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

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

Economic and oil price outlook Content

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

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

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

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 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, …)

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

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

Air transport developments Content

: 11.5% p.a : 5.8% p.a : 5.8% p.a. Source : ICAO, Airbus estimate for 2005 Gulf Crisis Asian Crisis Oil Crisis WTC attack World annual traffic - trillion RPK : 7.1% p.a. Air travel is resilient and has recovered ICAO total traffic GMF 2000 forecast 1 year Air traffic evolution

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 vs worldwide growth: 7%

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

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

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

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

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

Drivers of traffic growth Content

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 % AAGR %

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

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

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

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 airports with LCC operations Domestic* 77% Intra Asia* 23% September 2014** Airports served by LCC and type of operations

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

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

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

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

Average annual RPK growth rate (% p.a.) 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 ( )

International traffic: new routes and stronger hubs Content

Average annual RPK growth rate (% p.a.) 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.

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

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

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

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

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

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

% 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% million passengers million passengers Hub-hub x1.9 X2.4 Hub-2nd 2nd-2nd x2 Europe-Asia

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

Europe-Asia - Different markets for different aircraft VLA routes seater routes seater routes Between large economic centers Other routes

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

+182% RPKs (billion) -727-Freighters delivered new Change World fleet forecast +140% Dedicated freighters New passenger aircraft delivered +101% Passenger aircraft GMF highlights Total new deliveries

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 year forecast $1.9 trillion of value