1 Adria Airways Slovene Airline Company 4th Vienna Economic Forum Tomaž Škofic Depuity V.P. Sales & Marketing Vienna, 6 November 2007

2  1961 ● establishment of the charter airline Adria Aviopromet, operating DC- aircraft, end of the sixties purchase of DC-9 aircraft. aircraft, end of the sixties purchase of DC-9 aircraft.  1984 Adria becomes a member of the IATA. Starts developing scheduled services with: DC-9, MD-80 and Dash 7 aircraft. Fleet: DC 9, MD 80, Dash 7 aircraft.  1989 ● Purchase of first Airbus A320 aircraft.  1991 ● On 25 June, the Republic of Slovenia declares independence, for political reasons Adria is grounded for three months.  1992 ● End of January operations restarted in a significantly reduced market. The structure of operations is markedly changed, from primarily a charter airline to a mainly scheduled service carrier. Company history

3  1995 ● Start of cooperation with Lufthansa, inclusion in European integration processes.  1998 ● Purchase of three new CRJ 200 aircraft.  2000 ● Purchase of fourth CRJ 200.  2001 ● The first scheduled flight in the EU, from Vienna to Frankfurt.  2002 ● Adria selected as first European authorised Bombardier maintenance centre for CRJ aircraft.  2004 ● Adria joins the global association of airlines, Star Alliance, as a regional member.  2005 ● Purchase of fifth new CRJ 200 aircraft; opening of a new hangar.  2006 ● In November, Adria starts introducing e-ticketing.  2006 ● In December, Adria carries more than one million passengers for the first time in the independent Slovenia.  2007 ● Purchase of two new CRJ 900 aircrafts. Company history

Start Reorganisation Future Start Reorganisation Future of business operation Problems Solutions Stabilized Problems Solutions Stabilized operating, operating, further experience based development

5 Difficult situation in 2005  Extensive loss in the amount of 9,6 mio EUR  Inadequate fleet (gap between the 48-seater and the 162-seater )  Global drop in ticket prices  Global increase in oil prices  Lack of controling of financial risk  Lack of planning and creating of reserves for aircraft investment maintenence  High operating costs (airport handling, catering)  High financial costs  Cash flow problems

6 Measures for the improvement of business operation Measures for increasing the revenues Revenues from scheduled passenger services  Stop further decreasing of the value of passenger coupon (sticter limitation of promotional fares, general fare increase, increase of tariff add-ons, RSFs and No-show control)  Reorganization of revenue management process  Insateing new routes  Adding new frequencies

7 Measures for increasing the revenues Revenues from charter services  Charter services remain complementary services to the scheduled services and are aimed at optimising returns and not primarily at increasing the volume. Revenues from maintaining aircraft for third parties  Maintain the leading position in maintenance of CRJ 100/200/700/900  Expansion on the C-checks market for Airbus A-319/320/321 aircraft  Building of a new hangar.

8 Measures for increasing the revenues Other operating revenues  More active and inovative approach to marketing of our own media (the In-flight magazine and aircraft interior and exterior)  Active markting of Adria Airways web site  Further developement of our own pilot training resources and facilities

9 Cost Management Direct operating costs  Fleet optimisation - Lease of two A320 aircraft in “wet lease” - Due to too large gap between the Canadair CRJ-200 and the Airbus A320 aircraft, we leased two intermediary capacity aircraft with crew A320 aircraft, we leased two intermediary capacity aircraft with crew - Purchase of two new CRJ 900 aircrafts. - Lower operating expenses - Better occupancy of the aircraft - Options for CRJ900 and CRJ1000

10 Cost Management Direct operating costs  Mitigating high prices of kerosene through certain measures: - selecting the most competitive offer - planning the use of aircraft appropriate to the number of passengers; - adding of fuel surcharge - use of financial derivatives  Reviewing contracts with individual airports to achieve significant savings in airport charges

11 Cost Management Direct Operating costs  Maintenance costs - Challenge of cost management in fleet investment maintenance - Signing a contract with the manufacturer of the engines for the A320, IAE, to maintain engines and for payment of costs by engine flight hours; IAE, to maintain engines and for payment of costs by engine flight hours; advantages: advantages: –An easing of cashflows –Equal distribution of costs over years –Lower maintenance costs

12 Cost Management Indirect operating costs  reduction of cabin services  rationalisation of distribution network  reorganisation of company structure and job descriptions (introducing stimulating salary system with variable part of he salary)  outsourcing of certain activities (maintenence of IT systems, general purchasing, cleaning…)

13 Cost Management Non – operating result  Refinancing of the majority of long-term foreign currency loans; replacing fixed high-interest Dollars loans to Euros and cheaper sources of finance –cash-flow was improved due to the moratorium on repayment of the principal –Savings in financial costs  Adoption of a financial risk management strategy in order to achieve effective and systematic risk management - interest rate risk - interest rate risk - currency risk - currency risk - risk associated with fuel price changes. - risk associated with fuel price changes.

14 Miscellaneous  Intensively progressing with the electronic ticket project  Continuing with the trend of encouraging internet sale and other modern sales channels.  Building new headquarters and centraliseing the company in one location.  Organisation of effective controlling; primarily by establishing profit and cost centres.  Effective management of IT system.

15 Results  Continuous improving of load factors.

16  A growing number of passengers carried

17  Growth of the scale of operations of Adria Airways d.d.

 Net profit of Adria Airways d.d. 18

19 Summery  Striving to became leading carrier in the Balkans  Striving to expend and optimize the fleet  Remain the main maintenance centre for CRJ aircraft  Profiting Slovenia’s forthcoming EU Presidency for proving our excellence and improving our business results

3 Airbus A320 Adria Airways Fleet 7 Canadair Regional Jet Canadair Regional Jet 900

21 The Adria Airways network of scheduled and charter flights

22 Thank you for your attention