AIR BERLIN PLC FCF GERMAN INDUSTRY CAPITAL MARKET DAYS Dubai, 25 April 2012
2 AGENDA FCF German Industry Capital Market Days, 25 Apr. 2012 page Topic 1 Review 2011 3 Topic 2 Overview 2012 Macro-economic development Focusing the business model Measurements to improve profitability 11 14 17 Outlook 2012 26
3 2011 has mainly been influenced by factors which were beyond the control of airberlin Fuel & Dollar Negative development of both led to: cost increase and the need for further price increase especially in smaller catchments this led to a drop in SLF as demand fell Cautious consumer behavior Late booking pattern leading to less ability to forecast bookings $ AT 2011 Aviation tax imposed a heavy burden as this presented close to 5% cost increase on top of fuel EUR 166 m burden in 2011 Arab Spring loss of profits to North Africa destinations change of the capacity alignment lower margins in other leisure destinations due to overcapacity issues
airberlin reacts to the economic pressure by launching a new efficiency program Initiatives taken to strengthen airberlin s position in a competitive market A B Shape & Size - Our fitness program A comprehensive program to improve profitability Network optimization Optimized corporate organization Cost reduction Reduction of complexity Financing activities Aircraft sliding to improve the CAPEX (Investment reduction by $ 508 m in 2012 and by $ 1,128.4 m in 2013 * ) and reduce capacity pressure Bond issuance in November EUR 100 m C D Sharpening the Business model offering a worldwide network for business and leisure with access through multi distribution channels New partners Etihad and airberlin entered a deep strategic partnership covering commercial activities on network and sales plus financial involvement making Etihad the largest shareholder oneworld membership with effective date 20 March 2012 to strengthen and well position airberlin for the future * based on current average list prices as of 10/25/11 4
* pro forma (PF): incl. NIKI 1H 5 Financial Performance 2011 REVENUE EBITDAR Revenue increase of 10 % compared to 2010 driven by increase in SLF and Yield 3,850.2 +9.8% 4,227.3 Huge cost increases especially from aviation tax (EUR 166 m) and fuel (EUR 229 m) and non-recurring items in 2010 impacted EBITDAR negatively despite revenue growth 619.9-31.3% 425.9 EBIT 2010 PF 2011 NET income 2010 PF 2011 Next to the EUR 194 m negative swing on EBITDAR level, higher cost of AC (USD impact) led to negative EBIT swing of EUR 230 m -16.7 2010 PF -247.0 2011 Net income development is in line with EBIT development; within financial result app. EUR 39 m negative from MTM evaluation and FX development -106.3 2010 PF -271.8 2011
* pro forma (PF): incl. NIKI 1H 6 airberlin's revenue increased by 10 % compared to previous year Revenue split [EUR m] Change from FY 2010 PF +13.2% +1.5% +9.2% +62.0% -1.7% +9.2% 2,623.1 Seat only 1,233.9 Charter 3,857.0 Flight revenue 78.0 A/P tax revenue 38.6 Onboard sales 253.7 Others +9.8% 4,227.3 Total revenue Charter increased by only 1.5% especially due to Northern Africa crisis and subsequent capacity shifts and due to price pressure Seat only grew strongly due to yield and load increase Onboard revenue slightly decreased due to reduction in long-haul operation Growth in cargo revenue is the strongest driver for other revenue
Operational development good total revenue per ASK performance Capacity [m] Passengers [m] Seat load factor [%] Yield 1) [EUR] +7.9% Revenue 1) /ASK [EUR ct.] 45.6-1.1% 45.1 +1.2% +1.7%p. 76.5 78.2 101.2 109.3 34.9 35.3 +7.8% 6.31 6.80 2010 PF 2011 2010 PF 2011 2010 PF 2011 2010 PF 2011 2010 PF 2011 Yield = Flight revenue per passenger // Revenue = total revenue * pro forma (PF): incl. NIKI 1H 7
* pro forma (PF): incl. NIKI 1H 8 Cost of aircraft ownership Lease & depreciation expenses [EUR m] Development of number of aircraft [#] +3.5 167.1 3.5 3.7 1.0 1.3 3.4 170.6 +7.5% 604.7 649.9 75.4 72.0 13.0 14.0 A320 family Leases 537.0 587.0 63.9 67.6 A330 family B737 family E190 DH8H Depreciation 67.7 2010 PF 62.9 2011 3.5 10.0 1.3 Dec 2010 Additions Disposals / Lease expires 7.0 10.0 Dec 2011 B767/757
9 Balance sheet ratios Balance sheet structure, 2010 vs. 2011 [EUR m] B/S as of December 31, 2010 B/S as of December 31, 2011 Fixed assets Other current assets 64% 19% 2,370 21% 79% Equity Fixed assets 66% 2,264 11% Debt 89% Other current assets 23% Equity Debt Equity and liquidity decrease due to loss in 2011 Net debt impacted by liquidity swing, onbalance financing of aircraft and stronger USD Liquid assets 17% Liquid assets 11% Net debt: 489 Net debt: 813
10 AGENDA FCF German Industry Capital Market Days, 25 Apr. 2012 page Topic 1 Review 2011 3 Topic 2 Overview 2012 Macro-economic development 11 Focusing the business model Measurements to improve profitability 14 17 Outlook 2012 26
11 Economic situation across Europe affects demand for air travel Europe The debt crisis has not come to an end and continues to negatively impact the European economies Financial turbulences in the Eurozone lead to slow-down of economic growth European economy moving towards modest recession in 2012 Germany Economic growth expected with 0.7% Stable economy, but uncertain business situation Cautious consumer behavior Assessment of the current business situation cooled notably since mid 2011 Portugal Danger of debt restructuring impends Recession in 2012 by more than -3% Euro Greece EU rescue package Bailout strains Greek-German relations Spain Difficult financial situation Unemployment high and still rising Italy Recession (by approx. 1.5% in 2012) Industrial production -5% in January
12 2012 remains a challenging year airberlin reacts to the challenges in 2012 Encouraging signs from the US economy are offset by the persisting crisis in the eurozone. However, if the crisis in the eurozone cannot be solved permanently, IATA expects the international aviation industry to incur a loss. SHAPE & SIZE 2012 PARTNERSHIP with ETIHAD AIRWAYS It is expected that the aviation industry will be facing additional costs from national air travel surcharges and the introduction of emissions trading. oneworld Optimization of airberlin`s network
13 AGENDA FCF German Industry Capital Market Days, 25 Apr. 2012 page Topic 1 Review 2011 3 Topic 2 Overview 2012 Macro-economic development Focusing the business model Measurements to improve profitability 11 14 17 Outlook 2012 26
Customer Service 14 Etihad and oneworld allow airberlin further strategic development towards a full service airline airberlin strategic development transformation process HYBRID CARRIER FULL SERVICE AIRLINE BUSINESS LOW COST LEISURE Stand-alone airline (cooperation with NIKI) 135 destinations (mainly Europe) Global network (from America to Asia) alliance member Global positioned frequent flyer program (topbonus) Full service airline (lounge, priorities, etc.) Timeline
15 airberlin offers significant advantages to their guests Network of airberlin, Etihad and oneworld NETWORK Brand for business and leisure travelers Attractive mix of leisure and business destinations Three major hubs in Germany/Austria with access to America and through the hub in Abu Dhabi to Asia, India and Australia Huge variety of distribution channels (online, travel agencies, TOPs, GDS) COST Competitive cost structure GUEST SERVICE Unique combination of attractive prices and full service Business class product on long-haul services Worldwide lounge access FREQUENT FLYER PROGRAM Integration Etihad and in oneworld with full compatibility
16 AGENDA FCF German Industry Capital Market Days, 25 Apr. 2012 page Topic 1 Review 2011 3 Topic 2 Overview 2012 Macro-economic development Focusing the business model Measurements to improve profitability 11 14 17 Outlook 2012 26
17 Measures with important effects on revenue and profitability add up to a total EBIT improvement of more than EUR 200 m in 2012 6 > 10 m 5 > 55 m 4 > 10 m Cost initiatives Process improvement Maintenance Profitability Improvement EUR Network reduction & productivity Yield & Revenue mgmt Alliances > 70 m > 20 m 1 2 3 > 45 m EBIT values without effects from cost avoidance
18 Yield- and Revenue improvement measures 1 Examples > 70 m Yield & Ancillaries Optimize existing distribution channels and support additional opportunities, e.g. alliances Increase of yield in significant business segments Additional ancillary revenue through offering of new services to customers (e.g. piece-concept) Enhancing points of sale Increase in market share in international markets with a high airberlin presence Push principle for selected distribution channels in Offlinemarkets Systematic opening up of new customer segments, distribution and sales channels, e.g. in Spain Systems Improvement of the sales platform to increase revenue in new business segments Installation of new Revenue Mgmt System to efficiently manage availabilities & tariffs Systems as enabler for yield- and revenue improvements
19 Our all-encompassing cooperation with Etihad Airways opens a new world of destinations Etihad partnership More attractive corporate contracts due to wider network Increase passenger flows through code share Joint sales and distribution channels Joint frequent flyer program Joint network with aligning hub traffic Cabin crew training; joint simulators Joint procurement Airport sourcing > 20 m 2
20 With oneworld airberlin enters into an attractive alliance oneworld alliance Codesharing and interlining with partners to multiply the number of airberlin destinations offered Substantial increase of seat load factor Enhancing attractiveness by offering joint products, e.g round-theworld tickets through linking the airberlin topbonus program to the frequent flyer programs of other partner airlines Offer seamless travel to all customers on all oneworld flights > 20 m 2
21 Cut of unprofitable routes and related capacities increases efficiency & allows fleet optimization Network reduction Reduction of fleet from 170 to 152 aircraft will decrease cost of aircraft ownership per block hour by more than 9% Elimination of unprofitable network elements and optimization of fleet rotation Increase of aircraft productivity by 7% Optimize cycles to reduce crew travel and unproductive working hours Focus on high frequency destinations > 45 m 3
22 Maintenance savings through strategic procurement, improved planning and material logistics Maintenance Strategic procurement Optimization of material- and demand management over the group Improvement of logistic processes within supply chain management Synergies from further integration of NIKI maintenance in airberlin group maintenance function Additional revenues from maintenance services to third parties > 10 m 4
23 100+ measures for consequent ongoing cost reduction > 55 m 5 Fuel airberlin as industry benchmark fuel consumption < 3.5 litres per 100 PKM airberlin fleet with Ø age of 5.3 years Ongoing initiatives for additional reduction of 31.5 thousand tons weight reductions optimized engine washes use of more recent wind & temperature data optimized speed Airport sourcing Scale effects through focus on less destinations Improvement of contracts with handling agents and streamlining of service level agreements Bundling of procurement and ground-handling Crew productivity Mainly driven by network and fleet optimization Reduction of flight overtime through optimized crew planning Reduction of crew travel expenses through consequent planning of crew cycles and avoidance of proceedings
24 Process improvement further enhances profitability 6 > 10 m Operational performance Increase punctuality Quicker check-in process to increase customer satisfaction Developing an integrated Operations Control Center Bundling at stations Implementing single aircraft strategy Closing and pooling together of stations (crew and maintenance) Scale effects on airport conditions Ground efficiency Reduce personnel costs by placing additional self service counters at airports Ground handling staff only for passengers where individual troubleshooting is required Reduction of overhead cost
25 AGENDA FCF German Industry Capital Market Days, 25 Apr. 2012 page Topic 1 Review 2011 3 Topic 2 Overview 2012 Macro-economic development Focussing the business model Measurements to improve profitability 11 14 17 Outlook 2012 26
26 Capacity development Target 2012 Total seats [m] ASK [bn] Comments >-5% >-1.5% 45.1 62.2 2011 2012 2011 2012 ASK development 2011 to 2012 [bn] long haul medium haul 17.4% 12.3 >+6% 62.8% 39.0 <-3% Sharp fleet reduction from 170 to 152 aircraft Capacity reduction in medium and short haul by Giving up unprofitable routes Alignment of aircraft utilization Focusing on high frequency Expansion in long haul by Increasing flights to Abu Dhabi Strengthening Berlin hub with flights to North America short haul 19.8% 10.8 <-7%
27 Target 2012 Topline development yield and seat load factor improvement Revenue/pax [EUR] 119.8 >+5% Seat load factor [%] >+2%p. Revenue/ASK development [EUR ct] >+6.5% 78.2% 6.80 2011 2012 2011 Initiatives to increase yield Effect through alliances & partnerships Shape & Size 2012 2011 Price SLF Ancillaries 2012 Increase of base fare ( Eckpreis ) to all destinations Restrictive booking class steering drive higher yields (implementation of better RMS) Increase of fuel surcharge has been established in January further increase in March Cancellation of routes helps to improve yield and seat load factor Partnerships positively impact seat load factor
Fuel hedging 2012 Fuel hedging profile and fuel price development, 2012 vs. 2011 Hedging profile [%] Price 1) development * [USD/t] 100 96 64 47 20 1,100 90 80 70 1,050 1,000 60 950 50 40 900 30 850 20 10 800 0 550 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hedging Rate 2012 (as of 03/14/2012) Hedging Rate 2011 (as of 03/09/2011) Current Hedge price Best case hedge price Worst case hedge price Market / Forward price Hedge price 2011 1) excl. differentials * as of 14 Mar 2012 / 09 Mar 2011 28
Dollar hedging 2012 Dollar hedging profile and FX rate development, 2012 vs. 2011 Hedging profile [%] FX rate development * [USD/EUR] 100 100 77 50 43 1.42 90 80 1.40 70 60 50 1.38 1.36 40 30 1.34 20 10 1.32 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1.30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Hedging Rate 2012 (as of 03/14/2012) Hedging Rate 2011 (as of 03/09/2011) Current Hedge rate Best case hedge rate Worst case hedge rate Market / Forward rate Hedge rate 2011 * as of 14 Mar 2012 / 09 Mar 2011 29
30 Strong earning improvement envisaged Target 2012 Operational performance Capacity Strong fleet reduction (10% of aircraft) Reduction in selected nonstrategic markets in Europe Moderate increase in long haul business Capacity utilization and income Increasing load factor through network reduction, improved sales platform and partnerships Result Revenue Growth in revenue through yield and SLF growth expected ( Q1 trends were satisfactory) Expenses Cost per ASK ex fuel will be kept stable; structural cost increases will be offset through Shape & Size Result Improvement in profitability Balance sheet Balance sheet Equity and liquidity stabilized through Etihad investment Deleveraging is the key objective for 2012; initiatives are on the way A L Strong earnings improvement targeted for 2012, Shape & Size showing positive effects in the 1 st Quarter