The director presents the strategic report for the period ended 31 December 2023.
The board is pleased to present the strategic report for the Air One Aviation group for the period ended 31st December 2023.
In June of 2024 the immediate parent company changed from Air One Holdings Ltd, a company incorporated in the UAE, to Air One International Holdings Ltd, a company incorporated in the UK. As a consequence of this change the business revised its year end reporting date to 31st December to match the new parent entity. The decision to enact this change for the 2023 reporting cycle has resulted in an accounting period of 15 months ending 31st December 2023.
The ultimate beneficial owner remains unchanged.
A secondary consequence of this change has been the appointment of new auditors to match that of the new parent.
The business continues to operate in the field of aviation cargo chartering, primarily on Asia, Europe and Middle East routes as its principle business function. It also maintains a 100% holding in Quadrant Systems Limited offering flight simulator training and associated aviation services.
Air One Aviation Limited continues to be the sole global sales representative for Aerotranscargo Fze.
Chartering operations via Aerotranscargo Fze remain the mainstay of group turnover but Air One Aviation Limited has continued its successful chartering relationship with ROMCargo, the European based air freight operator during the reporting period. This airline has recently expanded its flight size, adding capacity to the Air One Aviation’s sales portfolio. 2023 also saw initial charter operations via One Air Limited, a trading relationship that has continued to grow in 2024.
The performance of the business in 2023 has matched expectations formed from developments in 2022.
The previously identified return to ‘normal’, after exceptional Covid global demand and pricing conditions, first apparent in mid-2022, stabilized in 2023.
The continuation of military action in Ukraine throughout the reporting period created a dynamic mix of demand and price impacting factors.
2023 experienced conflicting influences in the charter market. While the Covid premium was certainly missing the oversupply of air cargo capacity was somewhat absorbed by a degree of normality within the market place. The initial damaging effects on global demand from the Ukraine conflict receded somewhat, as the market accepted the new ‘normal’. Global recession fears have subsided and the initial price spikes in fuel costs have steadily fallen. Diversions due to restricted airspace remain challenging. The early months of the reporting period faced the twin effects of dampened demand due to global pricing driven by extremely elevated fuel costs and compressed operator margins for the same reason. In the latter half significantly reduced fuel costs have stimulated the market considerably. Management consider the business has adapted well during this period and its flexibility in difficult global market conditions has demonstrated its resilience.
Activity at the subsidiary, Quadrant Systems Limited, proved robust as the exit from Covid restrictions in 2022 reversed the previous trend of attrition in pilot numbers that had so heavily impacted demand for its simulator services. The previous investment in new equipment in 2022 enabled Quadrant to maximize its response to a returning demand curve during 2023. This increase allowed Quadrant to be self-sufficient in its cash management, with cash funding demands on its parent Air One Aviation falling to an absolute minimum. Cash balances grew from 2023 to a point in late 2024 when it was able to make a partial but sizeable repayment against the amounts it owed. Management consider its positive trajectory a strong validation of the strategy to invest in the initial underperforming business. It remains a small but important part of the group’s longer term plans.
At the end of 2023 the business decided to formally write off its remaining investment in the 100% owned Chinese based subsidiary, Beijing Air One Aviation Co Limited. The subsidiary, originally created in June 2022, never traded in its intended role of providing administration services associated with the licensing and permits required for in country charter movements. The impact of this in the financial statement is not material.
During the reporting period, One Air Ltd, a subsidiary holding previously disposed of in 2022 and now reclassified as a related party continued to build towards attaining its CAA operating certification. This was achieved in March of 2023. This was a culmination of an investment made in 2021 funded by advances made by Air One Aviation Ltd. On achieving its certification Air One Aviation Ltd provided its final funding in the form of a USD 16 million interest bearing loan. From this point One Air Ltd has been self- funding. Initial flight operations commenced in July of 2023 and One Air joined the portfolio of air operators that the business utilizes in its chartering business. This was the realization of the broader business strategy and the rational of supporting One Air Ltd through its initial phases. One Air Ltd now forms an intrinsic part of the air charter business model, bringing both extra flying capacity, further operator choice and diversity of risk to Air One Aviation’s charter business. Having access to the only UK based air cargo operator brings significant sales differentiation benefits to the group. The relatively limited flying volume in 2023 has gone on to expand substantially during 2024, a trend the business hopes to continue as time passes and operations at One Air Ltd mature.
This final element of funding to One Air Ltd by way of the USD loan added to the material funding supplied to date. After careful consideration the board decided to write off the 16 million USD loan on 31st December, based upon the likely extended timeframes of settlement and the intrinsic lack of material value to Air One Aviation Ltd in the intervening period. The balance of the aggregated funding supplied to the period end date of £19.9 million (2022 £11.3 million), exists under a separate arrangement, is considered collectable and so remains unadjusted on the balance sheet.
Management make limited use of KPI’s to direct business performance, centered on revenue, cash and cash equivalent growth.
Turnover, a key metric, has reduced to £277.3 million in the period ended 31st December 2023 (2022 £492.4 million). Post tax results were a £6.9 million loss (2022 £22.8 million profit). The net consolidated loss has been wholly generated by the aforementioned loan write off within Air One Aviation Limited.
The underlying positive result, ignoring the loss write off, should be considered in the context of the previously described changes within the marketplace, the absence of a Covid boost and the demand disruption arising from Ukraine. Given market sensitive charter prices have retreated in the region of 40% to 50% from Covid highs and markup commission rates have reduced in response to lower demand, management are comfortable that the business turnover is aligned to market factors. Lower revenues have naturally flowed through to lower post tax profits. It is equally important to note the effects of currency across the 2023 and 2022 reference dates. 2022 was beneficially impacted by the political events in the closing days of September 2022 when the GBP to USD exchange rate plummeted. The large USD currency reserves and debtor balances drove significant currency gains, although mainly unrealized, in the final days of 2022, boosting the profit performance of the business. As political upheaval fell away the GBP to USD exchange rate has reverted to a long term average range at the close of 2023, creating significant forex charges, again mainly unrealized, reversing the 2022 gains at the expense of 2023 operational profits.
Given the highly unusual causes of the currency movements, the fact that rates have returned to a long term average and that the movements were predominantly unrealized, management consider their decision not to hedge an appropriate position to adopt.
The balance sheet at 31St December remains an indicator of the underlying strength of the core business despite the lower revenue levels. Net assets have fallen as a direct consequence of the loan write off to a still substantial £26.8 million (2022 £34.9 million). While liquid cash has fallen substantially at the end of the reporting period to £3.9 million (2022 £22.5 million), it should be recognised that the primary reason for this reduction lies in funding supplied to One Air Ltd. While an element of this has indeed been written off there remains a net increase of £8.6 million in this receivable as reported at the period end.
Studying the evolving marketplace, management expect 2024 to generate group revenues approaching £200 million.
It is managements opinion that the material risks to the business are:
Currency. The group’s functional currency, as driven by its charter operation, remains USD as its cost base and revenue is charged in USD. The significant non USD items of expenditure remain payroll and overhead costs. These are minimal in scale compared to revenue levels. Foreign exchange movements are not hedged as receivable and corresponding payables are extremely contemporary, with very limited durations minimizing the scope for time based fluctuations. In the reporting period the previous substantial cash balances primarily held in USD have been replaced by GBP denominated loans reducing the scope for currency debits or credits. The GBP/USD exchange rate has improved steadily from 30th September 2022 when 1 GBP = 1.1171 USD. At 31st December 2023 this rate was 1 GBP = 1.2731 USD. As of today the FX has remained close to the December 2023 level.
Key personnel. Given the revenues it achieves the business continues to be run with a small headcount. The group has expanded headcount in response to revenue growth and upskilled its workforce as the charter business moves from its small company background to a very large company, bringing functions in house and improving internal processes. The business thoroughly evaluates new hires to ensure necessary and complimentary skillsets are brought in to the organization and has commission and bonus arrangements to aid retention. Management actively manages the risk of critical knowledge and skills exiting the business with mitigation policies. These are designed such that roles have interchangeable deputies and critical business information is shared across individuals within the business and within shared databases, systems and records.
Global demand. As previously discussed the period of boom prices and exceptional demand of Covid have clearly passed and the upheaval of the Ukraine invasion has subdued to a new normal that is more representative of activity and pricing akin to 2021. Demand especially in the later stages of 2023 remained strong and the business is confident of robust order pipelines when pricing is sensitive to the needs of the customer. The intrinsic requirement for air freight movements will not be replaced by alternative models of movement nor will the primary direction of goods from East to West which forms the core of the business model. The relative size and flexibility of the business and its ability to charter with a variety of air operators, each with differing strengths and capabilities allow management to be confident that the business model can successfully adapt and has adapted to demand changes.
Aviation costs. Aviation remains an intrinsically expensive mode of transport and rising fuel costs, particularly the sharp rises driven by the invasion of Ukraine have undoubtedly softened the market. On long term charters there is limited direct profit impact on the business as contract revenues rise through compensatory mechanisms. However the resultant elevated price has a dampening effect on demand, both in terms of specific contracted flights and the market generally. Some comfort can be gained from the resilience that has been evident in continuing flight operations through 2023. The business has demonstrated that it can remain both competitive and profitable and arguably the current supply/demand and cost scenarios merely represent the return to a normal marketplace.
Energy costs. Fuel forms the largest single cost element of the underlying chartering business and its limited impact on the business is discussed in the above point. General energy costs form an immaterial part of the greater group cost, simply because of the extremely small headcount and limited physical locations the group operates from. The energy required to run the flight simulator business is more substantial in relation to the business at Quadrant Systems Ltd. In this regard the business has entered into long term supply arrangements and generally has tried to fix its energy supplier contracts to the best available deals.
The Board’s objective continues to be the maximization of revenue and profit growth. It is pursuing this through the expansion of charter offerings in its Air One Aviation business especially through its relationship with One Air Limited and through the complimentary services offered by Quadrant Systems Ltd.
In summary the Board is satisfied with performance in the year.
The Board is fully aware of and supports the requirements of section 172 of the Companies Act 2006 and this statement summaries how the Board integrates wider shareholder considerations in its decision making for short, medium and long term outcomes.
The Board consider that its decisions and outcomes to date have been made diligently and honestly, with full consideration of the impacts on both the strategic success of the Group but also the wider community of stakeholders.
The potential complexities of meeting the Boards’ obligations with regard to section 172 are considerably mitigated by the compact scale of the business infrastructure relative to its transactional revenues and assets. The closeness of the Board to employees, investors and the small number of suppliers and customers allow for ease of communication, more personal engagement and greater understanding of the varied priorities of each stakeholder in any given decision making event be that near or long term.
The investors of the business are also employees within the Group and present on the Board thereby ensuring active engagement. As such the underlying strategic direction of the Group is intrinsically present in all business thinking. This is supported by documented Board processes and the tracking of business performance and remedial actions when expectations are not met.
The Board has identified the following stakeholders with interests vested in Board decisions and subsequent outcomes;
Employees, customers, suppliers, our environment/community and investors
The Board actively seeks engagement with and updates on each group, their expectations, concerns and priorities in relation to outcomes, prospective and actual, from Board decisions.
An example of engagement with and a decision made as a result of such interaction with the investors was the full refurbishment and remodelling of the Air One Aviation Ltd office, situated in Hampton Wick, in late 2023. This was deemed to be an investment in both facilities to the advantage of the employees and also to update the image of the business to prospective customers. The refurbishment was performed by local contractors in order to directly benefit the local economy. Aligned to the physical investment the investors authorised an extensive rebranding project, running into 2024, to refresh and update the company image, marketing tools, processes and website.
The business strives to do the right thing in everything it does, holding itself and its employees to the highest standards at all times by application of codes of conduct as stipulated in its documented internal policies.
Stakeholder engagement
Employees
The Board members (and investors) hold roles in the day to day business, work amongst the employees on a daily basis and actively encourage an open door policy. Issues faced by employees are commonly also shared by the Board and investors and a policy of open discussion allows concerns to be raised quickly. This closeness also allows identification of issues and the implementation of corrective actions with relative ease. The small scale of the team and its flat structure mean employees have access to the Board at all times.
Customers
The business operates with a small number of long term/repeat customers, many of whom represent business relationships of many years, either directly or through business networks and shared contacts. The nature of the business and the integral functions that the Board and the investors take in the commercial, contractual and day to day delivery of service gives extensive and contemporary feedback on customer considerations, expectations and priorities. This customer intelligence drives the business thinking.
Suppliers
The business seeks to use local suppliers for its small scale overheads thereby enhancing relationships with the community, where possible. Suppliers of a material nature, specifically those supplying aircraft movements for the charter business are almost exclusively businesses with investors in common and the day to day involvement of the Board members and investors ensure mutually beneficial contract arrangements. Feedback on performance is constant.
Environment/Community
The business is aware that its revenue streams are based upon contracting in the aviation industry, an industry not known for its green credentials. With regards to its charter business the Board monitors its suppliers to ensure they meet all appropriate environmental legislation relevant to the aviation sector. The business actively promotes green initiatives and technologies in its office and overhead functions. Employee hybrid working mitigates commuting pollution and office based emissions. Given the small scale of the business locations the Board also like to recruit locally wherever appropriate to benefit the community.
Investors
The investors of the business are employed in the business and hold positions in the Board thereby ensuring 100% engagement in decision making.
On behalf of the board
The director presents his annual report and financial statements for the period ended 31 December 2023.
The results for the period are set out on page 12.
Ordinary dividends were paid amounting to £373,750 (2022: £304,000). The director does not recommend payment of a further dividend.
The director who held office during the period and up to the date of signature of the financial statements was as follows:
Management consider the business is relatively insulated against financial risk given the nature of its operations. The primary currency within aviation is recognised as USD and charter revenue is charged almost entirely in this currency. The corresponding cost of sales from the aircraft operators is likewise in USD so the business is able to naturally hedge almost all of its charter operations. Non USD items are not material against the scale of revenue under consideration. The associated foreign currency trade receivables and payables, while sizeable are extremely contemporary, equal and opposite and exist for a relatively small number of days limiting the impact of exchange movements. The cash holdings of the business, as driven by the USD revenue streams, are held primarily in USD and while this gives rise to some exchange on reporting, management do not consider these exchange issues significant enough to warrant hedging arrangements. This is primarily due to the stable nature of the USD and GBP rate and the long term view on holding/using these cash balances such that near term/medium movements are likely to prove temporary and reversible. The largest asset of the business consists of its loan to One Air Limited, denominated in GBP, thereby removing any currency consideration.
The business has extremely limited exposure to price risk. It works on long term charter contracts with established pricing and margins with air operators locked into contractual arrangements. The market price for charters is intrinsically linked to the aviation fuel market as this accounts for the single largest cost element in flight provision. Our long-term contractual arrangements contain price adjustment mechanisms to insulate the impact of changing fuel cost, both up and down, allowing for a stable margin.
The business does not operate credit on its charter operations, flight movements only go ahead once customer funds are received thereby effectively eliminating meaningful credit risk. Such charter flights account for a significant majority of the revenue base. Commission income is collected prior to settling the corresponding cost invoicing with the aircraft operators further removing credit risk on this portion of revenue. Credit operated on the immaterial level of revenue related to post flight services is effectively managed in connection with the long term nature of our customer contracts. Unacceptable levels of overdue post flight debts can be used as leverage to withhold future charter operations. Revenues generated within the simulator business are not material in the scale of the group and the limited credit risk here is managed by a combination of close management oversight and established customer relationships.
The mode of business operation which mitigates both price and credit risk effectively also eliminates liquidity risk. The scale of cash balances held combined with the extremely small headcount and overhead base provide little grounds for concern on matters of liquidity.
Cash flow risk is considered immaterial for the reasons previously stated, that is, low overheads and funds in advance of charter movements, a no payment, no fly and hence no cost arrangement.
The group’s energy and carbon reporting is not disclosed as the company has consumed less than 40Mwh during the reporting period. The subsidiary amounts have not been included within the group amounts as the subsidiary would not themselves be required to report
We have audited the financial statements of Air One Aviation Limited (the 'parent company') and its subsidiaries (the 'group') for the period ended 31 December 2023 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the director with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the director's report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the director's report have been prepared in accordance with applicable legal requirements.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations. The laws and regulations applicable to the company were identified through discussions with directors and other management, and from our commercial knowledge and experience of risk management software services and consultants. Of these laws and regulations, we focused on those that we considered may have a direct material effect on the financial statements or the operations of the company, including Companies Act 2006, taxation legislation, data protection, anti-bribery, anti-money-laundering, employment, environmental and health and safety legislation. The extent of compliance with these laws and regulations identified above was assessed through making enquiries of management and inspecting legal correspondence. The identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
understanding the design of the company’s remuneration policies.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, relevant regulators and the company’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s loss for the year was £7,371,059 (2022 - £23,432,868 profit).
Air One Aviation Limited (“the company”) is a private limited company domiciled and incorporated in England and Wales. The registered office is 1 Becketts Place, Hampton Wick, Kingston Upon Thames, Surrey, KT1 4EQ.
The group consists of Air One Aviation Limited and all of its subsidiaries.
The reporting period for these financial statements has been extended. The accounts have been prepared for the 15 month period ended 31st December 2023. It should be noted that due to the extended period the comparative amounts presented in the financial statements (including the related notes) are not entirely comparable.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The Group financial statements have been prepared under the historical cost convention subject to the revaluation of simulator assets at fair value. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company Air One Aviation Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 31 December 2023. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
At the time of approving the financial statements, the director has a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Thus the director continues to adopt the going concern basis of accounting in preparing the financial statements.
Charter of Aircraft
Turnover associated with the charter of an aircraft movement is recognised in the income statement on the departure date of the underlying flight. Turnover associated with so called ‘wet lease’ contracts for the supply of an aircraft, associated crew and ancillaries over time, is recognised by reference to the date of the rental period. Commission income on arranging charter movements is recognised by reference to the departure date of the underlying aircraft flight and on the rental period when in relation to commission on ‘wet lease’ income.
Other revenues
Relate to direct costs incurred through flight movements such as navigation charges and de-icing fees etc and in the first instance are charged to the aircraft operator by the relevant authorities such as airport operators and only then charged onwards to the company itself. There is an inherent delay in these post operation costs. Such costs are only known to the company once those costs have been billed to the company by the aircraft operator and are then in turn charged onwards to the original customer of the charter service where it is permissible to charge subject to the terms of the specific contract. The corresponding turnover is recognised in the income statement at such time as the cost, billable to a customer, is charged to the company itself. Turnover recognition in this instance is not by reference to the underlying flight but the point in time that the aircraft operator notifies the company by way of a charge on it.
Revenue associated with the hiring out of simulator time and training events is recognised by reference to the dates of the training sessions. All turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight line basis over the lease term.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
In the application of the group’s accounting policies, the director is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The average monthly number of persons (including directors) employed by the group and company during the period was:
Their aggregate remuneration comprised:
The prior year financial statements did not include disclosure of directors’ remuneration for all group companies. The comparative figure has therefore been amended to reflect the correct amount.
As of 1 April 2023, the main rate of UK corporation tax increased from 19% to 25%. As the company’s financial year straddles this date, a blended corporation tax rate of 22.6% has been applied which is calculated by apportioning the two tax rates on a weighted basis for the proportion of the financial year for which each main tax rate was applicable.
The actual charge for the period can be reconciled to the expected (credit)/charge for the period based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
Negative goodwill arose on acquisition of Quadrant Systems. The negative goodwill is released to the P&L in line with the depreciation on the simulators.
The simulator equipment was valued on an open market basis on July 2023 by Aircraft Simulation Services. All other classes of Tangible Fixed Asset are held at cost.
The following assets are carried at valuation. If the assets were measured using the cost model, the carrying amounts would be as follows:
The previous investment in the 100% owned subsidiary Beijing Air One Aviation Company Ltd was deemed to carry no value, the company never traded and was dissolved in 2023, leading to a write off in full.
Details of the company's subsidiaries at 31 December 2023 are as follows:
As permitted by the reduced disclosure framework within FRS 102, the company has taken advantage of the exemption from disclosing the carrying amount of certain classes of financial instruments, denoted by 'n/a' above.
No amounts owed by related parties are due for repayment and no interest charged until 1st April 2028.
The bank holds a fixed and floating charge over the property held by the company. The floating charge covers all of the property or undertakings of the company.
Secured debts of £522,129 (2022: £913,729) relate to the 737B-800W Flight Simulator.
The finance lease is secured against the simulator over a period of 60 months from September 2020.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
The Ordinary shares carry 1 voting right per each individual share, all Ordinary shares of the company rank pari passu, and therefore carry equal rights to receive dividends. The ordinary B and Ordinary C shares are not entitled to vote.
In June 2024 there was a variation in the rights attached to the shares. The non-voting 'ordinary B' and 'ordinary C' shares were converted to ordinary shares which have full dividend and voting rights.
On the 17th of June 2024, Air One Holdings Ltd, a company registered in the UAE and the immediate and ultimate parent company of Air One Aviation Ltd, transferred its entire share capital holding, to Air One International Holdings Ltd. This UK registered company then became the new immediate and ultimate company.
The status of, Mr G Mirchandani, as the ultimate beneficiary owner, remained unchanged.
A consequence of this appointment of a new parent company was the re-alignment of the accounting year end date for the existing group to match that of the new parent, this being 31st of December.
Under section 392 of the Companies Act 2006 Air One Aviation Ltd and its subsidiary Quadrant Systems Ltd have chosen to revise the accounting year end date for the preceding reporting period thus making a 15 month accounting period running from 1st October 2022 to 31st December 2023.
Separately, on the 28th of June 2024, Air One Aviation Ltd converted it’s in issue class B (50) and class C (200) shares, which previously carried no voting rights, into Ordinary shares, with full voting rights.
The company has taken advantage of the exemption allowed under Section 33.1A of FRS102 not to disclose transactions with wholly owned members of the group.
During the year the company entered into transactions with companies under common control. Purchases were made totalling £224,412,662 (2022: £405,387,765) and sales totalling £9,126,814 (2022: £29,612,933).
At the year end the company owed a connected party £1,710,917 (2022: £11,109,810) included within trade creditors and were owed £5,635,374 (2022: £nil) by a connected company included within trade debtors.
Another connected company under common control owes the company £19,929,295 (2022: £11,331,857) which is included in amounts owed by related parties due after more than one year. During the year, the company provided capital through an interest-bearing loan of $16,000,000 to this company. The amount of interest accrued on the loan was $162,623. Subsequently, prior to the period end, the loan and accrued interest were written off.
The company were owed £888,011 (2022: £nil) by a connected company included within trade debtors. £341,689 (2022: £nil) is payable by the group to this company.
No other transactions with related parties were undertaken such as are required to be disclosed under Financial Reporting Standard 102.
During the year, a total of key management personnel compensation of £779,326 (2022 - £106,440) was paid.
In the prior year, the note omitted the amounts of other borrowings. These have been included, including comparatives, in the current year.
In the prior year, the note omitted the amounts of other borrowings. These have been included, including comparatives, in the current year.