REGIONAL AND GREENLAND OPERATIONS ÁRNI GUNNARSSON ǀ MD AIR

30 SCHEDULED DESTINATIONS 1986

GRÍMSEY

RAUFARHÖFN

KÓPASKER SUÐUREYRI ÞÓRSHÖFN FLATEYRI ÍSAFJÖRÐUR SIGLUFJÖRÐUR INGJALDSSANDUR HÚSAVÍK GJÖGUR ÓLAFSFJÖRÐUR BAKKAFJÖRÐUR

ÞINGEYRI REYKJANES SAUÐÁRKRÓKUR VOPNAFJÖRÐUR BÍLDUDALUR HÓLMAVÍK BLÖNDUÓS PATREKSFJÖRÐUR BORGARFJÖRÐUR

EGILSSTAÐIR NORÐFJÖRÐUR STYKKISHÓLMUR GRUNDARFJÖRÐUR RIF FÁSKRÚÐSFJÖRÐUR

BREIÐDALSVÍK

HÖFN

HORNAFJÖRÐUR REYKJAVÍK

KEFLAVÍK

VEYVESTMANNAEYJAR 13 SCHEDULED DESTINATIONS IN 2013

Grímsey

Þórshöfn

Ísafjörður Gjögur Húsavík Sauðárkrókur Vopnafjörður Bíldudalur Akureyri Egilsstaðir

Reykjavík Höfn

Air Iceland Norlandair Air Arctic MAJOR CHANGES IN RECENT YEARS ON THE DOMESTIC MARKET

With governmental definition Service agreements are in 2003 of minimum travel currently with the time to Reykjavík it was Government on domestic clear which routes should flights to 7 destinations be tendered and which not

Service contract routes are Air Iceland´s flights today counting for around are not operated 5% of the total number of under service contracts passengers on domestic flights DEVELOPMENT FOR THE LAST 40 YEARS 3% INCREASE PER YEAR ON AVERAGE

Number of passengers on domestic flights 1971-212

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

0

1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 DEVELOPMENT DOMESTIC FLIGHTS JANUARY-JULY 2012 AND 2013

Number of passengers domestic flights Load factor domestic flights January – July 2012-2013 in thousands January – July 2012 -2013

2012 2013 40 2012 2013 76% 74% 35 72% 30 70% 25 68%

20 66% 64% 15 62% 10 60% 5 58%

0 56% Jan Feb Mar Apr May Jun Jul Jan Feb Mar Apr May Jun Jul

ǀ Number of passengers in January-July 2013, 9% less than for the same period in 2012 ǀ Strong focus on capacity adjustment due to negative development in demand has resulted in higher load factor compared to last year (68% to 71%).

DEVELOPMENT IN EUROPE KEY INDICATORS

European Regional Association (ERA) reports a 9% decrease in passenger numbers with an increase in load factor of 2 ppt. (64.2% to 66.5%) in the first 3 months of 2013 vs. 2012.

Key indicators in Europe % change Q1 2013 vs. Q1 2012

-9.8% Landings growth

-12.5% Hours growth

-13.0% Seat km growth

-12.7% Seat growth

-10.0% Passenger km growth

-9.0% Passenger growth DEVELOPMENT OF TAXES AND FEES DOMESTIC FLIGHTS

Increase of taxes and fees per year 2003-2012 As of 1 April 2013 passenger 400% fees increased by 40% and landing fees by one third at 364% 350% Fees and taxes Reykjavik Airport Fees and taxes per passenger Price index Airfare RKV-AEY 300%

271% 250%

200%

150%

100% 82% 75% 50%

0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 REASON FOR TRAVELLING* DOMESTIC FLIGHTS

Passengers are not just municipal staff traveling on taxpayer´s expense. For example 30,000 children (2-11 years) and 6,000 infants (0-2 years) travelled with Air Iceland last year, representing about 10% of total passenger number

* Survey on board Air Iceland 2012

21.8% 23.5% Visit to friends/family 24.5% 25.1% 27.9% 28.0% 30.8% 29.3% 29.4% 29.8% Business 37.2% Vacation Other

14.8% 10.0% 13.2% 30.6% 16.4% 21.4% 32.0% 27.8% 32.3% 15.6% 36.2%

41.8% 41.9% 26.5% 38.8% 20.0% 29.2% 28.4% 20.3% 21.4% 28.4%

22.0%

27.2% 24.2% 22.3% 23.1% 19.2% 18.9% 20.0% 18.8% 18.9% 17.2% 14.0%

Jun´04 Nov´04 Jul´05 Feb´06 Aug´06 Dec ´07 Jul´08 Jul´09 Mar´10 Aug´11 May-Jun ´12 WHO PAID FOR THE FLIGHT*

Myself 46,9% ǀ Most passengers are traveling on their own or about 47% of the Private Company 20,7% passengers Public 11,8% Company/Institution ǀ 11% of flights are paid for by relatives Family 11,1% ǀ 20% are paid for by private Sports Club 5,1% companies Municipality 1,4% ǀ 12% by the state and municipalities Spouse 1,3% ǀ 5% by sports clubs Friend 0,4%

Other 1,4%

* Survey on board Air Iceland 2012 TOURISTS ON DOMESTIC FLIGHTS GREAT GROWTH OPPORTUNITY

Increase in the number of tourist on domestic flights January – July 2013 vs. 2012

35% 34% ǀ Despite a decrease of the total number of passengers on domestic flights the year to date number of foreigners travelling on domestic flights has increased by 22% 22% ǀ The continues increase in the number of foreign arrivals to Iceland gives a great 13% opportunity to increase the 10% share the tourist represent today of the total number of 9% passengers on domestic flights

-2%

Asia Total

N-America

Scandinavia

EastEurope WestEurope TERMINAL IN REYKJAVIK TERMINAL IN REYKJAVIK TERMINAL IN REYKJAVIK GREENLAND OPERATION ACTIVITIES IN GREENLAND 5 DESTINATIONS THEREOF 2 DESTINATIONS SERVED ALL YEAR

Reykjavik Reykjavik Reykjavik Kulusuk Kulusuk Nuuk 1-2 times a week all year Moreover 1-2 trips daily All year although no contract with from late May to the Greenland Government mid-September

Reykjavik Reykjavik Akureyri Ilulissat Narsarsuaq Nerlerit Inaat February to April June to GSA cooperation with and again from September Norlandair June to September

THE MARKET

Business Customers and other “must-go” travelers | Growing due to greater cooperation between countries | Connecting passengers | The majority of the passengers in low season

Tourists | Traditionally from Europe in high season | Growing opportunities in low season | from markets in U.S. and Far East (Japan, Taiwan)

FUTURE MARKET IN GREENLAND

Greenland is a country rich of Minerals and Oil. Initial steps have been taken to start exploiting the opportunities which these resources give. Many projects have been worked on over the last decade or more and some of them are getting closer to be operational. Below is an overview over the status of activities:

Mineral | No of prospecting licenses 19 | No of exploration licenses 63 | No of exploitation licenses 4 | No. km² under exploration licenses 37.730 (2011) | Exploration expenses (mill. DKK) 711 (2011) | Exploration drilling (meters) 52.304 (2011)

Oil | No of Hydrocarbon licenses 16 PASSENGER TO/FROM GREENLAND* 15% INCREASE ON AVERAGE PER YEAR

Number of passengers to/from Greenland 2007-2012 in thousands

30.4 29.0

24.3 22.1

19.3 17.4

2007 2008 2009 2010 2011 2012

*Air Iceland ICELAND AS A HUB FOR GREENLAND