1

Feb 2009 Storage Charges update

• Storage fees are standard for on airport warehouses

• GSOP ACA bond management provides billable storage amounts to all AP billing

systems

• Charging storage encourages customers to engage the clearance process

Storing shipments is a cost to the business

Inventory, tracing and follow up

Customers incentivized to use us for free storage

Storage goes directly to the bottom line

Implementation is simple

2

Current Status

No current plans to charge for storage

Automation not used, manual calculation, admin overhead

Fully implemented or scheduled

3.5.1 AP Upgrade approved by PPRB

All CN live from 1 Feb

HK – May

MY 2 Mar, TW 16 March

HHP

3

Annualised Storage '000 EUR @ Jan 09 BER

14 €

511 €

7 €62 €

252 €

159 €

91 €129 €

45 €

IN TH PH KR MM ID SG VN CN

Revenue

Storage Charge revenue from IAS was 1.04m EUR in 2008*

* Estimated unbilled storage was 2.4m EUR in 2008

4

Current charge regimes

CN implemented from 1 FebMin (LCY) Min (EUR) Per KG (LCY)

Per KG (EUR)

Free DaysCharge Hols?

Charge Wknds?

MinPer KG

Start Date

JP - -KR ?10,000 5.63 € ?60 0.03 € 5 N N ?20,000 ?500 1/23/08CN ￥50 5.20 € ￥0.50 0.05 € 5 N N 8/1/09TW NT$200 4.32 € NT$2.00 0.04 € 5 N N 3/17/09HK - - 5/1/09PH Php448.51 6.70 € Php1.67 0.02 € 3 N N 10/26/07IN INR 40.00 0.58 € INR 2.33 0.03 € 3 N Y 1/12/07

TH ฿100 2.04 € ฿1.25 0.03 € 2 Y Y 1/1/08SG $20 9.88 € $1.00 0.49 € 4 Y Y 8/21/08MM $0.50 0.35 € $0.05 0.04 € 3 N N 1/23/08

MY MYR 10 2.06 € MYR 0.50 0.10 € 2 N N 2/3/09

ID - 700 0.05 € 3 Y Y 7/9/07AU - -VN 150,000 ₫ 6.15 € 2,500 ₫ 0.10 € 4 N N 9/1/09NZ $5 2.06 € 0.06 ₫ 0.02 € 3 N N 2/1/08BD - -LK LKR 2.5 0.02 € LKR 0.10 0.00 € 3 N N Manual

Fees at Jan '09 BER= CO SMT has decided not to charge storage fees= Fees are calculated manually= CO still discussing internally - no agreed structure and / or date

Surcharge (Cold/Secure Storage

5

Deployment Notes

New charging CO’s are setting longer free periods (7 days including free weekends) which moves the revenue baseline downwards

6

5 € 4 € 3 €

11 € 11 € 10 €

16 € 14 € 13 €

8 €9 €

6 €

51 € 56 €

29 €

12 € 9 €

33 €

3 €4 €7 €

0 €

20 €

40 €

60 €

80 €

100 €

120 €

08 Mo Avg Jan Feb

Sto

rag

e R

even

ue

VN

CN

SG

ID

MM

KR

PH

TH

IN

Revenue Per Mo

SC interfaced to billing systems from IASIAS Interface report for charge code SC with CO’s using storage automation

7

Est Rev Potential PA

383 €

226 €

344 €

115 €

161 €

128 €

59 €

23 €

€ 0€ 25

€ 50€ 75

€ 100€ 125

€ 150€ 175

€ 200€ 225

€ 250€ 275

€ 300€ 325

€ 350€ 375

€ 400

JP AU BD NZ MY TW HK BN

('000

)

Revenue Opportunities

Est Rev PA for CO’s not charging storage

*Note – based on total AP SC revenue divided into shipments >72 hrs to clear for CO’s billing storage. The per hawb SC amount is then applied to non SC charging CO’s >72 hour clearance as an indicator of potential revenue

Based on avg rev/stored shipment for CO’s charging X shipments > 72 hrs clearance from SMART COA.

(>72 hrs + No Clearance) X Avg RPS SC for

CO’s with Storage Charges

There is 1.15m EUR of unbilled potential storage revenue in 2009

8

9

Risks and issues

Free Days

Holiday Charges

Minimum

Write off

Per Kg

Advantages Risks RecommendationReduces storage period disputesAllows customer some time to

provide paperworkAligns with apt cargo warehouse

Standards Allows for time when formals often can’t be cleared due to Custom’s hours

Loss of revenue Combined with holiday

& weekend can result in

long free periods

2 days free. Higher if

all other cargo warehouses are

No charge for holidays

Charge for weekends

Assured revenue minimum

Provides avenue for dispute

resolution

Must have audit trail Clear guidelines

5 EUR / day unless ACW*’s charge less

0.05 EUR Kg/Day unless

ACW’s charge less

100% write off in the event of a DHL clearance

Error or delay in cargo arrival notification

*ACW = Airline Cargo Warehouses

10

Risks and issues

Charge

Codes

Local

Policies

Advantages Risks Recommendation CO’s can maintain current

Local reporting

Revenue difficult to track Added headcount to create

receivable Inability to view in CREST

going forward

Use already in-built standard charge codes in

IAS

Set regional “floor” on

Parameters.

Allow CO’s to exceed, but

not go below

Stay in line with local market Support local reporting

*ACW = Airline Cargo Warehouses

Inconsistency of image to

customers Difficulty of implementing

change

• Implement consistently

• No additional headcount or new operations procedures

• Lay groundwork for more cost recovery in future

• Use same work instructions everywhere while allowing rate variances above a regional floor

11

Next Steps

Draft Policy & work instructions Finalise policies RO GSOP Review system setups CO Ops Programs / IT Agree Revenue reporting (Use IAS to report or report in CREST) Communicate to

Ops Notify broker turnovers via handouts Commercial Customers Finance Revenue reporting,set up of IAS code and SAP/LAS mapping

*ACW = Airline Cargo Warehouses

IT Set up “SC” standard storage charge in all IAS/ACA instances (Done) Reset Storage charge interface flag in CO ACA Configure invoices to print SC on invoices

√

6088 Misc Other income 321940 Other miscellaneous income

√

12

Next Steps – Phase 2

Other non core cost recovery

Review success of program at year end CO revenue reports Charge structure

Revisit structure and increase fees (reduce free days, increase minimums, raise per kg rate?) Add fees for other non core cost drivers

Personal Effects clearances Broker and documentation turnovers

Within the existing systems and processes we have today

*ACW = Airline Cargo Warehouses

13

Issues – Storage Charges

o System capability

o Administrative and clerical

work

o Payment Dispute

o Customer queries

ACA & IAS automate this

calculation.

No added headcount is

required

Create a fair & equitable

charge structure that defuses

common challenges

Notify prior to start via

handouts at collection

counters and mail

14

What is a Storage Charge?

The amount charged for storing a shipment in bond.

(# Days – Free days*) X (Kgs X Unit Fee)

Specific credit accounts can be exempted

Fee can be written off

ACA IAS

GL

Billing

*Day 0 counts as 1 day