ascend @ 7th annual china airfinance conference, 2009

www.ascendworldwide.com

AEROSPACEINFORMATIONREDEFINED

The impact of economic stimulus on China’s airline industry

Gary CrichlowAviation Analyst, ASCEND


7TH ANNUAL CHINA AIRFINANCE CONFERENCEJune 2009

Beijing, China

“The information contained in our databases and used in this presentation has been assembled from many sources, and whilst reasonable care has been taken to ensure accuracy, the information is supplied on the understanding that no legal liability whatsoever shall attach to Ascend Worldwide Limited, its offices, or employees in respect of any error or omission that may have occurred.”



2

ASCEND: INFORMATION & CONSULTANCY SERVICES

DATA

ANALYSIS

MODELLINGADVISORY

MARKET

INSIG

HT



REGULATORY

OEM

FINANCE

INSURANCE

LEASING

MRO

COMPONENTS

OPERATORS



OUTLINE

GLOBAL MACRO-ECONOMIC PICTURE Demand drivers & industry trends

REGIONAL COMPARISONS CHINESE AVIATION MARKET OUTLOOK



IATA GLOBAL TRAFFIC & REVENUE TRENDS

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

E

2009

F

2010

2011

2012

2013

2014

GD

P y-

o-y

% c

hang

e

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Pax RPK

/ airline revenue y-o-y % change

GDP growth (LHS)Passenger RPKs (RHS)Global airline revenues (RHS)

Source: IATA, IMF



PREMIUM TRAFFIC TRENDS

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%A

pr-0

7M

ay-0

7Ju

n-07

Jul-0

7A

ug-0

7Se

p-07

Oct

-07

Nov

-07

Dec

-07

Jan-

08Fe

b-08

Mar

-08

Apr

-08

May

-08

Jun-

08Ju

l-08

Aug

-08

Sep-

08O

ct-0

8N

ov-0

8D

ec-0

8Ja

n-09

Feb-

09M

ar-0

9A

pr-0

9

Prem

ium

reve

nue

y-o-

y gr

owth

(%)

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Premium

volume y-o-y grow

th (%)

Premium volumes Premium revenuesSource: IATA



-6

-4

-2

0

2

4

6

8

10

12

14

World EU USA Lat. Am./Caribbean

DevelopingAsia

CHINAGD

P (c

onst

ant p

rices

) ann

ual %

cha

nge

(%)

2007 2008 2009

Source: International Monetary Fund World Economic Outlook, April 2009

REGIONAL COMPARISONS — GDP TRENDS



REGIONAL COMPARISONS — TRAFFIC TRENDS

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%M

ay-0

8

Jun-

08

Jul-0

8

Aug

-08

Sep

-08

Oct

-08

Nov

-08

Dec

-08

Jan-

09

Feb-

09

Mar

-09

Apr

-09

May

-09

Pass

enge

r RPK

cha

nge

y-o-

y

Air Transport AssociationAssoc. of Asia-Pacific AirlinesAssoc. of Latin American Airlines (ALTA)Assoc. of European Airlines

Source: Airline trade association websites, Ascend analysis



REGIONAL COMPARISONS — 1Q09 AIRLINE RESULTS

(800) (700) (600) (500) (400) (300) (200) (100) 0 100 200

Japan Airlines GroupKorean Air

Singapore AirlinesAirAsia

Air ChinaAir France-KLMBritish Airways

Lufthansa GroupRyanair

Turkish Airlines (THY)LAN Airlines

COPA AirlinesDelta Air LinesUnited Airlines

American AirlinesAir Canada

Frontier AirlinesAllegiant Air

AirTran AirwaysWestJet

Net 1Q09 profit (loss) (US$ millions)

North AmericaLatin AmericaEuropeAsia-Pacific



REGIONAL COMPARISONS — PLANNED CAPACITY

From IAE June 2009 Appraisers’ Event, ParisSource: OAG



-6

-4

-2

0

2

4

6

8

10

12

14

World EU USA Lat. Am./Caribbean

DevelopingAsia

CHINAGD

P (c

onst

ant p

rices

) ann

ual %

cha

nge

(%)

2007 2008 2009 2010 2011

Source: International Monetary Fund World Economic Outlook, April 2009

REGIONAL COMPARISONS — GDP FORECASTS



CHINESE ECONOMIC GROWTH …

IMF (April 2009): China 2009 GDP: 6.5% growth World 2009 GDP: 1.3% decline

World Bank (June 2009): China 2009 GDP: 7.2% growth

(revised upward from March 2009 forecast of 6.5%) World 2009 GDP forecast: 2.9% decline



… AND ITS IMPLICATIONS FOR TRAVEL DEMAND2008 MAINLAND CHINA PASSENGER TRAFFIC GROWTH

-6%

-4%

-2%

0%

2%

4%

6%

Total Domestic International

2008

Yea

r-on

-yea

r gro

wth

Source: CAAC, CAPA analysis

2009 comparisons will be difficult due to 2008 Olympics & natural disasters



CHINESE AVIATION MARKET — SIGNS OF RECOVERY

From IAE June 2009 Appraisers’ Event, Paris

Domestic market growth; international travel still sluggish



CHINESE AVIATION MARKET — LOOKING AHEAD

Huge growth potential BUT … … years of high growth may have masked structural inefficiencies Chinese economic stimulus helping BUT … … long-term strategies will need to be addressed Domestic market better-performing BUT … … needs restructure

China Eastern / Shanghai Airlines merger?

Mainland Chinese carriers — fragile balance sheets



FUNDING REQUIREMENTS

CHINESE AIRLINES DELIVERIES DUE JULY 2009–DECEMBER 2015

0

20

40

60

80

100

120

140

160

180

200

2009 2010 2011 2012 2013 2014 2015

No.

of a

ircra

ft

A380

777

787

A330

A320 family

737 NG

Harbin ERJ-145

E190

ARJ21

MA60

700+ aircraft due,$35bn+ (2009$)

Source: Ascend Online Fleets & Values (V1)

$4bn

$9bn $9bn

$7bn

$4bn

$1bn$0.7bn



SUMMARY

Air transport demand primarily driven by economic health Global GDP, international trade international travel, freight

Global financial system recovery is the key

Chinese domestic market seems to be recovering Domestic GDP slowed but still positive, economic stimulus &

support, market restructuring

There is a way to go yet

THANK YOU!

Hong Kong+852 2813 [email protected]

New York+1 212 551 1118 [email protected]

London+44 20 8564 6700 [email protected]

www.ascendworldwide.com | ascend.aviation2020.net | twitter.com/AscendAviation | linkedin.com: “Ascend Aviation Group”

The information contained in our databases and used in this presentation has been assembled from many sources, and whilst the utmost care has been taken to ensure accuracy, the information is supplied on the understanding that no legal liability whatsoever shall attach to Ascend, its subsidiaries, officers, or employees with respect to any error or

omission that may have occurred.

For further information please visit www.ascendworldwide.com

ascend @ 7th annual china airfinance conference, 2009

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