF will not be subject to taxation on such results but a withholding or a withholding tax of 26 per cent. will apply, in certain circumstances, to distributions made in favour of unitholders or shareholders (the “Collective Investment Fund Tax”). If the Noteholder is a pension fund (subject to the regime provided for by Article 17 of the Legislative Decree No. 252 of 5 December 2005 – the “Pension Fund”) and the Notes are deposited with an authorised intermediary, interest, premium and other income relating to the Notes and accrued during the holding period will not be subject to imposta sostitutiva, but must be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to a 20 per cent. substitute tax (as increased by Law No. 190 of 23 December 2014 (the “Finance Act 2015”) which, however, provides for certain adjustments for fiscal year 2014). Pursuant to Decree 239, imposta sostitutiva is applied by banks, SIMs, fiduciary companies, SGRs, stockbrokers and other entities identified by a decree of the Ministry of Finance (each an “Intermediary”). An Intermediary must (a) be resident in Italy or be a permanent establishment in Italy of a non-Italian resident financial intermediary and (b) not intervene, in any way, in the collection of interest or in the transfer of the Notes. For the purpose of the application of the imposta sostitutiva, a transfer of Notes includes any assignment or other act, either with or without consideration, which results in a change of the ownership of the relevant Notes or in a change of the Intermediary with which the Notes are deposited. Where the Notes are not deposited with an Intermediary, the imposta sostitutiva is applied and withheld by any entity paying interest to a Noteholder. Non-Italian resident Noteholders Where the Noteholder is a non-Italian resident without a permanent establishment in Italy to which the Notes are connected, an exemption from the imposta sostitutiva applies provided that the non-Italian resident beneficial owner is either (a) resident, for tax purposes, in a country which allows for a satisfactory exchange EMEA 100217621 v16

61

of information with Italy; or (b) an international body or entity set up in accordance with international agreements which have entered into force in Italy; or (c) a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (d) an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it does not possess the status of taxpayer in its own country of residence. Please note that according to the Law No. 244 of 24 December 2007 (“Budget Law 2008”) a Decree still to be issued will introduce a new “white list” replacing the current “black list” system, so as to identify those countries which allow for a satisfactory exchange of information. In order to ensure gross payment, non-Italian resident Noteholders must be the beneficial owners of the payments of interest, premium or other income and (a) promptly deposit, directly or indirectly, the Notes with (i) a resident bank or SIM, or a permanent establishment in Italy of a non-Italian resident bank; (ii) a non-Italian resident entity or company participating in a centralised securities management system which is in contact, via computer, with the Ministry of Economy and Finance; (iii) a non-resident entity or company which has an account with a centralised clearance and settlement system (such as Euroclear or Clearstream, Luxembourg) which has a direct relationship with the Italian Ministry of Economy and Finance; or (iv) a centralised managing company of financial instruments, authorised in accordance with Article 80 of the Financial Services Act; (b) promptly file with the relevant depository, prior to or concurrently with the deposit of the Notes, a statement of the relevant Noteholder, which remains valid until withdrawn or revoked, in which the Noteholder declares to be eligible to benefit from the applicable exemption from imposta sostitutiva. Such statement, which is not requested for international bodies or entities set up in accordance with international agreements which have entered into force in Italy nor in case of foreign Central Banks or entities which manage, inter alia, the official reserves of a foreign State, must comply with the requirements set forth by Ministerial Decree of 12 December 2001, as subsequently amended; (c) the banks or brokers mentioned above receive all necessary information to identify the non-resident beneficial owner of the deposited debt securities, and all necessary information in order to determine the amount of interest that such beneficial owner is entitled to receive. Failure of a non-Italian resident Noteholder to comply promptly with the mentioned procedures set forth in Decree no. 239 and in the relevant implementation rules will result in the application of imposta sostitutiva on interest, premium and other income payments to a non-resident Noteholder. The imposta sostitutiva will be applicable at the rate of 26 per cent. (or at the reduced rate provided for by the applicable double tax treaty, if any) to interest, premium and other income paid to Noteholders who are (a) resident, for tax purposes, in countries which do not allow for a satisfactory exchange of information with Italy or (b) otherwise not eligible for the exemption from imposta sostitutiva. Capital gains Italian resident Noteholders Any gain obtained from the sale or redemption of the Notes would be treated as part of the taxable income (and, in certain circumstances, depending on the “status” of the Noteholder, also as part of the net value of the production for IRAP purposes) if realised by an Italian company or a similar commercial entity (including the Italian permanent establishment of foreign entities to which the Notes are connected) or Italian resident individuals engaged in an entrepreneurial activity to which the Notes are connected. Where an Italian resident Noteholder is (a) an individual holding the Notes not in connection with an entrepreneurial activity, (b) a non-commercial partnership, (c) a non-commercial private or public institution, any capital gain realised by such Noteholder from the sale or redemption of the Notes would be subject to an imposta sostitutiva, levied at the current rate of 26 per cent. Noteholders may set off losses with gains. In respect of the application of imposta sostitutiva, taxpayers may opt for one of the three regimes described below. Under the tax declaration regime (regime della dichiarazione), which is the default regime for Italian resident individuals not engaged in an entrepreneurial activity to which the Notes are connected, the imposta sostitutiva on capital gains will be chargeable, on a cumulative basis, on all capital gains, net of any incurred capital loss, realised by the Italian resident individual Noteholder holding the Notes not in connection with an EMEA 100217621 v16

62

entrepreneurial activity pursuant to all sales or redemptions of the Notes carried out during any given tax year. Italian resident individuals holding the Notes not in connection with an entrepreneurial activity must indicate the overall capital gains realised in any tax year, net of any relevant incurred capital loss, in the annual tax return and pay imposta sostitutiva on such gains together with any balance income tax due for such year. Capital losses in excess of capital gains may be carried forward against capital gains realised in any of the four succeeding tax years. As an alternative to the tax declaration regime, Italian resident individual Noteholders holding the Notes not in connection with an entrepreneurial activity may elect to pay the imposta sostitutiva separately on capital gains realised on each sale or redemption of the Notes (the risparmio amministrato regime). Such separate taxation of capital gains is allowed subject to (a) the Notes being deposited with Italian banks, SIMs or certain authorised financial intermediaries and (b) an express election for the risparmio amministrato regime being timely made in writing by the relevant Noteholder. The depository is responsible for accounting for imposta sostitutiva in respect of capital gains realised on each sale or redemption of the Notes (as well as in respect of capital gains realised upon the revocation of its mandate), net of any incurred capital loss, and is required to pay the relevant amount to the Italian tax authorities on behalf of the taxpayer, deducting a corresponding amount from the proceeds to be credited to the Noteholder or using funds provided by the Noteholder for this purpose. Under the risparmio amministrato regime, where a sale or redemption of the Notes results in a capital loss, such loss may be deducted from capital gains subsequently realised, within the same securities management, in the same tax year or in the following tax years up to the fourth. Under the risparmio amministrato regime, the Noteholder is not required to declare the capital gains in the annual tax return. Any capital gains realised by Italian resident individuals holding the Notes not in connection with an entrepreneurial activity who have entrusted the management of their financial assets, including the Notes, to an authorised intermediary and have opted for the so-called “risparmio gestito” regime will be included in the computation of the annual increase in value of the managed assets accrued, even if not realised, at year end, subject to a 26 per cent. substitute tax, to be paid by the managing authorised intermediary. Under the risparmio gestito regime, any depreciation of the managed assets accrued at year end may be carried forward against increase in value of the managed assets accrued in any of the four succeeding tax years. Under the risparmio gestito regime, the Noteholder is not required to declare the capital gains realised in the annual tax return. Any capital gains realised by a Noteholder who is a Real Estate Fund or any Italian real estate SICAF to which the provisions of Decree 351, as subsequently amended, apply will be subject neither to imposta sostitutiva nor to any other income tax at the level of the real estate investment fund. Any capital gains realised by a Noteholder who is Fund, a SICAF or a SICAV will be included in the management results of the Fund, the SICAF or the SICAV. Such result will not be subject to taxation at the level of the Fund, the SICAF or the SICAV, but subsequent distributions in favour of unitholders of shareholders may be subject to the Collective Investment Fund Tax. Any capital gains realised by a Noteholder who is an Italian Pension Fund will be included in the result of the relevant portfolio accrued at the end of the tax period, to be subject to the 20 per cent. substitute tax (as increased by Finance Act 2015, which, however, provides for certain adjustments for fiscal year 2014). Non-Italian resident Noteholders Capital gains realised by non-Italian-resident Noteholders, not having a permanent establishment in Italy to which the Notes are connected, from the sale or redemption of Notes issued by an Italian resident issuer, which are traded on regulated markets (and, in certain cases, subject to filing of required documentation) are neither subject to the imposta sostitutiva nor to any other Italian income tax. Capital gains realised by non-Italian resident Noteholders, not having a permanent establishment in Italy to which the Notes are connected, from the sale or redemption of Notes not traded on regulated markets are not subject to the imposta sostitutiva, provided that the effective beneficiary: (a) is resident in a country which allows for a satisfactory exchange of information with Italy; or (b) is an international entity or body set up in accordance with international agreements which have entered into force in Italy; or (c) is a Central Bank or an entity which manages, inter alia, the official reserves of a foreign State; or (d) is an institutional investor which is resident in a country which allows for a satisfactory exchange of information with Italy, even if it EMEA 100217621 v16

63

does not possess the status of taxpayer in its own country of residence. The list of countries which allow for an exchange of information with Italy should be amended as pointed out above. If none of the conditions above is met, capital gains realised by non-Italian resident Noteholders from the sale or redemption of Notes not traded on regulated markets are subject to the imposta sostitutiva at the current rate of 26 per cent. On the contrary, should the Notes be traded on regulated markets, capital gains realized by non-Italian resident Noteholders would not be subject to Italian taxation. In any event, non-Italian resident individuals or entities without a permanent establishment in Italy to which the Notes are connected that may benefit from a double taxation treaty with Italy providing that capital gains realised upon the sale or redemption of Notes are to be taxed only in the country of tax residence of the recipient, will not be subject to imposta sostitutiva in Italy on any capital gains realised upon the sale or redemption of Notes. Inheritance and gift taxes Pursuant to Law Decree No. 262 of 3 October 2006, converted into Law No. 286 of 24 November 2006, as subsequently amended, the transfers of any valuable asset (including shares, notes or other securities) as a result of death or donation are taxed as follows: (i)

transfers in favour of spouses and direct descendants or direct ancestors are subject to an inheritance and gift tax applied at a rate of 4 per cent. on the value of the inheritance or the gift exceeding, for each beneficiary, €1 million;

(ii)

transfers in favour of relatives to the fourth degree or relatives-in-law to the third degree are subject to an inheritance and gift tax at a rate of 6 per cent. on the entire value of the inheritance or the gift. Transfers in favour of brothers/sisters are subject to the 6 per cent. inheritance and gift tax on the value of the inheritance or the gift exceeding, for each beneficiary, €100,000; and

(iii)

any other transfer is, in principle, subject to an inheritance and gift tax applied at a rate of 8 per cent. on the entire value of the inheritance or the gift.

If the transfer is made in favour of persons with severe disabilities, the tax is levied at the rate mentioned above in (i), (ii) and (iii) on the value exceeding, for each beneficiary, €1.5 million. Transfer tax Following the repeal of the Italian transfer tax, contracts relating to the transfer of securities are subject to the following registration tax: (a) public deeds and notarised deeds are subject to fixed registration tax at a rate of €200; (b) private deeds are subject to registration tax only in the case of voluntary registration. Stamp duty Pursuant to Article 19(1) of Decree No. 201 of 6 December 2011 (“Decree 201”), a proportional stamp duty applies on an annual basis to the periodic reporting communications sent by financial intermediaries to their clients for the Notes deposited in Italy. The stamp duty applies at a rate of 0.2 per cent. and cannot exceed €14,000, for taxpayers different from individuals; this stamp duty is determined on the basis of the market value or – if no market value figure is available – the nominal value or redemption amount of the Notes held. Based on the wording of the law and the implementing decree issued by the Italian Ministry of Economy on 24 May 2012, the stamp duty applies to any investor who is a client (as defined in the regulations issued by the Bank of Italy on 20 June 2012) of an entity that exercises in any form a banking, financial or insurance activity within the Italian territory. The communication is deemed to be sent to the customers at least once a year, even for instruments for which it is not mandatory. Wealth Tax on securities deposited abroad Pursuant to Article 19(18) of Decree 201, Italian resident individuals holding the Notes outside the Italian territory are required to pay an additional tax at a rate of 0.2 per cent.

EMEA 100217621 v16

64

This tax is calculated on the market value of the Notes at the end of the relevant year or – if no market value figure is available – the nominal value or the redemption value of such financial assets held outside the Italian territory. Taxpayers are entitled to an Italian tax credit equivalent to the amount of wealth taxes paid in the State where the financial assets are held (up to an amount equal to the Italian wealth tax due). EU Savings Directive Under Council Directive 2003/48/EC on the taxation of savings income (the “Directive”), Member States are required to provide to the tax authorities of other Member States details of certain payments of interest or similar income paid or secured by a person established in a Member State to or for the benefit of an individual resident in another Member State or certain limited types of entities established in another Member State. On 24 March 2014, the Council of the European Union adopted a Council Directive amending and broadening the scope of the requirements described above. Member States are required to apply these new requirements from 1 January 2017. The changes will expand the range of payments covered by the Directive, in particular to include additional types of income payable on securities. The Directive will also expand the circumstances in which payments that indirectly benefit an individual resident in a Member State must be reported. This approach will apply to payments made to, or secured for, persons, entities or legal arrangements (including trusts) where certain conditions are satisfied, and may in some cases apply where the person, entity or arrangement is established or effectively managed outside of the European Union. For a transitional period, Austria is required (unless during that period it elects otherwise) to operate a withholding system in relation to such payments. The changes referred to above will broaden the types of payments subject to withholding in those Member States which still operate a withholding system when they are implemented. The end of the transitional period is dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries. A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). Implementation in Italy of the Directive Italy has implemented the Directive through Legislative Decree No. 84 of 18 April 2005 (“Decree 84”). Under Decree 84, subject to a number of important conditions being met, in the case of interest paid to individuals which qualify as beneficial owners of the interest payment and are resident for tax purposes in another Member State, Italian qualified paying agents shall report to the Italian tax authorities details of the relevant payments and personal information on the individual beneficial owner and shall not apply the withholding tax. Such information is transmitted by the Italian tax authorities to the competent foreign tax authorities of the State of residence of the beneficial owner. Prospective purchasers of the Notes are however advised to consult their own tax advisers in order to better evaluate Italian tax consequences connected to the application of the Savings Directive. The Proposed Financial Transactions Tax (“FTT”) The European Commission has published a proposal for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain, France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”). The proposed FTT has very broad scope and could, if introduced in its current form, apply to certain dealings in the Notes (including secondary market transactions) in certain circumstances. Under current proposals the FTT could apply in certain circumstances to persons both within and outside of the participating Member States. Generally, it would apply to certain dealings in the Notes where at least one party is a financial institution, and at least one party is established in a participating Member State. A financial institution may be, or be deemed to be, “established” in a participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a participating Member State or (b) where the financial instrument which is subject to the dealings is issued in a participating Member State. The FTT proposal remains subject to negotiation between the participating Member States and is the subject of legal challenge. It may therefore be altered prior to any implementation, the timing of which remains EMEA 100217621 v16

65

unclear. Additional EU Member States may decide to participate. Prospective holders of the Notes are advised to seek their own professional advice in relation to the FTT. FATCA Whilst the Notes are in global form and held within Euroclear or Clearstream, Luxembourg (together, the “ICSDs”), it is expected that FATCA will not affect the amount of any payments made under, or in respect of, the Notes by the Issuer, any Paying Agent and the common safekeeper, given that each of the entities in the payment chain between the Issuer and the participants in the ICSDs is a major financial institution whose business is dependent on compliance with FATCA and that any alternative approach introduced under an intergovernmental agreement will be unlikely to affect the securities. The documentation expressly contemplates the possibility that the securities may go into definitive form and therefore that they may be taken out of the ICSDs. If this were to happen, then a non-FATCA compliant holder could be subject to withholding. However, definitive notes will only be printed in remote circumstances.

EMEA 100217621 v16

66

SUBSCRIPTION AND SALE The Sole Underwriter has, in a subscription agreement dated 28 July 2015 (the “Subscription Agreement”) made between the Issuer and the Sole Underwriter and upon the terms and subject to the conditions contained therein, agreed to subscribe for the Notes. The Issuer has also agreed to pay certain combined commissions to the Sole Underwriter as set out therein and reimburse the Sole Underwriter for certain of its expenses incurred in connection with the issue of the Notes. The Subscription Agreement provides that the obligations of the Sole Underwriter are subject to certain conditions precedent, and the Subscription Agreement may be terminated in certain circumstances prior to payment for sale of the Notes being made to the Issuer. United Kingdom The Sole Underwriter has further represented, warranted and undertaken that: (a)

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the Notes in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and

(b)

it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

United States of America The Notes have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S. The Notes are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the United States Internal Revenue Code and regulations thereunder. The Sole Underwriter has agreed that, except as permitted by the Subscription Agreement, it will not offer, sell or deliver the Notes, (a) as part of their distribution at any time or (b) otherwise, until 40 days after the later of the commencement of the offering and the issue date of the Notes, within the UnitedStates or to, or for the account or benefit of, U.S. persons, and that it will have sent to each dealer to which it sells Notes during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. In addition, until 40 days after commencement of the offering, an offer or sale of Notes within the United States by a dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. Republic of Italy The offering of the Notes has not been cleared by CONSOB pursuant to Italian securities legislation. Accordingly, no Notes may be offered, sold or delivered, directly or indirectly, nor may copies of the Prospectus or of any other document relating to the Notes be distributed in the Republic of Italy, except: (a)

to qualified investors (investitori qualificati), as defined in Article 26, paragraph 1(d) of CONSOB Regulation No. 16190 of 29 October 2007, as amended (“CONSOB Regulation No. 16190”) pursuant to Article 34-ter, first paragraph, letter b), of CONSOB Regulation No. 11971 of 14 May 1999, as amended (“CONSOB Regulation No. 11971”) and Article 100 of the Legislative Decree No. 58 of 24 February 1998, as amended (the “Italian Financial Act”), each as amended from time to time; or

EMEA 100217621 v16

67

(b)

in other circumstances which are exempted from the rules on public offerings, pursuant to Article 100 of the Italian Financial Act and its implementing CONSOB Regulations including CONSOB Regulation No. 11971.

Any such offer, sale or delivery of the Notes or distribution of copies of this Prospectus or any other document relating to the Notes in the Republic of Italy must be in compliance with the selling restrictions under (a) and (b) above and must be: (a)

made by investment firms, banks or financial intermediaries permitted to conduct such activities in the Republic of Italy in accordance with the relevant provisions of the Italian Financial Act, CONSOB Regulation No. 16190 of 29 October 2007 and Legislative Decree No. 385 of 1 September 1993, in each case as amended from time to time (the “Banking Act”) and any other applicable laws or regulation;

(b)

in compliance with Article 129 of the Banking Act and the implementing guidelines of the Bank of Italy, as amended, pursuant to which the Bank of Italy may request information on the offering or issue of securities in Italy or by Italian persons outside of Italy; and

(c)

in compliance with any other applicable laws and regulations or requirement imposed by CONSOB, the Bank of Italy or any other Italian authority.

General The Sole Underwriter has represented, warranted and agreed that it has complied and will comply with all applicable laws and regulations in each country or jurisdiction in which it purchases, offers, sells or delivers Notes or possesses, distributes or publishes this Prospectus or any other offering material relating to the Notes. Persons into whose hands this Prospectus comes are required by the Issuer and the Sole Underwriter to comply with all applicable laws and regulations in each country or jurisdiction in which they purchase, offer, sell or deliver Notes or possess, distribute or publish this Prospectus or any other offering material relating to the Notes, in all cases at their own expense.

EMEA 100217621 v16

68

GENERAL INFORMATION Authorisation 1.

The creation and issue of the Notes have been authorised by a resolution of the Board of Directors of the Issuer dated 25 June 2015.

Listing and Admission to Trading 2.

Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and to be admitted to trading on the Main Securities Market. The total expenses related to the admission of the Notes to trading on the Irish Stock Exchange’s regulated market are expected to amount to approximately €6,891.20.

3.

Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on the Main Securities Market for the purposes of the Prospectus Directive.

Legal and Arbitration Proceedings 4.

There are no governmental, legal or arbitration proceedings, (including any such proceedings which are pending or threatened, of which the Issuer is aware), which may have, or have had during the 12 months prior to the date of this Prospectus, a significant effect on the financial position or profitability of the Issuer and the Alitalia Group.

Significant/Material Change 5.

There has been no significant change in the financial or trading position of the Issuer or the Alitalia Group and no material adverse change in the prospects of the Issuer or the Alitalia Group since 31 March 2015.

Auditors 6.

CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2013 and 2014 have been audited by Deloitte & Touche S.p.A., which are registered under No. 132587 in the Single Register of Legal Auditors at the Ministry of Economy and Finance (Registro Unico dei Revisori Legali presso il Ministero dell’Economia e delle Finanze), State General Accounting (Ragioneria Generale dello Stato). Deloitte & Touche S.p.A. are also members of ASSIREVI, the Italian association of auditing firms.

Documents on Display 7.

Physical or electronic copies of the following documents (together, where appropriate, with English translations thereof) may be inspected during normal business hours at the offices of the Principal Paying Agent at 33, rue de Gasperich, Howald – Hesperange, L – 2085 Luxembourg, Grand Duchy of Luxembourg for 12 months from the date of this Prospectus: (a)

the By-laws (statuto) of the Issuer;

(b)

this Prospectus;

(c)

the Trust Deed;

(d)

the Paying Agency Agreement;

(e)

CAI’s audited consolidated annual financial statements as at and for the years ended 31 December 2013 and 2014;

(f)

Issuer’s unaudited annual financial statements as at and for the year ended 31 December 2014; and

EMEA 100217621 v16

69

(g)

Issuer’s consolidated interim financial statements as at and for the quarter ended 31 March 2015, in respect of which a limited review has been performed by Deloitte & Touche S.p.A.

Clearing Systems 8.

The Notes have been accepted for clearance through Euroclear and Clearstream, Luxembourg. The ISIN is XS1263964576 and the common code is 126396457. The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy, L-1855 Luxembourg, Grand Duchy of Luxembourg.

Potential Conflicts of Interest 9.

The Sole Underwriter and its affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions (including, without limitation, the provision of loan facilities) with, and may perform services to the Issuer and its affiliates in the ordinary course of business.

10.

In addition, in the ordinary course of their business activities, the Sole Underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. Such investments and securities activities may involve securities and/or instruments of the Issuer or the Issuer’s affiliates or any entity related to the Notes. To the extent the Sole Underwriter and/or its affiliates have or may have a lending relationship with the Issuer, they may routinely hedge their credit exposure to the Issuer in a manner consistent with their customary risk management policies such as by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in the Issuer’s securities, including potentially the Notes offered hereby. Any such short positions could adversely affect future trading prices of the Notes offered hereby. The Sole Underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments. For the avoidance of doubt, the term “affiliates” includes also parent companies. Furthermore, as Sole Underwriter, Morgan Stanley & Co. International plc will receive commissions (as further described in “Subscription and Sale”).

Yield 11.

On the basis of the issue price of the Notes of 100 per cent. of their principal amount, the gross real yield of the Notes is 5.250 per cent. on an annual basis.

Legend Concerning US Persons 12.

The Notes and any Coupons appertaining thereto will bear a legend to the following effect: “Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code”.

EMEA 100217621 v16

70

INDEX TO THE ISSUER’S UNAUDITED FINANCIAL STATEMENTS AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2014

EMEA 100217621 v16

71

Issuer’s Balance Sheet as at and for the year ended 31 December 2014

A) B) I 1) 2) 3) 4) 5) 6) 7)

ASSETS UNPAID SUBSCRIBED CAPITAL DUE FROM SHAREHOLDERS NON-CURRENT ASSETS INTANGIBLE ASSETS . Start-up and expansion costs . Research, development and advertising costs . Industrial patents and other intellectual property rights . Concessions, licences, trademarks and similar rights . Goodwill . Intangible assets under construction and advances . Other

31 December 2014

-

-

II TANGIBLE ASSETS 1) . Land and buildings 2) . Plant and machinery: 3) . Industrial and commercial equipment 4) . Other assets 5) . Tangible assets under construction and advances

-

III FINANCIAL ASSETS 1) . Investments 2) . Receivables: 3) . Other financial assets

-

Total non-current assets C)

CURRENT ASSETS

I INVENTORIES 1) . Technical and other consumable materials II RECEIVABLES 1) . Due from customers 2) . Due from subsidiaries 3) . Due from associates 4) . Due from parents 4bis) . Tax assets 4ter) . Deferred tax assets 5) . Due from others (*)

244 70.000.000

70.000.244

III SECURITIES HELD FOR TRADING IV CASH AND CASH EQUIVALENTS 1) . Bank and post office deposits 2) . Cheques 3) . Cash and other valuables in hand

319.751.461 319.751.461 389.751.705

Total current assets D)

-

ACCRUED INCOME AND PREPAID EXPENSES

389.751.705

TOTAL ASSETS

________________________________________ (*) amounts falling due within 12 months (**) amounts falling due within 12 months

EMEA 100217621 v16

72

Issuer’s Balance Sheet as at and for the year ended 31 December 2014 (cont’d) LIABILITIES AND EQUITY A)

EQUITY

I II III IV V VII

. SHARE CAPITAL . SHARE PREMIUM RESERVE . REVALUATION RESERVE . LEGAL RESERVE . STATUTORY RESERVE . OTHER RESERVES 1.- Shareholders' capital contributions 2.- Loss coverage reserve

31 December 2014

50.000 -

-

-

VIII RETAINED EARNINGS/(ACCUMULATED LOSSES) IX . NET PROFIT/(LOSS) FOR THE PERIOD Losses covered during the year Total Equity B) 1) 2) 3) 4)

(212.148)

PROVISIONS FOR RISKS AND CHARGES . Pensions and similar obligations . Tax liabilities including deferred taxes . Other: . Capital increase Total provisions for risks and charges

C)

PROVISIONS FOR POST-EMPLOYMENT BENEFITS

D) 1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14)

PAYABLES . Bond issues . Convertible bonds . Shareholder loans . Bank borrowings . Other borrowings (*) . Down-payments . Trade payables . Debt securities . Due to subsidiaries . Due to associates . Due to parents (*) . Tax liabilities . Social security contributions payable . Other payables: Total liabilities

E)

(262.148)

-

387.500.000 387.500.000

24.968 2.401.440 37.445

2.463.853

ACCRUED EXPENSES AND DEFERRED INCOME

-

389.751.705

TOTAL LIABILITIES AND EQUITY

________________________________________ (*) amounts falling due within 12 months (**) amounts falling due within 12 months

EMEA 100217621 v16

73

Issuer’s Income Statement as at and for the year ended 31 December 2014 2014 A) VALUE OF PRODUCTION 1. - Revenue from sales and services 2. - Changes in inventories of materials for work in progress 3. - Changes in contract work in progress 4. - Increases in self-constructed assets 5. - Other revenue and income Total value of production B) PRODUCTION COSTS 6. - technical materials, fuel, other consumables and goods for resale 7. - services 8. - lease expense 9. - staff costs 10. - Amortization, depreciation and impairments 11. - Changes in inventories of technical materials, consumables and goods for resale 12. - Provisions for risks 13. - Other provisions 14. - Sundry operating costs Total production costs Difference between value of production and production costs C) FINANCIAL INCOME/(EXPENSES) 15. - Income from investments 16. - Other financial income 17. - Interest and other financial charges 17bis.- foreign exchange gains/(losses)

(262.705)

(380) (263.085) (263.085)

0 937

Total financial income/(expenses)

937

D) ADJUSTMENTS TO VALUE OF FINANCIAL ASSETS 18. - Revaluations 19. - Impairments Total adjustments

0

E) EXTRAORDINARY INCOME/(EXPENSES) 20. - Income 21. - Expenses Total extraordinary items

(262.148)

Income before taxes 22. - Income tax expense for the period 23. - Net profit/(loss) for the period

EMEA 100217621 v16

0

(262.148)

74

Issuer’s Cash Flow Statement as at and for the year ended 31 December 2014 31/12/2014 A)

B)

C)

Cash flows from (for) operating activities Net profit/(Loss) for the period Income tax expense Interest expense/interest income (Gains)/Losses on disposal of assets 1. Profit/(Loss) for the period before taxes, interest, dividends and gains/losses on disposals Adjustments for non-cash items without a matching entry in net working capital Provisions Amortization and depreciation of non-current assets Impairments Other adjustments for non-cash items Total adjustments for non-cash items 2. Cash flow before changes in net working capital Changes in net working capital Decrease/(increase) in inventories Decrease/(increase) in trade receivables increase/(Decrease) in trade payables Decrease/(increase) in accrued income and prepaid expenses increase/(Decrease) accrued expenses and deferred income Other changes in net working capital Total changes in net working capital 3. Cash flow after changes in net working capital Other adjustments Interest received/(paid) (Income tax paid) Dividends received (Use of provisions) Total other adjustments 4. Cash flow after other adjustments Cash flow from (for) operating activities (A) Cash flows from (for) investing activities Tangible assets Additions Proceeds from disposals Intangible assets (Additions) Proceeds from disposals Non-current financial assets (Additions) Proceeds from disposals Current financial assets (Additions) Proceeds from disposals Cash flow from (for) investing activities (B) Cash flows from (for) financing activities Debt Increase/(decrease) in short-term bank borrowings New borrowings Repayment of borrowings Equity Issue of new shares for payment Sale (purchase) of treasury shares Dividends (and interim dividends) paid Cash flow from (for) financing activities (C)

Increase/(decrease) in cash and cash equivalents (A ± B ± C) Cash and cash equivalents at 1 January 2014 Cash and cash equivalents at 31 December 2014

EMEA 100217621 v16

(262)

(262) 387.500

387.500 387.238

25

(67.562) (67.537) 319.701

0 0 319.701

0

50

50 319.751 0 319.751

75

REGISTERED OFFICE OF THE ISSUER Alitalia – Società Aerea Italiana S.p.A. Via A. Nassetti Pal. Alfa S.N.C. 00054 Fiumicino (Rome) Italy TRUSTEE BNP Paribas Trust Corporation UK Limited 55 Moorgate London EC2R 6PA United Kingdom SOLE UNDERWRITER Morgan Stanley & Co. International plc 25 Cabot Square Canary Wharf London El4 4QA United Kingdom PRINCIPAL PAYING AGENT BNP Paribas Securities Services, Luxembourg Branch 33, rue de Gasperich Howald - Hesperange L-2085 Luxembourg Grand Duchy of Luxembourg LISTING AGENT Arthur Cox Listing Services Limited Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland LEGAL ADVISERS To the Issuer as to Italian law:

To the Sole Underwriter as to English and Italian law:

To the Trustee as to English law:

DLA Piper Italy Via Gabrio Casati, 1 Milan 20123 Italy

White & Case (Europe) LLP Piazza Diaz, 1 20123 Milan Italy

White & Case LLP 5 Old Broad Street London EC2N 1DW United Kingdom

AUDITORS TO THE ISSUER Deloitte & Touche S.p.A. Via Tortona, 25 Milan 20144 Italy

EMEA 100217621 v16

76