CAPA

The Future Direction of Australia’s International Markets Andrew Miller – Chief Executive Officer CAPA Consulting18 October 2007: 

The Future Direction of Australia’s International Markets Andrew Miller – Chief Executive Officer CAPA Consulting 18 October 2007 www.capaconsulting.net 1

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Introducing CAPA Consulting: 

Introducing CAPA Consulting 3

A sample of our clients: 

A sample of our clients 4

Sweeping changes pending to major inbound, outbound & domestic markets: 

Sweeping changes pending to major inbound, outbound & domestic markets Development of new “kangaroo” route via ME, long haul LCCs First new operator In 15 years to mainland US; growth of Jetstar Consolidation of market; entry of Pacific Blue to NZ domestic Continuing weak outbound market Maintains high growth path; increasing market access NZ & the Tasman Japan The UK & Europe The USA China Japan LCC growth; more JVs SE Asia Devpt regional gateways; entry Tiger Australia

The aviation environment is the most positive for many years: 

The aviation environment is the most positive for many years Robust economic, trading conditions Increasing Liberalisation Strong market, yield growth High airline profitability Development of new, existing routes Investment in fleet, capacity Aggressive pricing competition New product development Service innovation

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Australia’s Major Markets, Year-on-year for 12 months to August 31 2007 Source: ABS Japan, HK visitors down 10%,4% Australia’s key tourism markets reflect this buoyancy, with a few exceptions Outbound growth 8%overall; inbound half that for 06-07

Pricing reflects 2 approaches to “linking up the dots” : 

Pricing reflects 2 approaches to “linking up the dots” 8 * Fares are lowest internet fare available for one way travel on 4 December 2007, including taxes and surcharges © CAPA Consulting Still to come – AirAsia: LCC type development Secondary airports – OOL, NTL? AVV? New routes/markets At 75% - 80% of fares

So what of the future........: 

So what of the future........

Jetstar’s development a two-edged sword: good for outbound, limited inbound benefits: 

Jetstar’s development a two-edged sword: good for outbound, limited inbound benefits Only 31% of current int. capacity deployed on a predominantly inbound market (Japan); Other 69% split between outbound destinations and two-way markets such as New Zealand, Singapore Serves 7 of top 10 outbound markets (8 if Jetstar Asia is included) Jetstar Share of Weekly Seats on International Routes Flown, as of October 2007 Source: OAG, CAPA Consulting

Other long-haul LCCs will break stranglehold of east coast gateways: 

Other long-haul LCCs will break stranglehold of east coast gateways AirAsia X to establish services to Gold Coast and Avalon Airports – first foreign carrier to focus on secondary gateways. Also interested in Newcastle Capitalising on unlimited access to Australia’s regional airports, lack of congestion Gold Coast, Avalon already served extensively on domestic routes by Jetstar and Virgin Blue Jetstar has also developed its Cairns base for Japan, Singapore

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Middle East QF/BA, Asian 6th freedom Emerging China Option 3.7% Average Annual Growth in Aust-Europe Weekly Seats, 2000-2007 Source: IATA/CAPA Consulting Within next five years, the Middle East may take over as dominant “kangaroo route” Airline share of Average Weekly Seats Australia-Europe by Region of Origin

Substantial growth planned by Emirates, other ME carriers : 

Substantial growth planned by Emirates, other ME carriers 113% growth in weekly seats by ME carriers to Australia 2007-2011 Middle East airlines build 19.8% share of Australia- Europe market Set to grow substantially by 2012 Source: IATA, CAPA Consulting Scenario if all existing rights taken up

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