1. The revenue crisis: when will the airline industry recover? Narjess Teyssier ICAO n Chief Economic Analysis & Policy Section Montréal 26 September 2010

2. Regional traffic overview for 2009 North America Traffic: -3.9% Capacity: -4.7% Load Factor: +0.7 Pt Latin America Traffic: 0.9% Capacity: 2.2% Load Factor: -0.9 Pt Europe Traffic: -3.9% Capacity: -4.3% Load Factor: +0.3 Pt Africa Traffic: -3.9% Capacity: -4.3% Load Factor: -0.7 Pt Middle East Traffic: 9.1% Capacity: 11.9% Load Factor: -1.9 Pt Asia Pacific Traffic: -0.2% Capacity: -0.9% Load Factor: +0.6 Pt World Traffic: -2.0% Capacity: -2.2% Load Factor: +0.2 Pt

3. Higher Disposable incomes Liberalization Falling air fares Globalization Main drivers for air travel demand

4. ICAN: ICAO forum for liberalization

5. As a % of international scheduled services Air transport conducted under liberal arrangements Source : ICAO Frequencies Country pairs

6. Number of LCCs : 13 Deregulation : 1978 Number of LCCs : 33 Deregulation : accelerating Number of LCCs (Africa and Middle East) : 10 Deregulation : uneven Number of LCCs : 10 Deregulation : in progress LCCs development by region Network carriers 79% LCCs 21% Network carriers 86% LCCs 14% Network carriers 79% LCCs 21% Number of LCCs : 48 Deregulation : 1987- 1997 Network carriers 76% LCCs 24% Network carriers 91% LCCs 9% Liberalization: a necessary frame for Low Cost Carriers development

7. Low Cost Carriers progression Source: ICAO 1999-2009: 14% p.a. 1999-2009: 4.3 %p.a. Total European air traffic

8. Toward more consolidation: Alliances, Airlines´ mergers and acquisitions 3 Major alliances grouping : more than 60% of the worldwide scheduled traffic Most well-known Non Aligned airlines

9. Traffic recovery started in 2010, despite the volcanic ash impact Source: ICAO 1999-2009 average growth 4.3% *Traffic of airlines registered in each region expressed in RPKs Regional traffic* growth forecasts

10. Challenges ahead for the airline industry How has the financial crisis impacted airlines and other industry stakeholders? How has the financial crisis impacted airlines and other industry stakeholders? What are the recovery strategies? What are the recovery strategies? Does liberalization improve or worsen the financial condition of airlines? Does liberalization improve or worsen the financial condition of airlines? How do alliances and antitrust immunity enhance revenue, reduce costs, and affect consumer welfare? How do alliances and antitrust immunity enhance revenue, reduce costs, and affect consumer welfare? Where will the industry be in five years? Where will the industry be in five years?

11. MOST CREATIVE ONES Charging for toilet paper – with O’Leary’s face on it, Charging €2.50 to read the safety cards, Charging €1 to use oxygen masks, Charging €25 to use the emergency exit, Charging €50 for bikini clad Cabin Crew. €1,000 cash prize for best suggestion of ancillary revenue

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13. Low Cost Carriers progression Source: ICAO, IATA Passengerr traffic Billion RPKs 1999-2009 +4.3 % p.a. Non IATA airlines 7% IATA members 93% Passenger traffic market share By airline type Non IATA airlines 25% IATA members 75% Passenger traffic market share By airline type 1999-2009 +14 % p.a.

14. Market shares* achieved * Market share of the scheduled traffic of the airlines domiciled in the region Europe 41% Latin America 4% North America 17% Asia Pacific 25% Africa * 3% Middle East 10% International passenger traffic** Domestic passenger traffic** North America 55% Africa * 1% Middle East 1% Latin America 5% Europe 8% Asia Pacific 30% International traffic represents 60% of the total passenger traffic International traffic represents 60% of the total passenger traffic **Expressed in Revenue Passenger Kilometre

15. Decrease in number of stored aircraft Source: Back Aviation Solutions Worldwide Long term & temporary aircraft storage Airbus and Boeing deliveries for 2010 expected to be above 900