2. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 1 Selection of LCC Destinations SEAPLANE Follow up Event Wolfgang Kurth 3. November 2005 Bergamo, Italy

3. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 2 Agenda LCCs in Europe Value for Cities and Regions Selection of LCC Destinations Conclusions LCCs in Europe

4. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 3 Business Environment VOLUME/GDP TIME Africa Asia Middle East Latin America PIONEER STAGE TRANSITIONRAPID GROWTH STAGE TRANSITION U.S. and Europe MATURE STAGE GDP Volume

5. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 4 For what reason would you fly more often? 11% 8% 41% 8% 6% 17% 0% 10% 20% 30% 40% 50% upgradesschedulesafety ground low faresmore FFP´s safety board others Source: IATA Online Survey 2003 Low Fares Stimulate Demand

6. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 5 Forecasts for the European Low- Cost Market 2002–2009F PAX (Mio) Pessimistisch Optimistisch Anzahl der Passagiere von Ryanair und easyJet auf Basis der Kapazitätsankün- digungen 19% 15% 30% Marktetpotential German Low-Cost Segment PAX (Mio) Schätzung unter Anwen- dung US und UK Marktanteile & Reisehäufigkeit auf die deutsche Population Forecasts Are Optimistic 1 Pessimistisch: Anzahl der No-Frills-Reisen in Europa erreicht derzeitiges UK / Irland Niveau (0.25 Trips / Capita) in 8 Jahren (Anzahl der Passagiere = 72MM) 2 Optimistic: Anzahl der No-Frills-Reisen in Europa erreicht das derzeitige Nivaeu in den U.S.A. (0.5 Trips / Capita) in 8 Jahren (Anzahl der Passagiere = 195MM) Quelle: Analystenreports, HLX-Schätzung, Monitor Group Analyse CAGR Pessimistisch

7. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 6 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2 LCC Routes 2001

8. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 7 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2 LCC Routes 2002

9. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 8 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2 LCC Routes 2003

10. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 9 Caption: Ryanair easyjet Volareweb bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope jet2 LCC Routes 2004

11. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 10 Caption: Ryanair easyjet bmi Baby Hapag-Lloyd Express Germanwings Sterling Skyeurope Jet2 etc, etc LCC Routes 2005

12. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 11 Split of LCC Customers Split of “new” Passengers Quelle: NFO Infratest, 2002; Monitor Group Analyse Sharel (%) Share(%) Growth Is Triggered By „New“ Passengers

13. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 12 Asia/ Oceania European Union North America Source: ITA Daten 2002/3, Analysis ADL Aviation Competence Center secondary airports continental hubs intercontinental hubs 4,5% 9,7% 6,2% European Union, secondary airports with LCC home base with- out LCC home base Growth Of Secondary Airports (Basis: Pax 2002/2003)

14. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 13 Agenda LCCs in Europe Value for Cities and Regions Selection of LCC Destinations Conclusions Value for Cities and Regions

15. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 14 LCCs – Generators Of Regional Economic Prosperity Impacts on regional economies be generally split into: Direct effects Mainly jobs at airlines, handling & related aviation acitivities (as being roughly half of total job effects). Total on-site employment of regional airports between 850 – 1200. 1,000 jobs created for every 1 million passengers through an airport. Indirect effects Regional airports support roughly 1200-1800 jobs within the regional or local economies. Studies have found regional airports to have comparable economic effects to several mid-size manufacturing plants. Catalytic effects Mainly effects stemming from attraction and detention of inward investment and the stimulation of inbound tourism. Especially the enhancement of competitiveness to local economies as well as the attraction of business and leisure passengers leads to higher generation of incomes and employment.

16. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 15 Direct Impacts Of LCCs  EasyJet’s direct operations con- tribute approximately £66 million to local gross income levels, supporting a total of 1,770 jobs in the aviation sector and supply- chain companies.  These levels of direct expen- diture and employment provide income and employment for others.  Taking all these wider effects into account, EasyJet’s operations add £120 million to local incomes and support a total of 3,185 local jobs. Source: National Economic Research Associates, London 2000 LTN Passenger development

17. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 16 Catalytic Impacts Of LCCs  Routes from London-Stansted launched in April 1998 and from Brussels-Charleroi in April 2001. Annual passengers of both routes account for roughly 250.000 visitors, 90% of which are non-French  Stimulus by London route only is estimated to account for € 215m, only € 6,5m of which related to direct effects at the airport. A total of 2.800 new jobs is estimated to be related to this new route and it´s consequences.  Prices of real estate are estimated to have risen by 25% between 1998.  LCCs contribute to regional development and economic development, directly and indirectly. Source: Financial Times, Dec12, 2002 Carcassonne

18. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 17 LCCs Generate Incoming-Traffic Approx. 25-30 per cent of the passengers on the LCC routes to Germany are Incoming Passengers

19. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 18 Region Verkehrsanteil Brussels area25% N Belgium19% S Belgium18% Netherlands17% Luxembourg 8% France 7% Germany 6% Catchment Charleroi

20. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 19 Per 1 mio passengers per annum on 12 routes….  Ryanair pays to Charleroi Airport: € 2.0 mio airport fees and handling charges  Charleroi Airport pays to Ryanair: € 1.9 mio Marketing Incentive for new routes € 2.0 mio Marketing Support € 1.5 mio Support for infrastructure and recruitment  Total costs for the airport: € 3.4 mio or € 3.4 per passenger Quelle: Aviation Strategy, July/August 2001, S.3 Incentivprogram for Ryanair

21. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 20 Agenda LCCs in Europe Value for Cities and Regions Selection of LCC Destinations Conclusions Selection of LCC Destinations

22. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 21 Unit Costs vs. Stage Length Low Cost Carriers Britannia Regional Airlines Scheduled Airlines BA EasyJet LH AF KL IB Ryanair SK SWA ATA AS AWA NW DL CO US UA TW AirT AZ AA Average Route Length (Miles) Cents / ASM ASM: Available Seats Miles Source: CASM Form 41, Air Transp. World June 2001 issue, Stage length data from the Airline Monitor Nov. 2001 issue; AirTran data Air Tran 10-Ks BAH Analysis Charter Airlines 25 20 15 10 5 0 0200 400 600 800 1.000 1.200 1.400 1.600

23. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 22 Note: Yield Curves include costs of Airports, Ground-Handling, TNC, En Route, Fuel and ACMI (1,980 and 1650 EUR/BH respectively) Source: TUI Data, Press, Company Reports, Company Website, Broker Reports, EU, AEA, Monitor Analysis Load Factor (%) 1,396 km 1,075 km 698 km 467 km Break Even Yield Curves Revenue/ Segment (€) Unit Costs Decrease with Stage Length Trip costs increase with stage length. Unit costs decrease with stage length or aircraft size. Break even yield increases with stage length. Break even yield decreases with LF.

24. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 23 Network Design EasyJet 2003E Liverpool Barcelona Malaga Edinburgh Glasgow Aberdeen Iverness Belfast Newcastle Geneva Nice Amsterdam Madrid Luton Gatwick Paris LCCs Follow Different Growth Patterns Ryanair Dublin Stansted Brüssels Shannon MilanFrankfurt-Hahn Stockholm Glasgow 2003E Growth Strategy Growth mainly triggered by new market generation (I.e. stimulating new leisure and business demand); some growth by taking share from incumbents Competition only from Ryanair (only 25% of routes have low- cost competition) and flagships (67% of routes); however, flagships started to react and protect their routes (BA kicked back ‘01) Accelerated growth over last two years; however, increased density but did not add new destinations High network gains by utilizing higher airport costs with high frequencies and many connections Expanded continuously since 1995; Since ’99 increased network density by adding new hubs and connecting these with existing network successively; Started integrating Go network end of ‘02 Hubs are based on successful destinations Growth mainly triggered by new market generation (I.e. stimulating new leisure and business demand); some growth by taking share from incumbents Competition only from easyJet (only 12% of routes have low- cost competition) and flagships (59% of routes); however, flagships started to react and protect their routes Accelerated growth over last two years, mainly by adding new destinations Not many network gains; due to lower airport cost not necessary Concentrated on domestic market until 1996, increased frequencies; Expanded between ’97 and ’00 by adding destinations; Started turning successful destinations into hubs since ‘01 “Density Approach” “Modular Approach”

25. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 24 Stage Lenghts HAJ vs STR Boeing typical airline rules Taxi times not included 85% annual winds 3% airways allowance London Madrid Paris Barcelona Shannon Lisbon Algiers Rome Palermo Malta Athens Dubrovnik Helsinki STUTTGART St. Petersburg Minsk Moscow TallinnOslo Budapest Warsaw Stockholm Belgrade Bucharest HANNOVER

26. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 25 Incremental Costs Caused By Geo – Strategic Disadvantage DOC A/P 1 A/P 2/3 ca. 560 Euro A/P 1A/P 2 A/P 3 Avg. Costs/Bhr

27. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 26 HAJ-NAP vs. STR-NAP At 70% LF: geo-strategic disadvantage HAJ vs. STR app.ca. 5 Euro/Pax

28. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 27 Agenda LCCs in Europe Value for Cities and Regions Selection of LCC Destinations Conclusions

29. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 28 Hamburg Berlin Hanover Cologne Stuttgart 26% 35% 33% 30% 27% Not All Destinations Are Equally Atttractive

30. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 29 Catchments Are Affected By Competition Liverpool East Midlands Luton Liverpool East Midlands Luton Leeds/Bradford Birmingham Catchment for: East Midlands - Barcelona Frühjahr 2002 (bmibaby) Catchment for: East Midlands - Barcelona Frühjahr 2003 (bmibaby and easyJet)

31. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 30 Legacy Carriers Are Cutting Back Cardiff/Wales (weekday deps) April 2002 British Airways*12 KLMuk 5 Manx 1 Ryanair 1 Air Wales 1 ---- 20 April 2003 bmibaby 11 KLMuk 5 Air Wales 3 Ryanair 1 ---- 20 Belfast International (weekday deps) April 1998 British Airways*19 British Midland12 Jersey European 4 KLMuk 3 Sabena 1 Aer Lingus 1 ---- 40 April 2003 easyJet35 bmibaby 4 British Airways* 4 Eastern 1 British Northwest 2 ---- 46 * including franchises

32. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 31 LCC Airport Tourism Organisation Incentives Passengers Tourism Industries Guests Touristic Value Creation ? The Challenge

33. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 32 Tax Financed Marketing Kärnten Werbung (legal entity, major shareholder State Government) provides certain incentives and support to LCCs and gets re-financed through  „Fremdenverkehrsabgabe“ Tourist Fee to be paid by tourism industries to Local and State Government  „Nächtigungstaxe“ Overnight Tax to be paid by hotels, B&Bs to Local and State Government Total Income: app. € 20 mio (est)

34. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 33 Touristik-AG

35. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 34 Regional „Airline“

36. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 35  LCCs stimulate the demand. Frequency and days of service are of paramount importance.  Attractivity of destinations de- termines the balance of the traffic flow  LCCs have very different business models  …. More Challenges

37. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 36 Incentives have to be based upon careful evaluation o follow the rules o stimulate Incoming Traffic o take into account the existing route portfolio o take into account the existing carrier-portfolio o „stretch“ the average stage length  The Home Page of LCC is perfect to market touristic services (hotel, entertainment, Guided Tours etc)  Catchments of LCC - airports may be influenced by other services …. More Challenges

38. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 37  Airports, cities and regions don‘t have necessariy the same interests!!  A strong and co-operative partnership between Low Cost Airline and tourism organisation/-industrie is pre-requisit for a significante stimulation of the touristic value creation.  Know how and experience are key for a realistic evaluation of LCC-services. Key Success Factors

39. Selection of LCC Destination, Bergamo, 3.11.2005 www.advolar.com © 38 Thank you for your attention!