1Airline Cost Conference

Geneva

August 30, 2016

Josua du Plessis, B.Sc, Hon B.Sc, M. Com

Airline Cost Management Group (Chairman)

Acting Chief Strategy Officer – South African Airways

Chairman’s reportACMG in Review 2016

Mission

The mission of ACMG is to

1. share best practices on airline cost management,

2. while providing an industry platform for effective cost benchmarking.

2Airline Cost Conference

Geneva

August 30, 2016

Reason for ACMG Existence

2543

Airlines

Asked Wikipedia

“Due to the size of

the list it has been

broken down”

Asked ch-aviation

to list “out of

business airlines”:

Result (2543

airlines)

42015 PwC Global Airline CEO Survey showed that 62% of CEO’s rank cost control a first or second top strategic priority as the importance of the cost base continues to dominate airline CEO agendas.

Is ACMG still relevant?IATA focuses on making air transport more safe, secure, efficient and sustainable.

Growth

2012 2013 2014 2015 2016

Region Specific Reporting

6

1st Steering Committee

1st Airline Cost Conference

Full time staff

IATA Restarted initiative

2012 2013 2014 2015 2016

Timeline of ACMG

1st Regional session

Focus on Regions

Regional Reporting

Type cost validation

Future?

Regional Workshops

Singapore

Johannesburg

Miami

Jordan

Madrid

Improved membership to reflect regions

Membership to the ACMG is open to all airlines, including cargo, charter and low

cost carriers

7

Group Goals1. Share best practices to foster sustainable airlines

2. Annual report analyzing cost drivers and identifying industry trends

3. Support industry to better understand cost drivers & trends

4. Refine and standardize definitions

5. Build a unique global airline costs database

6. Increase the number of participating airlines

7. Define and implement operational cost management strategies

8

Wrong areas are addressed when we do

not regularly benchmark

Consultants expensive (limited datasets)

Dimensions extremely important in

comparison (Fleet, Location, etc.)

Industry changing e.g: Lower Fuel = Lower

barrier of entry

World economy keeps changing

Why continue?

Airline Cost Management Group 10

http://seekingalpha.com/article/3976344-commodity-cycles-1970minus-2016-characteristics-bull-market

Why Continue?

Source: Tiberius Research, Bloomberg

Commodity Super Cycle

Biggest RiskWhere does we fit in IATA?

Stagnation

11

Focus areas going forwardHow we can assist in reducing industry cost

Focus more on practical cost reductions

Regional workshops helping ACMG members

improve benchmarking abilities

Improved benchmarks and trends

12

Fiscal Year Airlines losing

on Fuel hedges

Airlines winning

on Fuel hedges

Net impact of

Fuel hedges

2013 7 17 114 676 338$

2014 15 14 285 230 620$

2015 28 3 -3 492 298 116 $

Grand Total 50 34 -3 092 391 158 $

Is hedging to the benefit for the industry?

Improved benchmarks and trends

Continue to improve information

Montreal - March 6, 201313

ACMG TeamIATA Operations, Montreal

Chris Markou, Assistant Director

Klemen Ferjan, Airline Performance Manager

Jenna Destounis, Intern

Geraldine Cros, Operational Cost Manager

14Airline Cost Management Group (ACMG)

Steering Committee1. Chairman, Josua du Plessis, SAA

2. Vice-Chairman, Dimitrios Tziortzis/Ramanpreet Boparai, Air Canada

3. Larry Gibbons/Aaron Bricker, Atlas Air

4. Ayman Thabet/Ahmed Marei, Egyptair

5. Glenn Cusano, JetBlue

6. Suha Alarda, Royal Jordanian Airlines

7. Ashraf Suleman, Saudi Airlines

8. Luis Rosa, TAP Portugal

9. Yuliya Gerasymchuk, Ukraine International Airlines

15Airline Cost Management Group (ACMG)

Slot available

Page 16

Knowledge is power

Confucius

"Real knowledge is to

know the extent of one's

ignorance"

17

Questions

Evening Cocktail at Horizon Saleve Restaurant,

18Airline Cost Conference

Geneva

August 30, 2016

Josua du Plessis, B.Sc, Hon B.Sc, M. Com

Airline Cost Management Group (Chairman)

Acting Chief Strategy Officer – South African Airways

Panel discussion 1

Adapting to ever changing industry environment

Reason for ACMG Existence

2543

Airlines

Asked Wikipedia

“Due to the size of

the list it has been

broken down”

Asked ch-aviation

to list “out of

business airlines”:

Result (2543

airlines)

20

Growth of LCC

Montreal - March 6, 2013Maintenance Cost Task Force (MCTF) 21

22

It is clear that the overall commodity prices have been heading south over the last few years

• Look at your company as a tribe

• When changing build a new tribe

• Be careful of sub tribes e.g. Unions

and Mangement

24

25

Be careful of averages

With Averages: If your feet is in the oven and your head is in the freezer

on average you are ok………

26