AIRLINE CHALLENGES CURRENT STRATEGIES AIRLINE CHALLENGES CURRENT STRATEGIES A personal perspective by Pierre J. Jeanniot Opening session

INDUSTRY CHALLENGES  Economic cycles  Financial crises  Government actions  Terrorism  Environmental constraints  Infrastructure

passenger load factor 80.3% yield 0.3% 2013 profit $12.9 billion forecast profit $18.7 billion

REGIONAL FORECASTS Asia-Pacific $3.7 billion North America $8.6 billion Europe $3.1 billion Middle East $2.2 billion South America $1.0 billion Africa $0.2 billion

NORTH AMERICA

Full Service Network Carriers

North American Hybrid Models

FOUR MAJOR CARRIERS consolidation, slot reduction OPPORTUNITIES FOR NEW LCC’s

EUROPE

THE SHORT-HAUL MARKET low-cost airlines overtaking legacy airlines

regional offerings – HOP! regional offerings – HOP! leisure brand - Transavia leisure brand - Transavia alliance and partnerships alliance and partnerships

“SCORE” cost reduction program

81.5 million passengers 81.5 million passengers 1 st base outside Europe 1 st base outside Europe Business model - changing Business model - changing

pre-tax profit +27.9% hybrid model for business passengers

aims to connect the world via Istanbul one of the fastest growing airlines

MIDDLE EAST

WORLD GULF HUBS recent aircraft & engine technology-driven

the world economy continues to shift so do the traffic flows... so do the traffic flows

equity alliance strategy

ASIA PACIFIC

INDIA World’s largest democracy hard to do business !

new airlines, many LCCs Changing Aviation Policies fuel costs Indian rupee depreciation all LCCs losing money – except Indigo

lacked liquidity major losses heavily indebted Full Service Segment

New Joint Ventures Tata Sons – Singapore Airlines full service airline Tata Sons – Telestra Tradeplace – Air Asia low cost carrier - LCC

LATIN AMERICA

co-operative model “virtual airline” buys aircraft individual airlines operate flights “virtual airline” buys aircraft individual airlines operate flights

CONSOLIDATION

highly profitable! largest LCC in Brazil 15% domestic market

AFRICA  traffic growth +6% p.a  traffic growth +6% p.a.  accident rate  mostly government-owned

..

urbanization emerging middle class strong services aviation would play an important role ! Africa could industrialize

North America Europe Asia Pacific Latin America Africa Gulf Airlines

SHAPING FORCES New airplanes and engines Narrow bodiesNarrow bodies Less fuel burn – lower operating costs

SHAPING FORCES New airplanes and engines Wide bodies Less fuel burn – lower operating costs

Continued impact of IT INTERNET SOCIAL MEDIA SELF HANDLING MOBILE DEVICES

CURRENT TRENDS Ancillary Revenues Ancillary Revenues up to 20% of total intake up to 20% of total intake New Distribution Capability New Distribution Capability diversified product distribution diversified product distribution

OBSERVATIONS Aviation continues to change. It needs to adapt … And it needs STRONG LEADERSHIP