Montreal - March 6, 2013 Maintenance Cost Task Force (MCTF) 1

IATA Airline Operational Cost

Task Force (AOCTF)

Klemen Ferjan, MBA

Consultant, IATA Operations

Airline Cost Conference

Geneva

August 30, 2013

Facts & Figures to make us proud

Air Transport is one of those industries that has transformed the world

a major contributor to global economic prosperity

a major global employer

provides significant social benefits

And will continue to

provide jobs

remain a vital component of modern life, a force for good

2

19th in the

World

Geneva, Aug 30 2013 Source: Air Transport Action Group

57 million 3.5x

From 130 weeks

to 1.7 weeks

82 million

6 billion

6.9 trillion

And yet…

The worldwide airline industry has generated an average annual post-tax profit of just 0.1% of revenues between 1970 and 2010! (source ICAO, IATA)

Although post-tax profit is slowly improving it still doesn’t cover cost of capital

3 Airline Cost Task Force (AOCTF) Geneva, Aug 30 2013 AOCTF strives to improve the bottom line through effective cost management

AOCTF Mission & Objectives

Mission: To share operational cost management best practices while providing

an industry platform for effective cost benchmarking.

Objectives:

Support the industry efforts to better understand cost drivers & trends,

manage operational costs

Refine and standardize definitions and methods from a management

accounting perspective

Provide AOCTF members with an annual report, analyzing major cost

drivers, identifying industry trends

Increase the number of participating airlines, ensure greater data diversity

4 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

AOCTF Team IATA Operations, Montreal

Chris Markou, Assistant Director

Geraldine Cros, Operational Cost Manager

Klemen Ferjan, Consultant

Paris Dastjerdi, Intern

5 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Steering Committee

Formed in 2013, consists of 6 airline members:

Chairman, Richard W. Creagh, UIA

Vice-Chairman, Josua du Plessis, SAA

Valdimar Bjornsson, Primera Air

Hassan Ali, Egyptair

Carlos Ramirez, Air Canada

Nihat Cevik, Turkish Airlines

6 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

AOCTF FY2012 Process

Data Collection

Data Validation & Consolidation

Analysis

Report

7 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Data Collection

Various “channels” Current AOCTF members

Personal contacts

Steering Committee’s network

Promoting at Conferences, Symposiums, Seminars, etc.

Back and forth communication

Resulted in submissions from 30 Airlines

8 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Data Validation & Consolidation

The “fun” part!

Data Check within the Excel file

Back and forth communication

Consolidation in one large Excel file

More data checking with Qlikview

More back and forth communication

9 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Analysis

10

Identified Cost Drivers

Grouped data into several metrics to measure the effect of cost drivers

Provided benchmarking on KPIs with disclaimer:

Study is to inspire discussions around the cost drivers and cost elements

NOT meant to derive direct comparisons as every airline operates in unique environment

Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Report

11

Introduction

Airline Industry Landscape 2012

Overview of the AOCTF Airlines

Yearly Trends Analysis

Operational Cost Analysis

Focus on Fuel Cost

Aircraft Type Analysis

Detailed Analysis of B737NG and A320 family

Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Key highlights from the Report

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Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Productivity

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Revenue size indicated against RASK and CASK

14 AOCTF Geneva, Aug 30 2013

Yearly Trends Analysis

15

Airline Operational Cost Task Force (AOCTF)

2009 2010 Change (%) 2011 Change (%) 2012 Change (%)

Revenue Tonne Km (RTK) 39.6 Bil 42.7 Bil 7.6% 45.3 Bil 6.1% 49.6 Bil 9.5%

Available Tonne Km (ATK) 61.4 Bil 63.9 Bil 4.1% 69.7 Bil 9.0% 75.3 Bil 8.1%Weight Load Factor (WLF) 64.6% 66.8% +2.2 pt 65.0% -1.8 pt 65.9% +0.9 ptsRevenue Passenger Km (RPK) 312.4 Bil 327.1 Bil 4.7% 349.7 Bil 6.9% 380.6 Bil 8.8%Available Seat Km (ASK) 428.6 Bil 434.2 Bil 1.3% 471.7 Bil 8.6% 500.4 Bil 6.1%Passenger Load Factor (PLF) 72.9% 75.3% +2.4 pts 74.1% -0.8 pts 76.1% +2.0 ptsAverage Fleet Age (Years) 9.08 8.88 -2.2% 8.85 -0.4% 8.31 -6.1%Total Flight Hour 2.449 Mil 2.554 Mil 4.3% 2.757 Mil 8.0% 3.0 Mil 7.8%Total Flight Cycle 914.082 K 945.648 K 3.5% 1.007 Mil 6.5% 1.1 Mil 9.9%Total Operating Expenses (USD) $29.6 Bil $32.2 Bil 8.6% $38.7 Bil 20.4% 40.9 Bil 5.7%Total Operating Expenses/FH (USD) $12.1 K $12.6 K 4.1% $14.1 K 11.5% 13.8 K -2.0%Total Operating Expenses/ASK (US Cents) 6.91 7.41 7.2% 8.21 10.9% 8.18 -0.4%Total Operating Expenses/ATK (US Cents) 48.28 50.35 4.3% 55.61 10.5% 54.39 -2.2%Fuel Share of Total Ops. Expenses 32.7% 32.4% -0.3 pts 36.9% +4.5 pts 39.0% +2.1 ptsTotal Ops Expenses without Fuel/ASK (US Cents) 4.65 5.00 7.7% 5.19 3.6% 4.99 -3.8%

*Based on 15 recurrent airlines

CASK 8.21 8.18 cents

Geneva, Aug 30 2013

CATK 55.61 54.39 cents

2012 Operational Cost Structure

16 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Comparison with 6 Major US Airlines (DOT Form 41)

17 Airline Operational Cost Task Force (AOCTF)

6 US Airlines (DOT Form 41) 2012 US Cents/ATK Comparison with AOCTF US Cents/ASK Comparison with AOCTF

Fuel and Oil $35.6 Bil 22.79 7.74% 3.37 11.18%

Maintenance and Overhaul $9.5 Bil 6.09 6.05% 0.90 9.56%

General and Administrative $7.6 Bil 4.88 0.89% 0.72 4.58%

Flight Deck Crew $5.4 Bil 3.44 -12.17% 0.51 -7.99%

Reservation, Ticketing, Sales and Promotion $8.0 Bil 5.13 26.81% 0.76 29.54%

Station and Ground $9.7 Bil 6.24 45.81% 0.92 47.83%

Flight Equipment Depreciation $5.0 Bil 3.22 0.68% 0.48 4.38%

Aircraft Rentals $5.5 Bil 3.50 16.58% 0.52 19.69%

Airport Charges + Air Navigation Charges $8.8 Bil 5.64 16.85% 0.83 19.95%

Passenger Service* + Cabin Attendants $8.4 Bil 5.35 3.50% 0.79 7.10%

Other $2.0 Bil 1.27 35.39% 0.19 37.80%

Total $105.5 Bil 67.55 12.11% 9.99 15.38%

Geneva, Aug 30 2013

Cost Grouping

18 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Focus on Fuel Cost

19 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Aircraft Type Analysis

20 Airline Operational Cost Task Force (AOCTF)

B737 NG $13.3 Mil $4,152 $7,428 4.18 34.16

A320 Family $14.5 Mil $4,633 $9,722 4.56 36.80

B737 Classic $13.3 Mil $4,624 $6,315 5.36 46.21

B777 $48.6 Mil $11,220 $64,616 4.59 27.33

A330 $33.8 Mil $8,800 $38,455 4.24 26.93

B747 $43.1 Mil $13,975 $86,616 4.33 30.93

A340 $48.5 Mil $11,824 $88,705 5.73 32.46

B767 $33.8 Mil $8,002 $51,887 4.78 25.68

A380 $61.7 Mil $18,837 $181,920 5.02 40.03

Regional Jet* $8.8 Mil $3,437 $5,462 6.05 46.90

* Combined fleet of EMB-170, EMB-190, and CRJ

Flight Ops. $/FC Flight Ops. $/ASK (US Cents) Flight Ops. $/ATK (US Cents)Flight Ops. $/AC Flight Ops. $/FHFlight

Operations

B737 NG 695 10

A320 Family 277 11

B737 Classic 208 7

B777 184 10

A330 137 10

B747 55 7

A340 45 6

B767 38 < 5

A380 23 < 5

Regional Jet* 90 5

* Combined fleet of EMB-170, EMB-190, and CRJ

# Active Aircraft # of Airlines reportingFleet Type

Geneva, Aug 30 2013

Detailed Analysis of A320 Family

21 Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Way Forward

22

Input: We need your comments and suggestions to improve

Participation: AOCTF evolution indicates between 35 and 40

airlines will provide data FY2013, will you be among them?

Involvement: AOCTF Steering Committee will increase after the

Airline Cost Conference, will YOU be our new SC member?

Airline Operational Cost Task Force (AOCTF) Geneva, Aug 30 2013

Does AOCTF provide a real

value to YOU?

Thank you!

Q/A

Klemen FERJAN, MBA

Consultant, IATA Operations

FerjanK@iata.org

More info on

www.iata.org/aoctf,

AOCTF@iata.org