I need to forecast the income statement, balance sheet, and freecash flows generated by the company over a five year period on the attached company.

Annual report 2015 Virgin Atlantic annual report 2015\b Our purpose To embrace Chief the human spirit Executive Officer's and Review:let it fly Recovery Our ambition In Complete 2014 To be the airline most loved by our customers We will achieve this by being uniquely Virgin Atlantic Safety This recovery The safety and security phase has been successfully of our customers and completed in 2014 with Virgin our people is, and always Atlantic returning a pre-exceptional will be, our top priority profit before tax of 14m 2 Virgin Atlantic annual report 2015\b 3 Our routes Belfast1 Chicago1 San Francisco Los Angeles Detroit Boston New York / Newark Washington Atlanta Orlando Miami Cancun Havana Antigua St. Lucia Montego Bay Barbados Grenada Tobago Glasgow1 Manchester London Heathrow / Gatwick Las Vegas Shanghai Delhi Dubai Lagos Johannesburg 1 2016 Seasonal Summer route Hong Kong Virgin Atlantic annual report 2015\b 2015 Highlights Customers Our focus is always for the customer, with flair 4 5,939,000 We served 5,939,000 customers on 26,739 flights to 29 non-stop destinations NPS Score We saw our customer satisfaction and net promoter score continue to climb Fleet We have continued to modernise our fleet, taking delivery of a further seven new, fuel efficient Boeing 787-9 aircraft Network We successfully launched a new route to Detroit and increased frequencies to other US destinations, so that approximately 70% of our flights now serve the transatlantic market 550 We have created more connecting opportunities to US destinations with more than 550 codeshare routes through our transatlantic joint venture with Delta Air Lines, Inc. (Delta), and 392,000 connecting customers 325,000 We arranged 325,000 Virgin Holidays experiences for customers to visit over 40 destinations Virgin Atlantic annual report 2015\b 2015 Highlights continued People We know our people are our biggest differentiator and make us unique 5 Loved for service Throughout the year, 3,200 of our crew undertook the 'Me and My Customer' training 100% Virgin Holidays moved closer to its customers by becoming a 100% direct sale business 1.2m Together, Virgin Atlantic and the Virgin Atlantic Foundation distributed the equivalent of over 1.2m in money, time and donations-in-kind to charity, of which our people raised 275,000 for charity through fund raising activities and volunteering Waste 97% of our total UK ground waste is diverted from landfill. 65% is recycled, 30% is used to generate energy and 2% is composted. We have also reduced our total UK ground waste by 33% over the last eight years Noise We have reduced noise output per aircraft movement by 2.24dB to 95.32dB compared to 2012, and continue to work towards our target of reducing our noise output per aircraft movement by 6dB in 2020 as compared to 2012 Virgin Atlantic annual report 2015\b 2015 Highlights continued Financial Building on our return to profitability 6 22.5m Virgin Atlantic profit before tax and exceptional items of 22.5m, a 10.1m year on year1 improvement 55% The transatlantic joint venture with Delta continues to strengthen, with the contribution to our profits increasing by 55% year on year 196m Airline operating cost before exceptional items down 196m year on year, driven mainly by the reduction in fuel cost of 191m 85% Virgin Holidays' profit before tax and exceptional items of 10.9m, a 5.0m (85%) year on year improvement 220m The completion of a landmark senior secured note bond financing transaction of 220m, Virgin Atlantic's maiden capital markets transaction, and a first financing of its kind in Europe 6.8% Return on Invested Capital2 of 6.8% for 2015 1.\t\u0007Comparatives with 2014 are with the amounts restated under IFRS and, with the exception of profit before tax and exceptional items, are made on a constant currency basis 2.\t\u0007Return on Invested Capital (ROIC) has been calculated as EBIT divided by net assets deployed, less net debt. Adjustments are made to EBIT and net assets to account for those aircraft operated under operating leases and mark-to-market movements on open contracts Virgin Atlantic annual report 2015\b Contents 7 Our purpose, ambition and safety mission statement\b 2 Our routes \b 3 2015 Highlights \b 4 Contents\b7 Directors' report Strategic report Chairman's Review 8 Chief Executive Officer's Review 10 Chief Financial Officer's Review 14 Key Performance Indicators 18 Principal Risks And Uncertainties 22 Change Is In The Air - Our Sustainable Business Programme 25 Governance Board Of Directors 27 Group Company Secretary 29 Committees Of The Board 30 Safety Governance 30 Joint Venture Steering Committee 30 Directors' Report 31 Directors' responsibilities statement 33 Independent auditor's report 34 Financial statements Consolidated Statement of Comprehensive Income 35 Consolidated Statement of Financial Position 36 Company Statement of Financial Position 37 Consolidated Statement of Changes in Equity 38 Company Statement of Changes in Equity 39 Consolidated Statement of Cash Flows 40 Notes\t41 Corporate structure 97 Glossary 98 Virgin Atlantic annual report 2015\b Chairman's Review Our joint venture with Delta on transatlantic routes has continued to produce excellent results 8 I am pleased to report that the Virgin Atlantic Group increased its profits in the 2015 financial year, following its return to profitability in 2014. Our profit before tax and exceptional items3 for 2015 was 22.5m, compared to 12.4m for 2014 (both results stated under IFRS, which we adopted in 2015). Since the end of 2014, the price of oil has fallen by over 34%. This has been welcome. However, because we did not anticipate this development, our customary hedging programmes have restricted the immediate benefit we can pass on to customers. It is possible that a lower price level will persist for some time, as there is a clear excess of supply over demand, in the absence of significant changes in extraction levels, or of geopolitical events, which might restrict supply. Our objectives are to remain as competitive as possible by passing on the benefit of reducing costs to customers, while remaining appropriately prudent in terms of managing the risk of future price increases. We will also continue to take every opportunity we have to reduce consumption, by investing in new generation aircraft and engines. Over the long term, in the absence of alternative energy sources, reduced consumption is the most effective counter to price volatility. Our joint venture with Delta on transatlantic routes has continued to produce excellent results. In addition, Virgin Holidays has achieved a significant increase in profits, producing a profit before tax and exceptional items of 10.9m (2014: 5.9m). In 2015, we made great progress in implementing our long-term Plan to Win. While there remains a lot to be done, we are confident that the foundations of a sound and consistently profitable business are being built. Sustainable profitability The main objectives of the Plan to Win are to be consistently profitable through the economic cycles; to maintain an appropriate return on capital; and to have the most engaged and effective work force in the industry delivering the unique Virgin Atlantic experience to customers. In 2015, we took a number of important steps towards these goals. We strengthened the balance sheet with long-term financing, invested considerable sums in capital programmes, technology and training and development, including our Loved for Service initiative. We also reduced operating costs in a number of areas and in 2016 will move into a new headquarters facility which will give us a more flexible working environment as well as reducing expenses. The new building has been rated as 'excellent' under BREEAM 2011 and meets the EPC 'B' standard. Los Angeles Clubhouse We made significant investments in customer service, introducing new menus, on-board Wi-Fi and a new Clubhouse in Los Angeles. We took delivery of seven more Boeing 787-9 aircraft, so we now have nine out of our total order of 17. We are on track to have the most modern and efficient fleet across the Atlantic. This will be supported by the introduction in 2016 of our new passenger service system, Air4. This is a vital project for Virgin Atlantic, and in 2015 we made good progress in the development phase. To achieve the Plan to Win we must reach higher levels of operating efficiency, so that our non-fuel costs are properly competitive. We have undertaken a root and branch exercise to identify ways of doing this. We are creating centres of excellence, automating processes and eliminating overlaps and duplication in our departments. As a result we have reduced managerial and support staff numbers by approximately 500. The efficiency programme will deliver 30m of recurring annual benefit from 2016, which we will invest in our customer service and our people. Virgin Atlantic annual report 2015\b 9 Chairman's Review continued On behalf of the Board, I give heartfelt thanks to all our people at Virgin Atlantic for their loyalty, commitment and very hard work during 2015 Virgin Atlantic and Delta Air lines Shareholder returns Our balance sheet structure has benefited from the successful completion of a large long-term financing. This raised proceeds of 220m through a securitisation format which is the first of its kind in Europe. We are investing the proceeds in purchasing outright two of the Boeing 787-9 fleet. We will continue to re-balance our fleet profile, by increasing our level of outright ownership of aircraft. Celebrating 30 years of Virgin Holidays In 2015, Virgin Holidays celebrated its 30th year in business. Since 1985, Virgin Holidays has been one of the most innovative operators in its sector. It was the first tour operator to offer dedicated airport lounges to leisure customers, at Gatwick and Manchester. It has introduced innovative retail stores designed to inspire consumers through immersive experiences as holidays are brought to life through sight, sound and smell and through a welcoming atmosphere. Its ability to change the model and improve its product has enabled it to maintain a market-leading position and to remain profitable through periods of great change in the way in which holidays are sold. Colleagues During 2015, there were a number of changes to our Board and Executive Management Team. Perry Cantarutti stepped down as a non-executive director and we thank him very much for his contribution to our Board. We welcome his replacement, Nat Pieper, and also Erik Varwijk, who has joined our senior executive team as EVP, Commercial. Finally we congratulate our Board colleagues, Ed Bastian and Glen Hauenstein, on their promotions at Delta. Ed will become Chief Executive Officer and Glen will take over from Ed as President in May 2016. On behalf of the Board, I give heartfelt thanks to all our people at Virgin Atlantic for their loyalty, commitment and very hard work during 2015. From this foundation, we can face the future with confidence. Peter Norris Chairman 17 March 2016 3.\t\u0007Exceptional items include gains or losses on hedging, restructuring costs and gains or losses on the disposal of property, plant and machinery. Virgin Atlantic annual report 2015\b Chief Executive Officer's Review Our profit before tax and exceptional items increased to 22.5m, a significant improvement on 2014 of 10.1m 10 Safety and security first and always The safety and security of our customers and our people is, and always will be, our top priority. We aim to ensure every decision we take, no matter how big or small, starts with safety and security as our first consideration. It is built into our culture. This is supported by a management structure with clear accountability and defined escalation channels, a team of dedicated safety and security professionals, and focused action groups structured on the International Civil Aviation Organisation (ICAO) model. Our Safety Management System actively encourages our people to report confidently, openly and honestly. All reports are investigated by our safety and security experts, who identify appropriate actions and recommendations. Our profit before tax and exceptional items4 increased to 22.5m, a significant improvement on 20145 of 10.1m. Of note was Virgin Holidays' strong performance, where profit before tax and exceptional items increased by 85%. We continuously review how we manage safety and security, ensuring that the highest corporate standards, care for our people, and the safety and security of our customers are maintained at all times. In 2015, we started operating under the new European Aviation Safety Agency (EASA) Flight Time Limitations regulations and also became the first airline to complete a year of the Civil Aviation Authority's (CAA's) Performance Based Regulation approach. Based on the success of our last International Air Transport Association (IATA) Operational Safety Audit, in which we had no areas for improvement, we are now building towards an Enhanced IATA Operational Safety Audit (IOSA) for this year. We achieved these improved results in a year in which we also transformed our business, laying the foundations for a robust and enduring Virgin Atlantic. A key part of our Plan to Win has been creating a customer-focused organisation that is consistently profitable and capable of reaching the targets we have set ourselves. This includes the need to be structured in a simpler, more efficient way. By reducing the number of management layers, we bring our people closer to our customers. This, together with other initiatives, has helped to reduce our overall non-fuel costs, making us more competitive. This safeguards our ability to continue investing more in the unique Virgin Atlantic service and experience for the benefit of our customers, which we believe is a true differentiator for us. I would like to thank everyone across Virgin Atlantic Airways and Virgin Holidays for their continued commitment to the highest safety standards throughout our entire business. 2015: laying the foundations for the future After delivering successfully against our recovery plan in 2014, returning Virgin Atlantic to profitability, in 2015 we set our sights on positioning Virgin Atlantic for the future. It was the first full year of our Plan to Win, our four-year plan to deliver long-term success and profitability, ensuring we are always focused on our customers and delivering service with Virgin Atlantic flair. In 2015 Virgin Atlantic Airways flew 5,939,000 people on 26,739 flights to 29 non-stop destinations. 325,000 people enjoyed a Virgin Holiday. Both Virgin Atlantic Airways and Virgin Holidays are on track to meet our long term ambitions. Our focus remains on being always for the customer, with flair, and 2015 was a great year for our customers. Brent Crude prices fell by 34% and Virgin Atlantic passed on much of its benefit from fuel savings to our customers in the form of lower fares. 2016: a pivotal year 2016 will be a pivotal year for Virgin Atlantic. We will continue to enhance the customer experience, increase our earning potential, and invest in technology that benefits our customers and our people. Many of the benefits from the business transformation that we put in place in 2015 will be realised throughout 2016 and will last for years to come. 4.\t\u0007Exceptional items include gains or losses on hedging, restructuring costs and gains or losses on the disposal of property, plant and machinery. 5. \u0007The result for 2014 has been restated following our adoption of International Financial Reporting Standards as adopted by the European Union (\"IFRS\") for 2015, as explained in the Chief Financial Officer's review Virgin Atlantic annual report 2015\b Chief Executive Officer's Review continued AIR4 AIR4 is the biggest technology transformation in our history, and a key part of our Plan to Win. We are replacing our current Passenger Service System (PSS), SHARES, our Airport and Contact Centre systems and our mobile apps with a new technology platform called AIR4. Much progress has already been made towards its implementation in 2016. It's a major change in how we operate our business and interact with our customers. It is also part of a wider technology investment programme that will see the development of our Platform to Serve, helping us to improve the ways in which we personalise customer experiences and communications. 11 We expect benefits directly to the bottom line from reduced fuel hedging, leading to greater financial benefits from lower fuel prices. Our Boeing 787-9 programme continues to deliver cost efficiencies and customer benefits, and this trend will continue as we increase our Boeing 787-9 fleet from nine to 13 aircraft. We are investing in new technology, including our new passenger service system, AIR4, and a new Customer Relationship Management (CRM) system called Platform to Serve. We will grow further into the extra capacity that we have added through our joint venture routes with Delta, while continuing to drive maximum benefit from this partnership. We are moving our head office to a brand new building, and our operations at London Gatwick Airport are moving to new, modern facilities at the Airport's North Terminal. We expect to be fully operational in the North Terminal in early 2017. We are continuing our investment in our customer experience, both on the ground and in the air, as well as in our people and their development. Our Plan to Win The Plan to Win leverages our key strengths, including our people; customer experience and brand; our scale and advantageous position in the UK; our fleet of aircraft and network; and our transatlantic joint venture with Delta. Our people At Virgin Atlantic, our people play the most critical role in delivering the customer experience. We have an ethos of continually improving the way we serve our customers, always with Virgin Atlantic flair. 2015 was no exception and our people continued to deliver outstanding experiences, with customer feedback telling us that our people have made a real difference to their journeys. I would like to thank our people for the contribution they have made in achieving this. We place great emphasis on hiring the best people and welcoming them to our business through our dedicated Hello day (the Virgin Atlantic induction programme). We continue to invest in training and development to help them make best use of their talent, creativity and experience. In 2015 we continued to develop our customer-facing teams, including our crew, customer service centre and airport teams, through our Me and My Customer programme. This awardwinning programme ensures our people are empowered to do the right thing for our customer, delivering a consistently superior service across all touch points. We also continued to provide training to existing First Officers and Captains, investing particularly in training our flight crews in the safety, security and operational requirements of our new modern fleet of Boeing 787-9 aircraft. As part of our investment in people development, in 2015 we welcomed the first group of the Future Flyers pilot cadet scheme. The aim of the scheme is to train pilots with little or no previous flying experience, enabling people with diverse skills and backgrounds to join the profession. This year saw 12 cadets join the 18-month programme, which leads towards the Civil Aviation Authority's latest Multi-crew Pilot Licence (MPL) and a position as a Virgin Atlantic First Officer. In its first year, the scheme proved incredibly popular, with over 8,000 applicants. As always, at the core of our Virgin Atlantic culture is a belief in working together with the communities in which we operate and to give something back. In 2015, through the Virgin Atlantic Foundation, we raised 633,000 on board our aircraft for our Change for Children appeal. Our employees took part in six fundraising adventures; and more than 150 of our people gave up their time to volunteer at Free The Children's annual youth empowerment event, 'WE Day'. Virgin Atlantic annual report 2015\b Chief Executive Officer's Review continued In 2015, our customer satisfaction scores increased again, and we are exceeding the ambitious targets we have set ourselves 12 Our customers At the beginning of 2015 we launched our much anticipated advertising campaign, Let it Fly, bringing our customer-centric ethos to life through our iconic brand. The campaign message, 'Life doesn't come to you, so go to it', encapsulates our passion for service and demonstrates how we go above and beyond to deliver unforgettable experiences for our customers. We have always challenged the status quo. In this campaign, instead of challenging the competition, we are challenging ourselves for the customer. We continue to build on this promise - for our customers and our people. In 2015, our customer satisfaction scores increased again, and we are exceeding the ambitious targets we have set ourselves. We know we do particularly well where our customers have face-to-face interactions with our people. We are also investing in our product and services to support our brilliant people. from 2015 to 2018, we will have delivered over 300m of new investment into our customer experience. In 2015, we have already made great progress. We launched a fleet-wide Wi-Fi roll-out, which will be complete by the end of 2016. We opened a new Virgin Atlantic Clubhouse in Los Angeles and refurbished a number of our Clubhouses around the world. We also made significant investment in 2015 in our food and beverage offering, which has had a positive impact on our customers' flying experience. Our investment in 2015 focused primarily on the new Economy cabin that we introduced across our fleet between March and September 2015. Premium Economy Food and beverage service improvements included adding cheese and crackers to meals; providing water bottles to all customers in the cabin; increasing portion sizes for main meals and adding a second meal service on longer flights - and we also introduced a hot towel service as well as offering chocolates while serving tea and coffee to our Economy customers. And of course we won't lose sight of the basics, continuing to serve our customers' needs through best-in-class On Time Performance (OTP) scores. 2015 saw another strong performance for our OTP, with around 85% of flights departing within 15 minutes of schedule. Network and fleet: the right aircraft flying to the right places By the end of 2015, our fleet included nine Boeing 787-9 aircraft, and we're excited to be welcoming a further four Boeing 787-9 aircraft in 2016, as we replace 40% of our fleet over a four-year period. Thanks to the landmark financing deal that raised 220m, our final Boeing 787-9 delivery in 2015, Maid Marian, is an aircraft wholly owned by Virgin Atlantic. We now operate the Boeing 787-9 on routes where it makes most sense, both financially and to our customers. This includes routes like Hong Kong, Shanghai, Los Angeles and Johannesburg, which are longer flights where the customer experience and fuel efficiency benefits are maximised. Today approximately 70% of our flying is transatlantic, the same level as during the most profitable period in our history. While we announced changes to our longhaul network and to Little Red in 2014, Virgin Atlantic annual report 2015\b Chief Executive Officer's Review continued I would like to take this opportunity to thank our people once more. Their focus on being themselves while taking care of our customers has played a critical role in delivering the first year of our Plan to Win 13 it was in 2015 that those plans turned into reality. The strength of Delta's network in the United States, combined with the presence of Virgin Atlantic at London Heathrow and Gatwick, delivers a strong network proposition for our customers. We capitalised on our transatlantic joint venture with Delta during the year, adding more routes to North America, and increased our flying capacity to our most popular destinations. We also introduced our Heathrow to Detroit route, which connects our customers to almost anywhere in North America. Virgin Atlantic Airways now connects 392,000 customers to over 200 destinations in the United States with Delta, on over 550 routes. We also launched new opportunities for our customers in the UK, including a Belfast to Orlando direct seasonal route. Following the success of this route in 2015, we are continuing this offer in 2016. Virgin Holidays: exceeding targets In October, we announced that Virgin Holidays would transition to a direct sales model, ceasing its distribution through third-party travel agents. Owning the relationship with our customers allows us to deliver the personalisation and differentiation to achieve our vision of offering the best customer experience in the UK. This decision was made possible by the success of the retail network that Virgin Holidays has built up. In 2015 we opened the first of our standalone retail v-room stores, in Bluewater, Newcastle Metro Centre, Lakeside, Bristol and Leeds. Business in these stores is already strong and based on this early success, we will add three more retail v-room stores in the first half of 2016. Virgin Holidays V-Room store, Leeds We have also continued to invest and innovate in our offering for customers, including the launch of Wonderlist, a collection designed to showcase unique, once-in-a-lifetime holidays to premium customers. We have also invested in our customer touch points, including ensuring that our Customer Service Centres serve calls in the UK. This change was a direct result of listening to and acting on feedback from our customers, who told us how much they valued a UK call centre. Similarly, we have invested in a new mobile responsive website, and will back this investment up in 2016 with enhancements to our online customer experience through new functionality and improved design. Thank you to our people Progress has been made in many areas of our business. I would like to take this opportunity to thank our people once more. Their focus on being themselves while taking care of our customers has played a critical role in delivering the first year of our Plan to Win. We are well positioned to achieve our long-term targets, and expect to post record profits, on a sustainable basis, by 2018. It's now time to realise our potential. Craig Kreeger Chief Executive Officer 17 March 2016 Virgin Atlantic annual report 2015\b Chief Financial Officer's Review This is our second consecutive profitable year and supports the long-term goals of our Plan to Win 14 For the year ended 31 December 2015, Virgin Atlantic returned a profit of 22.5m before tax and exceptional items6. This is our second consecutive profitable year and supports the long-term goals of our Plan to Win. The result is significant given the considerable changes made to our network configuration and operations during the year, setting us up well for 2016 and our Plan to Win. Result highlights - \u0007Profit before tax and exceptional items improves by 10.1m year on year7 to 22.5m (statutory profit before tax of 87.5m, 2014: restated loss before tax of 174.7m) - \u0007Total revenue for the year down 45.6m - \u0007Airline passenger unit revenue down 2.9% - \u0007Airline operating costs have fallen year on year by 196m, driven by fuel cost reduction of 191m - \u0007Non-fuel unit costs remained flat year on year, despite regulated cost increases - \u0007Virgin Holidays saw a 5.0m year on year improvement in profit before tax and exceptional items in 2015 to 10.9m - \u0007Return on invested capital improves 0.4pts to 6.8%8 - \u0007The completion of a landmark senior secured note bond financing transaction raising 220m - \u0007Total cash (including restricted cash) increased by 300m to 596m Airline passenger revenue 2015 was a year of significant network change for Virgin Atlantic, aligning our network to take full advantage of our transatlantic joint venture with Delta and focusing on our longhaul operation. We stopped flying to Tokyo, Mumbai, Cape Town and Vancouver, and also closed our shorthaul service, Little Red, and have replaced these services with additional transatlantic flying. 2014 comparators - IFRS - \u0007We are now preparing our financial statements under full IFRS to allow better comparability with our peer group. We have historically prepared our financial statements under UK GAAP, and the key impact of the change to IFRS has been on fuel and foreign exchange hedging and the frequent flyer programme (Flying Club). In previous periods, fuel and foreign currency derivatives, as well as Flying Club, were not reflected on our balance sheet at fair value. Prior year comparators have been restated to reflect the conversion which reduces net assets at 31 December 2014 by 242m and profit before tax and exceptional items by 2.0m to 12.4m, leading to a year on year improvement of 10.1m. - \u0007In adopting IFRS we have also changed the revenue recognition criteria in relation to Passenger Service Charges (PSC) from (principal) gross accounting (reflected in Total Revenue and Traffic Direct Operating Cost) to (agent) a net basis within Total Revenue. Prior year comparators have been restated to reflect this which impacts total revenue and traffic direct operating costs by 97.5m. This change will make our revenue reporting more reflective of commercial activity. Overall for the year, our load factor was down 2.5pts to 76.8%, driven by the redeployment of our capacity from the rest of the world to our transatlantic services to reorient our network towards approximately 70% transatlantic flying. This will benefit the airline in the long-term. Yield performance was strong in the first part of the year, driven by improvements to market fares and in our performance in the business and premium economy cabins. This partially offset some of the decline in our load factor. In the latter half of the year the fuel environment, while reducing our fuel costs, led to downward pressure on our fares. These factors led to an overall reduction in airline passenger revenue of 72.8m year on year, a reduction in unit passenger revenue of 2.9%. 6.\t\u0007Exceptional items include gains or losses on hedging, restructuring costs and gains or losses on the disposal of property, plant and machinery. 7. \u0007Comparatives with 2014 are with the amounts restated under IFRS and, with the exception of profit before tax and exceptional items, are made on a constant currency basis 8. \u0007Return on Invested Capital (ROIC) has been calculated as EBIT divided by net assets deployed, less net debt. Adjustments are made to EBIT and net assets to account for those aircraft operated under operating leases and mark-to-market movements on open contracts. Virgin Atlantic annual report 2015\b Chief Financial Officer's Review continued Fuel hedging - \u0007Virgin Atlantic operates a hedging policy that protects the business from exposure to volatility in oil prices and foreign currency rates. The policy allows Virgin Atlantic to hedge within bands, up to 24 months out with declining percentages. While Brent Crude prices have fallen by 34% (from $56 on the 1 January to $37 on the 31 December 2015), we did not benefit fully from the decline in price because of our hedging policy. - \u0007We made realised hedging losses of 198m in 2015, but still benefited from a fall in our effective hedged fuel price by 17% year on year, and in 2016 we will see this reduce further. 15 In the transatlantic market we increased capacity by 14.8%. This is aligned with our strategy to offer a better and more frequent service to our customers, as well as opening up new US markets with Delta. We successfully added additional services into several existing Virgin Atlantic markets; New York, Los Angeles and San Francisco while also starting services into the key Delta hubs of Atlanta and Detroit, significantly enhancing the presence of Virgin Atlantic in the transatlantic market. We generated strong growth in passenger numbers, up 9.1% versus 2014 but these increases did not keep pace with our capacity growth. This led to a decline in our transatlantic load factor of 4.3pts. We launched Boeing 787-9 aircraft into existing markets to Shanghai, Hong Kong, Johannesburg and Delhi. These aircraft are delivering a superior experience to our customers as well as reducing our capacity in each market and driving down our unit costs. Cargo revenue Cargo revenue declined 13.0% primarily due to aggressive competitor activity and the low fuel cost environment, which put pressure on price and meant our yields were down 8% year on year. The change to our network was the right decision for the airline, but the loss of key routes, including Tokyo, Mumbai and Cape Town, resulted in declining volumes for our cargo business. We also introduced the Boeing 787-9 to Hong Kong and Shanghai, which reduced cargo capacity from the Far East. On the rest of the network, market capacity increases outstripped demand growth. Overall, cargo tonnage was down 4.3% year on year. Virgin Holidays 2015 saw continued growth in Virgin Holidays' profitability, with profit before tax and exceptional items up by 85% to 10.9m. Departed passenger volumes grew by 5%, underpinned by strong performances across all key regions. Growth was seen in both the North America and Caribbean markets, while new flight search technology enabled us to find the best prices for our customers and helped drive a 22% uplift in non-transatlantic routes. Gross margin was comparable with the prior year at 10.2%. Pre-exceptional operating costs totalled 48.3m and cost efficiency improved to 8.4% of revenue (2014: 9.0%). This included the benefit of an internal reorganisation to remove organisational layers and reduce support roles which will deliver an annualised benefit of 4m. Flying Club We have changed our frequent flyer programme (Flying Club) by making more seats available on more flights for our members, to drive higher customer satisfaction scores using our reward proposition. This change was reflected by a 17% increase in the number of standard redemption seats booked by our members in 2015, and a 3.4m increase in Flying Club revenue year on year to 72.3m for 2015. Operating costs Airline operating costs before exceptional items have fallen year on year by 196m, driven by falling fuel prices (including the cost of hedging) and improved operating efficiency. Airline unit operating cost of 4.69p improved by 7.3% year on year. Fuel cost On a unit basis, fuel costs fell by 20.4%, mainly driven by fuel prices. The introduction of new fuel-efficient aircraft has supported our efforts to reduce our physical fuel cost, which is reflected in a 4.6% reduction in fuel burn year on year with flat capacity growth. However, this was largely offset by hedging losses of 198m, which will continue to unwind over the next 12 months (see separate box on fuel hedging). Non-fuel cost Non-fuel unit cost remained flat year on year. Improved cost efficiency through our change programme, fit.nimble, has successfully covered the costs associated with our increased investment in customer product and services. Improved cost efficiency has also offset the on-going negative impact of above inflation cost increases we saw endorsed by regulators in the last review period, for certain regulated costs in our supply chain. (see separate box on fit.nimble.) Virgin Atlantic annual report 2015\b Chief Financial Officer's Review continued Change programme (fit.nimble) - \u00072015 has been a year of transformation and building a platform for long-term success. - \u0007In early 2015, we launched our change programme fit.nimble to drive efficiency and simplicity throughout all areas of the business while keeping the safety and security of our customers first and foremost, and delivering an even better customer experience: - \u0007fit is about becoming a leaner organisation, with efficient processes focused on value adding activities; - \u0007nimble is about becoming agile in how we work and having a cost base that reflects our size. - \u0007We will operate in a more efficient way with fewer management layers, bringing the entire business closer to the customer. - \u0007Following an independent cost benchmarking exercise, we have identified and are implementing more than 50 projects that will deliver 30m of recurring benefits in 2016 and with a run-rate of approximately 60m by 2018. - \u0007Focus areas for savings include the creation of Centres of Excellence for support functions (such as Finance, HR and Procurement) and reviewing contracts for ground handling and engineering. - \u0007We will continue to find opportunities to drive improved and competitive non-fuel unit cost relative to our peer group and below the prevailing market inflation. 16 Aircraft ownership costs We took delivery of seven new Boeing 787-9 aircraft during 2015, taking our total Boeing 787-9 fleet to nine overall. The replacement of Airbus A340 aircraft with the state-of-the-art Boeing 787-9 continued, reducing the average age of our aircraft from ten years to eight. This makes our fleet one of the youngest and most fuel-efficient in the skies. Aircraft ownership costs have reduced by 7.4m, driven by the cessation of our shorthaul operation (Little Red) and reduced interest costs due to an improved mix of leased and owned aircraft. In the long-term, as we move towards our target for ownership of approximately 50% of our aircraft fleet, we will increasingly benefit from lower ownership costs. Cash flow We continue to improve our capital structure through stronger operating performance, a better mix of leased and owned aircraft, and through the successful completion of a landmark senior secured note bond transaction. This was our maiden capital markets transaction, and the first financing transaction of its kind in Europe to utilise UK airport slots to raise debt finance (see separate box on this transaction). Total cash (including restricted cash) increased by 300m to 596m driven by cash generated from operations of 257m (up 177m year on year) and net cash flow from financing activities of 195m. Market overview 2015 saw downward pricing pressure on transatlantic routes, due to the increased capacity in the market. UK transatlantic capacity grew 5.8% year on year, partly impacted by the changes that we made to our network. In 2016, we expect to see seat capacity growth stabilise now that we have rebalanced our network. The price of fuel continued to decline, as reflected by the 68% fall in the price of Brent Crude per barrel (from a high point in 2014 of $116, $56 on the 1 January 2015 to $37 on the 31 December 2015). As hedges unwind, the benefit of a lower fuel price environment will be increasingly felt by airlines and other energy intensive industries. Overall, 2015 has been a relatively good year for airlines, which resulted in a 7.5% average airline ROIC, above the cost of capital for the first time. This new measure is a pillar of our Plan to Win (2015 ROIC 6.8%). Regulatory landscape Virgin Atlantic continues to advocate the importance of promoting competition in the travel industry, which ultimately benefits consumers. In particular, it remains critical that any new runway capacity, as endorsed by the Government, should be allocated to enhance competition and correct legacy carriers' inherited dominance, rather than exacerbate it. The 220m inflow from the senior secured note financing transaction allowed us to purchase a Boeing 787-9 outright, which is our first unencumbered new aircraft to be owned by the airline. In line with our strategy, our leverage9 ratio reduced to 3.9x (down from 4.2x in 2014) and we remain committed to reducing it further to 2.5x. 31 December 2015 31 December 2014 27.0m 13.2m 328.1m 280.3mm Leverage 3.9x 4.2x Liquidity 21.4% 10.5% m EBIT10 EBITDAR10 9.\t\u0007Leverage has been calculated as net debt divided by EBITDAR. Adjustments are made to net debt to account for those aircraft operated under operating leases. 10. before exceptional items Virgin Atlantic annual report 2015\b Chief Financial Officer's Review continued 220m senior secured note financing transaction - \u0007Completed in December 2015, this was a landmark senior secured note bond financing transaction with 220m being raised using the majority of our take-off and landing slot portfolio at London Heathrow as security. The bonds, which have a very attractive coupon when compared to other capital market products, have a tenor of up to 15 years with the notes being split between two tranches: 190m A1 notes (with a weighted average life of 12 years) and 30m A2 notes (with a weighted average life of 10 years). - \u0007This unique financing transaction, for which Macquarie Corporate and Asset Finance acted as sole arranger, was unique in a number of respects: Moody's provided the first such rating for this asset class in Europe, and the transaction was the first in Europe to use airport slots in this way. The transaction was also our maiden capital markets transaction. - \u0007The transaction attracted participation from a number of blue chip investors including Pension Insurance Corporation, a client of Hastings Funds Management (UK), Standard Life Investments and Edmond de Rothschild Asset Management (UK) Limited. - \u0007The financing transaction helps ensure that we have the appropriate capital base to fund our long term investment programme including the outright purchase of brand new Boeing 787-9 aircraft. Given the highly regulated and intangible nature of the security, the financing structure required the creation of a wholly owned and licensed airline subsidiary called Virgin Atlantic International Limited with flights operated by two Airbus A330300 aircraft serviced by Virgin Atlantic Airways' existing team of pilots and crew from London Gatwick Airport to a number of Caribbean destinations. 17 As we enter the initial process of discussions over regulated charges for Heathrow and Gatwick, we support the Davies Commission's recommendation that the economic benefits for the UK are greatest from expanding hub capacity at Heathrow. That said, a new runway must deliver a good outcome for local communities and boost competition - which ultimately will benefit customers. We continue to work constructively with the Government, the CAA and other stakeholders on how new capacity should be delivered and paid for, and will continue to encourage the Government to ensure decisions are made with customers' interests front of mind, in terms of funding models, slot allocation and capacity. Air Passenger Duty (APD) abolition for band C and D and children's travel was implemented in 2015. Despite these positive steps, APD is still the highest passenger tax in the world, double the next highest in Europe, which is in Germany. A passenger travelling with Virgin Atlantic will be taxed 73 in Economy or 146 in Premium Economy or Upper Class from April 2016 for an outbound journey. Achieving an internationally competitive rate of APD remains a priority. We will continue to engage with regulators and policymakers in the UK and Brussels to progress amendments to EU Regulation EC261/2014, by encouraging the development of a new passenger rights regulation on denied boarding and delay compensation. Finally, we will continue to support the need for an agreement on a global climate change framework for our industry which is both economically efficient and environmentally effective. Outlook In 2015, we set the foundations of our Plan to Win. 2016 is a year of delivery. We will improve our financial performance as we leverage our strengthened network and grow into the capacity added last year. The continuing unwinding of higherpriced hedging contracts and the further reduction in fuel prices is expected to lead to greater financial benefits in 2016. Through our change programme, fit.nimble, we have identified and are implementing more than 50 projects across eight workstreams and we are well on the way to delivering 30m of benefit in 2016, with a run-rate of approximately 60m by 2018. We will improve our financial performance as we leverage our strengthened network and grow into the capacity added last year Virgin Holidays will continue to build on the strong profit growth delivered in 2015, capitalising on good forward demand and realising the full benefits of the reorganisation that was implemented part-way through 2015. We expect that the decision to become a direct-only business will both yield stronger margins and allow Virgin Holidays to deliver an irresistible customer journey, which is one of the fundamental pillars of our Plan to Win. We will continue to invest in both the website and the retail distribution network to deliver this objective. Virgin Atlantic and its people are committed to delighting our customers, as we have done for over 30 years. Through exploiting our network and partnership with Delta, and investing in our people, customers and technology, we have the building blocks in place underpinning our Plan to Win and to deliver sustainable profits. Shai Weiss Chief Financial Officer 17 March 2016 Virgin Atlantic annual report 2015\b 18 Key Performance Indicators We have outlined below the key performance indicators that we rely on to manage our business. The financial indicators are stated at constant currency and on a 12 month basis to December for comparability. Safety Customers Number of incidents On time performance (D15) The safety and security of our customers is our primary concern11. 100% 100% YoY YoY 44 3 43 4 Always for the customer, with flair. 100% 100% YoY 100% YoY 100% -1.1pt -1.1pt YoY -1.1pt YoY -1.1pt YoY YoY 33 42 32 3 4 80% 80% 85.5% 85.5% 85.5% 84.6% 100% 85.5% 100% 84.6% 80% 80% 85.5% 40% 40% 60% 60% 31 1 85.5% 85.5% 84.6% 84.6% 00 20 60% 2 60% 20% 0 20% 40% 1 1 40% 1 1 2015 2013 2013 2013 2014 2014 2015 2013 2014 2014 2015 2015 1 40% 1 40% 0 0 20% 0 0 20% 1 1 2013 2014 2014 2015 2015 2013 2014 2014 2015 2015 2013 2013 0 0 0 20% 0 20% 2013 2014 2015 2013 2014 2015 2013 2014to managing 2015 2013 2014 2015 Disciplined approach our capacity. Capacity 4141 2.6% 2.6% Aircraft 4040 41 41 -0.7% YoY -0.7% Available seat kilometres (ASK)YoY (m) YoY YoY 2.6% 2.6% YoY 2.6% YoY 2.6% 52,000 52,000 YoY YoY 4040 41 39 3940 41 40 4040 40 40 3839 3839 40 4040 3939 4040 40 40 39 39 40 39 3738 3738 39 39 2013 2015 2013 2014 2014 39 2015 38 38 37 37 2013 2014 2014 2015 2015 2013 37 37 2013 2014 2015 2013 2014 2015 50,330 50,330 49,000 49,000 52,000 52,000 -0.7% -0.7% 48,710 48,710 48,385 48,385YoY -0.7% YoY -0.7% 48,710 48,385 48,710 48,385 48,710 48,710 48,385 Passengers Passenger growth remains a-3.8% key part of our Plan to Win. YoY YoY -3.8% 80% 80% 39,549 39,549passenger kilometres (RPK) (m) Revenue 37000 37000 40000 40000 37,157 37,157 39,549 YoY 39,549 38,643 40000 38,643 40000 34000 34000 37000 37000 39,549 39,549 37,157 37,157 38,643 38,643 37000 37000 31000 31000 34000 34000 -3.8% -3.8% -3.8% YoY -3.8% YoY YoY 38,643 38,643 37,157 37,157 34000 34000 28000 28000 31000 31000 2013 2013 2014 2014 2015 2015 31000 31000 28000 28000 2013 2014 2014 2015 2015 2013 28000 28000 2013 2014 2015 2013 2014 2015 48,385 -2.5pt -2.5pt YoY YoY 79.3% 79.3% 76.8% 76.8% 77.4% 77.4% Passenger load factor 60% 60% 80% 80% 79.3% 77.4% 79.3% 77.4% 80% 80% 40% 40% 60% 60% 77.4% 79.3% 77.4% -2.5pt -2.5pt 76.8% 76.8% YoY -2.5pt YoY -2.5pt 79.3% 76.8% YoY YoY 76.8% 60% 60% 20% 20% 40% 40% 40%0 0 40% 20% 20% 2013 2013 2014 2014 2015 2015 20% 20% 0 0 2013 2014 2014 2015 2015 2013 0 0 2013 2014 2015 2013 2014 2015 11.\t\u0007Incidents subject to review by external regulatory bodies (e.g. AAIB, NTSB) 3 5 2 4 1 3 0 2 1 0 0 6 4 6 2 50,330 46,000 46,000 40,000 40,000 43,000 43,000 2013 2013 2014 2014 2015 2015 43,000 43,000 40,000 40,000 2013 2014 2014 2015 2015 2013 40,000 40,000 2013 2014 2015 2013 2014 2015 40000 40000 4 YoY YoY 52,000 52,000 50,330 46,000 46,000 49,000 50,330 49,000 50,330 49,000 49,000 43,000 43,000 46,000 46,000 5 YoY YoY 100% 100% 60% 60% 80% 85.5% 80% 85.5% 85.5% 85.5% 84.6% 84.6% 3 3 31 3 21 2 3 -1.1pt -1.1pt YoY YoY 100% 100% 4 0 2 0 225 22 180 18 22 135 13 22518 909 18013 454 1359 0 904 45 0 Virgin Atlantic annual report 2015\b Key Performance Indicators continued -1.1pt -1.1pt YoY YoY 100% 100% -1.1pt -1.1pt -1.1pt 80% 80% 85.5% 85.5% 85.5% 85.5% 84.6% 84.6% YoY YoY 100% 100% YoY 60% 60% 100% 80% 85.5% 80% 85.5% 85.5% 85.5% 84.6% 84.6% 40% 40% 80% 85.5% 85.5% 84.6% 60% 60% 20% 20% 60% 2013 2013 2014 2014 2015 2015 40% 40% 40% 20% 20% 20% 2014 2015 -0.7% -0.7% 50,330 50,330 49,000 49,000 YoY YoY 48,710 48,710 48,385 48,385 52,000 52,000 YoY 46,000 46,000 52,000 50,330 50,330 49,000 49,000 48,710 48,385 48,710 48,385 43,000 43,000 50,330 49,000 46,000 46,000 48,710 48,385 40,000 40,000 46,000 2013 2013 2014 2014 2015 2015 43,000 43,000 -0.7% -0.7% -0.7% 43,000 40,000 40,000 40,000 80% 80% Airline passenger revenue per ASK, (PRASK) (p) 4 4 -2.9% -2.9% 4.08 4.08 4.22 4.22 3 53 5 2 4254 1 3143 02032 1 21 Airline passenger revenue per RPK (p) YoY YoY 5 5 -2.9% -2.9% YoY -2.9% 4.10 4.10 YoY YoY 4.08 4.08 4.22 4.22 4.10 4.10 4.08 4.22 4.10 2013 2014 -2.5pt -2.5pt YoY YoY 79.3% 76.8% 77.4% 77.4% 79.3% 76.8% 2013 2014 2014 2015 2015 2013 2013 2014 2015 4 4 6 6 5.00 5.00 6 2 2 4 4 4 00 2 2 2013 2013 2014 2014 2015 2015 5.00 5.00 5.00 5.32 5.32 5.34 5.34 0.3% 0.3% YoY 0.3% YoY YoY 5.32 5.32 5.34 5.34 5.32 5.34 0 0 2015 2015 7.3% 7.3% YoY YoY 5.07 5.07 4 4 6 6 6 2 2 4 4 4 00 2 2 5.06 5.06 5.07 5.07 5.06 5.06 5.07 5.06 7.3% 7.3% YoY 7.3% 4.69 YoY 4.69 YoY 2013 2013 2014 2014 2015 2015 4.69 4.69 200 200 0300 0 2013 2013 2014 2014 2015 2015 200 100 100 100 0 0 2013 2014 2014 2015 2015 2013 2013 2014 0 2015 Cargo 400 400 -4.3% -4.3% YoY YoY 225 225 Capacity reduced due to network and fleet changes. 225.0 224.0 225.0 224.0 214.0 214.0 180180 Cargo tonnage (kg) (m) 225 225 135 135 225 180 180 90 90 224.0 225.0 224.0 225.0 225.0 224.0 180 135 135 45 45 135 90 0 090 45 4590 0450 0 -4.3% -4.3% 214.0 YoY -4.3% 214.0 YoY YoY 214.0 2013 2013 2014 2014 2015 2015 2013 2014 2014 2015 2015 2013 2013 2014 2015 482 482 4.6% 4.6% YoY YoY 460 460 4.6% 4.6% YoY 4.6% YoY YoY 498 498 482 482 498 482 400 300 300 100 100 4.69 220 220 330 330 330 110110 220 220 0 0 2013 2014 2014 2015 2015 2013 498 498 500 400 400 200 200 32 3 202 110 500 500 consumed (USG) (m) Fuel 500 500 300 300 330 330 220 00 110110 2 6 6 Airline cost per ASK, (CASK) (p) 0 2015 0.3% 0.3% YoY YoY 6 6 0 improvement driven by falling fuel prices (including 0 Cost the cost of hedging), reduced 2013 2014 2015 2013 2014 2015 fuel usage and improved operating efficiency. 0 0 2013 2014 2014 2015 2015 2013 -2.5pt -2.5pt -2.5pt 0 Yield performance was strong in the first part of the year, and partially offset some of our load-factor weakness. 2 60% 60% YoY YoY 80% 80% 79.3% 76.8% 77.4% 79.3% 76.8% YoY 77.4% 40% 40% 80% 60% 60% 79.3% 77.4% 76.8% 20% 20% 60% 40% 40% 00 40% 2013 2013 2014 2014 2015 2015 20% 20% 20% 0 0 Passenger revenue 2013 2014 2013 2014 Airline costs YoY YoY 52,000 52,000 Airline financials 0 10 2013 2014 2014 2015 2015 2013 2013 19 460 460 460 2013 2013 2014 2014 2015 2015 2013 2014 2014 2015 2015 2013 2013 2014 2015 0 20 9494 91 91 91.19 9494 8888 94 91 91 91 8585 91 8888 9 8282 88 8585 202 85 8282 82 20 -2.9% 2.9% oY -2.9% 7.3% 3% 7.3% oY -4.3% 4.3% oY -4.3% Virgin Atlantic annual report 2015\b Key Performance Indicators continued YoY YoY 66 5.00 5.00 44 6 5.32 5.32 4 0.3% 0.3% 2 2 0 0 2014 2014 400 400 482 482 4.6% 100 100 2013 20132014 20142015 2015 YoY YoY 321 321 4.5% 220 220 4.5% 4.5% YoY YoY 330 330 321 321 311 311 1350 1350 1350 450 1350 450 2013 2013 2014 2014 900 900 00 2015 2015 2015 2015 Children holidaying 0 in Florida with us 2013 20132014 2015 2015 2014 91.1% 91.1% We made dreams come true for YoY YoY 3.7% 35,000 children! 36,000 36,000 93.9% 93.9% 1.9% 1.9% YoY YoY 93.9%93.9% 35,457 35,457 Number of children 92.0% 92.0% 34,195 34,195 33,000 33,000 36,000 30,000 36,000 30,000 3.7% 3.7% YoY YoY 31,825 31,825 35,45735,457 33,000 27,000 33,000 27,000 88 82 8288 30,000 24,000 30,000 24,000 82 2014 2014 0 92.0%92.0% 91 85 8591 91.1% 91.1% 82 2013 2013 450 450 94 88 8894 85 1.9% 1.9% YoY YoY 1,738 1,7381,771 1,771 1,667 1,667 325 325 94 94 85 1.9% 1,771 1,771 1,738 1,738 1,667 1,667 1800 900 1800 900 Focusing direct distribution 2013on 2014 2014 2015 2015 2013 to deliver an irresistible YoY YoY 1.9% customer experience. 91 91 YoY YoY 1800 1800 325 325 311 311 Direct distribution (%) 460 460 4.6% 4.6% 0 330 330 Investment in product is generating higher revenues. Distribution 0 0 300 300 YoY YoY 500 500 200 200 498 498 482 482 460 460 400 400 100 100 300 300 00 2014 2015 200 200 2013 2013 2014 2015 0 Revenue per passenger () 110 110 2013 20132014 20142015 2015 498 498 Inclusive tour passengers (000) 00 2015 2015 YoY YoY 500 500 Revenue We delivered growth across all key regions. 220 220 4 2013 2013 Passengers 110 110 5.32 5.325.34 5.34 5.00 5.00 00 Virgin Holidays 5.34 5.34 YoY YoY 6 22 0.3% 20 34,19534,195 31,82531,825 2013 2013 2014 2014 2015 2015 2013 2013 2014 2014 2015 2015 27,000 27,000 2013 20132014 20142015 2015 24,000 24,000 2013 20132014 20142015 2015 Virgin Atlantic annual report 2015\b Key Performance Indicators continued 21 Summary financial results Turnover by activity Year ended 31 December 2015 (m) Year ended 31 December 2014 (m) (162) 18 (160) 576 540 Total 2,782 Total 2,827 2,368 2,429 Profit before tax and exceptional items Year ended 31 December 2015 (m) Year ended 31 December 2014 (m) (0.4) (2.1) 4.8 10.9 Total 22.5 12.0 3.8 Total 12.4 5.9 Traffic Licensing activities Holiday tour operations Other and intra-group eliminations Virgin Atlantic annual report 2015\b Principal Risks And Uncertainties 22 The highly regulated and commercially competitive environment, together with operational complexity, leaves us exposed to a number of significant risks. Our focus remains on mitigating these risks at all levels of the business, although many remain outside of our control such as government regulation, taxes, terrorism, adverse weather, pandemics and the economic conditions in the markets in which we operate. Government intervention Regulation of the aviation and tour operator industries is increasing and covers many of our activities, including safety, security, route flying rights, airport slot access, environmental controls and government taxes and levies. The ability both to comply with and influence any changes in these regulations is critical to maintaining our operational and financial performance. The directors believe that the risks and uncertainties described below are the ones which may have the most significant impact on our long-term performance Safety, terrorism and security incidents The threat of terrorism to the aviation and tour operating industries has an impact on us. As a result, we ensure that the safety of customers, crew and staff is at the heart of our business. Failure to respond to terrorism or security incidents may adversely impact our operations and financial performance. We adopt a holistic approach to security, with the Corporate Security team having overall responsibility for security matters linked to aviation, border security, cargo, facilities, IT, personnel and asset protection. To ensure the robustness of our security regime, we operate a self-inspection and test programme. Joint audits and inspections are also conducted with regulators. Regulated compliance performance is monitored by way of a dedicated scorecard which is reviewed at the Safety and Security Review Board. In view of the on-going by terrorists targeting of civil aviation and the potential impacts of global geopolitical events, much focus is placed on threat monitoring and assessment to ensure that we have the most current and accurate data to make informed judgements about the security of our human and physical assets. Business and operational Brand reputation The strong reputation and loyalty engendered by the Virgin Atlantic brands is a core part of the value of our business. Any damage to the brands caused by any single event, or series of events, could materially impact customer loyalty and propensity of customers to travel and so adversely affect our business. We regularly monitor customer satisfaction through monthly customer surveys, alongside on-going research and development of our product and services, in order to mitigate this risk. We allocate substantial resources to safety, operational integrity, on-board product and new aircraft to maintain our strong brand position. Economic conditions Our operations are particularly sensitive to economic conditions in the markets in which we operate. A global economic slowdown may adversely affect the demand for business and leisure travel, and cargo services, which could result in a material adverse impact on our financial performance. We produce a regular revenue forecast, which is reviewed by the Executive Management Team and appropriate action is taken. Virgin Atlantic annual report 2015\b Principal Risks And Uncertainties continued 23 Failure of a critical IT system We are dependent on IT systems for most of our principal business processes. The failure of a key system through an internal or external threat or event may cause significant disruption to operations or result in lost revenue. System controls, disaster recovery and business continuity arrangements exist to mitigate the risk of a critical system failure. During 2016, we will introduce a new passenger service system (AIR4) which increases our critical IT systems risk; should the transition from old to new system prove to be problematic. We are mitigating this increased level of risk through a comprehensive implementation plan and by drawing on the extensive systems implementation experience of Delta, who is providing us with AIR4. Key supplier risk We are dependent on suppliers for some principal business processes. The failure of a key supplier to deliver contractual obligations may cause significant disruption to our operations. To mitigate this risk, a close relationship is maintained with key suppliers in order to ensure we are aware of any potential supply chain disruption. Financial risk management The directors are responsible for setting financial risk management policies and objectives, and for approving the parameters within which the various aspects of financial risk management are operated. Our Fuel and Foreign Currency Risk Management policy, which has been approved by the directors, outlines our approach to corporate and asset financing, interest rate risk, fuel price risk, foreign exchange risk and cash and liquidity management. The directors have delegated powers for treasury risk management to the Financial Risk Committee. This Committee ensures that the treasury policies and objectives approved by the directors are fully implemented. Liquidity, financing and interest rate risk Our working capital is financed by retained profit and sales in advance of carriage. The major risks to liquidity are driven by business performance and cash-timing differences for our derivative financial instruments. The former is managed by taking corrective actions in the form of amendments to fleet, network and the cost base in response to changing external factors. The latter is managed through our derivative financial instruments policy. All of our debt is asset related, reflecting the capital intensive nature of the airline industry and the attractiveness of aircraft as security to lenders and other financiers. These factors are also reflected in the medium-term profile of our loans and operating leases. Our interest rate management policy aims to provide a degree of certainty for future financing costs, which is achieved by funding the majority of loans and operating leases on a fixed interest rate basis. Our loans and operating leases are principally denominated in US Dollars. Foreign currency risk We have a significant US Dollar exposure including aviation fuel, finance and operating leases. In addition, we are exposed to a number of other currencies. We seek to reduce our foreign exchange exposure in various currencies through matching receipts and payments in individual currencies, and holding foreign currency balances to meet our future trading obligations. Where there is a predicted exposure in foreign currency holdings, we use a limited range of hedging instruments through our Fuel and Foreign Currency Risk Management policy. Some of the overseas countries in which we trade impose exchange controls to regulate the flow of money. This creates the risk that it may be impossible to bring the income earned in one or more of these overseas countries into the UK, either because it is not permitted by the authorities in the overseas country or because it is difficult to obtain foreign currency there. We seek to mitigate this risk by closely monitoring the value of our funds denominated in overseas currencies which are subject to exchange controls, to identify issues at an early stage and to take remedial action to minimise the value of these funds. Virgin Atlantic annual report 2015\b Principal Risks And Uncertainties continued 24 Fuel price risk Our Fuel and Foreign Currency Risk Management policy aims to provide protection against sudden and significant changes in the price of jet fuel. In order to provide protection we use a limited range of hedging instruments, principally vanilla put-and-call options, collars and forwards, with approved counterparties and within approved limits. Derivative financial instruments We use derivative financial instruments selectively for foreign currency and aviation fuel price risk management purposes. Our policy is not to trade in derivatives but to use these instruments to hedge anticipated future cash flows. We are not permitted to sell currency or jet fuel options, except as part of hedging structures authorised in our Fuel and Foreign Currency Risk Management policy. All derivatives are used for the purpose of risk management and accordingly they do not expose Virgin Atlantic to market risk as they are matched to identified physical exposures within Virgin Atlantic. However, the timing difference between derivative maturity date and current mark-to-market value can give rise to cash margin exposure; this risk is managed through choice of instrument, appropriate counterparty agreements and, where required, cash deposits with counterparties. Counterparty credit risk is controlled through mark-to-market based credit limits. Compliance and regulatory Compliance with competition, anti-bribery and corruption law We are exposed to the risk of unethical behaviour by individual employees or groups of employees resulting in fines or losses to Virgin Atlantic. To mitigate this risk we have comprehensive training schemes and compliance protocols in place to educate all appropriate staff. Compliance with regulatory authorities We are exposed to regulation across our network, including the Civil Aviation Authority (CAA). The CAA authorises Virgin Atlantic to continue its activities following assessments of safety, ownership and control, and financial fitness criteria, the broad framework of which is available via the CAA website (www.caa.co.uk). Virgin Atlantic annual report 2015\b Change Is In The Air - Our Sustainable Business Programme 25 For us, sustainability means being a responsible business. To us it also means a commitment to innovative and industry leading ways of supporting a sustainable future. Change is in the Air is the name we give to our sustainability strategy and it encompasses our environment and community investment programmes. Our strategy is shaped by a risk and opportunities based approach. We naturally focus on our biggest environmental and social impacts, but also on the things our customers and people care about and experience. Sustainability is owned and delivered by everyone across the business, from engineers to cabin crew to office-based employees. The sustainability team advises and coordinates all this great work and continually reminds our business of our vision 'to be the leading airline on sustainability, driving innovative solutions for the whole industry'. We publish an annual sustainability report in June, which contains all the latest information on our progress against targets such as aircraft CO2 and energy efficiency. For the latest sustainability reports and updates visit www.virgin-atlantic.com/ changeisintheair. Environment More than 99% of our direct carbon footprint comes from our aircraft operations. It's no surprise then that our environment programme focuses on this area, along with noise, ground operations, waste, design and buying. The Boeing 787-9 is not only around 30% more fuel efficient than the aircraft it is replacing, but also has a 60% smaller noise footprint 2015 was a step cha