IATA Cargo Summary

IATA Cargo Conference Presented by

Dr. Emre Serpen Executive Vice President March 8 , 2011

…in 2008 world air cargo market looked bleak YoY Percent Change

Air Freight Traffic January 2008 – January 2009

10%

5.9% 5%

4.5%

3.3%

3.7%

1.3%

0%

-0.8%

-1.9%

-5%

-2.7% -7.7%

-10%

-7.9%

-13.5%

-15%

-20%

-22.6% -23.2%

-25%

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Source: International Air Transport Association

However compared with 2009 world air cargo market expected to grow approx 5.9 % per annum over the next 20 years

1

Since 2000, GDP growth for emerging and developing economies has outpaced advanced economies Real GDP Growth CY 1980 – CY 2010 10%

8%

Emerging and Developing Economies

6%

4%

2%

Advanced Economies

0%

-2%

-4% 1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

Source: International Monetary Fund, World Economic Outlook Update, November 2010

2000

2002

2004

2006

2008

2010

2

Air Freight Traffic Shows Normalisation of cargo traffic in recent months, as high yoy growth rates was due to recovery from recession Air Freight Traffic January 2010 – January 2011

YoY Percent Change 40%

34.3%

35%

30%

28.3%

28.1% 26.5%

26.5% 25.2%

25%

22.7% 19.6%

20%

14.8%

15%

14.4%

9.1%

10% 6.7% 5.4% 5%

0%

Source: International Air Transport Association

3

IMF sees strong growth in emerging markets such as India and China World Economic Outlook Projections (GDP) 2011 Estimates Euro Area

1.5

Japan

1.6

United Kingdom

2

Canada

2.3

Advanced Economies

2.5

United States

3

Central & Eastern Europe

3.6

Other Advanced Economies

3.8

Mexico

4.2

World

4.4

Brazil

4.5

Russia

4.5

Africa

4.5

Middle East

4.6

CIS Excluding Russia

5.1

ASEAN-5

5.5

India

8.4

China

9.6

0

2

4

6

8

10

12

Percent Growth Source: International Monetary Fund, World Economic Outlook Update, January 2010

4

Asian and Middle Eastern Markets are among fastest growth markets World Air Cargo Forecast (RTKs) CY 1999 – 2009 (Historical) and CY 2010 – CY 2029 (Long-Term Forecast) 5.9%

1.9%

World

3.0%

-2.5%

Intra-North America

Latin America–North America

1999-2009 5.6%

2.5%

Latin America–Europe

4.2%

-1.5%

Europe–North America

2010-2029

5.7%

-0.7%

3.6%

0.1%

Intra-Europe

6.0% 6.5%

Middle East–Europe 5.1%

3.3%

Africa–Europe

6.7%

1.4%

Asia–North America

6.6%

4.1%

Europe–Asia

7.9%

3.4%

Intra-Asia

6.5%

4.1%

South Asia–Europe

9.2%

13.1%

Domestic China

-4%

-2%

0%

Source: Boeing World Air Cargo Forecast

2%

4%

6%

Economic Trends

8%

10%

12%

14%

5

Since 2004, the historical relationship between GDP and air freight volume growth has deteriorated YoY Percent Growth in Freight Tonne Kilometers vs. World GDP CY 2000 – CY 2009 YoY Percent Growth 14%

Freight Tonne Kilometers

12% 10% 8% 6% 4%

GDP

2% 0% -2% -4% -6% 2000

2001

2002

2003

2004

2005

Source: ICAO Air Transport Reporting Form A plus ICAO estimates for non-reporting States

2006

2007

2008

2009

6

Air freight yields continued to rise thru 2008 with increasing fuel prices than fell 22% 2009 with falling fuel prices Air Freight Operating Revenues per RTK CY 1995 – CY 2007

Air Freight Yield (USD ¢) 33¢

Fuel/Security Surcharge Effects 31¢

29¢

Avg. Annual Growth Rate Air Friend Yields

27¢

Deregulation, liberalisation and increased belly capacity contributed to continuously declining air freight yields

1995-2001

-1.1%

2002-2006

+2.9%

25¢

1995

1996

1997

1998

1999

2000

2001

2002

Source: ICAO Air Transport Reporting Form A plus ICAO estimates for non-reporting States

2003

2004

2005

2006

7

Few years ago compared to passenger airlines cargo airlines were slow in executing capacity adjustments YoY Percent Chance in Air Freight Traffic CY 2007 – 2008 5%

4.3%

4%

3% 2% 1% 0%

Capacity Growth

-1%

Market Growth

-2% -3% -4%

-4.0%

-5% -6%

2007

2008

Source: International Air Transport Association 8

Cargo Airlines are now doing much better job matching cargo capacity with demand YoY Percent Change in Traffic and Capacity – Passenger vs. Cargo January 2011 vs. January 2010

Passenger Traffic & Capacity

Cargo Traffic & Capacity

12% 10.9%

1.8% 10%

0.9%

9.1%

9.1%

Passenger Growth

8.2% 8%

Cargo Growth 6%

4%

2%

0%

Commercial decision making, Balancing Yield, Price and Service Source: International Air Transport Association

9

Operating freighter efficiency critical for profitable operation Net Payload (lbs)

Net Payload vs. Fuel Burn per Block Hour for Select Freighter Types

250,000

B747-400F B777-200F

200,000

MD11-F 150,000

A340-300F

B767-300F 100,000

A300-600F

50,000

10,000

12,500

15,000

17,500

20,000

22,500

Fuel Burn per Block Hour Source: DAC; Note: Fuel burn and net payload at 2,500 km (net payload at 8.5 lb/cu ft); Boeing

Fleet Trends

25,000

Opportunities for improving ‘ margins with better commercial decisions, route/yield management, fleet mix, and working with other carriers/alliances Operating Margin for Select Cargo Operators FY 2009 Astar Air Cargo

14.2%

Atlas Air

14.1%

EgyptAir Cargo

14.0%

Centurion Air Cargo

6.5%

UPS

5.9%

Kalitta Air

4.6%

Cargolux

4.4%

FedEx

3.6%

AirBridge Cargo

3.6%

Polar Air Cargo

-0.2%

Lufthansa Cargo Arrow Cargo

Average 4.1%

-8.8%

-12.5% -15%

-10%

-5%

Source: ATW World Airline Report Financial 2010

0%

5%

10%

15%

20%

11

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