EUROPEAN AIRPORTS AT A CROSSROADS Olivier Jankovec, Director General The European Aviation Club Brussels, 29 April 2010

OVERVIEW ACI EUROPE SETTING THE SCENE The Global Crisis & The Volcanic Ash Crisis EVOLVING BUSINESS MODELS KEY CHALLENGES

THE VOICE OF EUROPE’S AIRPORTS

2009 PASSENGER TRAFFIC: -5.9%

2009 FREIGHT TRAFFIC: -13.1%

UNPRECEDENTED IMPACT 100 MILLION PAX LOST = DOUBLE WHAMMY Declining aeronautical revenues Declining commercial revenues INCREASING CAPITAL COSTS Access to capital markets difficult/costly Credit rating downgrades (2009) Credit rating negative outlooks (2010) DETERIORATION IN FINANCIAL PERFORMANCE EBIT: decrease by up to -97% (top 25 European airports) INCREASING AIRLINE PRESSURE (charges)

BUT LIMITATIONS IN BUSINESS MODEL TIGHTENING THE BELT COST CUTTING STAFF reductions Schiphol -25%, Dublin -20%, Manchester -5%, Milan -30% OPEX reductions CAPEX: -€2.8 billion (2009) BUT LIMITATIONS IN BUSINESS MODEL MOST CAPITAL INVESTMENTS CONFIRMED €50 billion by 2013 Long lead times in airport development Ready for the rebound = air traffic to double by 2030

CHARGES = RESPONSIVE 2009 2010

DIFFERENTIATED IMPACT MOST SEVERELY AFFECTED MARKETS Spain, UK, Poland, Baltic countries… MAJOR HUBS: RESILIENCE -4.7% Transfer traffic Diversified portfolio of airline customers SECONDARY HUBS: MORE AFFECTED -6.1% Weakness of dominant carrier (SAS, Aer Lingus, Austrian Airlines, Alitalia, LOT…) REGIONALS: MANY LOSERS, SOME WINNERS -5.4% Down up to -60% at some airports Dependence on a single carrier Growth at some locations to the detriment of others

VOLCANIC ASH CRISIS OVERVIEW Up to 80% of airspace closed +100,000 flights cancelled +10 mil pax unable to travel AIRPORTS +16 mil pax lost +€250m lost revenue €10m assistance cost Most Fixed/variable cost unchanged AIRLINES +€1.3 bil lost revenues €200m assistance costs (AEA) Fuel costs savings

VOLCANIC ASH CRISIS - 18 April

VOLCANIC ASH CRISIS - 20 April

SLOW & GRADUAL RECOVERY 2010: PROTRACTED GROWTH JAN: +3.9% for pax... +20.2% for freight FEB: +4% for pax… +19.8% for freight GDP EURO AREA: +0.7% Uncertainty… AIRLINES: YIELD RECOVERY v. CAPACITY GROWTH Network carrier capacity: +2%? Low-Cost capacity: +11% (vs. +18% in 06/07)? CONTINUED EXPOSURE TO FUEL PRICES 50% of fuel requirements hedged Further rise in H2?

AIRPORT-AIRLINE RELATIONSHIP NEW MARKET STRUCTURE INCREASED DOMINANCE OF LOW-COST MODELS Growing market share: +50% in 2013! Increasing relevance to business travelers Challenge to Hub&Spoke model More pressure on charges expected AIRLINE CONSOLIDATION DOMINANT PARTY IN AIRPORT-AIRLINE RELATIONSHIP

BUSINESS TRANSFORMATION Times Past Mere infrastructure provider Securing needs of a flag carrier Exclusive public ownership Dependent upon public financing Today Fully fledged businesses with diversified activities Serving a wide range of customers with different needs Corporatisation = a “MUST” Privatisation Self-financing

KEY STRATEGIC DIRECTIONS (I) DIFFERENTIATE FACILITIES & SERVICES LCCs /Network airlines (alliances) Mainline & LC facilities Marseille, Amsterdam, Bordeaux, Copenhagen, Malpensa, Brussels REDUCE DOMINANT AIRLINE DEPENDENCE Legacy carrier or LCC COMPETITIVE AIRPORT CHARGES = A “MUST” 3.5% of airline costs (ICAO) Airline-related charges: 22% of total airport revenues ATC charges MUST follow the same example! 16

KEY STRATEGIC DIRECTIONS (II) DEVELOP NEW REVENUE STREAMS Commercial Developments 47% of total airport revenues New management models … NEW THREATS WHO ban on Tobacco/Alcohol duty free sales Restrictive cabin bag rules Security GROW INTERNATIONALLY Fraport, Aéroports de Paris, Schiphol, Zurich, AENA, TAV… AIRPORT ALLIANCES Aéroports de Paris & Schiphol Group SEA Milano & Aeroporti di Roma

NEW & DIVERSIFIED BUSINESS MODELS

ENVIRONMENT & CLIMATE CHANGE KEY CHALLENGES ENVIRONMENT & CLIMATE CHANGE CAPACITY & FINANCING SECURITY CONNECTIVITY

AIRPORT CAPACITY CHALLENGE THE CRUNCH – air traffic will double by 2030 41% capacity increase = 5 new airports & 79 new runways … BUT 11% of demand still not accommodated! Unprecedented congestion! Far reaching impact: SES, environment, competitiveness FINANCING ISSUE From airline-centric to passenger-focused regulation = Incentivise airports to finance development EU funding (SESAR, environment, co-modality) POLITICAL ISSUE EU priority & national support (alignment with SES…) Increasing environmental pressure License to operate & grow at risk!

ENVIRONMENTAL CHALLENGE REGULATORS & INDUSTRY TAKING ACTION… ETS = ICAO leadership needed for global system! SES + Clean Sky funding Airlines committed (IATA AGM, June 2009) Airport Carbon Accreditation (ACI EUROPE GA, June 2009) …BUT CLEARER POLICY DIRECTION NEEDED 1. RECONCILE growth & environmental objectives 2. PRIORITISE environmental objectives 3. ADDRESS energy supply issues… prioritise! 21

CONNECTIVITY CHALLENGE (I) AVIATION = REAL WORLDWIDE WEB Improved air transport links key to economic benefits BUT outdated & unfit regulatory framework BENEFITS OF TOTAL LIBERALISATION Intra-EU liberalisation + 170% increase in air routes! 1000 new city pairs (2003-2007)! MOVING FORWARD… QUICKLY! Pan-Mediterranean & European Aviation Area 58 countries & 1 billion consumers BRICs (Brazil, India, China)

CONNECTIVITY CHALLENGE (II)

THE SECURITY CHALLENGE 9/11, LAGs, UNDERPANTS BOMBERS… Costs: 35% of airport operating costs; 41% of airport staff New technology: + €1bn LAGs + €1bn Security Scanners… ONE-STOP SECURITY EU & Pan-European… including public financing! Globally « THE AIRPORT OF THE FUTURE » by 2020 Seamless & Integrated Processes New philosophy Deterrence over Detection, Probable over Possible Automated Screening & Border control Body scanners Biometric standards

LOOKING AHEAD VOLCANO AFTERMATH EC AVIATION PLATFORM EC proposals = European Aviation Relief Plan EU Transport Council 4 May EC AVIATION PLATFORM New Governance system within the EC Towards a real Industrial Policy for Aviation? EC WHITE PAPER – Future of Transport MOBILITY = making a comeback? No valid substitute to aviation

www.aci-europe.org www.airportcarbonaccreditation.org