Mandatory Cash Offer

RNS Number:1426E
Excel Airways Group PLC
15 October 2004


This Announcement is not for release, publication or distribution in whole or in
part in or into the United States, Canada, Australia, Japan or Ireland or to US
Persons.


             Announcement of Unconditional Mandatory Cash Offer by

                      KBC Peel Hunt Ltd ("KBC Peel Hunt")

                                      and

          Landsbanki - The National Bank of Iceland Ltd ("Landsbanki")

                                  on behalf of

                       Flugfelagid Atlanta HF, trading as

                     Air Atlanta Icelandic ("Air Atlanta")

                                      for

                       Excel Airways Group plc ("Excel")

The Air Atlanta Directors announce the terms of an unconditional mandatory cash
offer to be made by KBC Peel Hunt and Landsbanki on behalf of Air Atlanta for
the whole of the issued ordinary share capital of Excel not already owned by Air
Atlanta or persons acting in concert with it ("the Offer").

KEY FEATURES

* The Offer is 105 pence per Excel Share and values the
issued ordinary share capital of Excel at #100.8 million and represents:

* the price per Excel Share paid or to be paid by Air
Atlanta's wholly owned subsidiary X Aile in its purchase of 29,645,728 Excel
Shares from the Vendors pursuant to the Share Purchase Agreement; and

* a discount of approximately 2.3 per cent. to the closing
middle market price of 107.5 pence per Excel Share on 14 October 2004, the last
dealing day prior to this Announcement.

* Air Atlanta has received irrevocable undertakings from
those Excel Directors who hold Excel Shares and certain other Excel Shareholders
not to accept the Offer in respect of, in aggregate 25,263,838 Excel Shares,
representing approximately 26.3 per cent. of the entire issued share capital of
Excel.

* X Aile now holds approximately 71.4 per cent of the issued
share capital of Excel, following the completion of the Transaction.

* Excel Shareholders are herby given notice that Air Atlanta
intends to procure that Excel applies to London Stock Exchange for the
cancellation of the admission of Excel Shares to trading on AIM not less than 30
business days following the Closing Date. The Offer will close 21 days after the
posting of the Offer Document and will not be extended or increased. London
Stock Exchange has agreed with Excel that as, following completion of the
Transaction, Air Atlanta and Libra are interested in aggregate in 73,445,310
Excel Shares, representing approximately 76.5 per cent. of the issued ordinary
share capital of Excel at the date of this Announcement, it would not require
the cancellation to be approved by Excel Shareholders in a general meeting as
would otherwise be the case under rule 39 of the AIM Rules. Excel Shareholders
should note that cancellation of such admission would significantly reduce the
liquidity and marketability of any Excel Shares in respect of acceptances of the
Offer that are not validly made.

* This summary should be read in conjunction with the full
text of this Announcement. Certain terms of the Offer are set out in Appendix 1
of this Announcement.


15 October 2004


Enquiries:

KBC Peel Hunt                                020 7418 8900
Julian Blunt
Matt Goode

Landsbanki
Baldur Stefansson                            00 354 820 6584
Stefan Bjarnason                             00 354 820 6362

Air Atlanta                                  00 354 895 7707
Hafthor Hafsteinsson


KBC Peel Hunt, which is authorised and regulated by The Financial Services
Authority, is acting exclusively for Air Atlanta and is acting for no one else
in connection with the Offer and will not be responsible to anyone other than
Air Atlanta for providing the protections afforded to customers of KBC Peel Hunt
nor for providing advice in relation to the Offer.

Landsbanki, which is regulated by the Financial Supervisory Authority of
Iceland, is acting exclusively for Air Atlanta and is acting for no one else in
connection with the Offer and will not be responsible to anyone other than Air
Atlanta for providing the protections afforded to customers of Air Atlanta nor
for providing advice in relation to the Offer.

The Offer is not being made, directly or indirectly, in or into, or by use of
the mails, or any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of, or any
facility of a national, state or other securities exchange of, the United
States, Canada, Australia, Ireland or Japan. Accordingly, copies of this
Announcement are not being, and must not be, directly or indirectly, mailed or
otherwise forwarded distributed or sent in or into or from the United States,
Canada, Australia, Ireland or Japan or to US persons.

15 October 2004


This Announcement is not for release, publication or distribution in whole or in
part, in or into the United States, Canada, Australia, Ireland or Japan or to US
Persons.


             Announcement of Unconditional Mandatory Cash Offer by

                      KBC Peel Hunt Ltd ("KBC Peel Hunt")

                                      and

          Landsbanki - The National Bank of Iceland Ltd ("Landsbanki")

                                 on behalf of

                       Flugfelagid Atlanta HF, trading as

                     Air Atlanta Icelandic ("Air Atlanta")

                                     for

                       Excel Airways Group plc ("Excel")

1.         Introduction

On 15 October 2004 Air Atlanta's wholly owned subsidiary company X Aile,
completed the purchase of a total of 29,645,728 Excel Shares from the Vendors
pursuant to the Share Purchase Agreement. As a result of the Transaction, X Aile
holds in aggregate 68,545,728 Excel Shares, representing approximately 71.4 per
cent. of the issued ordinary share capital of Excel at the date of this
Announcement. Air Atlanta has therefore triggered an obligation under Rule 9 of
the City Code for a mandatory offer to be made to all Excel Shareholders.

2.         The Offer


KBC Peel Hunt and Landsbanki offer to acquire, on behalf of Air Atlanta, all of
the issued Excel Shares not already owned by its wholly owned subsidiary X Aile
on the following basis:

          For each Excel Share                      105 pence in cash

The Offer is being made at 105 pence per Excel Share being sufficient to meet
the requirement under the City Code to offer at least the highest price paid by
Air Atlanta or its wholly owned subsidiary, X Aile, for Excel Shares during the
last 12 months, (which is 105 pence per Excel Share paid on 15 October 2004 by X
Aile) for the whole of the issued share capital of Excel not already held by X
Aile.

The Offer values the issued ordinary share capital of Excel at #100.8 million
and the Excel Shares not already held by Air Atlanta at approximately #28.8
million.

The Offer represents:

* the price paid by Air Atlanta's
wholly owned subsidiary X Aile in its purchase of 29,645,728 Excel Shares from
the Vendors pursuant to the Share Sale and Purchase Agreement; and

* a discount of approximately 2.3
per cent. to the closing middle market price of 107.5 pence per Excel Share on
15 October 2004, the last dealing day prior to this Announcement.

The Offer will remain open for acceptance until 3.00 p.m. on the day which is 21
days from the date of posting of the Offer Document or (if that day is a
Saturday, Sunday or public holiday) on the next succeeding business day. The
Offer will not be extended beyond the Closing Date, and will not be increased.

The Offer, which having regard to the irrevocable undertakings referred to in
paragraph 4 below, is effectively being made to holders of 2,190,434 Excel
Shares. KBC Peel Hunt is satisfied that the necessary financial resources are
available to Air Atlanta for it to implement the Offer in respect of 2,190,434
Excel Shares, which are valued by the Offer at approximately #2.3 million.

3.         Financial effects of acceptance

The financial effects of acceptance of the Offer are illustrated in Appendix 3
of this Announcement.

4.         Undertakings not to accept

Irrevocable undertakings not to accept the offer have been given in respect of
Excel Shares held by those Excel Directors who hold Excel Shares and Excel
Shares held by the trustees of the Employee Benefit Trust, totalling in
aggregate 19,920,000 Excel Shares, representing 20.75 per cent. of the issued
ordinary share capital of the Company at the date of this Announcement.

In addition, irrevocable undertakings not to accept the Offer have been given in
respect of further holdings of Excel Shares, totalling in aggregate 5,343,838
Excel Shares representing approximately 5.6 per cent. of the issued ordinary
share capital of the Company at the date of this Announcement.

5.         Background to and Reasons for the Offer

On 15 March 2004 Air Atlanta's wholly owned subsidiary company, X Aile,
completed the purchase of 38,900,000 Excel Shares, representing approximately
40.5 per cent. of the then issued ordinary share capital of Excel from Libra at
a price of 76.9 pence per Excel Share. Following discussions with the Takeover
Panel, Air Atlanta was granted a request for a dispensation from the requirement
to make a mandatory offer to Excel Shareholders under Rule 9 of the City Code as
it had received irrevocable undertakings not to accept such an offer from Excel
Shareholders representing approximately 59.4 per cent. of the then issued share
capital of Excel immediately prior to the purchase. The irrevocable undertakings
were provided by sufficient numbers of Excel Shareholders such that the only
condition of any such mandatory offer, being that the offer would be conditional
upon Air Atlanta having received acceptances which, together with Excel Shares
acquired before such a mandatory offer, would result in Air Atlanta or X Aile
holding Excel Shares carrying more than 50 per cent. of the voting rights of
Excel would not have been met.

On 15 October 2004 Air Atlanta's wholly owned subsidiary company, X Aile,
completed the purchase of a total of 29,645,728 Excel Shares from the Vendors at
a price of 105 pence per Excel Share. As a result of the Transaction, X Aile
holds an aggregate of 68,545,728 Excel Shares, representing approximately 71.4
per cent. of the issued ordinary share capital of Excel at the date of this
Announcement. Air Atlanta has therefore triggered an obligation under Rule 9 of
the City Code for a mandatory offer to be made to Excel Shareholders.

Air Atlanta and Excel have enjoyed substantial cooperation over the last few
years during which Air Atlanta has been the major supplier of Boeing Aircraft
leased to Excel for summer use. This cooperation led to the significant share
purchases detailed above in March 2004 and today. These transactions have
secured and aim to enhance the business of both parties by using Air Atlanta's
skill and experience as a major operator in the wet lease market to seek to
export Excel's successful business model to other parts of the world.

The majority owners of Islandsflug and Air Atlanta have announced today that
they propose to complete the merger of the two companies by the end of 2004.
Islandsflug is a scheduled and chartered flight operator, and also has
airfreight and aircraft leasing businesses. It was founded in 1991 by Omar
Benediktsson, Gunnar Thorvaldsson and Holdur hf, a company owned by Mr
Benediktsson. Islandsflug is currently 67 per cent. owned by Blue Sky Transport,
a company owned by Magnus Thorsteinsson (who also has a controlling interest in
Air Atlanta) and Omar Benediktsson. Further details of this proposed transaction
will be provided in the Offer Document.

6.         Cancellation of admission of trading on AIM

Excel Shareholders are herby given notice that Air Atlanta intends to procure
that Excel applies to London Stock Exchange for the cancellation of the
admission of Excel Shares to trading on AIM not less than 30 business days
following the Closing Date. The Offer will close 21 days after the posting of
the Offer Document (or if that day is a Saturday, Sunday or public holiday, on
the next succeeding business day) and will not be extended or increased. London
Stock Exchange has agreed with Excel that as, following completion of the
Transaction, Air Atlanta and Libra would be interested in aggregate in
73,445,310 Excel Shares (comprising 68,545,728 Excel Shares held by X Aile and
4,899,582 Excel Shares held by Libra), representing approximately 76.5 per cent.
of the issued ordinary share capital of Excel at the date of this Announcement,
it would not require the cancellation to be approved by Excel Shareholders in a
general meeting as would otherwise be the case under rule 39 of the AIM Rules.
Excel Shareholders should note that cancellation of such admission would
significantly reduce the liquidity and marketability of any Excel Shares in
respect of which acceptances of the Offer are not validly made. Air Atlanta also
intends to procure the re-registration of Excel as a private company under the
relevant provisions of the Act.

7.         Views of the Independent Directors

The advice of the Independent Directors, who have been so advised by BDO Stoy
Hayward Corporate Finance, will be contained in the Offer Document to Excel
Shareholders. The options facing Excel Shareholders are the following:

   *Excel Shareholders may choose to accept the Offer. The Offer is at a
    discount of approximately 36 per cent. to the middle market price per Excel
    Share of 165 pence at the close of business on 5 October 2004, the last
    business day prior to the announcement that Air Atlanta and Libra were in
    discussions which could lead to Air Atlanta acquiring the majority of
    Libra's shareholding in Excel. However, acceptance of the Offer would enable
    Excel Shareholders to dispose of their Excel Shares free of share dealing
    costs which for a disposal of a small number of Excel Shares could be
    disproportionately significant.

   *Excel Shareholders may choose not to accept the Offer and retain their
    investment in Excel, as those Excel Directors who own Excel Shares have
    undertaken to do, and therefore participate in any potential future benefits
    of owning Excel Shares. However Air Atlanta will give notice in the Offer
    Document of its proposal, pursuant to an agreement with Libra, to procure
    the cancellation of the admission of Excel Shares from trading on AIM not
    less than 30 business days following the Offer closing. In the absence of an
    AIM quotation, non-accepting Excel Shareholders will be minority
    shareholders in an unlisted company with no public market for the shares.


   *As an alternative Excel Shareholders may wish to sell their Excel Shares
    in the market prior to the intended cancellation of admission of Excel
    Shares from trading on AIM rather than accept the Offer. The middle market
    price per Excel Share at the close of business on 14 October 2004 (the last
    business day prior to the publication of this Announcement) was 107.5 pence,
    a premium of approximately 2.4 per cent. to the Offer price. Excel
    Shareholders should note that they may not however be able to achieve this
    price in the open market.


Having considered these options, the Independent Directors, who have been so
advised by BDO Stoy Hayward Corporate Finance, will be unable to recommend any
one course of action to Excel Shareholders. Individual Excel Shareholders must
carefully consider each of the options taking into consideration other factors
such as their tax status and their personal views and make their own decision
according to their individual circumstances. Those Excel Directors who own Excel
Shares have signed irrevocable undertakings not to accept the Offer. Following
receipt of the Offer Document, individual Excel Shareholders are recommended to
seek their own financial advice from their stockbroker, bank manager, solicitor,
accountant or other independent financial adviser duly authorised under the
Financial Services and Markets Act 2000.



8.         The Offer Document


The Offer Document containing the full terms of the Offer, together with a Form
of Acceptance, will be despatched to Excel Shareholders in due course. This
Announcement does not itself constitute an offer or invitation to sell or to
purchase any securities.



9.            Definitions


Appendix 4 contains definitions of the terms used in this Announcement.



Enquires:

KBC Peel Hunt                                020 7418 8900
Julian Blunt
Matt Goode

Landsbanki
Baldur Stefansson                            00 354 820 6584
Stefan Bjarnason                             00 354 820 6362

Air Atlanta                                  00 354 895 7707
Hafthor Hafsteinsson


The availability of the Offer to persons not resident in the UK may be affected
by the laws of the relevant jurisdiction. Persons who are not resident in the UK
should inform themselves about and observe any applicable requirements.
Furthermore, the release, publication or distribution of this Announcement in
certain jurisdictions may be restricted by law and therefore persons in such
jurisdictions into which this Announcement is released, published or distributed
should inform themselves about and observe such restrictions.


The Offer is not being made, directly or indirectly, in or into, or by use of
the mails, or any means or instrumentality (including, without limitation,
telephonically or electronically) of interstate or foreign commerce of, or any
facility of a national, state or other securities exchange of, the United
States, Canada, Australia, New Zealand, Japan or South Africa. Accordingly,
copies of this Announcement are not being, and must not be, directly or
indirectly, mailed or otherwise forwarded distributed or sent in or into or from
the United States, Canada, Australia, New Zealand, Japan or South Africa or to
US Persons.


The Air Atlanta Directors accept responsibility for the information contained in
this Announcement other than that relating to Excel, its directors and their
dealings in Excel Shares. To the best of the knowledge and belief of the Air
Atlanta Directors (who have taken all reasonable care to ensure that such is the
case), the information contained in this Announcement is in accordance with the
facts and does not omit anything likely to affect the import of such
information.


The Directors of Excel accept responsibility for the information contained in
this Announcement relating to Excel and their dealings in and interests in Excel
Shares but, in the case of the Directors other than the Independent Directors,
excluding the statements set out in paragraph 7 of this Announcement. Subject as
aforesaid, to the best of the knowledge and belief of the Directors of Excel
(who have taken all reasonable care to ensure that such is the case), all such
information contained in this Announcement is in accordance with the facts and
does not omit anything likely to affect the import of such information.


KBC Peel Hunt, which is authorised and regulated by The Financial Services
Authority, is acting exclusively for Air Atlanta and is acting for no one else
in connection with the Offer and will not be responsible to anyone other than
Air Atlanta for providing the protections afforded to customers of KBC Peel Hunt
nor for providing advice in relation to the Offer.


Landsbanki, which is regulated by the Financial Supervisory Authority of
Iceland, is acting exclusively for Air Atlanta and is acting for no one else in
connection with the Offer and will not be responsible to anyone other than Air
Atlanta for providing the protections afforded to customers of Air Atlanta nor
for providing advice in relation to the Offer.



                                   APPENDIX 1


Unconditional Offer


Since Air Atlanta's wholly owned subsidiary company X Aile holds approximately
71.4 per cent. of the issued share capital of Excel, the Offer will be
unconditional in all respects and will close 21 days after the posting of the
Offer Document (or if that day is a Saturday, Sunday or Public holiday, on the
next successive business day).



                                   APPENDIX 2


Irrevocable Undertakings


Irrevocable undertakings not to accept the Offer have been given in respect of
the following Excel Shares held by those Excel Directors who hold Excel Shares
and by the trustees of the Employee Benefit Trust, totalling in aggregate
19,920,000 Excel Shares, representing 20.75 per cent. of the issued ordinary
share capital of Excel:

                                   Number of Excel               % of the issued
                                   Shares                             ordinary
                                                                   share capital
                                                                      of Excel
Name
Mr Steven Tomlinson                             607,554                   0.63
Mr Philip Wyatt                               9,600,000                   10.0
Employee Benefit Trust                        9,712,446                   10.1



In addition, irrevocable undertakings not to accept the Offer have been given in
respect of the following shareholdings in Excel, totalling in aggregate
5,343,838 Excel Shares representing approximately 5.6 per cent. of the issued
ordinary share capital of the Company.

                                 Number of Excel                 % of the issued
                                 Shares                               ordinary
                                                                   share capital
                                                                      of Excel
Name
Libra                                        4,899,582                     5.1
Technora Corporation                           320,366                     0.3
Mr Costas Miaoulis                             100,890                     0.1
Mr Theodoros Antoniou                           23,000                    0.02


                                   APPENDIX 3


                        Financial effects of acceptance


The following table compares, for illustrative purposes only, the financial
effects on capital value and gross income for a holder of Excel Shares of
acceptance of the Offer, on the bases and assumptions set out in the notes below
and the terms of the Offer.


Capital Value

                                                                         Pence

Value of cash                                                              105
Market Value of one Excel Share (note 1)                                 107.5

(Decrease) in capital value                                               (2.5)

Percentage (decrease) in capital value                           (2.3) per cent.



Income


The income available to shareholders of Excel who accept the Offer is dependent
upon individual circumstances. Excel Shareholders who accept the cash Offer may
receive interest income depending upon the manner in which the cash proceeds are
reinvested.


Notes:


(1)     The market value of an Excel Share is based on Excel's closing mid
market price on 14 October 2004, being the last business day prior to the date
of this Announcement.


(2)     No account has been taken of the treatment of any liability to taxation.


                                   APPENDIX 4


                                  Definitions


The following definitions apply throughout this Announcement unless the context
otherwise requires:

"Act" or "Companies      the Companies Act 1985 (as amended);
Act"

"AIM"                    the Alternative Investment Market of London Stock
                         Exchange;

"Air Atlanta" or "Air    Flugfelagid Atlanta HF D/B/A Air Atlanta Icelandic, of
Atlanta                  Hofdabakka
Icelandic"               9, 110 Reykjavik, Iceland;

"Air Atlanta             Magnus Thorsteinsson, Arngrimur Johannsson and Omar
Directors"
                         Benediktsson;

"Announcement"           this announcement of the Offer;

"Australia"              the Commonwealth of Australia, its states, territories
                         or possessions;

"BDO Stoy Hayward        BDO Stoy Hayward Corporate Finance, a division of BDO
                         Stoy
Corporate Finance"       Hayward LLP, Chartered Accountants, which is authorised
                         and
                         regulated by the Financial Services Authority to carry
                         on investment
                         business;

"Canada"                 Canada, its possessions, provinces, territories and all
                         areas subject to
                         its jurisdiction or any political subdivision thereof;

"City Code"              the City Code on Takeovers and Mergers;

"Closing Date"           the date 21 days after the posting of the Offer
                         Document or (if that
                         date is a Saturday, Sunday or a public holiday) the
                         next succeeding
                         business day;

"Document" or "Offer     the document which is to be issued containing the
                         Offer;
Document"

"Employee Benefit        The Excel Airways Group plc employee benefit trust;
Trust"

"Excel"                  Excel Airways Group plc, of Mitre Court, Fleming Way,
                         Crawley,
                         West Sussex, RH10 9NJ;

"Excel Directors"        the directors of Excel, namely Eamonn Mullaney, Andreas
                         Drakou,
                         Philip Wyatt, Paul Roberts, Jonathan Bousfield, Steve
                         Tomlinson,
                         Richard Gamble, Peter Owen, Christos Mavrellis,
                         Hafthor
                         Hafsteinsson and Magnus Thorsteinsson;

"Excel Shareholders"     registered holders of Excel Shares;

"Excel Shares"           the existing unconditionally allotted and/or issued and
                         fully paid or
                         credited as fully paid ordinary shares of 5 pence each
                         in Excel and any
                         further such ordinary shares which are unconditionally
                         allotted and/or
                         issued fully paid or credited as fully paid after the
                         date hereof and
                         before the Closing Date;

"Form of Acceptance"     the form of acceptance and authority relating to the
                         Offer which will
                         accompany the Offer Document;

"Independent             Eamonn Mullaney, Philip Wyatt, Paul Roberts, Jonathan
Directors"               Bousfield,
                         Steve Tomlinson, Richard Gamble and Peter Owen;

"Japan"                  Japan, its cities, prefectures, territories and
                         possessions;

"KBC Peel Hunt"          KBC Peel Hunt Ltd, of 111 Old Broad Street, London,
                         EC2N 1PH;

"Landsbanki"             Landsbanki - the National Bank of Iceland, of
                         Austurstraeti 11, 155
                         Reykjavik, Iceland;

"Libra"                  Libra Holidays Group Public Limited;

"London Stock            London Stock Exchange plc;
Exchange"

"Offer"                  the mandatory cash offer to be made by Air Atlanta to
                         acquire the
                         whole of the issued and to be issued ordinary share
                         capital of Excel
                         not already owned by Air Atlanta's wholly owned
                         subsidiary, X Aile;

"Offer Period"           the period commencing on the date of posting of the
                         Offer Document
                         and ending on the Closing Date;

"Offer Price"            the price payable by Air Atlanta for the Excel Shares
                         pursuant to the
                         Offer being 105 pence per Excel Share;

"Panel" or "Takeover     the Panel on Takeovers and Mergers;
Panel"

"sterling" or "#"        the lawful currency for the time being in the UK;

"Share Purchase          the agreement between Libra, X Aile and Air Atlanta
                         dated 15
Agreement"               October 2004 pursuant to which X Aile purchased
                         29,645,728 Excel
                         Shares from the Vendors;

"Transaction"            the purchase of 29,645,728 Excel Shares by X Aile from
                         the Vendors
                         pursuant to the Share Purchase Agreement;

"UK Listing Authority"   The Financial Services Authority acting in its capacity
                         as the United
                         Kingdom Listing Authority;

"United Kingdom" or      the United Kingdom of Great Britain and Northern
"UK"                     Ireland and its
                         dependent territories;

"United States" or       the United States of America, its territories and
"US"                     possessions, any state
                         of the United States of America and the District of
                         Columbia and all
                         other areas subject to its jurisdiction and any
                         political subdivision
                         thereof;

"US Person"              has the meaning ascribed to it by Regulation S under
                         the US Securities
                         Act 1933 as defined by Rule 902(k);

"US Securities Act"      the United States Securities Act of 1933 (as amended);

"Vendors"                Libra Holidays Group Public Limited, Bank of Cyprus
                         Ltd, Mr Aris
                         Savvides and Technora Corporation; and

"X Aile"                 X Aile Holding Limited, of 57-63 Line Wall Road, PO Box
                         199,
                         Gibraltar, a wholly owned subsidiary of Air Atlanta.


For the purpose of this Announcement, "subsidiary", "subsidiary undertaking",
"undertaking", and "associated undertaking" have the meanings given by the
Companies Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A
of the Companies Act).



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