Airline Business - Trends and Challenges Lucas den Boer Airline Business Executive Consultant LUCASBUSINESS B.V. January 2009, Netherlands

Financials and Business Models www.lucasbusiness.com ( ) This report or any part of it, may not be copied, circulated, quoted without prior written approval from LUCASBUSINESS B.V.

www.lucasbusiness.com ( ) Net Result: World Air Transport

Fuel price is soaring (*) including hedging policy effect oct. - déc. 03 (brent 28 $) oct. - déc. 04 (estimated 8/10/04) oct. - déc. 04 (estimated 26/10/04) + 66 % 105 175 160 On a flight from Paris to Asia : 2003 2004 www.lucasbusiness.com ( )

www.lucasbusiness.com ( ) Heavy Taxes

Source: BAH/ adapted AEA www.lucasbusiness.com ( ) Airlines business models

www.lucasbusiness.com ( ) “ Stuck in the middle”

www.lucasbusiness.com ( ) EBIT Margins

Air France - KLM : to combine the networks ... to sustain profitable growth 2 complementary airlines fare combinability common bottom-line Network airlines - Cooperation & Integration

2 complementary airlines

fare combinability

common bottom-line

Oneworld; like United Airlines, Lufthansa and SAS SkyTeam; like American Airlines, British Airways and Iberia Star Alliance; like Delta, Northwest, Air France-KLM and Alitalia … Together 60% of the market Alliances

Oneworld; like United Airlines, Lufthansa and SAS

SkyTeam; like American Airlines, British Airways and Iberia

Star Alliance; like Delta, Northwest, Air France-KLM and Alitalia

… Together 60% of the market

Dilemma: Joining alliances, or Staying independent Regional airlines

Dilemma:

Joining alliances, or

Staying independent

More profitable than passenger business More grow than passenger business Less pressure from Low Cost Airlines Cargo airlines

More profitable than passenger business

More grow than passenger business

Less pressure from Low Cost Airlines

Strong increase of low cost airlines Low cost airlines

Strong increase of low cost airlines

Source: UK CAA Low cost airlines

(Environmental) Trends www.lucasbusiness.com ( ) This report or any part of it, may not be copied, circulated, quoted without prior written approval from LUCASBUSINESS B.V.

Railteam: new alliance of West-European highspeed trains Competition: highspeed trains

Railteam: new alliance of West-European highspeed trains

Competition: new airlines from China

Competition: new airlines from India

New laws and rules

Before: London – Frankfurt – New York After: London – New York Open skies

Before: London – Frankfurt – New York

After: London – New York

Network is key

Growing importance of ME in network

Hub, heart of the network

A hub to link small markets to the rest of the world

Special branded network connections

Current situation Possible future situation Hub airports of different size Megahubs Regional/ P2P airports “ Specialist” Hub airport Regional / P2P airports Hubs in development

Fuel saving Twin-engines Reducing emission per flight More quiet, less noise B787 New aircraft types A350XWB

Fuel saving

Twin-engines

Reducing emission per flight

More quiet, less noise

Airline Challenges www.lucasbusiness.com ( ) This report or any part of it, may not be copied, circulated, quoted without prior written approval from LUCASBUSINESS B.V.

A seamless ground experience

Increasing revenue Optimization of capacity Increasing commercial load factor (%) e-Ticketing e-Services Payment methods Streamlining processes Mobile solutions Portals Websites (total travel experience) Commercial goals

Increasing revenue

Optimization of capacity

Increasing commercial load factor (%)

e-Ticketing

e-Services

Payment methods

Streamlining processes

Mobile solutions

Portals

Websites (total travel experience)

Greater differentiation, better customer care

Customer loyalty

Operational Excellence On-time performance Cost reduction Operations

Operational Excellence

On-time performance

Cost reduction

Amadeus creates dominant position …

Project Falcon - 3 Year Recovery Plan Fundamental Changes World-class customer service Brand & marketing strategy Call centre in MCT People Redesign network planning concepts Leisure brand airline Focus on yield Cost Reductions and efficiencies ... to position Gulf Air as a World-class airline with unique Arabian hospitality Typical airline transformation

Project Falcon - 3 Year Recovery Plan

Fundamental Changes

World-class customer service

Brand & marketing strategy

Call centre in MCT

People

Redesign network planning concepts

Leisure brand airline

Focus on yield

Cost Reductions and efficiencies

... to position Gulf Air as a World-class airline with unique Arabian hospitality

Future of Airline Business www.lucasbusiness.com ( ) This report or any part of it, may not be copied, circulated, quoted without prior written approval from LUCASBUSINESS B.V.

3-5 Long-haul Network Dominators Low-cost Service Providers No Frills (2 to 3 majors) Charters (2 to 3 majors in Europe) Niche Carriers Regional or national Cargo and Integrators Future of airline business in Europe

3-5 Long-haul Network Dominators

Low-cost Service Providers

No Frills (2 to 3 majors)

Charters (2 to 3 majors in Europe)

Niche Carriers

Regional or national

Cargo and Integrators

For more information please contact: Lucas den Boer phone: +31 (0)6 22 241 508 email: [email_address] My references