1. Seminar prior to the ICAO Air Transport Conference Perspective of a medium-sized Airline TAP – Air Portugal Montreal, March 23rd, 2003 The Future of Liberalization

2. What does Liberalization mean 1. In relation to the Aeropolitical Environment Freedom for Airlines to:  provide services on desired routes, at an economic and commercially viable scale  access new resources and join forces with other airlines, irrespective of nationality Freedom for Passengers to:  to choose among alternative services 2. In relation to Infrastructure Suppliers and Product Distributors Freedom for Carriers to:  choose how and with whom best to do business  where that is not attainable, be able to secure adequate correlation between service level and price to be paid

3.  To end monopolistic situations, where insufficient number of operators and/or suppliers provide less than satisfactory level of service  To allow fair and sound competition, that can work as a stimulus for inefficient service providers  To allow more flexibility in terms of resource sources and utilization, creating ways for reduction of fixed costs and enhancement of economies of scale, density and scope Why we think Liberalization is needed

4. 1.In relation to the Aeropolitical Environment  Liberalized environment  reduction of costs, but also of yields  Need for Governments monitoring of evolution  to strike a balance between Liberalization and Sustainability Market Access -Deregulation  Fragmentation  Excessive Capacity  Insufficient Profitability  Restructuring  Consolidation  Consistent regulatory policies, to avoid “fighting-for-survival” cycle leading to less competitive configuration  Gradual & regionally customized approach acceptable, if not at consumers’ cost Capital Access – Remedy for current undercapitalization  Liberal Ownership Clause: Crisis-affected, cash-strapped Airlines need to be able to open up their stock to investors around the world. How we see Liberalization should be pursued…

5. 2. In relation to Infrastructure Suppliers and Product Distributors, Liberalization must… … aim at creating fairer and more balanced gain distribution among business partners  Airlines are doing their homework. But reducing controllable costs and increasing efficiency not enough toimprove margins.  Time for others in the value chain to become more efficient in their structures, lower their charges … go hand in hand with international air policy convergence  different types of measures impose considerable discrepancies of treatment and incurred costs around world

6. Governments are called to pursue liberalization that:  Promotes an international playing field, freed from national discrimination and based on the sound principles of reciprocity, equal treatment and fair opportunities  Eliminates excessive market power, or otherwise regulate where no alternative exists to natural monopolies  Abolishes anachronistic restrictions, preventing airlines to access and make efficient use of resources, or to take full advantage of market potential

7. The Future of Liberalization Thank you for your attention José Guedes Dias TAP Air Portugal