Attachment 1

Recommendation, clarification and guidance on

an initial Economic Operating Authorization

1- With reference to the advisory circular AC-EOA 001 (0) step 5, the application together with the required business plan shall be submitted to ACC (Airlines Certification Commission) within 90 days from the date of the applicant's receipt of ACC ( Airlines Certification Commission) initial acceptance, otherwise the initial acceptance shall be considered automatically cancelled.

A. Business Plan issues

A submission for an initial Economic Operating Authorization must be in both hard and electronic copies, and must include a Business Plan in sufficient detail, including supporting assumptions for EOA Assessment Team to undertake an assessment of the viability of the plan. The information below is representative of the level of detail required, but applicants are encouraged to supply more information if it facilitates the assessment of the plan .

A 1- Content and Structure of Business plan

}- EXECUTIVE SUMMARY • Description of airline concept (scope, revenue/cost structure, service offering, aircraft

types, major markets served) • Target customer and perceived opportunity • Competitive advantage over incumbent carriers • Market share expectations and competitive strategy • Financial highlights: operating margin , profitability, etc. • Management team's airline operations experience level • Capitalization plan and ROI expectations

>- INDUSTRY & TARGET MARKET ,.--,. • Industry overview

• Target market analysis • Economic state (GOP) • Demographics / population • Income statistics • Growth rates • Air travel market size and trends • Forecasts for air travel • 0&0 pax/cargo traffic demand by market

~ COMPETITIVE ANALYSIS • Incumbent operating in the marketplace • Current competitors' market share by route • Competitor service offerings (including aircraft type/age) • Incumbent airline frequencies/schedules • Fare comparison by service class and route

Barriers to market-entry (gates, slots, bilateral agreements, etc.)

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, ~ SERVICE OFFERING • Overall Concept • MissionNision Statement • Scope (domestic, regional, international, network)

Markets to serve • Headquarters / Airport base(s) • Target customer segment • Route structure (local, hub/spoke, point-to-point) • Frequency • Schedule • Product / service offering (drives cost structure) • Seat pitch • Seat assignments • Boarding process • Service-class offering (economy, business, first, pods, beds) • Catering (hot meals, limited, purchase, beverage-only, etc.) • Aircraft interior (leather, bins, window size, lighting, age, etc.) • Duty-free / in-flight shopping • In-flight entertainment (IFE) - live TV, internet, video • Power / IFE at seat • Kiosk/online check in • Airport lounges • Customer loyalty program (FF program) • Amenities (towels, pillOWS, blankets, socks, eye masks, etc) • Aircraft Selection • Capacity (paxlcargo) to meet demand • Range to fly missions • Economics for profitability • Maintenance costs • Fuel efficiency • Reliability • Engines (fuel/range/performance) • Winglets (fuellrange/performance) • Fleet commonality • Avionics • Buy/lease • New/Used/Age • Insurance (airframe, engine, pax/cargo liability) • Noise/emissions • Alliances / code-sharing / partnering

Service entry and growth strategy • Sustainable competitive advantage

~ OPPORTUNITY • Estimated market share by market / route • Fare pricing by class / route • Load factor by class / route

Expected operating revenue, costs, and margins • Profit potential and sustain ability • Sensitivity analysis of profitability under various scenarios

~ MARKETING & DISTRIBUTION PLAN • Marketing Strategy • Marketing Mix (4Ps):

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• Product (service offering) • Price (fares) • Fare structure • Revenue management • Pricing / yield • Place (sales and distribution) • Internet (direct) • Internet (wholesale/3rd party) • Call Center • City Ticket Offices • Airport ticket counters (walk ups) • Global Distribution Systems (GDS) • Travel Agents • Corporate sales • Other (kiosks, etc) • Method (cash, credit, etc) • Promotion (advertising)

~ OPERATIONS PLAN - • Labor • Pay rates / scales

Benefits • In/out-sourcing • Unions (contracts) • Administration

Distribution • Airport Operations • Customer Service

Maintenance (line, light, heavy, equipment) • Ground Operations (ramp) • Dispatch • Flight Operations • Training • Fuel purchasing / hedging / policies • Technology (IT)

ETOPS (if applicable) • Cargo / Freight / Mail • Facilities / Equipment

~ MANAGEMENT TEAM • Organizational Chart • Executive Biographies / Resumes (CVs) for the 5 key functions : • Airport Operations • Flight Operations • Maintenance Operations • Finance • Marketing & Distribution • Other Management (VPs) • Independent Board of Directors • Professional Advisors/Consultants

~ RISKS AND MITIGATION PLAN • Business model risk • Market share penetration

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·. Fuel costs • Default on aircraft liabilities • Safety • Weather • Geo-political • Economic • Regulatory • Terrorism • I nfrastructu re • Gates/slots availability

» FINANCIALS (5-year pro forma) • Income Statement (P&L) • Balance Sheet • Statement of Cash Flows • Airline operating statistics & financial ratios

» IMPLEMENTATION SCHEDULE • Iterative Development Phase

• Business plan development • Financial model development • Management team assembly • Aircraft selection • Investor "roadshow" •

• Launch Phase -12-18 months • Funded • Certification • Aircraft sourcing • Certification • Staffing • Facilities / Equipment • Begin Flight Operations - 0 to 12 months • Initial Growth Phase - 3 to 5 years

r-- » CAPITALIZATION PLAN • Capital Structure

• Key management team investment • Startup capital needs • Seed capital sources • Aircraft financing • Venture funding

• Equity offering (if applicable) • Cash required from investors • Equity offer for investment • Use of funds • Anticipated return on investment (ROI) • I nvestor exit strategy • Timing

~ APPENDIXES

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·Please kindly see the additional details to the above business plan components as following:

A.2 the Market

Market potential detailed assessment. The following list highlights some of the areas that EOA Assessment Team requires in order to consider an applicant's assessment of the market size and its ability to attract business from that market. Applicants should not regard this list as all­inclusive and are encouraged to add value to any of the areas requested.

1. A description of the services that are planned to be operated, including routes, sources of revenue, market segments.

2. Details on the size of each market segment, the market share anticipated and the justification for the market share.

3. A competitive analysis of the market. In this respect, Applicant shall provide specific justification on the price competitiveness of the applicant compared to incumbent air carriers.

4. A detailed marketing plan to achieve the planned market share, with full costs included in the financial analysis.

,........, Note: Considering that your airline is one of the Sustainable and Economic Sound and would-be one of the best national designated airlines, and furthermore in accordance with the Government policy as well as air transport policy, we urge you to develop and illustrate thoroughly the strategic development plan for Domestic Market, including market segments, routes and intended operational and feasible plans in your comprehensive Business Plan as well as specific feasibility study.

A.3 Revenue Analysis

The justification for the revenue assessments made in the plan . The list below indicates some of the areas that EOA Assessment Team would expect to see in the revenue plan:

1. Numbers and demographics of passengers and/or cargo. 2. Competitive assessments for the revenue forecasts based on geography, price,

strength of competitors and other parameters. 3. Revenue estimates for each category of market segment identified. 4. Indications from potential customers of their plans to use the airline (if available).

A.4 Cost Analysis

The justification for cost assumptions made in the plan . The list below indicates some of the areas that EOA Assessment Team would expect to see in the cost plan:

1. A detailed break-down of start-up costs, clearly indicating all major items, including training, regulatory approvals, pre-payments and capital items.

2. Detailed costs for all fixed and variable cost elements, clearly identified and supported wherever possible by quotations and/or contracts , cross referenced to the revenue budget referred to earlier. Specific examples of the cost areas that need to be supplied in sufficient detail to permit verification by ACC ( Certification Commission) include, but are not limited to:

i. Technical staff salaries and benefits, split by functional area and expertise, including pilots, engineers and cabin crew (where relevant);

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ii. Other staff salaries and benefits; · iii. Aircraft acquisition costs, either through purchase or lease arrangements; IV. Fuel costs, including any hedging policies; v. Maintenance costs, including, where available, quotations from qualified

suppliers; vi. Maintenance reserves for leased aircraft;

VII. Insurance quotations; viii. Training costs;

IX. Marketing costs as identified in the marketing plan; x. Other variable costs pertinent to the operational plan, including landing and

navigation charges, catering costs, passenger taxes, travel agent commissions and Computer Reservation System charges;

xi. Other fixed cost elements, including office facilities, audit charges and legal charges;

xii. Straight-line Depreciation: - Straight-line depreciation of an asset is a depreciation method where equal amounts of depreciation expense will be taken in each year of the asset's useful life.

Straight-line Depreciation =Cost of the assets - Estimated salvage value Estimated useful life

A.5 Data Format.

The financial data should be provided in a format to allow EOA Assessment Team to carry out its own sensitivity analysis on key variables. The data contained within the spreadsheet or other data format should be on a monthly basis, and be linked so as to show the following:

1. Profit & Loss accounts to International Financial Reporting Standards (IFRS). 2. Cash Flow statements, consistent with the Profit & Loss accounts, and containing

a justification for the receipt and payment profiles. 3. Balance Sheets for the start of operations and every six months from that point. 4 . Statistical data on sector profitability, gross and net yields, flight and block hours.

,-.. A.6 Human Resource Plan.

A detailed Human Resource Plan including :

1. Staff numbers (number of Cambodians and expats) 2. Recruitment policies and plans. 3. Salary and other benefits by class of employee. 4 . Training requirements .

A.7 Operating Plan.

An operating plan demonstrating the planned build up of services, including, where relevant, an aircraft schedule, plans to acquire slots where required and relevant contingency plans.

A.8 Other information.

The submission should include other information as listed below.

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1. The most recent internal management accounts and, if available, audited accounts for the previous financial year.

2. Details of existing and projected sources of finance, including a clear breakdown of equity capital, debt or bond financing , working capital finance, including any covenants, repayment profiles and dividend plans.

3. Details of shareholders, including nationality and type of shares to be held, and the Articles of Association. If part of a larger group, supply information on the relationship between the companies.

4. Details of the financing of aircraft purchase/leasing including, in the case of leasing, the terms and conditions of contract.

A.9 Accident Plan

To develop and incorporate into business plan an "accident plan" to address the needs of families of passengers and other victims involved in any aircraft accident involving an aircraft of the air carrier and resulting in a major loss of life. The requirement to file an accident plan applies not only to passenger carriers but also to all-cargo carriers, which must file a plan to cover any employee or third-party accident victims, such as cargo attendants, non-revenue passengers, or persons on the ground.

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2- Legal Issues

8-1. the ownership and effective control requirements

Please be noted that the Air Carrier's Company shall be owned and continue to be owned directly or through majority (Not less than 51%) ownership by Cambodian nationals. It shall at all times be Effectively Controlled by such nationals. An Air Carrier shall at all times be able, on request, to demonstrate to the EOA Assessment Team that it meets the ownership requirements.

"Effective control" means a relationship constituted by rights, contracts or any other means which , either separately or jointly and having regard to the considerations of fact or law involved, confer the possibility of directly or indirectly exercising a decisive influence on an undertaking, in particular by:

(a) The right to use all or part of the assets of an undertaking; (b) Rights or contracts which confer a decisive influence on the composition, voting or

decisions of the bodies of an undertaking or otherwise confer a decisive influence on the running of the business of the undertaking."

8-2- Artic le and Memorandum of assoc iation (AMAIMAA)

Please provide Documentation on Incorporation (including article and memorandum of association (MAA) and Certificate of Patent).

Failure to provide details of the beneficial owners of shares may affect the validity of an EOA and may result in a decision by the Airlines Certificate Commission (ACC) to regard the nationality of any owners not verified as Cambodian to be non-Cambodian.

8 -3- Financial posit ion and source of fund

The applicant's financial resources and arrangements are adequate in relation to his existing and proposed business.

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This information will be used to assess the financial position of the applicant, whether the applicant has a reasonable understanding of the costs of starting and conducting its operations, and whether it has accessed to the capital required to commence operations. Before being granted an Economic Operating Authorization (EOA), an applicant must provide independent, third-party verification that it has available to it resources (e.g., cash, lines­of-credit, Bank Credit Reference Letter or bank loans) sufficient to cover all of its pre-operating costs (i.e., all of the costs incurred prior to the actual commencement of flight operations) plus the operating expenses that are reasonably projected to be incurred by the applicant during three to five years of "normal" operations.

8-4- Letter of Intent (Aircraft Lease Agreement)

With regard to Aircraft Lease Agreement, please ensure the letter of intent with the proper signature between your lesser and lessee of the aircraft to SOA Assessment as required.

Please be aware that Aircraft Lease Agreement (LOI) is not under our EOA assessment activities.

8-5- Independent Legal Advice/opinion

Please provide the independent legal advice/opinion on the status of your airline condition improvement. The legal advice from the independent lawyer is useful evident for the Airlines Certification Commission (ACC) to consider to the AOC process and accept your applicant for further steps.

You may kindly be informed since the International Civil Aviation Organization (ICAO) audited the State Secretariat of Civil Aviation (SSCA) in 2007 and followed up by the ICAO Coordinated Validation Mission to SSCA in 2009; SSCA has, consequently, revoked and suspended a number of which were ever operating in Cambodia including your airline. The list of revoked and suspended has been submitted to the ICAO and European Community and closely monitored by them .

This Legal advice is related to the AOC (EOA and SOA) issuance which you shall look at Government Approval and Cambodia Civil Aviation Regulations (Part 9- Air Operator Certificate Requirement, page 8) for that purpose.

3. Liability and Insurance

The Minimum Requirement for liability and insurance have been stipulated in the advisory circular no AC EOA-ACC 02 (0) .

Please provide evidence that you have access to, adequate means of liability and insurance to be procured meets and complies with our requirement.

4. Route authorization/permit

You will need to fill up an application for a Route Authorization/Permit, which shall be made in the form. This should be done after your Comprehensive Business Plan has been satisfied to EOA Assessment Team.

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A submission of application for Route Authorization/Permit shall be furnished with a twelve months Feasibility Study two month in advance prior to operation.

The requested route shall be on city-city basis ensuring that all the required information has been inserted and/or attached.

EOA Assessment Team will advise you on this matter from time to time.

5. Fees and Charge

5.1 Filing Application Fees

The fees for filling application for operating authorization are as follow:

• Domestic Schedule Operating Authorization US$850 • International Schedule Operating Authorization US$900 • Both Domestic and International Schedule Operating Authorization US$1,750

• Domestic Charter Operating Authorization US$850 • International Charter Operating Authorization US$650 • Both Domestic and International Charter Operating Authorization US$1,500

5.2 Analysis and Assessment Fees

Under our requirement as stipulated in CCARs and AOCR 1 5.2, Regulatory Professional Fees and Charge for airlines assessment will be:

• US$50/hour or minimum charge for US$1 OO/day for in house work. • The number of person-hour and person-day will be discussed and advised in due course.

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