PREMIUM TRAFFIC MONITOR FEBRUARY 2015 KEY POINTS

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1 PREMIUM TRAFFIC MONITOR FEBRUARY 2015 KEY POINTS Passenger travel on international markets rose 4.6% in February compared to a year ago, up on the 3.7% result in January; Economy class travel drove the rise in volumes in February, up 4.8% year-on-year, helped by falling fares affecting this more price sensitive market; But the acceleration in the year-on-year comparison is also partly a result of the Lunar New Year occurring one month later in 2015 (in February). The Lunar New Year tends to give a boost to holiday-related leisure travel; The growth trend in premium international passenger travel has flattened over the past several months. Premium international air travel volumes, as shown in the first chart below, have not increased since August There was a weak 2.3% rise in premium travel in February year-on-year; This development reflects a lagged response to the gradual slowdown in improvements in business confidence throughout H2 2014, with economic conditions in some emerging markets deteriorating; The within Europe travel market was particularly weak in January, up just 0.4% for premium class, and 1.6% for economy notably slower than the trend in 2014, which averaged close to 4% overall; By contrast, longer-haul markets continue to perform relatively more strongly, including the Middle East to the Far East/Europe and, which explains why international RPKs expanded at a much faster pace than passenger numbers; Latest data show there are signs of a pick-up in business confidence in the Eurozone and US, which could help ease some of the downward pressure on business-related international air travel in coming months. Looking at international air passenger volumes (first chart above) reveals a flattening in the growth trend, particularly for premium passenger numbers. There were signs of stronger growth in Q3 2014, after a period of notable weakness mid-year, but that positive momentum has slowed again. Premium international air travel volumes have not increased since August This weakness is consistent with a lagged response to the waning business confidence throughout H That said, data reported throughout Q1 by JPMorgan/Markit show there are signs of a pick-up in business confidence in the Eurozone and US, which could help ease some of the downward pressure on business-related international air travel in coming months.

2 There was notable difference in performance of premium and economy seat classes in February, with growth of 2.3% and 4.8%, respectively. In 2013 and during earlier parts of 2014, when premium travel was expanding at a faster pace than economy travel, there was a boost to the share of premium travel from total travel. This was positive for yields growth and revenues. During the last couple of months, however, weakness in business-related premium travel has placed downward pressure on the share of premium seats from the total. At the same time, a rebound in economy class travel has also contributed to a fall in premium s share of total travel. Economy class leisure travel, the relatively more price sensitive travel market, has been given a boost by falling fares. The trend in the share of premium travel from total travel can be seen in the second chart above. Even though there has been no further gain in premium s share of total traffic, growth on longer-haul markets has been robust. This has helped support premium yields on some markets, which in turn has supported the financial performance of the longer-haul network airlines, compared to shorter-haul mainly leisure travel focused airlines in some, though not all, regions. The profile of air travel growth, with a strong second half in 2013 and relatively slower growth during the earlier months of 2014, has been driven by wider economic developments. World trade and industrial production accelerated during the second half of 2013, but that trend failed to continue in 2014, with growth slowing for both measures in Q1. During the course of the second half of the year, however, there was another pick-up in world trade activity, mainly in Emerging Asia. But that positive development was negated by gradual slowdown in business confidence throughout much of H2 2014, which has restricted growth in international air travel. The lagged impact of that weakness in business confidence in late 2014 continues to show-up in premium travel performance in Latest data (March) show there are signs of a pick-up in business confidence in advanced economies namely the Eurozone and US which could help ease some of the downward pressure on business-related international air travel. Traffic Growth by Route - % Change over year 16% 14% 12% 8% 6% 4% 2% -2% First / Business Economy Total Within Europe North Atlantic Within Far East Europe-Far East Source: IATA 2

3 TRAFFIC GROWTH BY MAJOR ROUTE Economy class travel drove the rise in volumes in international air travel volumes in February, helped by falling fares affecting this more price sensitive market. But the acceleration in the year-on-year comparison is also partly a result of the Lunar New Year occurring one month later in 2015 (in February). The Lunar New Year tends to give a boost to holiday-related leisure travel. Results for the within Far East market showed the impacts of the Lunar New Year timing. Premium and economy international travel within the Far East was up 12.2% and 13.9%, respectively. The trend for this market was weak in 2014, with travel declines in Thailand and Malaysia as well as some slowdown in the Chinese economy. Due to the bias from the timing of the Lunar New Year, it is too early to conclude that there an improvement on earlier weakness. Economic conditions in the Eurozone remain fragile and continue to threaten the outlook for air travel. The within Europe travel market was particularly weak in January, up just 0.4% for premium class, and 1.6% for economy notably slower than the trend in 2014, which averaged close to 4% overall. However, recent efforts by the ECB to stimulate economic growth have led to an improvement in business sentiment in the region in February this may support stronger demand for air travel in the coming months. Longer-haul markets have been performing relatively more strongly which explains why international RPKs expanded at a much faster rate than passenger numbers. Examples include international travel on Europe Middle East (up 5.4%) and Middle East Far East (up 7.1%). Major economies in the Middle East, including Saudi Arabia and the United Arab Emirates, continue to show robust economic performance. Markit measures of business activity (both manufacturing and services) show sustained economic growth ahead, with the latest whole economy PMI for the United Arab Emirates continuing to surge strongly in 2015 to reach the highest level since the Indices creation in The is another longer-haul market that is showing solid growth up 6.5% in February year-on-year. The US economy remains a stand-out performer among developed nations, and recent gains in employment and business confidence bode well for both leisure and business-related travel. IATA Economics 20 st April economics@iata.org 3

4 TRAFFIC GROWTH BY ROUTE FEBRUARY 2015 Premium Traffic Growth Economy Traffic Growth Total Traffic Growth Africa - Far East -6.4% -8.1% -2.1% -8.6% -2.5% -8.6% Africa - Middle East -2.7% -0.9% -18.3% -11.7% -16.8% -10.7% Europe - Africa -7.4% -5.1% -3.9% % -2.4% Europe - Far East -0.1% 1.9% % 3.5% 2.7% Europe - Middle East 6.2% 8.2% 5.2% 6.5% 5.4% 6.7% Far East - Southwest Pacific 7.8% 4.4% 9.4% 5.7% 9.2% 5.6% Mid Atlantic 11.7% 11.3% 4.1% % 4.7% Middle East - Far East 6.2% 9.4% 7.1% 7.6% 7.1% 7.8% North America - Central America 3.3% 3.8% 7.9% 7.9% 7.4% 7.4% North America - South America -6.5% -5.5% -1.1% -0.9% -1.8% -1.5% 2.6% 2.7% 7.1% 3.8% 6.5% 3.7% North Atlantic 1.3% 2.7% 1.7% % 2.1% Other routes -3.9% -4.1% 3.1% 4.2% 2.4% 3.5% South Atlantic -1.4% 1.3% 2.3% 2.3% 1.9% 2.2% South Pacific -2.1% -3.3% 1.4% 2.3% 0.9% 1.5% Within Africa -14.3% -15.2% -6.6% -9.7% -7.3% -10.2% Within Europe 0.4% 0.3% 1.6% 1.7% 1.5% 1.6% Within Far East 12.2% 7.4% 13.9% 9.8% 13.8% 9.6% Within North America 0.8% -0.4% 12.6% 11.5% 11.6% 10.5% Within South America 3.6% 3.7% % 12.5% 11.2% Total 2.3% 2.4% 4.8% 4.1% 4.6% 3.9% Source: IATA Origin-Destination Statistics PREMIUM TRAFFIC BY ROUTE PREVIOUS MONTH Share of Premium Share of Total Traffic Revenues Traffic Revenue Africa - Far East 0.7% 0.8% 7.3% 23.5% Africa - Middle East 2.3% 1.3% 7.6% 24.5% Europe - Africa % 6.3% 33.1% Europe - Far East 8.9% 12.3% 9.2% 37. Europe - Middle East 5.2% 5.5% 10.7% 44.5% Far East - Southwest Pacific 2.9% 3.1% 6.6% 22.7% Mid Atlantic 1.8% 2.4% 8.1% 31.3% Middle East - Far East % 5.1% 15.8% North America - Central America 3.9% 1.8% 3.7% 8.8% North America - South America 2.9% 3.9% 10.2% 29.5% 6.5% 12.5% 12.6% 38.2% North Atlantic % 15.7% 52.4% Other routes 6.7% % 23.5% South Atlantic 2.2% 3.4% 9.9% 30.9% South Pacific % 11.3% 37.1% Within Africa 1.5% 0.6% 6.8% 18.2% Within Europe 12.7% 3.7% 2.8% 9.8% Within Far East 17.3% 8.2% 5.3% 15.2% Within North America 0.8% 0.5% 2.1% 7.3% Within South America 0.9% 0.3% 4.2% 7.8% Total % Source: Diio, IATA 4

5 Within Far East Within South America Within North America Far East - Southwest Pacific North America - Central America Middle East - Far East Europe - Middle East Mid Atlantic Total Europe - Far East Other routes South Atlantic North Atlantic Within Europe South Pacific North America - South America Africa - Far East Europe - Africa Within Africa Africa - Middle East Within Far East Mid Atlantic Far East - Southwest Pacific Middle East - Far East Europe - Middle East Within South America North America - Central America Total North Atlantic Within North America Within Europe Europe - Far East South Atlantic South Pacific Africa - Middle East Other routes Africa - Far East North America - South America Europe - Africa Within Africa Premium Traffic Monitor International Premium Traffic Growth by Route - Feb 2015 % Growth International Passenger Growth by Route - Feb 2015 % Growth