Chairman's report to Cimber Sterling Group’s Annual General Meeting

Dear shareholders

Welcome to Cimber Sterling’s annual general meeting. Like last year, our CEO, Jacob Krogsgaard, and I have split between us the tasks of making the report and presenting the annual report. I will start out by making a report on the events of the past year as well as recent events in the new financial year, and I will also discuss a number of matters regarding Cimber Sterling and the near future in relation to the new major shareholder situation, including our outlook for the year ending 30 April 2012. Following my report, Jacob will go through the annual report.

The year 2010/11 was another year of change at Cimber Sterling. In spite of a further positioning of the Company, especially in the Domestic segment, and an improvement of our traffic economy in terms of our RPK, we failed to meet our financial guidance for the year. We unfortunately had to lower the forecast of our operating results a number of times during 2010/11 and we were furthermore affected by a number of special items.

Overall, our performance was highly unsatisfactory, and our net loss for the year of DKK 212 million was not satisfactory.

Background for the year’s performance
So what were the conditions that characterised the year and contributed to the unsatisfactory performance?

In brief, it was a combination of the highly challenging market conditions, extraordinarily high costs and our ever tighter cash position during the financial year.

The market
As I also mentioned in my report to the extraordinary general meeting in June, the general market conditions in the aviation industry and specifically in Cimber Sterling’s near markets must still be said to be challenging. We have not yet seen a notable increase in the general demand since the first financial crisis, which has mainly resulted in lower average fares. The first six months of the financial year, in particular, were marked by excess capacity being offered at very low prices, resulting in stiff price competition and low visibility. However, a number of players have later elected to withdraw completely or partially from the Danish market, among them Transavia, which pulled out of the Danish market in early 2011.

But the gap – if we can call it that – is filled quickly, and the intensive competition will hardly ease much if a player leaves the market. This puts increased pressure on us to sharpen our profile and constantly reduce costs. This can to a certain extent be done internally – for instance as we did during the year by implementing the Thor and Odin programmes – but it also requires an ability to develop economies of scale. We must recognise that Cimber Sterling has not reached a size that enables us to compete profitably in the domestic, regional and leisure segments at the same time, and the acquisition by Mansvell of a majority shareholding in the Company and the later joint operation with Skyways and City Airline should be seen in that perspective.

We are pleased to see that, during the past financial year, our diversified pricing policy based on sales of basic tickets and increased sales of add-on services, such as baggage, seat selection and inflight service contributed to maintaining our market share on important routes and concurrently contributed to a reasonable trend in total revenue per passenger.

However, the extensive speculation regarding the survival of Cimber Sterling has undoubtedly made a number of leisure passengers refrain from booking flights on Cimber Sterling during the past year for fear that they would not be able to travel on holiday with us. This is particularly unfortunate as leisure passengers have the option of taking out bankruptcy insurance with Cimber Sterling if they want extra assurance.

We hope the Company’s new financial position will help remove any concern that may exist among Danish passengers, and that our load factor will be favourably affected.

Costs
On the cost side, performance in 2010/11 was also strongly affected by a very severe and long winter, and not least by surging oil prices in the course of the winter, which increased our costs very significantly. Even though Cimber Sterling imposed a fuel surcharge on all tickets – like our competitors – the rising prices resulted in substantially higher fuel costs.

Moreover, the severe winter weather led to operating disruptions and, combined with substantial extraordinary maintenance tasks, this affected Cimber Sterling’s operations to such an extent that we had to make an extraordinary adjustment to our traffic programme, which caused great disturbance to our customers and resulted in unexpectedly high costs.

Tight cash position
The fierce competition and the extraordinarily high costs were a great strain on our liquidity throughout the year. In addition, we saw a negative trend in our working capital during the year due to steadily increasing demands for prepayments, deposits, guarantees, etc. from our business partners. In particular, deposits of substantial funds with the Danish Travel Guarantee Fund and our credit card processing companies strained our cash.

This tight cash position meant that Cimber Sterling was not always able to pay its bills on time, but we experienced very great understanding from our primary business partners and a willingness to help us through a difficult period.

Improvements
Still, the year was not only a year of problems. In spite of the great challenges posed by excess capacity, rising fuel prices and extraordinary winter costs, our passenger numbers rose by 25% year on year. Our yield – revenue per passenger kilometre – increased by 10%, an improvement not achieved by just anyone in the industry. And our share of the Danish domestic market increased from 45% last year to 50% this year. These key figures show that Cimber Sterling not only has a strong position in the Danish domestic market, but that we have successfully strengthened our position in recent years.

We were also very pleased with the positive feedback we received from our own passengers in connection with a survey among 1500 of our passengers in 2010. 83% responded that they were satisfied or very satisfied with their flight on Cimber Sterling. This high rate of customer satisfaction was undoubtedly a contributory factor to the sustained growth in passenger numbers during the past year in spite of the many doomsday prophecies of the end of Cimber Sterling’s existence.

This also matches my own experience when talking to passengers and people in general with an interest in aviation – which most people have. They have all generally had positive experience with Cimber Sterling over time and like our profile and service. And they have been very pleased that we have succeeded in securing a prominent role for the Company in Nordic aviation through Mansvell’s acquisition of a majority shareholding.

In-house, our management and employees have been working hard to anchor the improvements we launched in connection with the Thor and Odin programmes last year. A number of improvements, especially an adjusted traffic programme, better utilisation of the fleet, sales of add-on services and the voluntary reduction of staff costs by 10% accepted by our employees can be mentioned as major contributors to an improvement of earnings by approximately DKK 140 million during the past financial year.

After the end of the financial year, we have successfully negotiated an agreement with a number of staff groups involving increased savings on staff costs. In particular, the recent agreements with our airborne crew are important to the competitiveness of Cimber Sterling. We are very pleased and proud of the prevailing common understanding among our management and staff of what is required to be competitive in today’s market, and not least the preparedness to act accordingly.

When fares increase, partly as a result of the necessary fuel surcharge, it affects passenger numbers, which has made it necessary to slightly reduce our capacity, including on our domestic services. When that happens, it is important to be able to use our capacity elsewhere so that we do not have aircraft and staff on the ground for too long at a time. Through our charter activity, we have been able to release one full aircraft, which is now operating on a fixed contract – also called ACMI – for Senegal Airlines, and we have other requests of a similar nature which we are considering.

Sourcing of capital
As communicated earlier, management focused throughout the year on strengthening Cimber Sterling’s capital base. We – or some of us – met in June and again in late July to consider a GEM agreement and a share issue directed at Mansvell.

Before we got that far, we tried to strengthen our cash resources through the sale and lease-back of three aircraft, which led to an immediate improvement of our cash position, but also to a substantial loss recognised as an exceptional item in the third quarter.

In March 2011, Cimber Sterling announced, with later approval by the shareholders in general meeting on 8 June 2011, that a three-year agreement had been signed with GEM Global Yield Fund for a three-year equity commitment of up to DKK 300 million. We have not yet made any drawdowns on that facility, and in connection with the agreement entered into with Mansvell Enterprises Ltd., the agreement with GEM has been put on hold.

However, in light of the framework conditions for airline operations since the financial crisis and the effect of unforeseen factors such as the ash cloud, higher fuel costs and severe winter weather on our liquidity, it also became clear that it was imperative to secure the future of Cimber Sterling by participating actively in the ongoing industry consolidation.

On 16 June 2011 we announced that Cimber Sterling and Mansvell Enterprises Ltd. had signed a non-binding agreement for an expected injection of capital amounting to approximately DKK 165 million through a directed share issue. The subscription agreement was later signed on 7 July, and, as you will know, the directed issue to Mansvell was adopted by the shareholders at an extraordinary general meeting held on 29 July 2011.

The agreement with Mansvell gives Cimber Sterling a principal shareholder with a strong capital base and with ambitions as well as the necessary funds to establish a strong Nordic regional airline. Mansvell’s airline activities currently include Swedish-based airlines Skyways and, through that airline, City Airline, and the Board of Directors and Executive Board are confident that this is a very good solution for Cimber Sterling in which we will benefit from forming part of a larger organisation in an extremely competitive market. Cimber Sterling Group thus becomes a platform for Mansvell’s expected expansion in the Nordic region, which is the best imaginable outcome of our efforts to secure the Company’s survival and future operations.

Loss for the year
Our performance in 2010/11 was far from satisfactory. As already said, this should be seen in light of the squeezed market, aggressive competition and a number of adverse factors severely affecting Cimber Sterling and the rest of the industry. But as I said at the latest EGM in July, I cannot claim that it is all due to aggressive competitors with fat wallets and all sorts of trouble. We have not been able to achieve the volume to profitably operate three different types of aircraft in three different market segments. And in spite of very hard efforts by everyone in the Company, we must recognise that we have not been able to operate the business as a whole at a profit in the past two years, and that has had an adverse effect on the price of our shares. We cannot be – and we are not – satisfied with this performance.

Når alt dette er sagt, så er vi som ledelse og bestyrelse nødt til at kigge fremad og arbejde benhårdt på at finde løsninger. We have done so by investing in retaining our strong market position, especially on the Danish domestic market, and in a number of operational initiatives which we expect will provide a return in the current financial year. And we have done that by implementing the plan designed to secure the future of Cimber Sterling through a capital contribution and the support of a new principal shareholder who wishes to give Cimber Sterling a leading role in the consolidation of regional air services.

Overall, the injection of approximately DKK 165 million of capital by Mansvell Enterprises Ltd. and the new ownership have created a basis for applying a going-concern assumption. However, the Group’s future capital and cash resources will require continuing focus on achieving substantially better financial performance going forward.

Cimber Sterling will therefore continue to focus on strengthening the Company’s operations, cash resources and capital base. Consequently, it must be expected that no dividend will be distributed in the coming years.

Highlights of the year
• Revenue grew by 25% in 2010/11 from DKK 1,551 million to DKK 1,941 million, which was on a level with the latest guidance of DKK 1,925-1,950 million.

• EBIT before special items for 2010/11 was a loss of DKK 200 million, which was on a level with the latest guidance of a loss of DKK 190 million to DKK 200 million and slightly better than the loss of DKK 228 million posted in 2009/10.

• The number of passengers rose by 26%, while production and traffic increased by 24% and 25%

respectively.

• The staff was increased by 20 in 2010/11 to an average of 840, up from 762 in 2009/10.

On behalf of the Board of Directors, I recommend that the shareholders adopt the annual report and the covering of the loss, i.e. that the loss for the year of DKK 212,670,000 be carried forward to retained losses.

In his review, Jacob will discuss these figures and other relevant key figures in greater detail.

Outlook
Cimber Sterling expects growth in demand for the Company’s core services in 2011/12. However, the persistent excess supply and the extremely competitive market make it difficult to estimate developments in average fares.

Airline traffic to and from Denmark and on domestic services is expected to see a growing trend in 2011/12, which will have a positive impact on results.

The competitive situation and the persistent excess supply will have an adverse effect on results.

Cimber Sterling’s highest priority is a continuing improvement of its profitability, to which the planned integration with the other airline activities owned by Mansvell Enterprises Ltd. will contribute.

Cimber Sterling forecasts consolidated revenue for 2011/12 of DKK 2.1 billion, up from DKK 1,941 million in 2010/11, and an EBIT loss in the region of DKK 20 million to DKK 60 million against a loss of DKK 200 million in 2010/11.

The forecasts are made for the Company on an “as is” basis after a capital injection of approximately DKK 165 million but disregarding the potential benefits of new equity, synergies and a new majority shareholder on Cimber Sterling’s operations and/or strategy. As always, the estimate is highly sensitive to developments in the DKK/USD exchange rate, fuel costs, number of passengers and yield.
The new principal shareholder situation

As you know, Mansvell acquired control of approximately 70% of the Company’s shares in connection with the injection of DKK 165 million of fresh capital. Mansvell made a so-called mandatory tender offer to Cimber Sterling’s remaining shareholders offering each shareholder to tender its shares to Mansvell at the price at which Mansvell subscribed for the new shares on 1 August, i.e. at DKK 1.50 per share.

In the published tender offer, Mansvell stated that the strategy behind its investment in Cimber Sterling is to consolidate a number of regional players on the Nordic market and thereby – in the longer term – establish a significant, Nordic-based airline on the basis of Cimber Sterling’s platform as a listed company. In that connection, the Board of Directors has noted that Mansvell wants to maintain Cimber Sterling as a listed company.

Through the ownership of Skyways, City Airlines and Cimber Sterling, Mansvell will gain a strong position within regional traffic, i.e. domestic traffic and routes between the Nordic countries, especially in Denmark and Sweden. In addition, Mansvell intends to use this platform to serve other European destinations.

It is expected that this position will make Mansvell, and the individual companies in the group, attractive business partners for other airlines and will, in the long term, also create a number of synergies among the companies that will potentially reduce costs, e.g. through a consolidation of aircraft types and economies of scale in procurement, and by strengthening the market position.

At this AGM, Mansvell intends to elect their representatives to the Board of Directors. The new Board of Directors does not yet have detailed knowledge of Cimber Sterling’s business, and the future plans for Cimber Sterling will be based on an evaluation process to be made by the new Board of Directors in the near future. In its forward- looking activities, the Board of Directors will use knowledge and recommendations inter alia from Cimber Sterling’s management and continuing Board members to evaluate the best possible operating structure with a view to achieving growth-generating synergies and efficiency improvements cutting across the activities of Cimber

Sterling and the Mansvell Group.
Mansvell has indicated that, in view of Cimber Sterling’s performance in recent years, changes will have to be made to Cimber Sterling’s operations in order to ensure that it will return to profitability in the years to come. Mansvell has not yet made any final decision on which specific action to take and support going forward as it depends on the analysis of Cimber Sterling that will be made by the new Board of Directors in the time to come. However, the plans already announced by Cimber Sterling in relation to divestment of non-core activities are supported by Mansvell on the present basis.

Board of Directors, management and employees
Mansvell, our new principal shareholder, has nominated four new Board candidates for this AGM. With their international experience in areas such as aviation, the banking sector an other service activities, these candidates will be able to contribute to positioning Cimber Sterling as a strong player on the Nordic regional market.

The Chairman will later review the background and competencies of each candidate.

At the same time, Mansvell wants to ensure that there is continuity on the Board and has therefore asked Jesper Jarlbæk and myself to offer ourselves for reelection, and with the support of the rest of the Board, we have accepted this invitation. Moreover, Jørgen Nielsen from the original founder family offers himself for reelection as a representative of the minority shareholders. The existing employee representatives on the Board also offer themselves for reelection.

With the election of the new Board of Directors I concurrently resign as Chairman of the Board, leaving the office to Gregory Gurtovoy.

I would like to take this opportunity to express my thanks for my time as Chairman of the Board, a period that has been short but with quite a lot of challenges in a turbulent period of Cimber Sterling’s history. The absolute highlight of my chairmanship has been to see how Cimber Sterling’s employees have joined forces and supported the Company during these harsh times. Without this solidarity and willingness to waive certain time-honoured privileges, it would not have been possible for the Company to survive and be able to play a new, exciting role in Nordic aviation as a result of the Mansvell investment. It has all been worth the effort, and it makes me optimistic about the future on behalf of the Company. Aviation is a ”people business”, and an important prerequisite for Cimber Sterling’s future success is that the special corporate spirit lives on and thrives, also in the new set-up.

I would therefore like to thank Cimber Sterling’s management and employees, who have made extraordinary efforts during the latest difficult and hectic period.

I would also like to thank the retiring Board members, Lone Koch and Kåre Stolt, for their work on the Board. Lone leaves the Board after many years of active participation on the Board, and I and the other members of the Board will miss Lone’s ardent enthusiasm and significant viewpoints at our meetings. Nobody has a more burning passion for the Company and the employees than Lone, and she has constantly kept a tight rein on us to ensure that we listened to the employees and gave priority to communicating our decisions throughout the organisation. Lone has made her very own imprint on the Board work. I hope we can keep on working along those lines. Thank you Lone.

I would also like to give my thanks to Kåre Stolt who accepted election to the Board at the probably most critical time in the history of the Company. It was a short but pleasant time with Kåre on the Board of Cimber Sterling. His advice and guidance was a great help in our navigation towards a safe haven.

I am aware that Cimber Sterling’s staff have many thoughts about how their future workplace will be, and that both the employees and the shareholders are anxious to learn about the new strategy and structure.

Mansvell’s and the Board’s evaluation process regarding the future operation of Cimber Sterling, and the collaboration with the other companies of the Group, has only just started, and we know from their due diligence studies of the Company before making the investment, that they like to do their homework well. Therefore, it will be some time before we have concrete information about the strategy and other factors and about how the process will affect Cimber Sterling’s workforce. However, later tonight, following the initial Board meeting, information will be issued on the evaluation process and on how the Board has constituted itself.

Thank you.

This Announcement has been prepared in Danish and translated into English. In the event of any discrepancy between the Danish Announcement and the

English translation, the Danish Announcement shall prevail.