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Setting the scene: The European market CONNECT – Vilnius Monday 14 March 2016 Ralph Anker Chief Analyst anna.aero <a href="mailto:[email protected]" target="_blank">[email protected] </a>What’s coming up … • Developments in Europe 2014-2016 • Passenger demand by country 2015 • European trends in S16 • Baltic states and airBaltic • LCC trends • easyJet, Ryanair and Wizz Air • Exchange rates • GDP forecasts • Conclusions 2Developments in Europe 2014 • Legacy carriers still struggling for profitability • Etihad’s involvement in European carriers – Aer Lingus, Air Serbia, airberlin, Alitalia (pending) • Ryanair opens new bases including Athens (ATH), Brussels (BRU), Lisbon (LIS) and Rome (FCO) • easyJet opens new bases in Hamburg and Naples • Vueling grows outside of Spain (turns 10 on 1 July) • Norwegian’s long-haul expansion with 787s • germanwings completing Lufthansa network transfer • Wizz Air up to 20 bases (10th birthday celebrated) • Turkish Airlines still growing at IST – Growing secondary hub at SAW (taking on Pegasus) 3Developments in Europe 2015 • Cheap fuel!!! • Many legacy carriers still struggling for profitability • Alitalia rescue by Etihad Airways approved • Lufthansa/germanwings/Eurowings evolution • IAG trying to acquire Aer Lingus • Gone: Cyprus Airways, eurolot, Air Lituanica, Estonian Air • Mixed response to growth of MEB3 carriers • Ryanair new bases in Berlin SXF, Bratislava, Copenhagen and Ponta Delgado • easyJet new bases in Amsterdam, Porto • Wizz Air new bases in Debrecan, Kosice, Lublin • Turkish Airlines still growing – over 240 routes 4Developments in Europe 2016 • Fuel even cheaper!!! • Many European legacy carriers making money, but … – IAG doing very well, now including Aer Lingus • Ryanair’s new bases in Belfast, Bucharest, Corfu, Hamburg, Ibiza, Milan MXP, Nuremberg, Santiago de Compostela, Timisoara • easyJet’s new bases in Barcelona and Venice • Transavia’s new base in Munich • Wizz Air’s new base in Iasi • Formation of A4E “alliance” against aviation taxation • Still no decision on London runway … • … Berlin’s “new” airport still not open 5European airport traffic 2015 Change in total annual passengers across all airports 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% All countries: +5.0% to 1.9 billion 6FIGUST countries 2015 Country UK Airport pax % vly >1m* 254.7m 216.5m 207.4m 181.4m 170.6m 156.8m +5.5% 20 (-1) +3.8% 17 (+1) +5.9% 20 (+1) +9.3% 17 (+2) +3.5% 17 (+1) +4.3% 23 Germany Spain Turkey France** Italy *Number of airports with more than 1 million annual passengers **Includes Basel-Mulhouse (BSL) airport. Source: UK CAA, ADV , Aen a<a href="/goto?url=http://www.aeroport.fr,Assaeroporti, DHMI" target="_blank">, www.aeroport.fr</a><a href="/goto?url=http://www.aeroport.fr,Assaeroporti, DHMI" target="_blank">, </a><a href="/goto?url=http://www.aeroport.fr,Assaeroporti, DHMI" target="_blank">Assaeroport</a><a href="/goto?url=http://www.aeroport.fr,Assaeroporti, DHMI" target="_blank">i</a><a href="/goto?url=http://www.aeroport.fr,Assaeroporti, DHMI" target="_blank">, DHMI </a>7Top 15 intra-European international pairs Change in monthly one-way seat capacity Jun16 v Jun15 (Monthly one-way seat capacity in June 2016 - millions) <ul style="display: flex;"><li style="flex:1">-10% </li><li style="flex:1">-5% </li><li style="flex:1">0% </li><li style="flex:1">5% </li><li style="flex:1">10% </li><li style="flex:1">15% </li></ul>19.0% 20% UK - Spain (2.446m) 9.4% 10.1% Germany - Spain (1.559m) Germany - Italy (0.892m) Germany - Turkey (0.810m) UK - Italy (0.797m) -6.8% 12.6% 1.8% UK - Germany (0.784m) UK - France (0.694m) 13.8% 6.3% 6.6% Spain - Italy (0.676m) Spain - France (0.658m) UK - Ireland (0.637m) 10.4% 5.6% France - Italy (0.625m) UK - Netherlands (0.537m) UK - Greece (0.528m) 7.8% 9.5% 5.2% 6.5% Germany - France (0.469m) Germany - Greece (0.444m) 8Top 14 European domestic markets Change in monthly seat capacity (Jun16 v Jun15) (Monthly seats in June 2016) <ul style="display: flex;"><li style="flex:1">-20% </li><li style="flex:1">-15% </li><li style="flex:1">-10% </li><li style="flex:1">-5% </li><li style="flex:1">0% </li><li style="flex:1">5% </li><li style="flex:1">10% </li><li style="flex:1">15% </li><li style="flex:1">20% </li></ul>6.2% Turkey (5.317m) 1.6% Spain (3.789m) Italy (3.456m) -0.7% 13.0% Germany (3.217m) France (2.918m) 0.8% -18.7% Russia (2.744m) 0.5% United Kingdom (2.167m) Norway (2.050m) Greece (1.032m) -4.1% 13.9% 10.9% Sweden (0.948m) Portugal (0.519m) Finland (0.291m) Denmark (0.206m) Poland (0.206m) 16.4% -2.7% -9.6% -0.5% 9Top 50 Airlines at European airports Change in monthly seat capacity Source: OAG Schedules Analyser for June 2016 and June 2015 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Total all carriers: +4.7% 10 Baltic airport traffic 2001-2015 Annual passengers (millions) 12 11 10 9Palanga (PLQ) 0.75 2.17 Kaunas (KUN) Tallinn (TLL) Vilnius (VNO) Riga (RIX) 0.72 2.02 0.69 1.96 0.83 2.21 0.87 1.91 3.33 5.16 80.81 1.38 0.41 1.81 2.95 4.81 2.66 4.79 70.46 1.35 0.39 1.73 2.20 4.77 1.71 5.11 61.37 4.66 2.04 3.69 1.54 1.30 4.07 51.72 3.16 1.40 41.45 2.49 31.28 1.87 1.00 20.72 0.72 0.71 0.96 1.06 0.61 0.64 0.63 0.57 0.58 0.62 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 11 Baltic airport seasonality Monthly passengers in 2015 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0Riga Vilnius Tallinn <ul style="display: flex;"><li style="flex:1">Jan </li><li style="flex:1">Feb </li><li style="flex:1">Mar </li><li style="flex:1">Apr </li><li style="flex:1">May </li><li style="flex:1">Jun </li><li style="flex:1">Jul </li><li style="flex:1">Aug </li><li style="flex:1">Sep </li><li style="flex:1">Oct </li><li style="flex:1">Nov </li><li style="flex:1">Dec </li></ul>12 Top 15 airlines from Baltic airports in 2015 Departing seats (% change versus 2014) <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">500,000 </li><li style="flex:1">1,000,000 </li><li style="flex:1">1,500,000 2,000,000 </li></ul>2,249,330 2,500,000 airBaltic (-0.8%) Ryanair (+11.1%) 1,507,842 819,360 Wizz Air (+39.8%) 425,846 405,472 Estonian Air (-9.0%) Lufthansa (-4.1%) 312,637 Aeroflot (+51.3%) 286,280 231,922 228,184 150,823 143,285 131,717 96,985 Finnair (+11.3%) SAS (+42.0%) Norwegian (+18.6%) Turkish Airlines (+19.5%) LOT Polish Airlines (+7.6%) Avies (+6.0%) Ukraine Int'l Airlines (+63.3%) Air Lituanica (-54.9%) Brussels Airlines (+79.4%) 77,916 55,827 13 Top 15 country markets from Baltic airports Departing scheduled seats in 2015 (000s) (% change versus 2014) <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">100 </li><li style="flex:1">200 </li><li style="flex:1">300 </li><li style="flex:1">400 </li><li style="flex:1">500 </li><li style="flex:1">600 </li><li style="flex:1">700 </li><li style="flex:1">800 </li><li style="flex:1">900 </li><li style="flex:1">1,000 </li></ul>954 947 UK (+10.9%) Germany (+10.5%) Russia (-4.2%) 594 577 Norway (+8.9%) Finland (+1.4%) Denmark (+5.9%) Sweden (+25.9%) Latvia (+4.0%) 438 374 350 336 314 Italy (-1.3%) 254 Estonia (-8.6%) 227 218 Netherlands (+7.6%) Belgium (+37.1%) France (+13.4%) Lithuania (-19.2%) Spain (+15.5%) 212 210 201 14 Top 15 airBaltic routes in S16 by ASKs Weekly one-way ASKs in August 2016 (millions) [Weekly departures - from RIX unless stated otherwise] <ul style="display: flex;"><li style="flex:1">0.0 </li><li style="flex:1">0.5 </li><li style="flex:1">1.0 </li><li style="flex:1">1.5 </li><li style="flex:1">2.0 </li><li style="flex:1">2.5 </li><li style="flex:1">3.0 </li></ul>2.76 2.68 London (LGW) [12] Moscow (SVO) [24] Paris (CDG) [10] 2.20 2.12 Amsterdam (AMS) [12] Munich (MUC) [12] Tbilisi (TBS) [5] 1.86 1.54 1.41 1.38 1.28 1.18 Vienna (VIE) [12] Berlin (TXL) [12] Zurich (ZRH) [7] Tel Aviv (TLV) [3] 1.17 1.17 1.15 1.15 TLL - Amsterdam (AMS) [7] Barcelona (BCN) [4] Milan (MXP) [6] Oslo (OSL) [19] 0.99 Copenhagen (CPH) [19] 15 LCCs still growing in 2015 … pax up 17% pax up 7% pax up 21% pax up 1% pax up 13% pax up 22% to 101.4 million to 69.9 million to 26.3 million* to 25.8 million to 22.3 million to 19.2 million * anna.aero estimate Other carriers: Lufthansa Group (107.7m) [includes Austrian, SWISS, germanwings] Air France/KLM (89.8m) IAG (BA/Iberia/Vueling) (88.3m) Turkish Airlines (61.2m) Aeroflot (39.4m), airberlin & SAS (both 30.2m) 16 European LCCs Average weekly route frequency in summer (2006-2016) 12 11 10 9easyJet (U2) Vueling (VY) Eurowings (4U/EW) 8Ryanair (FR) 7Transavia (HV/TO) 65Jet2.com (LS) 4Norwegian (DY/D8) 3Wizz Air (W6) 21Volotea (V7) 0<ul style="display: flex;"><li style="flex:1">S06 </li><li style="flex:1">S07 </li><li style="flex:1">S08 </li><li style="flex:1">S09 </li><li style="flex:1">S10 </li><li style="flex:1">S11 </li><li style="flex:1">S12 </li><li style="flex:1">S13 </li><li style="flex:1">S14 </li><li style="flex:1">S15 </li><li style="flex:1">S16 </li></ul>17 LCCs - % of new routes with competition In 2013, 2014 and 2015 <ul style="display: flex;"><li style="flex:1">0% </li><li style="flex:1">10% </li><li style="flex:1">20% </li><li style="flex:1">30% </li><li style="flex:1">40% </li><li style="flex:1">50% </li><li style="flex:1">60% </li><li style="flex:1">70% </li><li style="flex:1">80% </li><li style="flex:1">90% </li><li style="flex:1">100% </li></ul>52% 53% 50% Norwegian easyJet Vueling Ryanair Volotea Wizz Air 2013 42% 51% 47% 2014 2015 56% 57% 46% 9% 27% 39% 29% 36% 36% 10% 11% 12% 79% 90% Spirit Airlines Southwest Airlines Allegiant Air 85% 29% 29% 48% 7% 8% 10% 18 PELOCO5 head-to-head competition in S16 Number of competing airport pairs <ul style="display: flex;"><li style="flex:1">0</li><li style="flex:1">5</li><li style="flex:1">10 </li><li style="flex:1">15 </li><li style="flex:1">20 </li><li style="flex:1">25 </li><li style="flex:1">30 </li><li style="flex:1">35 </li><li style="flex:1">40 </li><li style="flex:1">45 </li><li style="flex:1">50 </li><li style="flex:1">55 </li></ul>55 Ryanair v Vueling Ryanair v easyJet 42 34 easyJet v Vueling 23 Ryanair v Norwegian easyJet v Norwegian Ryanair v Wizz Air Vueling v Norwegian Vueling v Wizz Air easyJet v Wizz Air Norwegian v Wizz Air 22 17 11 7 2119 Smaller markets: Gibraltar (+34%), Morocco (-42%), Egypt (-73%) Recently withdrawn from Russia, Tunisia 20 New country market: Montenegro (Tivat); Tivat only new destination

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