Annual report 2008 - Advanced Inflight Alliance AG

ANNUAL REPORT 2008

Advanced Inflight Alliance AG at a glance
Adress Schellingstr. 35, 80799 Munich, Germany
Telephone 0049-89-613805-0
Fax 0049-89-613805-55
E-mail info@aialliance.com
Website www.advanced-inflight-alliance.com
Management Board Otto Dauer, chief executive officer
Peter Biewald, chief financial officer
Supervisory Board Dr. Rüdiger Berndt, chairman
Rudolf Seidl, vice chairman
Dr. Andreas Beyer
Investor relations manager Susanne Rehm
Trading segment General Standard
Share capital (in EUR) 14,500,000
Shareholder structure (%) AXXION S.A., 5.590%
Lars Tvede 5.120%
Grand Haven Capital AG, 3.970%
Hauck & Aufhäuser 5.120%
Free float (%) 80.200
ISIN DE / Stock exchange symbol ISINDE0001262186, symbol: DVN1
Coverage DZ Bank AG
Viscardi AG
Designated Sponsor VEM Aktienbank AG
DZ Bank AG
Employees (Average) Parent company: 8; Group: 335
Accounting IFRS

Contents
5 Group struccture
Advanced Inflight Alliance Group
6 Group Management Report for the 2008 Financial Year
29 Consolidated Income Statement for the financial year from January 1 to December 31, 2008 (IFRS)
30 Consolidated Balance Sheet (IFRS)
32 Statement of Changes in Non-Current Assets for the 2008 Financial Year
34 Statement of Changes in Non-Current Assets for the 2007 Financial Year
36 Statement of changes in net equity including minority interest (IFRS)
38 Consolidated Cash Flow Statement (IFRS)
40 Publishing Information
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LOS ANGELES
LOS ANGELES
MONTREAL
MIAMI
MONTREAL
MIAMI
DUISBURG
MÜNCHEN
LONDON
AMSTERDAM
DUISBURG MUNICH
DUBAI
DUBAI
MUMBAI
MUMBAI
PEKING
SINGAPUR
MELBOURNE
BEIJING
SINGAPORE
MELBOURNE
TOKIO
AUCKLAND
TOKYO
AUCKLAND

Group structur
Advanced Inflight
Alliance Ltd., Bristol,
UK
100 %
Inflight Productions
Ltd. London,
UK
100%
100% Subsidiaries
in London, USA,
the Netherlands,
New Zealand,
Australia, Singapore
and the United Arab
Emirates
Atlas Air Film +
Media Service GmbH
Duisburg, Germany
100%
Atlas Air
Entertainment
Concepts, Inc.Los
Angeles, USA
100%
Fairdeal
Multimedia Pvt. Ltd.
Mumbai, India
100%
DTI
Software Inc.
Montreal, Canada
100%
100% Subsidiaries
in USA and the United
Arab Emirates
IFE Alliance
Licensing GmbH
Duisburg, Germany
100%
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ADVANCED INFLIGHT ALLIANCE AG
GROUP MANAGEMENT REPORT FOR THE 2008 FINANCIAL YEAR
Business and economic environment
1. Group structure
The Group operated in the inflight entertainment segment with its subsidiaries Atlas Air Film + Media
Service GmbH, Duisburg; IFE Alliance Licensing GmbH, Duisburg; DTI Software Inc., Montreal, Canada; Fairdeal
Multimedia Pvt. Ltd., Mumbai, India; and Advanced Inflight Alliance Ltd., Bristol, UK, along with their respective
subsidiaries. IFE Alliance Licensing GmbH is the subsidiary active in the film licensing segment.
Atlas Air Film + Media Service GmbH, Duisburg, Germany (hereinafter „Atlas Air“)
Atlas Air and its subsidiary Atlas Air Entertainment Concepts, Inc., Glendale, California, USA (hereinafter
„AAEC“) are content service providers for 27 national and international airlines with a focus on video programs
(feature films, documentaries, cartoons).
IFE Alliance Licensing GmbH, Duisburg, Germany (hereinafter „IFEL“)
We established a centralized purchasing organization called IFE Alliance Licensing GmbH in the 2006 and
2007 financial years for our subsidiaries in inflight entertainment. The Management Board resolved toward
the end of the 2007 financial year to contribute the film assets of Advanced Film GmbH to IFE Alliance
Licensing GmbH for reasons related to rationalization and concentration.
Advanced Inflight Alliance Ltd., Bristol, UK (hereinafter „AIA“)
AIA functions as an intermediate holding company for Inflight Productions Limited, London, UK (hereinafter
„IFP“), without engaging in operational activities itself.
IFP and its subsidiaries act as content service providers (delivery and implementation of program content)
with a focus on system integration and audio programs for 89 airlines around the world.
Advanced Film GmbH, Munich, Germany (hereinafter „Film GmbH“)
The purpose of Film GmbH is to create and acquire films or partial film rights and utilize them through sales,
licensing or any other form of commercial exploitation. The company discontinued its operations as of the
beginning of the 2008 financial year; its film stock was transferred to IFEL.
DTI Software Inc., Montreal, Canada (hereinafter „DTI“)
DTI, a company domiciled in Montreal that maintains offices in both the United States and Dubai, is the
leading company in the inflight computer game segment. It serves approximately 96 airlines worldwide.
The company‘s other activities encompass system applications and the development of graphical user
interfaces (GUI).

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Fairdeal Multimedia Pvt. Ltd., Mumbai, India (hereinafter „Fairdeal“)
The core business of Fairdeal involves selling airline film licenses worldwide, mainly for Indian films, commonly
known as Bollywood movies. Fairdeal also provides its 10 customers with Indian TV programs, service
fees, audio programs, and additional inflight entertainment services.
2. Explanation of the basic features of the compensation systems
Management Board
The compensation of the Management Board is determined by the Supervisory Board. It comprises different
components. The performance-independent component consists of an annual fixed salary and benefits. The
fixed salary is oriented on the economic situation and future prospects of the company, as well as on the
compensation systems of comparable companies. The variable components of the compensation comprise
a performance-based bonus contingent on a percentage of consolidated income.
A total of EUR 1,110 thousand – divided into fixed compensation of EUR 410 thousand and variable compensation
of EUR 700 thousand – were paid to the Management Board in the 2008 financial year. The
Management Board was also paid other compensation of EUR 173 thousand for direct life, retirement,
disability and accident insurance as well as in connection with the stock option plan, as well as monetary
benefits of EUR 32 thousand for health insurance and the use of a company car. Variable compensation for
the 2007 financial year of EUR 40 thousand was also paid in 2008.
Altogether 100,000 stock options were granted to the Management Board under the stock option plan
adopted by the Annual General Meeting on July 02, 2007; of these, 65,000 stock options were issued to the
chief executive officer, Mr. Otto Dauer, and 35,000 stock options were issued to the chief financial officer,
Mr. Peter Biewald. The options‘ exercise price of EUR 2.03 corresponded to the average of the opening and
closing prices of the shares of Advanced Inflight Alliance AG in XETRA trading on the last five trading days
before the relevant stock option was issued. The stock options may be exercised only if the average of the
opening and closing prices of the shares of Advanced Inflight Alliance AG in XETRA trading (or a successor
system that has taken its place) on the last five trading days prior to the onset of the given exercise period
have risen by at least 20% over the exercise price for the first third (option terms and conditions, item 5.1
sentence 2) of the options granted in a tranche, by at least 30% over the exercise price for the second third
(option terms and conditions, item 5.1 sentence 3) of the options granted in a tranche, and by at least 40%
over the exercise price for the final third (option terms and conditions, item 5.1 sentence 4) of the options
granted in a tranche.
The fair value of the stock options is measured at the time they are granted using a binomial model and
taking the conditions at which the options were granted into account.
The term of the options granted is governed by § 5.4 of the option terms and conditions. The term of a
stock option shall begin on the date it is granted and end upon expiration of five years for the first third of
the options granted in a tranche, upon expiration of six years for the second third of the options granted
in a tranche, and upon expiration of seven years for the final third of the options granted in a tranche.
There shall be no cash settlements. The Group has not executed any share-based payments entailing cash
settlements in the past.
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Since 2008, the Management Board has received compensation that takes the form of contributions to a
pension fund amounting to 40% and 30%, respectively, of the fixed compensation paid to the chief executive
officer and the chief financial officer; at the time they reach their retirement age, these contributions
shall constitute the basis of their pension payments.
The contracts that the company has made with the chief executive officer and the chief financial officer
contain change of control provisions. Accordingly, the chief executive officer and the chief financial officer
may terminate their employment contracts and resign their offices; if the respective director‘s contract is
terminated, they are entitled to compensation equivalent to their (fixed and variable) compensation plus
the stipulated contributions to the pension fund until the end of the term of office to which they had been
appointed, however, at a minimum a compensation payment equivalent to two gross annual salaries (fixed
and variable compensation).
If he is dismissed early, the chief executive officer shall be paid compensation equivalent to at least one
year‘s gross annual salary (fixed and variable compensation) plus contributions to the pension fund.
Supervisory Board
Aside from reimbursements of their outlays, the members of the Supervisory Board are also paid fixed
compensation pursuant to the company‘s Articles of Association as well as an attendance fee. Additionally,
the Articles of Association stipulate variable compensation based on the net income for the year subject to a
specific ceiling. The chairman of the Supervisory Board is paid twice the amount stipulated in the Articles of
Association and the vice chairman of the Supervisory Board is paid one and one half times that amount.
In 2008, a total of EUR 328 thousand was paid to the Supervisory Board, specifically, fixed compensation of
EUR 67 thousand for the 2008 financial year, variable compensation of EUR 216 thousand for the 2007 and
2008 financial years, as well as attendance fees of EUR 45 thousand for the 2007 and 2008 financial years.
The final compensation for the 2007 financial year was resolved by the Annual General Meeting on July 01,
2008, and thus was not yet shown in full in the 2007 annual report.
Please also see the Compensation Report in the Corporate Governance Report and the disclosures in the
notes to these consolidated financial statements in regards to the compensation granted to the members
of the company’s two boards during the reporting period.
3. Fields of business
The Group‘s main field of business is inflight entertainment. This is the international term for onboard
entertainment for passengers during a flight in the form of video and music programs, as well as electronic
games and Internet applications. The Group also integrates the corresponding software into onboard aircraft
systems.
Business model
For passengers, the quality of inflight entertainment („IFE“) is an important criterion — apart from the price
of the ticket and a few other key considerations — in deciding which flight to book. For carriers, inflight
entertainment is an important factor in their ability to distinguish themselves from other competitors?

The customers of the Group include airlines all over the world. Airlines generally choose their inflight entertainment
suppliers through invitations to tender, and they then contractually bind themselves to a more
or less exclusive relationship for an average of two to three years. Content services providers normally
purchase the content available to carriers – i.e. Hollywood movies, as well as news, sports and music programs
– for licensing periods of a few months and on a nonexclusive basis, i.e. competitors can purchase
the same film rights for their customers during the same period.
The IFE-Alliance
While the subsidiary groups active in our core business – Atlas Air, IFP, DTI and Fairdeal – continue to operate
separately and approach airlines using their own brand names, their affiliation is expressed through their
membership in the IFE Alliance. This structure allows other market participants to join the IFE Alliance while
retaining their established brand names. The name of the alliance followed the example on three airline
associations: Star Alliance (Air Canada, Air China, All Nippon Airways, Deutsche Lufthansa, Singapore Airlines,
United, etc.), Skyteam (Air France/KLM, Continental, Delta, Northwest, etc.) and Oneworld (American
Airlines, British Airways, Cathay Pacific, Qantas, etc.).
The IFE Alliance supplies an extensive range of inflight entertainment content consisting largely of audio and
video programs (feature films, TV programs, news, sports). Its services also include GUI (graphical user interface)
design for Internet applications, database management for managing the entire inflight entertainment
process, and the technical integration of the respective systems on board.
Our shared economic success in financial year 2008 demonstrates the benefits of retaining the brand names
of our subsidiaries in the inflight entertainment market. Our priority is to maintain continuity in the business
relationships between our operational subsidiaries and our airline customers.
Film licensing
As in the previous years, the traditional business of licensing international film rights for TV and DVD, mainly
for German-speaking territories, was of secondary importance in 2008. The film assets are exploited by
IFEL.
4. Overall economic situation
4.1 Global economic growth
The global economy expanded at a much slower rate in 2008. At 3.4%, GDP growth was below average.
The serious crisis in the international financial markets, which was triggered by the collapse of the US subprime
mortgage market in 2007, has by now affected all areas of the economy. There has been a dramatic
deterioration in the ability of companies and private households alike to obtain financing.
This time, the cooling of the global economy affected not just the major economic regions — North America,
Western Europe, and Asia — but also Central and Eastern Europe, Russia, and Latin America. Overall, global
GDP will rise by 0.5% in 2009 and by 1.4% in 2010. All in all, this constellation points to a global recession
in 2009 (source: Ifo Institute‘s Economic Forecast for 2009).
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Weltkonjunktur und ifo Weltwirtschaftsklima
Global economy and global business climate according to the ifo Institute (current as of 2009)
% change year on year 1995 = 100
Real GDP (left scale)
ifo global business climate* (right scale)
140
7,0
6,0
5,0
4,0
3,0
2,0
1,0
0,0
3,7
4,0
4.2 Domestic economic growth
The German economy has clearly been on a downward trajectory since the middle of 2008. While it rose to
a strong intermediate high in the year‘s first half, the massive deterioration in the export sector started to
have a growing impact on the economy from summer onwards. The financial crisis also worsened dramatically.
Value creation in Germany dropped substantially for the first time in the year‘s third quarter. On the
whole, all available economic data point to an accelerating slowdown in the economy‘s aggregate output in
the year‘s fourth quarter. Annual growth is likely to have been negative at 3.5%. The comparable figure for
the previous year was merely 0.4% less than the rate for production. Capacity utilization has fallen below
the long-standing average. Hence the German economy is in a recession. It is estimated that the real GDP
probably expanded by 1.5%, after 2.5% the previous year. Real GDP will fall by 2.2% in 2009. The financial
crisis is not expected to ebb until 2010, bringing with it a slight improvement in the international economic
climate and stabilization (source: Ifo Institute‘s Economic Forecast for 2009).
4.3 Oil prices
2,5
3,5
4,7
* Arithmetic mean in the assessment of the current
situation and expected developments
2,2
2,8
3,6
96 97 98 99 00 01 02 03 04 05 06 07 08
0,5
09 10
Source: OECD, IWF, Ifo World Economic Survey (WES), Berechnungen und Prognose des ifo Instituts.
In the first seven months of 2008, oil prices rose from just under USD 95 per barrel of Brent crude to peaks
of up to USD 150. In fall, they fell back down to a level of USD 50 in the wake of the worldwide decline
in demand. On a dollar basis, crude oil prices averaged over the year were about one third higher than in
2007. Given the anticipated weakness of the global economy, the demand for crude oil in 2009 is expected
to decline, in turn resulting in relatively low oil prices around USD 45 per barrel.
4,9
4,5
5,1
5,2
3,4
1,4
130
120
110
100
90
80
70
60
50
40

4.4 Currency developments
On an annualized basis, the US dollar declined by about 8% against the euro (2008: EUR 1.00 = USD 1.4743;
2007: EUR 1.00 = USD 1.3615; Reuters, end of day annualized exchange rates). The company‘s earnings
have been negatively affected by the development of the US dollar because the greater part of our business,
both in purchasing and in sales, is transacted in US dollars and because our German offices in Munich and
Duisburg incur considerable fixed costs in euros. However, we did succeed in cushioning the negative effect
to some extent by means of foreign currency hedges.
5. Industry-specific business environment
The International Air Transport Association (IATA) expects the worldwide aviation industry to suffer substantially
under the economic crisis. While the cargo segment will account for a large portion of the anticipated
losses in global aviation, passenger numbers are also expected to decline by about 5.7%. However, falling
fuel prices will prevent even higher losses. IATA even anticipates US carriers, which were affected by the
crisis early on and cut their capacities earlier than others, to post slight profits in 2009. The carriers in Asia
Pacific are expected to be most strongly affected in 2009. IATA anticipates the situation to improve slightly
toward the close of the year.
As before, inflight entertainment through films, music, and computer games is one of the most important
features by which carriers distinguish themselves in the competition for passengers. Demand for services in
the inflight entertainment segment (IFE) remains high.
The company is well positioned owing to its collaboration with leading international manufacturers of the
hardware electronics used in inflight entertainment as well as the broad range of its offerings in the entire
IFE segment.
6. Market volume and market share
The content service providers‘ competitive structure did not change much during the reporting period. As
before, the market is dominated by a few larger providers with an international customer base, as well as
many smaller, primarily regional providers.
The current difficulties of the global economy will continue to fuel the trend toward consolidation in the
industry, particularly because small providers will have difficulties compensating for the pressure on selling
prices. In addition, technical innovations have created a dynamic whereby carriers are increasingly looking
to enhance their position through partners capable not only of satisfying the new requirements in this arena
too but also of making both the products and the services available that are in demand.
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7. Corporate management
Strategic priority Operational goals Performance indicators
Expansion of position in the IFE market Organic growth and acquisitions
Increase in earnings
As part of the airline industry, the inflight entertainment segment is subject to ongoing competitive pressure.
To secure our market share and earnings for the long term, we must continuously engage in activities to
expand our market position and improve our profitability. This is also why we must have an active acquisition
policy and make full use of our internal resources.
The following tools are being used to monitor and control the Group and establish clear aims for the
management teams of the subsidiaries:
> specification of clear strategic goals for managing directors and division leaders
> evaluation of regular reports from managing directors
> involvement in specifying and approving target figures for subsidiaries
> evaluation of performance of individual subsidiaries during the financial year through analysis of target
and actual figures
> measures by the Management Board during the financial year in the event of deviation from target
figures
8. Employees
Personnel is critical to a service company. The more our staff focus on customers and services – particularly
in our core business, inflight entertainment – the greater our success. Indeed, it is our employees‘ knowhow
and the length of their service with us that secure the Group‘s market position in the inflight niche
market.
A total of 335 people were employed in the Group on average in 2008 (previous year: 212 employees).
AIA AG had 8 employees (previous year: 6 employees). There were 33 people employed in the German
subsidiaries (previous year: 33 employees). In the foreign subsidiaries, 294 people were employed (pre vious
year: 173 employees).
No trainees were employed in 2008.
Reduction of costs through synergies,
centralization of purchasing in the Group
Increased customer satisfaction as
demonstrated by customer surveys,
immediately visible success through
successful participation in invitations
to tender from airlines
Benchmark comparisons
(particularly materials, personnel)

9. Course of business and key events in 2008
The Supervisory Board member, Wolfgang Rück, resigned his office effective January 09, 2008. On January
14, 2008, Mr. Rudolf Seidl, auditor and president of ROTA Treuhand GmbH, Munich, Germany, was appointed
to the Supervisory Board by court order upon application of the Management Board and approval of the
Supervisory Board.
The acquisition of DTI took legal effect as of the contract signing date (January 11, 2008). AIA AG acquired
100% of the shares in DTI and paid the purchase price in cash. In addition to the purchase price, earn out
payments contingent on the acquired company‘s performance in the 2008 and 2009 financial years were
stipulated with DTI‘s management (the sellers of the shares); they will become due and payable in 2009 and
2010, following the adoption of the annual financial statements as of December 31, 2008, and December
31, 2009. According to the purchase agreement, earn out payments of up to CAD 3.7 million for the 2008
financial year will become due and payable in 2009.
In February 2008, AIA AG obtained an unsecured loan of EUR 10,000 thousand from HypoVereinsbank AG,
Munich, with a term of five years subject to regular loan payments, no prepayment penalties and variable
interest based on market rates. Existing funds were used to discharge the purchase price liability from the
acquisition of DTI. The company obtained the loan in anticipation of the ramifications of the global crisis in
the financial markets, thus securing freely disposable funds that may be repaid at any time. In the meantime,
two loan payments of EUR 1.0 million each fell due on June 30, 2008, and December 31, 2008; the
nominal amount of the loan outstanding as of January 01, 2009, thus was EUR 8.0 million, of which EUR 6.0
million are secured by means of a fixed interest agreement.
On February 28, 2008, the Munich Regional Court I ruled on two small shareholders‘ actions for annulment
of various shareholder resolutions adopted at the regular Annual General Meeting on July 2, 2007, permitting
all resolutions with the exception of agenda item 3 (formal approval of the Management Board‘s actions
during the financial year) to take legal effect. The company appealed the court‘s ruling on agenda item
3. The deadline for filing the appeal expired on April 04, 2008. The two small shareholders did not file an
appeal, whereupon the company withdrew its appeal regarding agenda item 3 such that the ruling took
effect immediately. As a result, with the exception of agenda item 3, the company has prevailed in all
actions for annulment of shareholder resolutions adopted at the regular Annual General Meeting on July 02,
2007. The plaintiffs must bear 92% of the costs of the proceedings before the Munich Regional Court I.
We succeeded in gaining American Airlines, a major carrier, as a new customer effective February 01, 2008.
The two-year contract runs until January 2010 and essentially covers American Airlines‘ total need for inflight
entertainment.
The Management Board was authorized by a shareholder resolution dated July 02, 2007, to issue up to
800,000 stock options overall. A total of 65,000 and 35,000 stock options were issued, respectively, to the
chief executive officer, Otto Dauer, and the chief financial officer, Peter Biewald, in the first half of 2008 with
the approval of the Supervisory Board. An additional 300,000 stock options were issued to nine managing
directors of subsidiaries during the same period.
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The conditions under the Stock Option Plan 2007 regarding performance targets were amended by a
shareholder resolution dated July 01, 2008. Henceforth, the first third of the stock options issued may only
be exercised if the stock‘s average price during the last five trading days prior to the onset of the relevant
exercise period has risen by at least 20% over the exercise price. The performance targets for the second
third of the stock options issued entail a 30% increase in the share price subject to a waiting period of three
years and, for the final third, a 40% increase in the share price subject to a waiting period of four years, in
each case relevant to the exercise price.
The Annual General Meeting on July 01, 2008, was much more harmonious than the AGMs in previous years,
which were characterized by critical shareholders. With 38%, the number of shareholders in attendance
was also higher than in previous years. All resolutions were adopted by large majorities. No actions for
annulment of shareholder resolutions have been filed even though two shareholders had their objections
recorded in the minutes.
The last remaining open actions for annulment of shareholder resolutions that were adopted at the
company‘s extraordinary Annual General Meeting on November 11, 2005, and its Annual General Meeting
on August 28, 2006, were also resolved by recourse to the courts in 2008.
Both the plaintiffs and the respondents (i.e. the company) had appealed the trial court‘s ruling in regards to
the extraordinary Annual General Meeting in 2005.
The final ruling of the Munich Regional Court I was modified on the respondent‘s (i .e. the company‘s)
appeal. All actions aimed at annulment of the resolutions of the company‘s Annual General Meeting in
regards to agenda item 2 (increase of the share capital in return for cash contributions subject to an indirect
subscription right), agenda item 3 (authorized capital), and agenda item 4 (authorization to issue convertible
bonds and/or bonds with warrants) were dismissed. The remainder of the respondent‘s appeal was
dismissed. This dismissal concerns agenda item 1 (control and profit transfer agreement with Atlas Air Film
+ Media Service GmbH); however, this issue had already been decided in the company‘s favor by means
of a release.
The plaintiff‘s appeal regarding agenda item 2 (increase of the share capital in return for cash contributions
subject to an indirect subscription right) was dismissed.
In the final analysis, therefore, all agenda items of the extraordinary Annual General Meeting in 2005 were
decided in the company‘s favor.
On September 24, 2008, the appeals court handed down its ruling on the appeals that had been filed by the
two small shareholders and the company against the ruling of the Munich Regional Court I on the Annual
General Meeting in 2006, which had merely dismissed plaintiffs‘ appeal regarding agenda item 6 (amendment
of the Articles of Association regarding the compensation of the Supervisory Board) and agenda item
7 (election of the auditor). The Higher Regional Court dismissed the plaintiffs‘ appeal of the Regional Court‘s
dismissal out of hand. The company‘s appeal in its capacity as respondent against the ruling on agenda
items 2 and 3 (formal approval of the actions of the Management Board and Supervisory Board) as well as
agenda item 4 (profit and loss transfer agreement) and agenda item 5 (Authorized Capital II) was successful
in part. The Higher Regional Court modified the ruling of the Munich Regional Court I in the company‘s favor
on the formal approval of the Supervisory Board‘s actions and the profit and loss transfer agreement. Given
that the authorized capital had been increased in the meantime, the appellants‘ only measurable success
relates to the approval of the actions of the Management Board, which they had challenged.

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Effective June 04, 2008, the Management Board used the resolution of the Annual General Meeting on July
02, 2007, and launched yet another share buy-back program entailing 300,000 shares with the approval
of the Supervisory Board. This share buy-back program was limited until September 30, 2008. A total of
EUR 534,568.46 was paid for the share buy-back. The shares were retired pursuant to a resolution of the
Management Board dated October 31, 2008. The share capital was reduced accordingly by EUR 300,000.00
to EUR 14,500,000.00. The capital reduction was recorded in the Commercial Register on December 05,
2008.
We acquired Fairdeal Multimedia Pvt. Ltd., which is domiciled in Mumbai (formerly known as Bombay),
India, on August 13, 2008. The trade with worldwide film rights constitutes Fairdeal‘s core business. Roughly
60% of the company‘s sales are generated through licenses for Indian movies. Fairdeal generates additional
revenue through Indian TV programs, service fees, audio programs, and additional services. We were able
to finance the acquisition price, which was in the low single-digit millions, on our own.
Prof. Dr. Manfred Niewiarra, longtime member of the Supervisory Board, resigned his office as of the reporting
date, according to internal regulations regarding the retirement age of executives into account.
II. Results of operations, financial position and net assets
1. Profit or loss
Sales
Once again, consolidated sales climbed substantially during the reporting period by about 26% to EUR
107.4 million, up from EUR 85.1 million the previous year. The sales for the 2007 financial year were adjusted
pursuant to IAS 8; in this regard, please see the disclosures in the notes to the consolidated financial
statements. Roughly one half of this increase results from the initial consolidation of the sales of our new
subsidiary, DTI. The sales of our new subsidiary, Fairdeal, were consolidated from the August 2008 acquisition
date. The film licensing segment remained insignificant in the 2008 financial year as well. In terms
of the distribution by region of the operating sales in the inflight entertainment segment, Europe accounts
for sales of approximately EUR 38 million, North-America for approximately EUR 26 million, and the other
regions (Asia, Australasia, etc.) for EUR 43 million.
Earnings
Starting with the 2008 financial year, the company is reporting earnings before interest, taxes, depreciation
and amortization (EBITDA) and earnings before interest and taxes (EBIT) including both interest expense and
interest income. The two key figures were calculated as earnings before interest expense until the 2007
financial year. As a result, the two key figures also included interest income up to and including the 2007
financial year, which limits their comparability. Based on the same method of calculation, the two figures
for the previous year decrease by the previous year‘s interest income of EUR 928 thousand.
The previous year‘s figures were also affected by the aforementioned adjustment in accordance with IAS 8.
The previous year‘s figures stated in this management report were determined on a proforma basis.
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EBITDA
Earnings before interest, taxes, depreciation and amortization (EBITDA) climbed even stronger than sales
during the reporting period by EUR 5,332 thousand to EUR 13,929 thousand, more than doubling year on
year as a result. For the most part, the increase in EBITDA is due to the initial consolidation of DTI‘s revenues.
Currency gains of EUR 1,627 thousand, as well as the contributions of all other subsidiaries, accounted for
the improvement in earnings.
EBIT
Earnings before interest and taxes (EBIT) rose substantially by EUR 3,443 thousand to EUR 9,955 thousand
over the previous year for the same reasons as EBITDA.
EBT
Earnings before taxes (EBT) climbed from EUR 3,797 thousand the previous year to EUR 9,292 thousand.
Net income for the year
Net income for the year grew accordingly to EUR 6,831 thousand, up from EUR 3,327 thousand the previous
year.
Earnings per share
Diluted and basic earnings per share climbed substantially to EUR 0.46 per share, up from EUR 0.21 per share
the previous year. EPS were calculated based on the annual average of 14,749,180 shares. The previous
year, the average number of basic shares had still been 15,563,153. The buy-back and retirement of shares
reduced the number of shares outstanding to 14,500,000 at the close of the 2008 financial year.
Depreciation, amortization and impairment losses
Depreciation, amortization, and impairment losses rose by EUR 2,085 thousand over the previous year to
EUR 3,975 thousand. This is due to the increase of EUR 1,178 thousand and EUR 1,984 thousand in amortization,
respectively, on film assets and intangible assets, largely as a result of the acquisition in 2008 of
two companies, DTI and Fairdeal.
Other operating income
Other operating income was EUR 2,299 thousand, up from EUR 926 thousand the previous year. This substantial
increase was mainly due to EUR 1,627 thousand in currency gains.
Staff costs
Staff costs rose in absolute terms, from EUR 12,430 thousand the previous year to EUR 15,126 thousand.
Relative to sales, staff costs remained more or less at approximately 14.0% as in the previous year.
Given that DTI, which was consolidated for the first time, runs a very personnel-intensive business, maintaining
the ratio of consolidated staff costs at the previous year‘s level must be deemed a success.
Other operating expenses
Other operating expenses rose to EUR 9,822 thousand, up from EUR 7,661 thousand the previous year; at
9.1%, the ratio of operating expenses to sales only slightly surpassed the previous year‘s ratio of 9.0%.

Finance income
Finance income dropped to EUR 348 thousand during the reporting period, down from EUR 929 thousand
the previous year, owing mainly to the outflow of EUR 17.5 million in cash, which had been invested at
interest, in connection with the payment of the purchase price for the two corporate acquisitions in 2008.
Cash and cash equivalents from income were built back up to a level of EUR 17.5 million as of the balance
sheet date, thus almost reaching the previous year‘s level of EUR 19.0 million.
Finance costs
Finance costs climbed during the reporting period to EUR 1,011 thousand, up from EUR 574 thousand the
previous year, due, among other things, to borrowings of EUR 10 million in 2008.
Income taxes
Income taxes were EUR 2,460 thousand, compared to EUR 458 thousand the previous year, owing to the
change in deferred income taxes.
Tax loss carryforwards
As of December 31, 2008, Advanced Inflight Alliance AG had tax loss carryforwards of EUR 63.8 million from
both corporate income taxes and municipal trade taxes. Comprehensive tax audits of the company through
the 2005 financial year have confirmed these tax loss carryforwards.
2. Financial position and net assets
Assets and liabilities
The acquisition of both DTI and Fairdeal impacted the company‘s economic base in the 2008 financial year.
A total of EUR 17.5 million in cash and cash equivalents was used in 2008 alone to finance the acquisitions.
Initial consolidation of the new subsidiaries caused a substantial increase in total assets to EUR 83.9 million,
up from EUR 59.6 million the previous year. As a result, equity of EUR 26.8 million fell to 31.9% of total
assets, compared to 45.4% the previous year.
Assets
Intangible assets:
The film assets remained largely intact in terms of the inventory of several hundred film titles even though
amortization and impairment losses caused them to decline to EUR 2,050 thousand from EUR 3,174 thousand
the previous year.
Goodwill rose substantially from EUR 10,565 thousand the previous year to EUR 21,446 thousand due to the
acquisition of DTI and Fairdeal.
The acquisition of DTI and Fairdeal caused the other intangible assets to increase from EUR 4,077 thousand
the previous year to EUR 15,572 thousand.
The changes in property, plant, and equipment were insignificant.
Deferred tax assets declined slightly to EUR 1,649 thousand, down from EUR 1,832 thousand the previous
year.
17

18
Trade receivables rose substantially to EUR 17,904 thousand, up from EUR 12,222 thousand the previous
year, due to the initial consolidation of the trade receivables of DTI (the company acquired in 2008) but also
due to the fact that carriers were slightly stretching payment terms as of the balance sheet date.
Cash and cash equivalents fell slightly to EUR 17,474 thousand as of the reporting date, down from EUR
18,955 thousand the previous year. In 2008, cash and cash equivalents were affected by approximately EUR
17.5 million in acquisition price payments for DTI and Fairdeal, the EUR 10 million loan from HypoVereinsbank
AG, Munich, as well as loan repayments of EUR 2 million.
Other assets rose in 2008 primarily due to advance payments made of EUR 2,894 thousand, up from EUR
1,396 thousand the previous year.
Equity and liabilities
Equity declined slightly to EUR 26,775 thousand from EUR 27,052 thousand the previous year. Aside from
the retirement of 300,000 shares in connection with a reduction in the share capital by EUR 300 thousand
and a reduction in reserves by EUR 238 thousand, this is also due to the currency-related adjustment of
the assets‘ value because the assets acquired in foreign currencies were translated as of the balance sheet
date using appropriate end of period exchange rates. The euro‘s strong increase vis-à-vis all other important
currencies triggered these currency translation adjustments in equity.
Non-current financial liabilities rose substantially from EUR 2,105 thousand the previous year to EUR 8,377
thousand due to the loan from HypoVereinsbank AG, Munich.
Other non-current financial liabilities of EUR 2,897 thousand (previous year: 0) contain the earn out obligations
under the purchase agreements for DTI and Fairdeal.
Deferred tax liabilities also rose substantially to EUR 6,773 thousand from EUR 2,023 thousand the previous
year in the wake of the acquisition of both DTI and Fairdeal.
Current income tax liabilities climbed from EUR 1,151 thousand the previous year to EUR 1,488 thousand
due to the positive earnings in 2008.
Current financial liabilities fell to EUR 3,099 thousand, down from EUR 4,526 thousand the previous year.
Trade payables climbed to EUR 26.3 million, up from EUR 19.1 million the previous year, especially due to
the rising business volume as well as the initial consolidation of DTI.
Other liabilities rose to EUR 8.153 thousand, up from EUR 3.498 thousand the previous year. The other liabilities
contain the current earn out obligations under the acquisitions.
Finance and liquidity management
Financing strategy
Our strategy entails ensuring that the Group‘s available liquidity is EUR 10,000 thousand at a minimum - also
in order to be able to act immediately as acquisition options arise. This is why we took out the loan from
HypoVereinsbank AG, Munich. As a result, maintaining a level of readily available cash has priority over
attaining short-term profitability.

Financial management
Our financial management is planned and managed Groupwide. This serves to ensure that the subsidiaries
can fulfill their obligations at all times and that acquisitions do not overwhelm the Group‘s finances. The
chief financial officer manages a finance team that includes the subsidiaries‘ finance managers in addition
to the staff of the parent company‘s finance department.
Financing activities
The acquisitions in 2008 were largely financed through available funds. We obtained an unsecured loan
from HypoVereinsbank AG, Munich, in connection with the acquisition of DTI in order to enhance the Group‘s
liquidity. Collateralized loan liabilities of DTI were also refinanced using these borrowings.
Cash flow statement
The net cash flow from operating activities climbed significantly to EUR 12,507 thousand, up from EUR 4,574
thousand the previous year.
The net cash flow of EUR -15,898 thousand from investing activities is essentially due to the acquisition of
both DTI and Fairdeal for a total of EUR 17,147 thousand.
The related refinancing by means of a EUR 10,796 thousand loan resulted in a net cash flow of EUR 3,294
thousand from financing activities.
Cash and cash equivalents declined from EUR 18,955 thousand as of the previous year‘s reporting date to
EUR 17,474 thousand as of the close of the financial year just ended. The total of EUR 19,642 thousand
in cash and cash equivalents as of December 31, 2007, included shares in funds recognized at EUR 687
thousand.
Please see the cash flow statement in these consolidated financial statements for information regarding
the Group‘s liquidity and financial position. For the most part, cash inflows stemmed from the subsidiaries‘
operating income and the loan from HypoVereinsbank AG, Munich. The cash outflows were mainly related
to the acquisition of two companies in 2008, DTI and Fairdeal.
Investments
The most significant investments, i.e. the acquisition of DTI and Fairdeal, resulted in a cash outflow of EUR
17.1 million.
III. Disclosures pursuant to Section 315 (4) German Commercial Code (Takeover Directive
Implementation Act)
The share capital of AIA AG amounted to EUR 14,500,000.00 as of December 31, 2008 and was divided into
the same amount of no-par value shares. Each share entitles the holder to one vote at the Annual General
Meeting. There do not exist different share classes.
The Management Board is not aware of any restrictions on voting rights or the transfer of shares.
There are no direct or indirect equity interests exceeding 10% of voting rights.
There are no shares with special rights conferring supervisory powers.
19

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The statutory provisions of Section 84 and Section 85 of the German Stock Corporation Act (Aktiengesetz –
AktG) apply to the appointment and discharge of members of the Management Board. Section 179 of the
AktG applies to amendments of the Articles of Association. According to Art. 12 of the Articles of Association
in conformity with Section 179 (1) sentence 2 of the AktG, the Supervisory Board is authorized to make
amendments to the Articles of Association that affect only the wording.
According to Art. 5 of the Articles of Association, the company has Authorized Capital of EUR 7,400,000.00
with which the Management Board is authorized to increase the share capital with the approval of the
Supervisory Board by issuing up to 7,400,000 new no-par value shares against cash and/or non-cash contributions.
The shareholders must be granted a subscription right. The Management Board is authorized by
the Articles of Association to exclude shareholders‘ subscription rights in full or in part with the consent of
the Supervisory Board and to determine the rights accruing to the shares in the future and the conditions
for issuing shares. Shareholders‘ subscription rights may only be excluded for fractional shares, capital increases
against non-cash contributions for the granting of shares for the acquisition of companies, business
units and equity interests and for capital increases against cash contributions if the issue price of the shares
issued with subscription rights excluded in accordance with Section 186 (3) sentence 4 of the AktG is not
significantly lower than the market price of shares in the company of the same class and with the same
rights that are already listed on the stock exchange at the time the issue price is finally determined and the
shares issued with subscription rights excluded in accordance with Section 186 (3) sentence 4 of the AktG
do not exceed a total of 10% of the share capital.
The Management Board was authorized by resolution of the Annual General Meeting on July 01, 2008, to
buy back treasury shares corresponding to 10% of the share capital extant as of the date of the resolution.
This authorization includes the option to purchase the treasury shares on stock exchanges or by means of
a purchase offer to all of the company‘s shareholders. It also authorizes the Management Board to resell
the company‘s treasury shares acquired under this authorization (in each case with the approval of the
Supervisory Board) on stock exchanges or to retire them, in whole or in part, without having to obtain another
shareholder resolution. A total of 300,000 treasury shares were repurchased between June 04, 2008,
and September 03, 2008, under this share buy-back program and retired in November 2008 by resolution
of both the Management Board and the Supervisory Board.
The Management Board was authorized by resolution of the Annual General Meeting on July 01, 2008, to
establish a Stock Option Plan 2008 with a par value of EUR 340,000.00 – subject to the approval of the
Supervisory Board – that grants options on shares in AIA AG to members of the company‘s Management
Board and members of the executive management of AIA AG‘s affiliates, in addition to creating Contingent
Capital 2008/I and executing the corresponding amendment of the Articles of Association.
The Management Board was authorized by resolution of the Annual General Meeting on July 02, 2007, to
establish a Stock Option Plan 2007 with a par value of EUR 800,000.00 – subject to the approval of the
Supervisory Board – that grants options on shares in AIA AG to members of the company‘s Management
Board and to members of the executive management of AIA AG‘s affiliates, in addition to creating (new)
Contingent Capital II and executing the corresponding amendment of the Articles of Association.

Some of our subsidiaries‘ contracts with customers contain change of control provisions. Both the content
of these contracts and the names of the business partners are confidential, in keeping with the provisions
of the relevant contracts. Any disclosure in breach of contract would expose the company or the members
of its two boards to claims for damages or fines, thus posing considerable risks to the company; hence no
disclosure is made.
The contracts that the company has made with the chief executive officer and the chief financial officer
contain change of control provisions. Accordingly, the chief executive officer and the chief financial officer
may terminate their employment contracts and resign their offices; if the respective director‘s contract is
terminated, they are entitled to compensation equivalent to their (fixed and variable) compensation plus
the stipulated contributions to the pension fund until the end of the term of office to which they had been
appointed, however, at a minimum a compensation payment equivalent to two gross annual salaries (fixed
and variable compensation).
If he is dismissed early, the chief executive officer shall be paid compensation equivalent to at least one
year‘s gross annual salary (fixed and variable compensation) plus contributions to the pension fund.
The company does not have any agreements with the employees to compensate them in the event of a
takeover offer.
Research and development
DTI is the sole Group company to incur research and development costs, specifically, in the amount of EUR
416 thousand.
IV. Events after the balance sheet date
After the vice chairman of the Supervisory Board, Prof. Dr. Manfred Niewiarra, resigned effective December
31, 2008, Dr. Andreas Beyer was appointed to the Supervisory Board on January 09, 2009, by the court upon
application of the Management Board with the approval of the Supervisory Board.
Mr. Rudolf Seidl has served as the vice chairman of the Supervisory Board since March 11, 2009.
21

22
V. Risk report
1. Risk management
The Group has established a decentralized risk management system. This means that risks are addressed
wherever they arise, namely, by the Group‘s subsidiaries. AIA AG is responsible for establishing both the
risk management system as such and its content. The Group subsidiaries are responsible for reporting risks
to AIA AG.
AIA AG further developed and updated the corporate risk management guideline for the entire Group in the
2008 financial year. The Group‘s risk strategy is based on the following principles:
> The company must always act in accord with applicable laws and regulations;
> Opportunities or risks that are identified must be assessed and addressed on the basis of standard
approaches;
> No single decision or act may spark risks that could jeopardize the Group as a going concern;
> Significant Group risks may only be taken on with the approval of AIA AG‘s Management Board;
> Each and every executive must be informed of risks relevant to their sphere of responsibility;
> Each and every Group employee must be aware of the risks in their immediate work environment and
contribute to identifying and addressing them;
> Internal controls are designed to ensure the efficiency and ongoing functionality of the Group‘s risk
management; and
> Risks must be communicated openly within the Group.
Each and every executive is responsible for the risks in their sphere of responsibility. This responsibility
comprises
> Identifying risks;
> Assessing risks;
> Initiating suitable measures for addressing the relevant risks;
> Monitoring both the risks so identified and the measures initiated; and
> Reporting to AIA AG‘s Risk Manager.
This responsibility may not be delegated.
The Management Board regularly submits reports regarding risk indicators for both AIA AG and its significant
subsidiaries to the Supervisory Board as part of the Group‘s risk management. All reports on risk indicators
include risk assessments, comments and outlooks for the categories inflight entertainment, film assets,
finances, personnel, IT, investor and public relations, legal affairs, taxes, and M&A activities.

2. Significant individual risks
External risks
All risks that affect the aviation industry from without are classified as external risks. This includes the
increase in prices for jet fuel (as reference, please see the information regarding the increase in the perbarrel
price of Brent Crude); the ongoing risk of terrorism, which affects civil aviation, in particular, given the
potentially large number of victims; as well as, increasingly, the consequences of global warming, which
could undermine air traffic in the future.
During the reporting period, speculation caused oil prices to soar and then fall back down again by the end
of the year. There were no terror attacks in the aviation industry. The worldwide debate on global warming
will not have any significant impact on aviation since no actions that will apply across the board are to be
expected for 2009 either.
Operational risks and sectoral risks
Operating risks and sectoral risks concern risks arising from competitive operations and changes in operations,
in particular, changes at customers.
The loss of one substantial customer during the reporting period was offset by new customers equivalent
in qualitative terms. While we expect to lose one customer in 2009, we are confident that we will also be
able to gain new customers.
We believe that losing an individual customer constitutes a manageable risk. The Group‘s largest customer
generated less than 10% of consolidated sales in 2008.
Financial risks
Liquidity risks
The Group is faced with liquidity risks if its existing liquidity or corresponding credit lines do not cover its
payment obligations. All funds available to the Group – demand deposits at banks, interest-bearing monthly
time deposits, as well as disposable credit lines – are sufficient to cover operating activities. Hence we consider
the Group‘s liquidity risk to be manageable both at this time and in the foreseeable future.
Currency risks
A currency risk is present, in particular, when receivables or liabilities are denominated in a currency other
than the Group‘s functional currency. Most operational business is carried out in US dollars, though some
takes place in euros, British pounds or Canadian dollars. In contrast, other expenses are essentially incurred
in euros, British pounds and Canadian dollars. This structure results in a dollar surplus which must be
exchanged for euros and pounds over the course of the year. To the extent possible, the latent currency risk
arising from this is countered with derivatives (hedging instruments) during the financial year.
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Interest rate risks
Both the earnings and operating cash flows of the Group are exposed to an insubstantial risk related to
changes in interest rates whereas financial assets are not exposed to substantial risks arising from interest
rate changes. Cash and cash equivalents are invested on a current basis subject to customary fluctuations.
Financial liabilities comprise both current and non-current liabilities. The longer-term liabilities to banks in
the amount of EUR 8.7 million are subject to a fixed interest rate over their entire term. EUR 2.0 million of
the non-current liabilities expose the Group to an interest rate risk. Its liquid funds are sufficient for repaying
its existing financial liabilities, including interest, on short notice.
Default risks
There is a default risk when a debtor does not discharge a liability at all or not in timely fashion. The Group
is exposed to default risks only in connection with trade receivables. Sufficient allowances have been recognized
to make provisions for the estimated default risk. Receivables are not insured, given the generally
good credit ratings of the Group‘s customers. The maximum default risk is always equivalent to the nominal
amount of the receivables less loss allowances. But the trade receivables do not contain substantial concentrations
of individual customers and there are no default risks in regards to other financial assets.
Market risks
Currency risks
Within the Group, currency risks essentially arise from the fact that both sales to customers and purchasing
were largely effected in US dollars while some of the operating companies‘ fixed costs are incurred in euros,
British pounds and Canadian dollars. The Group engages in hedging transactions to counteract direct currency
risks. Interest rate hedges can not fully offset multi-year trends. Moreover, the development of the US
dollar by itself has lowered sales in euros by more than 10% compared to translation at the euro exchange
rate applicable as of the previous year‘s reporting date. A further long-term weakening of the US dollar will
presumably have a negative impact on the Group‘s sales and income.
Price risks
Other price risks were material to both the Group and AIA AG during the reporting period and remain the
most important risk these entities face. Key purchasing terms and conditions are negotiated with major
suppliers in the fall of each year and prices are negotiated with carriers toward the end of each year for the
subsequent year. We can not preclude that we will have to offer price discounts in the future for competitive
reasons — with detrimental consequences for the Group — in order to hold our market position.
Strategic risks
Strategic risks arise from accurate or inaccurate assessments of the industry‘s development and the resulting
decisions regarding the acquisition of our new subsidiary, DTI, as well as from decisions related to other
potential takeovers, our expansion toward India and China and the broadening of our product range. The
acquisition of DTI will have been a strategic mistake if our assessment of the importance of inflight computer
games turns out to be in false. Our decisions to expand in China and India will have been flawed in strategic
terms if the global factors driving economic growth in these two countries were to weaken. From today‘s
perspective, however, all our strategic decisions have been on the mark. Because strategies are always forward
looking, setbacks resulting from inaccurate assessments, particularly with respect to the development
of the industry, could have negative ramifications for both the Group and AIA AG.

Litigation risks
All litigation with shareholders ended in 2008. No litigation is pending. But potential risks do arise from
possible court challenges to resolutions of future Annual General Meetings.
Tax risks
Large loss carryforwards are available to AIA AG for both corporate income and trade tax purposes. In the
future, however, we will be unable to use these loss carryforwards to the same extent as previously because
Germany‘s corporate tax reform has the positive effect of slashing corporate tax rates but the negative
effect of limiting companies‘ ability to utilize existing loss carryforwards.
The tax loss carryforwards for annual periods up to and including 2005 were confirmed by the company‘s
most recent comprehensive tax audit in 2008. The tax risk arising from additional taxes for the financial
years from 2006 onward in the event our tax loss carryforwards are successfully challenged remains in
place.
AIA AG‘s subsidiaries are stepping up transnational intragroup transactions in order to optimize the Group‘s
operating business. Any refusal by the tax authorities of the relevant countries to recognize related intragroup
pricing could trigger additional taxes. The same applies to AIA AG‘s cost allocations to its subsidiaries.
3. Overall appraisal of the risk situation and the probable development of opportunities and
risks
The overall risk position has changed from the previous year. The worldwide financial crisis, which intensified
dramatically in October 2008, is by now also affecting other sectors, for example, the auto industry. We
cannot preclude that the global economic downturn in 2009 will have an adverse effect on the number of
flights, which has grown steadily to date.
VI. Anticipated developments
1. Macroeconomic outlook
The global financial crisis has caused many governments worldwide to enact crisis packages that entail
incurring substantial new debt and record deficits. This is expected to have a negative impact on the global
economy in both 2009 and 2010. The financial sector, but also the automobile and engineering sector, are
particularly affected by the downturn and will undergo fundamental consolidation processes in the coming
years.
2. Future development of the industry
The aviation industry is indirectly affected by the weakness of the global economy. The growth rates that
were achieved in the recent past will not be repeated. IATA expects carriers‘ profits to decline substantially
in 2009. While we are unable at this time to provide specifics on the development of the number of
passengers, the Management Board does not preclude the possibility that it may drop by up to 10%. The
inflight entertainment niche market will be unable to delink itself from the general trend. In all likelihood,
the consolidation process that has been ongoing for years will further intensify.
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26
3. Changes in the business and the organization
Currently, there are no specific plans to modify the company in organizational terms. Yet changes might
arise in connection with additional acquisitions. We cannot preclude, furthermore, that we will eliminate
subsidiaries‘ names in order to align the Group‘s corporate image and restructure it under a common corporate
name by region in the next few years. The Management Board will only take this step after weighing
all related risks. Such a step would also aim to achieve further cost reductions as well as further intragroup
efficiency gains.
4. Future sales and earnings
Consolidated sales will surpass the EUR 100 million mark in 2009 and 2010 unless the global financial crisis
continues to intensify or oil prices skyrocket yet again. The Management Board expects the company to
continue along a profitable trajectory during this period. However, it cannot foresee at this time whether
the results of the 2008 financial year will be surpassed.
5. Opportunities
Our greatest opportunities continues to arise from the ongoing consolidation of the inflight entertainment
niche market. Compared to its competitors, the Group has a broader portfolio of products and services and a
larger network of branch offices. This fact puts additional pressure on our remaining competitors and makes
us much more attractive to potential customers because we deliver. The likelihood that smaller competitors
will withdraw from the market and/or that we will have the opportunity to acquire them has increased, as
have the opportunities for gaining additional customers among carriers. The acquisition of a market leader
in the inflight computer game segment in 2008 significantly enhanced our business opportunities.
6. Overall appraisal of the company‘s probable development
The Management Board is cautiously optimistic about the company‘s future in 2009, barring unforeseen
negative events. In the final analysis, we are unable to sufficiently gauge the ramifications of the financial
market crisis for our customers and thus our business. Overall, the Group is better positioned than its competition
and, as a result, will have additional business opportunities if competitors fail, especially in light of
the global financial crisis.
Hence its prospects for 2009 and 2010 are as positive as its financial position as of the reporting date, despite
the ongoing downturn of the global economy and the decline in carriers‘ earnings, allowing the Group to
take advantage of business opportunities as they arise.
Advanced Inflight Alliance AG
Munich, Germany, April 15, 2009
Otto Dauer Peter Biewald
Chief executive officer Chief financial officer

Otto Dauer (left)
Chief executive officer
Peter Biewald (right)
Chief financial officer
27

ADVANCED INFLIGHT ALLIANCE AG, MUNICH
CONSOLIDATED STATEMENT OF INCOME (IFRS)
Jan. 1 - Dec. 31, 2008 Jan. 1 - Dec. 31, 2007
EUR EUR
Revenue 107,408,288.69 85,105,610.11 4)
Other operating income 2,299,039.87 925,497.54
Cost of materials -70,829,790.59 -60,607,660.82 4)
Staff costs -15,125,924.65 -12,430,375.53
Depreciation, amortization and impairment losses -3,974,693.12 -1,889,594.65
Other operating expenses -9,822,134.88 -7,660,777.79
Net income from operating activities 9,954,785.32 3,442,698.86
Finance income 347,734.53 928,526.41
Finance costs -1,010,778.15 -574,248.88
Net income from financing and investment activities -663,043.62 354,277.53
Earnings before income taxes 9,291,741.70 3,796,976.39
Income taxes -2,460,337.48 -458,275.67
Minority interest in Group Income 0.00 -11,361.47
Net income for the year 6,831,404.22 3,327,339.25 4)
Basic EPS 0.46 0.21 4)
Diluted EPS 0.46 0.21 4)
Average number of shares (basic) 14,749,180 15,563,153
Average number of shares (diluted) 14,749,180 15,563,153
Number of weighted stock options 0 0
4) = Error correction acc. to IAS 8: Correction in connection with Revenue Recognition policy of EUR 3,395,906.97
as well as with respective Cost of Sales of EUR 3,017,851.11
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30
ADVANCED INFLIGHT ALLIANCE AG, MUNICH
CONSOLIDATED BALANCE SHEET (IFRS)
ASSETS Dec. 31, 2008 Dec. 31, 2007
EUR EUR
Non-current assets
Intangible assets:
- Film rights 2,050,247.66 3,173,554.741) - Goodwill 21,445,620.41 10,565,047.472) - Other intangible assets
Property, plant and equipment
15,571,997.23 4,076,703.13
- Land and buildings 656,844.09 887,794.18
- Furniture, fixture and fittings
Financial assets:
1,788,472.84 1,357,198.56
- Investments 0.00 103,018.47
- Other financial assets 19,341.13 33,604.15
Deferred tax assets 1,648,513.11 1,831,605.05
Total non-current assets 43,181,036.47 22,028,525.75
Current assets
Inventories 368,780.64 155,433.885) Trade receivables 17,904,192.10 12,221,984.754) Current income tax assets 2,120,036.35 505,361.98
Other financial assets 0.00 4,367,251.40
Cash and equivalents 17,473,824.89 18,954,809.44
Other assets 2,894,061.00 1,395,822.45
Total current assets 40,760,894.98 37,600,663.90
TOTAL ASSETS 83,941,931.45 59,629,189.65

EQUITY AND LIABILITIES Dec. 31, 2008 Dec. 31, 2007
EUR EUR
Equity attributable to equity holders of the parent
Subscribed capital 14,500,000.00 14,800,000.00
Capital reserves 8,676,643.95 8,347,841.15
Retained earnings 11,737,414.83 5,440,579.074) Other recognized gains and losses -8,139,210.43 -1,536,092.813) Total equity 26,774,848.35 27,052,327.41
Non-current liablities
Financial liabilities 8,376,911.17 2,104,705.27
Other financial liabilties 2,896,812.08 0.00
Deferred tax liabilties 6,773,340.40 2,023,219.59
Total non-current liabilities 18,047,063.65 4,127,924.86
Current liablities
Other provisions 120,000.00 100,000.00
Current income tax liabilities 1,488,331.93 1,151,075.84
Financial liabilities 3,099,314.20 4,525,535.88
Trade payables 26,258,929.89 19,142,107.944),5) Other liabilities to affiliates 0.00 32,705.39
Other liabilties 8,153,443.43 3,497,512.33
Total current liabilities 39,120,019.45 28,448,937.38
TOTAL EQUITY AND LIABILITIES 83,941,931.45 59,629,189.65
1) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise
in the amount of EUR 537,338.15
2) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise
in the amount of EUR 165,058.87
3) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise
in the amount of EUR 702,447.02
4) = Error correction acc. to IAS 8: Correction in connection with Revenue Recognition policy of EUR 378,055.86
5) = Error correction acc. to IAS 8: Correction in connection with purchase of shortterm filmrights of EUR 645,090.00
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32
ADVANCED INFLIGHT ALLIANCE AG, MUNICH
Statement of Changes in Non-Current Assets for Financial Year 2008 (IFRS)
INTANGIBLE ASSETS:
Jan.1, 2008 Changes of
consol. Comp.
At Cost of Acquisition or Production
Additions Disposals Currency
Differences
Dec. 31, 2008
EUR EUR EUR EUR EUR EUR
Film rights 8,069,474.53 1) 0.00 54,719.96 2,500.00 0.00 8,121,694.49
Goodwill 10,565,047.47 2) 14,796,485.87 0.00 0.00 -3,902,411.27 21,459,122.07
Other intangible assets 5,935,919.17 15,168,983.73 1,089,742.99 25,328.20 -2,743,084.16 19,426,233.53
24,570,441.17 29,965,469.60 1,144,462.95 27,828.20 -6,645,495.43 49,007,050.09
PROPERTY, PLANT & EQUIPMENT:
Land, similar rights and buildings 1,003,537.67 0.00 0.00 0.00 -314,362.25 689,175.42
Operating and office equipment 2,990,156.20 258,349.58 1,628,906.17 1,092,521.40 -176,722.28 3,608,168.27
3,993,693.87 258,349.58 1,628,906.17 1,092,521.40 -491,084.53 4,297,343.70
FINANCIAL ASSETS:
Investments 103,018.47 0.00 0.00 103,018.47 0.00 0.00
Other financial assets 33,604.15 0.00 0.00 14,560.28 297.26 19,341.13
136,622.62 0.00 0.00 117,578.75 297.26 19,341.13
28,700,757.66 30,223,819.18 2,773,369.12 1,237,928.35 -7,136,282.70 53,323,734.92
1) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise of EUR 537,388.15
2) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise of EUR 165,058.87

Accumulated Depreciation Net Book Values
Jan. 1, 2008 Additions Disposals Currency
Differences
Dec. 31, 2008 Dec. 31, 2008 Dec. 31, 2007
EUR EUR EUR EUR EUR EUR EUR
4,895,919.79 1,178,027.04 2,500.00 0.00 6,071,446.83 2,050,247.66 3,173,554.74 1)
0.00 13,501.66 0.00 0.00 13,501.66 21,445,620.41 10,565,047.47 1)
1,859,216.04 1,983,981.68 25,328.20 36,366.77 3,854,236.29 15,571,997.23 4,076,703.13
6,755,135.83 3,175,510.38 27,828.20 36,366.77 9,939,184.78 39,067,865.30 17,815,305.34
115,743.49 18,573.89 0.00 -101,986.04 32,331.34 656,844.09 887,794.18
1,632,957.64 780,608.85 325,543.19 -268,327.87 1,819,695.43 1,788,472.85 1,357,198.56
1,748,701.13 799,182.73 325,543.19 -370,313.91 1,852,026.77 2,445,316.93 2,244,992.74
0.00 0.00 0.00 0.00 0.00 0.00 103,018.47
0.00 0.00 0.00 0.00 0.00 19,341.13 33,604.15
0.00 0.00 0.00 0.00 0.00 19,341.13 136,622.62
8,503,836.96 3,974,693.12 353,371.39 -333,947.14 11,791,211.55 41,532,523.37 20,196,920.70
33

34
ADVANCED INFLIGHT ALLIANCE AG, MUNICH
Statement of changes in non-current assets for financial year 2007 (IFRS)
INTANGIBLE ASSETS:
Jan. 1, 2007 Additions
At Cost of Acquisition or Production
Disposals/
Reclassifications
Currency
differences Dec. 31, 2007
EUR EUR EUR EUR EUR
Film rights 9,380,134.41 94,392.52 1,405,052.40 0.00 8,069,474.53
Goodwill 11,243,426.40 0.00 0.00 -165,058.88 1) 11,102,435.62
Other intangible assets 6,061,639.44 39,338.60 0.00 -378,378.93 2) 6,100,978.04
26,685,200.25 133,731.12 1,405,052.40 -843,437.81 25,272,888.19
PROPERTY, PLANT & EQUIPMENT:
Land, similar rights and buildings 1,003,537.67 0.00 0.00 0.00 1,003,537.67
Operating and office equipment 2,377,079.92 641,731.76 28,655.48 0.00 2,990,156.20
3,380,617.59 641,731.76 28,655.48 0.00 3,993,693.87
FINANCIAL ASSETS:
Other investments 2,390,871.70 71,642.07 2,355,690.75 -3,804.55 103,018.47
Other financial assets 111,513.34 0.00 77,909.19 0.00 33,604.15
2,502,385.04 71,642.07 2,433,599.94 -3,804.55 136,622.62
32,568,202.88 847,104.95 3,867,307.82 -843,437.81 29,403,204.68
1) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise of EUR 537,388.15
2) = Restatement persuant to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business enterprise of EUR 165,058.87
6) = Error correction acc. to IAS 8: Correction of a write-up of non-current film rights in the amount of EUR -497,933.32

Jan. 1, 2007 Additions Disposals
Accumulated depreciation Net book values
Currency
differences Dec. 31, 2007 Dec. 31, 2007 Dec. 31, 2006
EUR EUR EUR EUR EUR EUR EUR
5,716,522.66 6) 450,515.43 1,405,052.40 133,934.10 4,895,919.79 3,173,554.74 3,663,611.75 6)
0.00 0.00 0.00 0.00 0.00 11,102,435.62 11,243,426.40
1,040,258.52 814,167.37 0.00 4,790.15 1,859,216.04 4,241,762.00 5,021,380.92
6,756,781.18 1,264,682.80 1,405,052.40 138,724.25 6,755,135.83 18,517,752.36 19,928,419.07
10,051.57 21,641.10 0.00 84,050.82 115,743.49 887,794.18 993,486.10
1,024,228.58 562,568.96 16,651.88 62,811.98 1,632,957.64 1,357,198.56 1,352,851.34
1,034,280.15 584,210.06 16,651.88 146,862.80 1,748,701.13 2,244,992.74 2,346,337.44
0.00 0.00 0.00 0.00 0.00 103,018.47 2,390,871.70
0.00 0.00 0.00 0.00 0.00 33,604.15 111,513.34
0.00 0.00 0.00 0.00 0.00 136,622.62 2,502,385.04
7,791,061.33 1,848,892.86 1,421,704.28 285,587.05 8,503,836.96 20,899,367.72 24,777,141.55
35

36
ADVANCED INFLIGHT ALLIANCE AG, MUNICH
Statement of changes in net equity including
minority interest (IFRS)
Subscribed capital
(No-par value shares)
Parent company
Capital
reserves
Retained
earnings
Number EUR EUR EUR
Balance as of December 31, 2006 16,239,562 16,239,562.00 7,103,814.62 4,791,828.31
Issue of shares
Acquisition/collection of treasury shares
Dividend payments
Changes in companies consolidated
-1,439,562 -1,439,562.00 1,424,815.40 -2,678,588.49
Acquisition of minority interest
Currency-related Changes on purchase of Intangible Assets
Other changes
-180,788.87
Net income/(loss) 3,327,339.254) Other group income
Total recognized results 3,327,339.25
Balance as of December 31, 2007 14,800,000 14,800,000 8,347,841.15 5,440,579.07
Balance as of December 31, 2007
Issue of shares
14,800,000 14,800,000 8,347,841.15 5,440,579.07
Acquisition/collection of treasury shares
Currency-related Changes on purchase of Intangible Assets
-300,000 -300,000 296,999.80 -534,568.46
Stock Options
Acquisition of minority interest
Cash-Flow-Hedge less deferred taxes
31,803.00
Net income/(loss)
Other group income
6,831,404.22
Total recognized results 6,831,404.22
Balance as of December 31, 2008 14,500,000 14,500,000 8,676,643.95 11,737,414.83
3) = Error correction acc. to IAS 8: Correction according to IAS 21.47 in the connection with the acquisition of a foreign business
enterprise of EUR -702,447.02
4) = Error correction acc. to IAS 8: Correction in connection with Revenue Recognition policy of EUR -378,055.86

Adjustments
from foreign
currency
translation
Other recognized
gains and losses
Parent company Minority interest
Other neutral
transactions Total
Equity in
accordance
with the
consolidated
balance sheet
Minority
capital
Adjustments
from foreign
currency
translationg
Other recognized
gains and losses
Other neutral
transactions Total
Equity
Consolidated
equity
EUR EUR EUR EUR EUR EUR EUR EUR EUR EUR
-459,610.83 0.00 -459,610.83 27,675,594.10 150,178.66 4,335.92 0,00 4,335,92 154,514,58 27,830,108,68
-2,693,335.09 -2,693,335,09
-180,788.87 -161,540.13 -161,540.13 -342,329.00
-374.034.96 0.00 -374,034.96 -374,034.96 -4,335.92 -4,335.92 -4,335.92 -378,370.88
3,327,339.25 11,361.47 11,361.47 3,338,700.72
3,327,339.25 11,361.47 11,361.47 3,338,700.72
-833,645.793) 0.00 -833,645.79 27,754,774.43 0.00 0.00 0.00 0.00 0.00 27,754,774.43
-1,536,092.81 0.00 -1,536,092.81 27,052,327.41 0.00 0.00 0.00 0.00 0.00 27,052,327.41
-537,568.66 -537,568.66
-6,454,442.21 0.00 -6,454,442.21 -6,454,442.21 -6,454,442.21
0.00 31,803.00 31,803.00
0.00 -148,675.41 -148,675.41 -148,675.41 0.00 0.00 0.00 0.00 0.00 -148,675.41
0,00 0.00 0.00
6,831,404.22 0.00 0.00 6,831,404.22
6,831,404.22 0.00 0.00 0.00 0.00 0.00 6,831,404.22
-7,990,535.02 -148,675.41 -8,139,210.43 26,774,848.35 0.00 0.00 0.00 0.00 0.00 26,774,848.35
37

38
ADVANCED INFLIGHT ALLIANCE AG, MUNICH
Consolidated Cash Flow Statement (IFRS)
Jan. 1 - Dec. 31, 2008 Jan. 1 - Dec. 31, 2007
TEUR TEUR
Net Income 6,831 3,327 4.1)
+ / - Adjustments to reconcile net income to net cash flows:
+ Depreciation and impairment of property, plant and equipment 799 584
+ Amortisation and impairment of intangible assets 3,175 1,265
+ Share-based payments expense 32 0
+ / - Other non-cash income and expense items 0 41
- / + Gain on disposal of property, plant and equipment 767 -456
- Finance income -348 -929
+ Finance costs 1,011 574
+ / - Movements in provisions 21 -403
Working capital adjustments:
- / + Movements in trade and other receivables and prepayments -6,848 1,057 4.2)
+ / - Movements in trade and other payables 3,710 1,410 4.3)
+ / - Movements in deferred taxes 4,933 -1,102
- Income tax paid -1,576 -795
= Net cashflows from operating activities 12,507 4,574
Investing activities
+ Proceeds from sale of property, plant and equipment 0 2,808
- Purchase of property, plant and equipment -1,629 -682
- Purchase of intangibles assets -1,144 -166
- Acquisition of subsidiaries, net of cash -17,147 0
+ Changes of other financial assets 3,680 13,268
+ Interest received 343 929
= Net cashflows from investing activities -15,898 16,157
Financing activities
+ Proceeds from borrowings 10,796 1,902
- Repayment of borrowings -5,951 -13,432
- Interest paid -1,013 -574
- Purchase of own shares -538 -2,679
= Net cashflows used in financing activities 3,294 -14,783
= Net increase in cash and cash equivalents -96 5,948
+ / - Changes in cash and cash equivalents -1,004 -1,085
+ Cash and cash equivalents at 1st January 18,955 14,778
+ Change in cash and cash equivalents due to basis of consolidation -381 0
= Cash and cash equivalents at 31st December 17,474 19,642
4.1) = Error correction acc. to IAS 8: Correction in connection with Revenue Recognition policy of EUR 378,055.86
4.2) = Error correction acc. to IAS 8: Correction in connection with Revenue Recognition policy of EUR 3,395,906.97
4.3) = Error correction acc. to IAS 8: Correction in connection with Revenue Recognition policy of EUR 3,017,851.11
(A) = Included in the cash and cash equivalents as of 1 January are securities in the amount of EUR thsd. 687, which could be cashed at any time.

Publishing Information
Editor:
Advanced Inflight Alliance AG
Schellingstraße 35
80799 München
Germany
Contact:
info@aialliance.com
Art Direction:
Peter Stulz, www.pure-design.de
Corporate Design:
www.designzone.info
www.advanced-inflight-alliance.com