London, 09 July 2012 -- Moody's Investors Service has today assigned the following provisional rating to bonds that will be issued by Bealine Plc (the "Issuer"):

- (P)A3 to the GBP[250] million [ o ]% Secured Corporate Bonds due 2023 (the "Bonds")

This transaction is the first secured financing transaction backed by airport slots to which Moody's has assigned a rating.

This is a secured whole business transaction of the entire business of British Airways (BA) Limited("Air Carrier"), which is engaged in a joint business arrangement with British Airways PLC ("BA") to operate a portfolio of aircraft take-off and landing slots ("airport slots") at London Heathrow ("LHR") airport. A 'slot' is the permission given by an airport co-ordinator (in the UK, Airport Coordination Limited ("ACL")) in accordance with the EU Slot Regulation (Council Regulation (EEC) No 95/93) (the "Slot Regulation") to arrive at or depart from a coordinated airport at a particular time on a particular day, and to use the full range of airport infrastructure in connection with the operation of the aircraft effecting such arrival and departure.

A defined series of slot pairs (with a valuation of approx. GBP [454] million which will be defined prior to close, selected out of a total of 31 potential slot pairs) allowing aircraft to land and take-off and covering seven days per week at LHR, both for the winter and summer seasons (the "Selected Slots") will be transferred from BA to Air Carrier before the closing of the transaction. The acquisition of the Selected Slots by Air Carrier from BA will be effected pursuant to a slot transfer agreement (the "Slot Transfer Agreement").

The proceeds of issuance of the Bonds and the Equity Loan Stock will be used by the Issuer to fund a loan facility pursuant to a loan agreement between the Issuer and Air Carrier (the "AC Facility Agreement"). The proceeds of the loan facility under the AC Facility Agreement will be used by Air Carrier to pay the purchase price for the Selected Slots under the Slot Transfer Agreement.

As a bundle of rights, slots have the characteristics of property and may be alienated by the holder thereof, although subject to the following considerations:

(i) Slots can only be granted to an air carrier, being an air transport undertaking (passenger, cargo or mail) with a valid operating licence;

(ii) There is no right of ownership attached to a slot. A slot is a right of usage, rolled from one season to another;

(iii) Article 8(2) of the Slot Regulation entitles the holder of a series of slots to maintain the same series of slots in the next equivalent "Scheduling Period" so long as the series of slots in question has been operated at least 80% of the time during the Scheduling Period for which it is allocated (the "Slot Usage Rule"). A Scheduling Period refers to either the summer season or the winter season, as determined in accordance with the Worldwide Scheduling Guidelines (the "Guidelines") published by the International Air Transport Association ("IATA"). The Slot Usage Rule is tested twice per year.

(iv) Slots cannot be considered as assets of a carrier for liquidation. However, following the insolvency by an air carrier, to the extent that the air carrier successfully applies to operate under a temporary operating licence ("TOL") valid for up to 12 months, Article 10(4)(c) of the Slot Regulation provides that an air carrier issued with a TOL will not have to comply with the Slot Usage Rules and slots can continue to be retained by the air carrier during that period of time. During this time, the air carrier may transfer and/or exchange for monetary or other consideration the slots it retains.

(v) Article 10(8) of the Slot Regulation provides that slots allocated to one air carrier may be used by (an)other air carrier(s) participating in a joint operation, provided that the designator code of the air carrier to whom the slots were allocated remains on the shared flight for coordination and monitoring purposes. Upon discontinuation of such operations, the slots so used will remain with the air carrier to whom they were initially allocated. Air carriers involved in shared operations shall advise coordinators (i.e. ACL) of the detail of such operations prior to the beginning of such operations.

Given the above considerations, Air Carrier and BA will also enter into a joint business agreement (the "Joint Business Agreement") with respect to the Selected Slots and the BA Slots to establish a "joint operation" between them in accordance with Article 10(8) of the Slot Regulation in order:

- to allow BA to continue operating the Selected Slots transferred to Air Carrier; and

- to allow Air Carrier to comply with the Slot Usage Rules so as to allow Air Carrier to retain the Selected Slots in future Scheduling Periods.

The amounts payable by BA to Air Carrier pursuant to the Joint Business Agreement on each quarter represent Air Carrier's share of the revenue arising from the joint operation of the Selected Slots and the BA Slots at LHR (the "BA Quarterly Payment"). The BA Quarterly Payment payable by BA is subject to a floor amount, regardless of actual revenue receipts and provides the source of cashflow to allow Air Carrier (and therefore the Issuer) to pay interest and costs due from the Issuer on the Bonds during the life of the transaction.

Drawdowns under the variable funding Equity Loan Stock issued by the Issuer to BA provides the source of cashflow to the Issuer to make the scheduled principal repayments on the Bonds on each interest payment date.

RATINGS RATIONALE

Today's assignment of an (P)A3 rating is based on (i) an assessment of BA's direct and irrevocable obligation to Air Carrier (and ultimately to the Issuer) and (ii) the likely ability for value of the Selected Slots to be realized in an insolvency scenario of BA and/or Air Carrier.

The first step of Moody's analysis was to assess the default probability of BA either in performing its operational obligations under the joint operation with Air Carrier relating to the Selected Slots or in satisfying its payment obligations relating to, for example, the BA Quarterly Payment and drawdowns under the variable funding Equity Loan Stock issued by the Issuer to BA. Moody's believes that BA's default probability on these obligations is commensurate with its current corporate family rating (B1, positive outlook).

Following a default of BA, Moody's has considered the following events in its analysis to be most likely to occur:

- BA enters into administration (rather than liquidation) during which the administrator of BA will continue to operate the most profitable parts of its business, including operating flights using the Selected Slots and its own BA slots, whilst attempting to restructure BA into a viable business concern in order to exit the period of administration.

- The structure envisages that an administrative receiver would be appointed in respect of Air Carrier. Air Carrier should successfully apply for a TOL for a period of 12 months, thus removing the need to comply with the Slot Usage Rule in order to retain the Selected Slots.

- Given that the Selected Slots are among the most desirable slots at LHR, BA would be incentivised to have the Selected Slots transferred back to it from Air Carrier in order to allow BA to continue as a viable going concern following the period of administration. BA could have the slots transferred from Air Carrier back to itself by complying with the put option Air Carrier will have exercised upon BA's initial default.

- There could be significant haircuts to the actual realised values of the Selected Slots or the value of the proceeds arising from a sale of Air Carrier. Moody's has tested various scenarios and believes the current Bonds leverage (i.e. 55% of the aggregate valuation of the Selected Slots at closing) is consistent with the rating assigned to the Bonds.

Moody's has considered other scenarios, which it believes were less likely to occur. For example, in the unlikely event that BA enters into liquidation rather than emerge from administration as a restructured viable business, Moody's believes that this would suggest very severe stresses affecting the airline industry globally. In such a scenario, the value of the Selected Slots may suffer as the number of potential third party airlines who may wish to acquire the Selected Slots become limited.

Moody's rating assigned on the Bonds also reflects the level of uncertainty arising from the fact of the untested and innovative nature of the transaction structure and the credit profile of BA. Given the nature of the transaction, Moody's performed no cash flow modelling in its rating analysis for this transaction. However, as stated above, Moody's took into consideration the assessment of the actual realised values of the Selected Slots or the value of the proceeds arising from a sale of Air Carrier following an insolvency of BA.

The viability of the transaction structure is dependent upon current law and regulations in relation to airport slots generally and, in particular, in relation to the way in which airport slots may be transferred and the joint operation of the Selected Slots by BA and Air Carrier. The ratings assigned to the Bonds assumes that the relevant law and/or regulations will remain unchanged or that changes which have been proposed remain in substantially the form in which Moody's has reviewed and would not negatively impact the transaction structure.

The transaction parties have consulted with third party regulators such as the Civil Aviation Authority and ACL to determine the viability of the transaction structure, including the process and scenarios under which Air Carrier may operate the Selected Slots under a TOL following breach of certain trigger events. The issuance of the Bonds is conditional upon the transfer of the Selected Slots to Air Carrier having been notified to ACL in accordance with Article 8a(2) of the EU Slot Regulation, and ACL having confirmed the status of the Selected Slots in ACL's database as being so transferred. Although the legal structure remains untested, Moody's has assessed the risk to be commensurate with the rating assigned on the Bonds.

Prior to 2008, there was uncertainty regarding the legality of slot trading. Although the European Commission has since officially acknowledged the existence of a secondary market at LHR with the issuance of a communication (COM 2008/227, 30 April 2008), historical slot trades prior to 2008 were often conducted for monetary consideration and other consideration. Whilst slot trades recorded since 2008 have indicated significantly higher traded values, these are unconfirmed in many cases as there is currently no requirement to publicly report the prices of exchanged slots.

Moody's has taken this into consideration when reviewing the methodologies used by the two independent appraisers, Ascend Worldwide Ltd ("Ascend") and GRA, Incorporated ("GRA") in their respective valuations of the Selected Slots. Moody's believes the loan-to-value (LTV) ratio of the rated Bonds to the average aggregate valuation of the Selected Slots is commensurate with the rating assigned to the Bonds.

Finally, Moody's has considered the potential impact on the value of the Selected Slots arising from potential developments at LHR or other airports serving the London area during the life of the transaction. Moody's understands that the current authorized developments of London airports remain very significantly below the anticipated unconstrained travel demand. In addition, the current coalition government in the UK scrapped plans for a third runway ("R3") at LHR in May 2010. Moody's considers that there is currently a low likelihood that R3 will be built and become operational or that there will be significant changes in capacity at other airports serving the London area within the life of the transaction.

The principal methodology used in this rating was Moody's Approach to UK Whole Business Securitisations published in October 2000. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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Ning Loh VP - Senior Credit Officer Structured Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Alex Cataldo Associate Managing Director Structured Finance Group Telephone:+39-02-9148-1100 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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