Half Yearly Report

2012 Interim Financial Report

Results for the half year ended

30 June 2012

For further information please contact:

Simon Pryce, Group Chief Executive (020) 7514 3999

Mark Hoad, Group Finance Director

BBA AVIATION PLC

David Allchurch / Christian Cowley (020) 7353 4200

TULCHAN COMMUNICATIONS

A video interview with Simon Pryce, CEO and Mark Hoad, FD is now available on www.bbaaviation.com and www.cantos.com

A live audio webcast of the analyst presentation will be available from 09:00 today on www.bbaaviation.com and www.cantos.com 

INTERIM FINANCIAL REPORT FOR PERIOD ENDED 30 JUNE 2012

(1) Before exceptional items (as defined in the financial statements).

(2) Basic earnings per share.

(3) Underlying operating profit return on average invested capital including goodwill and intangibles amortised or written off to reserves.

(4) Return on invested capital for full year 2011.

(5) Cash generated by operations, plus dividends from associates, less tax, net interest and net capital expenditure.

These definitions as outlined above are consistently applied throughout this interim financial report.

Overview

·; A challenging first half with soft markets: US B&GA market down 1%; commercial aviation market down 3%

·; Strong growth in Aftermarket Services and Systems

·; Improved efficiencies driving operational progress

·; Interim dividend increased by 5% to 4.20¢

Operational highlights

Flight Support (55% of Group EBIT)

·; Organic revenue decline 7%, 2% decline ex de-icing and FBO exits

·; De-icing impact on operating profit accentuated by a strong prior year comparator

·; Signature: further network expansion

·; ASIG: expanded service offering, effective labour flexing

Aftermarket Services and Systems (45% of Group EBIT)

·; Strong organic growth of 11%

·; ERO: continued strong demand for engine overhaul services, extension of field service capability

·; Legacy Support: successful integration of fuel measurement business, order book increased by 12%

·; APPH: operational improvements being delivered, successful start-up to the AW159 programme

Continued strategic progress

·; Further strategic progress: expansion of Signature network and two new Signature Select locations; ASIG C$27m acquisition of PLH Aviation Services and Dryden Air Services announced today; further Aftermarket authorisations secured

·; Strong pipeline of consolidation opportunities with significant investment capacity available to deploy, maintaining strict value discipline

Simon Pryce, BBA Aviation Chief Executive Officer, commented:

"In soft markets, BBA Aviation made further operational progress in the first half of 2012. Flight Support performed well given North American and European market weakness and an unusually poor de-icing season and Aftermarket delivered another six months of strong growth. The Group generated good cash flow and made positive strategic progress.

Consistent with the subdued macroeconomic backdrop, we do not now anticipate any material improvement in markets in the second half, however with fewer headwinds and continued operational improvements we expect to make progress in the second half of the year and beyond. Our acquisition pipeline remains strong and the medium-term indicators continue to support the exciting growth potential in our markets which, together with the underlying strengths of BBA Aviation's businesses give us continued confidence in our ability to generate superior through-cycle returns."

BBA Aviation plc - Interim Financial Report, 7 August 2012

INTERIM FINANCIAL REPORT 2012

Overview

BBA Aviation delivered further good operational and strategic progress, despite our major markets showing a modest reduction in activity, continuing the trend we saw in the first quarter.

Group revenue increased by 3% to $1,094.2m (2011: $1,062.9m), or 2% excluding fuel price inflation. On an organic basis (excluding the impact of fuel prices, acquisitions and disposals) Group revenue declined by 1%. The revenue impact of higher fuel prices amounted to $12.6m. Net of disposals, acquisitions contributed $30.8m of additional revenue.

Underlying operating profits declined by 7% to $90.2m, principally as a result of limited de-icing activity against a particularly strong prior year comparator. The reported Group operating margin at 8.2% (2011: 9.1%) was affected accordingly. Adjusting for higher fuel prices, underlying margins were 8.2% (2011: 9.0%).

The net interest expense increased to $18.5m (2011: $11.9m) as a result of the cost of the new long-term debt facilities put in place in 2011, together with the one-off acceleration of $2m of cost into the first half due to closing out interest rate swaps as part of ongoing treasury management. Interest expense is expected to reduce in the second half accordingly. Interest cover stands at 6.5x (2011: 10.6x).

Underlying profit before tax decreased by 15% to $71.7m (2011: $84.6m). The effective underlying tax rate of 20.1% (2011: 21.7%) was lower than our expectations due to favourable developments in our tax positions. Adjusted earnings per share were 12.0¢ (2011: 14.4¢) reflecting the reduction in underlying profit before tax together with the increased number of shares in issue compared to the prior period.

Profit before tax decreased by 27% to $58.4m (2011: $79.6m) with an increase in exceptional items to $13.3m (2011: $5.0m) relating to the closure of APPH's Basingstoke facility and costs associated with the ongoing project to drive cross-business synergies by standardising the finance function processes across the Group. These projects are progressing to plan and support the continued operational improvement across the Group with full run-rate benefits accruing from 2013. Non-cash amortisation of acquired intangibles was $3.9m (2011: $3.4m). Unadjusted earnings per share were 10.2¢ (2011: 13.7¢).

Free cash flow was $21.8m (2011: $5.7m) with a more normal first half working capital outflow than that experienced in 2011. The free cash flow included $8.5m of payments associated with the establishment of the Legacy fuel measurement business in Cheltenham. Gross capital expenditure increased as planned to $28.5m (2011: $13.9m) and included the aforementioned opening of the Cheltenham facility and the relocation of Signature's FBO at Chicago O'Hare International Airport. Tax payments reduced slightly to $3.6m (2011: $6.0m).

Total spend on acquisitions in the first half amounted to $5.3m pre-costs, including the $3.4m acquisition of the FBO in Omaha, Nebraska and ERO's $1.9m acquisition of Consolidated Turbine Support, Inc as outlined below. A further C$27m (US$27m) has been committed since the period end on ASIG's agreement to acquire the trade and assets of PLH Aviation Services and Dryden Air Services which enhances our commercial services operation and provides access to the attractive Canadian market.

There was a net cash outflow of $41.9m after paying dividends of $47.7m. Net debt increased to $443.9m (2011 year-end : $403.6m). Our balance sheet remains strong with net debt to EBITDA at 1.7x (2011 year-end: 1.5x; June 2011: 1.9x).

The Group's focus on capital employed continued with absolute invested capital in the base business broadly unchanged but there was a reduction in return on invested capital to 9.9% (2011 full year: 10.6%).

Business Review

Flight Support

Revenue in Flight Support declined by 4% to $668.3m (2011: $694.0m). There was limited de-icing revenue in the first half of 2012 compared to a strong first half in 2011 and activity in both the business and general aviation (B&GA) and commercial markets was also down against prior year comparators. Higher fuel prices increased revenue by $12.6m and the net impact of acquisitions and disposals contributed an additional $14.8m of revenue. On an organic basis Flight Support revenues decreased by 7% of which 2% related to de-icing and 3% to our exit from the Miami and Tampa FBOs.

Underlying operating profit in Flight Support reduced to $54.7m (2011: $65.7m) reflecting the impact of the revenue reduction. Adjusting for the impact of higher fuel prices, operating margins of 8.2% showed a 110 basis point reduction over the prior period (2011: 9.3%).

Flight Support generated an operating cash flow of $35.4m (2011: $47.7m) with cash conversion of 65% (2011: 73%). Return on invested capital decreased by 100 basis points to 9.6% (2011 full year: 10.6%).

Signature's reported revenue declined by 1% to $488.6m (2011: $494.1m). North American B&GA movements were down 1% year to date compared with a period of growth in the first half of 2011 and European B&GA movements were down 4% reflecting the ongoing economic uncertainty. On an organic basis, Signature's revenue declined by 6% of which 5% related to the exits from Miami and Tampa.

Signature continued the development of its network with further lease extensions, the previously reported acquisition of an FBO in Omaha, Nebraska, the opening of an FBO in Berlin, Germany, the addition of two Signature Select™ locations and a licensing arrangement with an FBO in Edmonton, Alberta under the Signature Select™ initiative. Signature's FBO at Berlin is a start-up operation at Schoenefeld Airport which is due to become the sole airport serving Berlin when Tegel Airport closes later this year. The new Signature Select™ FBOs are located at Daytona Beach, Florida and Greenbay, Wisconsin and reflect the continued interest that Signature is seeing in the rollout of this affiliate programme. The licensing arrangement with Airside FBO Operations in Edmonton, Alberta extends Signature's Canadian footprint and as part of the Signature Select™ initiative demonstrates the cost and capital effective methods that Signature is employing to further extend its network.

Signature's continued focus on key operational metrics such as enhanced customer service was supported by the rollout of a new loyalty programme, Signature TailWins™, in January. The new programme is specifically aimed at rewarding pilots, schedulers, dispatchers and flight departments for fuel and handling purchases and complements the existing Signature Status™ programme aimed at the aircraft's crew and passengers. The success of both programmes supported an increase in Signature's customer loyalty measure to 84%, its fourth consecutive year on year gain.

As previously outlined, ASIG's revenue was impacted by the limited de-icing activity and weaker commercial aviation movements experienced in the first half. As a result, revenue decreased by 10% to $179.7m (2011: $199.9m), or 4% excluding the impact of de-icing.

ASIG's strong pipeline of new business continued during the period with contract wins and renewals including new ground handling agreements with British Airways at Baltimore/Washington International Airport ("BWI") and Spirit Airlines at BWI and Los Angeles International Airport. Additionally, ASIG won the Spirit Airlines refuelling agreement at Fort Lauderdale International Airport. At London Heathrow, ASIG signed a new agreement with Singapore Airlines for cabin cleaning in addition to the aircraft refuelling services it already provides. ASIG also renewed its passenger handling agreement at London Heathrow with Emirates where it handles more than 1.4 million passengers a year. Revenue in Europe was impacted by the loss of the British Airways cleaning contract at London Heathrow.

ASIG renewed its into-plane refuelling agreement with Federal Express at 27 airports in the US including FedEx's busiest hubs Indianapolis International Airport and Fort Worth Alliance Airport where ASIG also manages and operates FedEx's dedicated jet fuel facilities. Currently, ASIG fuels over 60,000 flights and delivers more than 190 million gallons of jet fuel a year on behalf of FedEx.

During the period, ASIG signed an exclusive agreement with GE Aviation to become its third-party service provider for ClearCore™ engine wash systems for commercial and military engines in the US. The agreement represents an innovative and complementary expansion of ASIG's technical services, supporting ASIG's customers in achieving significant savings on fuel consumption and engine maintenance costs.

As announced today, ASIG has signed an agreement to acquire the trade and assets of PLH Aviation Services and Dryden Air Services, market-leading airport services providers delivering fuel farm management, into-plane refuelling, ground handling and de-icing services across 16 locations in Canada and 1 in the US for C$27m (US$27m). Through this acquisition, ASIG gains entry in to the attractive Canadian commercial aviation market as well as extending its market share at Los Angeles International Airport. The acquisition is expected to be earnings accretive and achieve the Group's ROIC target in the first full year.

Aftermarket Services and Systems

In Aftermarket Services and Systems, revenue increased by 15% to $425.9m (2011: $368.9m). Strong organic growth of 11% was complemented by the additional revenue contribution from the successfully integrated Legacy fuel measurement business acquired from GE.

Operating profits of $45.1m increased by 13% (2011: $39.8m) and operating margins were broadly unchanged from the prior period at 10.6% (2011: 10.8%).

Operating cash flow for the division increased to $30.9m (2011: $4.8m) with cash conversion of 69% (2011: 12%), impacted by working capital consumption associated with the division's continued strong organic growth together with the cash costs of establishing the Legacy fuel measurement business in Cheltenham. Return on invested capital improved by 20 basis points to 10.9% (2011 full year: 10.7%).

In Engine Repair and Overhaul ("ERO"), revenue increased by 13% to $326.1m (2011: $287.6m) all of which was organic. Overhaul activity remained strong reflecting a healthy order book of overhauls at the end of 2011 together with ERO's successful focus on broad reaching customer support both during key overhaul events and through its field support network.

ERO further expanded its field service capabilities for the Honeywell HTF7000 engine through its acquisition of Consolidated Turbine Support, Inc. a service company based in Arizona. The acquired tooling and inventory along with ERO's mobile response technicians will be based at ERO's Phoenix Regional Turbine Centre ("RTC") to provide around the clock response coordinated through the company's F1RST SUPPORT™ network.

ERO also secured an authorisation from Rolls-Royce to provide mobile repair support services for the BR710 turbofan engines powering the Gulfstream G550 and Bombardier Global Express aircraft. ERO will offer a variety of field service capabilities including on-site engine borescoping, troubleshooting, accessory replacement, engine removal and reinstallation.

ERO has continued to see positive progress from its strategic expansion in to both South America and Asia Pacific. The RTC at Seletar Airport, Singapore opened in February and ERO's Brazilian RTC has doubled its volume year over year. These represent important footholds for ERO from which to maximise the long-term growth prospects of these developing business aviation markets.

Revenue in Legacy Support increased to $70.1m (2011: $49.9m) with a 9% organic increase with revenues expected to be more evenly weighted across 2012 than in the prior year. The fuel measurement business acquired in May 2011 contributed $16.0m to revenue in the period.

The integration of the fuel measurement business has been successful with the new facility in Cheltenham, UK now fully certified and operational. This new 56,000 sq.ft. facility, together with an additional 5,000 sq. ft. of dedicated electronics space at its Chatsworth, California location, support the business's growing electronics capabilities.

Legacy Support extended its licensing relationship with Arkwin Industries by signing a new licence for the manufacture and support of the Fuel Ejector Pump used on the Bell UH1 and Cobra Helicopters. Legacy's order book continues to improve having grown 12% since the end of 2011 and demonstrates further security of future demand for authorised legacy parts and components.

APPH's revenue declined by 5% to $29.7m (2011: $31.4m) which, as previously reported was primarily due to the timing of landing gear deliveries, and included less MRO content than in 2011.

APPH had a successful start up to the AW159 programme. This complex programme, with contracted orders for original equipment landing gears of $6m over the next four years, was delivered ahead of schedule demonstrating the strength of APPH's technical capability.

APPH has begun to see the positive impact of its recent operational improvement initiatives. The company continues to rationalise its cost base and in the period successfully concluded the transfer of its component repair capability from Basingstoke to its Runcorn facility, removing duplication and facilitating an improvement in the capability of the Runcorn site.

Unallocated central costs increased slightly to $9.6m (2011: $9.0m).

Net debt at the end of the period was $443.9m (year-end 2011: $403.6m) with a net cash outflow of $41.9m and a favourable foreign exchange movement of $1.6m.

At the end of the period $471m of the total borrowing commitments of $1,050m remained undrawn and net debt to EBITDA was 1.7x (2011 year-end: 1.5x; June 2011: 1.9x). Interest cover stands at 6.5x (2011: 10.6x).

During the period €50m of cross currency swaps were closed out at a cash cost of $4.4m. As at 30 June $200m of cross currency swaps with a mark-to-market loss of $34.8m remained outstanding. Of these $75m with a mark-to-market loss at 30 June 2012 of $8.4m are due to mature in the second half of 2012, with the balance due to mature in the first half of 2013.

Dividend

The Board is declaring an increased interim dividend of 4.20¢ (2011: 3.99¢) up 5% reflecting the Board's progressive dividend policy and continuing confidence in the Group's medium-term growth prospects.

Outlook

Consistent with the subdued macroeconomic backdrop, we do not now anticipate any material improvement in markets in the second half, however with fewer headwinds and continued operational improvements we expect to make progress in the second half of the year and beyond. Our acquisition pipeline remains strong and the medium-term indicators continue to support the exciting growth potential in our markets which, together with the underlying strengths of BBA Aviation's businesses give us continued confidence in our ability to generate superior through-cycle returns.

Going Concern

The Directors have carried out a review of the Group's trading outlook and borrowing facilities (as outlined above), with due regard to the risks and uncertainties to which the Group is exposed, the uncertain economic climate and the impact that this could have on trading performance. Based on this review, the Directors believe that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, the financial statements have been prepared on a going concern basis.

Directors' Responsibilities

The Directors confirm that to the best of their knowledge:

(a) the condensed consolidated set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting";

(b) the interim financial report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and,

(c) the interim financial report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

Signed on behalf of the Board,

Simon Pryce Mark Hoad

Group Chief Executive Group Finance Director

6 August 2012 6 August 2012

This interim financial report contains forward-looking statements including, without limitation, statements relating to: future demand and markets of the Group's products and services; research and development relating to new products and services; liquidity and capital; and implementation of restructuring plans and efficiencies. These forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Accordingly, actual results may differ materially from those set out in the forward-looking statements as a result of a variety of factors including, without limitation: changes in interest and exchange rates, commodity prices and other economic conditions; negotiations with customers relating to renewal of contracts and future volumes and prices; events affecting international security, including global health issues and terrorism; changes in regulatory environment; and the outcome of litigation. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. This interim financial report has been drawn up and presented in accordance with and in reliance on applicable English company law and the liabilities of the directors in connection with this report shall be subject to the limitations and restrictions provided by such law.

This report is available in electronic format from the Company's website, www.bbaaviation.com

Condensed half-year financial statements for the six month period ended 30 June 2012

Unaudited condensed consolidated income statement

1 Before exceptional items. Exceptional items are items which are material or are non-recurring in nature, costs relating to acquisitions, and the amortisation of acquired intangible assets, together with related tax items, (note 3).

Unaudited condensed consolidated statement of comprehensive income

Unaudited condensed consolidated balance sheet

Unaudited condensed consolidated cash flow statement

* Net debt at 30 June 2012 includes a financial derivative of $26.8 million included within non-current assets.

Unaudited condensed consolidated statement of changes in equity

Notes to the half year condensed financial statements

1 Basis of preparation

The unaudited condensed consolidated financial statements of BBA Aviation plc, for the six months ended 30 June 2012 have been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, which permits the presentation of the financial information on a condensed basis. The financial information included in this report therefore does not include all the disclosures that would otherwise be required in a full set of financial statements, and therefore should be read in conjunction with the group's Annual Report for the year ended 31 December 2011.

The financial information included within the condensed financial statements has been prepared in accordance with the accounting policies, presentation and methods of calculation as set out in the Group's consolidated financial statements for the year ended 31 December 2011, which were prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union, the Companies Act 2006, and comply with Article 4 of the EU IAS Regulation.

The financial information relating to the year ended 31 December 2011 does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. A copy of the statutory financial statements has been delivered to the Registrar of Companies. The auditors reported on those accounts and their report was unqualified and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

During the year ended 31 December 2011, the group changed the currency in which it presents its consolidated financial statements from pounds sterling to US dollars. As a consequence the results and net asset position for the six months ended 30 June 2011 have been restated to reflect the change in presentational currency.

The directors are satisfied that, at the time of approving the interim financial statements, it is appropriate to continue to adopt a going concern basis of accounting.

2 Segmental analysis

IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance.

The Group provides information to the Chief Executive on the basis of components that are substantially similar within the segments in the following aspects:

·; the nature of the long term financial performance;

·; the nature of the products and services;

·; the nature of the production processes;

·; the type of class of customer for the products and services; and

·; the nature of the regulatory environment.

Based on the above, the primary reportable segments of the Group have been deemed to be Flight Support, which comprises Signature Flight Support and ASIG, and Aftermarket Services and Systems, which comprises Engine Repair and Overhaul, Legacy Support and APPH. The components of these two segments are substantially similar in the aspects above and are therefore deemed to be the primary segments of the Group.

The businesses within the Flight Support segment provide re-fuelling, ground handling and other services to the business, general and commercial aviation markets. The businesses within the Aftermarket Services and Systems segment maintain, manufacture and support engines and aerospace components, sub-systems and systems.

There has been no change to the Group's reportable segments since the last annual report.

2 Segmental analysis - continued

2 Segmental analysis - continued

2 Segmental analysis - continued

An analysis of the Group's revenues for the period is as follows:

3 Exceptional items

In the six months ended 30 June 2012, exceptional items amounting to a charge of $13.3 million (30 June 2011: $5.0 million) are included within operating profit, and include restructuring expenses of $8.4 million, (30 June 2011: $nil million) relating principally to the closure of the APPH Basingstoke facility; amortisation of intangible assets acquired and valued in accordance with IFRS 3 of $3.9 million, (30 June 2011: $3.4 million) included within administrative expenses; and $1.0 million, (30 June 2011: $1.6 million) of acquisition costs included within other operating expenses.

In the year ended 31 December 2011, exceptional items amounting to a charge of $18.3 million are included within operating profit, and include restructuring expenses of $1.3 million; amortisation of intangible assets acquired and valued in accordance with IFRS 3 of $7.9 million included within administrative expenses; $3.2 million of acquisition costs included within other operating expenses; and a $5.3 million loss on disposal of business relating principally to a goodwill write-down following the exit from the Tampa FBO.

In addition, in the year ended 31 December 2011, the Group received an exceptional tax refund of $23.7 million included within the exceptional tax credit, relating to the settlement of an old outstanding tax claim in Germany, together with associated exceptional interest receivable of $11.7 million.

4 Income tax expense

Corporation tax for the interim period is charged at an effective rate of 20.1% (June 2011: 21.7%; December 2011: 20.3%) on underlying profit before tax, representing the best estimate of the weighted average annual corporation tax expected for the full financial year.

The total income tax expense for the period includes a tax credit of $4.6 million relating to exceptional items.  

 5 Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

Adjusted earnings per share is shown calculated as earnings before exceptional items because the directors consider that this gives a useful indication of underlying performance.

6 Equity dividends on ordinary shares

The 2012 interim dividend of 4.20 cents per share (2011: 3.99 cents per share; $19.3 million in total) was approved by the Board of Directors on 6 August 2012 and will be paid on 2 November 2012 to ordinary shareholders registered on 21 September 2012. Shareholders will receive their dividends in sterling unless they complete and submit to the Company's registrars by 5pm on 8 October 2012 an election form stating their wish to receive their dividends in US dollars. The sterling dividend will be converted at a prevailing exchange rate on 9 October 2012 and this exchange rate will be announced on 10 October 2012.  

7 Cash flow from operating activities

8 Acquisitions

During the period the Group made two acquisitions.

On 6 January 2012, Signature Flight Support acquired substantially all the assets of Elliot Aviation of Omaha, Inc, a FBO operator in Omaha, Nebraska for a consideration of $3.4 million.

On 4 May 2012, ERO acquired substantially all the assets of Consolidated Turbine Support, Inc, a mobile engine support business based in Phoenix, Arizona for a consideration of $1.9 million.

The net assets acquired, and goodwill arising on these acquisitions, are set out below.

8 Acquisitions - continued

The fair values set out above are provisional and are subject to amendment on finalisation of the fair value exercise. The goodwill arising on these acquisitions is attributable to the anticipated profitability arising from the expansion of the Group's business, together with anticipated future operating synergies.

Subsequent to the period end, on 6 August 2012, the Group announced the purchase of substantially all the net assets of PLH Aviation Services and Dryden Air Services for a total consideration of CAD$27 million. Owing to the timing of this acquisition, the preliminary fair value exercise will be presented in the financial statements for the year ending 31 December 2012.

9 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are detailed below.

During the period, group companies entered into the following transactions with related parties who are not members of the group:

Purchases were made at market price, discounted to reflect the quantity of goods purchased and the relationship between the parties.

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or provided.

At the balance sheet date, the group had loan receivables from an associate of $2.5 million (June 2011: $2.6 million; December 2011: $2.5 million). The loans are unsecured and will be settled in cash, and were made on terms which reflect the relationships between the parties.  

10 Retirement obligations

The defined benefit obligation at 30 June 2012 for the UK Income and Protection Plan is estimated based on the latest actuarial valuation as at 31 March 2009, with assumptions updated to reflect market conditions at 30 June 2012 where appropriate. The defined benefit plan assets have been updated to reflect their market value as at 30 June 2012. The Group's foreign retirement obligations relate to a number of funded final salary defined benefit pension arrangements in North America. Pension costs are calculated by independent qualified actuaries, using the projected unit method and assumptions appropriate to the arrangements in place.

As at 30 June 2012 the update of the actuarial valuations of the UK and US schemes indicates a net deficit of $41.0 million (31 December 2011: $49.2 million), which when combined with the minimum funding liability recognised in accordance with IFRIC 14, of $12.8 million (31 December 2011: $4.3 million) gives a combined liability recognised on the balance sheet of $53.8 million (31 December 2011: $53.5 million). The next triennial valuation of the UK scheme is due to be undertaken during the course of 2012.

11 Borrowings

During the prior period ended 30 June 2011, the Group refinanced its debt facilities to replace the $900 million multicurrency revolving credit facility which was due to mature in September 2012 and the $175 million multicurrency revolving credit facility ("RCF") which was due to mature in August 2011. These facilities were replaced with a new $750 million multicurrency facility dated 21 April 2011 with a split maturity of $250 million which is due to expire in April 2014, and $500 million which is due to expire in April 2016.

In addition the Group raised $300 million in senior notes in the US private placement ("USPP") market dated 18 May 2011 with maturities of 7, 10 and 12 years. The private placement complements the $750 million RCF and the funds raised were used to repay drawings under the $750 million RCF.

12 Share capital

Ordinary share capital as at 30 June 2012 amounted to $251.4 million, (2011: $250.1 million). During the period the Group issued 2.6 million (2011: 1.2 million) ordinary shares to satisfy the vesting of share awards under the Group's various share schemes.

In addition, in the period ended 30 June 2011, the Group issued 43.2 million ordinary shares with a share price of 205.0p per placing share for a total consideration of $140.4 million, as part of a share placing in March 2011. This increased the number of shares in issue from 432.4 million at 31 December 2010 to 476.8 million at 30 June 2011.

Risks and uncertainties

There are a number of potential risks and uncertainties noted below which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 31 December 2011. A detailed explanation of the risks and how these risks are mitigated can be found on page 17 of the annual report which is available at www.bbaaviation.com. The risks are summarised below:

·; general economic downturn leading to a reduction in revenues and profits as a result of reduced B&GA and commercial flying and military expenditure;

·; catastrophic global event (terrorism, weather) with a material impact on global air travel leading to a reduction in revenues and profits as a result of reduced B&GA and commercial flying;

·; legislative changes causing a material increase to the cost of BG&A flight relative to alternatives leading to a reduction in revenues and profits as a result of reduced B&GA and commercial flying;

·; ability to attract and retain high quality and capable people resulting in a loss of key personnel;

·; potential liabilities from defects in services and products resulting in a loss of earnings from liability claims and adverse reputational impact;

·; intentional or inadvertent non-compliance with legislation resulting in an exposure to potential litigation or criminal proceedings and adverse reputational impact;

·; potential collapse of the Euro or exit of a Euro zone member from the Euro resulting in significant economic downturn and stability of Euro zone banks;

·; environmental exposures resulting in a loss of earnings from the cost to remediate or from potential litigation, the potential for the loss of licence to operate or greater than expected liabilities associated with historical operations.

Independent Review Report to BBA Aviation plc

We have been engaged by the company to review the condensed set of financial statements in the half-year financial report for the six months ended 30 June 2012 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement, consolidated statement of changes in equity and and related notes 1 to 12. We have read the other information contained in the half-year financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-year financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-year financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, United Kingdom

6 August 2012