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Ecommerce - a Paradigm Shift for Air Cargo eCommerce - A paradigm shift for Air Cargo Michael Steen EVP & Chief Commercial Officer Atlas Air Worldwide Inc. Atlas Air Worldwide at a Glance Structure 2017 Global Operating Network Headquarters: 2017 Operating Rev: Purchase, NY $2.16 Billion 252,802 Total Block Hours 422 Airports in 103 Countries Employees: NASDAQ Listed: 48,983 Flights 2,870 AAWW 790 Charters Completed 80+ Unique Customers Fleet (105 aircraft) Valued Customers Cargo Passenger Shippers Forwarders/ Airlines Integrators 10 (747-8F) 12 (777-200LRF) 4 (747-400) Brokers 35 (767-200/300F) 28 (747-400F) 4 (767-200/300ER) 1 (757-200F) 4 (747-LCF) 6 (737-400F) 1 (737-800) Privileged and Confidential 2 Our Value Proposition – Integrated Solutions ACMI CMI Charter Dry Leasing Services • Turnkey solution • Crew & technical • Ad-hoc & program • Asset financing & • Network analysis expertise charters management & design • Large fleet - various platforms • Economy of scale • Custom cargo & • Dry leasing, sales • Pilot training PAX service & sale / leaseback • Global footprint - • Flexible network • Spare parts scalable network solutions • Leader in South • Fleet planning management American freight • Performance, • Commercial • Conversion • Transportation reliability & collaboration • Leader in US DOD management visibility solution expertise passenger & cargo service A History of Delivering Value to Our Customers Privileged and Confidential 3 The Global Air Cargo Market & the impact of eCommerce Global Air Freight is a Large and Growing Industry Airlines operating freighters generate 90% of industry revenues Passenger Belly Only 10% All Cargo $8.5B 10% $8.5B Express Carrier Total 41% $33.6B $85B Combination Carrier 39% $32.8B Sources: Flight Global, U.S. DOT F41, airline reports, and Boeing estimates (2017 data) Privileged and Confidential 5 Air Cargo is essential to the Global Economy eCommerce will increase the value Privileged and Confidential 6 Megatrends Will Drive Opportunity in Airfreight Economic Megatrends Digitization . Increases in urban consumption . Technological breakthroughs at by the growing consuming an increasing pace class – Increase by 1.8B by . Adoption of new technologies 2025 . Change in buying behaviors. Global consumption to e-Commerce related surpass $30 trillion – increase airfreight demand growing from $12 trillion today significantly Globalization eCommerce . Global flows increasing – trade, . New consumer focused retail finance, people and data model will drive significant demand growth . Tourism and general travel increasing, adding jobs . Trends will require efficient air networks to serve effectively . Manufacturing moving away from traditional passenger hubs . Freighters will play a more important role in the future Privileged and Confidential 7 Global Airfreight Industry Performance Trends Global Airfreight Market Global Express Market . International freight tonne kilometers (FTKs) flown up 10.6% in 2017 . The International Express market is showing robust growth . FTK growth expected to exceed 4.3% in 2018 . 5.8% CAGR since 2011 vs. nominal CAGR for International FTK’s . PMI Index at 55 for 2017 and semi-conductor sales +18% for 2017 . The Express segment benefiting from the e-Commerce growth Total Global Airfreight Tonnage Growing from Record Levels International Express Market – DHL, FedEx and UPS 150% ??% 62.5 Change in Demand (Base year 2011 - 100%) 65 Freight Tonnes 59.9 (Millions) 54.9 140% 51.5 52.8 31% 55 49.1 49.3 48.8 49.5 130% 25% 43.4 45.4 45.1 45 41.1 19% 120% 12% 35 110% 6% 25 100% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F 2.5% 6.4% 4.6% (0.7)% (8.9)% 19.5)% 0.4% (1.0)% 1.4% 4.0% 1.5% 3.8% 10.6% 4.3% 90% 2011 2012 2013 2014 2015 2016 2017 Global e-Commerce Market Supply vs. Demand Global e-Commerce Estimates ($ Billion) 15% FTK and AFTK Growth $2,864 $3,000 $2,450 10% $2,076 $2,000 $1,735 5% $1,450 $1,191 $940 0% $1,000 $727 -5% $0 FTK AFTK 2012 2013 2014 2015 2016 2017 2018F 2019F -10% Overall e-Commerce market penetration is still low Sources: IATA, ICAO, Euromonitor, Forrester, eMarketer, BofA Merrill Lynch Global Research estimates Privileged and Confidential 8 Market Growth 2017 Privileged and Confidential 9 Evolution of Distribution Models The Last Mile Privileged and Confidential 10 B2C vs. B2B B2C B2B Number of Customers Millions Thousands Geographical Density Low High Shipment Unit Package Pallet Value/Weight Ratio High Low Delivery Frequency On-demand Scheduled Delivery Speed ASAP Predictable Shipper-Consignee Relationship Transactional Contractual Payment Credit card Purchase order Privileged and Confidential 11 e-Commerce – A real Paradigm Shift . e-Commerce only accounts for ~10% of global retail e-Commerce Penetration sales (as percentage of global retail sales) 16% 15.5% . US e-Commerce spend 14.6% $385B in 2016 – forecasted to grow to $600B by 2020 14% 13.1% . USA: 237M internet users – 12% 11.6% 73% mobile penetration – 9% e-Commerce penetration 10.1% 10% 8.7% . China: 700M internet users – 50% mobile penetration – 8% 7.4% 10% e-Commerce penetration 6% . India: 300M internet users – 2015 2016 2017* 2018* 2019* 2020* 2021* 25% mobile penetration – 2% e-Commerce penetration Source: Forrester, Statista, eMarketer Privileged and Confidential 12 Asia Express & e-Commerce has Great Potential ~2 People within ~500 billion 4 Hour Flight million Average 6.2% GDP Growth 2.5 - 3% (2016-2020) Stable w/ Middle Class 9% Growth limited growth Regional Limited Freighters Very fleet Deployed large fleet Source: Worldbank.org / Brookings Institution / OECD.org Privileged and Confidential 13 Summary Global Macro Outlook Growth of global “consuming class” will fuel the economy Airfreight Outlook Continued growth driven by e-Commerce and Express Supply Outlook Demand is expected to outpace Supply eCommerce will change the Supply Chain Continued globalization driven by consumer demand Positive Disruption Participate with expertize, digitization and continued investment.
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