1. Kopf

2. The View on Estonian Aviation for the Next 20 Years
Kopf
The View on Estonian Aviation for the Next 20 Years
20th Estonian Aviation Seminar

3. Agenda Past 20 Years Importance of Aviation Next 20 years Contacts
Kopf
Agenda
Past 20 Years
Importance of Aviation
Next 20 years
Contacts
Estonian Aviation Seminar, 12 November

4. Source: Tallinn Airport Statistics, Note- 2015 is 10 month figures
Over the last 20 years we have seen the passenger volumes more than quadruple with expected 2.1 M passengers in 2015
Source: Tallinn Airport Statistics, Note is 10 month figures
Estonian Aviation Seminar, 12 November

5. Source: Tallinn Airport Statistics, Note- 2015 is 10 month figures
The peak in regional airports remain at the time when Estonian Air operated 33 seater Saab aircraft
Source: Tallinn Airport Statistics, Note is 10 month figures
Estonian Aviation Seminar, 12 November

6. In the example of Riga Airport base carrier is fundamental to growth and development of an airport
Estonian Aviation Seminar, 12 November

7. Agenda Past 20 Years Importance of Aviation Next 20 years Contacts
Kopf
Agenda
Past 20 Years
Importance of Aviation
Next 20 years
Contacts
Estonian Aviation Seminar, 12 November

8. Airlines have lowest profit margins as landscape is faced with strongest competition but all other sectors start benefitting immediately
Kopf
Airline concentration in comparison to supplier industries...
Duopoly:
Airbus
Boeing
Two lessors have 45% of market share
1500 airlines despite overcapacity and fierce competition
Less than three providers in deregulated markets
In regulated markets: monopolies and state-owned airports
Two providers dominate 40% of the market, 7 providers control 70%
Monopolists
4 providers dominate the world market
Individual providers dominate single markets
Computer Reservation System
Airlines
Ground Handling
Manufacturer
Aircraft lessor
Catering
Airport
...and the impact on operating margin
2,6% profit forecast
for 2014 by IATA
>30%
16%
15%
11-14%
10-13%
10% 3 %
Source: Lufthansa Consulting research
Estonian Aviation Seminar, 12 November

9. Maintenance providers Ground transportation
When assesing the value of an airline, there is a wide range of beneficiaries involved to be considered
Socio-economic impact
Direct impact
Creates jobs (industry average is 60 to 80 airline employees per aircraft)
Generates payroll
Increases government revenues from local taxes
Produces airport rental fees
- Landing and parking fees
- Gate and hangar space rental
Increases supplier revenues
- Fuel & Maintenance
- Catering & ground handling services
+up to 3% GDP*
Retail
Utilities
Maintenance providers
Hotels
Other providers
Airport
Airline
Financial services IT
Ground handler
Caterer
Indirect social impact
Increases tourism expenditures (trade, restaurants, hotels, local transportation, etc..)
Facilitates business, import / exports, government affairs and VFR travel
Jobs & demand for skilled workers
Creates publicity for the region
Link to key world economies
Ground transportation
Tour operators
Note: * Figures based on averages & global benchmarks for illustration purposes only
Source: Economic catalytic effects of Air Transport; Oxford Economic Forecasting
Estonian Aviation Seminar, 12 November

10. Air traffic effect on GDP
Review of studies made on air traffic effect on economy revealed unanimous positive impact
Direct impact is fairly easy to assess and gives a good indication of the developments
Indirect and catalytic effects are harder to assess and depend greatly on the transparency of the economy
Oxford economics study found following items:
10% improvement on Latvian connectivity would increase 11,5M euros long-term GDP
Study found correlation between increased air connectivity and increased Foreign Direct Investment (FDI)
Latvian aviation sector provides jobs for roughly people
Carrying passengers is much more beneficial for economy as cargo contributed only 1,3%
Air traffic effect on GDP
Source: Kazakhstan – LCG project in 2013, Latvia – Oxford economis study in 2011, Estonia – Tallinn airport study in 2012
Estonian Aviation Seminar, 12 November

11. Estonia is best in Baltics in infrastructure however low quantity of international seat kilometers per week hinder further improvement
The Global Trade Enabling Report 2014
Lithuania
The Global Trade Enabling Report is a good indicator for expressing willingness to invest in certain countries
As Estonia ranks best in port infrastructure and shipping connectivity then improvement in air service connectivity would potentially further increase Estonian position in the list
Best way of improving position is taking over the risk of running the airline and hence making sure that connectivity is guaranteed
Latvia
Estonia
Source: The Global Trade Enabling Report 2014
Estonian Aviation Seminar, 12 November

12. Kopf
Only national carrier will take care of the market when things get difficult, adding value for the state and increasing stability amongst investors
Passenger traffic in VNO by carriers (in Millions)
2.8
2.6
Airlines operating in Vilnius never recaptured the passengers lost when FlyLAL went bankruptcy
Only the stimulation of the market by Ryanair and Wizz Air allowed to recover a decent traffic
Would FlyLaL continued, dynamics would have been completely changed and airport more profitable for the state
Air Baltic
2.4
2.2
Ryanair
2.0
1.8
1.6
Wizz Air
1.4
1.2
Lufthansa
Small Planet
Airlines
1.0
0.8
Scandinavian
Airlines
0.6
0.4
Others
0.2
0.0
2008
2009
2010
2011
2012
2013
Source: Vilnius Airport data, Lufthansa Consulting
Estonian Aviation Seminar, 12 November

13. Kopf
Even if to import services then carrier without true mission to serve the area will leave or reduce as seen by the example of Air Baltic
Market share of passenger traffic in VNO by carriers
Air Baltic
Ryanair
Wizz Air
Lufthansa
Small Planet Airlines
Scandinavian Airlines
Others
2008
2009
2010
2011
2012
2013
Source: Vilnius Airport data, Lufthansa Consulting
Estonian Aviation Seminar, 12 November

14. Agenda Past 20 Years Importance of Aviation Next 20 years Contacts
Kopf
Agenda
Past 20 Years
Importance of Aviation
Next 20 years
Contacts
Estonian Aviation Seminar, 12 November

15. Kopf
With the optimistic (11%) scenario the growth is exponential and impossibly high where as pessimistic (2%) growth unsatisfactory
For the base scenario looking average growth rate of 4% over the last 7 years (after recession) airport volumes would reach 4.6 M passengers
For the optimistic scenario of 10% growth rate (last 20 years average) per year airport would end up in 2035 with more than 15 M passengers
In the case of pessimistic scenario growth will be 2% (average of last 3 years) resulting in 3.1 M passengers in
Source: Lufthansa Consulting
Estonian Aviation Seminar, 12 November

16. What will determine which path will follow for Estonia for the next 20 years? The will of people and decision makers
Sucess/Failure of Nordic Aviation Group and their strategy and growth platform
Ministerial plans for the PSO services from/to the islands
Competitive situation around (Finnair, airBaltic, SAS) and their strategic decision
Ability to increase inbound tourism to Estonia
State priorities for the long-term development of the aviation sector:
Services vs Production
Maritime vs Aviation
Road vs Rail
Estonian Aviation Seminar, 12 November

17. Agenda Past 20 Years Importance of Aviation Next 20 years Contact Kopf
Estonian Aviation Seminar, 12 November

18. Contacts Sven Kukemelk Consultant Lufthansa Consulting GmbH FRA ZQ
FAC 1/ Frankfurt Airport Center 1 Building B, 7. OG
Hugo-Eckner-Ring 60546, Frankfurt, Germany
Mob: +49 (0) Fax:
Estonian Aviation Seminar, 12 November