Yearbook 2004

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Yearbook 2004

50 years 1954-2004 Association of European Airlines

Disclaimer

Any views or opinions presented in this Yearbook are solely those of the AEA and do not necessarily represent those of individual member airlines. 50 years 19954-200454-2004 Association of European Airlines . Avenue Louise 350 B - 1050 Brussels Tel. +32 (0)2 639 89 89 Fax 639 89 99 E-mail [email protected] Web www.aea.be

Dear reader of the AEA Yearbook,

As you may see from the letterhead at Nevertheless, when we airlines are the top of the page, 2004 has been a coping, on an individual basis, with such special year for the AEA. Last upheavals in the marketplace, at an December, the world celebrated 100 industry level we badly need a stable and years since the Wright Brothers first took coherent regulatory platform on which to ______to the air, which means that AEA has build our strategic planning. been around for half the lifetime of manned flight itself. This is where AEA comes in.

In recent years, the graph of our market 2004 is also a year of major change in development has looked a bit like one of the political landscape, as regards our those pioneering flights, tossed up and main regulatory ‘partner’, the EU. On down by turbulence rather than the May 1st it experienced its biggest-ever smooth and steady climb that we have enlargement – and it is not hard to been used to. imagine the importance of air transport in integrating those new markets. As usual, part of this Yearbook describes what happened to our market in 2003. 2004 is also seeing a new European This should have been a recovery year, Parliament, and a new Commission. following the steep downturn after 9/11 These are the people who will oversee which persisted through much of 2002. the ongoing involvement of the EU in Instead, we were hit with two exceptional external aviation affairs, security, traffic-suppressing events – the Iraq War environmental issues, safety regulation, and the SARS outbreak. consumer matters – all key issues for the airlines as they strive to establish a more The result – unforeseen at the beginning sustainable economic basis on which to of the year – was that the AEA airlines, grow and to thrive. collectively, would suffer a fifth consecutive annual loss. I hope you will find all these undercurrents properly addressed in the And so on to 2004, another year which following pages. dawned with hopes of a brighter outcome – hopes which have taken a sharp knock with the skyrocketing price of jet fuel.

This is not meant to be a catalogue of complaint. Our industry is dynamic and resilient and our customers remind us daily just how much they take for granted Vagn Soerensen the availability of convenient and Chief Executive Officer of Austrian affordable air transport. AEA Chairman 2004 Adria Airways, Aer Lingus, Air France, Air Malta, Alitalia, Austrian, bmi, British Airways, Cargolux, Croatia Airlines, CSA, Cyprus Airways, Finnair, Iberia, Icelandair, Jat Airways, KLM, LOT, Lufthansa, Luxair, Malev, Meridiana, Olympic Airlines, SAS, SN Brussels Airlines, Spanair, SWISS, TAP Air Portugal, Tarom, Turkish Airlines, Virgin Atlantic Airways. 50 YEARS OF SERVING EUROPEAN AIR TRANSPORT

In 2004, the Association of European Since then the AEA's structure has Airlines celebrates the 50 th anniversary of evolved to reflect the realities facing the its foundation as a permanent body industry. 'Industry Affairs' divided into serving the European airline industry. Commercial and Aeropolitical (subsequently renamed Public Policy), in AEA actually traces its history further, to recognition of the growing involvement of 1952, when the Presidents of Air France, the EU in air transport matters. This KLM, Sabena and Swissair formed a joint involvement was formalised in 1986 study group, shortly afterwards expanded when air transport was confirmed as with the addition of BEA (a forerunner of being subject to the single-market British Airways) and SAS. process. Social Affairs, Infrastructure and Environment have also gained their place In February 1954, the Air Research within the AEA's structure. Bureau was established on a permanent basis, in Brussels. The name was For most of AEA's history, membership subsequently changed to the European was limited to IATA member airlines. Airlines Research Bureau and - i n 1973 This rule was relaxed in 1981 to allow - AEA. Luxair to complete the (then) full set of EU flag-carriers. Shortly after the ARB was established, the 1954 Strasbourg Conference on the AEA has had in all 38 members: three Coordination of Transport in Europe led (Balkan, Sabena, Swissair) have suffered to the foundation of the European Civil corporate failures, two (BEA and BOAC) Aviation Conference (ECAC) as an inter- merged into British Airways, and two governmental body. (British Caledonian and UTA) were taken-over by BA and Air France It recommended that participating states respectively. encourage air carriers to undertake cooperative studies aimed at promoting Apart from the six founder members, an orderly development of air transport in additions to membership have occurred Europe. Evidently, the ARB was well- as follows : 1950s - seven; 1960s - four; placed to be the industry's representative 1970s - four; 1980s - three; 1990s - in dialogue with ECAC. seven; 2000s - seven.

By the time the AEA name was adopted, Evidently, there is as much demand for membership had grown to 19. There industry representation as at any other were three standing committees: time in AEA's existence. For the Research and Planning, Airline Industry Association to continue to serve its Affairs, and Technical Affairs, which was members into its second half-century, it formed when a pre-existing industry body will have to continue to adapt and (the 'Montparnasse Committee') was transform itself, to be as dynamic as the absorbed into AEA. industry it serves.

50 years 1954-2004 Association of European Airlines

ASSOCIATION OF EUROPEAN AIRLINES - i ASSOCIATION OF EUROPEAN AIRLINES CONTENTS

AEA – Serving the industry for 50 years i

SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9

SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5

SECTION III RESHAPING THE INDUSTRY III-1 Comparing Business Models – Network and No-Frills Carriers III-2 No-Frills Carrier Developments III-4 No-Frills Carriers and the Charleroi Decision III-5 Mergers and Alliances – Strengthening the Networks III-6 An End to Bilateralism ? III-7

SECTION IV REGULATION – TOO MUCH OR NOT ENOUGH ? IV-1 Security in the Aftermath of 9/11 IV-2 Does Europe at last have its Single Sky ? IV-4 Airports – A Fair Deal for Airlines and Passengers IV-5 Compensating the Passenger IV-6 The Great Gaseous Emissions Debate IV-7

SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7

SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9

ASSOCIATION OF EUROPEAN AIRLINES I-1 2003 AT A GLANCE

MONTHLY TRAFFIC MONITOR

60% change in Revenue Passenger Kilometres The traffic trend line started the year in reverse gear, as demand faltered in 50 Total Europe anticipation of the Iraq War. The North Atlantic recovery from a relatively short-duration 40 Far East / Australasia trough due to the war itself was hindered 30 Total Scheduled by the massive impact, particularly on the 20 Far East, of the SARS phenomenon. 10

-10

-20

-30 PASSENGER YIELDS - Total Europe Real Yields: adj. for exchange rate fluctuations and inflation -40

20 US¢ per Revenue Passenger Kilometre 2001 2002 2003 2004 Source: AEA AEA_YB_04010 19 Passenger yields tumbled, in real terms, 18 by 10.7% in 2003, a far greater drop than 17 at any other time in the long-run -3.5% per annum reduction in average prices. Several 16 effects were in play, not least of which was the network carriers’ response to 15 their no-frills competitors.

14 -10.7% CURRENCY EFFECTS: Strong Euro, Weak Dollar

13 1.4 US dollars = 1 Euro

12 1991 1993 1995 1997 1999 2001 2003 1.3 Source: AEA AEA_YB_04001 1.2

Annual average Currency fluctuations, in the shape of a 1.1 strong Euro vis-à-vis the US dollar, Euro appreciated by affected costs, revenues and market 20% against US dollar conditions. See chapter I-6 for an 1.0 analysis of how currency variations have repercussions – favourable and 0.9 otherwise – throughout the industry.

0.8 1999 2000 2001 2002 2003 2004 Source: OANDA AEA_YB_04003

I – 2 ASSOCIATION OF EUROPEAN AIRLINES -1.48Financial billion Loss (-1.42 US$ € bn)

Total5.9 Scheduled bn US$ Revenue more all services Revenue (5.3 € bn)

516 Total000 Scheduled fewer PassengerPassengers numbers

CRISES IN PERSPECTIVE AEA traffic and revenue loss in six months following:

Event Impact on RPK loss Revenue loss millions % USD millions

September 11 North Atlantic 20 463 25.5 1 289

SARS outbreak Far East 13 633 23.1 897

Source: AEA

AEA_YB_04025

1.5% PassengerTotal Scheduled Traffic Passenger increase Kms

1.8%Total increased Scheduled Seat Capacity Kms on offer

2003 over 2002

ASSOCIATION OF EUROPEAN AIRLINES I–3 THE GLOBAL ECONOMIC ENVIRONMENT

In 2003, world economies generally Economic growth in the US was a maintained their slow climb back from the relatively healthy 2.9%, with further depths of 2001, with a growth of 2% for the robust results projected. Japan, so long OECD countries as a whole, and increases in the doldrums, also posted relatively of 3% projected for 2004 and 2005. favourable figures at plus 2.7%.

Quarterly figures for 2003 showed a still The business house JP Morgan identifies very sluggish growth situation in the early a change in strategic thinking among the part of the year, with the geopolitical world’s policy-makers aimed at promoting uncertainty surrounding Gulf War II, high growth and economic welfare, rather than oil prices and low consumer and exclusively targeting price stability. business confidence. A significant upturn occurred in the third and fourth quarters, In the longer term it sees a 60% however. probability of reflation – stable growth and modestly-rising inflation. There is a These were global figures, to which the 25% probability of high and volatile European economies compared relatively inflation and growth leading to tightened poorly. With a 2003 growth of only 0.7%, monetary policies, and a 15% risk of the EU was the only main economic global deflation, with price declines and region to post poorer figures than in low growth. 2002. Beyond the major markets, recent Within the EU, Germany, with zero conditions have been generally growth, and France, with just +0.1%, favourable – perhaps the best period for were obvious constraints on the total. emerging markets for a decade. China, The UK economy was the most resilient Thailand and India are projected to have among the bigger players, at plus 1.9% growth of 6% or better in 2004, with Latin and is projected to continue above trend American economies also buoyant. over the next two years.

WORLD ECONOMIC GROWTH 8% growth in real GDP

0 Q1 Q2 Q3 Q4 -1 OECD EU Japan US -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Source: OECD estimates AEA_YB_04002 I – 4 ASSOCIATION OF EUROPEAN AIRLINES 2002 GLOBAL CAPITAL FLOWS

Importers of Capital

Others

Russia is foreseen as emerging from years Mexico of stagnation with plus 5% or more, and United Kingdom similar figures expected for Turkey and Spain Poland. Australia

However, there are some caveats. The current recovery is essentially US-led and has been driven by household consumption, based on low interest rates. United States

It has been referred to as a ‘job-less’ recovery, as the market has grown on Exporters of Capital productivity gains and not through Japan investment and associated gains in employment opportunities.

It has also been built on wide US fiscal and current account deficits, with the budget Germany deficit at its highest level ever, and growing. Government spending is up – with a strong

military and security component – but tax China receipts have fallen due to the 2000/1

recession and tax cuts in 2001 and 2003. Switzerland Others Business Investment lags Consumer Spending Russia

Source: IMF 16% change over previous year AEA_YB_04006

12 There exists also a huge US trade imbalance, financed by foreign investment 8 in the US which, according to the International Monetary Fund, absorbed 4 more than 75% of world capital in 2002. The largest investors are those countries 0 which are also the largest exporters to the US and they are thus fuelling both the -4 American and their own growth.

-8 If those countries (in particular China) attempt to address the imbalance this US Consumer Spending US Business Investment -12 creates in their own economies – 90 91 92 93 94 95 96 97 98 99 00 01 02 03 safeguarding against inflation, for example Source: OECD – this could again jeopardise world growth. AEA_YB_04004 Given the fiscal deficit, a rise in interest All in all, while the indicators are generally rates is not impossible. This could halt the favourable, there remain serious question- growing indebtedness of US consumers, marks about the sustainability of the current but also stall economic growth. model.

ASSOCIATION OF EUROPEAN AIRLINES I – 5 FLYING THROUGH CURRENCY UPHEAVALS

All international airlines conduct their results in a 1% loss in revenue, purely due to business in a cocktail of currencies, within exchange-rate effects. which their own, and the US dollar, predominate. In 2003, the Euro experienced an unprecedented appreciation against the The Dollar is particularly important for a dollar, of 20%. The President of the number of reasons. For many European European Central Bank described the airlines, the USA is among their largest currency movements as ‘brutal’ for exporters. external markets. In many other countries, They undoubtedly depressed economic fares and rates are fixed in US$. growth, one of the principal drivers of air traffic demand. Elsewhere, currencies such as the Chinese Yuan are pegged to the dollar or for policy On the cost side, the currency fluctuations reasons are limited in their fluctuation from it, mitigated the impact of increasing fuel costs. as in Japan. Throughout 2003, the European airlines were relatively protected against the fuel price As well as revenues earned in such markets, hikes by the weakness of the dollar. airlines also have costs and local expenses, Whereas the average price of jet fuel but far more importantly, fuel and lease increased by 26% in dollar terms between contracts which are traditionally expressed in 2002 and 2003, the increase was limited to US$. 5% in Euro.

In the last year for which figures are available In January 2004 the Rotterdam spot price for – 2002 – about a quarter of total costs for the jet fuel stood at US$ 43 per barrel, a figure AEA carriers based in the Eurozone were surpassed only in late 2000 and in early 2003 dollar-denominated, and exceeded their in the lead-up to the Iraq War. dollar revenues, which amounted to 18% of total receipts. Since then the price has continued to escalate, and by May had surpassed $48/barrel, It is estimated that, in general, a 5% triggering a round of fuel surcharges by appreciation of the Euro against the dollar airlines, within AEA and worldwide.

The Impact of the US dollar Exchange Rate extends beyond the US

In 4 of the top 10 destinations beyond the AEA homemarket the official currency for airline tickets is the USD. Where tickets are issued in local currency, de facto exchange rates still link airline accounts to USD developments.

Country% traffic beyond Currency IATA recommended De facto exchange rate AEA homemarket* Ticket Price currency regime vs USD

USA 32.4 USD US Dollar USD Japan 4.3 JPY Japanese Yen LC Synchronised Canada 4.2 CAD Canadian Dollar LC Synchronised Russia 4.0 RUB Russian Rouble USD India 3.3 INR Indian Rupee LC Synchronised South Africa 3.1 ZAR South African Rand LC Free Israel 2.7 ILS Israel New Shekel USD Brazil 2.6 BRL Brazilian Real USD China 2.0 CNY Chinese Yuan Renminbi LC Pegged Egypt 1.9 EGP Egyptian Pound LC Free

Total % 60.6 41.8 13.8 * 2003 Passenger data LC = Local Currency Source: AEA, IATA, OANDA AEA_YB_04007

I – 6 ASSOCIATION OF EUROPEAN AIRLINES TRAFFIC TRENDS 2003

At the outset of 2003, the projection was for half the Middle East traffic disappeared a year of recovery from the previous year’s during the first three weeks of the war. depressed figures, with consequently the expectation of above-average growth rate. While the political and military circumstances of the war contained elements of all three The substantial cloud on the horizon was the scenarios, the traffic loss tended towards the anticipated likelihood of war in Iraq and its less-severe end of the range of projections. consequences, for which the industry foresaw three basic scenarios: ‘clean and The European market returned to growth clinical’, ‘contained’ and ‘prolonged and within five weeks of the outbreak of war. On escalating’. In the very early days of the the North Atlantic, with a relatively more year, however, the ‘Base Case’ was that war buoyant underlying growth (see above), an could be avoided. increase was recorded within three weeks. The Middle Eastern market, as might be This scenario was soon abandoned and as expected, remained below previous year early as mid-February the European, Middle until June. Eastern and Far Eastern volumes were below 2002 levels, while the strong 2003 WEEKLY TRAFFIC EUROPE-FAR EAST recovery-induced growth rates on the North Atlantic had been halved. 10% change in RPKs

5 SARS virus first recognised 2003 WEEKLY TRAFFIC EUROPE-MIDDLE EAST end Feb-03 0 0 "Disease contained" -5 05-Jul-03 Beginning of Gulf War II End of "hostilities" 20-Mar-03 14-Apr-03 -10 -10

-15 -20 -20

-30 -25

-30 -40 -35 W05 W10 W15 W20 W25 -50 Source: AEA AEA_YB_04028

-60% change in RPKs W10 W12 W14 W16 W18 W20 Traffic on Far Eastern routes did not return Source: AEA to growth at all during the early Summer. AEA_YB_04027 Within three weeks of the beginning of the Iraq War, the recovering market was hit with The Iraq War actually began in the third the reaction to the SARS outbreak, sparking week of March and the effect on AEA traffic a series of massive traffic decreases which levels was immediate, with -15% in Europe, persisted throughout the Summer. -10% on the North Atlantic and a figure somewhere between the two on the Far Reaching a peak of more than 30% in the East. With many routes suspended, about middle of May, the traffic losses persisted at

ASSOCIATION OF EUROPEAN AIRLINES I – 7

more than 20% for nine weeks from mid- year, cleaned of Iraq War and SARS effects, April through mid-June. The subsequent was 4.7%. recovery back to positive growth figures was even more persistent, with no year-on-year The European RPK total for 2003 was at the increase recorded until well into October. same level as the 12-month total to March 2001 – in other words, zero growth in 2 To illustrate the severity of the SARS years, nine months. On the North Atlantic, phenomenon, during the six months from the annualised traffic was the same as it had the start of the outbreak until the market been in March 1999 – four years and nine returned to growth, Far Eastern traffic months previously. declined by 23.1% and the loss of passenger revenue amounted to US$ 900 The 2003 traffic pattern was closely million. mirrored, for the most part, by capacity developments, with the result that load These losses came close to the factors remained high. Overall, the figure of corresponding figures for the North Atlantic 73.4 was just 0.2 of a percentage point market in the six months following 9/11 – below the all-time high of 2002, while the 25.5% of the Market and $1289million load factor on European services, at 65.2, in lost revenue. was the highest on record.

The SARS impact was not confined to Far The exception was on Far Eastern services, Eastern routes. The illness took a brief where the severity of the crisis, the speed foothold in Canada, and the loss of longhaul with which it struck and the length of time it traffic invariably affected shorthaul routes as persisted, took the industry by surprise. connecting passengers stayed away. Although capacity cutbacks were instated, they did not match the traffic losses and load It must be said that, despite the evident factors for the year slipped by 3.8 points to seriousness of the SARS epidemic and its 76.7%. human consequences, the effect on air travel was always disproportionately high PASSENGER LOAD FACTORS and bore signs of ‘apprehension overload’ 85% Passenger Load Factors following 9/11, the Bali bombing, and the Max in 1990-2002

Iraq War. 80

It was not until late October or early 2003 75 November that 2003 traffic began to exhibit what might be described as ‘normal’ 70 patterns, with growth rates of around 4-5% in Europe, 7-8% on the North Atlantic, and 65 about 4% to the Far East, giving an overall min in 1990-2002 figure, including other regions, of around 6%. 60 Overall for the year, traffic in passenger- kilometres grew by just 1.5%; in passenger 55 boardings, there was a drop of 0.2%. Estimated ‘true’ RPK growth rate for the 50 Total Europe North Atlantic Far East/ Total Scheduled Source: AEA Australasia AEA_YB_04008

I – 8 ASSOCIATION OF EUROPEAN AIRLINES OPERATING RESULTS 2003

2003 saw the 5th consecutive yearly deficit the 2000 and 2002 results and while the for AEA airlines, with an operating loss of fourth quarter was again negative, it was US$ 1.5 billion (€1.4bn) after interest, much less so than in previous years. almost twice the $0.8bn recorded in 2002. The AEA airlines continue to address their Operating ratio (revenue:expenditure) fell structural cost base. Since 2000, they have from 98.8 in 2002 to 97.8. With traffic and trimmed back their workforce by 8%, capacity moving more or less in step, with equating to a reduction in head-count of virtually no change to load factor, the main 32,000. Personnel costs continue to be contributing factor was a weakening of the subject to constant review. cost:revenue ratio, with costs almost 6% above the previous year, outstripping Significant changes continue to be made to revenue growth. sales procedures, such as the reduction or abolition of agents’ commissions, internet The accompanying graphic shows AEA booking and the introduction of e-ticketing. profitability by quarter for the period 2000- Shorthaul services have seen a move 2003. The years 2000 and 2002 describe a towards simplification of schedules, higher ‘normal’ pattern for the industry, with losses aircraft utilisation and ongoing product in the winter quarters and profits in the review. Summer. In 2000 the plusses outweighed the minuses, in 2002 they did not. These changes, accelerated by competition from no-frills carriers, have accompanied In 2003, the first quarter posted a flexible and competitive fare structures in catastrophic loss with an operating ratio of Europe which, combined with the steady just 89.0. If anything, the build-up to the reduction in premium passengers, has seen long-anticipated Iraq War and rising real yields falling steadily. tensions worldwide had a more tangible impact on operating results than the military OPERATING RATIO AFTER INTEREST campaign itself which lasted just 6 weeks after the launch attack on 20th March. 106 Total Operating Ratio after Interest

The first quarter alone contributed a loss of 103 $1.86bn to the annual total. 100 The second quarter of 2003 suffered from both the ongoing War effects and the 97 impact of SARS, which in mid-March had been classified by the WHO as a worldwide 94 health threat, concentrated in Asia but also identified in Canada and to a lesser extent 91 in Europe and Africa. Consequently this was the first non-profitable second quarter 88 of the 2000s. 85 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Despite ongoing weaknesses in the Far East market which persisted through the 2000 2001 2002 2003 Source: AEA Summer, the third quarter was in line with AEA_YB_04009

ASSOCIATION OF EUROPEAN AIRLINES I – 9 ASSOCIATION OF EUROPEAN AIRLINES CONTENTS

AEA – Serving the industry for 50 years i

SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9

SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5

SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7

SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9

ASSOCIATION OF EUROPEAN AIRLINES II - 1 LOOKING FORWARD

+0 to 0.5 bn US$Total Financial Scheduled (0 Result*to 0.4 € bn)

+8.5% growth in PassengerTotal Scheduled Traffic* RPKs

The traffic recovery in 2004 – projected undone by runaway fuel prices, to provide a passenger-kilometre ascending into levels never before increase of 8.5% – will at last see experienced. aggregate traffic volume for the AEA airlines surpass the previous annual The stabilised traffic situation in 2004 high-point, which was attained in 2000. should have produced the first Load factors too are projected to reach consolidated profit for the AEA airlines their highest-ever level, nudging 75%. since 1998, a modest figure of perhaps US$ 0.5bn. Latest indications are that While the airlines are working hard to the fuel price effect will wipe out most or contain costs, their efforts are being all of this surplus.

CRUDE OIL & JET FUEL SPOT PRICES Crude Oil Benchmarks and ARA-Jet Fuel (fob) 60 US dollar per Barrel Strong demand + Market Anxiety

Gulf War II 50 Strong world oil demand

40 US military September 11 strike on Iraq

30 Economic slowdown in Asia

10 ARA Jet Fuel BRENT WTI

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: EIA AEA_YB_04012

* estimates for 2004

II – 2 ASSOCIATION OF EUROPEAN AIRLINES SUSTAINING THE RECOVERY

Following the upheavals of 2003, traffic growing at a rate which equates to about growth patterns in 2004 were bound to 3% per annum, compounded over two produce some unusual results. years. This is perhaps half the annual increase which prevailed through the Most obviously, the 30% losses 1990s. sustained on Far Eastern routes during the height of the SARS epidemic would Domestic markets within Europe have require increases of around 43% just to been even more sluggish, with no restore volume to the 2002 level, and significant growth currently being well over 50% to encompass two years of recorded. ‘normal’ traffic growth. Longhaul markets are faring somewhat Consequently, traffic figures in the early better. Again, discounting the severe part of 2004 have shown wide variances fluctuations in year-on-year increases over the corresponding 2003 levels. By and looking instead at average annual the middle of June, European traffic was growth rates over two years, North 7% up, North Atlantic almost 10% and Atlantic traffic has expanded at 6%-7% in Far East more than 20%. Increases in early 2004. the second half of the year are expected to be lower. This is in line with historical medium-term trends, although still constitutes only a partial recovery from the traffic losses PROJECTED TRAFFIC GROWTH sustained after 9/11. 2004 over 2003 Revenue Passenger Kilometres Route Area RPK Allowing for additions to membership, the % change AEA traffic volume on the North Atlantic in 2004 is projected to be about the same Europe cross-border +5 as it was in 1999. On an annualised Europe domestic -1 basis, the market is still about 10% North Atlantic +8 smaller than it was at its highest level

Far East +18 (March 2001).

Total International +9 Far Eastern traffic in 2004 is in the Total Scheduled +8 process of fully recovering the previous year’s Iraq War and SARS-related Source: AEA AEA_YB_04029 losses. Over two years from 2002, the market is expanding at an average of about 5.5% per annum. Translating these figures into medium- term trends produces much more modest Overall, the expected 8% increase on all growth rates over two years – in other services in 2004 follows on from a growth words, compared to a 2002 baseline of just 1.5% in 2003, equivalent to an which was itself still depressed in the annual growth rate over two years of just aftermath of 9/11. 4.7%.

Through the first half of 2004, AEA cross- border traffic within Europe has been

ASSOCIATION OF EUROPEAN AIRLINES II – 3 FINANCIAL OUTLOOK 2004

The anticipated 2004 increase in AEA and – in the current price environment – scheduled traffic of 8.5% is expected to advantageous currency effects. be accommodated within a capacity Nevertheless, the current round of growth of 7%, which would push inflation could add an extra $1bn to the passenger load factors to an all-time high AEA fuel bill for 2004. of close to 75%. Following five consecutive years of Nonetheless, yields remain an area of losses, 2004 brought the prospect of a concern, with Euro-denominated levels in return to profitability with a modest 2004 predicted to be 4% down on the operating surplus, for the AEA previous year. membership as a whole, of up to $500m.

More alarming, however, is the impact of This positive outcome was predicated on an fuel prices. The average benchmark estimated drop of 5-6% in (Euro-denominated) price for crude oil has reached unit costs, reflecting the efforts the airlines US$34/barrel, almost 20% above its have made to contain expenditure, offsetting 2003 level, with daily peaks of near $50 the projected 4% drop in yields. noted in August. However, once this scenario is modified Jet fuel, as a derivative, is quoted even to take account of the current fuel crisis, higher, already exceeding the $50/barrel it becomes increasingly clear that hopes mark in July 2004, with prices expected of a financial recovery were premature. to stay high throughout the year. In the longer term, higher energy prices Typically, AEA airlines consume close to threaten the fragile economic recovery 8 billion US gallons of fuel per annum, which is a crucial feature of air travel representing about 12% of their total demand growth. Prospects are not costs in a normal year. encouraging; the US Department of Energy’s EIA is predicting only a slight Some recourse from the high fuel prices moderation of fuel prices in 2005 before is provided by hedging, fuel surcharges resuming an upward trend in 2006.

PROFIT / LOSS ON TOTAL SCHEDULED ROUTES 2.5 billion current USD after interest 2.0 1.5 US$ billions 1.0 0-0.5 0.5 0.0

-0.5 estimate -1.0 -1.5 -2.0 -2.5 -3.0 -3.5 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Source: AEA AEA_YB_04011 II – 4 ASSOCIATION OF EUROPEAN AIRLINES NEW MARKET OPPORTUNITIES, IN EUROPE AND GLOBALLY

On 1st May 2004, the European Union anywhere near the frequency of service experienced its biggest-ever expansion. to the other EU capitals. The 10 countries, with a combined population of 75 million will increase the In 1995, the year following the last round of size of the Community by 20% in terms EU enlargement, traffic between Brussels of population, and 23% in land area. and Helsinki/Stockholm/Vienna grew by 28%. AEA members’ intra-European traffic at ACCESSION COUNTRIES - Main Economic Indicators Helsinki and Stockholm COUNTRY POPULATION GDP GDP/Capita in PPP REAL GDP REAL GDP exhibited growth well (million) (bn Euro) EU-15 = 100 avg % growth p.a. % growth 2002 2002 2002 1993-2002 2003 into double digits

Cyprus 0.7 10.8 76 3.7 2.0 (although the Vienna Czech Republic 10.2 73.9 62 1.9 1.7 increase was Estonia 1.4 6.9 40 3.7 5.0 somewhat lower). Hungary 10.1 69.8 53 3.2 3.0 Latvia 2.3 8.9 35 4.1 5.5 Lithuania 3.5 14.6 39 2.7 5.8 Of the ten Accession Malta 0.4 4.1 69 3.4 2.8 Poland 38.2 200.3 41 4.0 2.9 countries, Malta and Slovak Republic 5.4 25.1 47 3.8 4.0 Cyprus, and to a lesser Slovenia 2.0 23.3 69 3.8 2.2 extent Slovenia, are AC - 10 74.2 437.7 53 - 3.9 established leisure EU - 15 379.5 9 162.3 100 - 0.7 EU - 25 453.7 9 600.0 85 - 0.8 destinations. Some city Source: Eurostat, PriceWaterhouseCoopers, IMF, OECD markets (Prague, AEA_YB_04013 Tallinn, Krakow) are already, or will become, Evidently, the new markets are not large, established on the short-stay itinerary. either individually or collectively, in overall EU terms. As a benchmark While the level of economic Portugal, which has a population size advancement will, in the short term, very similar to that of Hungary or the constrain outbound travel from the new Czech Republic, has almost 400,000 Member States, they are likely to be a weekly seats to/from EU destinations. magnet for inward investment, with the consequent generation of travel demand. In terms of GDP per capita, only Cyprus, Malta and Slovenia would not rank below The Accession States have relatively all the existing EU members. underdeveloped airline infrastructures. Most have only a single airline of any In spite of this, or perhaps because of it, significant size, so any second-tier the new countries bring a considerable expansion encouraged by single-market growth potential to the aviation single ease of access will be difficult to gauge market. fully in the near future.

At the most basic level, they have a need Of the established carriers CSA and LOT to upgrade their communications with the are fully-fledged global alliance members EU’s institutions. The average distance (of SkyTeam and Star respectively). from Brussels to the ten capitals is Malev is also associated with SkyTeam, 1400km so air links are essential, yet and Adria with Star. Air Malta and only Warsaw and Prague come Cyprus Airways are unaligned at present.

ASSOCIATION OF EUROPEAN AIRLINES II – 5 Tallinn

Riga

Vilnius

Gdansk

Poznan Warsaw

Wroclaw Prague Katowice Ostrava Krakow Brno Kosice Bratislava

Budapest Ljubljana

Valletta Nicosia Luqa Paphos Larnaca Major international airport

AEA_YB_04023 Capital II – 6 ASSOCIATION OF EUROPEAN AIRLINES In the remaining four accession countries Elsewhere in the world, the outlook is – the Baltic States and Slovakia – the favourable for developing markets; JP airline sector is less well-developed. The Morgan has described the current small national carriers of Estonia and situation as ‘the best period for emerging Latvia are substantially owned by SAS. markets since 1993’. The small Lithuanian national airline is government-owned and the Slovak EMERGING MARKETS OUTLOOK industry is fragmented, the largest carrier being a recent ‘no-frills’ start-up. China Thailand

These last two states are also the object Argentina of ‘offshore hubbing’ with the planned development of a Bratislava-based India network by Austrian and a similar Hong Kong development in Vilnius by the Latvian Singapore carrier Air Baltic. Malaysia

A number of no-frills carriers have begun Taiwan to show an interest in the new EU. Prague Korea was already served in 2003 by four such Russia airlines and Budapest by two. In 2004 Tallinn, Riga and Ljubljana have been Chile added to the no-frills ‘map’ while a number of new entrants are springing up in Poland Emerging market economies and Slovakia. SAS’s two Baltic affiliates, Estonian and Air Baltic (Latvia) also Developed market economies substantially conform to the no-frills model. 0246810% Source: JP Morgan 2003 2004E GDP growth AEA_YB_04015 2004 SEATS PER WEEK (000) 12% Growth over 2002 Asia – excluding Japan – is predicted to Intra EU-15 Intra Accession grow at 6.4% in 2004, of which China, Thailand and India are foreseen with 8.0%, 6.3% and 6.0% respectively. The first two of these include a rebound from SARS, while India is beginning to 9 096.8 605.9 79.0 seats demonstrate the economic impact of its seats seats multitude of skilled IT workers and per week per week per week thriving textile industry.

Latin American economies are predicted (+10%) (+33%) (+34%) to grow by 4.4% in 2004, with Venezuela Inter EU-15 (7.5%) and Argentina (6.0%) leading the and way. Emerging European economies Accession have forecast growth of 4.9% with Turkey at 5.5% and Russia, re-emerging as a superpower after years of stagnation, 93% 6% 1% of EU 25 market of EU 25 market of EU 25 market aiming at a plus 5.1%. Source: OAG, airline websites AEA_YB_04014

ASSOCIATION OF EUROPEAN AIRLINES II – 7 ASSOCIATION OF EUROPEAN AIRLINES CONTENTS

AEA – Serving the industry for 50 years i

SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9

SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5

SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7

SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9

ASSOCIATION OF EUROPEAN AIRLINES III- 1 COMPARING BUSINESS MODELS – NETWORK AND NO-FRILLS CARRIERS

The recent proliferation of no-frills carriers in Under closer scrutiny, however, the spokes Europe is a clearly identifiable trend, in the no-frills model do not actually touch. although one which is hedged around with Both types of airline will fly their passsengers misconceptions. Many of these deal with from A to B and from A to C, assuming A is how these carriers are distinct from the their mainbase airport. (In the case of no- ‘traditional’ airlines which make up the frills carriers, A, B and C may be very membership of the AEA. remote from the destination they purport to serve, involving long and expensive ground The confusion extends to terminology. The transportation). newcomers are also referred to as ‘low-cost’ or ‘low-fare’, the traditional airlines as ‘full- But the main difference is that the network service’, ‘network’ or (in the US) ‘legacy’ carriers will provide travel between B to C, carriers. via their hub at A. They will quote a through fare (less than the sum of the parts), issue a Between the two groups of airlines, through ticket, check bags all the way differences in costs and fares are a matter of through, possibly check the passenger all degree. While some headline-grabbing the way through too, in a single transaction. fares offered by the no-frills carriers are pitched far below any economically- They will give assistance with transfers, and meaningful level, the mainstream prices should anything go wrong – such as a typically offered in an internet booking query missed connection – they will nevertheless are frequently matched or beaten by full- guarantee that the passenger makes it to his service competitors. or her destination, with a minimum of hassle.

The key difference, however, is As an analogy: imagine a complex metro encapsulated in the term ‘network’. This, system, like London or Paris, where there too, is a source of confusion, since there is were no interconnections between the lines; no evident difference between the route map to transfer from one to another passengers of a no-frills carrier, with spokes radiating would have to exit and re-enter the station from a central hub, and that of a full-service and queue up to buy another ticket. airline. Connectivity of this kind comes with a price tag; the major DEGREES OF CONNECTIVITY airlines’ hubs are very sophisticated structures. C B Moreover, there are operational costs involved in ensuring that all the aircraft, and their connecting loads, are in the right place at the A right time. Further costs arise through the operation of a mixed fleet of No-Frills model Network airline model aircraft types,

Source: AEA suited to different AEA_YB_04020 sizes of market.

III – 2 ASSOCIATION OF EUROPEAN AIRLINES

The network approach is equally suited to otherwise – of the no-frills model to longhaul cargo transportation in an operation which operations. Elements of the typical no-frills generates revenues, but also imposes costs. model are uniquely suited to shorthaul It is noteworthy that the typical no-frills operation – use of a single aircraft type, short business model excludes cargo carriage. turnrounds, multiple sectors a day, no in- flight service. Some areas in which they In one particular area of cost, the differential have no cost advantage, such as fuel, are a between the network and no-frills model has much bigger component of longhaul been substantially eroded in recent years. operations. The no-frills approach typically includes a heavy reliance on internet sales and While seating density is most certainly an ticketless travel, which are also being issue on longer flights, some niche carriers embraced strongly by the network airlines, have successfully operated longhaul for whom, traditionally, distribution has been programmes with much higher seating a major cost element. capacities than would be deployed by the network airlines. A 2002 study by the European Cockpit Association highlighted the areas in which It is very likely that, in the future, start-up no-frills carriers maintained a cost advantage airlines will try and replicate elements of the over the network airlines. no-frills model in longhaul , particularly transatlantic markets. Some may succeed By far the most important component, although past experience is that they will find accounting for almost 30% of the differential, the going very difficult – a single aircraft- was high-density seating in the aircraft. unserviceability problem or a delay which puts the crew beyond their duty limits can Next most important (17.5% of the cost gap) cause chaos to the schedule on a scale far was station handling costs, as distinct from greater than for shorthaul operations (or for lower airport charges which accounted for network carriers, who have commercial 10.5%, as did the absence of in-flight agreements to help each other out on such catering, and avoiding the payment of travel occasions). agency commissions.

NO-FRILLS CARRIER ADVANTAGE V/S FULL SERVICE CARRIERS

The commonly-quoted % Cost Advantage 2% 57% feature of the no-frills 3% model, of quick 6% turnrounds and 6% intensive daily 10% utilisation, is not borne out by the ECA study, 2% which attributes only 6%

5% of the overall cost 3% advantage to this 3% factor. 16%

The cost profile also gives pointers as to the transferability – or Seat Higher Lower Cheaper Outs. Minimal No In-Flight No Agent Reduce Lower TOTAL Density Aircraft Crew Costs Airports/ Maint./Single Station Catering Commission Sales/ Overhead Utilisation Landing Aircr. Type Costs/Outs. Reservations Costs Fees Handling Costs Source: A.T. Kearney AEA_YB_04017

ASSOCIATION OF EUROPEAN AIRLINES III – 3 DEVELOPMENTS IN THE NO-FRILLS SECTOR

The no-frills business model, in several over the 2003 total. Ryanair and Easyjet guises, continued to proliferate in 2003-4. continued to dominate the sector, each of Some sources put the number of such them five times the size of the next-largest. airlines in Europe as high as 60; for the purposes of AEA annual surveys only airlines The sector has not been without its setbacks, having substantial route structures, very low the most obvious of which was the European fares, and a rigorous focus on point-to-point Commission ruling that certain payments service are considered. made to Ryanair by the airport of Charleroi constituted illegal State Aid. This called into The table below has been updated for 2003 question the more general marketing support to include the Italian operator Volareweb. and inducements offered by airlines and Added for Summer 2004 are two UK regional authorities to new-entrant airlines. operators with extensive, largely leisure- destination, route structures; Jet2.com at Among the profitable players in the sector Leeds/Bradford and Thomsonfly at Coventry. there was a general deterioration in financial results and, coupled with the continued Also added is the sector’s first Eastern- proliferation of new entrants, a sense that the European operator. SkyEurope is a sector was becoming congested. In a well- Slovakian carrier which had a limited publicised remark in early 2004, the Ryanair operation in 2003, but has expanded CEO warned of a ‘bloodbath’. substantially with operating bases in Bratislava, Budapest and Warsaw. Ryanair itself abandoned thirteen routes between June 2003 and June 2004. Not included, since its main expansion occurred after the June schedule used in the In addition to the airlines in the survey, others survey, Wizz is a new Polish carrier, are introducing hybrid business models which operating out of Warsaw and other Polish combine many elements of no-frills operation cities, but also Budapest. with network and full-service features. Of these, AEA member Aer Lingus has gone The aggregated capacity offered by this furthest in transforming itself. group of carriers represented a 20% increase NO-FRILLS WEEKLY SEATS - SUMMER SCHEDULE

2 000 seats (000)

1 500

1000

500

0 1999 2000 2001 2002 2003 2004 RyanairEasyjetbmibabyGermanwingsAir Berlin CSSnowflake Virgin ExpDebonair Hapag-Ll. ExpBasiq Air MyTravelLiteVolareWebSkyEuropeJet2comThomsonfly Buzz Go Source: OAG/MAX; Airline websites AEA_YB_04024 III – 4 ASSOCIATION OF EUROPEAN AIRLINES NO-FRILLS CARRIERS AND THE CHARLEROI DECISION

On 3rd February 2004, the European practised by the airlines in this sector. Commission issued their finding on the However, they are believed to be typical package of financial benefits enjoyed by of arrangements enjoyed by Ryanair at Ryanair at their Charleroi ‘hub’1. other European airports.

The Commission summarised the The Commission’s findings were that the benefits granted to Ryanair by the payments – which, evidently, came Walloon Regional Government and the ultimately from the local taxpayer – were publicly-owned ‘Brussels South Charleroi such that they would not be made by a Airport’2 as follows: private investor (under the ‘rational investor’ principle) and therefore constituted State Aid. RYANAIR'S DEAL Part of this was clearly illegal under competition rules and was required to be • The Walloon Region granted Ryanair, under repaid. Part of it, the Commission a private-law contract, a preferential rate for decided, was justifiable as an instrument landing charges at Charleroi of EUR 1 per boarding passenger, which is about 50% of of Regional Development policy. the standard rate set in a decree which had been published in the Official Journal. No The decision represents a first step, other airline benefits from this. which necessarily requires further clarification, and further action. The real issue is the question of who determines • BSCA granted various types of advantages to Ryanair: infrastructure policy and its funding, o a contribution towards promotional underlying which is the relationship activities of EUR 4 per boarding between airports and airlines in more passenger, over 15 years and for up to general terms. 26 flights daily. No other airline benefits from this. Further guidelines are required creating o initial incentives amounting essentially to transparency as to whose money is EUR 160,000 per new route opened, for flowing, in which direction. 12 routes, or EUR 1,920,000 in total; EUR 768,000 in reimbursements for pilot training; EUR 250,000 for hotel accommodation costs. No other airline benefits from this. o a preferential rate of EUR 1 per passenger for ground handling services, whereas the rates normally charged to other airlines is EUR 8-13. No other airline benefits from this.

1 Ryanair fly to 12 destinations from Charleroi, although

Source: Commission Press Release of February 3rd, 2004 they do not offer connecting facilities in the same way AEA_YB_04031 network airlines do at their hubs – through pricing, ticketing and baggage, guaranteed connections, etc. Clearly, financial incentives on this scale 2 Schedule publications such as the Official Airlines represent a significant deviation from the Guide (OAG) do not show Charleroi – population commonly-understood features of the 207,000 – as an origin/destination city; it is merely no-frills business model, as generally listed under Brussels, 50km distant.

ASSOCIATION OF EUROPEAN AIRLINES III – 5 MERGERS AND ALLIANCES – STRENGTHENING THE NETWORKS

Uniquely in recent years, the AEA Yearbook For example, air services between 2003 did not contain a section devoted to Netherlands and Peru would normally be developments in industry consolidation. In restricted to Dutch or Peruvian airlines. the period from 2001 through mid-2003 the Any airline ‘losing’ its nationality would also field of airline alliances, an area of great lose its international traffic rights. activity throughout the 1990s, fell somewhat silent. AIRLINE ALLIANCES UPDATE

The big event of 2003 came STAR ALLIANCE SKY TEAM ONEWORLD after the Yearbook was % World Traffic21.8 19.0 12.7 published – the agreement United Airlines (3) Delta Air Lines (2) American Airlines (1) US Airways (5) Northwest (4) between KLM and Air North America Air Canada (14) Continental (9)

France which was signed in Central America Aeromexico (36)

October. South America Varig (33) LAN (55)

Lufthansa (6) Air France (8) British Airways (10) Scandinavian Airlines (15) Alitalia (17) Iberia (13) This will effectively merge bmi (40) KLM (20) Aer Lingus (48) Austrian (43) CSA (81) Finnair (50) the two airlines within a Spanair (57) Aeroflot* (54) LOT (78) holding company which, TAP* (53) Croatia Airlines* (115) within three years, will have Adria Airways* (135) 100% ownership of the two Europe Blue 1* (138) operating companies, which Africa South African Airways* (45) All Nippon Airways (7) Korean Air Lines (16) Qantas (12) will retain their separate Thai Airways International (22) Cathay Pacifc Airways (28) Singapore Airlines (24) identities. Asiana Airlines (29) Asia Air New Zealand (35) * Includes airlines whose mambership has been accepted, but not yet taken up (n) ranking The agreement rounds off Source: 2002 Passenger Traffic from AEA, ICAO, IATA a period of about 15 years AEA_YB_04018 in which cross-border mergers and takeovers have been proposed – and in many cases have come However, the 2003 European Court of close to fruition. If, ultimately, the Justice ruling on specific ‘open skies’ European airline market consolidates, as agreements between the US and several many observers believe will happen, Air EU countries also recognised that, in France-KLM will be seen as the general, such nationality clauses were watershed, and possibly the catalyst for contrary to EU law. change. It will not be a straightforward task to replace One factor which – rightly or wrongly – has a nationality clause with a ‘Community been seen up to now as a decisive barrier to clause’ in treaties which could number about cross-border corporate structures is, a thousand, nevertheless the parties to the potentially, diminishing in importance. AF/KL agreement do not see this as a stumbling-block to their future cooperation. Bilateral Air Service Agreements, which govern all international air travel (except As regards the global alliance scene, KLM within the European Single Market) formally joined SkyTeam in September invariably include clauses referring to the 2004, along with Northwest and Continental. nationality of the airlines which may fly the Clearly, the era of four (or more) global- routes covered by the agreement. alliance candidates is now passed.

III – 6 ASSOCIATION OF EUROPEAN AIRLINES AN END TO BILATERALISM ?

The decision by the European Court of Skies’ blueprint, applied at a multilateral Justice in 2003, initially on the legality of level, would serve the purpose of a number of bilateral agreements opening up the market. In the European between individual EU states and the US, view, this would essentially protect US established a mandate for the advantages in their domestic market Commission to negotiate a multilateral while sharing opportunities in Europe. agreement between the EU on the one hand and the US on the other. With the big political developments due both in the EU and the US this year, This was widely seen as the necessary there is strong pressure to conclude a first step towards the vision of a Single deal which both sides can claim as Market encompassing Europe and the victory, yet falls far short of the level of USA, a free-trade area of relaxed market integration in the market that AEA would rules, but which would also provide a liketosee. structure within which non-market issues – such as security – could be addressed. Then there is a different, but related issue. The ECJ judgement also ruled AEA has long championed such a that, as a general principle, ‘nationality comprehensive agreement, which it clauses’ in bilateral air agreements (for believes would benefit the consumers example, that air services between and the airlines on either side of the Germany and Peru can only be flown by ocean. German or Peruvian airlines) were contrary to EU law. For ‘German airline’, Inasmuch as such a structure would substitute ‘EU airline’. resemble – although not replicate – the unique multilateral regime that exists in The number of such bilateral treaties Europe, certain elements would require a involving EU countries amounts to about distinct departure from the conventional two thousand, all negotiated on a ‘give bilateral arrangements. and take’ basis.

An obvious example is ownership. To be The bilateral system has long been seen qualified to operate domestically and as a factor in holding back industry internationally, US airlines have to be at globalisation – notably in the area of least 75% owned by US interests. Within cross-border mergers and acquisitions. the EU the figure is 51%, but with the At the same time, it creates stability, and added distinction that for single-market competitive checks and balances. purposes, ‘community airlines’ need only be majority-owned by community The steps which have been taken, in interests – that is to say, a UK- Europe, eventually on the North Atlantic headquartered airline could be wholly- and ultimately perhaps on a global scale, owned by German, French or Dutch will create a very different regulatory investors. framework for the industry in the future, but it is not a change which will be While the European side has recognised realised in the short term. the opportunities presented by such a structure, the US has tended to see only threats. They believe that their ‘Open

ASSOCIATION OF EUROPEAN AIRLINES III – 7 ASSOCIATION OF EUROPEAN AIRLINES CONTENTS

AEA – Serving the industry for 50 years i

SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9

SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5

SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7

SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9

ASSOCIATION OF EUROPEAN AIRLINES IV- 1 SECURITY IN THE AFTERMATH OF 9/11

Airline passengers can scarcely have failed serving the USA comply with new data- to be aware of the greatly heightened provision rules. security which has become part of their travel experience since September 11th These have taken basically two forms – 2001. APIS (Advance Passenger Information System), which deals with the kind of data For the most part, the ‘visible’ security which would normally be routinely collected enhancement has taken place at airports, on arrival, but is now required to be where passengers are subject to much transmitted before departure, and PNR more stringent (and time-consuming) (Passenger Name Record) data. checks and inspections. The PNR is the record which is created Other developments are less obvious. within the reservation system when the Every aircraft in the AEA fleet – about 2,400 passenger makes a booking. In its most of them – is now equipped with a hugely basic form, it consists of just four ‘fields’ – expensive armoured cockpit door with a name, itinerary, a contact number – which sophisticated locking system. is quite likely to be a travel agency – and the date by which the ticket has to be The airlines have implemented intensive issued. programmes of staff screening, security awareness training, and increased Evidently, none of these are particularly surveillance of sensitive areas. controversial or sensitive. The PNR, however, is also used to store other Another ‘back-office’ development – which, information which may be of assistance to nevertheless, has featured heavily in the the airline in providing customer service, public domain – has been the use by such as special meals, requests for governmental agencies of passenger data. assistance and so on.

PROPOSED PASSENGER ACCESS INFRASTRUCTURE If the ticket has been bought

Airlines CRS systems Zero-risk environment Authority Access with a credit

Secured short- Access card, it is Filter term store Control Airline / airline group Authority entirely possible reservation system that the details are noted in the PNR.

Supply of PNR Deletion e.g. 72 hours data to the US took the form of a request for access to

Source: Secure Information Technology Center - Austria airline computer AEA_YB_04019 systems, an approach labelled ‘pull’ since it involved the This has been initiated by the American American authorities pulling information authorities’ requirements that airlines out of the databases.

IV – 2 ASSOCIATION OF EUROPEAN AIRLINES

Subsequently, issues of data privacy quickly PNR-Passenger Name Record Passenger surfaced. Proposals 1P- UR48MF were made to ‘push’ 1. 1HEAD/RICHARD*ADT 2. 1HEAD/JANET*ADT the data, in a filtered 3. 1HEAD/RICHARD*CHD form, from the 1 FY 666Y 28FEB SA FCOCDG MK2 930P 1130P/O E European side to the 2 UU 72Y 29FEB SU CDGATL MK2 125A 635A/O E 3 UU 73Y 17MAR WE ATLCDG MK2 1030A 1145P/O E US. 4 FY 665Y 18MAR TH CDGFCO MK2 730A 930A/X E P- 1.ZA770 678-4599-T/IMAGINARY TRAVEL/ JODIE On two occasions in T- 1.T/ 2003-4 a joint position TKG FAX-NOT PRICED FARE TYPE EX has been reached Flight Number Routeing between the European Source: AEA Commission and the AEA_YB_04026 USA on what level of detail, and the uses to terrorist measures, and to ensure that which the data might be put, would be differing requirements are reconciled. acceptable to both sides. In both instances, the European Parliament has expressed its The scope for protecting aircraft against as- dissatisfaction. yet-negligible threats is almost limitless – already US legislators are talking about The consequence has been that the airlines aircraft having to be equipped with have operated in a legal limbo, between countermeasures against hand-held two unreconciled sets of rules. missiles.

The huge burden of additional security, and If such programmes are mandated, with the different way it is treated in Europe and some airlines having to pay while their the US, has led to a cost imbalance so competitors are reimbursed, the competitive great that it has become an issue of balance in the industry will be competitive advantage. fundamentally disturbed.

The US airline industry has received over INCREMENTAL SECURITY RELATED COSTS $14 billion in financial assistance from the FOR EUROPEAN AIRLINES - 2002 government in 2002-4 – not all of which has been specifically security-related. Others* Cockpit Doors 22.1% 27.4% The US Transport Safety Agency (TSA), with a 2003 expenditure of $6.1bn, is essentially funded by Federal government. Airline contributions to the budget through a fee-based system have subsequently been reimbursed.

AEA continues to campaign for Insurance 50.5% governments to shoulder their national- security responsibilities for funding anti- * Includes: terrorism training, surveillance, IT Source: AviaSolutions AEA_YB_04016

ASSOCIATION OF EUROPEAN AIRLINES IV – 3 DOES EUROPE AT LAST HAVE ITS SINGLE SKY?

On 20th April, 2004, a set of four EU technical & operational implementation of regulations, comprising the basic Single a radically new Air Transport European Sky (SES) package, entered Management (ATM) system for Europe. into force. The framework regulation clarifies the This could be said to be the culmination role of the principal players. It of a fifteen-year campaign on the part of recognises that the cooperation of the the European airline community, and in civil and military sectors is crucial for the particular AEA, for an end to the optimised usage of the available operational and economic disadvantages airspace. of an airspace fragmented along national boundaries. The European Commission will define the objectives and the timetable of the new implementing rules for the SES. THE SES 'PACKAGE' Eurocontrol will be responsible for working out the detail of the process. The Framework Regulation, covering: · Civil/military cooperation The Single Sky Committee is the · Single Sky Committee interface between the Commission and · Industry Consultation Body the member states. The Industry · The role of Eurocontrol Consultation Body is the means whereby The Airspace Regulation: AEA and other stakeholder organisations · Establishing ‘functional blocks’ of can provide strategic advice to the upper airspace, eliminating Commission on the implementation of the national boundaries. future European ATM system and its components. The Service Regulation:

Providing the political framework to · enabling the provision of cross-border Only a well-established cooperation ATM services throughout the Community, mechanism, involving all airspace users’ also standard for controller licensing. organisations, will guarantee the anticipated benefits of the Single Sky. The Interoperability Regulation:

· Harmonising systems, constituents and procedures within the European While the medium term should see the ATM network. more effective deployment of current · Promoting the introduction of new resources, the SES also provides the agreed and validated concepts in basis for far-reaching development of ATM operations and technology. new ATM systems.

Source: European Commission The European aerospace industry has AEA_YB_04022 proposed a project on the realisation of To European travellers conscious that ATM for the year 2020, called SESAME, the delay rate is once again creeping which the Commission has made a high upwards, immediate benefits may not be strategic priority. AEA and other evident. Nevertheless the latest airspace users have signalled their regulations form the political framework support for the project, and in particular for the development of the necessary its potential to contribute to a world-wide institutional arrangements and the harmonisation of ATM systems.

IV – 4 ASSOCIATION OF EUROPEAN AIRLINES AIRPORTS – A FAIR DEAL FOR AIRLINES AND PASSENGERS

Recent developments involving promotional These passengers have already deals offered by regional airports to ‘no-frills’ contributed once to the airport’s revenue carriers have raised more general issues of stream through per capita fees charged to the relationship between airports, airlines the airlines. By means of this commercial and their passengers. activity, they contribute a second time.

Airports are no longer simply elements of The airlines have, in recent years, suffered the air transport infrastructure; they have a series of sustained losses. Even in evolved into commercial businesses which profitable years, surplus rarely exceeds 5% typically derive half their revenues from of total expenditure for individual airlines, non-aeronautical sources. and virtually never at the industry level.

These sources are self-evident: shops, Yet such profitability would be regarded as restaurants, banks, car-hire companies, shockingly poor within the major-airport and vast areas of advertising space. All community, where double-digit surpluses have excellent business potential and all are commonplace and figures in excess of generate premium rental and concession 25% are not unknown. fees. Unlike the no-frills carriers, the full-service The reasons are also self-evident. These airlines have no alternative but to serve the facilities are not aimed at airport workers, or major airports if they are to preserve the casual visitors. They share the terminal integrity of their networks. buildings with a captive market of generally affluent consumers – the airlines’ Consequently, given their status as natural passengers. monopolies, such airports enjoy considerable market power. A measure of

economic regulation is necessary to protect "WIN-WIN" SOLUTIONS against abuse of dominant position. Airport results in 2003

Copenhagen This could take the form af a legal · Profit up 14% mechanism for consultation and · Passenger volume down 3.1% agreements on airport charges, · Traffic revenue up 0.9% underpinned by an independent arbitration "...driven by an increase in airport charges..." body. Frankfurt · Profit up 8% A coherent airports policy should also · Passenger volume down 0.2% · Aviation revenue up 4.4% address the trend towards the privatisation of airports – in itself, no bad thing as it "...driven by an increase in airport charges..." paves the way for efficient organisational Zurich structures and market-orientated strategies. · Profit up 1.4% · Passenger volume down 5% · Aeronautical revenue up 5% Nevertheless, given the diversity of commercial activity at airports, it would be "...with full year impact of higher passenger and baggage sorting charges more than offsetting the detrimental if the private investor were to drop in aviation activity..." focus exclusively on maximising returns, at

Source: Merrill Lynch the expense of the airport’s core business AEA_YB_04021 of infrastructure provision.

ASSOCIATION OF EUROPEAN AIRLINES IV – 5 COMPENSATING THE PASSENGER

The long-drawn-out review of European In the case of a delay or cancellation on rules applying to passengers who are one leg of a multi-sector journey, the denied boarding resulted in early 2004 in airline involved would be responsible for a Council vote to adopt a new compensation and reimbursement of the Regulation, to come into force in early cost of the whole journey. 2005. In other words, a passenger who travels The vote was an extremely close one, half-way round the world, and finds his with individual states shifting their last, local flight is cancelled (for reasons positions up to the last minute. The which may be wholly outside the control outcome was a deeply disturbing one for of the airline) is entitled not only to the airline industry. compensation at the higher , longhaul, level, but also refund of the entire cost of The more-or-less doubling of the his trip – all out of the pocket of what compensation to passengers unable to might be a very small regional airline. be accommodated on a flight for which they held a valid reservation was not a While the denied-boarding rules currently particularly contentious point for the AEA in place have faced airlines with the airlines, who in any case were focused possibility of compensating one or two on implementing a system of volunteer passengers, in very isolated instances, calls to ensure that passengers giving up the new Regulation raises the prospect of their seats did so willingly. statutory payments to an entire planeload of customers – at a cost of up to a The features of the new legislation which quarter of a million Euro per incident. are of greatest concern to the industry concern compensation for passengers In response to legislation which they whose flights are delayed or cancelled. believe to be misguided and poorly conceived, the airlines, through IATA, While customer-orientated airlines will have had no option but to mount a legal always take appropriate action to challenge to the Regulation. minimize passenger inconvenience in the event of schedule disruption, the new rules fail to take proper account of the DENIED BOARDING COMPENSATION "THE RULES" predominance of such events occurring outside the airlines’ control. Existing compensation rules:

€ 150 for flights up to 3500km As such, the new rules run counter to the € 300 for flights over 3500km liability provisions in the Warsaw and for denied boarding Montreal Conventions, international flying within/departing EU treaties to which all EU states are parties, New rules (as from 17 Feb 2005): which recognise external circumstances € 250 for flights up to 1500km as mitigating factors. € 400 for flights 1500 – 3500km € 600 for flights over 3500km for denied boarding, cancellation, delay over 5hr As well as being in conflict with existing flying within/departing EU legal provisions, the new regulations flying into EU (EU carriers only) carry anomalies which make them, from a practical point of view, unworkable. Source: AEA AEA_YB_04030

IV – 6 ASSOCIATION OF EUROPEAN AIRLINES THE GREAT GASEOUS EMISSIONS DEBATE

Since the Kyoto Conference of 1997 Other, far more efficient, solutions exist. focused attention on the impact of ICAO has recognised that emissions ‘greenhouse gases’ on climate change, trading is the most environmentally the airline industry has signalled its effective and the most economically acceptance that it has a role to play in efficient mechanism for limiting global facing the global-warming challenge. warming emissions from aviation.

This is an issue around which there is a This involves setting an overall target great deal of uncertainty, supposition and covering a group of sources, and then misconception, but a number of things letting those participants decide in a are clear. flexible manner how to achieve the target. It doesn’t matter how much Firstly, aircraft burn kerosene and individual sources emit, as long as the produce carbon dioxide and other overall target is met. greenhouse gases. Secondly, the air transport share of the global total is Participants can either 1) meet their extremely small – perhaps 2-3% of the target by reducing their own emissions 2) world’s CO2. Thirdly, demand for air reduce their emissions below their target transport – even allowing for the and sell or bank the excess emissions setbacks of recent years – follows a allowances or 3) let their emissions growth trend. remain above their target, and buy emissions allowances from other Weaving these strands together, it is participants. clear that the industry cannot be complacent. It has already been singled The European Union is introducing an out by sections of the environmental Emissions Trading Scheme (ETS), lobby, perhaps less because of the covering energy, mining and iron & steel, magnitude of its emissions than the fact at the beginning of 2005. The aviation that it presents a relatively easy target. sector is of the view that an ETS must be compatible with the overriding objective One of the environmentalists’ instruments of enhancing the competitiveness of of choice is a punitive kerosene tax, set European aviation. at a level high enough to choke off demand. Successive studies have Many technical aspects, including shown that this would be only minimally competitive issues, would need to be effective, nevertheless it remains an resolved if this scheme was to be attractive money-making proposition for extended to aviation, and especially national exchequers. important is that the European airlines should not suffer competitive It is worth bearing in mind, however, that disadvantages as a result of this each percentage point of artificially- initiative. constrained growth represents three million AEA passengers a year prevented from making a journey they would otherwise have made. Manipulation and distortion of the market on this scale is indeed a blunt instrument.

ASSOCIATION OF EUROPEAN AIRLINES IV- 7 ASSOCIATION OF EUROPEAN AIRLINES CONTENTS

AEA – Serving the industry for 50 years i

SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9

SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5

SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7

SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9

ASSOCIATION OF EUROPEAN AIRLINES V-1 Brussels, 29 th January 2004 Meeting of the AEA Presidents' Committee with Vice-President European Commission Loyola de Palacio and Ludolf van Hasselt of the EC Transport Directorate

V–2 ASSOCIATION OF EUROPEAN AIRLINES AEA HIGHLIGHTS

In 2004 AEA celebrates the 50th The AEA also addressed several industry anniversary of its foundation. Read the symposiums and conferences. The full history of the Association at the following is just a snapshot: beginning of this Yearbook. • European Aviation Club, Brussels, Vagn Soerensen, CEO of Austrian was February 2003; • elected as the Association’s Chairman for Merrill Lynch Conference, London, March 2003; 2004. His appointment was confirmed at • Greek Presidency European the Presidents’ Assembly which took Conference, Crete, May 2003; st place in London on 21 November 2003. • Aviation Industry Group, London, He succeeds Rod Eddington, Chief October 2003; Executive of British Airways, who held • World Economic Forum, Davos, the post in the preceding year. January 2004; • IATA Legal Symposium, Sevilla, February 2004; AEA announced three senior • French Direction des Transports appointments in 2003 and early 2004, Aériens, March 2004; strengthening its position as an airline- • International Aviation Club & the driven lobbying organisation. American Bar Association, Washington, March 2004. On 1st September 2003, Giancarlo Crivellaro joined the AEA as General AEA also organised several workshops: Manager Political Affairs with • Airline Industry Development and responsibility for the development and Regional Co-operation in South East the co-ordination of AEA member Europe, Belgrade, November 2003; airlines’ policies on aviation related • EU Enlargement Workshop, Malta, April regulatory issues. 2003. • South-East European Regional Air On the same date, Paul Vandermoere Transport Conference, Zagreb, June was nominated as AEA’s General 2004. Manager Communications, with • AEA EU Enlargement Seminar, responsibility for the management of Brussels, June 2004. AEA’s integrated communication programme including media relations, public relations and issue management.

On 1st April 2004, Guenter Martis of Austrian, took up the position of General Manager Technical & Operations, covering many issues including operations, engineering & maintenance, air traffic management, flight crew licensing, technical procurement and security.

Throughout the past year AEA was active on a myriad of topical industry issues.

ASSOCIATION OF EUROPEAN AIRLINES V–3 Belgrade, 7 th November 2003 AEA Workshop on Airline Industry Development & Regional Co-Operation in South East Europe

V–4 ASSOCIATION OF EUROPEAN AIRLINES WHO’S WHO AT AEA

The Association of European Airlines is an industry organisation representing 31 major European airlines, with a collective turnover of € 60bn, carrying more than 300 million passengers and 5 million tonnes of cargo in 2003. AEA airlines operate 10,400 flights daily with a fleet of more than 2,400 aircraft, serving 550 destinations worldwide, with a combined staff of just over 360,000. The membership of AEA includes European scheduled and charter, passenger and all-cargo carriers, operating domestic, Assembly of Presidents European and international services. Chairman 2004 Vagn Soerensen, Austrian AEA is a non-profit making association. It Presidents' Committee operates for, and is represented jointly by Jean-Cyril Spinetta, Air France Giancarlo Cimoli, Alitalia all its members, expressing the common Vagn Soerensen, Austrian interests of its members at international Rod Eddington, British Airways Ivan Misetic,´´ ´ Croatia Airlines and governmental level. The Secretary Fernando Conte, Iberia General normally acts as the Leo van Wijk, KLM Wolfgang Mayrhuber, Lufthansa Association's spokesman. Jørgen Lindegaard, SAS

The AEA is governed by the full AEA Secretariat

Assembly of Presidents of its member Secretary General airlines. The Presidents elect a Chairman Ulrich Schulte-Strathaus, Secretary General to represent and support the AEA for a Nathalie Mulleners, Administrative Assistant period of one year, assisted by the so- Communications Team Paul Vandermoere, General Manager Communications called Presidents’ Committee, which is David Henderson, Manager Information composed of the past and present Doreen Blow, Executive Assistant Chairmen and seven other Presidents Anne-Marie Weirauch, Administrative Assistant elected by the Assembly, with a total of Political Team nine representatives. Giancarlo Crivellaro, General Manager Political Affairs Sefik Yuksel, General Manager Trade & Social Affairs Le Thi Mai, General Manager Infrastructure & Environment The AEA Secretariat, with at its head the Guenter Martis, General Manager Technical & Operations Vincent de Vroey, Manager Operations & ATM Secretary General, is located in Brussels Nathalie Herbelles, Manager Legal Analysis and has a staff of twenty-two. Ann Flynn, Administrative Assistant Yvonne Hopkins, Administrative Assistant

Market Research Team Sue Lockey, General Manager Market Research Dario Spila, Manager Research & Analysis Stefan Bruehlmann, Manager Strategy & Statistics

Administration Team Seya Immonen, General Manager Finance & Administration Mario De Smedt, Manager IT Didier Poriau, Specialist Applications & IT Support Jozef Swalus, Specialist Printing & Dispatch Miriam Swan, Administrative Assistant

ASSOCIATION OF EUROPEAN AIRLINES V – 5 Association of European Airlines

31 member airlines 60 billion € total turnover

360 000 employees 2 400 aircraft in the fleet

300 million passengers 5 million tonnes of freight

550 destinations served 10 400 flights per day 310 times around the world every day

V–6 ASSOCIATION OF EUROPEAN AIRLINES Adria Airways^ Kuzmiceva 7 1000 Ljubljana Slovenia

18 Scheduled Destinations 1 within Slovenia 17 rest of Europe 0 beyond Europe Review of 2003 539 Employees In 2003, Adria Airways and Russia's Aeroflot extended 8 Aircraft in Fleet their co-operation with the introduction of code share 3AirbusA320 flights on the Ljubljana-Moscow route. The service, which 5 Canadair CRJ-200 has been operated since late October, lands at Moscow’s Sheremetyevo Airport. 0 Aircraft on Order Summer 2003 timetable saw the operation of scheduled Status at 31st December 2003 for information flights from Ljubljana to 22 destinations in Europe, as well on destinations, employees and fleet. as an extensive network of charter flights to sunshine destinations in Europe and Tunisia. Overall the planned Owned by… frequencies for both scheduled and charter services were 55.80% Slovenian Pension Fund slightly increased over previous year. 20.00% Slovenian Restitution Fund 18.07% National Finance Corporation Adria Airways introduced its second scheduled flight th 3.39% Infond Investment Company within the EU internal market on a so-called 7 freedom 2.74% Zlata Moneta service, between Germany and Austria. In addition to the established service Frankfurt-Vienna started in November Owner of… 2001, Adria launched a daily service Munich-Vienna in - March 2003, operated with the 48-seater Canadair Regional Jet. Major partnerships Code-share agreements with Aeroflot, Air Adria’s authorised Bombardier service centre for Canadair France, Austrian, Croatia Airlines, Lufthansa. Regional Jet aircraft carried out technical maintenance work on 65 CRJ-200 and CRJ-700 aircraft for other airlines, including Lufthansa City Line, Air Dolomiti, Brit Financial Results Air, Malev and Air Nostrum. The Canadian aircraft € mill 2003 2002 manufacturer Bombardier selected Adria one year ago for Tur nover 121.6 112.1 its first and only authorised service centre in Europe. Operating profit/loss 3.9 3.1 Net profit/loss 0.45 0.52 In February Adria Airways added a fifth Canadair Regional Jet CRJ-100 to its fleet. At year end the fleet consisted of 8 aircraft, composed of 3 Airbus A320 and 5 Canadair Regional Jet 200 aircraft.

www.adria-airways.com ^ Branko Lucovnik President

ASSOCIATION OF EUROPEAN AIRLINES V–7 Aer Lingus Dublin Airport Dublin Ireland

44 Scheduled Destinations 3 within Ireland 36 rest of Europe 5 beyond Europe Review of 2003 4476 Employees Throughout 2003 Aer Lingus continued its strategy of 30 Aircraft in Fleet transforming the State-owned airline into a streamlined 4 Airbus A330-300 and profitable company. A major advertising campaign 3 Airbus A330-200 launched in August built on the strong association 6 Airbus A321-200 between the Aer Lingus brand, low fares and the service 6 Airbus A320-200 differentiators which set the airline apart from other no- 8 Boeing 737-500 frills carriers. The focus of the campaign was to drive 3 Boeing 737-400 sales through the company’s website, aerlingus.com, and by year end over 50 per cent of all bookings were made 17 Aircraft on Order online. The website is now the most important distribution 17 Airbus A320 channel for the airline.

Status at 31st December 2003 for information Aer Lingus is rapidly expanding its route network, having on destinations, employees and fleet. added 30 new routes over the last two years. Among the new destinations launched during 2003 were Lisbon, Owned by… Bologna, Palma, Toulouse and Tenerife. All the new 95.24% State ownership routes were launched as a result of greater efficiencies in 4.76% Aer Lingus employees the utilisation of aircraft and resources.

Owner of… In the final quarter of the year, a fleet restructuring - arrangement was concluded with Airbus, which will see the airline’s transition to a single fleet type for its Major partnerships European operation by end of 2005. Seventeen A320 Member of the Oneworld Alliance. aircraft will be acquired to complement the A320s and Code-share agreements with: American A321s already in the fleet, with options on a further ten Airlines, British Airways, Iberia, KLM and A320 aircraft. The move to a single aircraft type is a key SWISS. element of Aer Lingus’ very significant cost savings while increasing capacity and improving operational flexibility. Financial Results € mill 2003 2002 Turnover 888.3 958.6 www.aerlingus.com Operating profit/loss 83.0 63.8 Net profit/loss 69.2 35.3

William Walsh Chief Executive

V–8 ASSOCIATION OF EUROPEAN AIRLINES Air France 45ruedeParis 95747 Roissy CDG Cedex France 200 Scheduled Destinations 39 within France 78 rest of Europe 83 beyond Europe

71525 Employees (Group, FY 02-03 avg) Review of 2003 247 Aircraft in Fleet 22 Airbus A340-300 In October 2003 Air France and KLM signed an 10 Airbus A330-200 agreement which will lead to the creation of Europe’s 8 Airbus A321-200 leading airline group, to be known as Air France-KLM. 5 Airbus A321-100 The new holding company, a listed company, will, after a 54 Airbus A320-200 13 Airbus A320-100 transitory period of 3 years, have 100% ownership of the 40 Airbus A319-100 two operating companies Air France and KLM, which will 5 Airbus A318-100 each retain their separate identities. The deal was 25 Boeing 777-200 approved by US and EU competition and in May 2004 Air 15 Boeing 747-400 France acquired 96% of KLM’s share capital following an 3 Boeing 747-400F exchange offer. With the stake of the French State 4 Boeing 747-300 5 Boeing 747-200 effectively diluted, from 54% to 44.7%, Air France is 10 Boeing 747-200F hereby privatised. 23 Boeing 737-500 5 Boeing 737-300 In January Air France and Alitalia finalised a cross-equity shareholding of 2% of each other’s capital, underlining the 42 Aircraft on Order 10 Airbus A380-800 determination of the SkyTeam member airlines to build a 5 Airbus A330-200 long-term partnership. 1 Airbus A321-200 4 Airbus A320-200 In November Air France signed a code-share agreement 1 Airbus A319-100 with China Southern Airlines on the Paris-Guangzhou 10 Airbus A318-100 (Canton) route, launched in January 2004. This will be the 10 Boeing 777-300 4 th destination in China and will raise the number of weekly 1 Boeing 747-400F flights operated by Air France to China to 26. Status at 31st December 2003 for information on destinations and fleet. In May Air France’s Concorde made its last commercial Owned by… flight. The aircraft completed 27 years of service, carrying 45.51% Public Float more than 1.3 million passengers before its retirement. 44.07% State ownership 10.42% Air France employees In October, when celebrating its 70th anniversary, Air Owner of… France saw the arrival of the A318, making Air France the 100% Régional, Brit Air, CityJet first major airline to operate all 4 aircraft types in the A320 www.airfrance.com 96% KLM family. With up to 123 seats, the A318 is the latest and 39% Sté Nouvelle Air Ivoire smallest aircraft in the A320 family. A total of 15 single- 33.4% Air Austral aisle A318s have been ordered to replace Boeing 737s on 11.9% CCM (Corsica) French domestic and European routes. The last Boeing 7.7% Air Mauritius 7.5% Air Tahiti 767 was retired from the fleet during Summer 2003. 5.6% Tunis Air 3.6% Cameroon Airlines 3.5% Air Madagascar 2.9% Royal Air Maroc 2.1% Air Calédonie 2% Alitalia 1.5% Austrian Major partnerships Member of SkyTeam Alliance. Franchisees: Régional, Brit Air, CityJet, British European, CCM. Various code-share agreements, incl. Aeroflot, China Eastern, China Southern, Iberia, JAL, LOT, Luxair, South African, TAM.

Financial Results (Group FY 31st March) € mill 2003/04 2002/03 Turnover 12337 12687 Operating profit/loss 139 192 Jean-Cyril Spinetta Net profit/loss 93 120 Chairman

ASSOCIATION OF EUROPEAN AIRLINES V–9 Air Malta Head Office Luqa LQA05 Malta

49 Scheduled Destinations 2 within Malta 43 rest of Europe 4 beyond Europe Review of 2003 1877 Employees In June 2003, the Maltese Government appointed a new 13 Aircraft in Fleet Board of Directors, led by Mr. Lawrence Zammit, who 4 Airbus A320-200 assumed the position of Chairman. Mr Ernst Funk 7 Boeing 737-300 continues in his role as Chief Executive Officer of the 2 Boeing 737-200 Company.

12 Aircraft on Order With the accession of Malta to the European Union on 1st 5 Airbus A320 May 2004, Air Malta is redefining and repositioning itself 7 Airbus A319 in the market in order to meet effectively the challenges of open competition. It will still be expected to be a leader in Status at 31st December 2003 for information the growth of the economy of Malta, supporting the on destinations, employees and fleet. tourism and communications sectors. At the same time, it will further develop its scheduled leisure and business Owned by… point-to-point services, identifying its appropriate niche as 96.4% State ownership a regional carrier in the European Union. 3.6% Private shareholders Accordingly, Air Malta is planning to expand and align its Owner of… route network, as from 2004, in relation to its new 100% Malta Air Charter Co Ltd strategic plan, which takes into account the realities of 49% AZZURRA Air Malta’s EU membership.

Major partnerships The airline has made a substantial investment in its fleet Code-share agreement with Alitalia. renewal programme which was concluded in 2003. In early 2004 the company took delivery of two new Airbus, an A320 and an A319, with a total of five A320s and Financial Results (FY 31st July) seven A319s set to enter the fleet by 2008 giving Air € mill 2003/02 2002/01* Malta an all-Airbus fleet, with substantial financial, Turnover 219.3 312.9 operational and technological efficiencies. Operating profit/loss (22.3) 0.3 Net profit/loss (55.5) (1.4) In the year under review the airline continued to * 16 months due to change in FY participate actively in the Association’s activities. In April www.airmalta.com 2003 Air Malta hosted an AEA meeting for representatives from major European airlines to discuss both common and sectorial implications of EU enlargement. The meeting was chaired by the Secretary General and addressed by Mr. Ludolf Van Hasselt of the European Commission.

Lawrence Zammit Chairman

V–10 ASSOCIATION OF EUROPEAN AIRLINES Alitalia – Linee Aeree Italiane Spa Viale Alessandro Marchetti 111 00148 Roma Italy

82 Scheduled Destinations 23 within Italy 33 rest of Europe 26 beyond Europe Review of 2003 22200 Employees In 2003, Alitalia continued to implement restructuring 195 Aircraft in Fleet measures aimed at restoring the viability of the company 166 of which Alitalia and off-setting damaging external factors such as the war 23 Airbus A321 in Iraq and the outbreak of SARS. The changing market 11 Airbus A320 conditions due not only to the above-mentioned external 10 Airbus A319 factors but also to the development of no-frills competition 9 Boeing 777-200 and permanent changes in consumer perception and 13 Boeing 767-300 expectations as regards air transport have lead the 3 Boeing 747-200F company to adopt a new business plan covering the 89 MD82 period 2004-2006. 8 MD11 (grounded) 29 of which AZ Express The plan focuses on the reduction of unit cost, 14 Embraer RJ-145 implementation of new commercial and distribution 10 ATR-72 policies, further network repositioning and product 5 ATR-42 (grounded) redefinition. It also confirms the refocusing of the company on core business activities. In this regard, in July 10 Aircraft on Order 2003, Alitalia sold 80% of its charter company Eurofly. 4 of which Alitalia 2 Airbus A319 In parallel to these measures, Alitalia further developed its 1 Boeing 777-200 alliance with Air France and SkyTeam. With the Air 1 Boeing 767-300 France CEO a member of the Alitalia board and the 6 of which AZ Express Alitalia CEO a member of the Air France board, in 6 Embraer RJ-170 January 2003 a 2% equity swap was completed between the two companies, thus further reinforcing existing links. Status at 31st December 2003 for information on destinations, employees and fleet. In September 2003, Alitalia concluded a trilateral alliance agreement with Air France and KLM as well as a bilateral Owned by… alliance agreement with KLM. Those agreements 62.4% State ownership represent an important preliminary step for the integration 35.6% Private investors of Alitalia into the newly created Air France-KLM group, www.alitalia.com 2% Air France underlining the intention of Alitalia to play an active part in the consolidation process at European level. Owner of… 100% Alitalia Express In order to implement this strategy, the privatisation 20% Eurofly process of Alitalia was formally initiated in December 2% Air France 2003 when the Italian government launched the legislative procedure for a decree allowing State holding in the Major partnerships company to fall below 50%. Member of SkyTeam Alliance. Various code-share agreements incl. with AeroMéxico, Air France, Air Malta, China Airlines, Croatia Airines, CSA, Cyprus Airways, Delta Airlines, JAL, Korean Air, Meridiana, Qatar Airways, SN Brussels Airlines, TAROM and Varig.

Financial Results (Group) € mill 2003 2002 Turnover 4385 4844 Operating profit/loss (373) (118) Net profit/loss (519.7) 93.1 Giancarlo Cimoli Chairman & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–11 Austrian Fontanastrasse 1 P.O. Box 50 1107 Vienna Austria 118 Scheduled Destinations 6 within Austria 86 rest of Europe 26 beyond Europe Review of 2003 7137 Employees (Group) 91 Aircraft in Fleet In September the airlines of the Austrian Airlines Group 33 of which Austrian presented their new brand identity. Mainline operator 2 Airbus A340-300 Austrian Airlines, is renamed ‘Austrian’ and regional 2 Airbus A340-200 4 Airbus A330-200 airline Tyrolean Airways will henceforth be marketed as 3 Airbus A321-200 ‘Austrian arrows’, both using the red arrow logo. The 3 Airbus A321-100 Austrian Airlines Group brand also includes the carrier 8 Airbus A320-200 Lauda Air, mainly responsible for leisure traffic. The visual 4MD87 modifications are part of a fundamental restructuring of 2MD83 the business model. 1MD82 4 Fokker 70 19 of which Lauda Air In 2003, against the background of the impending 3 Boeing 777-200 enlargement of the European Union, Austrian Airlines 3 Boeing 767-300 Group continued to build up its Central Europe and 4 Boeing 737-800 Eastern European axis with the introduction of 2 Boeing 737-700 substantially more frequencies as well as new 1 Boeing 737-600 destinations, such as Rostov (Russia) and Baku 2 Boeing 737-400 1 Boeing 737-300 (Azerbaijan), offering in total more than 35 destinations in 3 Canadair CRJ-100 this economic area. 39 of which Austrian arrows 8 Bombardier Q400 Austrian entered into a new code-share agreement with 12 Bombardier Q300 Star Alliance partner Air New Zealand on flights to 12 Canadair CRJ-200 Auckland, Wellington and Christchurch arriving via 1 Canadair CRJ-100 6 Fokker 70 Australia. 16 Aircraft on Order In an on-going fleet harmonisation, the Group withdrew 7 Airbus A319 from the corporate jet business, with the long-term leasing 4 Boeing 737-800 out of the three Embraer RJ-145 aircraft in the fleet. The 2 Bombardier Q400 3 Canadair CRJ-200 planned fade out of MD80s started in December, with the release of two MD82 aircraft. In the order book a fourth st Status at 31 December 2003 for information Boeing 777 aircraft for Lauda Air has been converted to on destinations, employees and fleet. three Boeing 737-800s for delivery between 2005 and Owned by… 2006. One Canadair Regional Jet and three of the seven 39.7% OIAG Austrian Privatisation Agency A319s ordered are due for delivery in 2004, followed by 43.5% Free float two Bombardier Q400 aircraft in 2005. 10.3% Austrian Institutional Investors www.austrianairlines.co.at 5.0% Austrian Airlines 1.5% Air France Owner of… 100% Austrian arrows 100% Austrian Airtransport 100% Lauda Air 22.5% Ukraine International Airlines Major partnerships Member of the Star Alliance. Various code-share agreements with: Air Dolomiti, Air France, Air Mauritius, CSA, LH CityLine, Luxair, MAS, Royal Jordanian, TAROM, Ukraine International.

Financial Results (Group) € mill 2003 2002 Turnover 2242.7 2398.0 Operating profit/loss 63.3 41.4 Vagn Soerensen Net profit/loss 45.8 42.8 CEO

V–12 ASSOCIATION OF EUROPEAN AIRLINES bmi Donington Hall Castle Donington Derby East Midlands DE74 2SB Great Britain

30 Scheduled Destinations 12 within the United Kingdom 16 rest of Europe Review of 2003 2 beyond Europe In June 2003 bmi applied with Star Alliance partner United 4548 Employees Airlines, for blanket code-share agreement to cover each other’s markets from Heathrow in an ongoing attempt to 43 Aircraft in Fleet bring competition to USA services from Heathrow, 3 Airbus A330-200 currently restricted by bilaterals to Virgin 10 Airbus A321-200 Atlantic/Continental and British Airways/American Airlines. 11 Airbus A320-200 6 Fokker 100 bmi launched a code-share program with Spanair and 10 Embraer RJ-145 LOT Polish airlines, as both airlines joined the Star 3 Embraer RJ-135 Alliance in the course of 2003.

4 Aircraft on Order The bmi group, comprising bmi, bmi regional and no-frills 4 Airbus A319 subsidiary bmibaby, continued to expand in 2003. The group saw record passenger numbers reflecting the Status at 31st December 2003 for information success of route restructuring to be better tuned to on destinations, employees and fleet. demand, and a fare review. Information in this Yearbook does not include bmibaby. Owned by… 50% plus 1 share BBW Notable development in the route network: mid-year bmi (private shareholders) resumed flights from Manchester to Washington, after a 30% minus 1 share Lufthansa break over the Winter period, being the company’s 20% SAS second transatlantic route after Manchester-Chicago. Routes between Heathrow and Venice and Alicante were Owner of… also launched. 100% bmi regional 100% bmibaby bmi announced its aim to have an all-Airbus fleet within 18 months. In an acceleration of this transition, an order for Major partnerships four Airbus A319 aircraft with options for five additional Member of the Star Alliance. aircraft was placed. The first three of this 132-seater aircraft will be available for the 2004 Summer schedules, www.flybmi.com Various code-share agreements with: Air Canada, LOT, Singapore Airlines, South with the fourth aircraft to be delivered early in 2005. African Airways, Spanair, United Airlines and Virgin Atlantic.

Financial Results (Group) £ mill 2003 2002 Turnover 772 724 Operating profit/los Net profit/loss (9.8) (19.6)

Sir Michael Bishop CBE Chairman

ASSOCIATION OF EUROPEAN AIRLINES V–13 British Airways plc Waterside P.O. Box 365 Harmondsworth UB7 0GB Great Britain

153 Scheduled Destinations 20 within the United Kingdom 57 rest of Europe 76 beyond Europe Review of 2003

47702 Employees CE Rod Eddington was elected AEA Chairman for 2003.

300 Aircraft in Fleet (Group*) In February British Airways, Oneworld partner Iberia and 27 Airbus A320 franchise partner GB Airways launched a range of new 33 Airbus A319 code-share routes, marking the 2 nd phase in the airline’s 43 Boeing 777 wide ranging commercial agreement, signed in July 2002. 21 Boeing 767-300 13 Boeing 757-200 British Airways and SN Brussels Airlines received 57 Boeing 747-400 approval from the European Commission to continue their 10 Boeing 737-500 commercial relationship. British Airways also expanded its 24 Boeing 737-400 code-share co-operation with another Oneworld partner, 5 Boeing 737-300 Cathay Pacific. 28 Embraer RJ-145 16 Avro RJ100 In June British Airways signed an agreement to sell its 5 British Aerospace 146 wholly owned German subsidiary dba (formerly Deutsche 8 BAe ATP BA) to a Nuremburg-based aviation consultancy and 10 de Havilland Dash-8 investment company. * Group includes BA and BA CitiExpress. The Summer 2003 timetable saw the introduction of 16 Aircraft on Order British Airways’ first ever services from London City. 16 Airbus A320/A321 Operated by British Airways CitiExpress, Edinburgh, Frankfurt and Geneva are now all served from the city. Status at 31st December 2003 for information on destinations, employees and fleet. Concorde, the world’s only supersonic passenger aircraft was withdrawn from service at the end of October. The Owned by… aircraft flew for Air France and British Airways from its 100% Publicly quoted company. launch 27 years earlier, in 1976.

Owner of… In December, British Airways welcomed the publication of 100% British Airways CitiExpress the UK Government’s Aviation White Paper which detailed 18.3% Qantas Airways plans for the future development of air transport in the UK 18.3% Comair (South Africa) over the next 30 years. In particular the airline welcomed 9% Iberia the inclusion of the option for a third, short runway at

www.britishairways.com London Heathrow. Major partnerships Member of the Oneworld Alliance. Throughout the year the airline’s drive towards greater Franchisees: British Mediterranean, Comair efficiency and cost savings continued with the (South Africa), GB Airways, Loganair (UK), achievement of key Future Size and Shape targets. Maersk Air (UK), Regional Air (Kenya), Sun- Air (Denmark) and Zambian Airways. Various code-share agreements.

Financial Results (Group, FY 31st March) £ mill 2003/04 2002/03 Tur nover 7560 7688 Operating profit/loss 405 295 Net profit/loss 130 72

Rod Eddington Chief Executive

V–14 ASSOCIATION OF EUROPEAN AIRLINES Cargolux Airlines International Luxembourg Airport L-2990 Luxembourg Grand Duchy of Luxembourg

57 Scheduled Destinations 1 within Luxembourg cargolux 7 rest of Europe 49 beyond Europe Review of 2003 1356 Employees In 2003 Cargolux strengthened its position in the global 12 Aircraft in Fleet airfreight market and recorded the strongest operating 12 Boeing 747-400F result the company has ever achieved.

1 Aircraft on Order Cargolux’s business model targets a flexible, customer 1 Boeing 747-400F and quality focused all-cargo-airline, adding economic value to the company. In 2003 the company realigned and Status at 31st December 2003 for information refocused the internal organisation, improving on various on destinations, employees and fleet. operational performance indicators and achieving higher levels of productivity. Owned by… 34.9% Luxair Overall the operational focus moved more towards Asia, 33.7% SAir Lines with increased presence and strong demand, particularly 31.1% Luxembourg financial institutions in China. 0.3% Others Furthermore in the network, the start of the year saw Owner of… weak demand for services to/from South America, with - routes adjusted accordingly. By mid-year this market was showing signs of recovery. Freight onboard the aircraft Major partnerships ranges from shoes to helicopters and from fruit to car Various agreements with: AZAL (Azerbaijan), parts for export across South America and beyond. China Airlines, China Eastern Airlines, Aeromexpress, Asiana, Alitalia, Pacific East Cargolux extended its North American network by Asia Cargo and Turkish Airlines. opening sectors from the US to the Mexican industrial centre of Guadalajara, responding to the high demand for freight shipments from the booming electronics assembly Financial Results (Group) business there. US$ mill 2003 2002 Turnover 954.3 807.5 As air-cargo markets continue to grow, Cargolux will take Operating profit/loss 64.9 55.6 delivery of its 13 th Boeing 747-400F. Net profit/loss 70.9 49.6 www.cargolux.com

Ulrich Ogiermann President & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–15 Croatia Airlines Savska 41 10000 Zagreb Croatia

26 Scheduled Destinations 8 within Croatia 17 rest of Europe 1 beyond Europe Review of 2003 1045 Employees Implemented on 1st October 2003 all Croatia Airlines 10 Aircraft in Fleet international ticket prices are now quoted in Euro, instead 3 Airbus A320-200 of US$ as used previously. Approximately 80% of 4 Airbus A319-100 Croatia’s traffic is conducted within the Eurozone. 3 ATR 42-300 In late 2002 and early 2003 new tariffs were introduced 0 Aircraft on Order which had a positive effect on traffic trends. Overall 2003 was unique in that every month was a record month in Status at 31st December 2003 for information passenger traffic, the busiest month being August. In July on destinations, employees and fleet. Croatia Airlines recorded its 10-millionth passenger since Owned by… its inception. The company started flying in 1991 with a 94.08% State ownership leased-in MD82 aircraft. 2.44% State agency 1.65% Croatian Privatisation Fund In June, Pope John Paul II flew Croatia Airlines on his 1.83% Other shareholders third visit to, and tour of, the country.

Owner of… On behalf of the Croatian CAA, a candidate member of - the Joint Aviation Authorities, Croatia Airlines was certified with JAR OPS 1 AOC (Air Operator Certificate). Major partnerships Various code-share agreements with: Adria In December, Croatia Airlines was presented with ISO Airways, Air France, Alitalia, Austrian, CSA, 9001, thus completing its project of introducing integrated Lufthansa, LOT, SN Brussels Airlines and quality management systems in accordance with three Turkish Airlines. international norms – ISO 9001 and aviation norms JAR OPS 1 and JAR 145. Financial Results The Summer timetable saw the addition of frequencies to €mill 2003 2002 the Adriatic coast responding to ever increasing demand. Turnover 173.3 171.5 A new scheduled service was also introduced for the Operating profit/loss 17.1 19.3 Summer season: Split-Brussels. Frequencies to several Net profit/loss 2.0 (3.2) European capitals from Split and Dubrovnik increased, and the airline introduced code-share flights with SN

www.croatiaairlines.hr Brussels Airlines.

At year-end Croatia Airlines schedule included services to 26 destinations in Europe, domestic and international, and a further 11 cities served in co-operation with partner airlines.

Ivan Misetic' President & CEO

V–16 ASSOCIATION OF EUROPEAN AIRLINES Czech Airlines Head Office Ruzyn Airport 160 08 Prague 6 Czech Republic

73 Scheduled Destinations 4 within the Czech Republic 57 rest of Europe 12 beyond Europe Review of 2003

4543 Employees In September Jaroslav Tvrdik, a former Czech Minister of Defence with an acclaimed military career, became 35 Aircraft in Fleet President of Czech Airlines. He was also elected 3 Airbus A310-300 Chairman of the CSA Board of Directors. He replaces 12 Boeing 737-500 Miroslav Kula. 11 Boeing 737-400 4ATR-72 CSA and Transavia Airlines signed a long term 5ATR-42 maintenance agreement, whereby CSA will perform maintenance on the Dutch carrier’s fleet of Boeing 737- 0 Aircraft on Order 800s. CSA is a leading provider of B737 maintenance in Central Europe. Status at 31st December 2003 for information on destinations, employees and fleet. In the network CSA added new destinations Cork, Edinburg, Tallinn, Yerevan and Sliac (Slovakia). In 2003 Owned by… the busiest route out of CSA’s Prague hub was London 56.43% Czech National Property Fund (Stansted and Heathrow). CSA longhaul routes include 34.59% Czech Consolidation Bank services to New York, Toronto, Montreal, Canada, Dubai, 4.33% Czech investor UAE, Kuwait, Colombo and Sri Lanka performed with the ( Ceská pojiötovna a.s.) A310. For 2004 the company will be looking to expand its 2.94% City of Prague offer to Eastern Europe with the introduction of, amongst 0.98% City of Bratislava others, Samara and Ekaterinburg (Russia), Baku 0.49% Shares for Endowment Fund (Azerbaijan) and Krakow (Poland). 0.24% National Property Fund of the Slovak Republic The construction has started of a new CSA Cargo Terminal, with capacity of 60 thousand tonnes of goods Owner of… and mail at Prague Airport. The ‘old’ cargo terminal will - make way for the planned expansion of the airport and the construction of a new passenger terminal. Major partnerships Member of the SkyTeam Alliance. A third Airbus A310-300, one Boeing 737-400, and two Various agreements with: Air France, Boeing 737-500s joined CSA’s fleet in 2003. This fleet Aeroflot, Aeromexico, Aerosvit Airlines expansion meant an increase in capacity of 10% overall, (Ukraine), Air Malta, Alitalia, Austrian, Croatia 50% for longhaul services. All four of the aircraft were purchased via operational leasing. The fleet total at year- www.czech-airlines.com Airlines, Delta Air Lines, KLM, LOT, Lufthansa, Malev, Olympic Airlines, TAROM end stood at 35 aircraft. and Turkish Airlines.

Financial Results US$ mill 2003 2002 Turnover 673.3 517.5 Operating profit/loss 28.0 40.4 Net profit/loss 19.5 14.6

Jaroslav Tvrdik President, CEO Chairman of the Board

ASSOCIATION OF EUROPEAN AIRLINES V–17 Cyprus Airways Ltd 21 Alkeou Street 2404 Engomi P.O. Box 21903 1514 Nicosia Cyprus

32 Scheduled Destinations 2 within Cyprus 20 rest of Europe Review of 2003 10 beyond Europe In 2003 total revenue passengers on Cyprus Airways’ 2170 Employees flights recorded an increase of 2.4%, reaching the 1,695 million mark. 1.7 million tonnes of cargo were also 12 Aircraft in Fleet transported on these services. 2 Airbus A330-200 8 Airbus A320-200 The preliminary indication of the financial results for the 2 Airbus A319-100 Cyprus Airways Group for the financial year ending 31st December 2003 shows a net loss after tax of CY£ 20.8 0 Aircraft on Order million (€ 35.6 million), compared to a net profit after tax of CY£ 10.5 million (€ 18 million) in 2002. Turnover increased Status at 31st December 2003 for information by 1.2% to CY£ 188 million. on destinations, employees and fleet. Hellas Jet, the new start up airline in Greece in which Owned by… Cyprus Airways Group has a 49% share, commenced 69.62% State ownership operations in June 2003, operating out of Athens 30.38% Private shareholders International Airport to London, Zurich, Paris and Brussels. Owner of… 100% Eurocypria Cyprus Airways maintains alliances and co-operation 49% Hellas Jet agreements with major international airlines and operates code-share flights with several partners: Aeroflot, Alitalia, Major partnerships El Al, Gulf Air, KLM, LOT, SN Brussels Airlines and Syrian Various code-share agreements with: Arab Airlines. Aeroflot, Alitalia, El Al, Gulf Air, KLM, LOT, SN Brussels Airlines and Syrian Arab With the acquisition of a second A330-200 aircraft, the Airlines. delivery to Eurocypria (the company’s charter subsidiary), of 4 B737-800 and the withdrawal of the A310 aircraft, the year also saw the completion of the fleet renewal process Financial Results (Group) started in 2002. CY£ mill 2003 2002 Tur nover 188 185 Operating profit/loss (36) (3) Net profit/loss (20.8) 10.5 www.cyprusairways.com

Constantinos Loizides Chairman

V–18 ASSOCIATION OF EUROPEAN AIRLINES Finnair Oy P.O. Box 15 01053 Finnair Finland

55 Scheduled Destinations 16 within Finland 31 rest of Europe 8 beyond Europe Review of 2003 6920 Employees Finnair celebrated its 80 th anniversary in 2003, and the 50 th 58 Aircraft in Fleet anniversary of the company’s name. Founded as Aero in 5 Airbus A321-200 1923, ‘Finnair’ was first used in marketing in 1953 and 11 Airbus A320-200 was subsequently adopted as its official name in 1968. 9 Airbus A319-100 7 Boeing 757-200 Asia has been an area of strategic development for 7MD83 Finnair and the company now operates over twenty 5MD82 weekly frequencies to Asian destinations, covering 5MD11 Beijing, Hong Kong, Tokyo, Osaka, Bangkok and 9ATR-72 Singapore, with the addition of Shanghai to the network in September 2003. 6 Aircraft on Order 1 Airbus A321-200 TheWinterseasonalsosawthereturnofMiamiservices, 1 Airbus A320-200 following a three-year absence. 2 Airbus A319-100 2MD11 During the year the offer of code-share destinations with European partners Air France, SWISS and SN Brussels Status at 31st December 2003 for information Airlines was expanded. on destinations, employees and fleet. Finnair acquired a controlling interest in the Swedish no- Owned by… frills airline Nordic Airlink through the acquisition of 85% of 65% Public bodies (state, local the company’s shares in 2003, subsequently increased to government, employment 100% in May 2004. Nordic Airlink operates six aircraft pension funds) which are used for scheduled Scandinavian routes, as 12% Registered in nominee name well as charter and regional operations. 7% Financial institutions & insurance companies Following the addition of a fifth MD-11 in early 2003, 6% Private individuals Finnair is set to receive its sixth aircraft in Spring 2004 for 5% Foreign investors use on routes to Asia. The DC9s in the fleet (8 at year- 4% Private companies end 2002) were retired from the fleet and were replaced www.finnair.com 1% Associations by Airbus A320s. A second ATR-72 turboprop aircraft was transferred to Finnair’s Estonian subsidiary Aero Airlines Owner of… in November. 100% Nordic Airlink (Sweden) 49% Aero Airlines (Estonia)

Major partnerships Member of the Oneworld Alliance. Various code-share agreements, with: Aero Airlines, Air China, Air France, City Airline, CSA, Finnish Commuter Airlines, Lithuanian Airlines, Malev, SN Brussels Airlines, Sun Air, TAP, Ukraine International Airlines.

Financial Results (Group) €mill 2003 2002 Turnover 1557.6 1656.4 Operating profit/loss (18.8) 60.0 Net profit/loss (16.2) 36.8

Keijo Suila President & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–19 Líneas Aéreas de España SA Calle Velazquez 130 28006 Madrid Spain

99 Scheduled Destinations 34 within Spain 34 rest of Europe 31 beyond Europe Review of 2003 26314 Employees (Group) In June 2003 Fernando Conte was appointed Chairman & 140 Aircraft in Fleet CEO of Iberia, replacing Xabier de Irala, who resigned 3 Airbus A340-600 after being in charge since 1996. 18 Airbus A340-300 7 Airbus A321-200 Iberia and British Airways, Oneworld partner airline and 46 Airbus A320-200 9% shareholder, continued to expand their co-operation 4 Airbus A319-100 with the introduction of more code-share operations. The 17 Boeing 757-200 two carriers applied for anti-trust immunity from the 2 Boeing 747-300 European Commission in July 2002, to enter into an 5 Boeing 747-200 extensive commercial alliance which will also involve BA 14 MD88 franchise partner GB Airways. The go-ahead was finally 24 MD87 given in December 2003.

16 Aircraft on Order In the network Iberia added extra capacity on its Latin 3 Airbus A340-600 American routes during both the Summer and Winter 3 Airbus A321-200 timetables, confirming its leadership on the Europe-Latin 7 Airbus A320-200 American routes. 3 Airbus A319-100 Iberia introduced a code-share agreement with Belgian Status at 31st December 2003 for information carrier SN Brussels Airlines, on flights from Brussels to on destinations, employees and fleet. Madrid and Barcelona, in replacement of the Belgian airline’s seat agreement with Virgin Express. Further Owned by… code-shares were signed with SWISS, and Danish carrier 60% Floating Maersk. 30% Banks and various companies 9% British Airways Iberia placed an order for Airbus A340-600s to replace its 1% American Airlines Boeing 747-200s in the longhaul fleet. The first three A340-600s are for delivery in 2004, with the remainder to Owner of… follow in 2005 and 2006. During the Summer 2003 season www.iberia.com - Iberia already operated three A340-600, on lease from ILFC, to replace some of the older Boeing 747. Major partnerships Member of the Oneworld Alliance. Franchisee: Iberia Regional/Air Nostrum. Various code-share agreements with: Air France, CSA, LOT, Regional Airlines, Royal Air Maroc, Royal Jordanian, SN Brussels Airlines, SWISS, Syrian Arab Airlines, TAP, TAROM, Ukraine International Airlines.

Financial Results (Group) € mill 2003 2002 Turnover 4619.3 4699.5 Operating profit/loss 160.7 249.1 Net profit/loss 145.9 159.8

Fernando Conte Chairman & CEO

V–20 ASSOCIATION OF EUROPEAN AIRLINES Icelandair Reykjavik Airport 101 Reykjavik Iceland

26 Scheduled Destinations 7 within Iceland 14 rest of Europe 5 beyond Europe Review of 2003 2110 Employees (Group) In early 2003 a restructuring of Icelandair Group was 17 Aircraft in Fleet implemented. The international airline, Icelandair, is now a 2 Boeing 767-300 100% owned subsidiary of The Flugleidir-Icelandair 1 Boeing 757-300 Group, which comprises a total of 12 subsidiaries, 11 Boeing 757-200 including AEA-member Icelandair, the charter company 2 Boeing 757-200F Loftleidir Icelandic, Icelandair Cargo and the domestic 1 Boeing 737-300F airline Air Iceland performing air transport services. Other subsidiaries include hotels, travel services, technical and 0 Aircraft on Order ground handling services.

Status at 31st December 2003 for information Financially 2003 was the second best performance in the on destinations, employees and fleet. company's 67 year history. Pre-tax profit for 2003 was Icelandic Krona ISK 1406 million (€16 million). Net profit Owned by… (after taxes) stood at 1121 million ISK (€13 million). 35.2% Investment Funds Operating revenues were ISK 37561 million (€434 13.92% Insurance companies million), while operating costs were ISK 35578 million 13.62% Individual investors (€411 million). The Flugleidir-Icelandair Group has seen 13.44% Various companies unprecedented success in the last two years with 2002 21.57% Banks being the groups best ever year with a pre-tax profit of 2.25% Pension Funds ISK 3347 million (€39 million).

Owner of… Within the Group, the international airline Icelandair is - responsible for more than 50% of turnover. Icelandair's network services the home market, the fast growing Major partnerships tourism market into Iceland and the North Atlantic one- Code-share agreements with SAS. stop market. Icelandair is strongly emphasizing a policy of further strengthening Icelandair's international flight operations, through charter and cargo operations as well Financial Results (Group) as passenger services. ISK mill 2003 2002

Turnover 37561 38945 th In August, Icelandair celebrated its 30 anniversary. Operating profit/loss 1983 3873

www.icelandair.com Icelandair was formed by the merger in 1973 of two Net profit/loss 1121 2611 locally-based airlines - Flugfélag Íslands and Loftleidir - operating both international and domestic services. The former (the original Icelandair) traces its roots back to 1937, whilst the latter had its origins in 1945.

Sigurdur Helgason President & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–21 JAT Airways Bulevar umetnosti 16 11000 Beograd Serbia & Montenegro

39 Scheduled Destinations 3 within Serbia & Montenegro 29 rest of Europe 7 beyond Europe Review of 2003 3528 Employees In August 2003 the former ‘JAT-Jugoslovenski 25 Aircraft in Fleet aerotransport’ (Yugoslav Airlines) was officially renamed 1 Boeing 737-400 Jat Airways and saw the launch of a new company logo. 10 Boeing 737-300 At the same time the Federal Republic of Yugoslavia, as a 3 Boeing 727-200 country, was renamed Serbia and Montenegro. 1 Douglas DC10 6 Douglas DC9-30 Jat Airways has announced plans to restructure into a 4 ATR-72-200 holding company, with the parent company operating mainline commercial aviation. Several dependent 0 Aircraft on Order enterprises, which will be owned by the parent company, will be separate legal entities. This ‘structural adjustment Status at 31st December 2003 for information and development plan’ as determined by Jat Airways on destinations, employees and fleet. Managing Board, is to be realised by 2005.

Owned by… Jat Airways has the intention of developing its regional 100% State ownership presence. This will be achieved through a new regional airline that will use ATR-72s from the parent company’s Owner of… fleet. This company will operate regular flights from Jat’s - hub at Belgrade to destinations principally in the Balkans, starting operations in 2004. Major partnerships Code-share agreements with Austrian, CSA The AEA conference initiated in Belgrade by Jat Airways and Uzbekisatn Airways. in 2003, had as its goal to re-establish regional connections among carriers. This strategic objective set by the former President & CEO, Mr. Predrag Vujovic,' is Financial Results confirmed by his successor, Mr. Aleksandar Milutinovic.' YUN mill 2003 2002 Turnover 10200 9895 With regards to the network, 2003 saw the introduction of www.jat.com Operating profit/loss (412) (522) some new routes. The major new longhaul destination is Net profit/loss (412) (522) New York, served in co-operation with operating carrier Uzbekistan Airways.

Jat Airways leased-in its first Boeing 737-400 in 2003, with a further 2 due to arrive in February 2004. These will replace the remaining Boeing 727-200s in the fleet, which have been leased out, as has the DC-10. Jat Airways intends to pursue fleet commonality with Boeing 737-300s and 737-400s on its European and Mediterranean flights.

Aleksandar Milutinovic' President & CEO

V–22 ASSOCIATION OF EUROPEAN AIRLINES KLM P.O. Box 7700 Schiphol Airport 1117ZL The Netherlands

118 Scheduled Destinations 1 within the Netherlands 56 rest of Europe 61 beyond Europe Review of 2003 37487 Employees (Group, 31st March 2003) In Autumn 2003 KLM and Air France announced an 126 Aircraft in Fleet unprecedented consolidation move in European air 3 Boeing 777-200 transport, with the ‘combination’ of the two carriers, to be 12 Boeing 767-300 known as Air France-KLM. The grouping will create the 5 Boeing 747-400 world’s largest airline by turnover and the third largest by 17 Boeing 747-400 Combi traffic volumes, whilst capitalising on brand recognition, 2 Boeing 747-400F the two dynamic hubs of Paris-Charles de Gaulle and 4 Boeing 737-900 13 Boeing 737-800 Amsterdam-Schiphol and complementary networks. KLM 14 Boeing 737-400 and Air France will form ‘One group’, ‘Two airlines’ and 15 Boeing 737-300 ‘Three businesses’. KLM and US partners Northwest and 10 MD11 Continental will subsequently join the SkyTeam alliance. 20 Fokker 70 Having gained approval of the competition authorities in 11 Fokker 50 early 2004, a share exchange took place in May 2004 whereby Air France acquired 96% of KLM’s share capital. 14 Aircraft on Order The company has subsequently been de-listed. 6 Airbus A330-200 7 Boeing 777-200 Following a strategic review of the company’s no-frills 1 Boeing 747-400F strategy, KLM sold its 100% holding in its UK-based subsidiary buzz, to Ryanair, in April 2003. The company Status at 31st December 2003 for information also integrated the operation of KLM cityhopper and KLM on destinations, employees and fleet. cityhopper uk (formerly KLM uk).

Owned by… KLM renewed its co-operation agreement with Continental 96% Air France-KLM Airlines and extended its code-share agreements, with China Southern Airlines and with Brazilian airline TAM on Owner of… services to and within South America. In Europe, code- 100% KLM cityhopper sharing services with Malev were introduced. 100% KLM cityhopper uk st www.klm.com 100% Transavia Airlines In October KLM took delivery of its 1 Boeing 777-200ER 50% Martinair aircraft. A total of 10 aircraft have been ordered, with 20% Kencargo Airlines International delivery expected over the next 2 years. The 777 will operate in a 327-seat configuration, replacing the Boeing Major partnerships 747-300 fleet. KLM Cargo introduced two new Boeing Member of SkyTeam. 747-400ER freighters in April 2003, replacing the two 747- Various agreements, incl. with Air Alps, Air 300SFs in the fleet. From 2005 the A330-200 will start Europa, Alaska Airlines, Aer Lingus, China replacing the MD-11s and the Boeing 767-300 ERs. Southern Airlines, Comair, Continental Airlines, CSA, Cyprus Airways, Jet Airways, Kenya Airways, KLM cityhopper, KLM exel, Lithuanian Airlines, Maersk Air, Martinair, MAS, Malev, Meridiana, Surinam Airways, TAM, Transavia Airlines, Ukraine International Airlines.

Financial Results (Group, FY 31st March) €mill 2003/04 2002/03 Turnover 5877 6485 Operating profit/loss 120 (484) Net profit/loss 24 (416)

Leo M. van Wijk President & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–23 LOT Polish Airlines ul.17 Stycznia 39 00-906 Warszawa Poland

46 Scheduled Destinations 12 within Poland 30 rest of Europe 4 beyond Europe Review of 2003 3789 Employees In 2003, the Polish Treasury put on hold plans to float its 51 Aircraft in Fleet 68% stake in the airline. Another 25% equity share in the 3 Boeing 767-300 company held by SAir Lines (Swissair) until its bankruptcy 2 Boeing 767-200 in 2002, is now in the hands of the receiver, pending 10 Boeing 737-500 finding a strategic investor. 7 Boeing 737-400 2 Boeing 737-300 In 2004 LOT celebrates its 75 th anniversary. In late 1928 14 Embraer RJ-145 several private airline companies were amalgamated into 8 ATR-72 (operated by EuroLot) the state enterprise ‘Polskie Linje Lotnicze LOT Sp . 5 ATR-42 (operated by EuroLot) z.o.o.’, which started operations on 1st January 1929. The network consisted of two routes, from Warsaw to 12 Aircraft on Order Katowice and Bvdgoszcz. More recent milestone dates for 2 Boeing 737-800 the company include membership of the Star Alliance in 10 Embraer RJ-170 October 2003 and, on the 1st May 2004, the accession of Poland to the EU. Status at 31st December 2003 for information on destinations, employees and fleet. In addition to LOT’s existing flights from Warsaw to London Heathrow and Manchester and from Krakow to Owned by… London Gatwick, the company launched co-operation for 67.97% State treasury joint flights with bmi in March, adding further UK points to 25.10% SAir Lines the offer. LOT also signed a commercial agreement with 6.93% Employees United Airlines, including code-sharing on flights between Poland and the US. Following Lufthansa, Austrian, ANA Owner of… and bmi, United is the fifth member of the Star Alliance to 100% EuroLot sign an agreement with LOT.

Major partnerships In April LOT ordered ten 70-seat Embraer RJ-170 planes, Member of the Star Alliance. and entered into a contract with the Brazilian www.lot.com Various code-share agreements with: Air manufacturer whereby the technical base of the carrier France, American Airlines, ANA, Austrian, will become an authorised European Embraer service bmi, CSA, Cyprus Airways, El Al, Finnair, centre. In the first half of 2004, six of the new aircraft will Lufthansa, SN Brussels Airlines and United be delivered, with the remaining four due in 2005. The Airlines. deal also includes further options for an additional eleven Embraer RJ-170, -190 or -195 aircraft. LOT currently operated 14 Embraer RJ-145s. Financial Results PLN mill 2003 2002 Turnover 2856.9 2718.8 Operating profit/loss (31.3) 150.6 Net profit/loss (109.2) 112.6

Marek Grabarek President & CEO

V–24 ASSOCIATION OF EUROPEAN AIRLINES Deutsche Lufthansa AG 2-6 Von-Gablenz-Strasse 50679 Cologne Federal Republic of Germany 172 Scheduled Destinations 18 within Germany 71 rest of Europe 83 beyond Europe 39068 Employees Review of 2003 332 Aircraft in Fleet 306 of which Lufthansa, LH CityLine and LH Cargo In June, Wolfgang Mayrhuber was appointed as Chairman 4 Airbus A340-600 and CEO, succeeding Jürgen Weber, who took up the 30 Airbus A340-300 position of Chairman of the Lufthansa Supervisory Board. 5 Airbus A330-200 26 Airbus A321-100/-200 20 Airbus A320-200 In June 2003, in collaboration with the Munich Airport 17 Airbus A319-100 Company, Lufthansa opened a new terminal at Munich, 3 Airbus A310-300 used exclusively by Star Alliance and partner airlines, and 10 Airbus A300-600 underlining Munich's importance as Lufthansa's second 30 Boeing 747-400 24 Boeing 737-500 international hub. 34 Boeing 737-300 20 Canadair CRJ -700 In response to the AEA TEATS study Lufthansa initiated a 43 Canadair CRJ -100/-200 campaign to cut the high external input costs of air 18 Avro RJ85 transport in Germany. Partners in this initiative are the 8 Boeing 747-200F 14 MD11F hub airports Frankfurt and Munich, the ATC-provider DFS 26 of which LH Regional (wetlease and government organisations that regulate the air fleet operated on behalf of LH). transport sector or are shareholders in providers. 2 Airbus A319-100 2 Boeing 767-300 1 Boeing 737-700 Lufthansa and Arlington-based US Airways announced 5ATR42 plans for a long-term strategic alliance, centred around 11 de Havilland Dash-8 code-sharing, pre-empting US Airways’ accession to Star 5 Fokker 50 Alliance in 2004. Lufthansa and Aeroflot also undertook to + In addition, up to 40 aircraft are operated intensify their co-operation, specifically in the domain of by franchise partners on behalf of LH. aircraft maintenance and pilot training. 31 Aircraft on Order 15 Airbus A380 Lufthansa is restructuring its regional traffic effective 6 Airbus A340-600 January 2004. Under the joint name ‘Lufthansa Regional’, 10 Airbus A330 Augsburg Airways, Contact Air, Eurowings, LH CityLine Status at 31st December 2003 for information and Italian carrier Air Dolomiti (now 100% owned) are on destinations, employees and fleet. grouped under a new umbrella brand with distinctive logo.

Owned by… In December Lufthansa took delivery of its first A340-600. 89.95% Free float www.lufthansa.com 10.05% Public sector The airline has ordered a total of 10 aircraft of this type. These aircraft have been fitted with Lufthansa’s new Owner of… Business Class comfort concept and the entire longhaul 100% Lufthansa Cargo fleet will be retrofitted by the Spring of 2006. Lufthansa 100% Lufthansa CityLine 100% Air Dolomiti Cargo will sell all 8 of its Boeing 747-200s in 2004 in order 30% bmi to operate a uniform MD 11 fleet. From 2005, five MD11s 49% Eurowings will be added to the current 14 MD11s in the fleet. 13% Luxair 10% Condor Major partnerships Member of the Star Alliance. Franchisees (LH Regional): Air Dolomiti, Augsburg Airways, LH CityLine, Contact Air, Eurowings. Various code-share agreements with partners and Adria Airways, Air China, Air One, Cimber Air, Cirrus Airlines, Croatia Airlines, CSA, Maersk Air, SAA, US Airways. Member of the WOW cargo alliance, with SAS, SIA and JAL Cargo.

Financial Results € mill 2003 2002 Turnover 9070 9428 Operating profit/loss (445) 110 Wolfgang Mayrhuber Net profit/loss (1223) 1111 Chairman & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–25 Luxair Luxembourg Airport 2987 Luxembourg

42 Scheduled Destinations 1 within Luxembourg 34 rest of Europe 7 beyond Europe

2241 Employees Review of 2003

16 Aircraft in Fleet Despite the difficult economic context, Luxair still 3 Boeing 737-500 transported nearly 1.1 million passengers in 2003, 2 Boeing 737-400 representing a decline of some 8% over 2002. The 3 Fokker 50 financial result is nevertheless expected to be positive. 8 Embraer RJ-145 Tour operators Luxair Tours and Happy Summer, which belong to the Luxair Group, also performed well despite 3 Aircraft on Order strong competition, as did the Luxair-owned CargoCenter. 3 Boeing 737-700 The works for the construction of a new Terminal at Status at 31st December 2003 for information Luxembourg airport started in 2003, to be completed by on destinations, employees and fleet. the end of 2005.

Owned by… In the network, the Summer timetable saw the resumption 25.2% Banks of flights to Athens which will be operated year-round. In 23.1% State ownership May Luxair launched charter services to Dubrovnik for its 13.4% State-owned bank tour operating subsidiary Luxair Tours. 13.2% Luxair Group and others 13.0% Lufthansa Daily flights to Zurich and Budapest were added to the 12.1% Panalpina World Transport Winter timetable. In November 2003 Luxair made some changes to its network by introducing 3 daily flights to Owner of… London City Airport. This route was previously served in 34.88% Cargolux code-share with Belgium’s VLM Airlines. Luxair now operates this route with its own Fokker 50 aircraft. Luxair Major partnerships has discontinued services to London Stansted Airport, Various agreements with: Air France, while maintaining the flight to London Heathrow Airport. Austrian and Lufthansa. In 2003 Luxair placed firm orders for three Boeing 737- 700 aircraft, with one more on option. These aircraft will

www.luxair.lu Financial Results (Group) replace the Boeing 737-400 and 737-500 which are € mill 2003 2002 currently being used for charter and scheduled European Turnover 289.1 302.0 flights. The extended range of the new Boeings will also Operating profit/loss (4.1) 13.3 allow Luxair to look into new possible destinations. The Net profit/loss 3.6 29.6 first two aircraft will join the fleet in early 2004 while the delivery of the third one is expected for February 2005. The new Boeings show the new Luxair logo and corporate identity which will be introduced on the whole fleet and throughout the Luxair group during 2004.

Christian Heinzmann President & CEO

V–26 ASSOCIATION OF EUROPEAN AIRLINES Malev Hungarian Airlines Könyves K· lm· nkrt.12-14 1097 Budapest Hungary

50 Scheduled Destinations 1 within Hungary 43 rest of Europe 6 beyond Europe Review of 2003 2756 Employees In May a new Board of Directors was elected with Mr. 31 Aircraft in Fleet László Sándor as Chairman of the Board and Chief 2 Boeing 767-200 Executive Officer. In the same month Mr. András Hajdú 1 Boeing 737-800 resigned as Chief Commercial Officer and Mr. Tamás 2 Boeing 737-700 Morvai as Chief Financial Officer. In June respectively Mr. 3 Boeing 737-600 Ervin Nemes and Mr. András Dunai were nominated to 2 Boeing 737-500 these positions. 6 Boeing 737-400 7 Boeing 737-300 2003 presented a difficult operating environment, due to 6 Fokker 70 the war in Iraq and SARS, and saw Malev embark on a 2 Canadair CRJ-200 Program of Modernization of the Fleet and continue with the restructuring of the company. The external factors 12 Aircraft on Order combined with the short-term losses associated with the 4 Boeing 737-800 two above mentioned programs led to the deterioration of 5 Boeing 737-700 the company’s operating result. Malev reported an 3 Boeing 737-600 operating loss of HUF 9.7 billion (€38.5 million) in 2003, which is HUF 5 billion (€20 million) worse than the Status at 31st December 2003 for information operating result of 2002. on destinations, employees and fleet. 2003 saw the launch of preparations for Malev to join the Owned by… Sky Team alliance. Malev is expected to take up 97.9% State privatisation and assets Associate Membership in 2004. handling company 1.2% Municipalities In 2003 the Malev network was extended with 4 new 0.9% Private shareholders and other destinations. In April services to Pristina, in May to Split organisations and in July to Geneva and Krakow were launched. The new destinations have shown promising results. Owner of… In the Summer of 2003 a new strategy was elaborated

www.malev.hu 100% Malev Express and accepted. Two CRJ-200 and 6 new generation Major partnerships Boeing aircraft joined the Malev fleet as part of the Fleet Marketing agreements with Air Europa, Modernization Program which will lead to a healthier cost Balkan Air, KLM and Northwest Airlines. structure. Various code-share agreements with: Air Bosna, Air Europa, Aeroflot, Aerosvit Airlines (Ukraine), Air France, Alitalia, Austrian, Balkan Air, Bulgaria Air, City Air Germany, CSA, Finnair, KLM, LOT, Moldavian Airlines, Northwest Airlines and TAROM.

Financial Results HUF bn 2003 2002 Turnover 110.7 108.9 Operating profit/loss (9.7) (4.3) Net profit/loss (13.5) (2.3)

László Sándor Chairman & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–27 Meridiana S.p.A Centro Direzionale Aeroporto Costa Smeralda 07026 Olbia (SS) Italy

28 Scheduled Destinations 24 within Italy 4 rest of Europe 0 beyond Europe Review of 2003

1360 Employees In 2003 Meridiana embarked on a new business strategy designed to counter the impact of no-frills carriers 21 Aircraft in Fleet operating in the region. The new strategy offers the 17 MD82 standard high-comfort service of a regular airline with a 4 BAe 146-200 reduced-fares structure, made possible by reorganisation, an extensive cost cutting plan, but also through the 4 Aircraft on Order gradual establishment of multiple operating hubs. 4 Airbus A319-100 By year-end Meridiana offered a network of destinations, Status at 31st December 2003 for information operating from the four hubs of Olbia, Florence, Verona on destinations, employees and fleet. and Catania. Although principally a domestic airline, Meridiana also offers four destinations outside its home Owned by… country, to Amsterdam, Barcelona, London and Paris. 57.19% Interprogramme Holding SA 17.59% Aga Khan SA Looking ahead, Meridiana presented its 2004 business 16.08% Meridiana employees plan which targets a 10% growth in passenger traffic. The 7.90% Financial institutions company is introducing further low cost flights, between 1.24% Others Rome airport Fiumicino to the Linate airport in Milan, and with the Summer 2004 schedules new routes in the Owner of… network include Catania-Paris, Palermo-Paris, Florence- - Madrid.

Major partnerships The company also plans to renew the fleet, starting with Code-sharing with Alpi Eagles and KLM. the acquisition of four Airbus A319 aircraft in Spring 2004, to replace the BAe aircraft in the fleet, and the replacement of its MD82s. Financial Results € mill 2003 2002 Turnover 373.9 363.6 Operating profit/loss 10.2 4.2

www.meridiana.it Net profit/loss 0.3 0.4

Giovanni Sebastiani Managing Director & CEO

V–28 ASSOCIATION OF EUROPEAN AIRLINES Olympic Airlines Athens International Airport Bldg 97 5th km Spata-Loutsa Avenue Spata 19019 Greece

67 Scheduled Destinations 35 within Greece 22 rest of Europe Review of 2003 10 beyond Europe On 12th December 2003, after 46 years of continuous 1126 Employees operation, Olympic Airways was restructured and renamed as Olympic Airlines. 38 Aircraft in Fleet 2 Airbus A340-300 The new company incorporates the total flight operation 2 Airbus A300-600 activities of the former Olympic Airways Group (Olympic 16 Boeing 737-400 Airways, Olympic Aviation and Macedonian Airlines) with 1 Boeing 737-300 operations adjusted to the needs of the international 7ATR-72 airline market and its competitors. It operates under the 6ATR-42 same two-letter airline designator code : OA. 4 deHavilland Dash-8 In 2003, Olympic carried in excess of 5 million 0 Aircraft on Order passengers, serving 35 domestic and 32 international destinations with a fleet of 38 aircraft. Status at 31st December 2003 for information on destinations, employees and fleet. In November 2003, a new code-share agreement with Gulf Air gave the company the opportunity, as a marketing Owned by… carrier, to be present in Australia on a daily basis. 100% State ownership Olympic Airlines was officially appointed Grand National Owner of… Sponsor of the Athens Olympic Games 2004. -

Major partnerships Code-share agreements with: AeroSvit, Air Malta, CSA, Gulf Air, Kuwait Airways, TAP.

Financial Results € mill 2003 2002 Turnover 816.3 Operating profit/loss (105.8) Net profit/los( 8.7) www.olympicairlines.com

Petros Papageorgiou Leonard Odysseas Vlamis President CEO

ASSOCIATION OF EUROPEAN AIRLINES V–29 SAS Scandinavian Airlines Frösundaviks Allé 1 19587 Stockholm Sweden

72 Scheduled Destinations 26 within Scandinavia 37 rest of Europe 9 beyond Europe Review of 2003 22945 Employees* Following the restructuring in 2002, the SAS Group now 174 Aircraft in Fleet comprises five business areas, including ‘Scandinavian 7 Airbus A340-300 3 Airbus A330-300 Airlines’ (including SAS Commuter), member of AEA, and 8 Airbus A321-200 ‘Subsidiary and Affiliated Airlines’. In August 2003 20 Boeing 737-800 Scandinavian Airlines reorganised its operations, leading 6 Boeing 737-700 to the creation of autonomous business units 30 Boeing 737-600 (subsequently legal units) for its regional organisations, 8MD90-30 with bases in Copenhagen, Oslo and Stockholm, plus an 15 MD87 intercontinental unit. This has been followed by the 34 MD82 12 MD81 creation of a single unit in Norway, with the integration of 24 deHavilland Q400 Braathens and Scandinavian Airlines, under the name 7 Fokker 50 SAS Braathens.

8 Aircraft on Order All information provided in this Yearbook refers to Scandinavian 1 Airbus A330-300 Airlines, except for ‘ownership’ which is that of the SAS Group. 4 Airbus A321-200 3 Boeing 737-800

Status at 31st December 2003 for information on destinations, employees and fleet.

Owned by… SAS AB, parent company of the SAS Group, is listed on the stock exchanges of Oslo, Stockholm and Copenhagen: 50% State ownership 40-45% Institutional investors 5-10% Individual investors

Owner of… SAS AB is owner of: 100% SAS Danmark A/S 100% SAS Norge AS

www.scandinavian.net 100% SAS Sverige AB 100% Braathens (Norway) 100% Blue1 (formerly Air Botnia) 99.6% Widerøe’s Flyveselkap (Norway) 95% Spanair 49% Estonian Air 47.2% airBaltic (Latvia) 37.5% Air Greenland 25% Skyways (Sweden) 20% bmi

Major partnerships Member of the Star Alliance. Agreements with Air China.

Financial Results* SEK mill 2003 2002 Turnover 50290 58565 Operating profit/loss 1109 2880 Net profit/loss** (1643) (689) ** before tax Jørgen Lindegaard * Incl. all business units except airline holdings and hotels. President & CEO SAS Group

V–30 ASSOCIATION OF EUROPEAN AIRLINES Spanair Edificio Spanair Apdo Correos 50086 07611 Palma de Mallorca Spain

26 Scheduled Destinations 17 within Spain 8 rest of Europe 1 beyond Europe Review of 2003

2904 Employees On 1 st April 2003 Spanair joined the Star Alliance, which also includes United Airlines, Lufthansa and Spanair’s 53 Aircraft in Fleet stake holder SAS. 5 Airbus A321 11 Airbus A320 By mid March Spanair, as the first carrier in Spain, 4 Boeing 717 introduced a simplified and transparent One-Way pricing 1MD87 system on Domestic routes. 21 MD83 11 MD82 In November Spanair received clearance from the US 5 Aircraft on Order Transportation Department for code-share operations on 5 Airbus A320 US-Spain routes with American carrier US Airways.

st Status at 31 December 2003 for information With effect from 1 st April and Star Alliance membership, on destinations, employees and fleet. Spanair entered into a code-share agreement with British Owned by… carrier bmi, connecting points in Spain to Manchester, 94.9% SAS Group Glasgow, Edinburgh, Belfast and Dublin, via London. 5.1% Teinver For the Summer timetable Spanair introduced services Owner of… from Madrid to Stockholm (Sweden) and Oslo (Norway). 18% AeBal These flights come in addition to Madrid-Copenhagen, Major partnerships Barcelona-Stockholm and twice daily Barcelona- Member of the Star Alliance. Copenhagen flights, and underline the importance of the Various agreements with: AeBal, PGA Nordic countries in the Spanair network. Portugalia Airlines and with Star Alliance members. In July and August, peak tourist season, Spanair introduced an additional 211 flights from mainland Spain Financial Results to the Spanish Balearic Islands (Mediterranean Sea) and € mill 2003 2002 Canary Islands (off the West coast of Africa) to meet high Turnover 838.8 799.9 demand. Operating profit/loss 103.0 121.5 www.spanair.com Net profit/loss (4.9) (42.4) Spanair celebrated the third anniversary of its ‘Punctuality Guarantee’ policy, by extending it to all scheduled domestic routes with effect from 15 th January 2004. The guarantee provides passengers with a free ticket if the aircraft doors close more than 15 minutes after schedule due to airline-related delays.

Gonzalo Pascual Arias Enrique Meliá Executive President & CEO Chairman of the Board

ASSOCIATION OF EUROPEAN AIRLINES V–31 SN Brussels Airlines Delta Air Transport nv/sa trading as SN Brussels Airlines The Corporate Village Da Vinci laan 9 1930 Zaventem Belgium

52 Scheduled Destinations 1 within Belgium Review of 2003 36 rest of Europe 15 beyond Europe SN Brussels Airlines was created in 2002, after the bankruptcy of Sabena, by 40 Belgian companies who 1977 Employees founded the SN Air Holding. The airline, 92 % owned by SN Air Holding, operates a fleet of 37 aircraft, connects its 37 Aircraft in Fleet Brussels homebase with Europe and operates longhaul 3 Airbus A330 services to Africa. 3 Airbus A319 12 Avro RJ100 In the network SN Brussels Airlines expanded its African 14 Avro RJ85 network in 2003 (operated by Birdy Airlines on behalf of 5 BAe 146 SN Brussels Airlines), with the launch of services to Casablanca (Morocco) and Mombassa (Kenya) bringing 0 Aircraft on Order the offer on this continent to 15 destinations. SN is the only European carrier on several African routes. At year- Status at 31st December 2003 for information end SN Brussels also operated to 36 points in Europe. on destinations, employees and fleet. At the end of the year SN Brussels Airlines and Thalys Owned by… International signed a partnership which connects Paris 92% SN Air Holding and Brussels Airport by high speed train in under two 8% SIC hours.

Owner of… Next to its own flight operations, SN Brussels Airlines has - developed a strong code-share strategy. This strategy was further expanded in the course of 2003. Almost 10 % Major partnerships of SN passengers are transported thanks to the Various code-share agreements with Alitalia, agreements with partner airlines. SN Brussels Airlines American Airlines, British Airways, Croatia signed new code-share agreements with several carriers Airlines, CSA, Cyprus Airways, Finnair, in 2003, including Cyprus Airways to Paphos and Hellas Jet, Iberia, Lithuanian Airlines, Maersk Larnaca, Ukraine International to Kiev, Croatia Airlines to Air, Malev, Portugalia, Royal Air Maroc, Zagreb and Split, TAP Air Portugal to Lisbon and www.flysn.com SWISS, TAP, and Ukraine International Portugalia to Oporto, Hellas Jet to Athens, British Airways Airlines. to Southampton, Iberia to Barcelona and Madrid, Alitalia to Milan and Rome, and American Airlines to and beyond Chicago. Financial Results € mill 2003 2002 The fleet saw the arrival of three 132-seater short/medium Turnover 533.5 464.9 haul Airbus A319 aircraft, which entered into service at Operating profit/loss (17.6) (102.5) the end of March 2003. Net profit/loss 0.6 (36.8)

Rob Kuijpers Peter Davies Executive Chairman CEO

V–32 ASSOCIATION OF EUROPEAN AIRLINES Swiss International Air Lines Ltd 4002 Basel Switzerland

72 Scheduled Destinations 4 within Switzerland 38 rest of Europe 30 beyond Europe

8838 Employees Review of 2003

85 Aircraft in Fleet In September SWISS accepted an invitation to join the 6 Airbus A340 Oneworld partnership, including American Airlines and 9 Airbus A330 British Airways. However by mid-2004 the company had 4 Airbus A321 reversed its decision to join the alliance. 13 Airbus A320 (2 operated by Swiss Sun) In October SWISS and Oneworld airline British Airways 7 Airbus A319 entered into a strategic alliance. As part of the co- 5MD11 operation, the two airlines will code-share between 15 Avro RJ100 Switzerland (Zurich, Basel and Geneva) and Heathrow, to 4 Avro RJ85 be extended to all Switzerland-UK flights in 2004. Under 14 Embraer RJ-145 the agreement British Airways also agreed to a CHF 50 6 Saab 2000 million (€32 million) guarantee for SWISS. 2 Saab 340 (operated by ECA) In 2003 SWISS extended its code-share agreement with 37 Aircraft on Order Finnair, and signed with Japan Airlines and Qantas, 6 Airbus A340 completing the carrier’s presence on five continents. 1 Airbus A320 15 Embraer RJ-195 From 2003 SWISS charter operations are performed 15 Embraer RJ-170 under the designation Swiss Sun, using two A320s. Early in the year SWISS noted its intention to start-up a regional Status at 31st December 2003 for information subsidiary ‘Swiss Express’, which was ultimately on destinations, employees and fleet. abandoned in favour of a new European fare system.

Owned by… In 2003 Swiss International Air Lines took delivery of six 64.1% Institutional investors A340-300s on order, with another six on order. The 228- 20.4% Swiss Confederation seat longhaul aircraft will replace the MD-11s in the fleet. 12.2% Cantons and communities SWISS reduced its order for Embraer 175 and 190 aircraft 3.3% Private individuals from 60 to 30. Overall the SWISS network and fleet have been resized, with capacity lowered by 15% and fleet size www.swiss.com Owner of… reduced from 135 to 85 aircraft at year-end 2003 as part 99.9% Europe Continental Airways of an on-going company restructuring. (ECA) ‘Crossair Europe’ In early 2004 Christoph Franz was appointed President & st Major partnerships CEOofSWISS,effective1 July, following the departure Code-share agreements with Aer Lingus, of André Dosé. American Airlines, British Airways, Finnair, Iberia, JAL and Qantas.

Financial Results CHF mill 2003 2002 Turnover 4109 4364 Operating profit/loss (527) (859) Net profit/loss (705) (1018)

Pieter Bouw Christoph Franz Chairman of the Board President & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–33 TAP Air Portugal Apartado 50194 1704-801 Lisbon Portugal

36 Scheduled Destinations 7 within Portugal 15 rest of Europe 14 beyond Europe Review of 2003 8360 Employees TAP entered 2003 with a cost savings programme, to 38 Aircraft in Fleet achieve an additional cost reduction of 30 million, and 4 Airbus A340-300 further enhance the company’s efficiency and improve its 3 Airbus A321-200 financial result. TAP, which is still 100% state-owned, is 9 Airbus A320-200 earmarked for privatisation, with its structural organisation 16 Airbus A319-100 as a holding – TAP, S.G.P.S. – as approved by the 6 Airbus A310-300 Portuguese Government in March 2003. As a first step towards privatisation, a new Company – SPdH 0 Aircraft on Order (Portuguese Handling Services) – was launched (started from the former TAP Ground Handling Business Unit). Status at 31st December 2003 for information SPdH started operations in October and has been put out on destinations, employees and fleet. to international tender, the process being due for completion in the first half of 2004. Owned by… 100% State ownership In May TAP and Continental Airlines established a commercial co-operation agreement due to include code- Owner of… sharing on the US to/from Portugal route and beyond. 51% YES Charter Airlines TAP also extended the reach of its code-share agreement 40% Air Sao Tome e Principe with bmi to several destinations in the UK, started a new 15% Air Macau (indirect participation code-share operation with Iberia, which includes flights through a 20% stake held by to/from Portugal (Lisbon, Porto & Faro), to/from Madrid SEAP holding company, in which and Barcelona as well as several destinations beyond the TAP holds 75%). two Spanish cities, and launched a broader co-operation with Portugalia (another Portuguese airline). TAP also Major partnerships entered into code-share with Deutsche Bahn (German Various agreements with: railways), including a number of destinations in Germany bmi, Continental Airlines, Finnair, Iberia, beyond Frankfurt. www.tap.pt LAM (Mozambique), Olympic Airlines, PGA Portugalia Airlines, SATA (Air Azores), SN In the network, the company increased its operation to Brussels Airlines, TACV-Transportes Aereos Brazil to 33 frequencies a week, thus reinforcing its de Cabo Verde and Ukraine International. positioning as the leading European carrier in that market.

In 2003, TAP added and enhanced several service Financial Results features, including the installation of new high-tech lie-flat € mill 2003 2002 seats on all wide-body aircraft (A310 & A340). The Turnover 1144 1248 interruption of the Qualiflyer Programme brought the Operating profit/loss 22 55 creation of TAP’s own FFP and the return of its Net profit/loss 19 (6) Reservations System to the Company‘s HQ.

Manuel Pinto Barbosa Fernando Pinto Chairman CEO

V–34 ASSOCIATION OF EUROPEAN AIRLINES TAROM – Romanian Air Transport Ploiesti Road 16.5 Km Otopeni International Airport Bucharest Romania

36 Scheduled Destinations 9 within Romania 18 rest of Europe 9 beyond Europe Review of 2003

2608 Employees TAROM continued on its course of restructuring, aimed at returning the company to profitability by 2005, at which 19 Aircraft in Fleet point the Romanian government, TAROM's majority 2 Airbus A310-300 owner, is expected to privatise the carrier. 4 Boeing 737-700 6 Boeing 737-300 In 2003 the Romanian carrier underwent some 7 ATR 42-500 management changes. Alexandru Szlivka, appointed President & CEO in October 2002, left the company in 0 Aircraft on Order February and was succeeded by Ioan Lixandru, who himself resigned in November. The position is currently Status at 31st December 2003 for information held by Mrs. Rodica Odobescu. on destinations, employees and fleet. In June a new Departures Terminal at Bucharest - Owned by… Otopeni International Airport became operational, for use 92.63% State ownership by domestic flights operated by TAROM. The Romanian 5.42% Romanian Air Traffic Services government embarked on a feasibility study on setting up 1.43% Muntenia (private financial a new regional, primarily domestic, carrier for the country, investment fund) which would work closely with, and act as a feeder for 0.52% Romanian Civil Aviation Authority TAROM.

Owner of… In the network, TAROM operates a predominately - European and Middle Eastern schedule. Longhaul operations to Beijing were dropped amidst the SARS Major partnerships crisis and with the cessation of New York, the carrier Various code-share agreements with: discontinued its last longhaul operation in November Aeroflot, Air France, Alitalia, Austrian, CSA, 2003. Iberia, LOT, Malev and Syrian Arab Airlines. In June TAROM indicated it was considering ordering four www.tarom.ro Airbus A318 aircraft, as part of a fleet restructuring Financial Results program. In the narrow-body fleet TAROM operates US$ mill 2003* 2002 Boeing 737-300s and took delivery of a third of four 737- Turnover 226.5 202.6 700s on order in 2003. With the introduction of Airbus Operating profit/loss (5) (23.6) TAROM will be operating a mixed type shorthaul fleet. Net profit/loss (12.6) (23.1) The company’s only longhaul aircraft - two A310s - were * estimate put up for sale.

Rodica Odobescu President & CEO

ASSOCIATION OF EUROPEAN AIRLINES V–35 TürkHavaYollariA.O. Genel Müdürlük Binasi Atatürk Havalimani 34830 Yesilköy Istanbul Turkey

103 Scheduled Destinations 27 within Turkey 46 rest of Europe Review of 2003 30 beyond Europe In early 2003 Turkish Airlines saw changes at the top, with 10239 Employees the departure of both the President and the full Board, and the arrival of Abdurrahman Gündogdu as new President & 65 Aircraft in Fleet CEO. 7 Airbus A340-300 5 Airbus A310-300 Plans for the sale of Turkish Airlines, which is majority 26 Boeing 737-800 state-owned, are about to be launched, with the Turkish 2 Boeing 737-500 Government set to offer an initial 10-15% stake to the 14 Boeing 737-400 public in 2004. It is envisaged that the State will retain at 8 Avro RJ-100 least a 51% shareholding in the company. 3 Avro RJ-70 Turkish Airlines is expanding the scope of its domestic 0 Aircraft on Order operations, as part of a Government plan to increase regional air services within the country which also saw the Status at 31st December 2003 for information introduction of new services from at least two, pending on destinations, employees and fleet. approval four, other Turkish airlines.

Owned by… In the fleet, Turkish Airlines announced a renewal 98.17% State-owned Privatisation program and the intended acquisition of 19 new aircraft, Administration types still to be decided. The A310s, Boeing 737-400 and 1.83% Private investors -500s currently in the fleet will likely be replaced, as will the Avro RJ-100s and -70s for which the lease contracts Owner of… will not be renewed when they expire. The aim is to 50% Sun Express increase the fleet size from its current 65 aircraft to 90-95 aircraft by 2008, through combination of ownership and Major partnerships lease deals. Code-share with American Airlines.

Financial Results TRL tn 2003 2002 Turnover 2499.8 2950.5 Operating profit/loss 418.5 404.4 Net profit/loss 347.5 213.8 www.turkishairlines.com

Abdurrahman Gündogdu President & CEO

V–36 ASSOCIATION OF EUROPEAN AIRLINES Virgin Atlantic Airways The Office Manor Royal Crawley, West Sussex RH10 9NU Great Britain

25 Scheduled Destinations 3 within the United Kingdom 0 rest of Europe Review of 2003 22 beyond Europe In May 2003 Virgin Atlantic Airways became the thirty-first 6912 Employees member airline of the AEA, and the third UK-based carrier to join the airline association. 28 Aircraft in Fleet 6 Airbus A340-600 In 2003 Virgin Atlantic expanded its code-share 9 Airbus A340-300 agreement with Singapore Airlines to include SIA’s 13 Boeing 747-400 services between Manchester and Singapore, in addition to Singapore-London services, and on transatlantic 10 Aircraft on Order services from Manchester to Orlando. SIA is 49% owner 6 Airbus A380 of Virgin Atlantic Airways. 4 Airbus A340-600 Early in 2003 Virgin Atlantic Airways introduced a new Status at 31st December 2003 for information service from London Gatwick to Port Harcourt in Nigeria, on destinations, employees and fleet. the first ever direct service between these two cities. This was followed in May 2003 by a new service to Grenada Owned by… and Tobago in the Caribbean. In the autumn of 2003, 49% Singapore Airlines Virgin Atlantic launched a new Upper Class Suite, the largest fully flat bed in business class. Owner of… - Foreseen for 2004 is the launch of services to Australia, made possible by the liberalisation of the air service Major partnerships agreements between Hong Kong and the UK. Various agreements with: Air India, bmi, Continental Airlines, Malaysian Airline System, Singapore Airlines.

Financial Results (Group) £ mill 2003/042 2002/031 Turnover 1272 1401 Operating profit/loss Net profit/loss* 20.9 15.7 *pre-tax 1 FY ending 30th April 2003 www.virgin-atlantic.com 2 Change of FY: 10 months to Feb. 2004

Sir Richard Branson Steve Ridgway Chairman CEO

ASSOCIATION OF EUROPEAN AIRLINES V–37 ASSOCIATION OF EUROPEAN AIRLINES CONTENTS

AEA – Serving the industry for 50 years i

SECTION I AEA AIRLINES IN 2003 I-1 At a Glance I-2 The Global Economic Environment I-4 Flying through Currency Upheavals I-6 Traffic Trends 2003 I-7 Operating Results 2003 I-9

SECTION II OUTLOOK FOR 2004 II-1 Looking Forward ... II-2 Sustaining the Recovery II-3 Financial Outlook 2004 II-4 New Market Opportunities, in Europe and Globally II-5

SECTION V SPOTLIGHT ON THE AEA V-1 AEA Highlights V-3 Who’s Who at AEA V-5 AEA Fast Facts V-6 Airline Profiles & Review of 2003 V-7

SECTION VI KEY STATISTICS VI-1 Key Statistics - Total AEA VI-2 Key Statistics - By Carrier VI-4 What do we mean by…? VI-9

ASSOCIATION OF EUROPEAN AIRLINES VI-1 KEY STATISTICS - TOTAL AEA SCHEDULED TRAFFIC BY ROUTE AREA & NON-SCHEDULED TRAFFIC

121 - 2 Geographical 2003 Domestic Total Europe Europe %/pt %/pt %/pt 2002 DO EU ET Passengers (000) 98 153.8 0.2 132 827.8 -1.7 230 981.7 -0.9 Passenger Kilometres (mill) 51 550.9 0.7 133 912.7 0.1 185 463.6 0.3 Share in Tot. Sched. AEA Traffic (%) 8.6 22.4 31.0 Seat Kilometres (mill) 77 584.6 -2.1 206 748.4 0.1 284 333.0 -0.5 Passenger Load Factor (%) 66.4 1.9 64.8 0.0 65.2 0.5

Total Freight Tonnes Carried (000) 197.3 -9.7 539.8 -4.4 737.2 -5.9 Total Freight Tonne-Kilometres (mill) 153.4 -7.9 713.0 -3.7 866.4 -4.5 % Freight on Passenger Services 79.8 85.3 84.3

Total Revenue Tonne-Kilometres (mill) 4 994.4 0.0 13 386.9 -0.5 18 381.3 -0.4 Available Tonne-Kilometres (mill) 8 530.2 -2.1 23 493.1 -1.5 32 023.3 -1.7 Overall Load Factor (%) 58.5 1.3 57.0 0.6 57.4 0.8

Average Seats per Aircraft 128 118 120 Average Stage Distance (km) 469 887 721

3 42 - 4 Europe - Europe - Int'l Short/ 2003 North Africa Middle East Medium Haul %/pt %/pt %/pt NF EM IE Passengers (000) 3 103.2 9.4 5 361.9 2.5 141 292.9 -1.3 Passenger Kilometres (mill) 5 996.9 9.3 17 766.8 1.9 157 676.5 0.7 Share in Tot. Sched. AEA Traffic (%) 1.0 3.0 26.3 Seat Kilometres (mill) 9 174.7 14.9 25 565.1 -1.2 241 488.2 0.4 Passenger Load Factor (%) 65.4 -3.3 69.5 2.1 65.3 0.2

Total Freight Tonnes Carried (000) 52.4 2.0 200.0 0.0 792.2 -2.9 Total Freight Tonne-Kilometres (mill) 141.1 1.1 933.6 9.0 1 787.7 2.9 % Freight on Passenger Services 92.5 77.1 81.6

Total Revenue Tonne-Kilometres (mill) 710.0 6.3 2 669.7 3.6 16 766.6 0.4 Available Tonne-Kilometres (mill) 1 126.7 9.8 4 153.1 -1.8 28 773.0 -1.1 Overall Load Factor (%) 63.0 -2.1 64.3 3.3 58.3 0.9

Average Seats per Aircraft 157 195 124 Average Stage Distance (km) 1 686 2 663 943

VI - 2 ASSOCIATION OF EUROPEAN AIRLINES 5 678 Europe - Sub North Atlantic Mid Atlantic South Atlantic Saharan Africa %/pt %/pt %/pt %/pt NA MA SA AF 24 991.7 4.3 5 778.5 5.5 3 271.0 11.8 6 786.1 1.4 170 587.8 4.1 44 027.1 5.7 27 933.6 11.7 45 011.3 2.2 28.5 7.4 4.7 7.5 214 331.4 4.6 55 413.0 4.6 33 993.1 3.4 60 435.8 4.8 79.6 -0.4 79.5 0.8 82.2 6.1 74.5 -1.9

1 331.6 4.0 151.8 -2.9 200.4 -1.2 379.6 8.2 9 295.4 1.3 1 279.0 -0.6 1 839.9 10.5 2 724.8 8.3 69.2 83.4 55.5 57.8

25 909.7 3.1 5 437.0 4.1 4 498.4 11.0 6 980.0 3.4 37 252.6 5.1 8 037.1 2.2 6 177.7 -1.2 10 230.6 3.1 69.6 -1.3 67.6 1.2 72.8 8.0 68.2 0.2

271 327 265 285 6 313 6 347 6 549 5 030

95 - 91 - 9 Europe - Far Total Long Haul Total Scheduled Non-Scheduled East/Australasia %/pt %/pt %/pt %/pt AE IC TO CT 12 073.7 -4.5 53 199.2 2.3 292 646.0 -0.2 9 197.8 -3.9 101 410.9 -5.0 389 269.5 2.0 598 496.9 1.5 19 569.8 -6.3 16.9 65.0 100.0 132 169.5 -0.4 496 795.6 3.2 815 868.4 1.8 24 334.9 -6.0 76.7 -3.8 78.4 -0.9 73.4 -0.2 80.4 -0.2

1 656.9 7.1 3 720.8 5.2 4 710.4 3.0 41.8 -31.6 14 497.4 3.5 29 637.3 3.5 31 578.5 3.4 314.1 -62.3 35.5 51.4 53.3 19.9

24 444.9 -0.2 67 298.0 2.5 89 059.0 1.9 2 090.1 -11.0 33 215.3 3.3 94 954.5 3.6 132 257.6 2.1 2 980.9 -12.0 73.6 -2.6 70.9 -0.8 67.3 -0.1 70.1 0.8

283 281 189 170 6 566 6 159 1 237 1 720

ASSOCIATION OF EUROPEAN AIRLINES VI-3 KEY STATISTICS - BY CARRIER TOTAL SCHEDULED

2003 Passengers Passenger Kilometres

(000) % rank (mill) % rank

Adria Airways 758.4 5.3 29 700.2 3.3 28 Aer Lingus Air France 43 490.3 0.2 2 99 073.8 0.6 2 Air Malta 1 308.9 -6.4 23 2 173.7 -5.7 24 Alitalia 22 244.7 1.8 5 31 254.2 5.5 6 Austrian 6 895.1 -2.5 10 14 537.5 5.4 11 bmi 6 319.8 -7.1 11 4 335.6 -5.2 18 British Airways 34 815.4 2.4 3 100 425.7 1.3 1 Cargolux ------Croatia Airlines 1 243.9 12.6 24 870.3 10.9 27 CSA 3 344.3 19.4 18 4 784.2 24.6 16 Cyprus Airways 1 694.2 3.2 22 3 352.1 2.3 20 Finnair 5 672.3 -2.8 12 8 653.3 2.3 13 Iberia 24 669.8 3.3 4 41 957.6 3.7 5 Icelandair 1 134.0 -5.4 25 2 999.8 -5.9 22 Jat Airways 1 011.2 2.4 26 1 041.5 7.1 26 KLM 18 719.2 -6.2 7 56 540.6 -4.5 4 LOT 3 252.2 12.4 19 5 433.8 5.2 15 Lufthansa 44 463.3 1.2 1 96 616.8 3.2 3 Luxair 819.8 -8.4 28 548.5 -5.0 29 Malev 2 260.8 7.7 21 3 316.3 7.8 21 Meridiana 3 775.0 13.6 17 2 561.7 13.9 23 Olympic Airlines 5 105.1 -8.3 15 6 083.6 -19.4 14 SN Brussels Airlines 2 904.1 24.0 20 3 958.3 51.9 19 SAS 20 456.5 -10.7 6 23 020.3 -4.8 9 Spanair 5 288.6 2.4 14 4 551.4 6.7 17 SWISS 10 686.0 -5.3 8 24 169.9 10.9 8 TAP Air Portugal 5 633.7 3.6 13 12 011.5 6.7 12 TAROM 975.1 6.0 27 1 546.2 -1.2 25 Turkish Airlines 9 852.4 -0.6 9 15 047.1 -4.3 10 Virgin Atlantic 3 851.7 1.1 16 26 931.4 -0.9 7

AEA 292 646.0 -0.2 598 496.9 1.5

VI - 4 ASSOCIATION OF EUROPEAN AIRLINES Available Seat Kilometres Passenger Load Factor 2003

(mill) % rank (%) pt rank

1 260.3 4.4 28 55.6 -0.6 28 Adria Airways Aer Lingus 131 647.6 1.7 2 75.3 -0.8 4 Air France 3 225.7 -3.2 24 67.4 -1.8 17 Air Malta 43 564.5 4.5 6 71.7 0.7 8 Alitalia 20 386.6 4.2 11 71.3 0.8 12 Austrian 6 650.9 -9.0 18 65.2 2.6 20 bmi 137 843.3 1.2 1 72.9 0.1 6 British Airways ------Cargolux 1 460.5 1.6 27 59.6 5.0 25 Croatia Airlines 6 622.2 21.6 19 72.2 1.7 7 CSA 4 735.5 5.7 21 70.8 -2.3 13 Cyprus Airways 13 815.2 6.8 13 62.6 -2.8 22 Finnair 55 926.2 1.0 5 75.0 1.9 5 Iberia 4 336.6 -2.0 22 69.2 -2.9 14 Icelandair 1 772.4 6.6 26 58.8 0.3 26 Jat Airways 72 409.6 -1.9 4 78.1 -2.1 1 KLM 7 592.2 2.0 15 71.6 2.1 9 LOT 124 166.0 2.2 3 77.8 0.7 2 Lufthansa 1 078.8 -0.1 29 50.8 -2.6 29 Luxair 4 813.1 -1.4 20 68.9 5.9 16 Malev 3 810.0 6.3 23 67.2 4.5 18 Meridiana 9 720.3 -14.8 14 62.6 -3.5 23 Olympic Airlines 6 887.6 27.1 17 57.5 9.4 27 SN Brussels Airlines 33 332.7 -2.2 9 69.1 -1.8 15 SAS 7 488.7 7.0 16 60.8 -0.1 24 Spanair 33 829.9 7.4 8 71.4 2.3 10 SWISS 16 836.5 3.9 12 71.3 1.8 11 TAP Air Portugal 2 403.3 -5.2 25 64.3 2.6 21 TAROM 22 646.0 -1.1 10 66.4 -2.2 19 Turkish Airlines 35 606.2 6.3 7 75.6 -5.5 3 Virgin Atlantic

815 868.4 1.8 73.4 -0.2 AEA

ASSOCIATION OF EUROPEAN AIRLINES VI - 5 TOTAL SCHEDULED - Passenger & All-Cargo Services

2003 Freight Tonnes Carried Freight Tonne-Kilometres

(000) % rank (mill) % rank

Adria Airways 3.9 -16.6 26 3.5 -21.7 27 Aer Lingus Air France 659.1 1.8 2 4 874.5 0.3 2 Air Malta 8.8 8.5 23 13.8 1.7 23 Alitalia 201.2 -4.4 7 1 354.8 -2.5 6 Austrian 73.1 2.9 12 430.7 8.8 11 bmi 18.2 0.1 17 55.7 -3.2 19 British Airways 625.2 1.8 3 4 193.8 1.7 4 Cargolux 520.3 16.0 5 4 226.3 7.3 3 Croatia Airlines 3.9 -0.7 25 2.6 -2.5 28 CSA 17.8 21.8 18 36.2 32.6 21 Cyprus Airways 17.1 4.4 21 43.1 6.6 20 Finnair 54.3 12.9 13 255.4 18.7 13 Iberia 180.9 0.7 8 809.9 2.1 9 Icelandair 36.0 16.5 15 95.5 5.1 16 Jat Airways 3.6 -7.1 27 4.5 0.8 26 KLM 522.2 0.1 4 4 085.3 2.3 5 LOT 17.8 3.7 19 70.4 5.6 17 Lufthansa 1 021.3 -0.7 1 7 260.5 1.3 1 Luxair 0.3 21.8 30 0.2 30.9 30 Malev 9.8 -5.4 22 28.4 12.8 22 Meridiana 1.8 -14.7 29 1.1 -15.2 29 Olympic Airlines 28.8 -17.6 16 55.8 -30.1 18 SN Brussels Airlines 17.7 125.9 20 100.7 118.4 15 SAS 127.0 -1.7 10 723.6 3.2 10 Spanair 8.1 -1.7 24 10.6 -6.5 24 SWISS 224.9 13.7 6 1 247.6 21.4 7 TAP Air Portugal 48.4 -1.3 14 199.8 2.9 14 TAROM 3.1 -19.5 28 6.8 -19.0 25 Turkish Airlines 117.7 -0.8 11 368.9 -1.8 12 Virgin Atlantic 138.4 12.6 9 1 018.4 13.8 8

AEA 4 710.4 3.0 31 578.5 3.4

VI - 6 ASSOCIATION OF EUROPEAN AIRLINES Revenue Tonne-Kilometres Available Tonne-Kilometres 2003

(mill) % rank (mill) % rank

66.6 1.6 29 134.4 1.9 29 Adria Airways Aer Lingus 13 811.1 -0.8 2 19 397.3 -0.2 3 Air France 208.9 0.7 25 357.0 -30.3 26 Air Malta 4 498.9 3.0 6 6 386.4 2.2 6 Alitalia 1 980.2 6.5 11 2 814.5 5.0 12 Austrian 417.6 -6.1 20 780.5 -11.1 18 bmi 13 277.4 1.4 3 21 196.9 1.3 2 British Airways 4 226.3 7.3 7 5 950.1 10.5 7 Cargolux 81.5 10.1 28 160.4 1.6 28 Croatia Airlines 471.1 24.9 17 735.5 22.5 20 CSA 348.2 2.9 22 569.4 7.1 23 Cyprus Airways 1 047.4 5.5 14 2 079.7 9.7 14 Finnair 4 632.0 3.3 5 7 798.5 1.6 5 Iberia 395.3 -2.3 21 612.0 -5.7 22 Icelandair 98.6 5.0 27 205.0 5.5 27 Jat Airways 9 955.2 -1.5 4 12 639.7 -1.3 4 KLM 607.8 4.6 16 1 002.7 2.6 16 LOT 17 199.7 2.4 1 23 664.8 2.8 1 Lufthansa 49.7 -5.1 30 102.7 -0.3 30 Luxair 290.4 -5.0 23 692.5 6.4 21 Malev 231.7 13.7 24 422.2 6.1 24 Meridiana 632.1 -20.8 15 1 281.9 -13.4 15 Olympic Airlines 456.9 62.7 18 811.2 13.7 17 SN Brussels Airlines 3 041.1 -2.9 10 4 533.9 -1.0 10 SAS 420.2 6.3 19 745.6 9.1 19 Spanair 3 687.7 14.2 8 5 826.3 11.1 8 SWISS 1 298.2 6.0 13 2 208.6 3.7 13 TAP Air Portugal 146.8 -2.6 26 393.6 -3.0 25 TAROM 1 930.3 -3.9 12 3 056.0 -2.4 11 Turkish Airlines 3 550.0 3.4 9 5 698.3 7.7 9 Virgin Atlantic

89 059.0 1.9 132 257.6 2.1 AEA

ASSOCIATION OF EUROPEAN AIRLINES VI - 7 TOTAL SCHEDULED - Passenger & All-Cargo Services

2003 Overall Load Factor

(%) pt rank

Adria Airways 49.5 -0.2 25 Aer Lingus Air France 71.2 -0.4 3 Air Malta 58.5 18.0 18 Alitalia 70.4 0.6 5 Austrian 70.4 1.0 6 bmi 53.5 2.8 22 British Airways 62.6 0.1 12 Cargolux 71.0 -2.1 4 Croatia Airlines 50.8 3.9 23 CSA 64.0 1.2 9 Cyprus Airways 61.2 -2.5 14 Finnair 50.4 -2.0 24 Iberia 59.4 1.0 16 Icelandair 64.6 2.2 8 Jat Airways 48.1 -0.2 28 KLM 78.8 -0.2 1 LOT 60.6 1.2 15 Lufthansa 72.7 -0.3 2 Luxair 48.4 -2.5 27 Malev 41.9 -5.0 29 Meridiana 54.9 3.7 21 Olympic Airlines 49.3 -4.6 26 SN Brussels Airlines 56.3 17.0 20 SAS 67.1 -1.3 7 Spanair 56.4 -1.5 19 SWISS 63.3 1.7 10 TAP Air Portugal 58.8 1.3 17 TAROM 37.3 0.1 30 Turkish Airlines 63.2 -1.0 11 Virgin Atlantic 62.3 -2.6 13

AEA 67.3 -0.1

VI - 8 ASSOCIATION OF EUROPEAN AIRLINES WHAT DO WE MEAN BY … ?

MEMBERS OF THE AEA European Russia up to the Urals (longitude 55°E), including Iceland, Turkey, Azores, Canary Islands, JP Adria Airways Madeira and Cyprus. EI Aer Lingus AF Air France 1-2 Total Europe: the sum of Domestic & Territorial KM Air Malta and cross-border Geographical Europe. AZ Alitalia OS Austrian 3. Europe-North Africa: scheduled services between BD bmi Europe and Algeria, Egypt, Libya, Morocco, Sudan and BA British Airways Tunisia. CV Cargolux Airlines International OU Croatia Airlines 4. Europe-Middle East: scheduled terminating OK CSA Czech Airlines services between Europe and Bahrain, Iran, Iraq, CY Cyprus Airways Israel, Jordan, Kuwait, Lebanon, Muscat, Oman, Qatar, AY Finnair Saudi Arabia, Syria, UAE, Republic of Yemen. IB Iberia FI Icelandair 2-4 International Short/Medium Haul: the sum of JU JAT Airways Geographical Europe, North Africa and Middle East. KL KLM LO LOT Polish Airlines 5. North Atlantic: scheduled services between Europe LH Lufthansa and the Americas via gateways in Continental USA and LG Luxair Canada. MA Malev Hungarian Airlines IG Meridiana 6. Mid Atlantic: scheduled services between Europe OA Olympic Airlines and the Americas via gateways in the Caribbean (plus SK SAS Bermuda), Central America or the South American JK Spanair mainland north of Brazil. SN SN Brussles Airlines LX SWISS 7. South Atlantic: scheduled services between Europe TP TAP Air Portugal and the Americas via gateways in, or south of, Brazil. RO TAROM TK Turkish Airlines 8. Europe-Sub Saharan Africa: scheduled services VS Virgin Atlantic Airways between Europe and Africa, excluding those countries classed as North Africa (see above).

AREA/ROUTE DEFINITIONS 9. Europe-Far East and Australasia: scheduled services between Europe and points east of the Middle The data refer to the scheduled operations of AEA East region, including trans-Polar and trans-Siberian member airlines, broken down between the following flights. groups of routes. It should be noted that each route is allocated in its entirety to one region from station of 5-9 Total Long-haul: the sum of North, Mid- and South origin to final destination, except for the Atlantic where Atlantic, Sub-Saharan Africa, Far East/Australasia and first point of entry determines the route allocation. ‘Other long-haul’ routes not covered above.

Numbering corresponds to that found in the Key Total International: the sum of International Statistics section. Short/Medium Haul and Total Long-haul.

1. Domestic & Territorial: scheduled services 1-9 Total Scheduled Traffic: the sum of International commencing and terminating within the boundries of a Short/Medium Haul and Total Long-haul plus Domestic State by an air carrier whose principal place of & Territorial. business is in that State, or on routes between a State and territories belonging to it, or between two such Non-Scheduled: see below. territories even tough a stage may cross international waters or over the territory of another State and carry Systemwide: Total Scheduled and Non-Scheduled international traffic on intermediate stages. In the case traffic. of multinational airlines owned by partner States, traffic within each partner State is reported as Domestic and all other traffic as international. STATISTICAL DEFINITIONS 2. Geographical Europe: includes all scheduled international routes originating and terminating within Reporting Methodology: For the statistical data the region comprising geographical Europe and included in the data tables in this Yearbook, the reporting guideline applicable from 2001 data is as

ASSOCIATION OF EUROPEAN AIRLINES VI - 9 follows: All operational and traffic items should be Revenue Passengers Carried: A passenger for reported by the operating carrier, including those whose transportation an air carrier receives commercial performed by code-shared, franchised or pooled remuneration. This includes, for example, (i) services, blocked-off charter, blocked-space passengers travelling under publicly available arrangements, joint services and leased aircraft promotional offers (for example “two-for-one”) or loyalty services. In this context the term operating carrier programmes (for example redemption of frequent flyer refers to the carrier whose flight number is being used points); (ii) passengers travelling as compensation for for air traffic control purposes. denied boarding; (iii) passengers travelling at corporate discounts; (iv) passengers travelling on preferential In terms of data coverage, airline mainline data may fares (government, seamen, military, youth, student also include data for subsidiaries, franchisees or etc). Are excluded, for example, (i) persons travelling daughter companies. For 2003 data, following free; (ii) persons travelling at a fare or discount subsidiaries and/or franchisees are reported to the AEA available only to employees of air carriers or their annual data collection by the participating airlines, in agents or only for travel on the business of the carriers; addition to mainline data: (iii) infants who do not occupy a seat.

• Air France (AF): Brit Air, British European, Revenue Freight: All freight counted on a point-to- Compagnie Corse Méditerranée (CCM), City Jet, point basis (in metric tonnes) covered by air waybills for Régional (merger of Regional Airlines, Flandre Air which remuneration is received. Freight carried on and Proteus). trucking services is not included. • Alitalia (AZ): Alitalia Team (until Aug 2002) and Alitalia Express. Distances: Airport-to-Airport great circle distances are • Austrian Airlines Group (OS): Austrian AG, Lauda used. Air, Tyrolean Airways. Tyrolean Airways. • British Airways (BA): BA CitiExpress [Brymon Revenue Passenger-Kilometres (RPK): One fare- Airways, British Regional Airlines or BRAL (wef 1st paying passenger transported one kilometre. RPK's Apr 2002), Manx Airlines (wef 1st Sept 2002)] and are computed by multiplying the number of revenue CityFlyer Express (incorporated in BA mainline). passengers by the kilometres they are flown. • bmi (BD): British Midland Regional. • Icelandair (FI): Icelandair Cargo, Icelandair Charter Available Seat-Kilometres (ASK): The total number of & Lease. seats available for the transportation of revenue • Spanair (JK): AeBal (Aerolineas de Baleares). passengers multiplied by the number of kilometres • KLM (KL): KLM CityHopper, KLM cityhopper uk. which those seats are flown. • Lufthansa (LH): Lufthansa Cargo, LH Regional (Augsburg Airways, Contact Air, Eurowings, LH Passenger Load Factor %: The percentage of seating CitylLine, Air Dolomiti). capacity which is actually sold and utilised. Computed by dividing revenue passenger-kilometres flown by • LOT (LO): wetlease operations on Eurolot. available seat-kilometres flown on revenue passenger • Malev (MA): Malev Express. services. • SAS (SK): Snowflake, SAS Commuter • SN Brussels Airlines (SN): wetlease operations on Revenue Tonne-Kilometres (RTK): One tonne of Birdy. revenue traffic transported one kilometre. Revenue • SWISS (LX): Europe Continental Airways. (ECA). tonne-kilometres are computed by multiplying metric tonnes of revenue traffic (passenger, freight and mail) Scheduled Services: Flights scheduled and performed by the kilometres which this traffic is flown. Passenger for remuneration according to a published timetable, or tonne-kilometres are calculated using standard weights so regular or frequent as to constitute a recognisably (including baggage) which may differ between airlines systematic series, which are open to direct booking by and between domestic/short/long-haul. members of the public. Extra flights occasioned by overflow traffic from scheduled flights and preparatory Available Tonne-Kilometres (ATK): The total number revenue flights on planned air services are also of metric tonnes available for the transportation of considered to be scheduled services. passengers, freight and mail multiplied by the number of kilometres which this capacity is flown. Non-scheduled services: Are defined as ‘Non- scheduled services’: charter flights and special flights Overall Load Factor %: The percentage of total performed for remuneration on an irregular basis, capacity available for passengers, freight and mail including empty flights and blocked-off charters, other which is actually sold and utilised. Computed by than those reported under scheduled services. dividing total revenue tonne-kilometres actually flown Blocked-off charters: when the whole capacity of an by total available tonne-kilometres. aircraft is reserved for charter sale on flights published as scheduled but carried out as charter flights on the same or similar routing and timetable.

VI - 10 ASSOCIATION OF EUROPEAN AIRLINES Yield: The average amount of revenue received per CFMU: Central Flow Management Unit, of Eurocontrol. revenue tonne-kilometre. Passenger yield: passenger revenue per RPK. CODA: Central Office for Delay Analysis.

Unit Cost: The average operating cost incurred per DGCA: Directorate General of Civil Aviation. available tonne-kilometre. ECAC: European Civil Aviation Conference, with Operating Ratio: The relationship between operating headquarters in Paris. revenues and operating expenses. The latter may be inclusive or exclusive of net interest. EIA: Energy Information Administration of the US governments’s Department of Energy. Breakeven Load Factor: The load factor at which operating revenues will cover operating costs. Unit EU: European Union: (from 1958) Belgium, France, cost divided by yield. Germany (west), Italy, Luxembourg, Netherlands, (from 1973) Denmark, Ireland, United Kingdom, (from 1981), Greece, (from 1986) Portugal, Spain, (from 1995) AIR FREEDOM RIGHTS Austria, Finland and Sweden, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, 1st freedom: to overfly one country en-route to Poland, the Slovak Republic and Slovenia. (1st May another. 2004) Membership of Bulgaria and Romania is expected in 2007. 2nd freedom: to make a technical stop in another country. Eurocontrol: European Organisation for the Safety of Air Navigation. 3rd freedom: to carry passengers from the home country to another country. IACA: International Air Carrier Association: worldwide membership of leisure (non-scheduled) air carriers. 4th freedom: to carry passengers to the home country from another country. IATA: International Air Transport Association, with headqarters in Geneva and Montreal. 5th freedom: to carry passengers between two countries by an airline of a third on a route with ICAO: International Civil Aviation Organisation, with origin/destination in its home country. headquarters in Montreal, Canada.

6th freedom: to carry passengers between two OAG: Official Airline Guide, of the Reed Elsevier plc countries by an airline of a third on two routes Group. connecting in its home country. OECD: Organisation for Economic Co-Operation & 7th freedom: to carry passengers between two Development countries by an airline of a third on a route outside its home country. DIRECTORATES GENERAL 8th freedom or cabotage: to carry passengers within OF THE EUROPEAN COMMISSION* acountrybyanairlineofanothercountryonaroute * valid until 1st November 2004 with origin/destination in its home country. Agriculture 9th freedom or Stand-Alone cabotage:tocarry Competition passengers within a country by an airline of another Economic and Financial Affairs country. Education and Culture Employment and Social Affairs True domestic: to carry passengers by an airline in its Energy and Transport (DG Tren) home country. Enterprise Environment Fisheries ABBREVIATIONS Health and Consumer Protection Information Society AAPA: Association of Asia Pacific Airlines, with Internal Market headquarters in Kuala Lumpur. Joint Research Centre Justice and Home Affairs ATC: Air Traffic Control Regional Policy Research CAA: Civil Aviation Authority. Taxation and Customs Union

ASSOCIATION OF EUROPEAN AIRLINES VI - 11 01 Adria Airways - Founded in 1961. AEA member since 1995. 01 16

02 Aer Lingus - Founded in 1936. Logo dated 1940s. AEA member since 1956. 02 17

03 03 Air France - Founded in 1933. AEA member since 1954. 18

04 Air Malta - Founded in 1973. AEA member since 1988. 04 19 05 Alitalia - Founded in 1947. AEA member since 1955. 05 06 Austrian - Founded in 1957. AEA member since 1964 20 . 21 07 bmi - Founded in 1938, as Air Schools Ltd, 06 later Derby Airways until renamed in 1964 22 as British Midland Airways. Logo dated 1960s. 07 AEA member since 1993. 23

08 08 British Airways - Founded in 1935 24 British European Airways (BEA, logo dated 1940s) and British Overseas Airways Corporation 25 (BOAC, logo dated 1930s), members since respectively 09 1954 and 1958, merged into British Airways in 1973.

10 26 09 Cargolux - Founded in 1970. AEA member since 1996.

10 Croatia Airlines - Founded in 1989. AEA member since 1998. 27 11 11 CSA Czech Airlines - Founded in 1923. AEA member since 1991.

12 28 12 Cyprus Airways - Founded in 1947. Logo dated 1960s. AEA member since 1992. 29 13 13 Finnair - Founded in 1923 as Aero o/y. Logo dated 1940s. AEA member since 1957. 14 30

14 Iberia - Founded in 1927. AEA member since 1956. 15 31 15 Icelandair - Founded in 1937. In 1973 Flugfélag Íslands and Loftleidir were merged and named Flugleidir, later renamed Icelandair. AEA member since 1957.

16 Jat Airways - Founded in 1927. AEA member since 1971.

17 KLM - Founded in 1919. AEA member since 1954.

18 LOT - Founded in 1929. AEA member since 2002.

19 Lufthansa - Founded in 1926. AEA member since 1955.

20 Luxair - Founded in 1948. Logo from 1960s. AEA member since 1981.

21 Malev - Founded in 1954. Logo dated 1990s. AEA member since 1987.

22 Meridiana - Founded in 1963 as Alisarda, renamed Meridiana in 1991. Logo dated 1990s. AEA member since 2002.

23 Olympic Airlines - Founded in 1957 as Olympic Airways. AEA member since 1960.

24 SAS - Founded in 1946. AEA member since 1954.

25 SN Brussels Airlines - Founded in 2002. AEA member since 2002.

26 Spanair - Founded in 1986. AEA member since 2000.

27 Swiss International Airlines - Founded in 2002. AEA member since 2002.

28 TAP - Founded in 1945. AEA member since 1961.

29 TAROM - Founded in 1954. AEA member since 2000.

30 Turkish Airlines - Founded in 1933. Logo from 1950s. AEA member since 1967.

31 Virgin Atlantic Airways - Founded in 1984. AEA member since 2003. Association of European Airlines Avenue Louise 350 1050 Brussels, Belgium Tel. + 32 (0)2 639 89 89 Fax + 32 (0)2 639 89 99 [email protected] www.aea.be