month 200X

Airport of the Future WorkshopAndrew Gordon

Head of Market Analysis and Research

Strategy and Cooperation

Schiphol, Amsterdam

March 2006

Content

Economic and oil price outlook

Air transport developments

Drivers of traffic growth

International traffic: new routes and stronger hubs

Economic and oil price outlook

Content

A strong world economy …Trade

Corporate profits Consumer confidence

GDP

0%

1%

2%

3%

4%

5%

6%

2000 2001 2002 2003 2004 2005

USA Europe Asia

% growth

-5%

0%

5%

10%

15%

20%

2000 2001 2002 2003 2004 2005

USA Europe Asia

% growth

-20

-10

0

70

80

90

100

110

2000 2001 2002 2003 2004 2005

US

Europe

Index

0

200

400

600

800

1000

1200

1400

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

0

20

40

60

80

100

120

140

160

180Asia

Europe

In Billion of US$ Indexed in 2000

US

… with a good short term outlookGDP Trade

Corporate profits Consumer confidence

0%

1%

2%

3%

4%

5%

6%

2000 2001 2002 2003 2004 2005 2006 2007

USA Europe Asia

70

80

90

100

110

0

200

400

600

800

1000

1200

1400

Jan-

00

Jul-0

0

Jan-

01

Jul-0

1

Jan-

02

Jul-0

2

Jan-

03

Jul-0

3

Jan-

04

Jul-0

4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

-5%

0%

5%

10%

15%

20%

2000 2001 2002 2003 2004 2005 2006 2007

USA Europe Asia

% growth % growth

In Billion of US$

-20

-10

0

2000 2001 2002 2003 2004 2005

US

Europe

Index

Crude oil price at 62$/bbl

20

30

40

50

60

70

Source: US Department of energyCrude oil WTI Spot price FOB in $ per barrel

$/barrel

Oil price will stay high in the short term

20

25

30

35

40

45

50

55

60

65

70

75

80

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

US$ per barrel (WTI)

Base case

High-price scenario

Low-price scenario

History Forecast

Source: Global Insight, January 2006

2002 2003 2004 2005 2006

• Energy demand remain robust in spite of near record prices

• Modest Increase investment in exploration and drilling

• Vulnerability (or fears) of supply disruption (strike in Venezuela and Argentina, rebel activities in Nigeria, Iraq, …)

The logic of long-term crude oil price forecast

• Restored spare crude production capacity

• Increase refining capacity

• Slower demand in emerging economies

• Oil reserve back to adequate level

• OPEC seeks to defend a nominal $40/bbl floor, non-OPEC cost rising to bring floor price to $30/bbl

• Higher prices give incentives for (1) further exploration, (2) technology to squeeze more out of existing oil fields, and (3) meaningful production of synthetic fuels

Below $30/bbl unlikely, above 70$/bbl equally unlikely

Oil price anticipated to trend downward

Brent $ / bbl

0

10

20

30

40

50

60

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

History Forecast

Real $2005

Nominal

Source: Global Insight, December 2005

Air transport developments

Content

0

0.5

1

1.5

2

2.5

3

3.5

4

1970 1975 1980 1985 1990 1995 2000 2005

1971-1979:11.5% p.a.

1980-1990:5.8% p.a.

1991-1997:5.8% p.a.

Source : ICAO, Airbus estimate for 2005

Gulf CrisisAsianCrisisOil Crisis

WTCattack

World annual traffic - trillion RPK

1998-2000:7.1% p.a.

Air travel is resilient and has recovered

2.5

3

3.5

4

4.5

1998 1999 2000 2001 2002 2003 2004 2005

ICAO total trafficGMF 2000 forecast

1 yearAir traffic evolution

Source: ATA (North America), AEA (Europe), AAPA Int’l (Asia/Pacific), IATA Gabi (Latin America, Africa & Middle East), Airbus estimate

2005 passenger traffic well above 2004 level

Asia/Pacific Int’lAsia/Pacific Int’l

+6%+6%

Asia/Pacific Int’lAsia/Pacific Int’l

+6%+6%

EuropeEurope

+6%+6%

EuropeEurope

+6%+6%

Latin America Int’lLatin America Int’l

+11%+11%

Latin America Int’lLatin America Int’l

+11%+11%Africa Int’lAfrica Int’l

+10%+10%

Africa Int’lAfrica Int’l

+10%+10%

North AmericaNorth America

+4%+4%

North AmericaNorth America

+4%+4% Middle East Int’lMiddle East Int’l

+13%+13%

Middle East Int’lMiddle East Int’l

+13%+13%

Passenger - RPKs - 2005 vs. 2004

2005 worldwide growth: 7%2005 worldwide growth: 7%

Strong traffic growth anticipated for 2006

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

RPKs % year over year change

Source: ICAO, Airbus forecast

2005 aircraft gross orders – Airbus & Boeing

by region by type of customer

Asia-Pacific

44%

Lessors16%

Uniden.1% North

America10%

Europe19%

Latin America

5%

Middle East3%Africa

2%

Lessors16%

Uniden.1%

Network carriers

52%

Charter carriers

1%

Low-cost carriers

29%

VIPs1%

Total orders 2140 aircraft

Emerging market orders

0

100

200

300

400

500

600

700

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

0%

5%

10%

15%

20%

25%

30%

35%

40%Aircraft Orders Order Share

Source: Airclaims Case Database – January 2006

Emerging: Brazil, India, FSU/CIS, China

Emerging market deliveries

0

20

40

60

80

100

120

140

0%

5%

10%

15%

20%

25%

Aircraft Deliveries World Delivery Share

1995 -2005

Source: Airclaims Case Database – January 2006

Emerging: Brazil, India, FSU/CIS, China

The drivers of traffic growth

• Growing Middle East passenger and cargo hubs

• Recovery in Latin America

• Asia: a new economic paradigm in the making

• LCCs in Asia growing in number and traffic share

• Deregulation in India

• Continuing high growth rate for domestic China and emerging China international outbound traffic

• Development of new routes and stronger hubs

Drivers of traffic growth

Content

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1990 1995 2000 2005 2010

Middle East growing international demand led by tourism and business activity

Fourfold increase of tourism and business travellers in Fourfold increase of tourism and business travellers in Middle East from 1990 to 2010Middle East from 1990 to 2010

Tourism in Middle East

Number of tourists (000)

Source: Global Insight

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1990 1995 2000 2005 2010

Business travellers in Middle East

Passengers (000)

AAGR 1990-2010

+7.2%

AAGR 1990-2010

+8.0%

Latin America 2005 market trends

Source: Global Insight, AITAL

0% 2% 4% 6% 8% 10%

2005 GDP GrowthNote: Bubble size proportional to 2005 real GDP

Venezuela

2005 GDP growth for Top 10 largest countries

Argentina

Chile

Dominican Rep.

Peru

Colombia

Mexico

Guatemala

Brazil

Cuba

Strong growth of Latin American Airlines traffic in 2005

Note: Jan-Sep 2005 vs. Jan-Sep 2004 traffic

RPK:+7%LF: 81%

RPK:+11%LF: 73%

RPK:+2%LF: 78%

RPK Network:+14%RPK LCC: +51%LF: 73%

RPK Dom.+Intra: +17%RPK Int’l: +11%RPK Total: +14%

Strong economic growth, especially for Venezuela, Argentina and Chile

Jan-Sep 2005 passenger traffic up 14%

Strong growth at GOL, LAN, TACA

Consolidation, merger activity possible

Rise of Mexican low fares carriers

0%

5%

10%

15%

20%

25%

0% 10% 20% 30% 40% 50%

2004-2014 Annual growth rate

2004 market share

Europe

USA

LCCs in different phase of maturity

Emerging

Developing

Maturing

Asia

LCC growth and market share per region

Great potential for LCCs in Asia

Population : 290mNumber of LCCs : 10Deregulation : 1978

LCC Market share : 30%

Population : 290mNumber of LCCs : 10Deregulation : 1978

LCC Market share : 30%

Population : 375mNumber of LCCs : 50-60Deregulation : 1997

LCC Market share : 20%

Population : 375mNumber of LCCs : 50-60Deregulation : 1997

LCC Market share : 20%

Population : 3.5bNumber of LCCs : 10-15Deregulation : acceleration today

LCC Market share : 5%

Population : 3.5bNumber of LCCs : 10-15Deregulation : acceleration today

LCC Market share : 5%

North America Europe Asia & Japan

For now, domestic operations have been themain driver of Asian LCC rapid expansion.

37airports with LCC

operations

113airports with LCC

operations

Intra Asia* 4%

Domestic* 96% Domestic* 90%

Intra Asia* 10%

* % of total LCC seats. Source : OAG/ST September. ** Conservative scenario

Type of operations

September 2001 September 2004

310airports with LCC

operations

Domestic* 77%

Intra Asia* 23%

September 2014**

Airports served by LCC and type of operations

India progressive liberalisation towards a new policy framework

2004

Decision to build new airports in Bangalore and Hyderabad on a private-public partnership

Private carriers allowed to launch international service

Abolition of taxes on air travel Reduction of excise duty on

Aviation Turbine Fuel Reduction of landing charges

2003

New bilateral agreement with ASEAN countries

1st no-frill airline: Air Deccan

2005

Competition in the supply of Aviation Turbine Fuel “Open Sky” agreement during peak season Foreign equity up to 49% and Non Resident Indian

investment up to 100% in domestic airline New bilateral agreements with France, China, UK,

USA, Oman, Qatar, Netherlands, Belgium, Germany, Canada, Bhutan, Philippines, Singapore, New Zealand and UAE

New Entrants: Kingfisher, Spice Jet, Paramount, Go Air and Air India Express

2006

Privatisation of New Delhi and Mumbai airports

Potential IPO of Indian Airlines and Air India

New bilateral agreements with Thailand and Italy

New entrant: Indigo

Opportunity for LCCs in India

• Liberalizing aviation market

• Increasing urbanization rate

• 280 million middle class consumers

• Increasing propensity to travel

• Expensive current domestic fares

• Slow, uncomfortable, overcrowded rail transport

Indian LCC targeting first class and 30% 2nd class train passengers

MUMBAI - DELHI by Railroad

• 1380 km

• 23 hours

First class fare: 3373 Rs

Second class fare : 1775 Rs

MUMBAI - DELHI by Air

• 1130 km

• < 90 minutes flight

2004 Network fare:

8970 Rs

2005 LCC fare* : 2900 Rs

*: LCC promotion fare as low as 1669Rs

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15%

China and India driving the world economy

GDP Growth 2005-2010

Exports growth (goods & services) 2005-2010

US

India

China

S. Korea

AustraliaUKFrance

Germany

Thailand

Japan

Latin America

RussiaTurkey

GDP growth / Exports growth (2005-2010)

Note: Bubble size proportional to GDP at PPP (Purchase Power Parity) in US$ Billion in 2010Source WEFA/Globalinsight

9.59.1

8.7

7.97.5 7.5 7.3 7.3 7.2 6.9

0

2

4

6

8

10

Average annual RPK growth rate (% p.a.)2004 - 2023

Do

me

stic

In

dia

n S

ub

Do

me

stic

PR

C

Asi

a -

PR

C

Cen

tral

Eu

rop

e –

In

dia

n S

ub

PR

C -

US

A

Au

stra

lia/

NZ

- P

RC

CIS

- P

RC

Wes

tern

Eu

rop

e -

PR

C

Ind

ian

Su

b -

US

A

Worldaverage

5.3 %

China in the same backyard effect

Jap

an -

PR

C

Top 10 Asia-Pacific growing markets (2004-2023)

International traffic: new routes and stronger hubs

Content

9.1

7.97.6 7.5

7.2 6.9 6.96.6 6.5 6.3

0

2

4

6

8

10

Average annual RPK growth rate (% p.a.)2004 - 2023

Asi

a -

PR

C

Wes

t. E

uro

pe

- M

idd

le E

ast

PR

C -

US

A

Intr

a A

sia

Ind

ian

Su

b.

- U

SA

Au

stra

lia/

NZ

- P

RC

Wes

t. E

uro

pe

- P

RC

Asi

a -

Au

stra

lia/

NZ

Asi

a -

US

A

Wes

t. E

uro

pe

- In

dia

n S

ub

.

Top 10 International passenger traffic

Worldaverage5.3% p.a.

Strong traffic growth to be distributed through:

fragmentation fragmentation andand consolidation consolidation

CONSOLIDATION ‘Hub to hub’

• Hubs are ‘points’ too !

• Hubs improve connectivity

FRAGMENTATION ‘Point to point’

• Market development

• If traffic volume/frequency sufficient

Fragmentation/consolidation depending on evolving equilibrium of:

- World demographics, trade centers

- Origin and destination demand

- Pace of liberalization

- Airline and hub economics

- Airline alliances

- Congestion and environmental issues

- Passenger choice for pricing, convenient schedule, non-stop

Influences on network development

Primary/hub cities today were, are and will remain dominant.

LO

N

NY

C

FR

A

PA

R

CH

I

AM

S

WA

S

LA

X

AT

L

BO

S

0

200

400

600

800

1000

WA

S

CP

H

RO

M

AM

S

FR

A

CH

I

PA

RLO

N

NY

C

BO

S

0

200

400

600

800

100020051975

Main cities on Europe – USA (1975/2005)

Seats Seats

Source : OAG/ST. Monthly departure seats on Western Europe - USA

8 are still in the top 1030 years later

80% of new routes since 1995 and still operated are

linked to these cities.

Primary/Hub cities are where people want to fly

77%of the demand involves at least one of the 32 Primary city at one end.

Primary-Primary

Primary-Other

Other-Other(transverse routes)

Total long haul O&D demand

100 fastest growing city pairs (1995-2005)

World

NORTH ATLANTIC EUROPE-ASIA NORTH PACIFIC

100 fastest growing city pairs* (1995-2005)

* Growth in additional seats.Source : OAG/ST September of each year. Non stop routes only with range > 2000nm. Domestic routes excluded.

0

2000

4000

6000

8000

10000

12000

1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

Hub-hub

Hub-2nd

2nd-2nd

Trunk routes and thinner routes from hub cities grow in parallel

Source : OAG, world international routes over 2,000nm. Hubs are 32 Primary cities from which 90% of the LR seats are offered.

September seats offered (000)

World >2000 nm

% of pax who can fly directly will increase by 5 points

Point-to-point

Connecting

Hub-hub

Hub-2nd

2nd-2nd

45%

55%

Point-to-point50%

2004

23.5 million passengers

2014

45 million passengers

Hub-hub

x1.9

X2.4Hub-2nd

2nd-2ndx2

Europe-Asia

Stronger hubs and new route development

0 10 20 30 40

2nd-2nd

Hub-2nd

Hub-hub

Growth allocation on Europe-Asia

2004 2014

Annual seat capacity

2004 2014

Europe-Asia

Including 1 additional route

Including 27 additional routes

Including 4 additional routes

Europe-Asia - Different markets for different aircraft

LON

SIN

TYO

HKG

PAR

BKK

FRA

DEL

BOM

SEL

AMS

BJSMIL

MOW

ROMMAD

SHA

VLA routes350-400-seater routes250-300-seater routes

Between large economic centers.

2014

Other routes

HKGCAN

PEK

LAXSFOIAD

SIN

PVG

JFK

DXB

CDGFRALHR

MEM

ANC

SDFNRTICN

KIX

HNDNGO

YVR

TPE

SYD

MEL

KUL

AUH

DEL

BOM

SFD

A380 announced destination to North East Asiaby 2010 by existing customers …

… 160 A380 weekly frequencies already planned by 2010 from China

159 firm orders & 159 firm orders & commitmentscommitments

159 firm orders & 159 firm orders & commitmentscommitments

+182%8 9993 193RPKs (billion)

-727-Freighters delivered new

Change20232003World fleet forecast

+140%3 6161 506Dedicated freighters

-16 60116 601-New passenger aircraft delivered

+101%21 75910 838Passenger aircraft

GMF highlights

-17 32817 328-Total new deliveries

10,902

3,306

1,472 1,648

0

2,000

4,000

6,000

8,000

10,000

12,000

Single-aisles Small twin-aisles Intermediate twin-aisles

Large aircraft

Number of new aircraftNumber of new aircraft

New passenger and freighter aircraft deliverieswill average 866 per year

17,328 new17,328 new passenger and freighter aircraft deliveries passenger and freighter aircraft deliveries

63%

19%8% 10%

% value: 40% 24% 14% 22%

Source: Airbus GMF 2004

20-year forecast

2004 - 2023

$1.9 trillion of value$1.9 trillion of value