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Independent Analysis ofIn-Flight Portable Media Players

Walé Adepoju – CEO

Thursday 24th May 2007

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Contents

Overview of Portable IFE Market

Trends in consumer portable media players

Outlook for portable media players in IFE

1

2

3

3

Our Perspective on IFE Portable Media Players

Airline assistance

with IFE\PMP strategy & purchase

Passenger Research

Ancillary revenue

analysis for airlines

Technology Trend Analysis

Corporate Finance

Airline Research

360˚Independent Perspective

4

Overview of portable IFE

market

1

5

Market Overview• IFE systems have been traditionally designed for twin-aisle, intercontinental market

• Today’s IFE systems fail to reach an audience 3 times bigger than the current market

• Portable Media Players can be an innovative solution on twin aisle aircraft

100

200

300

400

500

8 14 16

‘ULTRA LONG &

THIN’ e.g. A340-

600

124 62 10

MID-RANGE WIDE-

BODY e.g. 767,

A330

MID-RANGE

NARROW-BODY

e.g. 757 A321SHORT HAUL A320 &

737FEEDER &

HOPPER

e.g. CRJ,EMB

CORPORATE

0Length of flight (hours)

Aircraft size

(seats)

Twin-aisle

Wei

ght

cons

trai

nts

Logistics and passenger needs change

100

200

300

400

500

8 14 16124 62 10

MID- RANGE

NARROW-BODY

e.g. 757 A321SHORT HAUL A320 &

737FEEDER &

HOPPER

e.g. CRJ,EMB

CORPORATE

0Length of flight (hours)

(seats)

Wei

ght

cons

trai

nts

Logistics and passenger needs change

Aircraft market in terms of IFE

Ultra-long &Thin routese.g. A340-500

Mass inter-continental

Eg. 747-400, A380

777

Mid range

Twin-aisle

e.g. A330, 767

Global commercial fleet

Single71%

Twin29%

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Portable Media Players (PMP) Technology profile

• Technically quite robust

• Delivered high percentage of initial promise

• Inflight portables can match the IFE experience provided by full interactive systems

• Content security

• 2 hardware approaches by vendors

• Customised units

• Consumer Off The Shelf (COTS) technology

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Portable Media Players (PMP) Technology profile

““I gotta have it” I gotta have it” phase”phase” Airlines scramble to get one & drive high requirements

The idea phase -The idea phase -

An idea is born from innovation, new technology, or...

The “die trying” The “die trying” phasephase

Some suppliers never make it and die trying

The “I got it too” phase -The “I got it too” phase -

suppliers all claim to have the new product…or one better

The peak :The peak : goal is set very high from demands of airlines…or promises from suppliers, or...

The plateau -The plateau -

The final result is a relaxation of the requirements...

and a settling down to reality

REED TheoryDan Reed

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Panasonic

Airvod

Mezzo

Phantom Media

Inflight portable device market

• Inflight portables are currently a very small market• Less than 2% IFE expenditure in 2006 (excluding DVD players)

• Market is characterized by relatively low cost of entry• Resulting in a high number of start-ups

Panasonic Thales

LiveTVRockwell Collins

Embedded IFEEstablished

Inflight PMPsDeveloping

65% combined market share

e.Digital

IMS

DigEcor

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Main portable IFE suppliersManufacturer Product Airlines

digEcor DigEplayerDigEplayer XT

30 Airlines including: Aeroflot, Alaska Airlines, American Airlines, Hawaiian Airlines, Icelandair, Independence Air, Jetair, Jetstar, KLM, L’Avion,MaxJet, Midwest Airlines, North Monarch, Pacific Blue, PIA, SilkAir, SN Brussels Airways, Virgin Blue

IMS PEAPAV-704PAV-604

American Airlines, VARIG, Jet Airways, EOS Airlines, SonAir, Excel, Air India, TAM

Panasonic Avionics Corp eXpress ANA

eDigital Corp eVU Lufthansa, Alitalia, MAS

Mezzo eVU Silverjet, Jet2, Flyglobespan

Airvod Entertainment MACH5 Tiger Airways

Phantom Media Bluebox lite bmi

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Trends in portable media2

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Drivers of inflight PMP

Technology

advances

Single aisle aircraft IFE

& backlog of twins

Provides alternative

to embedded

IFE

Passenger expectation

s

Differentiate airline product

Inflight PMPs Airline product

Consumer power

Natural constraints of embedded IFE

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Consumer portable devices

Consumer portables are increasing their:

• Prevalence• Quality• Importance

As a result passengers expect more from IFE, but can provide their own content if enabled

Smartphones

iPod

• Sales up 70% from Q3 2006 to Q1 2007• Becoming thinner, more stylish and have more

compelling features

• iPod sales up 24% to 10.5 million in Q1 2007

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Consumer portable devices

Portable gaming devices

Ultra Mobile Personal Computers

UMPCs

• $10 billion industry in 2007• Nintendo DS at 40 million units worldwide• Sony PSP at 20 million units worldwide

• Potential to add benefits of a PC to inflight PMP• Bleeding edge / Immature technology• Some inflight PMP suppliers are using UMPCs in a

COTS approach to product development

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Outlook for portable media players in

IFE

3

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Market trends

• Increasing demand for aircraft

• Need to extend life of older aircraft

• Increasing competition among airlines

• Declining yields

• Need for shorter product life cycle

Increase in demand for more portable IFE devices

Increase in demand for plug & play with passenger’s own device

RISKS & ISSUES

Safety issues relating to batteries onboard

Perceived security risks to content are higher

Full seat-back installation of PMPs incurs hidden costs that wipe out some of the advantage over existing embedded IFE systems.

Cost per unit will continue to fall rapidly

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Getting the max return on PMP investment

• Providing a total solution, more than just a great product, is the key to success as a vendor

• Content supply chain solutions

• Unit distribution and maintenance logistics

Business

problem

Business

opportunity

Solution

Technology

Software

Process

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Getting the max return on PMP investment

• PMPs ‘fit’ as a business model in a number of markets

• Recently profitable US carriers looking to improve their product on an aging fleet

• European carriers seeking to differentiate themselves and gain ancillary revenues

• Premium only start-up carriers such as Silverjet and Eos

Portable media has the potential to deliver a higher proportion of media revenues

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If we see Portable media players as hardware – it will struggle to provide sufficient value.

However, if it is seen as a tool in the media content value chain, then it provides us with opportunities that we did not have before.

Thank you

Walé Adepoju

www.imdc.net