1. month 200X Airport of the Future Workshop Andrew Gordon Head of Market Analysis and Research Strategy and Cooperation Schiphol, Amsterdam March 2006

2. Content Economic and oil price outlook Air transport developments Drivers of traffic growth International traffic: new routes and stronger hubs

3. Economic and oil price outlook Content

4. A strong world economy … Trade Corporate profits Consumer confidence GDP % growth 200020012002200320042005 US Europe Index Asia Europe In Billion of US$ Indexed in 2000 US

5. … with a good short term outlook GDP Trade Corporate profits Consumer confidence % growth In Billion of US$ 200020012002200320042005 US Europe Index

6. Crude oil price at 62$/bbl Source: US Department of energy Crude oil WTI Spot price FOB in $ per barrel $/barrel

7. Oil price will stay high in the short term US$ per barrel (WTI) Base case High-price scenario Low-price scenario HistoryForecast Source: Global Insight, January 2006 20022003 200420052006 Energy demand remain robust in spite of near record prices Modest Increase investment in exploration and drilling Vulnerability (or fears) of supply disruption ( strike in Venezuela and Argentina, rebel activities in Nigeria, Iraq, …)

8. The logic of long-term crude oil price forecast Restored spare crude production capacity Increase refining capacity Slower demand in emerging economies Oil reserve back to adequate level OPEC seeks to defend a nominal $40/bbl floor, non-OPEC cost rising to bring floor price to $30/bbl Higher prices give incentives for (1) further exploration, (2) technology to squeeze more out of existing oil fields, and (3) meaningful production of synthetic fuels Below $30/bbl unlikely, above 70$/bbl equally unlikely

9. Oil price anticipated to trend downward Brent $ / bbl HistoryForecast Real $2005 Nominal Source: Global Insight, December 2005

10. Air transport developments Content

11. 1971-1979: 11.5% p.a. 1980-1990: 5.8% p.a. 1991-1997: 5.8% p.a. Source : ICAO, Airbus estimate for 2005 Gulf Crisis Asian Crisis Oil Crisis WTC attack World annual traffic - trillion RPK 1998-2000: 7.1% p.a. Air travel is resilient and has recovered 2.5 3 3.5 4 4.5 1998199920002001200220032004 2005 ICAO total traffic GMF 2000 forecast 1 year Air traffic evolution

12. Source: ATA (North America), AEA (Europe), AAPA Int’l (Asia/Pacific), IATA Gabi (Latin America, Africa & Middle East), Airbus estimate 2005 passenger traffic well above 2004 level Asia/Pacific Int’l +6% +6%Europe+6%Europe+6% Latin America Int’l +11% +11% Africa Int’l +10% +10% North America +4% +4% Middle East Int’l +13% +13% Passenger - RPKs - 2005 vs. 2004 2005 worldwide growth: 7%

13. Strong traffic growth anticipated for 2006 RPKs % year over year change Source: ICAO, Airbus forecast

14. 2005 aircraft gross orders – Airbus & Boeing by regionby type of customer Total orders 2140 aircraft

15. Emerging market orders Aircraft Orders Order Share Source: Airclaims Case Database – January 2006 Emerging: Brazil, India, FSU/CIS, China

16. Emerging market deliveries Aircraft Deliveries World Delivery Share 1995 -2005 Source: Airclaims Case Database – January 2006 Emerging: Brazil, India, FSU/CIS, China

17. The drivers of traffic growth Growing Middle East passenger and cargo hubs Recovery in Latin America Asia: a new economic paradigm in the making LCCs in Asia growing in number and traffic share Deregulation in India Continuing high growth rate for domestic China and emerging China international outbound traffic Development of new routes and stronger hubs

18. Drivers of traffic growth Content

19. Middle East growing international demand led by tourism and business activity Fourfold increase of tourism and business travellers in Middle East from 1990 to 2010 Tourism in Middle East Number of tourists (000) Source: Global Insight Business travellers in Middle East Passengers (000) AAGR 1990-2010 +7.2% AAGR 1990-2010 +8.0%

20. Latin America 2005 market trends Source: Global Insight, AITAL 2005 GDP Growth Note: Bubble size proportional to 2005 real GDP Venezuela 2005 GDP growth for Top 10 largest countries Argentina Chile Dominican Rep. Peru Colombia Mexico Guatemala Brazil Cuba Strong growth of Latin American Airlines traffic in 2005 Note: Jan-Sep 2005 vs. Jan-Sep 2004 traffic RPK:+7% LF: 81% RPK:+11% LF: 73% RPK:+2% LF: 78% RPK Network:+14% RPK LCC: +51% LF: 73% RPK Dom.+Intra: +17% RPK Int’l: +11% RPK Total: +14%  Strong economic growth, especially for Venezuela, Argentina and Chile  Jan-Sep 2005 passenger traffic up 14%  Strong growth at GOL, LAN, TACA  Consolidation, merger activity possible  Rise of Mexican low fares carriers

21. 2004-2014 Annual growth rate 2004 market share Europe USA LCCs in different phase of maturity Emerging Developing Maturing Asia LCC growth and market share per region

22. Great potential for LCCs in Asia Population : 290m Number of LCCs : 10 Deregulation : 1978 LCC Market share : 30% Population : 375m Number of LCCs : 50-60 Deregulation : 1997 LCC Market share : 20% Population : 3.5b Number of LCCs : 10-15 Deregulation : acceleration today LCC Market share : 5% North AmericaEuropeAsia & Japan

23. For now, domestic operations have been the main driver of Asian LCC rapid expansion. 37 airports with LCC operations 113 airports with LCC operations Intra Asia* 4% Domestic* 96% Domestic* 90% Intra Asia* 10% * % of total LCC seats. Source : OAG/ST September. ** Conservative scenario Type of operations September 2001September 2004 310 airports with LCC operations Domestic* 77% Intra Asia* 23% September 2014** Airports served by LCC and type of operations

24. India progressive liberalisation towards a new policy framework 2004  Decision to build new airports in Bangalore and Hyderabad on a private-public partnership  Private carriers allowed to launch international service  Abolition of taxes on air travel  Reduction of excise duty on Aviation Turbine Fuel  Reduction of landing charges 2003  New bilateral agreement with ASEAN countries  1 st no-frill airline: Air Deccan 2005  Competition in the supply of Aviation Turbine Fuel  “Open Sky” agreement during peak season  Foreign equity up to 49% and Non Resident Indian investment up to 100% in domestic airline  New bilateral agreements with France, China, UK, USA, Oman, Qatar, Netherlands, Belgium, Germany, Canada, Bhutan, Philippines, Singapore, New Zealand and UAE  New Entrants: Kingfisher, Spice Jet, Paramount, Go Air and Air India Express 2006  Privatisation of New Delhi and Mumbai airports  Potential IPO of Indian Airlines and Air India  New bilateral agreements with Thailand and Italy  New entrant: Indigo

25. Opportunity for LCCs in India Liberalizing aviation market Increasing urbanization rate 280 million middle class consumers Increasing propensity to travel Expensive current domestic fares Slow, uncomfortable, overcrowded rail transport

26. Indian LCC targeting first class and 30% 2 nd class train passengers MUMBAI - DELHI by Railroad 1380 km 23 hours First class fare: 3373 Rs Second class fare : 1775 Rs MUMBAI - DELHI by Air 1130 km < 90 minutes flight 2004 Network fare: 8970 Rs 2005 LCC fare* : 2900 Rs *: LCC promotion fare as low as 1669Rs

27. China and India driving the world economy GDP Growth 2005-2010 Exports growth (goods & services) 2005-2010 US India China S. Korea Australia UKFrance Germany Thailand Japan Latin America Russia Turkey GDP growth / Exports growth (2005-2010) Note: Bubble size proportional to GDP at PPP (Purchase Power Parity) in US$ Billion in 2010 Source WEFA/Globalinsight

28. Average annual RPK growth rate (% p.a.) 2004 - 2023 Domestic Indian Sub Domestic PRC Asia - PRC Central Europe – Indian Sub PRC - USAAustralia/NZ - PRC CIS - PRC Western Europe - PRC Indian Sub - USA World average 5.3 % China in the same backyard effect Japan - PRC Top 10 Asia-Pacific growing markets (2004-2023)

29. International traffic: new routes and stronger hubs Content

30. Average annual RPK growth rate (% p.a.) 2004 - 2023 Asia - PRC West. Europe - Middle East PRC - USA Intra Asia Indian Sub. - USAAustralia/NZ - PRC West. Europe - PRC Asia - Australia/NZ Asia - USA West. Europe - Indian Sub. Top 10 International passenger traffic World average 5.3% p.a.

31. Strong traffic growth to be distributed through: fragmentation and consolidation CONSOLIDATION ‘Hub to hub’ Hubs are ‘points’ too ! Hubs improve connectivity FRAGMENTATION ‘Point to point’ Market development If traffic volume/frequency sufficient

32. Fragmentation/consolidation depending on evolving equilibrium of: - World demographics, trade centers - Origin and destination demand - Pace of liberalization - Airline and hub economics - Airline alliances - Congestion and environmental issues - Passenger choice for pricing, convenient schedule, non-stop Influences on network development

33. Primary/hub cities today were, are and will remain dominant. 20051975 Main cities on Europe – USA (1975/2005) Seats Source : OAG/ST. Monthly departure seats on Western Europe - USA 8 are still in the top 10 30 years later 80% of new routes since 1995 and still operated are linked to these cities.

34. Primary/Hub cities are where people want to fly 77% of the demand involves at least one of the 32 Primary city at one end. Primary-Primary Primary-Other Other-Other (transverse routes) Total long haul O&D demand

35. 100 fastest growing city pairs (1995-2005) World NORTH ATLANTIC EUROPE-ASIANORTH PACIFIC 100 fastest growing city pairs* (1995-2005) * Growth in additional seats. Source : OAG/ST September of each year. Non stop routes only with range > 2000nm. Domestic routes excluded.

36. Trunk routes and thinner routes from hub cities grow in parallel Source : OAG, world international routes over 2,000nm. Hubs are 32 Primary cities from which 90% of the LR seats are offered. September seats offered (000) World >2000 nm

37. % of pax who can fly directly will increase by 5 points Point-to- point Connecting Hub-hub Hub-2nd 2nd-2nd 45% 55% Point-to- point 50% 2004 23.5 million passengers 2014 45 million passengers Hub-hub x1.9 X2.4 Hub-2nd 2nd-2nd x2 Europe-Asia

38. Stronger hubs and new route development Growth allocation on Europe-Asia 2004 2014 Annual seat capacity 2004 2014 Europe-Asia Including 1 additional route Including 27 additional routes Including 4 additional routes

39. Europe-Asia - Different markets for different aircraft VLA routes 350-400-seater routes 250-300-seater routes Between large economic centers. 2014 Other routes

40. A380 announced destination to North East Asia by 2010 by existing customers … … 160 A380 weekly frequencies already planned by 2010 from China 159 firm orders & commitments

41. +182%8 9993 193RPKs (billion) -727-Freighters delivered new Change20232003World fleet forecast +140%3 6161 506Dedicated freighters - 16 601 -New passenger aircraft delivered +101%21 75910 838Passenger aircraft GMF highlights - 17 328 -Total new deliveries

42. Number of new aircraft New passenger and freighter aircraft deliveries will average 866 per year 17,328 new passenger and freighter aircraft deliveries 63% 19%19% 8%8% 10% % value:40%24%14%22% Source: Airbus GMF 2004 20-year forecast 2004 - 2023 $1.9 trillion of value