Setting the scene: The European market

CONNECT – Monday 14 March 2016

Ralph Anker Chief Analyst anna. [email protected] What’s coming up …

• Developments in Europe 2014-2016 • Passenger demand by country 2015 • European trends in S16 • Baltic states and airBaltic • LCC trends • easyJet, Ryanair and Wizz Air • Exchange rates • GDP forecasts • Conclusions

2 Developments in Europe 2014 • Legacy carriers still struggling for profitability • Etihad’s involvement in European carriers – Aer Lingus, Air Serbia, airberlin, Alitalia (pending) • Ryanair opens new bases including Athens (ATH), (BRU), Lisbon (LIS) and (FCO) • easyJet opens new bases in and Naples • Vueling grows outside of Spain (turns 10 on 1 July) • Norwegian’s long-haul expansion with 787s • germanwings completing Lufthansa network transfer • Wizz Air up to 20 bases (10th birthday celebrated) • Turkish still growing at IST – Growing secondary hub at SAW (taking on Pegasus)

3 Developments in Europe 2015

• Cheap fuel!!! • Many legacy carriers still struggling for profitability • Alitalia rescue by Etihad Airways approved • Lufthansa/germanwings/Eurowings evolution • IAG trying to acquire Aer Lingus • Gone: Cyprus Airways, eurolot, Air Lituanica, • Mixed response to growth of MEB3 carriers • Ryanair new bases in SXF, Bratislava, Copenhagen and Ponta Delgado • easyJet new bases in , Porto • Wizz Air new bases in Debrecan, Kosice, • Turkish Airlines still growing – over 240 routes 4 Developments in Europe 2016

• Fuel even cheaper!!! • Many European legacy carriers making money, but … – IAG doing very well, now including Aer Lingus • Ryanair’s new bases in Belfast, Bucharest, Corfu, Hamburg, Ibiza, MXP, Nuremberg, Santiago de Compostela, Timisoara • easyJet’s new bases in Barcelona and Venice • Transavia’s new base in • Wizz Air’s new base in Iasi • Formation of A4E “alliance” against aviation taxation • Still no decision on London runway … • … Berlin’s “new” airport still not open

5 European airport traffic 2015 Change in total annual passengers across all airports

35%

30%

26.3%

25.6% 25%

20% 19.2%

16.1%

15.3% 15%

13.5%

12.8%

12.7%

12.5%

11.7% 11.7%

11.3%

10.9%

10.7%

10.3%

9.3%

9.0%

10% 8.6%

7.9%

7.5%

7.4%

7.3%

7.1%

7.0%

6.6%

6.1%

5.9%

5.5%

4.3%

4.2%

3.8% 5% 3.7%

3.5%

3.5%

3.4%

3.1%

2.0%

1.6%

1.5%

1.3%

-9.0%

-1.3%

-10.1% 0% -1.0%

-5%

-10%

-15%

UK

Italy

Malta

Spain

Latvia

Serbia

Russia

France

Poland

Turkey

Greece

Cyprus

Austria

Ireland

Kosovo

Croatia

Finland

Iceland

Estonia

Albania

Norway

Ukraine

Georgia

Sweden

Belgium

Moldova

Bulgaria

Portugal

Armenia

Slovakia

Hungary

Slovenia

Romania

Gibraltar

Germany

Lithuania

Macedonia

Bos & Herz & Bos

Czech Rep. Czech

Switzerland

Montenegro

Netherlands

Luxembourg

All countries: +5.0% to 1.9 billion

6 FIGUST countries 2015

Country Airport pax % vly >1m* UK 254.7m +5.5% 20 (-1) 216.5m +3.8% 17 (+1) Spain 207.4m +5.9% 20 (+1) Turkey 181.4m +9.3% 17 (+2) ** 170.6m +3.5% 17 (+1) 156.8m +4.3% 23

*Number of airports with more than 1 million annual passengers **Includes Basel-Mulhouse (BSL) airport.

Source: UK CAA, ADV, Aena, www.aeroport.fr, Assaeroporti, DHMI

7 Top 15 intra-European international pairs Change in monthly one-way seat capacity Jun16 v Jun15 (Monthly one-way seat capacity in June 2016 - millions) -10% -5% 0% 5% 10% 15% 20%

UK - Spain (2.446m) 19.0% Germany - Spain (1.559m) 9.4% Germany - Italy (0.892m) 10.1% Germany - Turkey (0.810m) -6.8% UK - Italy (0.797m) 12.6% UK - Germany (0.784m) 1.8% UK - France (0.694m) 13.8% Spain - Italy (0.676m) 6.3% Spain - France (0.658m) 6.6% UK - Ireland (0.637m) 10.4% France - Italy (0.625m) 5.6% UK - (0.537m) 7.8% UK - Greece (0.528m) 9.5% Germany - France (0.469m) 5.2% Germany - Greece (0.444m) 6.5%

8 Top 14 European domestic markets Change in monthly seat capacity (Jun16 v Jun15) (Monthly seats in June 2016) -20% -15% -10% -5% 0% 5% 10% 15% 20%

Turkey (5.317m) 6.2%

Spain (3.789m) 1.6%

Italy (3.456m) -0.7%

Germany (3.217m) 13.0%

France (2.918m) 0.8%

Russia (2.744m) -18.7%

United Kingdom (2.167m) 0.5%

Norway (2.050m) -4.1%

Greece (1.032m) 13.9%

Sweden (0.948m) 10.9%

Portugal (0.519m) 16.4%

Finland (0.291m) -2.7%

Denmark (0.206m) -9.6%

Poland (0.206m) -0.5%

9 Top 50 Airlines at European airports Change in monthly seat capacity Source: OAG Schedules Analyser for June 2016 and June 2015 45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

S7

LOT

SAS

KLM

HOP!

UTair

Flybe

Iberia

TUIfly

SWISS

Alitalia Finnair

Condor

Vueling

easyJet

Volotea

Ryanair

Aeroflot

Jetairfly

WizzAir

Wideroe

Onur Air Onur

airberlin

Emirates

Jet2.com

Lufthansa

Air France Air

Air Europa Air

Eurowings

Aer Lingus Aer

Ukraine IA Ukraine

Norwegian

SunExpress

SmartWings

Ural Airlines Ural

TAP Portugal TAP

Transavia TO Transavia

Transavia HV Transavia

Delta Air Lines Air Delta

United Airlines United

British Airways British

Aegean Airlines Aegean

Turkish Airlines Turkish

Pegasus Airlines Pegasus

Austrian Airlines Austrian Airlines Brussels

Monarch Airlines Monarch

American Airlines American

Thomson Airways Thomson

Thomas Cook Airlines Thomas Total all carriers: +4.7%

10 Baltic airport traffic 2001-2015 Annual passengers (millions)

12 Palanga (PLQ) 11 0.75

Kaunas (KUN) 2.17 10 0.72 0.69 (TLL) 0.83 2.02 9 0.87 1.96 Vilnius (VNO) 2.21 1.91 8 3.33 (RIX) 0.41 0.81 2.95 1.81 7 1.38 2.66 0.39 0.46 1.71 2.20 1.73 1.35 6 1.37 2.04 5 1.54 1.30 5.11 5.16 1.72 4.77 4.79 4.81 1.40 4.66 4 1.45 4.07 3.69 3 1.00 1.28 3.16 2 2.49 0.72 0.96 0.57 0.61 1.87 0.72 1 0.64 0.58 1.06 0.62 0.63 0.71 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

11 Baltic airport seasonality Monthly passengers in 2015

600,000

550,000

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000 Riga

100,000 Vilnius

50,000 Tallinn

0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

12 Top 15 airlines from Baltic airports in 2015 Departing seats (% change versus 2014)

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

airBaltic (-0.8%) 2,249,330 Ryanair (+11.1%) 1,507,842 Wizz Air (+39.8%) 819,360 Estonian Air (-9.0%) 425,846 Lufthansa (-4.1%) 405,472 Aeroflot (+51.3%) 312,637 Finnair (+11.3%) 286,280 SAS (+42.0%) 231,922 Norwegian (+18.6%) 228,184 Turkish Airlines (+19.5%) 150,823 LOT Polish Airlines (+7.6%) 143,285 Avies (+6.0%) 131,717 Ukraine Int'l Airlines (+63.3%) 96,985 Air Lituanica (-54.9%) 77,916 Brussels Airlines (+79.4%) 55,827

13 Top 15 country markets from Baltic airports Departing scheduled seats in 2015 (000s) (% change versus 2014)

0 100 200 300 400 500 600 700 800 900 1,000

UK (+10.9%) 954 Germany (+10.5%) 947 Russia (-4.2%) 594 Norway (+8.9%) 577 Finland (+1.4%) 438 Denmark (+5.9%) 374 Sweden (+25.9%) 350 (+4.0%) 336 Italy (-1.3%) 314 (-8.6%) 254 Netherlands (+7.6%) 227 (+37.1%) 218 France (+13.4%) 212 (-19.2%) 210 Spain (+15.5%) 201

14 Top 15 airBaltic routes in S16 by ASKs Weekly one-way ASKs in August 2016 (millions) [Weekly departures - from RIX unless stated otherwise]

0.0 0.5 1.0 1.5 2.0 2.5 3.0

London (LGW) [12] 2.76 Moscow (SVO) [24] 2.68 (CDG) [10] 2.20 Amsterdam (AMS) [12] 2.12 Munich (MUC) [12] 1.86 Tbilisi (TBS) [5] 1.54 (VIE) [12] 1.41 Berlin (TXL) [12] 1.38 Zurich (ZRH) [7] 1.28 Tel Aviv (TLV) [3] 1.18 TLL - Amsterdam (AMS) [7] 1.17 Barcelona (BCN) [4] 1.17 Milan (MXP) [6] 1.15 Oslo (OSL) [19] 1.15 Copenhagen (CPH) [19] 0.99

15 LCCs still growing in 2015 …

pax up 17% to 101.4 million pax up 7% to 69.9 million pax up 21% to 26.3 million* pax up 1% to 25.8 million pax up 13% to 22.3 million pax up 22% to 19.2 million * anna.aero estimate Other carriers: Lufthansa Group (107.7m) [includes Austrian, SWISS, germanwings] Air France/KLM (89.8m) IAG (BA/Iberia/Vueling) (88.3m) Turkish Airlines (61.2m) Aeroflot (39.4m), airberlin & SAS (both 30.2m) 16 European LCCs Average weekly route frequency in summer (2006-2016)

12 easyJet (U2) 11

10 Vueling (VY)

9 Eurowings (4U/EW) 8 Ryanair (FR) 7

6 Transavia (HV/TO)

5 Jet2.com (LS)

4 Norwegian 3 (DY/D8)

2 Wizz Air (W6)

1 Volotea (V7)

0 S06 S07 S08 S09 S10 S11 S12 S13 S14 S15 S16

17 LCCs - % of new routes with competition In 2013, 2014 and 2015

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

52% Norwegian 53% 50% 2013 42% easyJet 51% 2014 47% 56% 2015 Vueling 57% 46% 9% Ryanair 27% 39% 29% Volotea 36% 36% 10% Wizz Air 11% 12%

79% Spirit Airlines 90% 85% 29% Southwest Airlines 48% 29% 7% Allegiant Air 8% 10%

18 PELOCO5 head-to-head competition in S16 Number of competing airport pairs

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

Ryanair v Vueling 55

Ryanair v easyJet 42

easyJet v Vueling 34

Ryanair v Norwegian 23

easyJet v Norwegian 22

Ryanair v Wizz Air 17

Vueling v Norwegian 11

Vueling v Wizz Air 7

easyJet v Wizz Air 2

Norwegian v Wizz Air 1

19 Smaller markets: Gibraltar (+34%), Morocco (-42%), Egypt (-73%) Recently withdrawn from Russia, Tunisia 20 New country market: Montenegro (Tivat); Tivat only new destination Smaller markets: Romania (+120%), Bulgaria (+115%), Finland (-76%) 30 country markets in total (same as in S15) 21 Increased from 184 to 187 airports (10 new, 7 dropped) Biggest new airports: AMS, BFS, MXP (all 28 flights per week) 22 Where's Wizz Air growing in S16? Leading country markets (Aug16 v Aug15) (Monthly departing seats in August 2016)

-5% 0% 5% 10% 15% 20% 25% 30% 35% 40%

Poland (384k) 12.0% UK (362k) 27.6% Romania (317k) 37.4% Hungary (214k) 18.6% Italy (201k) 14.9% Germany (134k) 13.5% Bulgaria (102k) 11.2% Sweden (97k) 14.1% Spain (86k) 16.6% Norway (78k) 8.2% Lithuania (66k) 31.5% Netherlands (63k) 14.9% FYROM (50k) 3.3% Overall Belgium (40k) 10.4% +17.4% France (31k) -2.8%

23 Wizz Air's network evolution Airports with biggest increase in weekly departures August 2016 v August 2015

0 5 10 15 20 25 30 35 40

London (LTN) 37 Cluj-Napoca (CLJ) 27 (WAW) 25 Bucharest (OTP) 24 Iasi (IAS) 17 Birmingham (BHX) 14 Craiova (CRA) 14 Sofia (SOF) 13 Debrecan (DEB) 12 Doncaster Sheffield (DSA) 12 Vilnius (VNO) 12 (NYO) 10 Eindhoven (EIN) 9 Lublin (LUZ) 8 Oslo (TRF) 8 Increased from 105 to 118 airports (14 new, 1 dropped) New airports: BHX, BTS, CPH, CRA, FKB, GYD, IBZ, KUN, NCE, OPO, PLQ, PSR, SXF, TFS 24 Exchange rate Value of 1 Source: xe.com 1.4

1.3 Down 23% 1.2

1.1

USD 1.0 GBP

0.9

0.8 Down 18%

0.7

0.6

Jul-12 Jul-13 Jul-14 Jul-15

Oct-12 Oct-13 Oct-14 Oct-15

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16

Apr-12 Apr-13 Apr-14 Apr-15

Jun-12 Jun-13 Jun-14 Jun-15

Feb-12 Feb-13 Feb-14 Feb-15 Feb-16

Sep-12 Sep-13 Sep-14 Sep-15

Dec-12 Dec-13 Dec-14 Dec-15

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16

Aug-12 Nov-12 Aug-13 Nov-13 Aug-14 Nov-14 Aug-15 Nov-15

May-12 May-13 May-14 May-15

25 GDP forecasts for 2016 Source: The Economist (5-11 March 2016)

0% 1% 2% 3% 4% 5% 6% 7% 8%

India 7.5% China 6.4% Poland 3.5% Turkey 3.2% Sweden 3.1% Spain 2.7% United Kingdom 2.0% USA 2.0% Canada 1.6% Norway 1.5% Germany 1.5% Euro Area 1.5% France 1.3% Italy 1.1% Japan 0.8%

26 Conclusions

• Cheap fuel means 2016 should be an even better year for airlines and airports in Europe (make the most of it!)

• LCCs in Europe are increasingly competing against legacy carriers and against each other

• LCCs still responsible for generating majority of short- haul growth in Europe

27 28