north hub riga 2010

International aviation conference 2010

ContentsGunther SollingerSenior Vice President of airBaltic

Welcome speechNils UšakovsChairman of the Riga City Council

Anrijs MatīssState Secretary of Ministry of Transport of Republic of Latvia

Global Market Forecast 2009 – 2028Andrew GordonForecast Market Analysis, AIRBUS

Extending EU`s aviation frontiersMark NicklasAir Transport Agreements & Internal Market of EU Commission

Lithuanian Aviation SectorAgnė KatkutėCivil Aviation Department of Ministry of Transport of Republic of Lithuania

Engine and Environmental ChallengesStephane AuterDirector of International Aero Engines AG, Engine and Environmental Challenges

Challenges facing aviation in the CISBoris RybakGeneral Director of Infomost

Finding the adequate strategy for Northern airlinesMax NilovFreelancer, Aviation Consulting Services

Challenges of Survival & Prospects for the FutureGuenter SeibtGeneral Representative of Air Berlin

Engine of Growth in the BalticsBertolt FlickPresident and CEO of airBaltic, Engine of Growth in the Baltics

HAVAS (Havaalanları Yer Hizmetleri A.S.)Müjdat YücelGeneral Manager of HAVAS

BBI-Adapting to customer needsMarjan SchoekeHead of Airline Marketing of Berlin Airports

Supporting customers’ successJānis BaļķensCEO of North Hub Services

International Airport RigaKrišjānis PetersChairman of the Board of International Airport Riga

airBaltic in social mediaTero TaskilaCCO of airBaltic


Günther Sollinger is a Senior Vice President in Air Baltic, responsible for external affairs. For several years he worked for a major European airline, both in central head office and line functions, covering areas as diverse as network, sales and marketing, project management, station handling and partnership & alliances. He was Area Director responsible for Central- East Europe, as well as country manager for Russia based in Moscow. During the mid-1990 he was directly involved in the start-up of Air Baltic. In 2002 he returned to the airline as Commercial Director, advancing to his present position in 2006. Günther graduated from Uppsala University in Sweden, complementing his education with studies in the USA and in Great Britain. He was a lecturer in government at Stockholm University and the University of Uppsala. Günther has published a number of studies relating to the early history of aviation in both Sweden and in Russia. He is a member of the Historical Society for Science and Technology, Russian Academy of Sciences, and a Corresponding Member of the Academy of Sciences, Aviation and Aeronautics, in Moscow.

Günther SollingerModerator

3

International aviation conference 2010Keynote speech

Nils UšakovsChairman of Riga City Council

Date of birth: 08.06.1976

Education: In 1999 acquired Bachelor’s Degree in Economics at the Faculty of Economics and Management of the University of Latvia. Specialization – analytical economics (the studies took place within the frames of the Eirofakultāte (Euro faculty) program). In 2002 acquired the Cand.oecon degree (M.Sc. in Anglo-Saxon system) at the Economics Department of the Social Sciences Faculty of the Southern Denmark University. Specialization – European Integration Issues.

Work Experience:1998 – 1999Producer, Baltic Division of the Russian TV channel NTV

1999 – 2000Correspondent of LTV News, Latvian Public Television

April 2000 – September 2001Editor, News and Politics Department, newspaper «Respubļika»; after that till July 2002 — Editor, News and Politics Department newspaper «Teļegraf»

2001 – 2004Host and Editor of the weekly program «Nedēļas tēma» (Theme of the week), television channel TV5. Co-producer, Editor and Host of the pre-election show «Krievu jautājums» (Russian Question), television channel TV5. «Krievu jautājums» was the first extensive pre-election debate in the Russian language in the history of Latvia.

March 2004 – November 2005Editor of the News Service of the First Baltic Channel, prepared news releases of Lithuania, Latvia and Estonia; from January 2005 — Editor of the evening news for Lithuania and Estonia.

In 2004 received the Ciceron Award established by the Latvian Union of Journalists and the University of Latvia for the input in journalism. Member of the Board of the public organisation «Baltic Forum»

In summer 2005 entered into the National Harmony Party. In November 2005 he was unanimously elected to the post of the Chairman of the Political Union «Harmony Centre». On 27th November Nils Ušakovs was repeatedly elected to the post of the Chairman of the Board of the Political Union «Harmony Centre» for two years. He is a naturalised citizen of Latvia.

In October 2006 elected to the 9th Saeima (Parliament of Latvia).

On 1st July 2009 elected to the post of the Chairman of Riga City Council.

Languages: Russian — native, Latvian and English — fluent, German and Danish — basic, Swedish — learning.

Hobbies: sports — running and cycling.

4


Date of BirthSeptember 13, 1973, Riga (Latvia)

EDUCATIoN1994 -1996Riga Technical University, Master of Engineering scince

1991 -1994Riga Technical University, Bachelor of Engineering scince

1991Riga State Grammar school No.1, secondary education

4. PERIPHERAL TRAINING CoURSES1993Standardizations course, Deutsches Institut für Normung DIN

1995Quality management, audit course, Det Norske Veritas DNV

1999Quality management and internal audit courses, Deutsches Gesellschaft für Qualitat (DGQ)

5. WorK exPerienceDecember 2009 – at presentMinistry of Transport of Republic of Latvia, State Secretary

January 2008 – December 2009Ministry of Economics of Republic of Latvia, State Secretary

June 2003– January 2008Ministry of Economics of Republic of Latvia, Vice secretary of state responsible for industrial, business and internal market questions

August 2006 – January 2008Latvian National metrology centre Ltd., Member of the Board

March 2006 - April 2006Investment and Development Agency of Latvia, Acting Director

March 2004 - March 2006Non-profit organization The Norway – Latvia Business Development Fund Ltd., Holder of the state capital share representative

october 2003 – December 2004Special economics region of Rezekne, Councilor

1999 -2003Ministry of Economics of Republic of Latvia, Director of Quality structural policy and intern market department

1999 -2002Non – profit organization Latvian National metrology centre Ltd., Authorized Person of Government

1997 - 1999Ministry of Economics of Republic of Latvia, Deputy director of Quality structural policy and intern market department

1994 -1997Ministry of Economics of Republic of Latvia, Head of Quality structural policy and intern market unit

1993 -1994 Ministry of Economics of Republic of Latvia, Chief specialist at Standardization and Certification department

1989 (2 months); 1999 (2 months)The Institute of Polymer Mechanics of Latvian Academy of Sciences, technician

6. PERIPHERAL INFoRMATIoN2008 – December 14, 2009 JSC Rīgas Siltums, JSC Latvijas gāze, Holder of the state capital shares

2008 - April, 2009Latvijas Standarts Ltd., Latvian National metrology centre Ltd., Agency of Latvian Guarantee Ltd., Holder of the state capital share

2009Award from Minister of Economics for the contribution in the development of the Ministry

Anrijs MatīssState Secretary of Ministry of Transport of Republic of Latvia

5

International aviation conference 2010Anrijs Matiss / Presentation

We realized from the very beginning that in such country as Latvia, which is located relatively far from the centre of Europe, with no railway link to European railway system, to provide connectivity to the customers and to ensure economic needs, a rapid development of aviation was the necessary precondition. It included building up and reconstruction of a new infrastructure and establishing and then supporting an effective air carrier.

Since 2004, when Latvia became a member of EU and got access to common free air transport market, we have been seeing continuous growth of traffic carried by our national airline Airbaltic, and also uninterrupted growth of passenger numbers for Riga airport from mere 700 thousand in 2004, to more than 4 million in 2009. Even now, in the period of deep crises in the national economy, a stable performance of Airbaltic and effective use of transit opportunities allows to keep traffic growing.

Excellencies, colleagues, Ladies and Gentlemen!It is an honour and pleasure for me to welcome you in Riga on the second North HubRiga conference to discuss issues which are important for the future of the air transport.

It is a great opportunity to share views and experience with the key persons and real experts in the air transport field, and I hope it would benefit to all of us and would also allow us to find answers to questions which emerge every day with no answers in the textbooks.

The recent natural disaster in Iceland resulted in air traffic chaos in Europe and showed explicitly that there is no substitute for air transportation in the modern society.

A6


Results More than 90 direct destinations to/from Riga.

More than 4 million passengers in 2009.

Uninterrupted growth of the Riga airport and the Airbaltic traffic up to this day including period of crisis.

Effective east – west and north - south link .

From the ministry’s point of view it is utmost important to facilitate development setting and introducing the right air policy principles. That includes helping to set the right strategy goals for the national carrier, ensuring that the infrastructure, and first of all, the airport capacity meets the growing traffic demand, the necessary regulations are introduced timely, airport and air navigation tariffs are just and do not put the excessive burden on carriers, and bilateral air services agreements with the third countries concerned are concluded.

A7


Lack of airport capacityAction

Building of a new terminal; Government decides to support Riga International Airport and Airbaltic’s common decision to participate in a new terminal project.

CHALLENGES

Economic uncertainty in Europe, recession in the national economyAction

Airline attracts more transit traffic including from the non EU countries to compensate shrinking of the domestic market. Ministry facilitates the intergovernmental bilateral negotiations on air services agreements to support such policy.

(Recently agreements concluded: with Armenia, Tajikistan, Uzbekistan, Kirgizstan, Turkmenistan, Jordan, Lebanon Bahrain; ongoing negotiations with Iran etc.)

A8


Environmental issues; emission tradingThe emission trading scheme which is accepted at EU level and supposes to mitigate pollution created by air transport does not create equal conditions for large EU carriers, established long time ago, and the new rapidly growing carriers from the new EU member states. This is particularly important in countries where there is no alternative mode for the air transport.

There should be a global decision on limitation of aviation emissions.

Regulatory environment supporting development

Effective participation in the decision taking in the air transport field in the EU.

A9

International aviation conference 2010Global trends in the aviation industry

Andrew GordonForecast Director of AirBus

Andrew Gordon became Director Market Analysis at Airbus in 2001. In this role he is responsible for facilitating the production of the Airbus Global Market Forecast, which details future demand for all civil aircraft of 50 seats or more. Andy is also accountable for analysis and forecasting of products as diverse as business jets, regional aircraft and military derivatives.

Prior to this appointment Andrew worked for a ten-year period for British Aerospace Airbus as part of the Forecasting & Market Evaluation Team, where he was involved in providing analysis for many of the market and product related decisions including the A380 project.

In 2001, at the creation of Airbus as a single entity, Andrew moved to Toulouse, to work directly for Airbus in the Market Forecasting & Research Group, now part of the Strategy and Co-operation team.

Andrew Gordon began his career with BAE/Airbus in 1991 and prior to this he worked for one of the UK’s largest banks.

Andrew has a Masters Degree in Marketing from the University of the West England. He is married and lives near Toulouse. In his free time he enjoys rambling, golf and is also playing cricket for Toulouse Cricket Club, where he is the Club Secretary.

10

International aviation conference 2010Andrew Gordon / Presentation

Premium ticket volume and revenue growth

Premiumvolumes

Premiumrevenues

Premium revenues (left scale)

Premium volumesPremium volumes(right scale)

Source: extract from IATA

June 9th 2010, North Hub Riga,

Andrew Gordon Director Market Analysis

June 9th 2010, North Hub Riga,International Aviation Conference

A11


The aviation cycle, several cycles impacting in series

The last Cycle (s)The last Cycle (s)

Source: Global Insight, ICAO & IATA

Agenda

The recoveryThe recovery

Global Market OutlookGlobal Market Outlook

The Baltic Market OutlookThe Baltic Market Outlook

A12


Recovery and the volcano… Recovery tracking

World real GDP year-over-year quarterly evolution (%)

WORLD ECONOMY World trade year-over-year quarterly evolution (%)

WORLD TRADE

History Forecast History Forecast

We are h

We are h herehere

2007 2008 2009 2010 2007 2008 2009 2010

World ASKs year-over-year monthly evolution (%)

WORLD PASSENGER TRAFFIC World FTKs year-over-year monthly evolution (%)

WORLD FREIGHT TRAFFIC May

passenger traffic up5.6%

Aprilfreight

t ffitraffic up 24%

2007 2008 2009 2010 2007 2008 2009 2010

Source: Global Insight, OAG, IATA, ATA, AEA, Airbus

A13


Passenger traffic above pre-crisis level since Oct-2009

ASKs (billion)

Source: OAG, Airbus

Could we live without flying?

Ash cloud grounds U.S. produce,Ash cloud grounds U.S. produce,fish and parts

A14


Traffic recovery anticipated for 2010

World air traffic growth (%RPKs)World air traffic growth (%RPKs)

Best caseBest case

Worst case

2007 2008 2009 Estimate

2010(Forecast)

2011 (Forecast)

Source: ICAO, Airbus Market Research and Forecasts

Estimate (Forecast) (Forecast)

Recovery tracking

ASKs year-over-year monthly evolution (%) ASKs year-over-year monthly evolution (%)

US AIRLINES WESTERN EUROPEAN AIRLINES

Maypassenger

Maypassenger

traffic down1.7%

p gtraffic up1.3%

ASKs year-over-year monthly evolution (%) ASKs year-over-year monthly evolution (%)

EMERGING ECONOMIES* AIRLINES REST OF WORLD AIRLINES

2007 2008 2009 2010 2007 2008 2009 2010

Maypassengertraffic up15 3%

Maypassengertraffic up 1.2%

15.3%

Source: OAG, * 54 emerging economies, Airbus

2007 2008 2009 20102007 2008 2009 2010

A15


Air travel remains a growth market

20-yearld lWorld annual traffic (RPKs

ICAO Airbus

world annualtraffic growth

4.7%

World annual traffic (RPKs -trillions)

total traffic GMF 2009

Source: ICAO, Airbus

Air travel has proved to be resilient to external shocks…

World annual traffic (RPKs - trillions) +38%*

+36%*+36%

Source: ICAO, Airbus * since 2000

2009E

A16


The Airbus Global Market Forecast (GMF) 2009

20 i ft d d f t i ft 19 t20 year aircraft demand forecast, aircraft >19 seats

Traffic forecast modeling 156 distinct traffic flows

Detailed study of network evolution including new routes, markets and deregulation hot spots

Model the impact of evolving airline models e.g. Low cost carriers

Fleet build-ups covering >750 passenger airlines, 190 freight carriers

Available as a book, interactive pdf and on the web., p

Agenda

The recoveryThe recovery



A17


Large potential to increase propensity to travel

10

Switzerland Denmark

Ireland

SwedenUKQatar Canada

UAE

Australia

MacaoSingapore

Hong Kong

New Zealand

Spain

Kuwait

Cyprus

Bahamas

Puerto RicoGreece

Malta

Bahrain

Barbados

Seychelles

Maldives

TrinidadFiji

St Lucia USA

10

2 trips percapita

Sweden

Netherlands

Finland

JapanBelgium

France

Germany Italy Brunei

KuwaitPuerto Rico

Portugal South Korea

Slovenia

Israel Taiwan

Saudi Arabia

Czech Rep.

Estonia

Hungary Slovakia

Latvia Panama

Suriname

j

Cape Verde

Samoa

Jordan

Poland

Mauritius Malaysia

Croatia

Mexico

Turkey

RussiaBrazil

1

ta -

2008

0.11 trip per

World average

Equatorial Guinea Botswana

Bosnia

BrazilChina

India

Algeria

Belarus Angola

Nigeria

0,1

per

cap

it

percapita

0.05 trip percapitaIraq

Bangladesh Lesotho

Afghanistan

ChadNiger

0,01

Trip

s*

0,0010 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 55 000

Passengers originating from a particular country Note: GDP in 2005 US$

Source: IATA PaxIS, Global Insight, Airbus

2008 Real GDP per Capita

Taking into account key industry drivers

Economics Demographics Networks• Growth • Emerging markets • Cycles

Demographics Networks• Population growth • Age profiles • Disposable income

• Global cities • Hubs • New routes

• Urbanisation • Deregulation

Airlines Aircraft Passengers• Ticket price • Fuel • Seats Speed utilisation• Ticket price• Comfort • Origin and destination • Connectivity

• Fuel• Range • Fleet mix • Business models

• Seats, Speed, utilisation• Frequency, load factor • Range • Replacement

• Environment • Legislation/taxation • Environment

• Fleet mix • Environment

A18


Air transport is still emerging for 85% of the world

ChinaIndia Middle East 5.7Asia* Africa CIS

billionpeople2008

Latin America Eastern Europe

2008

Western Europe North America Japan

1billionpeople2008p

* Asia excludes India, China and Japan

Large potential to increase propensity to travel

10

Switzerland Denmark

Ireland

SwedenUKQatar Canada

UAE

Australia

MacaoSingapore

Hong Kong

New Zealand

Spain

Kuwait

Cyprus

Bahamas

Puerto RicoGreece

Malta

Bahrain

Barbados

Seychelles

Maldives

TrinidadFiji

St Lucia

10

Sweden

Netherlands

Finland

JapanBelgium

France

Germany Italy Brunei

KuwaitPuerto Rico

Portugal South Korea

Slovenia

Israel Taiwan

Saudi Arabia

Czech Rep.

Estonia

Hungary Slovakia

Latvia Panama

Suriname

j

Cape Verde

Samoa

Jordan

Poland

Mauritius Malaysia

Croatia

Mexico

Turkey

RussiaBrazil

1

ta -

2008

World average

Equatorial Guinea Botswana

Bosnia

BrazilChina

India

Algeria

Belarus Angola

Nigeria

0,1

per

cap

it Latvia

Iraq

Bangladesh Lesotho

Afghanistan

ChadNiger

0,01

Trip

s*

0,0010 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 50 000 55 000

Passengers originating from a particular country Note: GDP in 2005 US$

Source: IATA PaxIS, Global Insight, Airbus

2008 Real GDP per Capita

A19


More larger aircraft will be needed as LCC routes grow

Number of airline routes 41%of the LCC

capacity

LCC Routes* > 500 daily seats.

19%of the LCCof the LCC

capacity

Source: Airbus, OAG. Number of LCC routes* > 500 daily seats. *Airport pairs operated by a specific airline

History Estimates

Low Cost Airlines have continued to grow

Worldwide LCCs market share (% seats offered)

21% of seats now offered byoffered by

LCCs

2006 2007 2008 2009

Source: OAG, Airbus

A20


Aircraft size increased in all regions over the last 35 years

+41%

Average aircraft capacity (number of seats) per flight

Aircraftgetting41%

+34%

gettingbigger

+31%

+28%

+21%

+16%

Source: OAG, January 2009 Aircraft >90 seats only

Great potential for growth for LCCs in Asia Pacific

Intra Asia Pacific LCC market share (% seats offered)

12% of seats now offered by LCCs in A i /P ifiAsia/Pacific

2006 20092007 2008

Source: OAG, Airbus

A21


Emerging markets driving World urbanisation

Population (billions)

Urban Population T dToday

Rural Population

Source: UN,Airbus

Single Aisles getting bigger

2%

13%

48%

46%

5%

45%29%

12%

Source: Ascend January 2008 Western Pax only

A22


The number of mega-cities will more than double

82 bi iti h l h l82 big cities where long-haul passengers will want to fly between in 20 years

MoreMega cities

A

Mega-cities

AA B

A

Destinations with more than 10 000 daily long haul pax

A network of cities : 92% of the long haul traffic is from and/or to 37 “mega-cities”

37 “mega cities” in terms of37 mega-cities in terms ofinternational air traffic demand


A23


The A380 network keeps growing 30 A380s delighting passengers around the world

LondonManchester

FrankfurtToronto

New York

Paris

Seoul

Tokyo

Los Angeles

BeijingZurich

Hong Kong JeddahBangkok

Dubai

Singapore Airlines

Qantas

SydneyJ h b

SingaporeEmiratesg p

Air France Lufthansa

Additional airline-announced routes for 2010 shown dotted Auckland

Melbourne

Johannesburg

Over 138,000 revenue flight hours in over 15,000 revenue flights ( f J 3 d 2010)

More than 5.4 million passengers have already enjoyed the A380 experience (as of June 3rd, 2010)

Growth in the size and number of mega-cities

Main long haul VLA routes by 2028Main long-haul VLA routes by 2028

AAA B

A


A24


Airbus Global Market Forecast highlights

+153%11 584 58RPKs (trillion)

Change20282008World fleet forecast

+153%11.584.58RPKs (trillion)

+100%28,111 14,016Passenger aircraft

-24,097-New passenger aircraft deliveries

854New freighters deliveries

+123%3,8651,731Dedicated freighters

-854-New freighters deliveries

-24,951-Total new deliveries

Passenger aircraft >= 100 seats

The main drivers of tomorrow’s traffic growth

Growing Middle East passenger and cargo hubs

In Asia, more people able and wanting to fly everyday

LCCs in Asia growing in number and traffic shareLCCs in Asia growing in number and traffic share

More potential through deregulation, particularly in Asia and AfricaAsia and Africa

Growing urbanisation and a resulting increased demand between major cities

A25


New aircraft demand will average 1,248 per year

Number of new aircraft

% units: 68% 17% 8% 7%

Passenger and freighter aircraft

% value: 39% 27% 15% 19%

Asia to lead in world traffic by 2028

20-year world annual traffic

growth

% of 2028Traffic by airline domicile

RPKs (billions)

% of 2008

4.7%

% of 2028WorldRPKs

20-year growth

Traffic by airline domicile% of 2008WorldRPKs

26% 6% 33%2008 traffic 2009-2028 growth

28% 4.3% 26%

31% 2.4% 20%

5% 6.9% 8%

4% 5.8% 6%

3% 5.9% 4%

3% 5.2% 3%

A26


Baltic region’s traffic more than quadrupled since 2000

ASK development, 2009 vs. 2000

CISIntra

regionalNorth America

No nonstop CIS+446%

C t l

regional+257%

No nonstoptraffic in 2000

CentralEurope+643%

Western Europe+322%

I t i l t ffi +257% Middle East andIntra regional traffic +257%International traffic +361% Overall traffic +358%

Source: OAG (September traffic), Airbus

Middle East andNorth Africa

+544%

Agenda

The RecoveryThe Recovery



A27


Traffic to Central and Western Europe dominating

Traffic (million ASK)

North AmericaNorth America Baltic regionBaltic region Africa and Middle EastAfrica and Middle East Central and West EuropeCentral and West Europe CISCIS


Expanding international network from Baltic countries

20002000

InternationalInternationalnonstop routes*nonstop routes*

200920094545 nonstop routesnonstop routes

InternationalInternationalnonstop routes*nonstop routes*121121 nonstop routes*nonstop routes*


* International routes: Routes from airports in Estonia, Latvia and Lithuania to airports outside these countries

A28


No coincidence airBaltic has grown its presence too

50%1,000 Traffic (million ASK) Traffic share (on ASK)

30%

40%

600

800North AmericaNorth America Baltic regionBaltic region Africa and Middle EastAfrica and Middle East Central and West EuropeCentral and West Europe CISCIS

20%

30%

400

600

10%200

0%01995 1997 1999 2001 2003 2005 2007 2009


A29

International aviation conference 2010Extending EU`s aviation frontiers

Mark NicklasAir Transport Agreements & Internal Market of EU Commission

Mark Nicklas joined the European Commission’s Air Transport Directorate in 2003. He has been a key member of the EU team in the EU-US air transport negotiations. As policy officer in the European Commission’s unit for air transport agreements and internal market, he has been involved in EU air transport negotiations with various third countries (e.g. US, Australia, New Zealand, Latin America, Mediterranean). In addition, he has dealt with the implementation of the internal aviation market in the EU. Since June 2010, he is assisting the European Commission’s Director for Air Transport in the coordination of the EU air transport policy.

Prior to joining the European Commission, he worked as a manager in the telecommunications industry in Germany (Deutsche Telekom; T-Mobile International).

He studied economics and business administration at Hohenheim University (Germany). He holds a Ph.D. in economics.

30

International aviation conference 2010Mark Nicklas / Presentation

2

Extra-EU traffic flowsExtra-EU passenger traffic is 35% of total EU traffic

1

Extending EU’s Aviation

Frontiers

Mark NicklasInternal Market, Air Transport Agreements & Multilateral Relations

European Commission

North Hub Riga Aviation ConferenceRiga, 9 June 2010

A31


4

Before 1992: national markets within the EU were protected and fragmented through restrictive bilateral air service agreements between EU Member States

After 1992: One Single market without restrictions on market access and pricing

2004/2007: Enlargement to 27 Member States

Common EU rules in all areas of aviation

The world’s largest and most successful example of regional market integration and liberalisation in air transport.

From 27 National Air Transport Markets to 1 Single European Market

3

International Air Services Agreements

Air traffic between two states is traditionally governed by restrictive bilateral air services agreements (ASAs)

Restrictions on: How many and which carriers may fly? How many weekly flights (frequencies)? To which cities / airports? Pricing

“Open Skies” agreements - opened market access, but based on national ownership

EU aviation policy – aiming at market opening, ownership normalisation and regulatory convergence

A32


6

Key Objective: Ensuring Sustainability of the Sector’s Growth

Means:

1. Continue to lead towards highest safety and

security standards – a pre-condition for growth

2. Ensure environmental sustainability Comprehensive approach

1. Tackling the capacity crunch Avoid/reduce bottlenecks on the ground and in the air

1. Competitiveness of the industry Cost reductions, efficiency and consolidation No bail-out – but accelerating structural reform Removal of out-dated ownership and control restrictions

1. Extend benefits of market opening

5

Unprecedented Challenges

1. Global economic downturn

2. Volatile fuel prices

3. Increasing environmental pressure

4. Security measures

5. Increasing costs from congestion – on land and in the air

6. Most recently: volcanic ash in Europe

A33


8

Guiding Principles in EU External Aviation Relations

Relations must be based on agreements that respect Community law. If not:

Agreements vulnerable to legal challenge

Uncertainty for commercial operators

Level playing field allowing all airlines to compete on a fair and equal basis

Regulatory convergence

No «one fits-all» approach: Agreements depend on relations to third country

7

I. Bringing existing bilateral agreements into

line with Community law

II. The creation of a “Common Aviation Area”

with neighbouring countries Parallel process of market opening and

adoption of EU legislation

I. Conclusion of ambitious global agreements

with key partners (US, Canada, Australia,

New Zealand, India, China, Russia, Brazil…).

Going Beyond Europe: The Three Pillars of the External Dimension

A34


10

Progress on the EC designation

104 non-EU states have accepted Community

designation

Nearly 900 Bilateral ASAs (around half) have

been brought into conformity with Community

law (representing 70% of extra-EU traffic)

41 “Horizontal” Agreements covering nearly

700 ASAs

9

Objective: To allow EU carriers to benefit from the

right of establishment within the EU,

including non-discriminatory access to air

routes to third countries.

New clause: Any EU Member State can designate any

licensed EU carrier with an establishment

in its territory

No changes in traffic rights granted in

bilateral agreements

Pillar I: “Community Designation”

Requirement of the EU internal market

A35


12

Southern and Eastern neighbouring countries

Pre-accession context: Western Balkans (ECAA)

ECAA Agreement signed in June 2006

New candidate: Moldova

Morocco (Euro-Mediterranean agreement)

EU-Morocco Agreement signed in December 2006

Negotiations concluded with Georgia and Jordan in 2010

Ongoing negotiations with Ukraine, Israel, Lebanon Negotiation mandates for Tunisia, Algeria

Open to other countries, including from Central Asia

Ambition: “Towards a single market of more than 50 states and 1 billion inhabitants”

Common Aviation Area with Neighbouring

Countries by 2010 – progress

11

Pillar II: A Wider Common Aviation Area

58 States – Approx. 1 Billion inhabitants

A36


14

Air services: supply EU-ECAA

The figures represent the supply from EU27 to the ECAA P artners

Supply from EU27 to partners from South-Eastern Europe

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: OAG winter schedules

Yearly seats available

0

20

40

60

80

100

120

Number of routes

Yearly seats

Number of routes

13

The ECAA Timeframe

Gradual integration of the ECAA Partners into the EU air transport market in three phases

First transitional phase: Third and Fourth Freedom traffic liberalised Basic aviation acquis to be implemented

Second transitional phase: Fifth Freedom added All remaining acquis to be implemented

Third, final phase: Full liberalisation of traffic rights including

cabotage Full implementation of the acquis

A37


16

The challenge of EU-Russia aviation relations

A huge opportunity: linking the two biggest markets in Europe

Stalemate in relations: Siberian overflights and EU airline designation

Agreement initialled at EU-Russia summit 2006, but so far not implemented / signed by Russia.

Cooperation frozen until this is solved

15

Example of the EU-Morocco Aviation Agreement

» Total passenger traffic increased by over 45% since

2005 – from 6 million to 8.6 million;

» More than 50 new routes (from Fez, Tanger, Oujda,

Gerona, Marseille, Bergamo, Gatwick etc.);

» 12 new air carriers have entered into the EU-Morocco

market

A38


18

Pan-European approach in aviation

The challenges to today’s aviation sector do not stop at EU borders

Aviation Agreements integrate neighbouring countries into EU aviation market

Cooperation also necessary to address the challenges in the fields of Environment

Safety

Air space capacity

External dimension of Single European Sky

Common European position (EU+ECAC) in ICAO on environmental measures

Common European position (EU+ECAC) in ICAO on safety issues

17

With key and like-minded partners Aim: to “normalise” aviation by combination of:

Market opening Removal of investment barriers (airline ownership) Regulatory convergence

EU-US Agreement (1st and 2nd stages) First stage agreement has been in effect since 30 March 2008 Second stage agreement initialled on 25 March 2010 following eight

rounds of negotiations which started in May 2008.

EU-Canada Agreement Phasing in of full Open Aviation Area (OAA) All market aspects covered Investment & regulatory convergence key

Australia and New Zealand (Negotiations started in November 2008)

Next: Brazil (Negotiating mandate requested 5 May 2010)

Pillar III: Comprehensive Agreements

A39


20

UK - IR

Spain - Portugal

FAB EC

NUAC

Baltic

FABCE Danube

Blue MED

NEFAB

22

Functional airspace blocks

19

More than 60 Area

Control Centres in

Europe in 2003

4

Sectors and routes are

designed according to

national borders rather

than traffic flows

Single European Sky: Modernising ATM to avoid national fragmentation and environmental damage

A40


22

Thank you!

[email protected]

http://ec.europa.eu/transport/air/index_en.htm 21

Conclusions: The EU Approach in a Nutshell

EU Air Transport policy aims at ensuring

a strong European industry with the

highest standards of safety and

security performing in a sustainable

manner to the benefits of our citizens

A41

International aviation conference 2010Lithuanian Aviation Sector

• Main activities and responsibilitiesParticipation in forming of state policy in civil aviation –developmentCoordinating activities of Civil Aviation Administration –of Lithuania under the Ministry of Transport and Communications, State Enterprise Vilnius International Airport, State Enterprise Kaunas International Airport, State Enterprise Palanga International AirportRepresenting the Ministry in international bodies –(ICAO, EASA, European Commission) and state institutionsImplementing EU laws in civil aviation –Drafting national laws –Licensing of air carriers –Drafting and representing Lithuania’s positions to the –EU Council, the Commission

March 1998 – July 2003Stock company “Lithuanian Airlines”• Type of business or sectorAir company• Occupation or position heldLegal adviser, from the year 2000 – Head of Legal Division• Main activities and responsibilities

Drafting legal acts, agreements and other documents –Organizing the work of the division –Representing the company in courts and other –dispute resolution institutions and governmental bodiesAdvising on legal issues –

August 1996 – March 1998Joint stock company “Volmeta”, Vilnius, Lithuania• Type of business or sectortrading

Agnė KatkutėCivil Aviation Department of Ministry of Transport of Republic of Lithuania

NationalityLithuanian

Date of birth02.06.1974

Work experienceSeptember 2009 onwardsMinistry of Transport and Communications of the Republic of Lithuania, 17 Gedimino Av., LT-01505, Vilnius, Lithuania• Type of business or sectorGovernmental Institution• Occupation or position heldDeputy Director of Roads and Civil Aviation Department• Main activities and responsibilities

Participation in forming of state policy in civil aviation –developmentCoordinating activities of Civil Aviation Administration –of Lithuania under the Ministry of Transport and Communications, State Enterprise Vilnius International Airport, State Enterprise Kaunas International Airport, State Enterprise Palanga International AirportRepresenting the Ministry in international bodies –(ICAO, EASA, European Commission) and state institutionsImplementing EU laws in civil aviation –Drafting national laws –Drafting and representing Lithuania’s positions to the –EU Council, the Commission

July 2003 – September 2009Ministry of Transport and Communications of the Republic of Lithuania, 17 Gedimino Av., LT-01505, Vilnius, Lithuania• Type of business or sectorGovernmental Institution• Occupation or position heldDeputy Director of Civil Aviation Department

42


• Writing skillsBasic

Russian• Reading skillsExcellent• Writing skillsGood• Verbal skillsGood

Social skills and competencesLiving and working with other people, in multicultural environments, in positions where communication is important and situations where teamwork is essential (for example culture and sports), etc.

Experienced in team activities within different types of teams, working groups, steering committees, governmental and EU bodies.

Technical skills and competencesWith computers, specific kinds of equipment, machinery, etc.

Computer literate (Windows, MS Office).Skills in using different kind of legal databases

Additional informationMember of the Board of EASA• Member of the Single Sky Committee• Member of the Boards of Vilnius, Kaunas and Palanga • International Airports.

• Occupation or position heldLegal Adviser• Main activities and responsibilities

Providing legal consultations –Representing the company in courts –

Education and training1992-1997Faculty of Law, Vilnius University, Lithuania.• Principal subjects/occupational skills coveredCivil Law and Civil Procedure, Criminal Law and Criminal Procedure, Constitutional and Administrative Law, International Law, Labor Law, Theory and History of Law.• Title of qualification awardedQualification of Lawyer (Diploma in Law)• Level in national classification (if appropriate)Master’s degree in LawCourses of IATA (International Air Transport Association)

Personal skills and competencesAcquired in the course of life and career but not necessarily covered by formal certificates and diplomas.

LANGUAGESMother tongueLithuanian

Other languagesEnglish• Reading skillsExcellent• Writing skillsGood• Verbal skillsGood

French• Reading skillsBasic

43

International aviation conference 2010Katkutė Agnė / Presentation

Passengers in the airports of Lithuania in

1993–2009

MINISTRY OF TRANSPORT AND

COMMUNICATIONS OF THE

REPUBLIC OF LITHUANIA

2




LITHUANIAN AVIATION

SECTOR

NORTH HUB RIGA

INTERNATIONAL AVIATION CONFERENCE

2010.06.09.

RIGA

A44


Passengers in the airports of Lithuania

in the 1st quarters of 2009 and 2010




4

Air transport passenger flow

dynamics




3

During the last 10 years, till 2008 air transport flow in Lithuania has grown

by more than 3,5 times

The average annual growth from 2000 to 2008 was about 19%

The beginning of 2009 saw a sudden slump in the flow of air passengers

due to which the flow of passengers during 2009 decreased by 27%

A45


Lietuvos Respublikos susisiekimo ministerija

Routes from Vilnius International Airport

26 direct scheduled routes

from Vilnius International

Airport

Scheduled routes

Non-scheduled routes

Riga

Dublin

Manchester

Varna

Copenhagen

Frankfurt

VILNIUS

Heraklion

Pal

erm

o

Ibiza

Aircraft movements in the airports of

Lithuania in the 1st quarters of 2009

and 2010




5

A46



Routes from Palanga International Airport


from Palanga International

Airport

Scheduled routes

Non-scheduled routes

Riga

Copenhagen PALANGA

Antalya


Routes from Kaunas International Airport


from Kaunas Airport

Scheduled routes

Riga

Tampere

Dublin

Bristol

KAUNAS

A47


Future development of airports




10

Optimization of the management of International Airports:

Coordinated management of the three Lithuanian International Airports

Conversion of state enterprises running Lithuanian International Airports

into joint stock companies

Raising of partial private capital for the management of the airports




9

Routes from International Airports of

Lithuania

47 scheduled routes

26 non-scheduled routes

73Routes

A48


THANK YOU

12




Key directions and priorities of air

transport development




11

Development of airports

Expansion of the geography of scheduled flights

Cooperation in the region

A49

International aviation conference 2010Aircraft and Environmental Constraints

Stephane AuterDirector of International Aero Engines AG

Stephane has been working since nearly 15 years for United Technologies Corp, holding different positions inside UTC’s subsidiaries. He has started his UTC career at Pratt & Whitney Canada in 1996 being Field Service Representative for South-Europe, taking over the Sales and Marketing activities covering France, Italy, North-Africa and Turkey.

He moved early 2002 to the Engine Alliance ( joint-venture between Pratt & Whitney and General Electric to supply the GP7200 engine for the A380) to act as GP7200 Program Manager covering integration of the engine on the A380. After certification in 2007 and before Entry in Service of the A380 with GP7200 at Emirates, he joined International Aero Engines (IAE) to be Customer Business Director covering the Airbus Account for IAE and several customer accounts in Europe, CIS and Africa.

Prior to UTC, Stephane has worked several years at ATR (Avions de Transport Regional) mainly in Customer Support and Engineering.

Stephane holds a Master from a South-West of France Business School and he is also graduated from the Toulouse University of Sciences.

Apart of aircraft and engine business, Stephane spent much time as he can with his family and he is very supportive of the StadeToulousain Rugby Club.

50

International aviation conference 2010Stephane Auter / Presentation

IAE International Aero Engines AG Proprietary Information

IAE Brings Together the Best in the Industry

• Headquarters - East Hartford, CT, USA

• Engineering Center - Dahlewitz, Germany

• Final Assembly

Middletown, Connecticut, USA

Dahlewitz, Germany

Partner Companies


This document contains material which is proprietary to IAE International Aero Engines AG and is delivered on the express condition that it is not to be used, disclosed or reproduced in whole or in

part for any purpose without IAE’s express written permission.

Engine and Environmental Challenges

Stephane AuterDirector, Customer Business Toulouse

June 2010

A51



Aviation and the Environment

Environment regulations aim at lowering:fuel burned (= less CO2)combustion emissions (UHC, CO, NOx, Smoke)noise

Administered through regulations, cap / trade schemes and local fees

intended to encourage operating more efficient aircraft


IAE – Market Leader for the A320 Family

190 Customers based in 65 CountriesOver 1800 aircraft in serviceOver 1000 aircraft on firm order

A52



Aviation in the Kyoto Protocol

ICAO in charge of secure a way forward for international aviation

Domestic Aviation is included in each national GHG inventory pending harmonized mechanisms also through ICAO

Open Emissions Trading Scheme (ETS) always been considered as most cost efficient device

ICAO agreed the ETS scope but not the geographic measure. Non EU states require bilateral agreements.


Key Environmental stakeholders in aviation industry

Community

Government/regulators

International org. OEM

Airport

Media

Airline

EnvironmentalRequirements

A53



Emissions Charging for CO2

Trading in carbon emissions for aviation launched in Europe Airlines given CO2 allowance

Emit more, need to buy additional CO2 permitsEmit less, allowed to sell excess CO2 permits

CO2 futures value dropped in 2009Driven by recession - lower output by EU industrial sectorsAt current prices, CO2 futures are valued at ~€17 or ~$23 per tonne

Source: www.europeanclimateexchange.com

Improving airline fuel efficiency translates into further savings on Carbon permits


reference

Reference97%

Growth

2004-2005-2006Yearly average of CO2

EmissionsIntra flying in/out of EU

2010Airline split of global

Traffic by payload carriedAirline Monitoring

2012Airline free allocation

auction & open tradingIn CO2 tons

Intra flying in/out of EU

3 Yr avg CO2Emissions in sector

Total traffic in unit/km

2012 CO2Emissions in sector

Bought on Euro-pean open market

15% up for auction

EU CO2 Emissions Trading Scheme - Summary

A54



CAEP NOx Regulations Timeline

CAEP/1 Standard

CAEP/2

CAEP/4

CAEP/6

CAEP/8

202020051990 1995 2015201020001985

CAEP = Committee on Aviation and Environmental Protection

V2500-A5 SelectOneTM meets all applicable CAEP Standards

-20%

-16%

-12%

-15%

CAEP Meeting – set new standards

Date all new engines certified must comply

Date all engines produced must comply

2018 min


Consequences of EU ETS for Aviation Industry

Complexity in risk evaluation framework- Uncertainties around allocations & market arrangement- Implications for investment in aircraft, route planning,

trading, compliance, monitoring, settlement.

Strategic options- Fleet choice, modern aircraft

more CO2 advantage- Short haul less CO2 advantage- Higher occupancy rates or freight

load more advantage

A55



Summary of Airport Emissions Charges

All following standard methodology except: London Luton and Basel

LTN “applies where the Engine NOx Emission exceeds 400g per passenger“– IAE and CFM are < 400g/pxBSL applies an “adjustment according to the aircraft's classification” – no difference for IAE vs CFM

Copenhagen has stated that is plans to initiate charges April 1, 2010 (but not available as of May-2010)

Charge per kg of emissionsIn Local In Euros In USD

UK London Gatwick £ 4.52 € 5.19 $6.90UK London Heathrow £ 2.73 € 3.14 $4.17UK London LutonGermany Frankfurt € 3.00 € 3.00 $3.99Germany Hamburg € 3.00 € 3.00 $3.99Germany Munich € 3.00 € 3.00 $3.99Germany Koln / Bonn € 3.00 € 3.00 $3.99Denmark CopenhagenSwitzerland Lugano CHF 3.40 € 2.37 $3.15Switzerland Berne CHF 3.30 € 2.30 $3.06Switzerland Geneva CHF 1.40 € 0.98 $1.30Switzerland Zurich CHF 2.50 € 1.74 $2.32Switzerland BaselSweden Stockholm/Arlanda SEK 50.00 € 5.18 $6.91Sweden Stockholm/Bromma SEK 50.00 € 5.18 $6.91Sweden Göteborg/Landvetter SEK 50.00 € 5.18 $6.91Sweden Malmö SEK 50.00 € 5.18 $6.91Sweden Karlstad SEK 50.00 € 5.18 $6.91Sweden Kiruna SEK 50.00 € 5.18 $6.91Sweden Luleå SEK 50.00 € 5.18 $6.91Sweden Ronneby SEK 50.00 € 5.18 $6.91Sweden Skellefteå SEK 50.00 € 5.18 $6.91Sweden Sundsvall-Härnösand SEK 50.00 € 5.18 $6.91Sweden Umeå SEK 50.00 € 5.18 $6.91Sweden Visby SEK 50.00 € 5.18 $6.91Sweden Åre Östersund SEK 50.00 € 5.18 $6.91Sweden Ängelholm SEK 50.00 € 5.18 $6.91Sweden Örnsköldsvik SEK 50.00 € 5.18 $6.91

Average: UK, Germany, Switz, Sweden € 2.99 $3.98

as of May-2010


Airports with Emissions Related Fees

GermanyFrankfurt, Hamburg, Munich, Koln-Bonn

UKLondon: Heathrow, Gatwick, Luton

SwitzerlandGeneva, Zurich, Basel, Lugano, Berne

SwedenStockholm, Goteborg, Malmo, etc (all 15 managed by LFV Group)

as of May-2010

Trend:Trend:Most launched Emissions related fees within the last 2 yearsNearly all which had fees in 2009, raised those fees for 2010

A56



Noise

Standards developed by ICAO (via the CAEP)Regularly revised – ICAO currently considering standards beyond Chapter 4

ImpactsNew aircraft/engine developmentLocal operating restrictions (bans, curfews, alt procedures)

Rising trend in adding local airport fees for noiseCAEP = Committee on Aviation and Environmental Protection


Example: A321 Emissions Costs Evaluation

NOTES:A321 mission (2.0 hr/cy, 3600 hr/yr, Cruise Altitude FL350)CO2 costs based on 4.4% V2500 fuel burn advantage and $30 / metric ton for CO2Emissions-related Airport Landing Fees based on ICAO Emissions Data Bank data for IAE / CFM

Annual Costs

IAEIAEAdvantageAdvantage

Local NOx charges – dependent on airport usage

CO2 ETS Savings – regardless of airports used

Frequency of Landings

A57



Thank You!!!!


Summary

Environment is driving new regulationsImpacts on airline fleet planning

Environmental costs play role in assessment of new aircraft direct operating costs

• Lower CO2 = Lower fuel costs

Could affect business case for current fleet / timing of fleet renewal decisions

Engine Manufacturers like IAE are committed to providing fuel efficient engines that minimize the impact on the environment

A58

International aviation conference 2010Challenges facing aviation in the CIS

Boris Rybak,Partner, CEO, Infomost

Boris Rybak, 52, member of Advisory Council of Russian Parliament Transport Committee, has a degree in aerospace engineering and during the 1980s he worked at the conceptual design department of the Mikoyan Design Bureau, a world-leading fighter plane designer and manufacturer.

In 1990 he created AviaData - one of the first independent market-oriented aerospace consulting companies in the former Soviet Union. In 1994 Boris Rybak opened Infomost, a communications consultancy agency, and won Airbus Industrie as the first account. For over 15 years Boris Rybak has developed and performed a wide range of long-, medium- and short-term campaigns for both international and Russian clients, including Airbus Industry, General Electric Aircraft Engines, Russian Space Agency, MiG Corp., Khrunichev Space Center, NPO Saturn.

A special area of Rybak’s interests since mid-nineties is air transport. Rybak played a key role in development of long-term international business development and communications programs for a number of Russian and international airlines: Volga-Dnepr / AirBridge Cargo Airlines, Transaero, Siberia Airlines, East Line, UTAir Aviation, Lufthansa German Airlines, German Wings, Qatar Airways. He is acknowledged in Russia as an expert in international air transport and aircraft industry.

Since year 2000 Boris Rybak spends most of his working time for strategic consulting programs, industrial and transport project management, development of high profile public affairs campaigns in the interest of large industrial, transport and energy companies.

Boris received numerous industrial certificates and awards.

59

International aviation conference 2010Boris Rybak / Presentation

The globalized economy, enthusiastically promoted by cheerful • bankers and stock brokers as a new era for business, has so far failed to deliver on its promises. The deep recession that followed has resulted in unprecedented losses and depression for the airline business all over the world.

The natural disaster in Iceland, aggravated by the narrow minded • actions of officials, has completed the picture of a depressed industry.

Airlines have been and still are struggling to survive in both the EU • and Russia. Not all of them were lucky enough to survive. Some are asking, «who will be next to fail under such conditions?»

AIR TRANSPoRT RELATIoNS BETWEEN RUSSIA AND EURoPE: GLIMMER oF HoPE oR SAME DULL GAME,

JUST ANoTHER BoRING SEASoN?

Ladies and Gentlemen,It is a privilege to be a speaker here at the second North Hub Riga meeting, now annual aviation event of growing importance for our part of the world. In my short speech I would like to talk about relations between Russia and Europe in air transport area, relations which are experiencing interesting and challenging phase.

Airline business all over the world is passing through a period of severe turbulence. Last year, probably the most difficult and challenging year in the whole history of civil aviation, has brought up frustration on nearly all fronts:

A60


However, just a month ago something new came on the scene. Long awaited but nevertheless unexpected changes in Russian policy towards the West and the EU in particular, began to take shape.

Some information regarding official Russian government documents related to this new policy has leaked to the press, for example the widely circulated article in Russian Newsweek dated May 9, 2010. Many believe that document described in this article is a fake, but others thought that it did not matter if this specific document was a real governmental program outlining new Russian international relations doctrine or not. New trends in Russian foreign policy are clearly visible.

Contact between Russian aviation authorities and the European • Commission on aviation issues have stopped completely – marking almost three years of deadlock.

Russian authorities have initiated a number of investigations • pertaining to airline ownership and beneficiaries of several European nations, indirectly threatening them with potential problems in obtaining permission to fly to and over Russia within the framework of existing bi-lateral Air Service Agreements (ASA).

The mostly useless bi-lateral talks held in 2009 and early 2010 • between the Russian Ministry of Transport and respective authorities of many EU nations did not add anything positive to this gloomy picture.

A61


All these recent events that have virtually set a New Course for Russia policy regarding the West are being widely discussed today as 25th EU-Russia Summit held in the Russian city of Rostov-on-Don a week ago. Interested people from all sides expect that politicians will find in very nearest future answers to many questions or at least pave the way to finding efficient solutions to long standing issues. Hopes are very high – at least in Russia.

This principal turn in relations between Russia and the European Union give us an excellent opportunity to re-visit major issues of Russia-EU civil aviation relations and try to forecast future developments. Not pretending to be able to cover or even touch on all important issues, I will focus on only those few issues I believe are relevant to this meeting.

The long awaited Strategic Arms Reduction Treaty (START) between Russia and the US was signed in April – with good chances for ratification by both the Russian Duma and the US Congress. Successful and very productive summits between the Russian President and leaders of Northern Europe have taken place in rapid succession. New prospects for Russia joining the World Trade Organization in the near future have started to fuel almost forgotten expectations. And finally rumors regarding the possibility of a “New Basic Agreement” between Russia and the European Union to be signed in the near future have made these expectations even more realistic.

A62


about different positions on different issues. It is not a problem to have different views. But it is a problem when parties do not understand each other. And today misunderstanding is a major problem between Russia and European Union, covering virtually all aspects of the airline industry.

What did the Russians actually mean by making an enquiry into the • Austrian and Swiss ownership of these airlines?

What was the actual purpose of attempts to direct Lufthansa Cargo • to Krasnoyarsk airport, a base mostly unsuitable for modern cargo operations?

Why are Russian officials not answering letters, e-mails and phone • calls when asked for more explanations?

Russia-EU Air Transport Dialogue at a GlanceContact between Russian transport authorities and European Commission DG TREN were resumed rather unexpectedly a month ago, providing a glimpse of hope for those positively minded and new sources of frustration for pessimists. Little is publicly known as both sides have not released any information. It is known, however, that both sides have agreed to continue a dialogue and have planned another meeting for this autumn.

While re-establishing official contacts is, by all means, a good thing, there are some fundamental deficiencies in the relations between the Russian and European air transport communities. A lot has been said

A63


What are their financial and operational results in Russia? You • will never find a single financial figure for any European airline operating in Russia for the last decade. Do we should call it transparency?

Answers for these and many other questions have never materialized.

orWhat was the real purpose of the extensive SAFA activities • regarding Russian airlines in EU airports between 2006 and 2008?

Why are European authorities so reluctant to allow Russian capital • or other forms of participation in European airlines?

Why does the Association of European Airlines never talk to the • Russians?

In Russia, we do not hear the voice of European airlines. What do • they actually want?

What are their strategies and goals in this market?•

A64


Trans-Siberian Route overflight PaymentsThis issue has become a stumbling block that has frozen Russia-EU civil aviation relations for three years. Has it been worth it? I can hardly believe it. There is a common understanding in Russia that European airlines have asked the Commission to remove Trans-Siberian Route (TSR) over-flight royalties. But why the Commission has made this issue not only a number one priority, but de facto a mandatory precondition for all future contacts and negotiations remains a mystery. In this regard, the Commission has made itself a sort of hostage of a single issue.

Can airline industries from both sides do anything to improve situation? I strongly believe that the answer is a firm yes. We need to widen the dialogue beyond the box restricted by political and governmental circles. In these times when policy is being formed from scratch, contributions from a broader spectrum of interest groups, like Parliament members, economists, financiers, entrepreneurs, airliners and participants across the industry as a whole would be invaluable. We cannot afford to let outsiders – political dealmakers in Europe and Russia who know little or nothing of the airline industry - to forge game rules for our industry for decades ahead. We in the industry must be more vocal participants in the conversation.

A65


Is the Commission representing a sort of political substitute for European airlines who are hiding behind it to minimize the risk of jeopardizing their highly lucrative deal with Soviets struck in seventies?

It would very naïve to think that a political, as opposed to an industry solution for the elimination of TSR payments will make any difference from a pure monetary standpoint for European airlines. Today it is absolutely clear that there will be no cost savings for those flying TSR. The TSR fee most probably will be replaced with either new environmental charges of some kind (thank you European Union for the hint) or a Navaid fee increase or both. A political solution could have possibly been achieved in the late Soviet Union, where elderly Communist Party bosses could sacrifice pragmatic interests to their often imaginary political interests. These times are long time gone. It is strange that policy makers in Europe can not see that simple fact.

We know that historically it was European and Japanese airlines that asked the then Soviet government to provide them Siberian over-flight permission for cash. Nobody is forcing European airlines today to make code-sharing agreements or to purchase additional frequencies from Aeroflot. There are a number of other trunk routes from the EU to Asia and the Pacific Rim outside of Russia airspace. What’s all the fuss about? Some say this system is against EU and international aviation laws, yet Russia has never signed any relevant treaties. Some say that that it is unfair to give money to Aeroflot, that it is a breach of the rules of competition. It is highly doubtful that Aeroflot represents any serious competition to European airlines overflying Russia and I do not think that anybody in Europe will ever experience any competitive advantage if Aeroflot stops receiving over-fly money at some point. Given that the Russian government wants to help this state-owned company, it could subsidize Aeroflot at any time it chooses – WTO membership or not.

A66


Can we do anything? Of course! Taking a broader minded approach, the airline industry can develop a better solution for the TSR payment issue and offer it to politicians. The time is ripe for industry perspectives to have a place on the negotiation table.

One possible “airline industry” solution would be in the sphere of making Russian air transport more and more de-regulated and more in line with contemporary international standards, allowing for integration into the global airline business. Giving this as a starting point, the issue of TSR over-flight payments would dissolve quickly by itself. The Commission should not insist on unilateral cancellation of what some view as unfair costs, but help Russia to modernize its air transport infrastructure and integrate it into the Common Aviation Area, bringing maximum pragmatic advantage for all parties. An approach like this would most certainly be appreciated by the Russian government.

In my own opinion, a practical solution to the TSR payments issue does not rest in political trade-offs; it must be a result of modernization and deregulation of Russian air transport.

A67


What will the Russians do if they cannot think beyond the narrow logic? Will they demand the termination of air service to these countries as they are no longer subject to bi-lateral Air Service Agreements? How will Europeans react to such pointless rhetoric?

Can we do anything? The answer is obvious provided the airline industry actively begin looking for an industry solution to this vital issue in EU-Russia civil aviation relations. Otherwise we are completely at the mercy of the tender but often misinformed hands of those whose job is to care about the prosperity of mankind but not the airline industry. Again, participants in the industry are directly affected by these decisions and so they should be legitimate participants in the conversation.

New Realities and Challenges of Airline ConsolidationLarge-scale changes are taking place in Russian and European civil aviation – consolidation among EU and Russian carriers has caused fundamentally new legal and regulatory problems as well as changes in civil aviation regulations in Russia. I have already mentioned inquiries made by Russian authorities regarding airline ownership and national beneficiaries for several European airlines. The question is: who cares? Very soon there will be no “national“, “flag-carrying” airlines in many EU member states, e.g. in capital of Europe Belgium, and center of Central Europe, Austria, where two major airlines are foreign-owned. Not to mention a dozen of smaller countries.

A68


A truly ground breaking code-sharing agreement was signed between Aeroflot and Air France / KLM in Paris this last April in the presence of the Russian and French Ministers of Transport. New SU/AF code-sharing agreements now include intra-European sectors for the Russian carrier and Russian domestic sectors for its European partner.

One might think that this is an exemption to the rule, representing a deeper commercial and marketing integration of Sky Team members favored by their respective governments. This is not, however, a unique case. Just a month later a new set of similar code-sharing agreements followed, this time with CSA, providing Aeroflot with more commercial rights within Europe.

Airline Commercial CooperationThe expansion of Russian airlines’ to include cooperation with global alliances and the conclusion of previously unthinkable code-sharing agreements mark the coming of a new era in business cooperation between Russian and EU airlines. Bi-lateral Air Service Agreements will obtain new meaning in this context. New forms of airline business cooperation are on the horizon both within the framework of global alliances as well as outside of these boundaries. Pursuing its own course, the Russian air transport industry is moving towards de-regulation and liberalization regarding international air service, despite the often harsh framework of bi-lateral agreements.

A69


Given this context, it is not quite clear why Russian aviation authorities are not supporting the idea of Community Designation and / or a horizontal Open Sky agreement with the European Union. All of these remarkable events are a very tangible indication that mutually beneficial dialogue is both feasible and practical provided both sides want it.

Can we do anything in this area? Airlines from both sides are already doing a lot in this direction. Still, there remains a long list of events and benchmarks needed to set the stage for the long-awaited deregulation of Russia-EU air transport market.

In fact this means that Russia’s largest airline has not only been accepted into the EU Common Aviation Area, but is already taking serious advantage of the fact. Other Russian and European airlines, for example BMI and Transaero, Air Berlin and s7, are also making intensively use of opportunities offered by code-sharing with their partners.

Even more impressive examples of new types of Russian-forged bi-lateral ASAs can be found in another part of the world. The recent agreement between Russia and Hong Kong (which is not an independent state by the way, but still subject to bi-lateral agreement) provides Russian airlines with possibility to have fifth freedom flights via Hong Kong to other Asian destinations. Singapore Airlines is already enjoying fifth freedom privileges for its Singapore-Moscow-Houston service.

A70


Yet to take full advantage of these opportunities a lot of effort will be required. Making these major airports in European Russia fully compliant with EU standards, including new environmental requirements, aviation security regulations and the new air traffic management system (ATM) CESAR in its final stages of development in Europe will be a major undertaking.

Transforming these five Russian airports into truly European centers of operations could present risks to competition, but it is nevertheless a must as a prerequisite for formal inclusion of Russia into the Common Aviation Area in the future. Not to mention the potential for huge business opportunities for European airport management companies.

New Ground Breaking Infrastructure ProjectsThe Northern Capital Gateway project, cost over 1.5$ billion, launched in St. Petersburg joint Russian and European partners, along with the successful operation of Moscow Sheremetyevo Terminal D started recently as well as ongoing modernization of Sochi and Moscow Vnukovo airports clearly demonstrates the reality of Russian air transport infrastructure modernization. The role of European companies and experts in this process can be significant. The opportunities are truly amazing.

A71


Tourist and Leisure TravelTourism between Russia and European countries has been a major driving force behind the constant growth of Russia-EU air traffic over the last twenty years. Air traffic between Russia and EU member states tripled in the 90’s and had been growing at average rate of 15-17% annually thereafter until 2008.

Two out of the four largest Russian international airlines are dedicated leisure travel charter operators - OrienAir and VIM Avia. The two largest Russian international airlines, Aeroflot and Transaero, have a significant part of their European business from the tourist industry.

By the way, high-tech modernization of Russian ATC/ATC is a must. All airlines will benefit from such upgrading. And Europe is leading ATC modernization in our part of the world. It could be an excellent opportunity in finding compromise on TSR issue.

Cooperation in this area is a very pragmatic matter and should be very beneficial for all parties involved. For example, one of the major drivers in NCGW business development would be purely economical – to get as many airlines, both European and Russian, flying to Pulkovo airport as possible, directly challenging existing monopolies and thus contributing to de-regulation. Success of projects like Northern Capital Gateway should demonstrate the feasibility of large-scale EU-Russian cooperation in the area of air transport infrastructure and pave a way to other similar projects.

A72


situation with traffic to Spain and Italy with 50+ million and 40 million international visitors per year. It is hardly surprising that Sky Team members and their Russian partner, Aeroflot, dominate all these markets.

It is quite obvious that easier access for more Russian carriers to these markets will result in a significant growth of tourist traffic to these countries and to Russia.

The most liberalized (from regulatory point of view) travel market for air transport, the Russia-German market, has clearly demonstrated all the advantages of easy access to the market. For many years Germany has been the No.1 international market for Russian airlines (you will find exact figures in the conference pack). Other EU countries are far behind, including major tourist destinations like France, England, Italy and Spain.

According to the leading Russian airline and travel journalist Polina Zvereva, Lufthansa carried 430,000 passengers between Saint Petersburg and Germany in 2008. For comparison: France has 75 million visitors per year and only 1/2 million of those tourists are carried by Russian airlines, which means that Air France has another ½ million passengers. We can see a very similar artificially depressed

A73


Can we do something in this area? The airline industry could make a major contribution to developments EU-Russia tourist market by insisting on the liberalization of air travel regulations between Russia and European countries. National travel industries should also stimulate its respective governments to takes steps and relax and simplify visa procedures, both for countries and specific territories, e.g. major transit traffic and premiere tourist attractions.

Russia’s Tourist Industry Union is currently leading a lobbying campaign targeted at relaxing the visa regime for travelers from developed countries, first and foremost for residents of the European Union. The simplification procedures for obtaining short term visas for those traveling to Saint Petersburg implemented during a trial last year immediately resulted in a boom in the number of travelers to this major Russian tourist attraction.

Potentially cardinal changes in the tourist market loom as a consequence of moving forward with negotiations on relaxing visa procedures. Talks on this issue were announced as a priority issue on the Russian agenda for the Russia-EU Summit held last week in Rostov-on-Don.

A74


Another possibility is to provide solid, valuable industry input in this conversation before the political process becomes hardened and poorly informed laws and agreements cripple the progress that has been made so far. The bottom line is that today politicians and governmental officials from both sides do not have any clear strategy for the future development of air transport. European policy on the Russian air transport market looks very sketchy and, from Russian standpoint, one sided. Russian policy for the European air transport market is so vaguely formulated that its provisions are considered by many to be completely unacceptable from the perspective of EU legislation.

In these circumstances, given the airline industry intends to take a pro-active approach and contributes to the political and legislative conversations at the initial stages of what is essentially a new era of relations between Russia and EU, many very useful and positive things could be done.

What to do?Fundamental changes in relations between Europe and Russia demand an immediate response from market participants.

I can see two basic scenarios. The first is to simply do nothing. “Let politicians do their job. We will wait and jump on this bandwagon when all the ground work is done.” How often we hear this, or if not actually hear, meet this very common, hassle-free, “energy-saving” approach.

A75


Other similar opportunities should be researched and explored to the full advantage of our industry. Endless talk about crazy Russians who are always against all nice EU initiatives (simply because of their bad temper and the twisted workings of their mysterious souls) and the constant Russian accusations about European with their hidden intentions to squeeze unilateral benefits our of Russia and discriminate against friendly Russian businesses will lead to nowhere, to say the least.

Its time we in the industry begin to have a more significant voice in the conversation about the state of affairs in the international airline industry and dispel the myth of gloom with a clear thinking and straight talk about the potential for growth and cooperation in this new era for the benefit of the airline business and better relations between neighbor nations.

Here is just one example. In the political arena, Russia and the EU are moving forward to developing the Partnership for Modernization Program, originally proposed by the European Commission earlier this year and well received by the Russian government. The airline industry can and should include itself in this potentially important program with feasible, understandable and pragmatic programs with clear goals and results. The success of industry inspired programs within this framework will build-up mutual credibility and trust for further cooperation in the political and commercial spheres.

A76

International aviation conference 2010Finding the adequate strategy for Northern airlines

Max NilovStrategy Consultant

PERSoNAL INFo:Permanent address:Ruth-Scheye-Weg, 10 51105 CologneGermanymobile Tel.:+49 (0) 1752681448+7 812 9396937email: [email protected]

Date / place of birth: 22/11/1971 Almaty, Kazakhstan

Nationality:German

Key features:More than 10 years experiences in Aviation Industry• 2,5 last years in the different senior management • positions of top Russian airlines About 10 years of practical experiences of project • management at Lufthansa Consulting in Cologne, Germany for top-tier airlines - Lufthansa, Saudi Arabian Airlines, Philippine Airlines, Etihad, etc.Development and implementation of comprehensive • restructuring / turnaround management programs (airline strategy, airline economics, airline commerce, fleet development, etc)Project management of several successful airline start-• ups in Europe, Russia, Western and Southern Africa and Middle East – strategy and commercial issues (product, network and revenue management) Network development and optimization / modernization • for different airlines – from small regional up to global alliance network carriersSolid experiences in acquisition / consulting of top • customers (Lufthansa, El Al Israeli Airlines, Transaero Airlines, etc.)

CURRENT AND RECENT PREVIoUS EMPLoYMENT RECoRDS:Current employmentfreelancer

Description of main tasksTurnaround Management• Strategy Development• Development of the Business Plan• New Organizational Structure• Cost Cutting activities• Development of completely new network• Product re-design• etc.• Preparation for the privatization• Reorganization into single Business units• Airline Consulting Activities•

Feasibility Studies –Market Potential Analysis –Strategy Development –Network Management –Revenue Management –Profitability –

Airport Consulting Activities• Feasibility Studies –Market Potential Analysis –Regional Development –Route Network Development –Airline Attractiveness –

Airport Marketing•

77

International aviation conference 2010Max Nilov / Presentation

Max Nilov, freelancerAirline Consulting Services

Newer products offer lower step gains than before – lower unit costs

All over the years the aviation industry has constantly evolutioned

SegmentationCompetition

Deregulation Fragmentation

past yesterday today

60th 70th 80th 90th 00th 10th

Governmental ownership

Limited networks

Highly regulated

Restricted competition

Privatization

Global Alliances

Customer loyality

Price transparancy

Consolidation

Niche players

Customer choice

Poor yields

2Max Nilov, freelancerAirline Consulting Services

1

Finding the adequate strategy for Northern airlines

Max Nilov, freelancerAviation Consulting Services

A78



Legacy network carriers have recently tried out five ways to escape from the „Airlines‘ No-Man‘s Land“

Premium carriers

Low cost carriers

Legacynetwork carriers

Options toescape fromstuck-in-the-middle position(„Airlines‘No-Man‘s Land“)

Become apremiumcarrier

Become a lowcost carrier

Become a„better“ net-work carrier- reduce costand/or improvedifferentiation

Provide superiorproduct to highyield clients

Establish leanoperationalmodel

Specialize inintercontinentaltransfer traffic

Segment offeringand operationalplatform

Find a niche(geography/customer segm.)


Airline business model in 3 D:market environment - product strategy - operation performance

3

… leading to key strategic questions

Which markets do we want to serve?

How will the competitive situation evolve?

What do our customers expect from us?

What are the major cost drivers?

How does the fleet match our needs?

Are the resources deployed efficiently?

How should the future network look like?

What is the future product offering?

What future fleet do we need?

A79



Game’s rules: to stay inline with the competitors, the airline must adjust production costs according to the industrial standards

Source: ATI, IATA, TRL own researchOAL

Referent airlines

16

0

2

4

6

8

10

12

14

200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800

Northwest

Air Lingus

Air France

Alitalia

Air Malta

Monarch

Britannia FirstChoice

Iceland Air

Th.Cook

Средняя дистанция (km)

Uni

t C

ost:

€C

ent/

Ava

ilab

le S

eat

(km

)

SAS

Ryanair

Easyjet

Cyprus Air

British Airways)

Emirates

Lufthansa

Iberia

Austrian

SkyWest

Virgin Express

City FlyerExpress

Air Dolomiti

Go

3000

Oman Air

regional

legacy network

budgetcharter

= unit costs

SingaporeAirlinesSQ sector length:6523Km

AA

Аэрофлот

ГТК Россия

6Max Nilov, freelancerAirline Consulting Services

- 5 -

while service the chosen segment…

--

-

-

-

-1,1

1,9

0,81,4

1,20,6

2,3

1,5

1,2

1,7

0,8

2,6

1,3

4,5

Cost advantage of a low- cost airline

12,0 cents/ASK

Top 3 major traditional airlines (international)

Ryanair

1

2

3

4

5

6

Overhead

Sales

Passenger services

Crew costs

Airport charges, ground handling

Seat density

- 62,5%Service

-0,5 ¢-1,7 ¢

-0,8 ¢-0,6 ¢

-2,6 ¢

-1,3 ¢

4,5 ¢

General and Admin

Sales and Distributions

CrewMROFuelHandling

AirNav / Airport ChargesAC Ownership

Cost advantage of a low- cost airline

Top 3 major traditional airlines (international)

Ryanair

1

2233

4

5

66

1

2

3

4

5

6

General and Admin

Sales and Distributions

Service

Crew

Airport Charges and AirNav

AC capacity (seat dencity)

- 62,5%

The art of the airline management is to control the production unit cost

A80



Some of the carriers found a way to participate in all segments at the same time …

8

Internal competition as a tool to control efficiency of the businessbeing closer to the market is more efficient, even by eventual lost of the sinergy

Uni

t co

st

distance

Model/concept


Legacy network carriers have recently tried out five ways to escape from the „Airlines‘ No-Man‘s Land“

Premium carriers

Low cost carriers

Legacynetwork carriers

Options toescape fromstuck-in-the-middle position(„Airlines‘No-Man‘s Land“)

Become apremiumcarrier

Become a lowcost carrier

Become a„better“ net-work carrier- reduce costand/or improvedifferentiation

Provide superiorproduct to highyield clients

Establish leanoperationalmodel

Specialize inintercontinentaltransfer traffic

Segment offeringand operationalplatform

Find a niche(geography/customer segm.)

A81



Private / Governmental / VIP

regi

ona

l

domestic

Segmenttion by distance

Segm

ente

d by

tra

vel p

urpo

se

shorthaul

VIP

charter

Leas

ure

VFR

bu

sin

ess

middle haul long haul

2.8 M*

10

20,7 21,86 23,08 24,38 25,74 27,18 28,70 30,31 32,01

13,1 13,73 14,50 15,31 16,5317,86

19,1120,44

21,8711,5

12,6513,92

15,0316,31

17,6119,02

20,5422,18

0

10

20

30

40

50

60

70

80

90

2009 2010 2011 2012 2013 2014 2015 2016 2017

чартерные

международные

внутренние

региональные

vip20.7 M* 13.1 M*

11.5 M*

0.03 M*

Segm

ente

d by

yie

ldh

igh

med

ium

low

International

- P2P

- Transfer

feeder possibilities of the Russian market are overestimated –

Share of the Moscow airports in schedule international traffic is about 72,7%, the second biggest airport - LED has about 16,8% and all other airports together about 7%.


-10

-5

0

5

10

15

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Con

solid

ated

pro

fit m

argi

n (%

)

Global - Weighted Average Operating Profit Margin by Airline Category 1995-2005 (1)

Low Cost

премиум

сетевые

Note: Weighted average operating profit marginSource: Datastream, Factiva

LCCs = Southwest, Jetblue, EasyJet, RyanAir, Air Asia, Virgin Blue

Premium = Cathay, Singapore,…

Network = Air France/KLM, Lufthansa/Swiss, Alitalia, SAS, Iberia, Air China, Asiana, EVA, Korean, Thai, Qantas, JAL, American, United, Northwest, Delta

“Stuck-in-the-

Middle”

9

Apart from LCCs, only carriers that have differentiated themselves by offering some ‘premium’ have weathered the storm

A82



The future of the russian aviation will depend on Aeroflot’s ability to design and operate a national wide network based

12

Niigata

P- Kamchatsky

Yuzhno-Sakhalinsk

Magadan

Anadyr

Komsomolsk

Neryungri

Vladivostok

Murmansk

Moscow

Novokuznetsk

Norilsk

Osaka

Tokyo

Bangkok

Phuket

Hanoi

Seoul

Frankfurt

London

Minsk

Kaliningrad

Urumqui

Shangchai

Sanya

Guandzhou

Yakutsk

Beiging

Tsian

Ulan-Ude

Yekaterinburg

Abakan

Irkutsk

Bratsk

Ulan-Bator

Chita

Blagoveshensk

Kharbin

Denpasar Manila

Utopao

Vilnius

Helsinki

Riga

St. PetersburgCopenhagen

Khabarovsk

Krasnoyarsk

Chendou

Dalyan

Nizhnevartovsk

Pusan

Tumen

Frankfurt

Tashkent

Almaty

NovosibirskIstanbul

Barnaul

KhudzhantDushanbe

Dubai

SamarkandBishkek

AstanaErevan

Baku

Tbilisi

Gyndzha

TomskOmsk

Kemerovo

KhurgadaSharm Al sheikh

Tel-Aviv

MinVody

Munich

DusseldorfAmsterdam

Lisboan

Barcelona

Stockholm

Volgograd

Samara

Erevan

Buhara

Astrakhan

Fergana

MakhachkalaAtyrau

Arkhangelsk

PermKazan

ChelyabinskUfa

KhantySurgut

Orenburg

RostovOdessa

KievVienna

Prague

KrasnodarSotchi

Far-East subsidary

South Regional

Бюджетная

Premium carrier


61,7% 58,8% 55,6% 52,2% 48,5% 44,5%40,2% 36,3%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

2011 2012 2013 2014 2015 2016 2017 2018

Rel

ativ

e m

arke

t sh

are

Should the latest government’s plan to integrate all state owned airlines into Aeroflot, the market share in Russia of the New Aeroflot will be about 70%

O T H E R A I R L I N E S

11

A E R O F L O T (p r e m i u m)

r e g I o n a l u n i tb u d g e t u n i t

c h a r t e r u n i t

38,3% 41,2% 44,4% 47,8% 51,5% 55,5% 59,8% 63,7%

A83



Status-quo of Rossiya Airlines

14

• Being still strongly interrelated with each other, both, St-Petersburg’s only the airport Pulkovoand it’s home base airline GTK “Rossiya” are rapidly loosing shares in their business

• Over the last years neither the airport nor the airline have found a solid survival strategy to re-act properly on the changing environment of the Russian aviation business.

• Meanwhile, Moscow as Hub not only fully recovered its historical traffic (1990), but also increased share in all-russian domestic and in/outbound traffic from 26 to 82% in terms of frequencies.

• At the same time, the second biggest Russian city Sankt-Petersburg with a direct catchment area of 6,2 Mio PAX has being underserved in number of city pairs, frequencies, capacity and dos not participate in transfer traffic

The future strategy of the GTK “Rossiya” is mostly dependable on the future Pulkovo development

Max Nilov, freelancerAirline Consulting Services 13

Gov. projects / diplomatic FDI and trade relationsExhibitions, intl. events

All service elements , including the airport,have to reflect the needs of the three main customer segments

government / business

VFR*

Traders*

Education

Vacation abroad

Trade fare visits in Europe,

Time sensitivity, High frequency, direct flightsFFP membership, service

Majority in Y class, Low faresExcess and unaccompanied -baggage, FFP

Price sensitivityHigh frequency, direct flightsFFP membership, service

Travel motivation Decision factors

Incoming tourismtraffic

Vacation in Russia

Multi-stop vacation

Direct flightsGood fare/service relationPackage offers

Preferred service class

Segment share**

School and university Professional trainings and qualifications

High number of seats in YClass, price sensitiveExcess baggage capabilities

Five identified customer segments show significant differences in product-market-mix preferences

More than three quarters of the identified passenger volume consist of following customer segments:

Government & business, VFR and Traders

BusinessEconomy

First

BusinessEconomy

First

BusinessEconomy

First

BusinessEconomy

First

BusinessEconomy

First

A84



Future network strategy is driven by the participation in the global market

16

The capability of the local market are very limited.Further growth without participation in the global market is not possible

LED

Nort-Western Russia

Siberia and Far East

Southern RussiaUkraine and CIS

Europe

Middle EastChina and S.-E. Asia

Transatlantic

Existing flows

Future flows


15

Competitive Situation

• Customer orientation is a very important factor for the airline’s management.

• A lack of a alternative premium airline in the Russian market, that deserves to be called premium, provides the chance to position itself as a premium, 2-class carrier focusing on clear distinctive factors compared to its competitors.

• Hi-yield target passenger group are government and business travelers, “Visiting Friends and Relatives” passengers as well as traders which together represent more than 75% of the market.

• The corporate brand identity and values will be align with expectations of the target customer group. The name ROSSIYA as a less representative for the market strategy might be replaced by a LOCAL POINT NAME (secret yet)

Excellent airport services for the passenger as a part of the product are ESSENTIAL

A85



- 18 -

While focusing on the high potential of the market the defined business model needs to take certain risks into consideration

SWOT Analysis

● Customer orientation is in its infantry

● Market is under-served with reliable services

● Region represents a high yield market (above russian average yield)

● Relatively high traffic growth rates (6% p.a.)

● Designation for attractive destination in Europe

Weaknesses

● Airport constraints to transport international passengers to domestic destinations

● Poor airport infrastructure might dilute a positive impression from the airline

● Foreign airlines dominates the European market

● Overstaffing due to political reasons

ThreatsOpportunities

● Change for governmental ownership to privat and orientation to be a profit driven venture

● Management’s efforts to create a lean and efficient organization with focus on core activities

● Harmonized, safe and reliable western built fleet

● Customer demand driven network & product design

● Unable to operate complex Network / Hub is a prerequisite due to limited ability of the airport

● Airline is only an early follower (s7, SU, UN, UT already operating in LED) stealing passengers to Moscow and European hubs

● Poor product level

Strengths


2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

pessimistic 3,5 2,9 3,0 3,2 3,4 3,7 4,0 4,3 4,5 4,8 5,1 5,4 5,7

most likely 3,5 3,0 3,3 3,6 4,0 4,4 5,3 6,3 7,3 8,3 9,1 9,8 10,5

optimistic 3,5 3,0 3,4 3,8 4,3 5,1 6,4 7,8 9,3 10,8 12,1 13,3 14,5

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

Passenger Traffic Forecast (GTK “Rossiya” traffic only)

• IATA industry average growth

• Very conservative (2-3 new AC p.a.)

• Share protection, sinking by 2% p.a.

• NO NEW TERMINAL built

pessimistic most likely optimistic

Market growth rate

FV’s capacity growth

FV’s Market share

LED Terminal

• In-line with Russian GDP’s forecast

• Realistic (up to 10-12 new AC, p.a.)

• Market Share recovered to 65%

• NEW TERMINAL in ops in 2014

• In-line with Russian GDP’s forecast

• Aggressive (up to 15 new AC, p.a.)

• Historical Market Share ~ 80%

• NEW TERMINAL opens in 2013

17

A86



20

MAX NILOV, freelancerairline consulting services

Contact :+7 812 [email protected]

a selection of recent reference projects:

?

• graduated in 1995 (production organization) and twice in 2009 (management organization)

• about 10 years within Lufthansa Consulting in 1999 -2008

• re-moved to Russia

• div. executive positions in top Russian Airlines (AirUnion, Rossiya Airlines) in 2008-2010

• start-up with own Aviation Consulting in June 2010


19

In order to be prepared for the future challenges, the new business plan (as an Aeroflot unit) following key factor for success in 2013 are defined:

• to recover and maintain the historical market share in LED - 65%

• to increase the share of transfer pax to 50%;

• to achieve network profitability and control О&D

• to Increase number of «loyal» passengers;

• to create the best premium-class in segment

• to maximize distribution channel mix efficiency

• to compete with Russian and western airlines for high-yield passengers;

• to achieve the highest level of reliability and safety in Russia;

• to support hub in Pulkovo – efficient connection within the network

• to operate a effective fleet of reliable aircraft, adequate to the network (product);

• to maximize brand value as a part of THE product

• to optimize commercial realtionships with other commercial AL ( global alliance?)

• to achieve the maximum level of employee loyalty

A87



THANK you for your attention

21

A88

International aviation conference 2010Challenges of Survival & Prospects for the Future

Date of birth05.01.1956

NationalityGerman

AddressFontaneallee 42-43ZeuthenTelephone 0049 172 311 33 56e-mail [email protected]

BUSINESS DEVELoPMENTSince 2006General Representative of Air Berlin Group (Air Berlin, LTU, Niki, Belair) in Russia and the CISTASKS: as before

2005 – 2006General Representative of Germania Airline and dba in Russia and CISTASKS: as before

Since 2007CEO of TCH Transport Clearing House Europe GmbH

2002 - 2005General Representative of Germania Airline in Russia and CISTASKS: Responsible for sales and marketing on Russian and CIS market Initiation and realization of scheduled flightsRepresentation of the Airline at intergovernmental negotiations in RF and CIS. Responsible for warrantee of traffic rights and cooperation with aviation authority. Responsible for contracting, consulting Russian Airlines, Airports

1993 – 2002Aviation consultant Germania Fluggesellschaft for Russia and the CISTASKS: Initiation and realization of aircraft leasing in Russia, Georgia, Uzbekistan. Initiation, preparation for scheduled flights to Russia and Georgia. Airline consultingOrganization of sales distribution systems in Russia

1990 – 1993Consultant Russian Market

1987 – 1990Department Ministry of DefensePosition: Major

1884 – 1987Military DiplomatPosition: Assistant Military Attaché Greece

EDUCATIoN1981 – 1884 Military academy Certificate: Diploma military scientist

1974 – 1981Artillery regiment Certificate: Chief reconnaissance officer Position: Reconnaissance captain

1974 – 1977Military academy for officersCertificate: Diploma engineer economist Position: Lieutenant

1974Abitur (A-level)

LANGUAGESGerman native, English fluent, Russian fluent, Greek high level

Günter SeibtGeneral Representative of Air Berlin

89

International aviation conference 2010Günter Seibt / Presentation

2

2006

27,0

2007

28,6

20081996

1,6

1997

2,0

1998

3,0

1999

4,1

2000

5,5

2001

20,0

2002

10,0

2003

12,1

2004

13,5

2005

0,5

1992

0,8

1993

1,0

1994

1,1

1995

1,4

6,7

55 89 112 127 151 169 213 291407 568

695

8631.034

1.215

1.575

2.5403.401

Passagiere in Mio.Mio. EUR

PHASE 3

PHASE 2

PHASE 1

Mallorca-Shuttle

Start Euro-Shuttle

Takeover TUIfly-Cities

Takeover LTU / belair (share 49%)

IPO / dba

2009

27,9

Increase NIKI-share to 49,9%*

2010e

*subject to anti-trust authority approval

The History Of Air Berlin Founded 1978 under US-law

Licensed under German law in 1991 asAir Berlin GmbH & Co. Luftverkehrs KG

16 years of profitable growth

3 major phases in the history of the company3.240

Air BerlinChallenges of survival & prospects for the future

North HUB Riga Conference / 09.06.2010 / Riga

A90


4

Air Berlin is number 5 in European market – Significant growth over the last years – outperforming the competition...Air Berlin environment and development 2009

Longterm pax development Air Berlin** Passenger [m]*

2)

12

21

23

23

25

32

45

59

74

83

3328

* 01.01.2009-31.12.2009; company web sites (except Alitalia) ** as reported figures

1)

1)

3)

3)

3)

1) Fiscal year 2008/2009 2) incl. TUIfly city-ops full year and NIKI – subject to approval of antitrust agency 3) 2008

18.2

0.7

2006

16.8

2.0

14.8

2005

13.5

2009

27.9

7.1

19.6

1.2

2008

28.6

7.1

19.9

1.6

6.1

25.0

2007

Domestic Euro Intercont

1.2 3.2Flightrevenue[EUR bn]

3.42.51.6

CAGR: 28%

CAGR: 20%

3

Air Berlin's growth path

Presence Switzerland

2005 2006 2007 2008 2009

Growth through acquisi-tions & partner-ships

German domestic traffic + flights to

RUSSIA

Charter & long haul

City business –domestic, Italy, Austria, Spain

Organic growth

Launch holistic branding concept

IPO raises capital for extended

growth strategy

AB – S7 co-operation launch

Enforced focus on corporate accounts

Relaunchtopbonus

IPO in 2006 rose the capital for future growth. Through the take over of dba and LTU, Air Berlin entered the German domestic and intercontinental market.

Growth through M&A

2010

Agreement on step up share

in NIKI

A91


6

Air Berlin's 'hybrid strategy' - competitive advantage to “low cost – no thrill” - by best 'value for money' proposition

CORPORATE ACCOUNTS Targeting price-oriented business

customers High frequency schedules on high

demand routes

TOUR OPERATORS

Exploiting excellent market position in charter segment

Vast network service to Mediterranean and other tour operator destinations

PRIVATE TRAVELERS

HOLISTIC SINGLE-CLASS MARKET COVERAGE

High frequency service on higher volume O&Ds with attractive departure & arrival times

Combination of schedule and charter service rotations to achieve higher asset utilization

Single class concept Full Economy service with buy-

on-demand product items Attractive customer loyalty

program Highly recognized and cherished

brand Simplified processes

COMPETITIVE, VALUE-FOR-MONEY PRODUCT & PRICING APPROACH

The Air Berlin hybrid business model allows an optimal exploitation of the different customer segments' willingness to pay

Targeting clients with medium-range price sensitivity

Vast network from all major German catchments

Air Berlin's hybrid strategy

HYBRIDSTRATEGY

5

Jan

2%

11%

Dec

2%

13%

Nov

-1%

11%

Oct

-3%

1%

Sep

-5%-5%

Aug

-4%-4%

Jul

-4%-3%

Jun

-7%-5%

May

-9%-8%

Apr

-6%-3%

Mar

-11%

-6%

Feb

-14%

-9%

Jan

-13%

-4%

The negative market development is slowing down – Air Berlin back on growth track after integration of TUIfly city-ops Pax development across the industry year-on-year [%]

Demand in pan-European travel is recovering

Air Berlin showed growth again caused by integration of TUIflycity-ops end of Oct 2009

Further market outperformance expected

Q4Q1 Q2 Q3 Q1

Source: AEA (as of Febuary)

AEA (region Geographical Europe and Domestic) Air Berlin

'102009

A92


8

Germany – Russia - a stabile base for continous growth –despite clear crisis effects – now recovering…

Quelle: SAFIR

Gateway FRA looses significantly, TXL growing ; 80% pax flying directly

GE-RU (final destination - OW)in % of all

20%

80%

+6%

904 17%

83%

2005

19%

81%

1.225

20%

80%

1.152

2007 2008 20092006

+8%

2004

19%

81%

+18%

79520%

1.070

80%

+7%

846

+14% -6%

Transfer Direkt

18% 20% 20% 16% 18% 19%

4%5% 7%5% 5% 7%7% 6%

16%

14%

13%14%32% 29% 25%

19%

13%11%

3%3 % 4%3 %

17%14%

2% 1% 6%8% 5%3%

169

29%

182

2004

VIE

KGD

SVO

FRA

DME

24%

154

26%

Übrige

MUC

TXL

27%

7%

185

18%

19%

230

23%

17%

225

2005 2006 2007 2008 2009

GE-RU (final desitnation - OW)in % of all

7

Air Berlin's 'hybrid strategy' offers the opportunity to be competitive on different markets….Overview of business units

DOMESTIC

Main and secondary

routes for Domestic-

German business

travel and tourism

EURO SCHEDULE

City-Shuttle (Europe

and Russia), PMI-

Hub, Balearics,

Domestic-Spain

EURO CHARTER

Medium haul routes

tourism (e.g. Egypt,

Greece, Turkey, Ca-

naries) -Touroperator

INTERCONT

Lang haul routes

(business travel and

tourism)

Air Berlin – not being a member of international alliances >>> needs the right partner for co-operation…

A93


10 BER-25806-003-01-14-G.ppt

Air Berlin - co-operation a pre condition for –Successfully managing growth

Air Berlin - co-operating in different forms and conditions:(Russian market)

Member of IATA-BSP (Russia)>>> conclusion of SPA / MITA with Russian Airlines

Member of Russian TKΠ>>> participant of Multi-Interline

>>> participant of DME Transfer Service

STRATEGIC PARTNER>>> Code Share Agreement >>> mutual FFP acceptance

9

Russia and Germany - different markets: MOW and LED dominate the Russian marketwhile the German destinations are distributed

Flights from German speaking Origins to Russia(Year through 2007)

4.7431.0621.0851.1962.4512.5232.7072.7622.8993.7824.1144.1914.8934.965

13.04150.50752.675

59.44567.875

100.617110.609

144.245150.675

203.781209.147

292.142

0 50.000 100.000 150.000 200.000 250.000 300.000 350.000

Re st

FDH

FKB

P AD

LNZ

S ZG

GRZ

LEJ

BS L

D RS

BRE

I N N

QYG

FM O

NUE

S TR

HAJ

C GN

GVA

HAM

ZRH

D US

VI E

M UC

BER

FRA

Flights from German speaking Origins to Russia(Year through 2007)

4.7431.0621.0851.1962.4512.5232.7072.7622.8993.7824.1144.1914.8934.965

13.04150.50752.675

59.44567.875

100.617110.609

144.245150.675

203.781209.147

292.142

0 50.000 100.000 150.000 200.000 250.000 300.000 350.000

Re st

FDH

FKB

P AD

LNZ

S ZG

GRZ

LEJ

BS L

D RS

BRE

I N N

QYG

FM O

NUE

S TR

HAJ

C GN

GVA

HAM

ZRH

D US

VI E

M UC

BER

FRA

Flights from German speaking origins to Russian destinations(Year through 2007)

1.978

1.066

1.365

1.484

2.349

2.699

4.072

5.330

8.977

9.698

10.230

11.261

11.264

11.508

19.772

23.975

27.330

43.426

299.279

1.001.069

0 200.000 400.000 600.000 800.000 1.000.000 1.200.000

Rest

ARH

MMK

ASF

AAQ

RTW

VOZ

AER

VOG

MRV

KZN

GOJ

PEE

UFA

KRR

ROV

KUF

KGD

LED

MOW

Flights from German speaking origins to Russian destinations(Year through 2007)

1.978

1.066

1.365

1.484

2.349

2.699

4.072

5.330

8.977

9.698

10.230

11.261

11.264

11.508

19.772

23.975

27.330

43.426

299.279

1.001.069

0 200.000 400.000 600.000 800.000 1.000.000 1.200.000

Rest

ARH

MMK

ASF

AAQ

RTW

VOZ

AER

VOG

MRV

KZN

GOJ

PEE

UFA

KRR

ROV

KUF

KGD

LED

MOW

Source: PaxIS

A94


12 BER-25806-003-01-14-G.ppt

Air Berlin + S7 Code Share co-operation – an ongoing process with obstacles…

Air Berlin + S7 Code Share:1st. Phase:- MUC <<>> DME - AB Operating Carrier (7/7) / S7 Marketing Carrier + op. Carrier (1/7)

- DUS <<>> DME - AB Operating Carrier (7/7) / S7 Marketing Carrier + op. Carrier (1/7) - DME <<>> FRA - S7 Operating Carrier (7/7) / AB Marketing Carrier- DME <<>> HAJ - S7 Operating Carrier (2/7) / AB Marketing Carrier

>>> still impossible to include Berlin since S7 does not get designation…

2nd. Phase: - MUC / DUS / FRA / HAJ connected via DME to Irkutsk / Perm / Ufa / Rostow / Samara- DME connected via DUS to STR // via VIE to INN …

>>> first beyond point Codes Share between Western and Russian Airlines !!!>>> Both airlines vice versa designated to each of the city pairs…>>> AB on inner Russian routes acting ONLY as marketing carrier>>> S7 on inner German / Austrian routes acting only as marketing carrier

limitation: Inclusion of city pairs only possible for cities agreed between the countries

3rd. Phase: NECESSARY to integrate the range of networks of the two airlines to gain mutual benefit !!!

11 BER-25806-003-01-14-G.ppt

Strategic co-operation partners:Air Berlin + S7

- both successfully coping with the crisis

Air Berlin + S7 Code Share:>>> each other networks fit together well – one in the West, one in the East…

>>> Russian and West European markets for passengers not really integrated

>>> more than 20% of transfer pax – both airlines benefit and do not disturb inner markets

A95


14

The co-operation task is real integration – building a powerful bridge…

13

New Berlin HUB structure enables better to combine the advantage on different markets – providing resources of transfer

In summer 2010 Air Berlin passengers have access to more than 6,000 weekly connections in six waves with app. 22 aircraft from/to Berlin

GermanySpainItaly

SwitzerlandAustria

GermanyScandinavia

RussiaSwitzerland

AustriaIsrael/Egypt

GermanySwitzerland

AustriaScandinavia

Italy

GermanySwitzerland

AustriaScandinavia

GermanySwitzerland

AustriaScandinavia

GermanySwitzerland

AustriaPoland

Italy Russia

GermanyItaly

France

RussiaGermanySpainItaly

SwitzerlandAustriaPoland

GermanyScandinavia

RussiaSwitzerland

AustriaIsraelEgypt

07:30 – 9:00 BERLIN10:25 – 12:25 11:45 – 13:00 16:00 – 17:30 17:50 – 18:50 20:00 – 21:35

FranceItaly

Germany

A96


16

Air Berlin and S7 fit to each other well– at significantly better position than LCCs

Primary Airports

Hubs and Network

Frequent Flyer Program

Separate check-in for premium travelers

Lounges

Class differentiation on board

Free meals and additional frills1)

1) Newspapers, seat reservation, free entertainment on board2) Only on long-haul services with A 330

2)

15

AB/HG + S7 realise a phased approach to cooperation

Code shareFreesale codeshare on all our routes between Russia and Germany/AustriaCodeshare agreements have been signed in October. Implementation realised in November 2008 First Beyond points in Russia and in Europe included

Harmonized PricingS7 changed pricing structure to OW logic similar to Air BerlinBoth carriers evaluated their pricing structures on flights between Russiaand Germany/Austria

Joint Sales andMarketing

Depends on implementation of codeshare and harmonized pricingPossible fields of cooperation: joint approach to corporate clients and travelagencies, joint sales promotions, joint advertising campaigns, commonairport facilities ….

FFPCooperation

S7 launched a frequent flyer program in 2008Air Berlin experts advised S7 experts in this this areaAfter S7s FFP was in place co-operation started - “earn and burn on each other’s flights”

A97


18

New e-service avaiable now: mobile.airberlin.com Check in anywhere:

• Access your booking, choose a seat and obtain yourboarding pass directly

Book anywhere:

• Any flight within the airberlin route network can be

booked

• Even the topbonus number can be entered

Get information anywhere:

• Current departures / arrivals

• Current flig

Comfort anywhere:

• Your details are already saved in the topbonus & Air Berlin Comfort login

17

Developments and new technologies – the way for future prosperous development: - most modern Check-in Technology

Seat reservation via SMSsend SMS for reservationPick up boarding card at check-in

Web check-inCheck-in at airberlin.comSelect seat and print boarding card

Email check-in invitationAdvice by e-mail when web check-in for booked flight is openedSelect seat and print boarding card with web check-in

Check-in automaticSelect seat and print boarding card in less than 60 seconds Identification by identity card, credit card or topbonus member card

MMS Check-inProceed with check-in via MMSBoarding card on MMS

A98


20

Air Berlin‘s award-winning Service – the way to win the pasangerSelected awards

Country-Expertise

Switzerland

Great Britain

Best German Airline to Spain

Scandinavia

Best Service

Best service for kids; 2007-08

Best value for money, e.g. for luggage; 2009

Best in customerfriendly service; 2009

best transparency and valuefor money 2008-09

No. 1 for Golf2010

Best Airline

Best low-cost 2006-08

a.o. World and European best low-cost; 2005-09

World´s leadingbudget airline; 2007-08

Best low-cost; 2007-08

Top low-cost; 2005-09

Best low-cost;2005-09

Best Short-Haul Airline 2010

Prime-Status Corporate Responsibility

19

The next new generation e-service: iPhone App

Mobile check in enhancement for touchscreens

A99

International aviation conference 2010airBaltic: Engine of Growth in the Baltics

Bertolt Martin FlickPresident and CEO of airBaltic

1997 until 2000Latvijas Gaze Deputy chairman of Latvijas Gaze AS in Riga

1994 - 1997 Treuhand osteuropa Beratungsgesellschaft mbH ToB, Berlin Consultant to the Latvian Privatisation Agency in Riga

1992 – 1994Ministry of Justice in Berlin

FURTHER ACTIVITIES1996-1999Member of the Advisory Board of the Latvian airline Air Baltic A / S, from August 1999 Chairman of the Board

1997 - 2000Member of the Advisory Board of Ave Lat A / S, from Oktober 1999 Chairman of the Supervisory Board

LANGUAGES:German, Englisch, Latvian, Russian, Italian and French

PUBLICATIoNS:“Privatisatierung mittlerer und großer Unternehmen in Lettland”, in Eigentum in Osteuropa, Berlin 1996.

“Die GmbH nach neuem lettischen Recht”, in Investieren in Osteuropa, Berlin 1994.

Artikel für das Handelsblatt und andere Zeitungen

Date of Birth:July 2nd, 1964

Nationality:German

EDUCATIoN:1984 - 85Trenton State College (USA), History

1985 - 91Universität Heidelberg (Germany), Law School

1991Law School Graduation, Heidelberg (Germany)

1994Bar Exam, Berlin

WorKing exPerience:2002 to presentAirBaltic A/S, President and CEO

2001 until 2002Indecon – consulting, Consultant involved in privatisation projects in Serbia

2000 until 2001Markant Südwest Handelsgesellschaft AG, Chairman responsible for restructuring of the financial sector of the food chain and the implementation of an online home delivery service

100

International aviation conference 2010Bertolt Martin Flick / Presentation

airBaltic highlights in 2009/2010June 3, 2010

airBaltic started 17 new routes in 2009 (12 from Riga, 3 from Vilnius, 2 from Tallinn

SAS share buy-out

Airline of Year 2009/10 in Europe by ERA

ATW Phoenix Award 2010 (Oscar of the airline industry)

2009 in figures:

EUR 293million turnover, EUR 20 million preliminary profit

2.75 million passengers, 68% load factor, 91.3% punctuality

airBaltic:Engine of Growth

in the Baltics

April, 2010

A10

1


Direct flights from Riga airport in 2002

June 3, 2010

Direct flights from Riga airport in 1990

June 3, 2010

A10

2


airBaltic flights from Riga 2010June 3, 2010June 3, 2010

Riga in 2010 - Hub of the Baltic Region

A10

3


June 3, 2010

Strategic Expansion to the North – Estonia, Sweden, Finland

Strategic Expansion to the North - Finland

June 3, 2010

A10

4


airBaltic passenger growthJune 3, 2010

262 212

589 229

1 037 925

1 425 277

2 007 150

2 590 3572 757 404

3 534 274

336 367

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

2002 2003 2004 2005 2006 2007 2008 2009 2010e

airBaltic direct flights from Vilnius 2010

June 3, 2010

A10

5


Passenger growth in Riga 2009, airBaltic vs other airlines

June 3, 2010

airBaltic and AOL Passenger Growth in Riga airport, 2008 vs 2009

50%

34% 34%

59%

35% 35% 34%31%

27%

35%

25% 25%

-23%-26%

-22%-17% -17% -15%

-18% -19% -22%-17%

-6%

1%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Jan Feb Mar Apr May Jun Jul

Aug Sep Oct Nov Dec

airBaltic Growth All Other Airlines Growth Riga Airport Growth

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

4 500 000

5 000 000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e year

Number of paxRiga Vilnius Tallinn

Passenger growth in Baltic airports 1999 – 2010est

June 3, 2010

A10

6


airBaltic Punctuality 2007-2009June 3, 2010

15min Total Punctuality

91,3

82,782,3

76

78

80

82

84

86

88

90

92

2007 2008 2009

Passenger growth of airBaltic vs GDP of Latvia

June 3, 2010

-13%-17%

-22%-18%

39%42%

31%28%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Q1 '09 Q2 '09 Q3 '09 Q4 '09

GDP Growth BT pax Growth

A10

7


airBaltic consolidated result,TLVJune 3, 2010

Consolidated Annual Result Before Taxes, TLVL

412 1 105

-845 -1 313

3 7041 302

-30 380

14 000

-35 000

-30 000

-25 000

-20 000

-15 000

-10 000

-5 000

0

5 000

10 000

15 000

20 000

2002 2004 2006 2008

Year

TLVL

IATA Net Profit Forecast, Billion USD

June 3, 2010

Net Profit of IATA airlines, USD Billion

12,90

-5,60

-11,00

-16,80-20

-15

-10

-5

0

5

10

15

2007 2008 2009F 2010F

Year

Billn USD

A10

8


airBaltic Hotels

10 airBaltic Hotels in 4 countries (3* to 5*)

R ga, Latvia – 4 hotelsī

Tallinn, Estonia – 3 hotels

Vilnius and Kaunas, Lithuania – 2 hotels

St.Petersburg, Russia – 1 hotel

Partners: Reval Hotel Group and Islande Hotel

Packages with airBalticHotels

June 3, 2010

airBaltic total revenueJune 3, 2010

Total Revenue, TLVL

28 597 33 531

51 620

84 621

117 365

161 594

202 753 206 398

0

50 000

100 000

150 000

200 000

250 000

2002 2003 2004 2005 2006 2007 2008 2009

estimated

Year

TLVL

A10

9


BalticMiles programme

Earn points Spend Points

Travel

Banking

Telecoms

Retail&services

Entertainment

Travel

Banking

Telecoms

Retail&services

Entertainment

June 3, 2010airBalticTravel

Travel packages (flights, hotels, car rental)

Cheaper when purchasing a package of flight+hotel

30 000 hotels in 120 countries (soon 90 000 hotels)

June 3, 2010

A11

0


Thank you!

June 3, 2010Travel to Latvia in 2010

500 year anniversary of Christmas tree in Riga

LiveR GA successful citybrandĪ

Cheaper accomodation - VAT for hotels down to 10%

Travellers to Latvia – on the increase since Dec 2009

Signature events of LiveR ga:ī

Nordea Riga Marathon May 23

Go Blonde Festival May 28-29

Riga Opera Festival June 8-18

Riga City Festival August 20-22

June 3, 2010

A11

1

International aviation conference 2010HAVAS (Havaalanları Yer Hizmetleri A.S.)

He started his career at THY in 1972. He worked as an executive at Singapore, Tehran, New York, Manchester, Istanbul branches of THY and took the Assistant General Manager position at THY. He was assigned as the Assistant General Manager of Havas in 2004 and became the General Manager of Havas in 2005. He knows English.

Müjdat YücelGeneral Manager of HAVAS

112

International aviation conference 2010Müjdat YÜCEL / Presentation

Müjdat YÜCEL

General Manager

Speaker

HAVAŞ(Havaalanları Yer Hizmetleri A.Ş.)

A11

3


History

• General Overview Of HAVAŞ• New Technologies used in GHS• Experiences – Working Abroad• Partnership with North Hub Services• Green HAVAŞ

Topics

A11

4


Technical Services

A greement

GEORGIATechnical

Services A greement

MACEDONIA

ManagementContract

TUNISIA

Partnership withCA S

CYPRUS

Partnership withNHS

LATVIA

• Operating 19 stations• Partnership with TGS

TURKEY

Worldwide Operations

Ankara ESB

Konya KYA

İstanbul ATA

Antalya AYT

Adana ADAŞanlıurfa GNY

G.Antep GZT

Trabzon TZX

İzmir ADB

Nevşehir NEV

Bodrum BJV

Dalaman DLM

Kayseri ASR

Sivas VAS

Malatya MLXElazığ EZS

Muş MSR

Batman BAL

Samsun SZF

Hopa HPX

Gazipaşa GZP

Adıyaman ADF

Hatay HTY

İstanbul SAW

Ground Handling (19)

Surface Transportation (16)

Warehouse (1)

Carpark (1)

Turkish Ground Services

Cyprus Aiport Services

Eskişehir AOE

Sinop SIC

Çanakkale CKZ

Uşak USQ

Merzifon MZH

2010 (5)

Turkey Operations

A11

5


New Technologies used in GHS by Havaş

182.7854.058 Operations

4.470 Overall

19

+200

ATM

Airports

Airlines

Staff

2009 Figures of Havaş

A11

6


Benefits of the system

• Identify and reduce unnecessary engine hours

• Increase in GSE availability to service flights

• Enhance fuelling efficiency

• Reduce GSE and vehicle running costs

• Improve GSE Safety & Security

• Reduce the misuse of GSE and vehicles

• Reduce maintenance costs

• Increase equipment availability

• Real-time and historical data

New Technologies used in GHS by Havaş- Zebra Solutions

What does the system stands for

• Optimize GSE maintenance management and, at the same time, increase security, safety, productivity, and fleet allocation

• Maximize the Utilization of Aircraft Ground Support Equipment

New Technologies used in GHS by Havaş- Zebra Solutions

A11

7


• Enables trainees to meet their learning

objectives more effectively and cost efficiently

• Help the evaluationof the abilities of the

operators

• Acts as a tool for measuring the success of the

operators

New Technologies used in GHS by Havaş- Katron Simulator

• Uniquely allows real-time assembly and

disassembly of the 3D equipment, improving

the learning experience and the results

•Provides the best training experience to

actual hands-on equipment use

• Provides employees with unlimited virtual

hands-on practice time

New Technologies used in GHS by Havaş- Katron Simulator

A11

8


• Operations already started in Riga

• Start operations in Helsinki in July 1, 2010

• Start operations in Talin in November 1, 2010

• Havaş has a active customer database of +200 airlines , that will help operations

with NHS

• Working abroad experiences of HAVAŞ will be an definite advantage

•Georgia

•Macedonia

•Tunusia

•Cyprus

• Synergy between Havaş and NHS will help RIX to become on of the biggest HUB

Havaş with NHS

• In order to get rid of the effects of crisis; GH companies must spread their operations geographically

• At the end of 2009 an increase in air traffic only seen in Middle East

• Havaş was able to handle with crisis with the help of diversified operations in different locations

Importance of Globalization

A11

9


Havaş in abroad and other partners

• Cyprus – Partnership with CAS

• Macedonia – TSA

• Georgia – TSA

• Tunisia – Management Contract

• Gaining experience

• Learning other cultures

• Sharing know-how

• Training opportunites

•TGS is handling GHS of Turkish Airlines

•Turkish airlines is one of the biggest growing airline company in the world

•Turkish Airline’s growing strategy is to have 197 aircrafts in 2014 while as of

now they have 135 aircrafts.

•This aggressive strategy directly have positive effects on TGS

•Havaş’s share in Turkey GH market increased to 67 % compared to %56 the

year before the TGS

Havaş with TGS

A12

0


There will be tough financial and legal constraints for Ground Handling Companies regarding environmental laws in near future

Green Havaş

Green Havaş

A12

1


Our philosphy

communicationcoordination

cooperation

keep handling!!!

Chargers for Equipments

Vehicles working with alternative power

Biological based de-icing fluid

Equipment working with solar power

Wireless Equipment management

Vehicles working with zero emmission

Mobile Technology

Electrical Cobus

Green Havaş

A12

2

International aviation conference 2010BBI – Adaptingtocustomerneeds

ProfessionAl exPerienceoct 2009 to now Berlin Airports, Berlin, Germany

Head of airline marketing•

August 2006 to Sept 2009Berlin Airports, Berlin, Germany

Senior Consultant Airline Marketing & strategic pircing•

July 2004- July 2006Hapag Lloyd Express GmbH, Hanover, Germany

Network, Route& Strategy Development• Scheduling and slot management•

Feb.- July 2003Deloitte Business Consulting GmbH, Stuttgart, Germany

Internship in Aerospace& Defense practice•

July- Aug. 2002Airbus Aircabin GmbH

Internship in controlling department•

Feb. - June 2002Ryanair Plc

Internship in Marketing & Online department•

July- Sep. 2001Arthur Andersen Consulting

Internship in Public Services practice•

EDUCATIoN2000- 2004European School of Business, Reutlingen, GermanyDublin City University Business School, Ireland

1995- 1999Business High School, Bad Saeckingen, Germany

1996-1997High School, Blue Springs, U.S.A.

LANGUAGESGerman: fluent• English: fluent• French: basic• Latvian: learning•

Marjan SchoekeHead of Airline Marketing of Berlin Airports

123

International aviation conference 2010Marjan Schoeke / Presentation

Berlin. Brandenburg.Capital Region in the Heart of Europe with a huge Potential.

Capital Region of Germany.

Largest German city with3.4 million inhabitants.

2 times larger than Hamburg,3 times larger than Munich,5 times larger than Frankfurt.

Total Catchment Area consists of 10 Mio People (120 min driving time)

Ideal geographical location for transferring passengers throughout Germany and Europe

Germany’s most visited city and Europe´s 3rd biggest incoming market.

Dublin

Madrid

Frankfurt

Hamburg

MunichParis

LisbonRome

LondonAmsterdam

Brussels

Copenhagen

Warsaw

Prague

Vienna

Budapest

Belgrade

OsloStockholm

Helsinki

Moscow

Minsk

Kiev

Bucharest

Sofia

Athens

FRANCE

SPAIN

ENGLAND

IRELAND

NORWAY

SWEDEN

FINLAND

RUSSIA

BELARUS

UKRAINE

ROMANIA

BULGARIA

POLAND

GERMANY

ITALY

AUSTRIASWITZERLAND

CZECH REPUBLIC

GREECE

HUNGARY

BERLIN

1

BBI - Adapting to customer needsNorth Hub Conference, Riga

A12

4


33

Benchmark of selected German airports.January to December 2009.

Quelle: ADV

1.687

1.865

8.904

9.710

12.206

17.756

20.977

32.629

Rest

Leipzig/Halle

Stuttgart

Köln/Bonn

Hamburg

Düsseldorf

Berlin (total)

München

Frankfurt 50.616

-5,8

-4,7

-2,0

-2,0

-5,4

-4,9

-7,5

-7,0

-10,0

Growth (%)vs. 12/08 vs. 12/07

PAXin Thousands

0,4

-21,7

-13,3

-6,7

-3,9

-0,2

5,0

-3,6

-6,1

0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

TXLSXFTHF

Berlin Airports.The story of successful growth.

Passenger Development

In just 7 years Berlin Airports has increased its passenger volume by more than 65 percent.

Operating two airports that handled 21.0 million passengers in 2009.

Passenger decline in 2009 was only 2,0% compared to 2008. German traffic sank by - 5,1% on average

166 destinations are connected with 52 airlines.

Third largest airport in Germany.

20.98 million Pax in 2009

2

A12

5


Dense network for summer 2010.166 destinations with a focus on Europe enable connecting traffic.

5 Date: March 2010

Europe Germany

Low CostNetwork Carrier

2,281 weekly take-offs from Berlin to 166 Destinations in 52 Countries. 17 domestic, 123 European destination.

Berlin Airports.Strong O&D traffic forms the basis for further potential.

4,350 3,623 2,229 2,058 Weekly flights50,0% 36,3% 1,7% 9,7% Transferrate

Source: ADV, SAFIR, APG

60,00

50,00

40,00

30,00

20,00

10,00

0,00

TransfersO& D Traffic

50,93

25,48

25,45

32,68

20,81

11,87

20,98

20,63 17,791,73

16,06

Frankfurt Munich Berlin Dusseldorf

4

0,35

A12

6


New hub structure of Air Berlin enables for more than 6000 connections per week as of May 2010.

Germany Scandinavia

RussiaSwitzerland

AustriaIsraelEgypt

07:30 – 9:00 BERLIN(TXL)

10:25 – 12:25 11:45 – 13:00 16:00 – 17:30 17:50 – 18:50 20:00 – 21:35

GermanySpainItaly


Russia

FranceItaly

Germany

GermanyItaly

France

Russia

GermanyItaly


Germany ScandinaviaSwitzerland

Austria


Austria


AustriaItaly

Germany Scandinavia

RussiaSwitzerland

AustriaIsraelEgypt

GermanySpainItaly

SwitzerlandAustria

Source: Air Berlin7

Die Unternehmensstrategie für BBI bildet dieBasis der Marktstrategie.

BBI

Capacity

CapitalHub

MagnetBerlin

Gateway to theEast

A12

7


BBI has been developped in close interaction betweenexisting and future customers

BBI

Airlines& freight

customers

Neighbours

Passengers

sharehiolders

9

Terminal configuration&

operationAirport charges

ResettlementNoise proctection

programme

Traffic infrastructureanalysis

Passenger conveniencePRM

8

BBI – The new home of Berlin Airports.One of the last projects of the reunification process.

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11

BBI – Adapting to (airline) customer needsAirport layout allows for efficient operations.

* February 2009

BBI has been developped in close interaction betweenexisting and future customers

BBI

Airlines& freight

customers

Neighbours

Passengers

sharehiolders

10

Terminal configuration&

operationAirport charges

ResettlementNoise proctection

programme

Traffic infrastructureanalysis

Passenger conveniencePRM

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BBI – Adapting to customer needsTerminal design leads to short distances and quick processes.

13

Arrival area

Road access arrivals

Road access departures Check-In Security Retail Non-Schengen

Schengen

Gates

Access train station

Baggage claim

A

DB

C

E

BBI – Adapting to (airline) customer needs.Terminal and apron layout has been adjusted.

Cargo facility

South pier

North pier

Apron area Eoffices

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14

BBI – Adapting to (airline) customer needsThe North pier offers less features than the other piers.

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Berlin Brandenburg International (BBI)Thank you for your attention.

16

Development of BBI Aviation fees.Partnering up with airlines to be transparent & non-discriminatory.

Cafeteria-approach:

Your have the choice!

Innovative elements:

• Choice of levels of

infrastructure and

time-based fees

• Baggage fee

• Use of waiting area

Formal meetings(consultation)

Official application with

authorities

Approvalprocess byauthorities

Publication ofaviation fees

Businessplan

Development of structure

and keyelements

Working groups

(airlines andassociations) for feedback

and alterations

Meeting forairlines about

plannedstructure andlevel of fees

Benchmarkingand talks withkey customer

groups

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Berlin’s Future.BBI Airport.

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International aviation conference 2010Supporting customers’ success

PERSoNAL INFoRMATIoNMarital status: married, three daughters

Nationality: Latvian• Age: 30• Place of Birth: Ventspils, Latvia•

EDUCATIoN2005 – 2008

Business University Turiba, Riga, Latvia• Degree in Tourism and Hospitality Management •

2008 – presentInternational Airport Professional, • Montreal, CanadaACI-ICAO Airport Management Professional • Accreditation Programme (AMPAP)

ProfessionAl exPerience10.2009 – presentNorth Hub Services, Riga, LatviaExecutive Director, CEO

Management of the operation of all services provided by • company;Management of the maintenance programme for all • handling equipment by North Hub Services ;Negotiation of terms of the provision of maintenance • support for all handling equipment by North Hub Services;Provision of necessary recourses to operations and • maintenance activities;Selection of suitable premises required for North Hub • Services operations;Negotiation of terms for North Hub Services required • premises;Maintenance of all certification required by North Hub • Services as an authorised handling service provider;Establishment and implementation of appropriate • financial management systems (including accounting) and the management and operation thereof;

Establishment of all necessary forms and operational • documents required in relation to the conduct of the organization of passenger handling, cargo handling and service supervision functions;Establishment of appropriate tariffs and the obtaining of • approvals thereof;Credit control procedures;• Claims management;• Selection, negotiation, implementation and renewal of • insurance;Management of debtors and creditors;• Hiring and dismissal of personnel;• Making arrangements, entering into contracts and • performing other matters identical to and conductive to the proper fulfilment of the foregoing.

04.2007 – 06.2009Riga International Airport, Riga, Latvia

Member of the Board, Vice PresidentResponsible for Aviation Marketing and Route • Development (attracting new airlines/routes both passenger and cargo. Commercial development with existing customers)Responsible for Ground Handling (incl. 450 employees)• Responsible for Aviation Security (incl. 220 employees)• Responsible for Apron Management (incl. 100 • employees)

02.2006 – 04.2007SAS Ground Services UK, London, UK

Manager Business DevelopmentResponsible for commercial activities within the company • and business development including geographic expansion, increased market shares and sales / purchasing agreements.Increased turnover by 10M GBP (from 17 to 27)•

Jānis BaļķensCEO of North Hub Services

134


Deputy Director StationsEstablished internal ground operations instructor • organization that conducted courses in all ground ops functions internally as well as provided training to Riga Airport Handling, Moscow Sheremetyevo Airport, Warsaw Airport Services, SAS, Globeground and others.Established airBaltic Central Load Control Centre, • which started its operations with handling airBaltic flights from Riga, Copenhagen and Stockholm (daily 20 departures) in 2 January 2003. Today CLC handles more than 50 daily BT departures from 7 airBaltic destinations as well as an average 20 WF daily flights from number of Scandinavian airports. Special Assistance Coordinator for Special Assistance • Team (SAT) within airBaltic Emergency Organization.

1998 - 2002airBaltic Corporation, Riga, Latvia

Station Support & DevelopmentDuring 1999-2000 Managed newly established • airBaltic ramp handling organization that included ramp coordinators, cleaning and de-icing units (50 staff).Overall support to Director Stations in handling matters.• Instructor for Load Control and Dangerous Goods • Quality Auditor• Responsible for procedures and standards at stations• Editor of airBaltic Aircraft Handling Manuals (AHG, • AHM)In 2000 Editor of Ground Operations Manual for Air • Botnia (presently Blue 1 Oy Finland).


opened-up full handling operations in Aberdeen, • Scotland and expanded operations at London-Heathrow.Member of SGS UK management group.•

2005 – JAN 2006airBaltic Corporation, Riga, Latvia

Vice President Ground operationsHead of Ground Ops, Nominated Post Holder (NPH) • Ground OpsResponsible for all airport related activities and • agreements (ground handling, airport ticketing, fueling, de-icing, airport marketing support, incentive programs) at 2 bases and 25 scheduled destination airports (approx. 90 daily departures)Deputy Emergency Director•


Director StationsHead of Ground Ops, Nominated Post Holder (NPH) • Ground OpsEstablished station management organization, to • manage multi-base operationDecreased handling prices for airBaltic aircraft by an • average 24 %.Increased Ground Ops punctuality to 94.5 % AVG in • 2004. Member of airBaltic Management Group• Deputy Emergency Director•


135


AWARDSRoutes & OAG Marketing Award for Riga Airport as the • best airport in Scandinavia & Baltic States 2009SAS Ground Services Sales Leads Award 2006 • SAS Ground Services Corporate Sales Award 2006•

As A sPeAKerCost control and asset management May 2009, London • UK“Aviation World” magazine Conference Nov 2007, • Vilnius LithuaniaAirports Council Intl. Small and Medium Size Airport • Conference May 2008, Porto Portugal

HoBBIES History of 20th Century, International Foreign Affairs/Politics, tennis, basketball, classical music and of course, my family.

CoURSESAirport Commercial and Strategic Management, by ACI • & ICAO Air Transport System, by ACI & ICAO• European Aviation Security Management, by ECAC• Airport User Charges, by ICAO• Negotiation Techniques, by Sales Partners Denmark• Key Account Management by Sales Partners Denmark• Spokesperson training by Kenyon International• Service Level Agreement Workshop by IATA• Ground Handling Agreement Workshop by IATA• International Negotiation Skills by IATA• Critical Incident Stress Management Advanced by ICISF• Dangerous Goods Acceptance Level; for Instructor, by • SAS Cargo CollegePrinciples of Management by Latvian Business School• Airside Safety Management by IATA• Instructor Course by SAS•

Passenger Handling Agent, Load Control Agent & Supervisor

Started at airBaltic as Passenger Handling Agent, at age • of 16 (JAN 1996).Obtained SAS Load Control license at age of 17 (JAN • 1997) and serviced airBaltic, SAS and Lufthansa as load control agent.In 1997 appointed as Load Control Supervisor, • performed load control quality checks, responsible for local load control procedures.WorldTracer Coordinator•

LANGUAGESLatvian, English, Russian, German

REFERENCESMr. Bengt Jarfelt, Area Station Manager SAS Ground Services, e-mail: [email protected] (directly reporting to during 1998-2001)

Mr. Bertolt Martin Flick, President & CEO airBaltic Corporation AS, e-mail: [email protected] (directly reporting to during 2004-2005)

Mr. Christer Svensson, Managing Director SAS Ground Services UK, e-mail: [email protected], (directly reporting during 2006)

Mr. Krisjanis Peters, Chairman of the Board, Riga International Airport, e-mail: [email protected] (directly reporting since April 2007)

MEMBERSHIPChairman of the Riga Intl. Airport Security Committee

Member of the Airport Council International Europe • (ACI) Policy CommitteeMember of the Airport Council International Europe • (ACI) Facilitation Committee

136

International aviation conference 2010Janis Balkens / Presentation

A new player in the market

Established in 2009Owned by Baltic Aviation Systems (BAS) and HAVAS Ground Handling Company

North Hub Services

Supporting customers successNorth Hub Riga conference 9 June 2010

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Strengths

Strategic: a) Unique and strong network of main airports

in the Baltic Sea Region b)strong ownership

Our home network

Riga – 1 Jan 2010Helsinki – 1 July 2010Tallinn – 31 October 2010Stockholm-Arlanda – 27 March 2011Vilnius – Autumn 2011Copenhagen – Summer 2012

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Strengths

Product: a) maximizing customer revenue at airportsb) sustainable and reliable delivery every day

on every single turnaroundc) full handling service product at all airports

Strengths

Cost efficient: a) low-cost base b) efficient resource planningc) all non-core functions outsourced and

centralized

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Our customers, our sales teamOur employees, key successMulti-national team: Steady employment growth

1 Jan 2010 = 1001 Jul 2010 = 2001 Jan 2011 = 5001 Jul 2011 = 650

0

175

350

525

700

1 Jan 2010 1 Jul 2010 1 Jan 2011 1 Jul 2011

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Thank you and enjoy North Hub Riga!

North Hub Services...best people, skills, service

Partnership, key to success

Ground Handling provider: punctuality, tailor-made service

+Airport: efficient infrastructure, fast security

+Airline: reliability

= Joint operational and commercial success

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International aviation conference 2010Keynote speech

Krisjanis Peters became the Chairman of the Board of the RIGA International Airport in January 2007.

Krisjanis Peters has extensive government and industry experience; he was elected as a Member of the 8th Saeima (Parliament) and worked as Parliamentary Secretary to the Minister of Economics and the Minister of Transport. Immediately prior to joining RIGA International Airport Krisjanis Peters was the Minister of Transport of the Republic of Latvia (2006). Krisjanis Peters studied Political Science at the prestigious Moscow International Relations State Institute.

Krisjanis Peters was elected to the Board of Airport Council International (ACI) Europe in 2009, also he is was in the council of Air Baltic Cooperation (2007–2009).

As a Latvian national, Krisjanis Peters speaks fluent English and Russian. In his spare time he enjoys travelling, tennis and any aviation related activity.

Krišjānis PetersChairman of the Board of International Airport Riga

142

International aviation conference 2010Krisjanis Peters / Presentation

The population of Latvia is 2.27 million

39% of the Latvian population lives the Riga Metropolitan Area. 717,000 in the City and 168,000 in the wider area.

Latvia has enjoyed significant economic growth in recent years with construction, commerce, transport and services underpinning development. The global crisis hit Latvia hard. Thus the Latvian government have secured a Euro 7.5 billion loan from IMF.

Austerity measures put in place are taking effect and it is forecast that Latvia will leave recession in 2011.

Riga, as the capital of Latvia, is the country’s economic and political centre.

Latvia is the centre of the Baltic States, Estonia to the North and Lithuania to the South. Together they have combined population of 7 million. Riga is the unofficial capital of the Baltic States.

An Introduction to Latvia

Mr. Krisjanis PETERSChairman of the BoardJune 2010

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Riga – the metropolis of the Baltic's

Large – with ca. 1 million population including nearest suburbs, it’s one of the largest cities in the region

Ambitious – NATO Summit 2006

Educated – more than 48 Universities & higher education facilities

Beautiful – Art nouveau, UNESCO World Heritage

Cultural – Opera, Theatres, Cinemas, Museums

Sporting – ice hockey, basketball, football, golf

Hospitable – 121 hotels

Accessible – City Centre just 12km from RIX

Latvia the heart of the Baltic's 4.8m tourists in 2009, spending 6.2 million nights in Latvia. Average length of stay is 1.3 days.

There are 559 hotels in Latvia, 14,686 rooms and 32,496 beds.In Riga there are 121 hotels; 7 are 5*, 13 are 4* and 29 are 3* hotels.

Hotel brands include SAS Radisson, Ramada and Reval Hotels. Sheraton, Kempinsky and Hyatt have all selected locations for their new planned properties.

RIGA International Airport is the principal gateway for international visitors to Riga and beyond.

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Only Riga is located within a 300km radius of all three Baltic capital cities.

• The maps below illustrate a 300km radius from each airport• Much of Vilnius and Tallinn’s catchment areas are lost to the Baltic Sea and the boundaries with Russia/Belarus

RIX, the centre of the Baltic’s! Few Facts about RIGA AirportRIGA Airport was built in 1974. It was used for domestic flights within USSR

After Latvia regained its independence in 1991 – RIGA Airport became a RIGA International Airport

RIGA International Airport is operated by SJSC RIGA International Airport

The owner of all shares is the Republic of Latvia

Airport occupies the area of 650 ha

Airport has more than 1200 employees

The annual turnover is 35 million EUR (2008)

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Passenger Traffic Growth

Source: RIGA Airport

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2004 2005 2006 2007 2008 2009 2010

(Jan-

Mar)

Passengers (m)

0

10

20

30

40

50

60

70

Aircraft Movments (thousands)

Passengers

Aircraft Movements

Significant passenger traffic growth was observed at RIGA Airport in recent years, 2009: Pax +10.2%, Aircraft movements +5%

Even in these troubled times passenger traffic goes up.2010 Q1: Pax +21%, Aircraft movements +12% in Q1 2010)

Access to a market of 7 million citizens

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Baltic Passenger Traffic in 2009 Today RIGA International Airport is the no.1 airport in the Baltic States, providing Service of the highest quality and having a very significant role in the development of Latvia.


50 000

150 000

250 000

350 000

450 000

550 000

Riga 256 685 224 600 274 681 326 419 351 558 385 904 431 518 428 168 386 793 375 106 307 528 317 894

Tallinn 99 341 91 710 113 627 111 384 115 276 127 058 128 334 130 650 118 687 117 908 99 755 92 506

Vilnius 93 163 75 870 90 726 98 576 112 579 128 428 139 511 138 965 126 312 118 601 95 771 90 130

Jan Feb Mar Apr May Jun Jul Aug Sep Okt Nov Dec

Passenger Traffic Forecast

0

2

4

6

8

10

12

14

16

2008 2012 2018 2023 2028 2032

Passengers (m)

IATA’s Long Term Passenger Forecast suggests that R IGA Airport will be handling 14 million passengers by 2032.

Source: IATA

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Baltic States passenger traffic Jan-Mar 2010

RIX, the No. 1 airport for the Baltic States


RIGA TALLINN VILNIUS

Passengers

Pax growth (09-08)

914 386

21 %

281 755

- 7,5 %

285 980

10,09 %

Aircraft movements

ACM growth (09-08)

14 368

12,7 %

7 188

- 5,9 %

6 008

19,9 %

Cargo (t)

Cargo growth (09-08)

2 731

35,5 %

4 749

- 16,9 %

1 209

25,2 %

Baltic States passenger traffic Jan-Dec 2009

RIX, the No. 1 airport for the Baltic States


RIGA TALLINN VILNIUS

Passengers

Pax growth (09-08)

4 066 854

10,2 %

1 346 236

- 25.7 %

1 308 632

- 36,04 %

Aircraft movements

ACM growth (09-08)

60 087

5,0 %

32 572

- 21.8 %

22 429

- 40,73 %

Cargo (t)

Cargo growth (09-08)

9 431

23,0 %

21 001

- 49.8 %

4 336

- 24,16 %

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Top Destinations (Jan-Dec 2009)


6.1%

4.4%

3.4% 3.3%3.1%

2.7%2.5% 2.4% 2.3%

3.7%4.2%

4.9%

3.5%

8.3%

3.6% 3.5%3.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

London

Stockholm

Vilnius

Helsinki

Oslo

Tallinn

Berlin

Dublin

Frankfurt

Moscow

Copenhagen

Milano

Brussels

Amsterdam

Istanbul

Dusseldorf

Tampere

Market Share (Passenger Base) Jan-Dec 2009

Airlines PAX

Air Baltic Corporation 2 650 303

Ryanair 885 646

KLM 44 558

SmartLynx Airlines 78 610

Norwegian Air Shuttle 70 828

CSA 70 851

Lufthansa 62 799

Finnair 50 052

Aeroflot 47 984

Turkish Airlines 39 626

LOT Polish Airlines 28 100

Uzbekistan Airways 18 835

SAS 1 042

Windjet 2 419

Bulgaria Air 3 746

VIP Aviation 171

Japana Airlines 1 036

Other 10 248

Grand Total 4 066 854

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16 Airlines Serving RIGASuccessful Development of Passenger Transfer Hub

In 2009 RIX transfer passengers increased by 163% over 2008

7%

93%

2007

Transfer O&D

2008

16%

84%

Transfer O&D


2009

32,45%

67,55%

TransferOther

transfer 37

other 63

2010 Jan-Mar

37%

63%

transfer

other

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Integral Part of the Baltic Sea RegionMore than 400 direct flights per week to Baltic Sea Region,the fastest growing region in Europe!

RIGA Airport’s Network

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New Routes&Airlines in 2009

14 airlines

71 destinations

11 NEW destinations

East meets West in Riga!Expanding Eastern network

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Cargo at RIXRIX has seen significant 23% growth in cargo during 2009.

In QI of 2010 cargo has continued to grow at 35% y-o-y.

New Routes&Airlines in Q1 2010

4 NEW airlines

20 NEW routes

82 destinations

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RIX, the most competitive airport in the Baltic Sea Region!

Currency exchange rates used from July 2009

Source: RIGA International Airport, Tallinn Airport, Vilnius Airport, Helsinki AirportArlanda Airport, Copenhagen Airport, Oslo Airport, St. Petersburg Airport, Warsaw Airport

airport services charges for 737-500 in EUR

0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

RIX (Riga)

TLL (Tallin)

VNO (Vilnius)

HEL (Helsinki) *

ARN (Stockholm)**

CPH (Copenhagen)

OSL (Oslo)

LED (St.Petersburg)

WAW (Warsaw)***

total cost 631.00 1838.52 1789.96 2225.60 1817.47 2589.03 2195.79 2124.57 2422.52

RIX

(Riga)

TLL

(Tallin)

VNO

(Vilnius)

HEL

(Helsinki

ARN

(Stockho

CPH

(Copenh

OSL

(Oslo)

LED

(St.Peter

WAW

(Warsaw

RIX, the most competitive airportfor location and price!

As of 1 November 2009, RIX introduced the lowest fees inEurope for a capital city airport

Passenger tax

Per departing pax.

€ 3.10

Landing fee

Per ton

€ 2.05

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airport services charges for 737-500 in EUR

0.00

500.00

1000.00

1500.00

2000.00

2500.00

3000.00

RIX (Riga)

TLL (Tallin)

VNO (Vilnius)

HEL (Helsinki) *

ARN (Stockholm)**

CPH (Copenhagen)

OSL (Oslo)

LED (St.Petersburg)

WAW (Warsaw)***

total cost 631.00 1838.52 1789.96 2225.60 1817.47 2589.03 2195.79 2124.57 2422.52

RIX

(Riga)

TLL

(Tallin)

VNO

(Vilnius)

HEL

(Helsinki

ARN

(Stockho

CPH

(Copenh

OSL

(Oslo)

LED

(St.Peter

WAW

(Warsaw




airport service charges for 737-800

0.00

1000.00

2000.00

3000.00

4000.00

5000.00RIX (Riga)

TLL (Tallin)

VNO (Vilnius)

HEL (Helsinki) *

ARN (Stockholm)**

CPH (Copenhagen)

OSL (Oslo)

LED (St.Petersburg)

WAW (Warsaw)***Total cost 891.45 2660.84 2623.69 3345.46 2750.84 3832.71 3247.37 3084.97 3538.26

RIX (Riga) TLL (Tallin) VNO (Vilnius)HEL

(Helsinki) *

ARN

(Stockholm)**

CPH

(Copenhagen)OSL (Oslo)

LED

(St.Petersbur

WAW

(Warsaw)***

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Runway extension 2008

An increase of 600m (from 2550m to 3150m)

Enhancement of lighting system to ICAO category II

Runway permits landing and takeoff of almost all aircraft types




airport service charges for 737-800

0.00

1000.00

2000.00

3000.00

4000.00

5000.00RIX (Riga)

TLL (Tallin)

VNO (Vilnius)

HEL (Helsinki) *

ARN (Stockholm)**

CPH (Copenhagen)

OSL (Oslo)

LED (St.Petersburg)

WAW (Warsaw)***Total cost 891.45 2660.84 2623.69 3345.46 2750.84 3832.71 3247.37 3084.97 3538.26

RIX (Riga) TLL (Tallin) VNO (Vilnius)HEL

(Helsinki) *

ARN

(Stockholm)**

CPH

(Copenhagen)OSL (Oslo)

LED

(St.Petersbur

WAW

(Warsaw)***

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Transformation of land42 ha of land will be received from the Marupe municipality and transformed for the Airport needs

Business Park development

The total area of Business Park is more than 90 ha

Logistic centre, cargo warehouses, post sorting centre, pilot’s academy are already builthotels, exhibition centre, convention centre, office buildings, car parks will be built in the near future

The main developer of business park is company RIXPORT – shared ownership entity. 72 % of shares are owned by Norwegian property development/investment company EBO Invest AS

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Conclusions

DevelopmentBy 2013 a new passenger terminal, expansion will enable the airport to handle at least 12M passengers per year

Total costs of the terminal and airport infrastructure development estimated at about 200M euros

One of the largest exhibition complexes in North-eastern Europe intend to built in the territory of 36 hectares next to RIGA International the municipality of Riga jointly with the international exhibition operator Messe Frankfurt

This year the first fixed base operator (FBO) in the Baltic and Scandinavian countries was developed at RIGA International Airport

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Being a member of the Schengen visa regime strengthens our position

East meets West in Riga!

Successful development of passenger transfer hub.

RIX’s central location and superior route network means it can easilydraw traffic from all three Baltic countries and Scandinavia.

Ability to work with both low cost and full service carriers.

Upgrading and diversifying infrastructure to meet demand.

The lowest capital city airport charges in the Europe.

30% of our customers are business travellers.

State, city, airport – one team!

No. 1 Airport in the Baltic State’s!

“It is in our view thatRIGA International Airportis poised for one of themost exciting periodsin its development”.

Traffic Forecast, IATAJune 2008

Traffic Forecast, IATAJune 2008

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Thank you!

ROUTES EUROPE Airport Award 2009

the best airport in Scandinavia & Baltic's

EMERGING MARKETS Airport Awards 2010

the best airport up to 5M

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International aviation conference 2010airBaltic in social media

Tero Taskila is the Chief Commercial Officer and Board Member of airBaltic. He has a wealth of knowledge and experience in commercial and strategic management gained from various roles in Asia, South America, Africa, Europe and Middle-East.

In his current role, he is responsible for strategic and commercial aspects of airBaltic, one of the fastest growing airlines in European Union.

Before joining airBaltic, Tero has been instrumental in developing and executing Gulf Air’s commercial turnaround program and sustainable growth strategy. His leadership as Chief Commercial and Strategy Officer helped the airline to identify unit cost savings of 8%, yield improvement of 12% and break all time revenue records with downsized and restructured network. Prior the assignment in Gulf Air, he has worked in commercial, strategic and operational issues around the globe. Tero has been working in several roles for Qatar Airways, Lufthansa Group, Mexicana, Royal Brunei Airlines and Finnair, to name a few. He has also worked for airports in strategic and commercial issues. His academic qualifications serve as a right foundation for his work experience. He is pursuing a Doctorate in Aeronautical Engineering at London University. He also holds an MSc in Aeronautical Engineering (Air Transport Management) from the same university as well as business degree from University of Northern Colorado, USA.

Tero is a frequent speaker in conferences, seminars and universities on strategic and commercial issues. He is a regular Lecturer at London City University (in London and Dubai) about Strategy development, Low Cost airlines and optimal business models for airlines. Tero’s lectures are regular also at Bad Honnef Fachhochschule (Private University for Masters degree in Hospitality and Air Transport Management) about Airline Planning -strategy development and implementation, Revenue Management and capacity Optimisation). He is also respected analyst for media on aviation related matters in Nordic countries.

Tero TaskilaChief Commercial Officer and Board Member of airBaltic

161

International aviation conference 2010Tero Taskila / Presentation

What is social media?

airBaltic insocial media

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Social media allows us to

“listen” the customer

Think before jumping into the social media

We set a clear strategy for• Promotion, informal communication, post purchase communication,

sales, awareness, increase loyalty, trust

• Audience – followers, customers, to be clients, media, partners,

competitors

• Geography - Global territory

• Cross marketing of social media channels via website, newsletter, in-

flight magazine

Set “do not speak” topics according to corporate culture• Treat the interactive channels as a BBQ party

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We use each channel differently

Facebook allows us to “sell” products and the strategy

by explaining to customers why we do things in certain

way

Twitter is used for tactical purposes (announcements,

campaigns, operational issues)

Youtube allows us to be visible in other means and is

good for SEO

What resources does it require start?

0,3 FTEs from

Marketing

Investment in

multimedia phone

500 euros to

spread the word

At launch

1 FTEs from Marketing

Investment in 3 multimedia phones

Current

10 selfmade brand advocates

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We actively monitor the spread of the Fans/Followers on our key markets

... and offer them special deals, exclusive on social media - FanDay

Facebook growth is driven by interactive campaigns

100% growth

in a week

200%

growth in

2 weeks100% growth

in a week

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It is not all dancing on roses,

but one has to get used to it… We are small, but recognised

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When online social goes back to

offline life and feelings

World’s first tweetups in aircraft and during route inauguration

... till volcano #ashtag comes!

No warnings, just alarm goes on – like in firefighters depo

Twitter and Facebook helps to unload traditional communications channels – phone, e-mail, fax, ticket offices

#ashtag becomes really social as people help each other with advices, shared transport and hotels

it gives huge push for airline industry to explore social media more effectively and some CEOs search Google with keywords “what’s social media?”

wide post factum coverage globally in blogs, newspapers, magazines, B2B articles, lunch breaks...

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Finally, the hard facts!

Real sales - Conversion rate of 5-15% in Facebook,

approximately 2% in Twitter• FB has same conversion rate as our newsletter database

Top 3 in Twitter and Facebook in Europe• Brand awareness increasing – we punch above our weight

Top 10 in Twitter and Facebook globally• Spread is huge globally, jetBlue has 1.6 Million followers in Twitter!

• Southwest is biggest in Facebook with 800 000 fans

Evolution of social media

Push messages

Customer Support

Product Development

Interactiveness

All aiming to build brand and either directly or indirectly increase sales in cost effective manner

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Thank you!

The last but not least!

Please

welcome the

beautiful lady –

the first

tweeting plane!

twitter.com/tweetingplane

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airBaltic ticket offices in Latvia: Riga International Airport Riga, City Ticket Office, Tērbatas iela 14, Riga, LV-1011, Latvia

90001100 (LVL 0.36 per minute, local calls only) +37167006006 (for abroad calls)Fax +371 67224282e-mail: [email protected]

airBaltic ticket offices in Lithuania: Vilnius International Airport Vilnius, 10 – 7 Universiteto str. Klaipeda, Žvejų. g.10

1825 (LTL 2,54 per minute, local calls only)+37070055660 (for abroad calls)e-mail: [email protected]

airBaltic ticket office in Estonia: Tallinn, 1/3 Estonia pst.

+372 630666617107 (within Estonia, EEK 8 per minute),

+358 (0) 60018181 (within Finland, EUR 1.70 per minute + local call costs) / Fax +372 6306665e-mail: [email protected]

www.airbaltic.com

north hub riga 2010

Business

early history of aviation

university of latvia

uppsala university

university of uppsala

startup of air baltic

transport of republic

ceo of airbaltic

commercial director