26 January 2011 Produced by: The Royal Bank of Scotland N.V ....

Produced by: The Royal Bank of Scotland N.V.

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Important disclosures can be found in the Disclosures Appendix.

Airlines

What would you do with 90 A380s?

Gulf carrier growth is a key strategic issue for European network airlines. Wemodel Emirates' fleet to 2020 and have developed hypothetical networks in 2015and 2020, identifying markets, surprisingly easily, for 90 A380s. The implied inter-regional growth rates are broadly consistent with Airbus and Boeing forecasts.

Key recommendations & forecasts

Reuters Year end Recom Price Target price

EPS1fcst

PE1fcst

Air France-KLM AIRF.PA Mar 2011 Buy €13.65 €17.50 -0.08 n/a Deutsche Lufthansa LHAG.DE Dec 2010 Buy €15.83 €19.00 1.06 14.90

British Airways and Iberia have merged to form IAG. We do not yet have a recommendation on the merged company. Source: Company data, RBS forecasts

The growth plans of Gulf carriers are a key strategic issue for European flag carriers The greatest medium-term strategic challenge facing incumbent network carriers, in our view, comes from the growth aspirations of the Gulf airlines – Emirates, Etihad and Qatar Airways (all NR) – as well as Turkish Airlines (NR), which is pursuing a growth strategy with some similar features. These carriers have been expanding rapidly over the past five years and have placed significant orders to maintain that growth over the coming decade.

We do not think it is hard to find a set of viable routes to utilise 90 A380s Dubai is located at the intersection of traffic flows to and from developing markets, including India, Africa, Russia and China. Over the coming 10 years, we expect Emirates to retire a significant share of its existing fleet. The Emirates route system is predominantly long haul, and many of the routes use a large amount of aircraft time.

The implied growth rates from our network are consistent with OEM forecasts Across most intra-regional markets, the growth rates implied by our hypothetical network are in line with the aircraft manufacturers’ growth rates, thus implying a generally stable market share development for Emirates in many route areas. There are four significant exceptions to this: South Asia to North America, North Asia to the Mid East, North Asia to Africa and Eastern Europe to the Mid East. These are all relatively high-growth developing market routes, which thus implies an increase in total global market share for Emirates. For these traffic flows, we think Dubai is optimally located as a hub. We think this geographic location conveys material competitive advantage to Emirates, meaning share gains in these specific markets are not implausible.

So we see Gulf carriers only a moderate challenge to European flag carriers Gulf carriers remain a material strategic challenge to the European legacy industry. But we do not see their growth creating an inevitable structural crisis in the industry. We would expect European carriers to continue to lobby against the advantages of the Gulf carriers and to develop defensive strategies using alliances. The most successful strategy, however, in our view, will be to focus their development on routes where they have structural geographic advantage over Gulf carriers, rather than chasing those markets where Dubai’s location and Emirates’ strong network, notably to India, give it a major advantage.

26 January 2011

Analysts

Andrew Lobbenberg +44 20 7678 1488 [email protected]

Julia Winarso +44 20 7678 1813

Joe Spooner +44 20 7678 0280

Sector sales

Mitesh Kotecha +44 20 7678 7752 250 Bishopsgate, London, EC2M 4AA, United Kingdom http://research.rbsm.com

FTSE Eurotop 300 Index: 1151.18 Europe Transport: 174.30 Source: Bloomberg

Overweight

Sector performance

(1M) (3M) (12M)Absolute 6.7 5.7 27.8Absolute (%) 4.0 3.4 19.0Rel market (%) 3.7 -2.2 5.9

Airlines | Table of Contents | 26 January 2011

2

Contents

Examining the scale of the Gulf threat 4 We examine the challenge to European network airlines posed by the growth plans of Gulf carriers. Our conclusion is that this threat is surprisingly benign. Our Gulf growth forecasts are consistent with Airbus and Boeing global forecasts, in the relevant markets.

4

We are Buyers of European network airlines 4

There are significant medium term threats 4

We think fears around Gulf carriers are overstated 4

The Gulf threat examined 5

Growth plans consistent with Boeing and Airbus estimates 6

What confidence can we have in this benign conclusion? 6

Where we might be wrong 7

Consequences for European network airlines 9 Some European carriers are seeking to flag the unfair advantages enjoyed by the Gulf carriers and limit the traffic rights available. Lobbying against export credit has been partly successful. Alliance and network planning can also offer some protection.

9

How are European airlines threatened by Gulf carriers? 9

European network airlines will keep up the pressure 11

Current European strategies 12

Future strategies 12

A hypothetical fleet plan 15 This section of the report presents a summary of Emirates’ current fleet and orders and our estimated fleet plan for Emirates to 2020.

15

Key findings from fleet modelling 15

Emirates 2010 fleet 15

Our estimated fleet development plan 16

A review of the 2010 network 18 This section of the report reviews the Emirates network as it was in September 2010.

18

Key network findings 18

Emirates 2010 network 18

A hypothetical network plan 21 This section of the report uses our estimated fleet plan to develop hypothetical network model in 2015 and 2020.

21

Key network findings 21

Our estimated network development plan 21

The hypothetical 2015 schedule 22

The hypothetical 2020 schedule 25

Origin and destination traffic analysis 31 In this section of the report, we take our hypothetical networks in 2015 and 2020, and estimate how the traffic might divide between point-to-point and intra-regional connections. We can thus derive intra-regional traffic forecasts.

31

Key conclusions of intra-regional traffic analysis 31

Dubai is a hub – estimating flows is important 31

Estimated traffic allocation 32

Origin and destination traffic estimates 33

Airlines | Table of Contents | 26 January 2011

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Implied growth rates analysis 35 This section of the report takes our hypothetical intra-regional traffic flows and compares the implied growth rates with Airbus’s and Boeing’s regional growth estimates.

35

Key conclusions of the implied growth rates analysis 35

Implied growth rates 35

Regional growth estimates in context 37

Implied market share analysis 39 This section of the report takes our hypothetical intra-regional traffic flows and estimates Emirates regional market shares in 2010 and then using the manufacturer forecasts for regional growth, estimates Emirates’ market shares in 2020.

39

Key conclusions of the implied growth rates analysis 39

Implied growth rates 39

Appendix 41 We present our detailed fleet plan and network plans. 41

Airlines | Executive Summary | 26 January 2011

4

Examining the scale of the Gulf threat

We examine the challenge to European network airlines posed by the growth plans of Gulf carriers. Our conclusion is that this threat is surprisingly benign. Our Gulf growth forecasts are consistent with Airbus and Boeing global forecasts, in the relevant markets.

We are Buyers of European network airlines British Airways and Iberia have merged to form IAG. We do not yet have a recommendation on the merged entity. We have Buy recommendations on the other major European network airlines. This is principally based on our view of the cycle. European network airlines have rallied an average of 107% from their March 2009 trough (vs a FTSE increase of 69%), but we do not think the cyclical upswing is over. Airline cycles typically last six to eight years. The network carriers have been rising for 22 months.

We recognise that there are material challenges for network airlines in the year ahead from rising fuel prices, increased capacity and macro economic uncertainty, notably in Europe. Our position remains that we think we can continue to see a decent revenue environment in the year ahead on key long-haul routes. Demand for long-haul travel, and particularly premium long-haul, is driven in our view by international trade flows and global economic growth, not on European consumer confidence. As such we are optimistic about the trading environment that European network airlines will face on key long-haul markets to developing regions of the world, including China, Africa and Latin America. On North Atlantic, we have some concerns over capacity growth, but think the introduction of the Joint Business Agreement between British Airways, Iberia and American Airlines will leave the market substantially in the hands of the three immunised alliances; this should provide some support for the revenue environment for all market participants, in our view.

We also argue that the strategic position of the European major airlines is strengthening within the industry, as secondary network airlines reduce their exposure to long-haul operations and as consolidation and alliances create a more predictable environment. Tighter financial conditions are also making it tougher than in the past for new entrants to de-stabilise the industry.

We are keen to stress that we are not so optimistic as to predict the airline business becoming a consistently value creating industry. We think it is getting slightly better over time and that there is a cyclical trading opportunity for equity investors.

There are significant medium term threats In the context of recommending network airline stocks as a cyclical trade we argue that medium or long-term challenges to the European network airlines industry, such as the environment of Gulf carrier growth plans, are not necessarily material to our investment thesis.

That does not stop them being interesting to explore and, to the extent that we can offer some reassurance about such threats, we think it might add some reassurance to investors willing to consider trading network airlines at this time.

In this note we explore the challenge posed to European network airlines by the growth plans of the Gulf carriers Emirates, Etihad and Qatar. Emirates is the largest of the three Gulf carriers and we undertake a detailed study of its fleet plans and its potential route development, as a way of understanding the potential market impact of this growth.

We think fears around Gulf carriers are overstated Whilst there is a range of opinion, there is one view (certainly being pushed by Lufthansa amongst others publically at the moment) that the growth plans of Gulf carriers might be excessive. It is a common concern that the very substantial aircraft orders of the Gulf carriers will take significant market share from European, Asian and US network carriers and will threaten to upset the long-haul airline market in a way that low cost carriers have destabilised the short-haul markets.

We recommending Buying European network airlines

We remain optimistic for long haul premium demand

Our recommendation is focussed on trading the cycle

Medium term issues are not overly relevant to our investment thesis

But if we can reassure on mid term threats it might help

Gulf carrier growth plans are widely seen as a major threat


5

We understand why incumbent flag carriers are lobbying against Gulf airlines given they have significant growth plans, benefit from lower costs and operate with very supportive governments and high quality infrastructure.

However, on the basis of our fleet and network modelling, we think the growth plans of Emirates appear broadly consistent with our Airbus and Boeing forecasts for regional growth. We would expect the Gulf carriers to leverage their geographic advantage and focus their growth on traffic flows linking India, China, Africa and the Mid East. We would consequently expect Gulf carriers to gain material market share on traffic flows such as India-US and China-Africa, but we would not expect them to focus disproportionately on slower growth markets such as Europe-Australia or Europe-South East Asia. We would be surprised to see them launch fifth freedom services from Europe on the North or South Atlantic and we do not see Gulf carriers as well placed to compete in the China-Europe market.

We do not think the Gulf carriers will necessarily destabilise the whole long-haul industry. From the perspective of European carriers, we think the major strategic issue will be that Gulf carriers are likely to gain very significant market share on traffic flows from India to the US and Canada. This is forecast by Boeing and Airbus to become a major growth market and it is a market that European carriers would like to take advantage of in the future. We would expect the Gulf carriers to also gain share, probably more modestly between India and Europe.

We thus think the real price of Gulf growth will not be an industry meltdown, but will be a cap on European carriers’ ability to leverage the potential growth form the Indian market

The Gulf threat examined The greatest medium-term strategic challenge facing incumbent network carriers, in our view, comes from the growth aspirations of the Gulf airlines – Emirates, Etihad and Qatar Airways – as well as Turkish Airlines, which is pursuing a growth strategy with some similar features. These carriers have been expanding rapidly over the past five years and have placed significant orders to maintain that growth over the coming decade. The largest aircraft orders have been made by Emirates, which has ordered 90 A380s (of which 75 remain to be delivered), the largest passenger aircraft ever built, as well as 70 A350s, some 50 B77s and 15 B747-800 freighters.

Table 1 : Growth carrier passenger fleet and orders

Emirates Etihad Qatar TurkishWide body current passenger fleet 148 36 54 31of which A380 15 0 Narrow body current fleet 0 15 31 99

Wide body firm passenger orders 193 82 120 14of which A380 75 10 5 Narrow body firm orders 20 16 40

Wide body passenger options 117 12 17 of which A380 10 Narrow body options 6 25

Source: ATI, January 2011

Emirates, like the other Gulf carriers, is a private company. Consequently there is relatively limited information about the business in the public domain, notwithstanding the regular publication of a complete annual report. This partial information vacuum allows an extremely wide range of views to develop about the growth aspirations of the Gulf carriers, with some commentators suggesting the growth plans are excessive, while others argue that the Gulf growth plans are a rational exercise of geographic advantage that will have only a limited impact on other industry participants.

Our interest in preparing this note is not to make judgement on the Gulf carriers themselves, but to understand how Emirates’ fleet and network might develop and thus judge the scale of the challenge posed by Emirates on the major European networkairlines. We have therefore not done any financial modelling of Emirates, but have prepared a model of the potential fleet and network development of Emirates. It would clearly be instructive to replicate the analysis on the fleet plans and network options for Qatar and Etihad, but doing this work on one airline alone was already a challenging task. We thus focus our attention on Emirates, as the largest Gulf carrier, as a proxy for the overall Gulf-based airline industry.

We think Gulf growth capacity will be deployed to take advantage of the Gulf's position at the crossroads of key developing markets

We do not foresee industry destabilisation

Just growth opportunities to India constrained

Gulf carrier growth plans are a major challenge to European carriers

There is a wide range of views over the merits of Gulf carrier plans

We model Emirates fleet and network plans in detail


6

We have no non-public information about the company and have not discussed this report with the company. The hypothetical fleet plan is based on published aircraft orders, our assumptions over the timing of deliveries and an assumed continuation of the current practice of retiring aircraft at around 12 years. We have then constructed hypothetical network plans for the estimated fleet in 2015 and 2020.

We then take the 2010 actual schedule together with our assumed schedules in 2015 and 2020 and estimate how the traffic flows on these services might be split between point-to-point traffic to Dubai and connecting flows to different regions. We thus develop snapshot estimates of Emirates’ intra-regional traffic flows in 2010, 2015 and 2020.

We then compare the growth rates implied in this analysis with the intra-regional growth rates published by Airbus and Boeing in their most recent market outlooks. Using the aircraft manufacturers’ regional traffic forecasts, we can also then examine estimates of Emirates’ market shares within these regional over the period.

Growth plans consistent with Boeing and Airbus estimates The key conclusion we draw from this analysis is that the Emirates fleet plan we have modelled does not look to add excess capacity to the markets in which we think it could be deployed.

In developing a hypothetical network, it was remarkably unchallenging to imagine potential routes to use up the growth capacity, notwithstanding the many A380s due for delivery.

This reflects three factors.

Dubai is located at the intersection of traffic flows to and from developing markets, including India, Africa, Russia and China.

Over the coming 10 years, we expect Emirates to retire a significant share of its existing fleet.

The Emirates route system is predominantly long haul, with quite a lot of multi-sector routes and a growing share of ultra-long-haul services. Many of the routes thus constitute very long round trips that use a large amount of aircraft time.

Across most intra-regional markets, the implied Emirates growth rates are in line with the aircraft manufacturers’ growth rates, implying a generally stable market share development for Emirates.

There are four significant exceptions to this, for which we model Emirates gaining material market share. These markets are between South Asia and North America, between North Asia and the Mid East, between North Asia and Africa, and finally, between Eastern Europe and the Mid East. These are all relatively high-growth developing market routes, where we judge Dubai to be optimally located as a hub. For these traffic flows we think the geographic location of Dubai conveys material competitive advantage to Emirates, which suggests market share gains are not implausible.

What confidence can we have in this benign conclusion? Our conclusion is clearly surprisingly benign for legacy carriers in Europe, North America and Asia. Overall, we expect Emirates to gain market share on growth markets to and from India, which will constrain the opportunities for incumbent legacy carriers, but we do not foresee very significant excess capacity for the industry. We suggest that Emirates’ existing fleet orders could be absorbed by a network plan that sees Emirates growing in line with the market across most route areas – notably those to and from Western Europe – and gaining material market share in route areas involving selected developing markets.

Might Emirates be tempted to dump capacity in Europe? This invites the question of how confident we can be that Emirates would not chose to deploy very significant capacity into the affluent markets of Europe – if it could get traffic rights – weakening European competitors and seeking to grow market share from Europe to the Mid East, South Asia, South East Asia and Australia.

We think Emirates will seek market share gains in the markets we identify (India-US, China-Mid East, China-Africa) because we think it would be rational for Emirates to deploy its capacity in markets where it has the maximum competitive advantage.

We build a hypothetical fleet plan and route network

We derive intra-regional traffic forecasts from the hypothetical network…

... and consider the implied growth rates to Airbus and Boeing estimates

It is not hard to imagine viable routes for Emirates


7

In each of these markets, we think the Dubai hub is optimally located to offer connections. While it will face competition from Doha, Abu Dhabi and Istanbul, we think the larger scale of the hub will offer Emirates scale economies also. Dubai is optimally located to serve these markets. At present, the competitor carriers are financially weak (India), relatively small (Africa) or offer lower standards of service (Chinese carriers). Each of these markets is forecast by Airbus and Boeing to be high-growth market and is thus an attractive market per se, and Emirates has high competitive advantage.

By contrast, if we consider traffic flows from Europe to South Asia or South East Asia, Europe is a developed market and as such, Boeing and Airbus forecast more modest growth trends from Europe. As the markets grow, however, we would expect to see new non-stop services overlying hubs. The network positions of the European majors are relatively strong and the networks, cost structures and services levels of the Asian operators are relatively good. Traffic flows to Australia are quite widely dispersed around multiple carriers, since this traffic flow can be served by a wide range of carriers.

Should Emirates be tempted to chase fifth freedom routes from Europe? Our panglossian view of the future also invites the question of why Emirates – again, if it can get traffic rights – might not deploy material capacity into fifth freedom markets from Europe. It does, after all, have a track record of deploying significant capacity between Australia and New Zealand, where it has 14% capacity share (OAG Max, September 2010).

It is possible that Emirates might look to add some fifth freedom operations through European points to North or South America. However, we would be surprised to see Emirates launch a major capacity expansion in these markets.

In the transatlantic market, the three major European airlines are entrenched in global alliances and have strong market positions and strong networks. They are strong competitors with high-frequency operations on trunk routes.

Emirates does not need to operate with technical stops in Europe to reach the US or Latin America.

With its Australian services, Emirates typically offers a mix of non-stops from Dubai to Australia and a one-stop service through Asia. We imagine Emirates can do reasonably well as a fifth freedom operator between South East Asian points and Australia. Clearly the carrier has toyed with a similar concept to the US, trying a Dubai-Hamburg-New York route alongside its direct Dubai-New York service. It has cancelled the Hamburg-New York sector.

Where Emirates offers service to the Americas via points in Europe, it ends up offering a weak two-stop service proposition in the India-US market and non-Dubai Mid East markets. These are the attractive high-growth markets, where Emirates would be discarding a competitive advantage over competing airlines, for the benefit of a few fifth freedom passengers from Hamburg to New York. This does not look like an attractive proposition to us.

We also note that any major fifth freedom expansion of service from Europe would see Emirates increasingly exposed to the costs and service levels associated with European infrastructure. This would be not taking advantage of one of its major competitive advantages – high-quality, cost-efficient infrastructure. Were it to operate fifth freedom services from Europe, it could well have to employ more staff locally in Europe, which would expose Emirates to higher-cost labour.

We therefore think the rational strategic plan for Emirates should be to maximise its use of its competitive advantages from the strategic location of Dubai, at the crossroads of several key developing markets, its high-quality infrastructure and flexible labour environment.

Where we might be wrong There are myriad risks to our somewhat benign conclusion. Our analysis is based on a traffic estimate built off estimated origin and destination breakdowns applied to a hypothetical network and schedule operated by an estimated fleet. It does not take a sleuth the calibre of Sherlock Holmes to spot a potential flaw in the modelling.

In defence of the work, we would argue that at each stage we have put together a fleet, network and traffic allocation plan that seem sensible. The fleet and network plan is reasonably balanced

Emirates has significant competitive advantage in the growth markets we identify

European markets are lower growth and offer less competitive advantage

The three global alliances are strong on the Atlantic, in our view

Emirates aircraft have the range to overfly Europe

Stopping in Europe offers poor service to high-growth India-US market

Operating fifth freedom services would waste the competitive advantages of infrastructure and labour, in our view


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and produces growth rates that are broadly consistent with the regional forecasts of Airbus and Boeing.

What could produce a less benign outcome for European carriers? Our analysis suggests that it is possible to see a scenario in which Emirates takes delivery of all its ordered aircraft without gravely damaging European carriers. How might this conclusion be wrong?

Our fleet plan could be wrong. Emirates might be planning a slower retirement programme for its older aircraft, it might have earlier delivery dates for its existing aircraft on order and it might make additional aircraft orders that grow its fleet more quickly than anticipated. We think that the recent operational challenges of the manufacturers mean that Emirates is unlikely to take faster delivery of aircraft than we model, but we do not have any great visibility on their delivery schedule.

The growth plans of Middle Eastern and Indian low-cost carriers might take market share from Emirates in the India-Gulf market, weakening Emirates’ position on traffic flows from India to the world and leaving aircraft that we assume Emirates would deploy in the India-Dubai market to be deployed elsewhere.

Our hypothetical network development assumes that the UAE is able to negotiate sufficient traffic rights to leverage the potential from the hub location. If traffic rights are restricted in certain key markets, then growth capacity might be redeployed, sub-optimally, into alternative markets, bringing greater competitive challenges on the carriers active in those markets. This could see greater capacity deployed into Europe or, indeed, capacity deployed into fifth freedom markets from Europe.

Our hypothetical network development produces a benign outcome for European carriers, but we have not modelled the plans of the three other carriers, which are pursuing somewhat similar strategies, albeit on a slightly smaller scale: Turkish, Qatar and Etihad. The viability of Emirates’ expansion plans and the impact on legacy carriers outside the Gulf will also be significantly affected by how these carriers develop. Even if Emirates does maintain a policy of maximising competitive advantage, focusing on the developing markets we discuss, we cannot be certain that these other carriers do not destabilise the key markets for European airlines.

Our analysis assumes that Emirates is able to gain very significant market share in the South Asia-North America market and also see solid growth from other traffic flows to and from South Asia, including to East and West Europe and the Mid East. Should we see a rapid and successful restructuring of the Indian airline industry and the emergence of one or more significant global players from India, then this outcome would be threatened.

We take reassurance that the regional traffic flows we have developed are consistent with the regional traffic forecasts of Airbus and Boeing. The comparison with these data sources drives our conclusion that Emirates will not see significant market share gains in many markets. However, it needs to be recognised that Airbus and Boeing, in developing their traffic forecasts, are not disinterested parties: they are trying to sell aircraft. If their forecasts prove materially inaccurate, then our conclusion that Emirates can absorb its orders without materially damaging the interests of European carriers would no longer be valid.

What could produce problems for Emirates? There are also several factors that could lead to material problems for Emirates, that mean it might be unable to develop its business or see the traffic growth that we envision. The two key risk areas we see in this context are based around geopolitical instability and the A380.

Should there be significant geopolitical instability in Dubai or the broader UAE, then the whole prospect of Dubai’s development as a tourist and business hub will fail. Origin and destination traffic will drop and we do not think the Emirates fleet plan could be absorbed purely with a connecting traffic model.

Should there be technical or operational flaws with the A380, Emirates’ business plan would be materially challenged.

If the Emirates vision were challenged in one of these two ways, this would be a long-term positive development for European carriers. The short-term consequences would be less predictable, as the Gulf carriers work through whatever shock event might have brought about such a material change in prospects.

Our fleet plan could be wrong

India-Dubai could become predominantly a low-cost carrier market

Inability to gain traffic rights could drive more capacity to Europe

The Emirates copycats could destabilise the market

The development of a successful Indian airline industry would challenge our thesis

If Boeing and Airbus forecasts prove to be nonsense, then our market share projections will be, too

A geopolitical crisis in Dubai would threaten the Emirates project…

... as would problems with the A380


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Consequences for European network airlines

Some European carriers are seeking to flag the unfair advantages enjoyed by the Gulf carriers and limit the traffic rights available. Lobbying against export credit has been partly successful. Alliance and network planning can also offer some protection.

How are European airlines threatened by Gulf carriers? Currently the growth plans of Gulf carriers are a potential challenge to all three of the European majors. However, since the European carriers are all exposed to this challenge in different ways, we are reluctant to spell out their relative exposures.

Looked at geographically – and we think that is the best way to think about airline networks, since neither unpredictable regulators nor aberrant managers can mess with it – Gulf carriers are major competitors to European network carriers on traffic flows form Europe to the Mid East, India (and broader South Asia), South East Asia and Australia/New Zealand. They are also emerging challengers on traffic flows from North America to the Middle East and India.

Chart 1 : Emirates share of seats deployed in European flag carrier home markets

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BA/Iberia Lufthansa AF-KLM

United Kingdom Germany France Switzerland Austria Netherlands

Source: OAG MAx

Chart 2 : European carrier capacity by seat

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LH BA IB AF-KL

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Source: OAG Max


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Chart 3 : European carrier exposure to Emirates relvant markets

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LH BA IB AF-KL

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Source: OAG Max

If we consider the markets in which Emirates currently deploys its capacity, there is greater capacity deployed in BA’s home market than Lufthansa’s, which in turn faces more Emirates capacity than Air France and KLM in their home markets.

BA/Iberia – current key markets not threatened If we consider how much seat capacity of the European carriers is deployed into the Mid East and Asia, we find that the exposures of the three major flags are not significantly different – BA has slightly higher exposure, but Iberia has very little, implying the three groups overall are similarly exposed.

For BA/Iberia, we note that India and Australia are important markets for BA and these are contested by Gulf carriers. Emirates also has a lot of capacity deployed in the UK. On the other hand, the most important market for BA is North Atlantic and the most important for Iberia is South Atlantic – neither of these markets is relevant to Emirates and as such we think BA/Iberia have certain strategic advantages relative to their peers.

However, India is a potential strategic growth market for BA and we think Gulf carrier plans will cap BA’s ability to leverage historic and business links and the UK’s decent geographic location midway between India and the US.

Lufthansa – suffers from a decentralised home market Lufthansa has quite a diversified network overall, with the notable weakness to Latin America. This is slightly unfortunate, since the Europe-Latin America market is not, in our view, threatened by the Gulf carrier growth plans.

Lufthansa also faces a particular challenge in its home market of Germany, which as a decentralised market is particularly hard for Lufthansa to control. Lufthansa naturally offers the strongest network and frequencies out of its hubs in Frankfurt, Munich, Zurich and Vienna, but there is a swathe of significant German provincial cities, such as Hamburg, Dusseldorf, Stuttgart and Berlin, where it appears vulnerable to long-haul services by Gulf carriers.

Air France – a balanced network Air France-KLM has the most balanced network of the European majors, with meaningful exposure on the North Atlantic and South Atlantic markets, which are not threatened by Gulf carriers. Air France-KLM has a very important network in terms of profitability (in our view) to Africa, which is only marginally threatened by Gulf carriers, since routings through the Gulf are circuitous. Air France-KLM is similarly growing aggressively to China and is very well placed with Chinese alliance partners. Again, Gulf carriers offer only a circuitous offering in the China-Europe market.

The French air travel market is also highly centralised on Paris, which means that Air France is less threatened in our view by Gulf carrier growth in provincial France than Lufthansa is by growth in provincial Germany.

North and South Atalntic less threatened

Indian growth aspirations challenged

Decentralised home market is tough to defend

A well diversified network

And a centralised home market


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Threats to both Air France and Lufthansa More broadly, we believe the hub functions of both Air France and Lufthansa are threatened by Gulf carrier growth into secondary cities throughout Europe. Gulf carriers can offer less circuitous routings to Asia from points in Europe to the south and east of the Lufthansa hubs. For example a Venice-Dubai-Bangkok would compare favourably against Venice-Munich-Bangkok.

Lufthansa and Air France are also notably disadvantaged on routings linking secondary European points with secondary Asian points. Emirates can offer a one stop service from say Birmingham to Cochin India, whereas Lufthansa and Air France would offer a double connect through their European hub and Bombay or Delhi.

European network airlines will keep up the pressure We think the conclusion of our detailed network analysis is actually broadly positive for the European flags. We think the Emirates growth plan can be absorbed by the market, with Emirates gaining market share on selected developing market traffic flows for which Dubai is particularly well located. We thus think the Gulf carriers will not necessarily be the major destabilising force on the network carrier industry that some commentators fear. They could, however, have a good chance of taking a disproportionate share of selected high-growth traffic flows.

That said, we would expect European – and indeed US and Asian – carriers to maintain their efforts to challenge the expansion plans of the Gulf carriers. The Gulf carriers are tough competitors. They offer highly regarded customer service that is generally a match for the European network carriers, and operate with lower costs than European network carriers, although Emirates’ long stage length is responsible, in our view, for a significant part of that difference.

Table 2 : Airline quality rankings: Gulf carriers are a match for European flag carriers

Overall Long-haul first class’ Long-haul business class Long-haul economy classEmirates **** **** **** ***Etihad **** **** **** ****Qatar ***** ***** ***** *****Turkish **** **** **** ****

British Airways **** **** **** ***Air France **** **** **** ***Lufthansa **** *** **** ***

American *** **** *** ***Delta *** **** ***

SIA ***** ***** ***** ****Cathay ***** ***** **** ****

Source: Skytrax

Chart 4 : Emirates has low unit costs, but long sector length

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AF YE Mar10

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Passenger Length of Haul (km)

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Note: Passenger division data for Lufthansa; non-passenger revenues excluded from cost base of other carriers Source: Company data

Our analysis suggests that Emirates might not be a major destabilising force on the industry

Gulf carriers have high service levels and low costs


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Our network model shows Emirates making only moderate market share gains from Europe to South Asia and maintaining stable market share from Europe to the Mid East and Australia. We believe European carriers would sooner see themselves gain market share and Emirates lose share.

Our network model shows Emirates gaining material share on South Asia to North America routes. This will be a fast growth market, for which Europe is well located to function as a hub – European carriers would like to take meaningful share in this market – our modelling suggests they will lose out to Gulf carriers in this market.

Current European strategies The European major network airlines (Air France-KLM, Lufthansa and British Airways/Iberia) all seem to recognise the threat posed by the Gulf carriers’ expansion plans. The Gulf carriers benefit from lower unit costs, offer high service levels and competitive prices, and are growing faster than the European incumbents.

The current strategic plans of European carriers focus on attacking certain aspects of the Gulf carriers’ cost advantages. A prime example is export credit agency financing, which provides advantageous financing to Gulf carriers, which at present is not available to US airlines or carriers from Airbus home countries. The US carriers and main European flag carriers have lobbied to change the rules governing Export Credit Agency financing and the issue was discussed before Christmas at an OECD meeting in Paris. European carriers have also questioned the costs of Gulf infrastructure, flagging that airport and handling costs are substantially lower in the Gulf than in Europe, despite the high investment undertaken at these airports.

Some European carriers are also keen to restrict Gulf carriers’ access to markets: Lufthansa is currently lobbying to refuse Emirates access to a fifth German departure point. Emirates is keen to add service to Berlin in addition to its existing services to Frankfurt, Munich, Dusseldorf and Hamburg. This is a rational move by Lufthansa, in our view. A Gulf connection from Berlin would offer relatively attractive routings for long-haul traffic between Berlin and Asia compared with Lufthansa’s routings, which involve a circuitous backtrack to Frankfurt or Munich.

However, it is indisputable that the strategic expansion plans of the European majors are highly reliant on increased airline liberalisation, both to facilitate their consolidation activities and to generate new long-haul service opportunities to expand their strong long-haul operations. As such, arguing for the restriction of route rights for other carriers is a delicate task.

Politically, we judge the European carriers as being unsure of how to portray the Gulf carriers. The European majors do not know whether they should portray the Gulf carrier growth plans as excessive expansion that is doomed to failure. One argument is that the growth plans may even be illusory, and that the carriers will reduce the scale of A380 orders in due course after incremental traffic rights are earned. Alternatively, they might want to portray the Gulf carriers as having genuine business plans that threaten European businesses and jobs, and benefit from certain advantages that they would be seen to characterise as unfair. Meanwhile, the government relations teams of the Gulf carriers are becoming increasingly proactive, seeking to rebut accusations of subsidy and unfair advantage.

Future strategies Looking to the future, we would expect the defence strategies to become somewhat more sophisticated than the accusations of unfair advantage and calls for protectionism that are dominating the debate over Gulf carrier growth. Although the lobbying will likely continue, too.

Secure partners in the hinterland of the hubs European carriers are also building up alliance partnerships in the shadow of the Gulf hubs, in an effort to compete effectively on a network basis. From a network standpoint, we see good sense in European airlines seeking alliance partners in the hinterland of Gulf hubs, such as Kenya (Skyteam) and Ethiopia (Star).

We also think it will be particularly important for each alliance to have an alliance partner in India to try to strengthen their network penetration in this fast-growing market, where the Gulf carriers

On India-US, we model Emirates taking share in a market where European majors would like to grow

European carriers are seeking, where possible, to reduce Gulf carrier cost advantages

Some European carriers are trying to restrict access to markets

Seeking to limit liberalisation of the industry is a delicate matter

Building alliance partners in the hinterland of Gulf hubs seems sensible


13

have such a strong position. Star already has an agreement in principle to welcome Air India, while Kingfisher is joining oneworld. It will thus be very important for Skyteam to win Jet Airways into the alliance. Conversely, it would strategically be very beneficial for Star or oneworld if they could secure the partnership of Jet Airways, thus leaving Skyteam in a very weak position in India.

Securing alliance partners around the Gulf hubs should allow the European carriers to use these local carriers to access secondary points in the region that act as feeder points for the Gulf carriers. In selling in these markets, the network carriers would have home-country advantage, in contrast to the Gulf carriers, which have to sell on price and product, with less network advantage.

If you can’t beat them? One option that might build on the hinterland alliance strategy could be to contemplate allying with either Etihad or Qatar. Emirates has publically stated it does not plan to join a global alliance, but Qatar and Etihad have been somewhat open to bilateral partnerships. Qatar currently has codeshare partnerships with predominantly Star alliance carriers including Lufthansa, United and Asiana. Etihad has codeshare partnerships with a range of carriers across all three global alliances, including American, Alitalia, Asiana, Malaysian and a significant strategic partnership with Virgin Blue.

For European majors, partnering with Qatar or Etihad could bring similar network strengths to those enjoyed by Emirates; it could offer a particularly effective alliance strategy for India, which could be of particular interest to oneworld and Skyteam given that Star looks to have Air India on board.

Partnering with Qatar or Etihad could however make it tougher to politically lobby against Emirates and seek to restrict route rights for Gulf carriers.

That said, given the importance of the Indian market in the context of the global industry and the relative weakness of oneworld’s Kingfisher and Skyteam’s potential Indian partner Jet, losing the right to politically challenge Emirates might be a price worth paying. After all, we believe the industry is on a clear path towards liberalisation. Efforts to limit traffic rights may have some effectiveness in the short term, but ultimately will only prove a delaying tactic.

Understand which traffic flows are defensible We think it is important for European flag carriers to look to defend and grow their strategic positions in markets where they have natural competitive advantage over other carriers generally and over Gulf carriers in particular.

We thus see good strategic logic in BA/Iberia seeking to build on its transatlantic fortress through partnerships with American and potentially LAN/TAM. The Atlantic is not contested by Gulf carriers today and we would be surprised to see material fifth freedom operations developed even if traffic rights become available. On the flip side, we imagine BA might be looking to build capacity to and from India, given business and cultural links between India and the UK and given London’s position as a decent transit point between India and North America. We think BA will find Gulf carriers very challenging in this context.

We see sense in Air France-KLM looking to build a strength market to China, particularly to offset the increasing competition it faces in Africa. Gulf carriers offer a circuitous routing between Europe and China.

Lufthansa has already secured its position in Eastern Europe through its partnership with Austrian.

Lobbying efforts will also continue We would expect European carriers to continue to devote considerable political energies towards the Gulf carriers.

We do not think efforts to limit Gulf carriers traffic rights will prove successful on a long-term basis – the industry trend has been one of consistent gradual liberalisation. However, efforts to delay the granting of traffic rights will delay the impact of incremental competition in specific markets, which can be to the advantage of the home carriers in markets where market access is delayed. Protectionism can be a viable short-term “beggar thy neighbour” strategy.

Drawing Qatar or Etihad into a global alliance could be useful

The move would strengthen the alliance position in India

This would make it tricky to lobby against Emirates

But perhaps a price worth paying

The Atlantic looks relatively unthreatened…

... as does Europe-China

Protectionism is a short-term beggar thy neighbour strategy


14

This being the case, we would expect European network carriers to continue to highlight advantages enjoyed by Gulf carriers, in an effort to both even out those disadvantages and delay the granting of traffic rights.

Lobbying by European and US network carriers looks to have achieved moderate changes in the OECD agreement covering EXIM financing, which will make export credit funding of new aircraft less advantageous. The European and US carriers are continuing their efforts to further balance this playing field, arguing that airlines based in countries where aircraft are built should also have access to this financing.

We would expect European carriers to continue to campaign about the user charges associated with the new infrastructure being developed in the Gulf.

We would expect European carriers to emphasise competition against Gulf carriers in their lobbying efforts regarding national aviation taxation and the imposition of the forthcoming emissions trading scheme.

Airlines | Industry Dynamics | 26 January 2011

15

A hypothetical fleet plan

This section of the report presents a summary of Emirates’ current fleet and orders and our estimated fleet plan for Emirates to 2020.

Key findings from fleet modelling The existing Emirates fleet is all wide-bodied, reflecting the predominantly long-haul nature of

the network. Among the shorter sectors, many are very high-density routes, such as to India.

We would expect the A330s, A340s and older B777s to be replaced by the A380s, A350s and B777s on order. As such, we would expect the average aircraft size to continue to grow. Large aircraft deliver low unit costs. On Emirates’ long-haul routes, frequency is a less critical factor than it is on high-density, short-haul sectors.

Our fleet model assumes the aircraft numbers record a 4.9% CAGR to 2020, growing 6.1% pa to 2015 and 3.7% pa from 2015 to 2020.

Taking into account the increasing average aircraft size, our fleet model assumes the seat capacity of the Emirates fleet records a 6.6% CAGR to 2020, growing 9.4% pa to 2015 and 3.9% pa from 2015 to 2020.

Our model foresees the Emirates fleet growing from 155 aircraft in 2010 to 249 aircraft in 2020. This is notably more modest than one might expect, given the media discussion around Emirates’ high-growth plans. This fleet of 249 aircraft in 2020 compares with the current fleet at the Lufthansa Group of 722, Air France-KLM of 593, United Continental of 1,261 and Delta of 821. These figures are boosted by large portfolios of regional aircraft, but the scale of the Emirates fleet, on our modelling, would be modest.

We would not be surprised to see the company announce further orders for the second half of the decade and into the next decade. Our fleet model has Emirates ending 2020 with no replacement or growth aircraft on order.

Emirates 2010 fleet At September 2010, the Emirates fleet comprised 151 aircraft in service, of which 143 were passenger aircraft. All aircraft are relatively large-capacity, wide-bodied aircraft.

The passenger fleet was dominated by 777s, which, in various guises, accounted for 86 aircraft, nearly 60% of the passenger fleet. The Emirates 777 is far from homogeneous. It includes 10 777-200LR aircraft, which are the ultra-long-haul aircraft with low seating capacity. It contains a growing fleet of modern 777-300ER aircraft, which are modern high-capacity aircraft, which we see being used by European flag carriers such as BA and Air France to replace aging 747s. The fleet also contains some older 777-200s and 777-300s. The 777s come in a wide variety of two and three class configurations, ranging from the sparse 176 seats on the ultra-long-haul 777LR to 442 seats on the 777-300 in a two-class, high-capacity configuration.

The second major type was the smaller A330, of which Emirates has 37 in service. These aircraft operate in both two- and three-class configuration, with capacity ranging from 237 to 278 seats.

The third mainstream fleet at Emirates is the A340, with eight of the relatively old A340-300s operated in three-class, 267-seat configuration, and 10 younger ultra-long-haul A340-500s that are configured with 258 seats. This type’s function overlaps with the 777LR and at the moment the 340-500 does not seem to be typically used on sectors that maximise its range capability.

In September 2010, Emirates had 12 A380s, which are configured in three classes with 489 seats. The aircraft are configured with Engine Alliance engines, so the fleet has not suffered from the recent operational disruption that Rolls–Royce*-powered aircraft suffered following the incident with the failure of an engine on a Qantas A380 in late 2010. *RBS Hoare Govett Ltd is broker to this company.

An all-wide-bodied fleet

Currently dominated by the B777

12 A380s in operation at the end of 2010


16

Table 3 : Emirates September 2010 fleet

Manufacturer Model Average age Seats Range Emirates configurations In service On order On option Airbus A330-200 8 237-278 5930 C27Y251, F12C42Y183 29 - 3Airbus A340-300 13 267 13700 F12 C42Y213 8 - -Airbus A340-500 6.5 258 16700 F12C42Y204 10 - 10Airbus A350-1000 N/A 350 14800 N/A - 20 -Airbus A350-900 N/A 314 15000 N/A - 50 50Airbus A380-800 1 489 15200 F14C76Y399 12 78 10Boeing 777-200 14 346 9700 C42Y304 3 - -Boeing 777-200ER 13 290 14300 F12C42Y236 6 - 5Boeing 777-200LR 2 176 17400 F8C42Y126 10 - -Boeing 777-300 9 374-380 11100 F18C42Y320 F12C42Y310 12 - -Boeing 777-300ER 3 358-442 14700 C42Y400, C42Y386, F12C42Y304

F12C42Y31053 48 39

Total passenger 143 196 117 Boeing 747-400ERF 3 N/A 9200 N/A 3 - -Boeing 747-400F 10 N/A 8200 N/A 3 - -Boeing 777-200LRF 1 N/A 9100 N/A 2 6 -Boeing 747-8F N/A N/A 14800 N/A - 15 -Total cargo 8 21 0 Total 151 217 117

Source: ATI, Airbus, Boeing, JPFleets

Our estimated fleet development plan Our forecast for Emirates’ fleet is based on the existing published orders for 90 A380s in total, for 70 A350s and for a further 48 B777s.

In terms of retirements, we have broadly assumed that Emirates retires aircraft after around roughly 12 years, which appears to be the current Emirates policy.

We have assumed that the A380 fleet is phased in relatively evenly over the period to 2020. We assume that A350 deliveries start in 2014, are somewhat heavy in 2015 with 18 deliveries as the last A330s and A340s exit the fleet and then are relatively stable to 2020. We assume that 777 deliveries are weighted to 2013 and 2014, backfilling the retirement of old 777s and A330s.

On the cargo side, we assume the 777 freighter aircraft are phased in to 2013, with the 747-800 freighter aircraft being phased in from 2013. However, the cargo aircraft do not form an integral part of the modelling elsewhere in this note, which focuses purely on the passenger business.

Overall, this fleet development plan delivers only a 4.9% CAGR in the number of aircraft in the fleet over the 10-year period – 6.1% pa from 2010 to 2015 and 3.7% pa from 2015 to 2020.

We recognise that Emirates may well buy more aircraft to maintain a higher growth rate in the second part of the current decade and to position itself with orders into the next decade. The current fleet model leaves Emirates with no aircraft on order at 2020, which is likely to be unrealistic.

The complete fleet plan is illustrated fully in the Appendix.

Table 4 : Estimated fleet plan summary

2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020FPassenger total 146 155 164 171 182 192 201 208 216 222 226Cargo total 9 10 11 13 14 16 19 22 23 23 23Total 155 165 175 184 196 208 220 230 239 245 249

Source: RBS forecasts

We work using the published orders

We assume old planes are retired at 12 years


17

Chart 5 : Estimated year-end fleet plan by aircraft type

29 29 27 17 23 33 42 55 66 70

24 34 44 5260

6672

7884 90

8688 93 100 113

109102

9483

7266

7510

101417

5

14

2323

232219

1614

131110

9

0

50

100

150

200

250

2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F

A330 A340 A350 A380 B777 Cargo



18

A review of the 2010 network

This section of the report reviews the Emirates network as it was in September 2010.

Key network findings Western Europe and Southern Asia are the key regions for Emirates at the moment.

The most significant countries in terms of capacity allocation are India, the UK and Australia.

Emirates operates quite a lot of fifth freedom services, some of which are a function of immature routes (eg Africa), some of which optimise aircraft utilisation (eg Trans Tasman) and some of which appear excessively complex to us (eg Sri Lankan operating patterns).

The Emirates network is almost entirely operated on a daily or multiple of daily basis. This would be positive for operational simplicity and marketing connections.

Many Emirates routes are operated by a mix of aircraft through the week. This would be suboptimal operationally and from a marketing perspective.

Emirates 2010 network Figure 1 : 2010 Emirates network

Auckland

Brisbane

Christchurch

Melbourne

PerthSydney

Houston

New York JFK

Los Angeles San Francisco

Toronto

Amman

Bahrain

BeirutDamascus

Dammam

Doha

Tehran Jeddah

Kuwait

Riyadh

Sanaa

Sao Paulo

Amsterdam

Athens

Birmingham

Zurich

Dusseldorf

Rome

Frankfurt

GlasgowHamburg

Istanbul

Larnaca

London Gatwick

Madrid

Manchester

London HeathrowMalta

Milan MalpensaNice

Newcastle

Venice Vienna

Paris CDG

Prague

Munich

Moscow Domodedovo

Bangkok

Jakarta

Kuala LumpurSingapore

Manila

Ahmedabad

Hyderabad

ChennaiMumbai

Kozhikode

Kolkata

ColomboKochi

Dhaka

Delhi

Bengaluru

Islamabad

Karachi

Muscat

Dubai

Lahore

Male

Peshawar

Thiruvananthapuram

GuangzhouHong Kong

Seoul

OsakaTokyo

Beijing

Shanghai

Cape TownDurban

Johannesburg

Luanda

CairoCasablanca

Khartoum

TripoliTunis

Addis Ababa

Dar es Salaam

Entebbe

Mauritius

Nairobi

Mahe Island

AbidjanAccra

DakarLagos

Auckland

Brisbane

Christchurch

Melbourne

PerthSydney

Houston

New York JFK

Los Angeles San Francisco

Toronto

Amman

Bahrain

BeirutDamascus

Dammam

Doha

Tehran Jeddah

Kuwait

Riyadh

Sanaa

Sao Paulo

Amsterdam

Athens

Birmingham

Zurich

Dusseldorf

Rome

Frankfurt

GlasgowHamburg

Istanbul

Larnaca

London Gatwick

Madrid

Manchester

London HeathrowMalta

Milan MalpensaNice

Newcastle

Venice Vienna

Paris CDG

Prague

Munich

Moscow Domodedovo

Bangkok

Jakarta

Kuala LumpurSingapore

Manila

Ahmedabad

Hyderabad

ChennaiMumbai

Kozhikode

Kolkata

ColomboKochi

Dhaka

Delhi

Bengaluru

Islamabad

Karachi

Muscat

Dubai

Lahore

Male

Peshawar

Thiruvananthapuram

GuangzhouHong Kong

Seoul

OsakaTokyo

Beijing

Shanghai

Cape TownDurban

Johannesburg

Luanda

CairoCasablanca

Khartoum

TripoliTunis

Addis Ababa

Dar es Salaam

Entebbe

Mauritius

Nairobi

Mahe Island

AbidjanAccra

DakarLagos

Source: OAG Max

Network analysis by region The Emirates network in September 2010 was weighted towards Western Europe and South Asia. We see this reflecting the current network flows being dominated by leisure and business flows between Europe and Dubai, immigrant worker flows between South Asia and Dubai, and strong visiting friend and relations (VFR) traffic flows between Europe and both South Asia and Australia.

Existing network weighted to Western Europe and South Asia


19

Table 5 : Seat departures by region

Departure region Daily Ssats ShareEurope : Western Europe 12,838 23.1%Asia : South Asia 11,635 21.0%Middle East 7,652 13.8%Asia : South East Asia 5,221 9.4%Southwest Pacific 4,832 8.7%Asia : North East Asia 3,494 6.3%Africa : Eastern Africa 2,160 3.9%North America 1,834 3.3%Africa : Southern Africa 1,795 3.2%Africa : North Africa 1,551 2.8%Africa : Central/Western Africa 1,356 2.4%Europe : Eastern/Central Europe 859 1.5%Latin America : Lower South America 266 0.5%

Note: This segmentation divides Emirates departures by region, excluding Dubai departures. The Southwest Pacific seat departures include Trans-Tasman routes. Source: Seat departure by region, excluding Dubai departures, OAG Max, September 2010

Network analysis by country By country, the most important destination is India, followed by the UK and Australia. The network is diversified, covering 60 different destination countries. The importance of India in the network reflects the immigrant worker flow to Dubai and the Mid East as well as VFR flows to Europe. The UK’s importance to the network reflects the attraction of Dubai’s tourist product to UK consumers and Dubai’s position as a transit point to India and Australia, both important markets for the UK.

Table 6 : Seat departures by country

Departure country Daily seats ShareIndia 6,917 12.5%UK 5,246 9.5%Australia 3,357 6.0%Germany 2,294 4.1%Thailand 1,945 3.5%China 1,751 3.2%South Africa 1,693 3.1%Pakistan 1,650 3.0%US 1,624 2.9%New Zealand 1,475 2.7%Italy 1,372 2.5%Qatar 1,240 2.2%Saudi Arabia 1,238 2.2%Sri Lanka 1,196 2.2%Malaysia 1,092 2.0%France 1,076 1.9%Kuwait 1,050 1.9%Maldives 988 1.8%Iran, Islamic Republic of 972 1.8%Bangladesh 884 1.6%Indonesia 728 1.3%Philippines 728 1.3%Singapore 728 1.3%Bahrain 715 1.3%Lebanon 647 1.2%Nigeria 631 1.1%Hong Kong (sar) China 630 1.1%Japan 624 1.1%Russian Federation 622 1.1%Switzerland 607 1.1%Jordan 581 1.0%Other 9192 16.6%

Note: This segmentation divides Emirates departures by country, excluding Dubai departures. The Australian seat departures include Trans-Tasman routes, as well as services to Asia and Dubai. Source: Seat departure by region, excluding Dubai departures, OAG Max, September 2010


20

Network analysis by airport The leading destination airport in 2010, outside of Dubai, was Heathrow, followed by Bangkok, Mumbai and Doha.

Fifth freedom operations add complexity A notable feature of the current Emirates network is that there are quite a lot of multi-sector routes, with Emirates selling fifth freedom services between two non-home countries.

It is common for airlines to operate multi-sector services in particularly thin routes, which require a combination of destinations to generate sufficient volume. Emirates operates a couple of typical tag services in Africa (Abidjan/Accra and Addis Ababa./ Entebbe), as well as one in Europe combining Malta and Cyprus.

On Australian routes, Emirates typically operates a mix of non-stop flights to Australian destinations and a service operating via points in South East Asia, including Singapore, Kuala Lumpur and Bangkok.

Emirates operates a similar combination of direct flights to Hong Kong in combination with a stopping service via Bangkok.

Emirates also operates very significant capacity between Australia and New Zealand, with daily services between Auckland and Sydney, Brisbane and Melbourne, as well as between Christchurch and Sydney.

Finally, Emirates has a mesmerisingly complex operating pattern serving Colombo Sri Lanka, which we suspect is a legacy of the company’s past stake in Sri Lankan Airways. Emirates serves Colombo non-stop from Dubai, as a tag beyond Male, as a triangle routing with Male and as an intermediate point on the way to Singapore.

Frequencies consistent; aircraft allocation less so Across the system, most operations are flown daily or multiples of daily, thus offering consistent connections through the week. There are some rare exceptions that are flown less than daily, including Lahore (four/week) and Dakar (five/week). From a marketing perspective, this is a positive feature of the network.

Looking around the network, the allocation of aircraft types to routes is notably less consistent. Many routes are serviced by a mix of aircraft types, with Zurich, for example, being served by A330, A340 and B777 aircraft across its double-daily schedule.

Obviously the A330 and A340 aircraft have common cockpits, but mixing 777 and 330/340 operations would be inefficient for crew scheduling, and would add operational complexity at the station. It will likely also be suboptimal for marketing, given the differing aircraft types will have varying product specifications.

Table 7 : Seat departures by airport

Departure airport Name Daily seats Share of totalLHR London Heathrow Apt 2,070 3.7%BKK Bangkok 1,945 3.5%BOM Mumbai 1,482 2.7%DOH Doha 1,240 2.2%CMB Colombo Bandaranaike Apt 1,196 2.2%KHI Karachi 1,142 2.1%SYD Sydney Kingsford Smith Apt 1,119 2.0%DEL Delhi 1,118 2.0%AKL Auckland International Apt 1,111 2.0%JNB Johannesburg O.r. Tambo International 1,092 2.0%KUL Kuala Lumpur International Airport 1,092 2.0%MEL Melbourne Airport 1,092 2.0%KWI Kuwait 1,050 1.9%LGW London Gatwick Apt 994 1.8%

Note: This segmentation divides Emirates departures by country, excluding Dubai departures. The Bangkok, Colombo, Sydney and Male seat departures include fifth freedom routes as well as services to Asia and Dubai. Source: Seat departure by region, excluding Dubai departures, OAG Max, September 2010

Multi sector routes are common where routes are developing

Emirates is a major player in the trans-Tasman market

Most routes flown daily or multiples of daily

Aircraft allocation is far less tidy


21

A hypothetical network plan

This section of the report uses our estimated fleet plan to develop hypothetical network model in 2015 and 2020.

Key network findings Our hypothetical 2015 schedule adds 21 new destinations to the Emirates network relative to

2010, with the new points weighted towards China, Japan and Europe.

Our 2015 schedule for 60 A380s is weighted towards truck routes to Australia, Europe, the US, China and Japan. We assume a small high-density subfleet deployed to India, Jeddah and Nairobi.

Our hypothetical 2020 schedule adds a further 25 new destinations, weighted rather more towards Africa, with a buildout of service in North America and Latin America, provincial India and China, as well as Eastern Europe.

Our 2020 schedule for 90 A380s deployed the A380s more intensively to North America and deploys them to Latin America (which would depend on range enhancement relative to early models). The deployment is increased on Western European and Australian routes. The deployment of the high-density version is extended to some major South East Asian points and additional Indian services.

Our estimated network development plan Colleagues who worked with me when I was in the industry will know very well that I always was a frustrated network planner. Lacking both the attention to detail and the political skills to ever acquire a proper job in network planning, it is with great pleasure that in preparing this note I am using the key economist’s skill, simply assuming that I am head of network planning at Emirates.

We do not have access to the detailed databases that proper network managers have and have not developed traffic and financial estimates for each and every route.

What we have done is put together a set of routes that seem plausible developments of the Emirates network today. These are our hypotheses – Emirates does not disclose publically what its 10-year network development strategy is, which would be politically and commercially unwise. But Emirates’s public comments do emphasise the company’s plan to leverage the position of Dubai and its proximity to developing markets. We think our hypothetical network is consistent with this.

We have looked to simplify the network, reducing the multi-sector operations and have maintained single aircraft types on each route. We have added some incremental destinations in Western Europe and Australia, but most come in the developing worlds of Africa, China and India. We have also grown the company’s ultra-long-haul services to the US and Latin America.

We have modelled the rotation times for each of the routes, assuming a four-hour layover in Dubai at the end of each rotation. We have not scheduled the fleet to operate, but have allowed a 12% margin to account for heavy maintenance – a figure consistent with the 2010 schedule and fleet.

Our network modelling assumes that Emirates is able to negotiate additional traffic rights. We appreciate very well that these negotiations will in many cases prove challenging and that the rights to deliver our assumed network may not be available in the appropriate time. However, should certain routes be unavailable due to traffic rights issues, we would expect Emirates to able to open alternatives.

Moreover, we note that the aviation industry has made massive strides towards liberalisation over the past 10 years. While there may be occasions when the liberalisation process takes a step backwards, we are firmly of the conviction that the industry will continue to liberalise over the coming 10 years.

Always wanted to be a network planner

Not all traffic rights may be obtainable

Progress will not be linear, but we expect the industry to liberalise


22

The hypothetical 2015 schedule Our hypothetical 2015 schedule is fully illustrated in the appendix.

Figure 2 : New route additions in our hypothetical 2015 network

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Ne w Non -sto p de stin ation

Fo rm er tag f ligh t replaced by n on-stop

DUBAI

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DUBAI


For 2015, our fleet plan assumes 23 A350s (20 scheduled, after taking into account maintenance needs), 109 B777s (97 operating) and 60 A380s (53 operating). In our modelling, we assume seven A380s are configured in a high-density configuration service predominantly India.

The growth to 2015 is weighted towards South Asia and the Middle East, followed by Europe, North Asia and East Africa.

Chart 6 : 2015 schedule by region

W EUR19%

ME15%

SE ASIA6%

AUS/NZ4%

N ASIA9%

N AFR2%S AFR

3%NA5%

E AFR4%

W AFR2%

E EURO3%

LATAM2%

S ASIA26%



23

What can you do with 60 A380s in 2015? Our modelling of the A380 fleet allocation in 2015 is shown in the following table. At present, some airports listed may not have the capability to handle A380s (eg Lagos, Nairobi), but we do not consider it unreasonable that they might become ready by 2015.

Some of the routes shown are beyond the operational commercial range of the early A380s (Los Angeles, Houston). This modelling assumes that improvements to later models will increase the range for these routes.

For 2015, we have generally allocated the A380s to trunk European, US, Australian, Chinese and Japanese routes, as well as deploying a high-density version on key Indian, Saudi and East African routes.

Table 8 : A380 network allocation in 2015

Route Region Aircraft Weekly frequency Rotation timeIncluding DXB

ground time Aircraft days

usedKuala Lumpur-Melbourne AUS/NZ 380 7 01 10 00 01 14 00 1.58Sydney AUS/NZ 380 7 01 11 50 01 15 50 1.66Sydney-Auckland AUS/NZ 380 7 01 20 15 02 00 15 2.01Moscow E EUR 380 21 00 13 20 00 17 20 2.17Cairo N AFR 380 14 00 08 40 00 12 40 1.06Guangzhou N ASIA 380 14 00 17 15 00 21 15 1.77Tokyo Haneda N ASIA 380 7 01 01 35 01 05 35 1.23Hong Kong N ASIA 380 14 00 18 55 00 22 55 1.91Osaka N ASIA 380 7 01 01 35 01 05 35 1.23Seoul N ASIA 380 7 01 01 25 01 05 25 1.23Shanghai N ASIA 380 14 01 01 30 01 05 30 2.46Tokyo Narita N ASIA 380 7 01 00 55 01 04 55 1.20Houston NA 380 7 01 09 40 01 13 40 1.57Los Angeles NA 380 7 01 11 15 01 15 15 1.64New York JFK NA 380 14 01 04 05 01 08 05 2.67Johannesburg S AFR 380 21 00 18 50 00 22 50 2.85Bangkok SE ASIA 380 14 00 14 50 00 18 50 1.57Singapore SE ASIA 380 7 00 22 15 01 02 15 1.09Lagos W AFR 380 14 00 18 40 00 22 40 1.89Frankfurt W EUR 380 14 00 15 10 00 19 10 1.60Gatwick W EUR 380 21 00 16 05 00 20 05 2.51Heathrow W EUR 380 35 00 16 20 00 20 20 4.24Madrid W EUR 380 7 00 16 40 00 20 40 0.86Manchester W EUR 380 14 00 16 20 00 20 20 1.69Munich W EUR 380 14 00 15 05 00 19 05 1.59Paris W EUR 380 14 00 15 55 00 19 55 1.66Bombay S ASIA 38H 35 00 07 20 00 11 20 2.36Delhi S ASIA 38H 35 00 08 10 00 12 10 2.53Jeddah ME 38H 14 00 07 55 00 11 55 0.99Nairobi E AFR 38H 7 00 14 10 00 18 10 0.76 Total scheduled 54 Total fleet 60

Source: Company data, RBS forecasts


24

Key network developments from 2010 to 2015 The new routes, frequency upgrades and aircraft size upgrades are summarised in the following table.

Table 9 : 2015 network developments over 2010

New routes Frequency increase Aircraft size increase Unchanged W EUR Barcelona, Edinburgh, Geneva,

Berlin Athens, Birmingham, Istanbul Paris CDG, Dusseldorf, Rome,

Frankfurt, Gatwick, Heathrow, Madrid, Manchester, Munich, Milan, Nice, Newcastle, Venice, Zurich

Amsterdam, Glasgow, Larnaca/Malta, Vienna

S ASIA Goa, Katmandu, Colombo and Male delinked

Ahmedabad, Bangalore, Kozhikode, Kolkata, Cochin, Dhaka, Delhi, Islamabad, Lahore, Madras, Peshawar, Thiruvananthapuram

Mumbai, Hyderabad, Karachi

ME Baghdad Amman, Bahrain, Beirut, Damman, Damascus, Tehran, Jeddah, Muscat, Medina, Riyadh, Sanaa

Kuwait

SE ASIA Denpassar, Ho Chi Minh Bangkok, Singapore Jakarta, Kual Lumpur, Manila AUS/NZ Wellington Brisbane Sydney, Melbourne, Perth N ASIA Sapporo, Chengdu, Tokyo

Haneda, Nagoya, Taipei Hong Kong, Guangzhou, Beijing Osaka, Tokyo Narita, Shanghai Seoul

E AFR Addis Ababa and Entebbe delinked

Mauritius Dar es Salaam, Khartoum

NA Boston, Chicago Toronto Houston, JFK, Los Angeles S AFR Cape Town Luanda Durban, Johannesburg N AFR Cairo Casablanca, Tripoli, Tunis W AFR Abidjan and Accra delinked Dakar Lagos E EURO Almaty, Baku, St Petersburg Moscow Prague LATAM Mexico City Sao Paulo


New destinations for 2015 Our network model assumes 21 new destinations over the five-year period to 2015, with five in North Asia, four in Europe, three in Eastern Europe, two each in South Asia, South East Asia and North America, and single destinations in South Asia, Australasia and Latin America.

Without looking to justify each route development, we offer a brief comment on each of the new destinations we have used in our hypothetical network:

Barcelona: is relatively underserved by network carriers and the local government has stated that expanding long-haul operations is a strategic goal. Qatar currently services Barcelona from Doha.

Edinburgh: Emirates currently serves Glasgow, which has a stronger South Asian community than Edinburgh, but Edinburgh is wealthier. We would expect Emirates to increase capacity to Scotland by adding Edinburgh rather than expanding Glasgow.

Geneva: Emirates has already announced plans to open Geneva in 2011. As home to several multinational organisations and a financial services hub, it should generate decent inbound flows from the Mid East.

Berlin: Emirates has been campaigning with the German government for several years to get traffic rights to Berlin.

Goa: is currently served by Qatar from Doha and Air Arabia from Sharjah.

Katmandu: is currently served by both Qatar and Etihad, but not Emirates. There is no European flag carrier service into Kathmandu.

Baghdad: If the geopolitical situation improves, then Iraq could offer several potential destinations. Emirates has recently announced low-frequency service to Basra for 2011, which is not factored into our network plan.

Denpassar: We think leisure traffic flows from Europe and the Mid East should sustain a route to Bali.

Ho Chi Minh: We think leisure traffic flows from Europe and the Mid East and business traffic from this fast-growing economy should sustain a route to the commercial capital of Vietnam.


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Wellington: We think Emirates might be interested in diversifying its New Zealand network with a third destination tagged from Australia.

Sapporo and Nagoya: We model two new Japanese cities joining the network.

Tokyo Haneda: Now that this airport closer to downtown Tokyo is open to international traffic, we anticipate that growth capacity to Tokyo would be deployed here, rather than at Narita. Slots are tough to obtain, but patience and cheque books seem a remarkably successful combination to build slot portfolios around the world.

Taipei: Currently cargo services are the main links to the Mid East from Taipei.

Boston and Chicago: both have significant populations of South Asian origin.

Almaty and Baku: could generate business traffic associated with resources traffic.

Mexico City: This would seem to be the second obvious destination in Latin America.

The hypothetical 2020 schedule Our hypothetical 2015 schedule is also fully illustrated in the appendix.

Figure 3 : New route additions in our hypothetical 2020 network

Stockholm

Dublin

Brussels

Stansted

Amritsar

PuneHanoi

Phuket

Cairns

Nanjing

Urumqi

Xiamen

Reunion

Antananarivo

Newark Washington

Harare

Lusaka

Abuja

Kiev

Warsaw

Budapest

Buenos Aires

Rio de Janeiro

Santiago

DUBAI

New Non-stop destination

New destination served by tag flight

Stockholm

Dublin

Brussels

Stansted

Amritsar

PuneHanoi

Phuket

Cairns

Nanjing

Urumqi

Xiamen

Reunion

Antananarivo

Newark Washington

Harare

Lusaka

Abuja

Kiev

Warsaw

Budapest

Buenos Aires

Rio de Janeiro

Santiago

Stockholm

Dublin

Brussels

Stansted

Amritsar

PuneHanoi

Phuket

Cairns

Nanjing

Urumqi

Xiamen

Reunion

Antananarivo

Newark Washington

Harare

Lusaka

Abuja

Kiev

Warsaw

Budapest

Buenos Aires

Rio de Janeiro

Santiago

DUBAI

New Non-stop destination

New destination served by tag flight


For 2020, our fleet plan assumes 70 A350s (63 scheduled, after taking into account maintenance needs), 67 B777s (60 operating) and 90 A380s (80 operating). In our modelling, we assume 10 A380s are configured in a high-density configuration service, predominantly India.

The growth to 2020 is weighted towards South Asia and North America, followed by North Asia Europe and South East Asia.


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Chart 7 : 2020 Schedule by region

W EUR19%

ME15%

SE ASIA6%

AUS/NZ4%

N ASIA9%

N AFR2%S AFR

3%NA5%

E AFR4%

W AFR2%

E EURO3%

LATAM2%

S ASIA26%


What can you do with 90 A380s in 2020? And so to the headline question of this note – what could an airline do with 90 A380s? Our modelling of the A380 fleet allocation in 2020 is shown in the following table. Again, some airports listed may not have the capability to handle A380s (eg Lagos, Nairobi), but we do not consider it unreasonable that they might become ready by 2020.

Further routes shown in the 2020 network model are beyond the operational commercial range of the early A380s (US West Coast, Latin America). This modelling assumes that improvements to later models will increase the range for these routes.

For 2020, we have more aggressively deployed the A380s onto long-haul sectors to the US, as well as Latin America. They are more broadly deployed in China, to which we have also added a handful of new European, Australian and South East Asian routes. We have added a further Indian destination to the network for the high-density 380s and added some South East Asian routes to the high-density version.


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Table 10 : What to do with 90 A380s?

Route Region AircraftWeekly

frequency Rotation timeIncluding DXB

ground timeAircraft days

usedMelbourne-Auckland AUS/NZ 380 7 01 19 00 01 23 00 1.96Singapore-Melbourne AUS/NZ 380 7 01 19 15 01 23 15 1.97Sydney AUS/NZ 380 14 01 11 50 01 15 50 3.32Sydney-Auckland AUS/NZ 380 7 01 20 15 02 00 15 2.01Moscow E EUR 380 14 00 13 20 00 17 20 1.44Mexico City LATAM 380 7 01 05 00 01 09 00 1.38Sao Paulo LATAM 380 7 01 11 00 01 15 00 1.63Riyadh ME 380 14 00 05 10 00 09 10 0.76Cairo N AFR 380 14 00 08 40 00 12 40 1.06Bangkok Hong Kong N ASIA 380 7 01 01 15 01 05 15 1.22Beijing N ASIA 380 28 01 00 10 01 04 10 4.69Guangzhou N ASIA 380 14 00 17 15 00 21 15 1.77Tokyo Haneda N ASIA 380 7 01 01 35 01 05 35 1.23Hong Kong N ASIA 380 14 00 18 55 00 22 55 1.91Osaka N ASIA 380 7 01 01 35 01 05 35 1.23Seoul N ASIA 380 7 01 01 25 01 05 25 1.23Shanghai N ASIA 380 14 01 01 30 01 05 30 2.46Tokyo Narita N ASIA 380 7 01 00 55 01 04 55 1.20Chicago NA 380 7 01 08 40 01 12 40 1.53Houston NA 380 7 01 09 40 01 13 40 1.57Los Angeles NA 380 14 01 11 15 01 15 15 3.27New York JFK NA 380 21 01 04 05 01 08 05 4.01San Francisco NA 380 7 01 10 25 01 14 25 1.60Toronto NA 380 7 01 08 40 01 12 40 1.53Johannesburg S AFR 380 21 00 18 50 00 22 50 2.85Hyderabad S ASIA 380 14 00 08 45 00 12 45 1.06Singapore SE ASIA 380 7 00 22 15 01 02 15 1.09Lagos W AFR 380 14 00 18 40 00 22 40 1.89Dusseldorf W EUR 380 14 00 15 15 00 19 15 1.60Frankfurt W EUR 380 14 00 15 10 00 19 10 1.60Gatwick W EUR 380 21 00 16 05 00 20 05 2.51Heathrow W EUR 380 35 00 16 20 00 20 20 4.24Istanbul W EUR 380 14 00 10 25 00 14 25 1.20Manchester W EUR 380 14 00 16 20 00 20 20 1.69Munich W EUR 380 14 00 15 05 00 19 05 1.59Paris W EUR 380 14 00 15 55 00 19 55 1.66Rome W EUR 380 14 00 13 50 00 17 50 1.49Zurich W EUR 380 7 00 14 15 00 18 15 0.76Nairobi E AFR 38H 7 00 14 10 00 18 10 0.76Jeddah ME 38H 14 00 07 55 00 11 55 0.99Bombay S ASIA 38H 35 00 07 20 00 11 20 2.36Delhi S ASIA 38H 35 00 08 10 00 12 10 2.53Bangkok Hong Kong SE ASIA 38H 14 00 14 50 00 18 50 1.57Kuala Lumpur SE ASIA 38H 7 00 17 05 00 21 05 0.88 Total scheduled 80 Total fleet 90



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Key network developments from 2015 to 2020 The new routes, frequency upgrades and aircraft size upgrades are summarised in the following table.

Table 11 : Network summary, 2015 to 2020

New routes Frequency increase Aircraft size increase Unchanged

W EUR Stockholm, Dublin, Brussels, Stansted

Amsterdam, Dusseldorf, Rome, Zurich Athens, Barcelona, Birmingham, Paris, Edinburgh, Frankfurt, Glasgow, Geneva, Hamburg, Istanbul, Larnaca/Malta, Gatwick, Heathrow, Madid, Manchester, Munich, Milan, Nice, Newcastle, Berlin, Venice, Vienna

S ASIA Amritsar, Pune Cochin, Colombo, Calcutta, Kozhikode. Male

Ahmedabad, Bangalore, Mumbai, Dhaka, Goa, Hyderabad, Islamabad, Karachi, Katmandu, Madras, Lahore, Peshewar, Trivandurum

ME Baghdad Riyadh Amman, Bahrain, Beirut, Damascus, Damman, Tehran, Jeddah, Kuwait, Muscat, Medina, Sanaa

SE ASIA Hanoi, Phuket Bangkok, Kuala Lumpur, Singapore Denpassar, Jakarta. Manila, Ho Chi Minh AUS/NZ Cairns Melbourne Sydney, Brisbane, Perth N ASIA Nanjing, Urumqi,

Xiamen Hong Kong, Beijing Guangzhou, Sapporo, Chengdu,

Haneda, Seoul, Osaka, Nagoya, Narita, Shanghai, Taipei

E AFR Reunion, Antananarivo Addis Ababa, Dar es Salaam, Entebbe, Khartoum, Mauritius, Nairobi, Mahe

NA Newark, Washington New York, Los Angeles Chicago, San Francisco, Toronto Boston, Houston S AFR Harare/Lusaka Cape Town, Durban. Luanda, Johannesburg N AFR Cairo, Tripoli, Tunis, Casablanca W AFR Abuja Abidjan, Accra, Dakar,Lagos E EURO Kiev, Warsaw,

Budapest Moscow, Prague, Ste Petersburg,

Baku, Almaty

LATAM Buenos Aires, Rio de Janeiro/Santiago

Mexico City, Sao Paulo


New destinations for 2020 Our network model assumes 25 new destinations over 2016-20, with four in Europe, three in North Asia, Eastern Europe and Latin America, two each in East Africa, South Asia, South East Asia, Southern Africa and North America, and single destinations in Australasia and East Africa.

Without looking to justify each route development, we offer a brief comment on each of the new destinations we have used in our hypothetical network:

Stockholm: Emirates currently does not serve Scandinavia and this is the first market we model it entering. Norwegian and SAS both serve Dubai, and Qatar serves Doha from Stockholm.

Dublin: Aer Lingus served Dubai previously, but has since withdrawn. Etihad currently serves Abu Dhabi, but Dublin is poorly served by long-haul with the exception of the North Atlantic.

Brussels: currently served by Etihad, but not Emirates.

Stansted: the South Asian community is widely spread across the UK. A third departure point in the London catchment area would not seem unreasonable in this timeframe.

Amritsar: currently served by Qatar but not Etihad or Emirates.

Pune: Air India serves Dubai but no Gulf carriers operate.

Hanoi: Emirates has no destinations in Indo-China at the moment, but we model the addition of Ho Chi Minh by 2015 and Hanoi by 2020. Given the strong economic growth of Vietnam and growing tourist inflows, these assumptions may be conservative.

Phuket: This is primarily an inbound leisure destination. Dubai looks well placed to funnel traffic from the Mid East and Europe. Phuket is currently served by Qatar Airways from Doha.

Cairns: This is principally an inbound tourist market; currently tourist inflows are weighted towards the Japanese market, but by 2020 it would not seem unreasonable to think the market could sustain service from Dubai, with European and Middle Eastern tourist flows.


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Nanjing: Nanjing is not served by any Gulf carrier, but does have non-stop service to Frankfurt with Lufthansa. Nanjing has an urban population of over 5m and is the second-largest commercial center in the East China region, after Shanghai.

Urumqi: Urumqi has an urban population of over 2.5m and is the largest city in China's western interior. Since the 1990s, the city has developed economically and now serves as a regional transport node and commercial centre.

Xiamen: Xiamen is not served by any Gulf carrier, but KLM is launching non-stop service to Amsterdam. Xiamen has a population of 3.6m.

Reunion: The Gulf looks well located as a hub for traffic from West Europe, East Europe and the Mid East to the islands of the Indian Ocean. At present, tourism to Reunion is very heavily concentrated from France. Should the island diversify its tourism base, looking towards Russia, for example, we believe Dubai would be the ideal transit point.

Antananarivo: The capital of Madagascar is poorly served today, with international links principally through Kenya and Paris. Tourism and potential resources could see increasing travel demand.

Newark: This could offer an alternative service into the New York catchment area.

Washington: It does not seem impossible to us that the US FlyAmerica legislation, which restricts US government travel to US airlines, might be repealed by 2020. There is a strong South Asian community in the Washington area as well.

Harare/Lusaka: We think service from Dubai to Zimbabwe and Zambia might serve resources and tourist interest from the Mid East, eastern Europe and China.

Abuja: We see potential for an additional Nigerian destination in addition to Lagos, given resources links and the high population of Nigeria.

Kiev, Warsaw, Budapest: We see potential for further growth by Emirates into Eastern Europe markets, and by 2020 we imagine the economic environments should be strong enough to support incremental services. Dubai should serve as an attractive hub from these destinations to points in East and South Africa, South Asia, South East Asia, Australia and the Indian Ocean. Routings via Western European hubs would involve significantly more circuitous routes.

There is no shortage of additional potential routes It is clearly plausible that some of the routes we have suggested in our draft network will be unsuitable, due to adverse economic developments, competitor activity or regulatory limitations.

We can, however, think of a wide range of alternative routes that might be served by Emirates and would benefit from the connecting opportunities in Dubai. We would suggest that it is even easier to have confidence in the companies’ ability to deploy its draft 2020 fleet, if we can find a range of alternative destinations to those proposed here.

In Canada, we can imagine more than one daily flight to Toronto being supported by the Dubai hub. In the US, the oil industry might support further capacity to Texas, with Dallas a possible destination. The strong economy of the Southeast and considerable South Asian population might make Atlanta a possibility. Miami could also be a possible destination.

Latin America might support more service than the four daily flights we have modelled by 2020. Service might initially be developed with an intermediate stop in Africa or Europe.

In sub-Saharan Africa, our model does add incremental destinations, but if Africa’s political and commercial environment strengthens and links with the resources hungry economies of China and India develop, then we see considerable potential for further growth destinations in countries such as Malawi, Mozambique, Botswana, Namibia and the Congo. In North Africa, we do not model any new destinations, but we can easily imagine service to Algiers and to secondary points in Egypt.

In Western Europe, a single destination in Scandinavia by 2020 looks conservative. We could imagine additional service to provincial UK (eg Bristol, Leeds), France (eg Lyon, Bordeaux, Toulouse) or Spain (eg Malaga, Valencia). In Eastern Europe, we could imagine service being launched into the Balkans (Zagreb or Belgrade), possibly tagged with secondary points in Greece (Thessaloniki) or Turkey (Ankara). We could foresee more service into Russia above and beyond our assumed Moscow and St Petersburg routes (eg Novosibirsk, Yekaterinburg, Nizhny Novgorod).

Some of our hypothetical routes will face operational, regulatory or economic challenges But we see a range of potential alternatives

There are several alternative North American destinations

More African growth could be plausible

No shortage of alternative West and East Europe points


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In the Mid East, we could see further route development into Iran or Iraq, should political conditions normalise. Similarly, under benign geopolitical conditions, there could be potential for greater capacity to Pakistan and new services to Afghanistan.

In both India and China, by 2020 we can imagine further provincial cities than those identified here being able to support service. Again, depending on political developments, Burma, Laos and Cambodia could all be potential destinations.

In Australia, we could imagine service to Adelaide.

Favourable geopolitical outcomes could open up more points


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Origin and destination traffic analysis

In this section of the report, we take our hypothetical networks in 2015 and 2020, and estimate how the traffic might divide between point-to-point and intra-regional connections. We can thus derive intra-regional traffic forecasts.

Key conclusions of intra-regional traffic analysis It is important to appreciate how regional capacity divides between point-to-point and

connecting flows.

We estimate that in 2010, the point-to-point share of traffic varied from quite low levels (20-30%) on ultra-long sectors to 50-60% on sectors to South Asia, where immigrant worker flows are high and around 50% on European sectors, where inbound tourism is well developed.

Dubai is a hub – estimating flows is important To understand the viability of the capacity buildout by Emirates, it is critical to understand how the traffic flows through the system. If we look at the Emirates network today, many routes appear particularly strange at first glance: it is hard to understand how there is sufficient traffic to support a daily wide-bodied flight from, say, Newcastle to Dubai, or Venice, Hamburg, Nice or Casablanca. It is equally hard to see why Emirates chose to deploy an early A380 onto one of its double daily Manchester services.

Underpinning each of these operations is cumulated traffic demand from the point-to-point Dubai market, connections to the Mid East, South Asia, South East Asia and Australia, as well as some circuitous, and hence price-sensitive travel to Africa and North Asia.

As we look to understand the dynamics of the growth plans for Emirates, we think it is particularly important to understand the intra-regional flows. We are comfortable with the robust growth forecasts from Boeing and Airbus for traffic flows to and from Middle Eastern points and Dubai in particular. However, the key to understanding the growth opportunity comes from appreciating how the intra-regional traffic flows in the Emirates network might develop. There are several intra-regional flows that we think will become increasingly important to the traffic system: South Asia to Europe, South Asia to North America and China to Africa.

The table below illustrates the connecting flows on Emirates services from the UK according to UK CAA survey data.

Table 12 : Origin and Destination Flows

Heathrow Gatwick Manchester Birmingham Glasgow Dubai 34.8% Dubai 24.7% Dubai 19.9% Dubai 27.0% Dubai 19.7%Perth 4.4% Johannesburg 6.7% Perth 8.5% Perth 13.1% Perth 11.0%Islamabad 3.5% Perth 6.7% Bangkok 7.4% Bangkok 7.9% Melbourne 9.1%Johannesburg 3.5% Bangkok 6.0% Sydney 6.5% Melbourne 5.4% Bangkok 7.1%Cape Town 3.3% Cape Town 3.8% Melbourne 5.4% Sydney 5.0% Sydney 6.1%Melbourne 3.3% Sydney 3.2% Brisbane 5.3% Bombay 3.7% Brisbane 5.4%Singapore 2.7% Melbourne 3.0% Auckland 4.4% Brisbane 3.0% Auckland 3.9%Bangkok 2.5% Brisbane 2.9% Cape Town 3.0% Auckland 2.5% Johannesburg 3.7%Bombay 2.5% Cochin 2.6% Singapore 2.6% Christchurch 2.5% Christchurch 2.1%Brisbane 2.1% Singapore 2.5% Bombay 2.1% Johannesburg 2.5% KUL 2.1%Cochin 2.1% Auckland 2.4% Delhi 2.1% Colombo 2.0% Cochin 2.0% Number of connecting points 70 102 88 22 85

Source: UK CAA Survey data

Emirates flies plenty of routes that appear unlikely at first glance

Flow traffic is critical


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Estimated traffic allocation The following tables show our estimates of traffic allocation on sectors aggregated, for simplicity, by region. We show different estimates for 2010, 2015 and 2020. In each row, we show the daily seats offered each way, taken from the September 2010 schedule and our estimated schedules for 2015 and 2020. Since the focus of this analysis is understanding the development of the Dubai hub, we ignore the impact of fifth freedom operations. In allocating the capacity of a multi-sector service touching two regions (eg Dubai-Bangkok-Sydney), we allocate 30% of the capacity to the intermediate region (SE Asia in this case) and 70% to the end point (Australia/New Zealand).

To understand the table, in each row, we show the seats offered in each direction between the region and Dubai (eg 12,513 seats per day to/from Western Europe in 2010). We then show in the third column the percentage of traffic that we estimate will be point-to-point passengers, travelling to Dubai as their final destination (eg 51% from Western Europe in 2010). In the subsequent columns, we show how we expect the traffic to spread across region-to-region connections.

As different regions have different scale operations, the tables are not symmetrical. We estimate, for example, that 0.75% of the traffic on services from Western Europe connect to East Africa. However, since East Africa has around one-sixth of the capacity there is to Western Europe, we estimate Western European connections account for 4.4% of the capacity on East African routes.

We also model a small share of connections from within the Mid East connecting to other Mid East destinations, but we do not model this being the case for other regions. We think it unlikely, for example, that passengers will connect from one East African point to another in Dubai.

Table 13 : 2010 estimated origin and destination

Region Daily seats

each wayPt

Pt DXB W EUR S ASIA MESE

ASIAAUS/

NZ N ASIA E AFR NA S AFR N AFR W AFRE

EURO LATAMW EUR 12,513 51% 0 22% 3% 7% 11% 3% 1% 0% 2% 0% 0% 0% 0%S ASIA 11,189 57% 25% 0% 3% 0% 0% 0% 1% 9% 3% 2% 1% 1% 1%ME 7,953 46% 4% 4% 11% 6% 7% 7% 3% 5% 3% 2% 1% 1% 2%SE ASIA 3,710 40% 24% 0% 16% 0% 0% 0% 5% 5% 3% 4% 2% 1% 1%AUS/NZ 3,044 24% 45% 0% 18% 0% 0% 0% 5% 0% 0% 3% 3% 2% 0%N ASIA 3,399 54% 11% 0% 16% 0% 0% 0% 6% 0% 4% 4% 4% 0% 1%E AFR 2,114 50% 4% 5% 11% 9% 7% 10% 0% 1% 0% 1% 1% 0% 1%NA 1,960 20% 0% 49% 20% 9% 0% 0% 1% 0% 0% 1% 0% 0% 0%S AFR 1,739 40% 14% 16% 11% 6% 0% 8% 0% 0% 0% 1% 0% 3% 0%N AFR 1,295 45% 0% 13% 9% 11% 7% 11% 1% 2% 1% 0% 0% 0% 0%W AFR 1,061 52% 0% 11% 7% 7% 9% 13% 1% 0% 0% 0% 0% 1% 0%E EURO 849 62% 0% 11% 9% 4% 5% 0% 1% 0% 7% 0% 1% 0% 0%LATAM 350 25% 0% 24% 34% 6% 0% 8% 3% 0% 0% 0% 0% 0% 0%

Source: RBS estimates


Region Daily seats

each wayPt


ASIAAUS/


EURO LATAMW EUR 17,620 51% 0 27% 3% 6% 10% 2% 1% 0% 2% 0% 0% 0% 0%S ASIA 22,560 57% 21% 0% 3% 0% 0% 0% 2% 9% 3% 2% 2% 3% 1%ME 15,140 49% 3% 4% 11% 5% 4% 8% 4% 3% 3% 2% 1% 3% 2%SE ASIA 4,290 38% 23% 0% 20% 0% 0% 0% 5% 5% 3% 4% 2% 2% 1%AUS/NZ 3,455 22% 48% 0% 18% 0% 0% 0% 5% 0% 0% 3% 3% 2% 0%N ASIA 7,945 58% 4% 0% 15% 0% 0% 0% 7% 0% 5% 5% 5% 1% 1%E AFR 3,720 46% 3% 9% 14% 6% 5% 14% 0% 1% 0% 1% 1% 0% 1%NA 3,360 19% 0% 60% 14% 6% 0% 0% 1% 0% 0% 1% 0% 0% 0%S AFR 2,870 34% 11% 20% 13% 4% 0% 14% 0% 0% 0% 1% 0% 3% 0%N AFR 1,910 35% 0% 18% 12% 8% 5% 19% 2% 1% 1% 0% 0% 0% 0%W AFR 1,910 42% 0% 18% 8% 4% 5% 21% 1% 0% 0% 0% 0% 1% 0%E EURO 2,830 49% 0% 24% 16% 2% 2% 3% 1% 0% 3% 0% 1% 0% 0%LATAM 700 17% 0% 24% 43% 3% 0% 9% 3% 0% 0% 0% 0% 0% 0%



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Region Daily seats

each wayPt


ASIAAUS/


EURO LATAMW EUR 19,200 51% 0 27% 3% 6% 10% 2% 1% 0% 2% 0% 0% 0% 0%S ASIA 25,640 51% 20% 0% 3% 0% 0% 0% 2% 14% 2% 1% 1% 3% 2%ME 15,690 46% 3% 5% 11% 5% 5% 9% 3% 3% 3% 1% 1% 3% 3%SE ASIA 5,758 45% 18% 0% 16% 0% 0% 0% 5% 6% 3% 3% 2% 2% 1%AUS/NZ 4,439 31% 41% 0% 16% 0% 0% 0% 5% 0% 0% 3% 3% 2% 0%N ASIA 9,653 59% 4% 0% 15% 0% 0% 0% 6% 0% 5% 4% 5% 1% 1%E AFR 3,834 42% 3% 11% 12% 7% 6% 15% 0% 1% 0% 1% 1% 0% 1%NA 5,460 18% 0% 66% 9% 6% 0% 0% 0% 0% 0% 0% 0% 0% 0%S AFR 3,100 33% 11% 19% 13% 6% 0% 16% 0% 0% 0% 1% 0% 3% 0%N AFR 1,910 32% 0% 16% 12% 8% 6% 22% 1% 1% 1% 0% 0% 0% 1%W AFR 2,220 42% 0% 16% 7% 5% 6% 22% 1% 0% 0% 0% 0% 1% 0%E EURO 3,460 54% 0% 20% 14% 3% 2% 3% 0% 0% 3% 0% 1% 0% 0%LATAM 1,600 31% 0% 32% 27% 3% 0% 5% 2% 0% 0% 1% 0% 0% 0%


Origin and destination traffic estimates It is now a simple step to take our estimated intra-regional splits, apply these to the scheduled capacity from our model to derive intra-regional capacity. If we then assume a 78% load factor, consistent with recent Emirates performance, we derive intra-regional traffic estimates. These traffic estimates, shown on the basis of passengers per day each way, are shown in the following tables. The total number of passengers per day shown in the bottom right does not represent the straightforward sum of the regional totals above, since passengers travelling between, say Western Europe and South Asia are double counted, in the West Europe connecting to South Asia figure and the South Asia connecting to West Europe figure.

Table 16 : 2010 intra-regional traffic estimates

Pax per day each way DXB W EUR S ASIA ME SE ASIA AUS/NZ N ASIA E AFR NA S AFR N AFR W AFR E EURO LATAM TOTALW EUR 5,021 - 2,147 273 683 1,074 293 73 - 195 - - - - 9,760 S ASIA 4,961 2,147 - 218 - - - 87 742 218 131 87 70 65 8,727 ME 2,827 273 218 682 372 434 434 186 310 155 93 62 62 93 6,203 SE ASIA 1,162 683 - 454 - - - 145 145 87 116 58 29 16 2,894 AUS/NZ 570 1,074 - 434 - - - 119 - - 71 71 36 - 2,374 N ASIA 1,426 293 - 434 - - - 159 - 106 106 106 - 21 2,651 E AFR 826 73 87 186 145 119 159 - 16 - 15 8 7 8 1,649 NA 300 - 742 310 145 - - 16 - - 15 - - - 1,529 S AFR 545 195 218 155 87 - 106 - - - 7 - 43 - 1,356 N AFR 456 - 131 93 116 71 106 15 15 7 - - - - 1,010 W AFR 427 - 87 62 58 71 106 8 - - - - 8 - 828 E EURO 408 - 70 62 29 36 - 7 - 43 - 8 - - 662 LATAM 69 - 65 93 16 - 21 8 - - - - - - 273 Total 29,798



34

Table 17 : 2015 intra-regional traffic forecasts

Pax per day each way DXB W EUR S ASIA ME SE ASIA AUS/NZ N ASIA E AFR NA S AFR N AFR W AFR E EURO LATAM TOTALW EUR 6,982 - 3,711 385 756 1,306 275 89 - 241 - - - - 13,744 S ASIA 9,971 3,711 - 440 - - - 264 1,584 440 264 264 528 132 17,597 ME 5,788 385 440 1,299 531 472 945 413 354 295 177 118 354 236 11,809 SE ASIA 1,260 756 - 660 - - - 167 151 100 117 67 50 18 3,346 AUS/NZ 580 1,306 - 472 - - - 135 - - 81 81 40 - 2,695 N ASIA 3,565 275 - 945 - - - 403 - 310 279 310 62 50 6,197 E AFR 1,345 89 264 413 167 135 403 - 19 - 26 15 12 15 2,902 NA 498 - 1,584 354 151 - - 19 - - 16 - - - 2,621 S AFR 770 241 440 295 100 - 310 - - - 11 - 72 - 2,239 N AFR 519 - 264 177 117 81 279 26 16 11 - - - - 1,490 W AFR 621 - 264 118 67 81 310 15 - - - - 15 - 1,490 E EURO 1,074 - 528 354 50 40 62 12 - 72 - 15 - - 2,207 LATAM 95 - 132 236 18 - 50 15 - - - - - - 546 Total 51,624


Table 18 : 2020 intra-regional traffic forecasts

Pax per day each way DXB W EUR S ASIA ME SE ASIA AUS/NZ N ASIA E AFR NA S AFR N AFR W AFR E EURO LATAM TOTALW EUR 7,608 - 4,044 419 824 1,423 300 97 - 262 - - - - 14,976 S ASIA 10,296 4,044 - 600 - - - 340 2,800 450 240 280 550 400 19,999 ME 5,632 419 600 1,346 551 551 1,101 367 367 306 171 122 367 337 12,238 SE ASIA 2,015 824 - 714 - - - 202 269 135 121 90 90 31 4,491 AUS/NZ 1,067 1,423 - 551 - - - 173 - - 93 104 52 - 3,462 N ASIA 4,464 300 - 1,101 - - - 452 - 376 324 376 75 60 7,529 E AFR 1,267 97 340 367 202 173 452 - 21 - 21 15 12 24 2,991 NA 784 - 2,800 367 269 - - 21 - - 17 - - - 4,259 S AFR 799 262 450 306 135 - 376 - - - 12 - 77 - 2,418 N AFR 475 - 240 171 121 93 324 21 17 12 - - - 15 1,490 W AFR 727 - 280 122 90 104 376 15 - - - - 17 - 1,732 E EURO 1,458 - 550 367 90 52 75 12 - 77 - 17 - - 2,699 LATAM 381 - 400 337 31 - 60 24 - - 15 - - - 1,248 Total 58,925



35

Implied growth rates analysis

This section of the report takes our hypothetical intra-regional traffic flows and compares the implied growth rates with Airbus’s and Boeing’s regional growth estimates.

Key conclusions of the implied growth rates analysis Our hypothetical network produces a passenger CAGR from 2010 to 2020 of 7.1%.

The point-to-point markets with the highest-growth CAGRs are from Dubai to Latin America, Eastern Europe, North America and North Asia.

The growth rates forecast for connecting markets vary widely.

We forecast very low growth rates in markets that will be increasingly overflown by new non-stop services (eg Europe-North Asia) and in relatively mature markets (eg Western Europe-Australia).

We forecast notably high CAGRs in markets linking two developing markets, such as between South Asia and Eastern Europe and between South Asia and Latin America.

When we compare the implicit intra-regional CAGRs produced by our network model for Emirates with those forecast by Boeing and Airbus, the Emirates growth rates are broadly in line with or slightly lower than the manufacturer forecasts in most cases.

Two point-to-point markets are exceptions. Our network model implies that Emirates’ point-to-point traffic between Dubai and North Asia will grow more quickly than the overall North Asia-Mid East market and that Emirates’ point-to-point traffic between Dubai and Eastern Europe will grow more quickly than the overall Eastern Europe-Mid East market. We think none of these are implausible.

There are three connecting markets in which our network model implies Emirates will gain share. These are between South Asia and North America, between South Asia and the Middle East and between South Asia and Eastern Europe. We think none of these are implausible.

Implied growth rates Taking the traffic estimates illustrated in the previous section of this report, we can calculate the hypothetical traffic CAGRs from our network model by regional traffic flow. These CAGRs vary from as low as 0.2% to as high as 22.9%.

The low CAGRs include regional flows that are circuitous via Dubai (eg 0.2% on Western Europe-North Asia). We would not expect these flows to grow materially for Emirates, as Gulf routings will likely lose market share to new direct routings. We similarly have low CAGRs on some quite well established markets, which are widely contested (2.9% on Europe-Australia) or markets that would lose share to new non-stop services (1.9% CAGR on Europe-Southeast Asia).

We see some very high CAGRs in regional flows between developing markets, such as between South Asia and Latin America (19.8%) and between South Asia and Eastern Europe (22.9%).

We model wide variations in CAGRs across different traffic flows


36

Table 19 : Implied pax CAGRs, 2010-20

Pax CAGR DXB W EUR S ASIA ME SE ASIA AUS/NZ N ASIA E AFR NA S AFR N AFR W AFR E EURO LATAM TOTALW EUR 4.2% NA 6.5% 4.4% 1.9% 2.9% 0.2% 2.9% NA 3.0% NA NA NA NA 4.4%S ASIA 7.6% 6.5% NA 10.6% NA NA NA 14.6% 14.2% 7.5% 6.2% 12.4% 22.9% 19.8% 8.6%ME 7.1% 4.4% 10.6% 7.0% 4.0% 2.4% 9.8% 7.0% 1.7% 7.0% 6.3% 7.0% 19.5% 13.7% 7.0%SE ASIA 5.7% 1.9% NA 4.6% NA NA NA 3.4% 6.4% 4.5% 0.5% 4.5% 12.0% 7.0% 4.5%AUS/NZ 6.5% 2.9% NA 2.4% NA NA NA 3.8% NA NA 2.8% 3.8% 3.8% NA 3.8%N ASIA 12.1% 0.2% NA 9.8% NA NA NA 11.0% NA 13.5% 11.8% 13.5% NA 11.0% 11.0%E AFR 4.4% 2.9% 14.6% 7.0% 3.4% 3.8% 11.0% NA 2.4% NA 3.5% 6.1% 6.1% 11.2% 6.1%NA 10.1% NA 14.2% 1.7% 6.4% NA NA 2.4% NA NA 1.1% NA NA NA 10.8%S AFR 3.9% 3.0% 7.5% 7.0% 4.5% NA 13.5% NA NA NA 6.0% NA 6.0% NA 6.0%N AFR 0.4% NA 6.2% 6.3% 0.5% 2.8% 11.8% 3.5% 1.1% 6.0% NA NA NA NA 4.0%W AFR 5.5% NA 12.4% 7.0% 4.5% 3.8% 13.5% 6.1% NA NA NA NA 7.7% NA 7.7%E EURO 13.6% NA 22.9% 19.5% 12.0% 3.8% NA 6.1% NA 6.0% NA 7.7% NA NA 15.1%LATAM 18.6% NA 19.8% 13.7% 7.0% NA 11.0% 11.2% NA NA NA NA NA NA 16.4% 7.1%


The very high CAGRs are generally based on very low 2010 estimated traffic flows. It is thus perhaps more useful to look at the absolute increase in passengers implied by our network model, illustrated in the following table.

Table 20 : Implied absolute traffic growth in passengers per day each way, 2010-20

Absolute PDEW growth DXB W EUR S ASIA ME SE ASIA AUS/NZ N ASIA E AFR NA S AFR N AFR W AFR E EURO LATAM TOTALW EUR 2,586 - 1,896 146 140 349 7 24 - 67 - - - - 5,216 S ASIA 5,335 1,896 - 382 - - - 253 2,058 232 109 193 480 335 11,272 ME 2,805 146 382 664 179 116 667 181 57 151 78 60 305 244 6,035 SE ASIA 852 140 - 261 - - - 57 125 48 6 32 61 16 1,597 AUS/NZ 497 349 - 116 - - - 54 - - 22 33 16 - 1,088 N ASIA 3,039 7 - 667 - - - 293 - 270 218 270 75 39 4,878 E AFR 441 24 253 181 57 54 293 - 4 - 6 7 5 16 1,342 NA 484 - 2,058 57 125 - - 4 - - 2 - - - 2,730 S AFR 255 67 232 151 48 - 270 - - - 5 - 34 - 1,062 N AFR 19 - 109 78 6 22 218 6 2 5 - - - 15 480 W AFR 300 - 193 60 32 33 270 7 - - - - 9 - 904 E EURO 1,050 - 480 305 61 16 75 5 - 34 - 9 - - 2,037 LATAM 312 - 335 244 16 - 39 16 - - 15 - - - 975


The following table takes the absolute increases in passengers per day by region and looks at these flows as a percentage of the total traffic growth in the system. Apart from point-to-point growth to Dubai, the table clearly shows that the key regional flows supporting the capacity growth are from South Asia to Europe, from South Asia to North America (7% of total growth each) and from North Asia to Africa (4% of the total traffic growth).

Table 21 : Distribution of traffic growth by region, 2010-20

Distribution of pax growth DXB W EUR S ASIA ME

SE ASIA AUS/NZ N ASIA E AFR NA S AFR N AFR W AFR E EURO LATAM TOTAL

W EUR 9% 0% 7% 1% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 18%S ASIA 18% 7% 0% 1% 0% 0% 0% 1% 7% 1% 0% 1% 2% 1% 39%ME 10% 1% 1% 2% 1% 0% 2% 1% 0% 1% 0% 0% 1% 1% 21%SE ASIA 3% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 5%AUS/NZ 2% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 4%N ASIA 10% 0% 0% 2% 0% 0% 0% 1% 0% 1% 1% 1% 0% 0% 17%E AFR 2% 0% 1% 1% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 5%NA 2% 0% 7% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 9%S AFR 1% 0% 1% 1% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 4%N AFR 0% 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 2%W AFR 1% 0% 1% 0% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% 3%E EURO 4% 0% 2% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 7%LATAM 1% 0% 1% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 3%



37

Regional growth estimates in context To sanity check these hypothetical growth rates, we have compared our estimated intra-regional growth rates with the intra-regional growth forecasts published by Airbus and Boeing into their main forecast documents (Global Market Forecast for Airbus, Current Market Outlook for Boeing).

In looking at the regional growth rates published by Airbus and Boeing, we treat our point-to-point traffic flows to Dubai and traffic flows connecting to the Mid East as “Middle east” as defined in their forecasts. On some smaller markets, Airbus and Boeing do not publish specific intra-regional forecasts, but we have interpolated their forecasts from the regions to derive an estimate for the traffic area.

The first table that follows illustrates the largest 18 intra-regional traffic flows in our 2020 model (accounting for 81% of total traffic) and compares the implied growth CAGRs in our model with the Airbus and Boeing estimates. The second table that follows illustrates the same for the highest-growth markets in our model in terms of absolute passengers per day.

Growth rates broadly in line with manufacturer estimates Looking across the two tables, we can see that in the majority of markets, the intra-regional growth rates from our hypothetical network are very closely aligned with the Boeing and Airbus market growth forecasts, sometimes even below the manufacturer estimates.

There are five notable exceptions:

North Asia point-to-point traffic to Dubai

South Asia to North America

Eastern Europe point-to-point traffic to Dubai

South Asia to Middle East

South Asia to Eastern Europe

We compare our modelled regional growth rates with the forecasts from Airbus and Boeing

Table 22 : Implied growth estimates in major markets compared with Airbus and Boeing growth estimates

2020 largest PDEW markets 2020 passengers per

day each way 2010-20 growth CAGR Boeing CMO growth Airbus GMF growthS ASIA DXB 10,296 7.6% 7.3% 6.3%W EUR DXB 7,608 4.2% 6.0% 5.8%ME DXB 5,632 7.1% 7.6% 7.4%N ASIA DXB 4,464 12.1% 6.0% 7.4%W EUR S ASIA 4,044 6.5% 7.1% 5.8%S ASIA NA 2,800 14.2% 7.4% 8.0%SE ASIA DXB 2,015 5.7% 7.4% 4.4%E EURO DXB 1,458 13.6% 4.7% 5.2%W EUR AUS/NZ 1,423 2.9% 6.0% 3.5%ME ME 1,346 7.0% 6.0% 6.0%E AFR DXB 1,267 4.4% 6.5% 7.5%ME N ASIA 1,101 9.8% 7.6% 7.4%AUS/NZ DXB 1,067 6.5% 6.0% 7.3%W EUR SE ASIA 824 1.9% 5.5% 4.4%S ASIA ME 600 10.6% 7.3% 6.3%ME SE ASIA 551 4.0% 7.4% 4.4%ME AUS/NZ 551 2.4% 6.0% 7.3%S ASIA E EUR 550 22.9% 4.7% 6.0%

Source: Source: RBS forecasts, Airbus, Boeing


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Table 23 : Implied growth estimates in major growth markets compared with Airbus and Boeing growth estimates

Largest PDEW growth markets, 2010-20 PDEW* 2020 Passenger growth Boeing CMO growth Airbus GMF growthS ASIA DXB 5,335 7.6% 7.3% 6.3%N ASIA DXB 3,039 12.1% 7.6% 7.4%W EUR DXB 2,586 4.2% 6.0% 5.8%ME DXB 2,805 7.1% 6.0% 6.0%S ASIA NA 2,058 14.2% 7.4% 8.0%W EUR S ASIA 1,896 6.5% 7.1% 5.8%S ASIA ME 382 10.6% 7.3% 6.3%E EURO DXB 1,050 13.6% 4.7% 5.2%SE ASIA DXB 852 5.7% 7.4% 4.4%ME N ASIA 667 9.8% 7.6% 7.4%ME ME 664 7.0% 6.0% 6.0%AUS/NZ DXB 497 6.5% 6.0% 7.3%S ASIA E EUR 480 22.9% 4.7% 6.0%W AFR DXB 300 5.5% 6.5% 7.5%E AFR DXB 441 4.4% 6.5% 7.5%W EUR AUS/NZ 349 2.9% 6.0% 3.5%S ASIA LATAM 335 19.8% 7.2% 9.0%LATAM DXB 312 18.6% 7.0% 15.2%ME E EUR 305 19.5% 6.0% 5.2%

* PDEW = passengers per day each way Source: RBS forecasts, Airbus, Boeing

In the context of the point-to-point markets, our hypothetical network model implies that Emirates traffic to and from Dubai from North Asia (principally China) and East Europe (principally Russia) is going to grow more quickly than traffic from China and Russia to the overall Mid East. This is not a given, but we do not think it is implausible.

In the context of the connecting markets, our hypothetical network model implies that Emirates can gain market share traffic to and from South Asia (principally India) to North America (US and Canada), from South Asia to the Middle East and from India to Eastern Europe (principally Russia). Once again, we would not want to take any of this for granted, but we do not think market share gain in these markets is implausible. We would recognise that traffic between India and the Middle East will face low-cost-carrier competition.

We explore the development of Emirates regional market shares from 2010 to 2020 in the following section of this report.


39

Implied market share analysis

This section of the report takes our hypothetical intra-regional traffic flows and estimates Emirates regional market shares in 2010 and then using the manufacturer forecasts for regional growth, estimates Emirates’ market shares in 2020.

Key conclusions of the implied growth rates analysis Our analysis suggests Emirates, if it were to execute our hypothetical network plan, would be

likely to maintain relatively stable markets shares in many intra-regional markets.

Our network model implies Emirates gaining market share in North Asia-Africa. We think this is very plausible given the optimal location of Dubai to function as a hub in this market.

Our network model implies Emirates gaining market share in the South Asia-North America market. We think this is plausible given the broad range of destinations in India, the low operating costs of the A380s, the challenges facing Indian carriers and the tax challenges facing European carriers.

Our network model implies Emirates gaining market share in the North Asia-Middle East market. We think this is reasonably given the strength of the Dubai hub, which will support direct service to more Chinese provincial destinations than other Mid East hubs.

Implied growth rates Working off the traffic estimates produced from our hypothetical network, we have grossed up the passengers per day each way traffic data to annualised passenger traffic. We have then taken an average sector length for each regional market to produce a regional RPK figure for Emirates.

We then estimate total market RPKs in each regional market, using the actual 2009 regional RPKs, sourced from the manufacturer market outlooks, grossed up to 2010 and 2020 using the average of Airbus and Boeing CAGRs for each flow.

In this analysis, we combine Emirates’ point-to-point traffic to Dubai with its Middle East connecting flows, since the manufacturers do not disaggregate Dubai from the Mid East in their estimates. We also aggregate Western Europe with Eastern Europe and we aggregate Western, Eastern and Southern Africa into one Sub-Saharan Africa market.

Our analysis suggests Emirates, if it were to execute our hypothetical network plan, would be likely to maintain relatively stable markets shares in many intra-regional markets with the key exceptions of:

North Asia-Africa;

South Asia-North America; and

North Asia-Mid East.

Table 24 : Estimated intra regional market shares

Intra-regional market Estimated 2010 market share Estimated 2020 market shareSouth Asia Middle East 12.4% 13.6%Europe Middle East 14.1% 13.3%North Asia Middle East 32.3% 46.7%South Asia Europe 21.7% 23.6%South Asia North America 29.3% 52.7%South East Asia Middle East 11.6% 10.9%Europe Australia 22.0% 19.4%Intra middle East 5.4% 6.0%Sub-Saharan Africa Middle East 29.2% 24.4%Australia Middle East 33.3% 28.1%LatAm Middle East 24.9% 26.6%North Asia Sub-Saharan Africa 35.2% 48.2%

Source: RBS forecasts, Airbus, Boeing


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How plausible are the region-specific market share gains? We think the probability of Emirates gaining significant market share in the North Asia to Africa market is very high. The strong economic interest being taken by China in the resources-rich economies of Africa means that there will likely be strong traffic growth in this market. However, we think the traffic demand will be highly dispersed across multiple markets in Africa. From China, we would expect demand to be relatively concentrated from the major markets of Shanghai, Beijing and Guangzhou, but with meaningful demand from provincial points also. We would thus expect there to be very few viable point to point routes between China and Africa, necessitating connections through a hub. The Gulf looks optimally located to function as a hub between China and Africa. There are few fast-growing financially strong airlines in Africa. That said, Kenya Airways and Ethiopian Airlines are two of the stronger airlines in Africa that would seek to participate in this traffic flow. However, the scale and strength of the Dubai hub is today and is likely to remain in future stronger than the connection complexes in Nairobi and Addis Ababa.

We think the probability of Emirates gaining significant market share in the South Asia to North America market is high. We foresee strong traffic growth in this market. Indian, European and US carriers will be interested in this market. Indian carriers could be inhibited in their ability to take full advantage of this market by limited fleets and constrained infrastructure. The strong growth of low-cost carriers in the domestic market is also weakening the major carriers’ short-haul feed markets, as has happened to European carriers. European carriers’ efforts to take advantage of the growth market between India and the US and Canada will be constrained by limited departure points in India and by ETS charges and aviation taxation. US carriers have limited ultra-long-haul capacity. Emirates has a very broad network in India and will have low operating costs on the sectors to the US, thanks to the deployment of A380s.

We think the probability of Emirates gaining market share on traffic flows from North Asia to the Middle is reasonable. The size and scale of the Emirates hub will support a wider range of destinations in China than other Middle East carriers.

We think Emirates is very likely to gain market share in the China-Africa market

We think Emirates is likely to gain market share in the India-North America market

Airlines | Appendix | 26 January 2011

41

Appendix

We present our detailed fleet plan and network plans.

Table 25 : September 2010 network

Route Route area Aircraft Block time Per week

Block time plus turn

time at baseAircraft

days Seats

Seats per day each

wayDXB BNE AKL AUS/NZ 340 01 19 00 7 01 23 00 1.96 262 262 DXB MEL AKL AUS/NZ 777 01 19 00 7 01 23 00 1.96 350 350 DXB SYD AKL AUS/NZ 380 01 20 15 7 02 00 15 2.01 490 490 DXB BKK SYD CHC AUS/NZ 777 01 20 55 7 02 00 55 2.04 350 350 DXB SIN BNE AUS/NZ 777 01 22 00 7 02 02 00 2.08 350 350 DXB KUL MEL AUS/NZ 777 01 10 00 7 01 14 00 1.58 350 350 DXB PER AUS/NZ 340 01 02 35 7 01 06 35 1.27 262 262 DXB PER AUS/NZ 777 01 02 55 7 01 06 55 1.29 350 350 DXB SIN MEL AUS/NZ 777 01 19 15 7 01 23 15 1.97 350 350 DXB SYD AUS/NZ 777 01 11 50 7 01 15 50 1.66 350 350 DXB ADD EBB E AFR 777 00 16 20 7 00 20 20 0.85 350 350 DXB DAR E AFR 340 00 12 30 7 00 16 30 0.69 262 262 DXB KRT E AFR 340 00 09 30 7 00 13 30 0.56 262 262 DXB MRU E AFR 777 01 02 25 7 01 06 25 1.27 350 350 DXB MRU E AFR 777 00 14 40 2 00 18 40 0.22 350 100 DXB NBO E AFR 330 00 11 55 7 00 15 55 0.66 237 237 DXB NBO E AFR 777 00 14 10 7 00 18 10 0.76 350 350 DXB SEZ E AFR 330 00 10 35 6 00 14 35 0.52 237 203 DXB DME E EUR 340 00 13 20 7 00 17 20 0.72 262 262 DXB DME E EUR 777 00 12 00 7 00 16 00 0.67 350 350 DXB PRG E EUR 330 00 13 40 7 00 17 40 0.74 237 237 DXB GRU LATAM 777 01 11 00 7 01 15 00 1.63 350 350 DXB AMM ME 330 00 07 10 5 00 11 10 0.33 237 169 DXB AMM ME 777 00 07 10 7 00 11 10 0.47 350 350 DXB BAH ME 330 00 03 30 20 00 07 30 0.89 237 677 DXB BAH ME 777 00 03 30 1 00 07 30 0.04 350 50 DXB BEY ME 330 00 07 40 10 00 11 40 0.69 237 339 DXB BEY ME 777 00 07 40 7 00 11 40 0.49 350 350 DXB DAM ME 330 00 07 35 9 00 11 35 0.62 237 305 DXB DAM ME 777 00 07 35 5 00 11 35 0.34 350 250 DXB DMM ME 330 00 03 30 4 00 07 30 0.18 237 135 DXB DMM ME 777 00 03 30 3 00 07 30 0.13 350 150 DXB DOH ME 330 00 03 15 25 00 07 15 1.08 237 846 DXB DOH ME 777 00 03 15 7 00 07 15 0.30 350 350 DXB IKA ME 777 00 05 25 19 00 09 25 1.06 350 950 DXB IKA ME 330 00 05 25 2 00 09 25 0.11 237 68 DXB JED ME 380 00 07 55 7 00 11 55 0.50 490 490 DXB KWI ME 777 00 04 30 11 00 08 30 0.56 350 550 DXB KWI ME 330 00 04 30 17 00 08 30 0.86 237 576 DXB MCT ME 330 00 02 55 13 00 06 55 0.54 237 440 DXB MCT ME 777 00 02 55 1 00 06 55 0.04 350 50 DXB MED ME 330 00 07 00 4 00 11 00 0.26 237 135 DXB RUH ME 330 00 05 10 4 00 09 10 0.22 237 135 DXB RUH ME 777 00 05 10 7 00 09 10 0.38 350 350 DXB SAH ME 330 00 06 35 7 00 10 35 0.44 237 237 DXB CAI N AFR 777 00 08 40 10 00 12 40 0.75 350 500 DXB CAI N AFR 330 00 08 40 1 00 12 40 0.08 237 34 DXB CMN N AFR 340 00 17 35 7 00 21 35 0.90 262 262 DXB TIP N AFR 340 00 13 50 7 00 17 50 0.74 262 262 DXB TUN N AFR 330 00 13 50 7 00 17 50 0.74 237 237

Source: OAG Max, ATI


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Table 25 : September 2010 network (cont’d)




days Seats

Seats per day each

wayDXB BKK HKG N ASIA 777 01 01 15 7 01 05 15 1.22 350 350 DXB CAN N ASIA 777 00 17 15 7 00 21 15 0.89 350 350 DXB HKG N ASIA 777 00 18 55 7 00 22 55 0.95 350 350 DXB ICN N ASIA 380 01 01 25 7 01 05 25 1.23 490 490 DXB KIX N ASIA 777 01 01 35 7 01 05 35 1.23 350 350 DXB NRT N ASIA 777 01 00 55 5 01 04 55 0.86 350 250 DXB PEK N ASIA 380 01 00 10 7 01 04 10 1.17 490 490 DXB PEK N ASIA 340 01 01 00 7 01 05 00 1.21 262 262 DXB PVG N ASIA 777 01 01 30 7 01 05 30 1.23 350 350 DXB PVG N ASIA 340 01 01 30 7 01 05 30 1.23 262 262 DXB IAH NA 777 01 09 40 7 01 13 40 1.57 350 350 DXB JFK NA 777 01 04 05 7 01 08 05 1.34 350 350 DXB JFK NA 777 01 11 05 7 01 15 05 1.63 350 350 DXB LAX NA 777 01 11 15 7 01 15 15 1.64 350 350 DXB SFO NA 777 01 10 25 7 01 14 25 1.60 350 350 DXB YYZ NA 380 01 08 40 3 01 12 40 0.65 490 210 DXB CPT S AFR 777 00 20 25 7 01 00 25 1.02 350 350 DXB DUR S AFR 330 00 18 55 7 00 22 55 0.95 237 237 DXB JNB S AFR 777 00 18 50 21 00 22 50 2.85 350 1,050 DXB LAD S AFR 330 00 19 10 3 00 23 10 0.41 237 102 DXB AMD S ASIA 330 00 07 00 10 00 11 00 0.65 237 339 DXB BLR S ASIA 330 00 09 35 19 00 13 35 1.54 237 643 DXB BLR S ASIA 777 00 09 35 1 00 13 35 0.08 350 50 DXB BOM S ASIA 777 00 07 20 21 00 11 20 1.42 350 1,050 DXB BOM S ASIA 330 00 07 20 14 00 11 20 0.94 237 474 DXB CCJ S ASIA 777 00 09 15 11 00 13 15 0.87 350 550 DXB CCU S ASIA 330 00 11 45 12 00 15 45 1.13 237 406 DXB MLE CMB tag S ASIA 777 00 17 15 5 00 21 15 0.63 350 250 DXB MLE CMB triangle S ASIA 777 00 13 20 2 00 17 20 0.21 350 100 DXB MLE S ASIA 777 00 09 35 7 00 13 35 0.57 350 350 DXB CMB S ASIA 777 00 10 05 7 00 14 05 0.59 350 350 DXB COK S ASIA 330 00 09 10 5 00 13 10 0.39 237 169 DXB COK S ASIA 777 00 09 10 9 00 13 10 0.71 350 450 DXB DAC S ASIA 777 00 11 05 17 00 15 05 1.53 350 850 DXB DEL S ASIA 777 00 08 10 14 00 12 10 1.01 350 700 DXB DEL S ASIA 330 00 08 10 14 00 12 10 1.01 237 474 DXB HYD S ASIA 330 00 08 45 17 00 12 45 1.29 237 576 DXB HYD S ASIA 777 00 08 45 4 00 12 45 0.30 350 200 DXB ISB S ASIA 777 00 07 45 7 00 11 45 0.49 350 350 DXB KHI S ASIA 330 00 05 15 15 00 09 15 0.83 237 508 DXB KHI S ASIA 777 00 05 15 13 00 09 15 0.72 350 650 DXB LHE S ASIA 777 00 07 45 4 00 11 45 0.28 350 200 DXB MAA S ASIA 330 00 09 30 8 00 13 30 0.64 237 271 DXB MAA S ASIA 777 00 09 30 13 00 13 30 1.04 350 650 DXB PEW S ASIA 330 00 07 50 2 00 11 50 0.14 237 68 DXB TRV S ASIA 330 00 09 20 12 00 13 20 0.95 237 406 DXB BKK SE ASIA 380 00 14 50 7 00 18 50 0.78 490 490 DXB BKK SE ASIA 777 00 14 00 7 00 18 00 0.75 350 350 DXB JKT SE ASIA 777 00 18 35 14 00 22 35 1.88 350 700 DXB CMB SIN SE ASIA 777 00 22 15 7 01 02 15 1.09 350 350 DXB KUL SE ASIA 777 00 19 05 14 00 23 05 1.92 350 700 DXB MNL SE ASIA 777 00 19 05 14 00 23 05 1.92 350 700 DXB ACC ABJ W AFR 340 00 22 20 7 01 02 20 1.10 262 262 DXB DKR W AFR 340 00 21 20 5 01 01 20 0.75 262 187 DXB LOS W AFR 777 00 18 40 7 00 22 40 0.94 350 350 DXB LOS W AFR 340 00 18 40 7 00 22 40 0.94 262 262 DXB AMS W EUR 777 00 15 35 7 00 19 35 0.82 350 350 DXB ATH W EUR 330 00 12 00 10 00 16 00 0.95 237 339



43

Table 25 : September 2010 network (cont’d)




days Seats

Seats per day each

wayDXB BHX W EUR 777 00 16 10 14 00 20 10 1.68 350 700 DXB CDG W EUR 380 00 15 55 7 00 19 55 0.83 490 490 DXB CDG W EUR 777 00 15 20 7 00 19 20 0.81 350 350 DXB DUS W EUR 330 00 15 15 7 00 19 15 0.80 237 237 DXB DUS W EUR 777 00 15 15 7 00 19 15 0.80 350 350 DXB FCO W EUR 330 00 13 50 7 00 17 50 0.74 237 237 DXB FCO W EUR 777 00 13 50 7 00 17 50 0.74 350 350 DXB FRA W EUR 777 00 15 10 14 00 19 10 1.60 350 700 DXB GLA W EUR 777 00 16 40 7 00 20 40 0.86 350 350 DXB HAM W EUR 777 00 14 40 7 00 18 40 0.78 350 350 DXB IST W EUR 777 00 10 25 11 00 14 25 0.94 350 550 DXB LCA MLA W EUR 330 00 16 05 7 00 20 05 0.84 237 237 DXB LGW W EUR 777 00 16 05 21 00 20 05 2.51 350 1,050 DXB LHR W EUR 380 00 16 20 14 00 20 20 1.69 490 980 DXB LHR W EUR 777 00 16 20 21 00 20 20 2.54 350 1,050 DXB MAD W EUR 330 00 16 40 7 00 20 40 0.86 237 237 DXB MAN W EUR 380 00 16 20 7 00 20 20 0.85 490 490 DXB MAN W EUR 777 00 16 20 7 00 20 20 0.85 350 350 DXB MUC W EUR 777 00 15 05 7 00 19 05 0.80 350 350 DXB MUC W EUR 330 00 14 00 7 00 18 00 0.75 237 237 DXB MXP W EUR 340 00 14 30 14 00 18 30 1.54 262 524 DXB NCE W EUR 330 00 15 05 7 00 19 05 0.80 237 237 DXB NCL W EUR 330 00 16 30 7 00 20 30 0.85 237 237 DXB VCE W EUR 330 00 13 45 7 00 17 45 0.74 237 237 DXB VIE W EUR 777 00 13 00 7 00 17 00 0.71 350 350 DXB ZRH W EUR 330 00 14 15 5 00 18 15 0.54 237 169 DXB ZRH W EUR 340 00 14 15 2 00 18 15 0.22 262 75 DXB ZRH W EUR 777 00 15 00 7 00 19 00 0.79 350 350


Table 26 : 2015 network



time at base Aircraft days Seats

Seats per day each

wayDXB BKK SYD CHC AUS/NZ 350 01 20 55 7 02 00 55 2.04 310 310DXB BNE AKL AUS/NZ 350 01 19 00 7 01 23 00 1.96 310 310DXB BNE WEL AUS/NZ 350 01 19 00 7 01 23 00 1.96 310 310DXB KUL MEL AUS/NZ 380 01 10 00 7 01 14 00 1.58 490 490DXB MEL AKL AUS/NZ 777 01 19 00 7 01 23 00 1.96 350 350DXB PER AUS/NZ 777 01 02 35 14 01 06 35 2.55 350 700DXB SIN MEL AUS/NZ 777 01 19 15 7 01 23 15 1.97 350 350DXB SYD AUS/NZ 380 01 11 50 7 01 15 50 1.66 490 490DXB SYD AKL AUS/NZ 380 01 20 15 7 02 00 15 2.01 490 490DXB ADD E AFR 777 00 09 30 7 00 13 30 0.56 350 350DXB DAR E AFR 777 00 12 30 7 00 16 30 0.69 350 350DXB EBB E AFR 777 00 14 10 7 00 18 10 0.76 350 350DXB KRT E AFR 777 00 09 30 7 00 13 30 0.56 350 350DXB MRU E AFR 777 00 14 40 14 00 18 40 1.56 350 700DXB NBO E AFR 38H 00 14 10 7 00 18 10 0.76 650 650DXB NBO E AFR 777 00 11 55 7 00 15 55 0.66 350 350DXB SEZ E AFR 350 00 10 35 14 00 14 35 1.22 310 620DXB ALA E EUR 350 00 12 00 7 00 16 00 0.67 310 310DXB DME E EUR 380 00 12 00 21 00 16 00 2.00 490 1470DXB GYD E EUR 777 00 11 00 7 00 15 00 0.63 350 350



44

Table 26 : 2015 network (cont’d)




Seats per day each

wayDXB LED E EUR 777 00 15 20 7 00 19 20 0.81 350 350DXB PRG E EUR 777 00 13 40 7 00 17 40 0.74 350 350DXB GRU LATAM 777 01 11 00 7 01 15 00 1.63 350 350DXB MEX LATAM 777 01 05 00 7 01 09 00 1.38 350 350DXB AMM ME 777 00 07 10 21 00 11 10 1.40 350 1050DXB BAH ME 777 00 03 30 35 00 07 30 1.56 350 1750DXB BEY ME 350 00 07 40 28 00 11 40 1.94 310 1240DXB BGW ME 777 00 05 25 7 00 09 25 0.39 350 350DXB DAM ME 777 00 07 35 21 00 11 35 1.45 350 1050DXB DMM ME 777 00 03 30 14 00 07 30 0.63 350 700DXB DOH ME 777 00 03 15 35 00 07 15 1.51 350 1750DXB IKA ME 777 00 05 25 28 00 09 25 1.57 350 1400DXB JED ME 38H 00 07 55 14 00 11 55 0.99 650 1300DXB KWI ME 777 00 04 30 28 00 08 30 1.42 350 1400DXB MCT ME 777 00 02 55 28 00 06 55 1.15 350 1400DXB MED ME 777 00 07 00 7 00 11 00 0.46 350 350DXB RUH ME 777 00 05 10 14 00 09 10 0.76 350 700DXB SAH ME 777 00 06 35 14 00 10 35 0.88 350 700DXB CAI N AFR 380 00 08 40 14 00 12 40 1.06 490 980DXB CMN N AFR 350 00 17 35 7 00 21 35 0.90 310 310DXB TIP N AFR 350 00 13 50 7 00 17 50 0.74 310 310DXB TUN N AFR 350 00 13 50 7 00 17 50 0.74 310 310DXB BKK HKG N ASIA 777 01 01 15 7 01 05 15 1.22 350 350DXB CAN N ASIA 380 00 17 15 14 00 21 15 1.77 490 980DXB CTS N ASIA 777 00 18 55 7 00 22 55 0.95 350 350DXB CTU N ASIA 777 01 01 30 7 01 05 30 1.23 350 350DXB HKG N ASIA 380 00 18 55 14 00 22 55 1.91 490 980DXB HND N ASIA 380 01 01 35 7 01 05 35 1.23 490 490DXB ICN N ASIA 380 01 01 25 7 01 05 25 1.23 490 490DXB KIX N ASIA 380 01 01 35 7 01 05 35 1.23 490 490DXB NGO N ASIA 777 01 01 35 7 01 05 35 1.23 350 350DXB NRT N ASIA 380 01 00 55 7 01 04 55 1.20 490 490DXB PEK N ASIA 777 01 00 10 28 01 04 10 4.69 350 1400DXB PVG N ASIA 380 01 01 30 14 01 05 30 2.46 490 980DXB TPE N ASIA 777 01 01 30 7 01 05 30 1.23 350 350DXB BOS NA 777 01 02 05 7 01 06 05 1.25 350 350DXB IAH NA 380 01 09 40 7 01 13 40 1.57 490 490DXB JFK NA 380 01 04 05 14 01 08 05 2.67 490 980DXB LAX NA 380 01 11 15 7 01 15 15 1.64 490 490DXB ORD NA 777 01 08 40 7 01 12 40 1.53 350 350DXB SFO NA 777 01 10 25 7 01 14 25 1.60 350 350DXB YYZ NA 777 01 08 40 7 01 12 40 1.53 350 350DXB CPT S AFR 777 00 20 25 14 01 00 25 2.03 350 700DXB DUR S AFR 777 00 18 55 7 00 22 55 0.95 350 350DXB JNB S AFR 380 00 18 50 21 00 22 50 2.85 490 1470DXB LAD S AFR 777 00 19 10 7 00 23 10 0.97 350 350DXB AMD S ASIA 777 00 07 00 21 00 11 00 1.38 350 1050DXB BLR S ASIA 777 00 09 35 28 00 13 35 2.26 350 1400DXB BOM S ASIA 38H 00 07 20 35 00 11 20 2.36 650 3250DXB CCJ S ASIA 777 00 09 15 21 00 13 15 1.66 350 1050DXB CCU S ASIA 777 00 11 45 21 00 15 45 1.97 350 1050DXB CMB S ASIA 777 00 10 05 21 00 14 05 1.76 350 1050DXB COK S ASIA 777 00 09 10 21 00 13 10 1.65 350 1050DXB DAC S ASIA 777 00 11 05 28 00 15 05 2.51 350 1400DXB DEL S ASIA 38H 00 08 10 35 00 12 10 2.53 650 3250DXB GOI S ASIA 777 00 08 10 7 00 12 10 0.51 350 350DXB HYD S ASIA 777 00 08 45 14 00 12 45 1.06 350 700DXB HYD S ASIA 777 00 08 45 7 00 12 45 0.53 350 350DXB ISB S ASIA 777 00 07 45 14 00 11 45 0.98 350 700DXB KHI S ASIA 777 00 05 15 28 00 09 15 1.54 350 1400



45





Seats per day each

wayDXB KTM S ASIA 350 00 11 45 7 00 15 45 0.66 310 310DXB LHE S ASIA 777 00 07 45 14 00 11 45 0.98 350 700DXB MAA S ASIA 777 00 09 30 28 00 13 30 2.25 350 1400DXB MLE S ASIA 777 00 09 35 21 00 13 35 1.70 350 1050DXB PEW S ASIA 350 00 07 50 7 00 11 50 0.49 310 310DXB TRV S ASIA 777 00 09 20 14 00 13 20 1.11 350 700DXB BKK SE ASIA 380 00 14 50 14 00 18 50 1.57 490 980DXB DPS SE ASIA 350 00 19 05 7 00 23 05 0.96 310 310DXB JKT SE ASIA 777 00 18 35 14 00 22 35 1.88 350 700DXB KUL SE ASIA 777 00 17 05 7 00 21 05 0.88 350 350DXB MNL SE ASIA 777 00 19 05 14 00 23 05 1.92 350 700DXB SGN SE ASIA 350 00 18 10 7 00 22 10 0.92 310 310DXB SIN SE ASIA 380 00 22 15 7 01 02 15 1.09 490 490DXB ABV W AFR 350 00 18 40 7 00 22 40 0.94 310 310DXB ACC W AFR 350 00 19 40 7 00 23 40 0.99 310 310DXB DKR W AFR 350 00 21 20 7 01 01 20 1.06 310 310DXB LOS W AFR 380 00 18 40 14 00 22 40 1.89 490 980DXB AMS W EUR 777 00 15 35 7 00 19 35 0.82 350 350DXB ATH W EUR 350 00 12 00 14 00 16 00 1.33 310 620DXB BCN W EUR 350 00 15 35 7 00 19 35 0.82 310 310DXB BHX W EUR 777 00 16 10 21 00 20 10 2.52 350 1050DXB CDG W EUR 380 00 15 55 14 00 19 55 1.66 490 980DXB DUS W EUR 777 00 15 15 14 00 19 15 1.60 350 700DXB EDI W EUR 777 00 16 40 7 00 20 40 0.86 350 350DXB FCO W EUR 777 00 13 50 14 00 17 50 1.49 350 700DXB FRA W EUR 380 00 15 10 14 00 19 10 1.60 490 980DXB GLA W EUR 777 00 16 40 7 00 20 40 0.86 350 350DXB GVA W EUR 350 00 16 40 7 00 20 40 0.86 310 310DXB HAM W EUR 777 00 14 40 7 00 18 40 0.78 350 350DXB IST W EUR 777 00 10 25 14 00 14 25 1.20 350 700DXB LCA MLA W EUR 777 00 16 05 7 00 20 05 0.84 350 350DXB LGW W EUR 380 00 16 05 21 00 20 05 2.51 490 1470DXB LHR W EUR 380 00 16 20 35 00 20 20 4.24 490 2450DXB MAD W EUR 380 00 16 40 7 00 20 40 0.86 490 490DXB MAN W EUR 380 00 16 20 14 00 20 20 1.69 490 980DXB MUC W EUR 380 00 15 05 14 00 19 05 1.59 490 980DXB MXP W EUR 777 00 14 30 14 00 18 30 1.54 350 700DXB NCE W EUR 777 00 15 05 7 00 19 05 0.80 350 350DXB NCL W EUR 777 00 16 30 7 00 20 30 0.85 350 350DXB SXF W EUR 777 00 15 05 7 00 19 05 0.80 350 350DXB VCE W EUR 777 00 13 45 7 00 17 45 0.74 350 350DXB VIE W EUR 777 00 13 00 7 00 17 00 0.71 350 350DXB ZRH W EUR 777 00 15 00 14 00 19 00 1.58 350 700


Table 27 : 2020 network


Plus turn time

at baseAircraft

days Seats SDEWDXB BKK SYD CHC AUS/NZ 350 01 20 55 7 02 00 55 2.04 310 310 DXB BNE AKL AUS/NZ 350 01 19 00 7 01 23 00 1.96 310 310 DXB BNE WEL AUS/NZ 350 01 19 00 7 01 23 00 1.96 310 310 DXB KUL ADL AUS/NZ 350 01 10 00 7 01 14 00 1.58 310 310 DXB KUL MEL AUS/NZ 777 01 10 00 7 01 14 00 1.58 350 350 DXB MEL AKL AUS/NZ 380 01 19 00 7 01 23 00 1.96 490 490 DXB PER AUS/NZ 350 01 02 35 14 01 06 35 2.55 310 620 DXB SIN CNS AUS/NZ 350 01 04 00 7 01 08 00 1.33 310 310



46



Plus turn time

at baseAircraft

days Seats SDEWDXB SIN MEL AUS/NZ 380 01 19 15 7 01 23 15 1.97 490 490 DXB SYD AUS/NZ 380 01 11 50 14 01 15 50 3.32 490 980 DXB SYD AKL AUS/NZ 380 01 20 15 7 02 00 15 2.01 490 490 DXB ADD E AFR 350 00 09 30 7 00 13 30 0.56 310 310 DXB DAR E AFR 350 00 12 30 7 00 16 30 0.69 310 310 DXB EBB E AFR 350 00 14 10 7 00 18 10 0.76 310 310 DXB KRT E AFR 350 00 09 30 7 00 13 30 0.56 310 310 DXB MRU E AFR 350 00 14 40 14 00 18 40 1.56 310 620 DXB NBO E AFR 777 00 11 55 7 00 15 55 0.66 350 350 DXB NBO E AFR 38H 00 14 10 7 00 18 10 0.76 650 650 DXB RUN E AFR 350 00 14 40 4 00 18 40 0.44 310 177 DXB SEZ E AFR 350 00 10 35 14 00 14 35 1.22 310 620 DXB TNR E AFR 350 00 15 10 4 00 19 10 0.46 310 177 DXB ALA E EUR 350 00 12 00 7 00 16 00 0.67 310 310 DXB BUD E EUR 350 00 13 30 7 00 17 30 0.73 310 310 DXB DME E EUR 350 00 12 00 7 00 16 00 0.67 310 310 DXB DME E EUR 380 00 13 20 14 00 17 20 1.44 490 980 DXB GYD E EUR 350 00 11 00 7 00 15 00 0.63 310 310 DXB KBP E EUR 350 00 12 00 7 00 16 00 0.67 310 310 DXB LED E EUR 350 00 15 20 7 00 19 20 0.81 310 310 DXB PRG E EUR 350 00 13 40 7 00 17 40 0.74 310 310 DXB WAW E EUR 350 00 14 30 7 00 18 30 0.77 310 310 DXB EZE LATAM 350 01 14 00 7 01 18 00 1.75 310 310 DXB GIG SCL LATAM 350 01 20 00 7 02 00 00 2.00 310 310 DXB GRU LATAM 380 01 11 00 7 01 15 00 1.63 490 490 DXB MEX LATAM 380 01 05 00 7 01 09 00 1.38 490 490 DXB AMM ME 777 00 07 10 21 00 11 10 1.40 350 1,050 DXB BAH ME 777 00 03 30 35 00 07 30 1.56 350 1,750 DXB BEY ME 350 00 07 40 28 00 11 40 1.94 310 1,240 DXB BGW ME 350 00 05 25 14 00 09 25 0.78 310 620 DXB DAM ME 777 00 07 35 21 00 11 35 1.45 350 1,050 DXB DMM ME 777 00 03 30 14 00 07 30 0.63 350 700 DXB DOH ME 777 00 03 15 35 00 07 15 1.51 350 1,750 DXB IKA ME 777 00 05 25 28 00 09 25 1.57 350 1,400 DXB JED ME 38H 00 07 55 14 00 11 55 0.99 650 1,300 DXB KWI ME 777 00 04 30 28 00 08 30 1.42 350 1,400 DXB MCT ME 777 00 02 55 28 00 06 55 1.15 350 1,400 DXB MED ME 777 00 07 00 7 00 11 00 0.46 350 350 DXB RUH ME 380 00 05 10 14 00 09 10 0.76 490 980 DXB SAH ME 777 00 06 35 14 00 10 35 0.88 350 700 DXB CAI N AFR 380 00 08 40 14 00 12 40 1.06 490 980 DXB CMN N AFR 350 00 17 35 7 00 21 35 0.90 310 310 DXB TIP N AFR 350 00 13 50 7 00 17 50 0.74 310 310 DXB TUN N AFR 350 00 13 50 7 00 17 50 0.74 310 310 DXB BKK HKG N ASIA 380 01 01 15 7 01 05 15 1.22 490 490 DXB CAN N ASIA 380 00 17 15 14 00 21 15 1.77 490 980 DXB CTS N ASIA 777 00 18 55 7 00 22 55 0.95 350 350 DXB CTU N ASIA 777 01 01 30 7 01 05 30 1.23 350 350 DXB HKG N ASIA 380 00 18 55 14 00 22 55 1.91 490 980 DXB HND N ASIA 380 01 01 35 7 01 05 35 1.23 490 490 DXB ICN N ASIA 380 01 01 25 7 01 05 25 1.23 490 490 DXB KIX N ASIA 380 01 01 35 7 01 05 35 1.23 490 490 DXB NGO N ASIA 777 01 01 35 7 01 05 35 1.23 350 350 DXB NKG N ASIA 777 01 01 30 7 01 05 30 1.23 350 350 DXB NRT N ASIA 380 01 00 55 7 01 04 55 1.20 490 490 DXB PEK N ASIA 380 01 00 10 28 01 04 10 4.69 490 1,960 DXB PVG N ASIA 380 01 01 30 14 01 05 30 2.46 490 980 DXB TPE N ASIA 777 01 01 30 7 01 05 30 1.23 350 350 DXB URC N ASIA 777 00 14 30 7 00 18 30 0.77 350 350 DXB XMN N ASIA 777 00 18 55 7 00 22 55 0.95 350 350



47



Plus turn time

at baseAircraft

days Seats SDEWDXB BOS NA 777 01 02 05 7 01 06 05 1.25 350 350 DXB EWR NA 777 01 04 05 7 01 08 05 1.34 350 350 DXB IAD NA 777 01 08 40 7 01 12 40 1.53 350 350 DXB IAH NA 380 01 09 40 7 01 13 40 1.57 490 490 DXB JFK NA 380 01 04 05 21 01 08 05 4.01 490 1,470 DXB LAX NA 380 01 11 15 14 01 15 15 3.27 490 980 DXB ORD NA 380 01 08 40 7 01 12 40 1.53 490 490 DXB SFO NA 380 01 10 25 7 01 14 25 1.60 490 490 DXB YYZ NA 380 01 08 40 7 01 12 40 1.53 490 490 DXB CPT S AFR 777 00 20 25 14 01 00 25 2.03 350 700 DXB DUR S AFR 350 00 18 55 7 00 22 55 0.95 310 310 DXB HRE LUN S AFR 350 00 22 10 7 01 02 10 1.09 310 310 DXB JNB S AFR 380 00 18 50 21 00 22 50 2.85 490 1,470 DXB LAD S AFR 350 00 19 10 7 00 23 10 0.97 310 310 DXB AMD S ASIA 777 00 07 00 21 00 11 00 1.38 350 1,050 DXB ATQ S ASIA 777 00 08 10 7 00 12 10 0.51 350 350 DXB BLR S ASIA 777 00 09 35 28 00 13 35 2.26 350 1,400 DXB BOM S ASIA 38H 00 07 20 35 00 11 20 2.36 650 3,250 DXB CCJ S ASIA 777 00 09 15 28 00 13 15 2.21 350 1,400 DXB CCU S ASIA 777 00 11 45 28 00 15 45 2.63 350 1,400 DXB CMB S ASIA 777 00 10 05 28 00 14 05 2.35 350 1,400 DXB COK S ASIA 777 00 09 10 28 00 13 10 2.19 350 1,400 DXB DAC S ASIA 777 00 11 05 28 00 15 05 2.51 350 1,400 DXB DEL S ASIA 38H 00 08 10 35 00 12 10 2.53 650 3,250 DXB GOI S ASIA 777 00 08 10 7 00 12 10 0.51 350 350 DXB HYD S ASIA 380 00 08 45 14 00 12 45 1.06 490 980 DXB HYD S ASIA 777 00 08 45 7 00 12 45 0.53 350 350 DXB ISB S ASIA 777 00 07 45 14 00 11 45 0.98 350 700 DXB KHI S ASIA 777 00 05 15 28 00 09 15 1.54 350 1,400 DXB KTM S ASIA 777 00 11 45 7 00 15 45 0.66 350 350 DXB LHE S ASIA 777 00 07 45 14 00 11 45 0.98 350 700 DXB MAA S ASIA 777 00 09 30 28 00 13 30 2.25 350 1,400 DXB MLE S ASIA 777 00 09 35 28 00 13 35 2.26 350 1,400 DXB PEW S ASIA 350 00 07 50 7 00 11 50 0.49 310 310 DXB PNQ S ASIA 777 00 08 00 14 00 12 00 1.00 350 700 DXB TRV S ASIA 777 00 09 20 14 00 13 20 1.11 350 700 DXB BKK SE ASIA 38H 00 14 50 14 00 18 50 1.57 650 1,300 DXB DPS SE ASIA 350 00 19 05 7 00 23 05 0.96 310 310 DXB HAN SE ASIA 350 00 18 10 7 00 22 10 0.92 310 310 DXB HKT SE ASIA 350 00 15 10 7 00 19 10 0.80 310 310 DXB JKT SE ASIA 777 00 18 35 14 00 22 35 1.88 350 700 DXB KUL SE ASIA 38H 00 17 05 7 00 21 05 0.88 650 650 DXB MNL SE ASIA 777 00 19 05 14 00 23 05 1.92 350 700 DXB SGN SE ASIA 350 00 18 10 7 00 22 10 0.92 310 310 DXB SIN SE ASIA 380 00 22 15 7 01 02 15 1.09 490 490 DXB ABJ W AFR 350 00 20 00 7 01 00 00 1.00 310 310 DXB ABV W AFR 350 00 18 40 7 00 22 40 0.94 310 310 DXB ACC W AFR 350 00 19 40 7 00 23 40 0.99 310 310 DXB DKR W AFR 350 00 21 20 7 01 01 20 1.06 310 310 DXB LOS W AFR 380 00 18 40 14 00 22 40 1.89 490 980 DXB AMS W EUR 380 00 15 35 7 00 19 35 0.82 490 490 DXB ARN W EUR 350 00 16 40 7 00 20 40 0.86 310 310 DXB ATH W EUR 350 00 12 00 14 00 16 00 1.33 310 620 DXB BCN W EUR 350 00 15 35 7 00 19 35 0.82 310 310 DXB BHX W EUR 350 00 16 10 21 00 20 10 2.52 310 930 DXB BRU W EUR 350 00 15 00 7 00 19 00 0.79 310 310 DXB CDG W EUR 380 00 15 55 14 00 19 55 1.66 490 980 DXB DUB W EUR 350 00 16 40 7 00 20 40 0.86 310 310 DXB DUS W EUR 380 00 15 15 14 00 19 15 1.60 490 980 DXB EDI W EUR 350 00 16 40 7 00 20 40 0.86 310 310



48



Plus turn time

at baseAircraft

days Seats SDEWDXB FCO W EUR 380 00 13 50 14 00 17 50 1.49 490 980 DXB FRA W EUR 380 00 15 10 14 00 19 10 1.60 490 980 DXB GLA W EUR 350 00 16 40 7 00 20 40 0.86 310 310 DXB GVA W EUR 350 00 15 00 7 00 19 00 0.79 310 310 DXB HAM W EUR 350 00 14 40 7 00 18 40 0.78 310 310 DXB IST W EUR 380 00 10 25 14 00 14 25 1.20 490 980 DXB LCA MLA W EUR 350 00 16 05 7 00 20 05 0.84 310 310 DXB LGW W EUR 380 00 16 05 21 00 20 05 2.51 490 1,470 DXB LHR W EUR 380 00 16 20 35 00 20 20 4.24 490 2,450 DXB MAD W EUR 350 00 16 40 7 00 20 40 0.86 310 310 DXB MAN W EUR 380 00 16 20 14 00 20 20 1.69 490 980 DXB MUC W EUR 380 00 15 05 14 00 19 05 1.59 490 980 DXB MXP W EUR 350 00 14 30 14 00 18 30 1.54 310 620 DXB NCE W EUR 350 00 15 05 7 00 19 05 0.80 310 310 DXB NCL W EUR 350 00 16 30 7 00 20 30 0.85 310 310 DXB STN W EUR 350 00 16 05 7 00 20 05 0.84 310 310 DXB SXF W EUR 350 00 15 05 7 00 19 05 0.80 310 310 DXB VCE W EUR 350 00 13 45 7 00 17 45 0.74 310 310 DXB VIE W EUR 350 00 13 00 7 00 17 00 0.71 310 310 DXB ZRH W EUR 350 00 15 00 7 00 19 00 0.79 310 310 DXB ZRH W EUR 380 00 14 15 7 00 18 15 0.76 490 490


Airlines | A

ppendix | 26 January 2011 49

Table 28 : Detailed fleet model

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Open Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order Age In svc Order

Airbus A330-200 8 29 0 9 29 - 10 29 - 11 27 - 12 17 - 13 7 - 14 - - 15 - - 16 - - 17 - - 18 - -

Airbus A340-300 13 8 0 14 7 - 15 4 - 16 - - 17 - - 18 - - 19 - - 20 - - 21 - - 22 - - 23 - -

Airbus A340-500 6.5 10 0 7.5 10 - 8.5 10 - 9.5 10 - 10.5 10 - 11.5 5 - 12.5 - - 13.5 - - 14.5 - - 15.5 - - 16.5 - -

Airbus A350-1000 0 20 - - 20 - - 20 - - 20 - - 20 - - 20 1 5 15 1 10 10 1.3 15 5 1.8 20 - 2.8 20 -

Airbus A350-900 0 50 - - 50 - - 50 - - 50 - - 50 1 5 45 0.6 18 32 1.2 23 27 1.9 27 23 2.2 35 15 2.5 46 4

Airbus A380-800 1 12 78 1.7 14 76 1.6 24 66 1.8 34 56 2.2 44 46 2.7 52 38 3.2 60 30 3.8 66 24 4.4 72 18 5 78 12 5.6 84 6

Boeing 777-200 14 3 0 15 1 - 16 - - 17 - - 18 - - 19 - - 20 - - 21 - - 22 - - 23 - - 24 - -

Boeing 777-200ER 13 6 0 14 6 - 15 2 - 16 - - 17 - - 18 - - 19 - - 20 - - 21 - - 22 - - 23 - -

Boeing 777-200LR 2 10 0 3 10 - 4 10 - 5 10 - 6 10 - 7 10 - 8 10 - 9 10 - 10 10 - 11 5 - 12 - -

Boeing 777-300 9 12 0 10 12 - 11 12 - 12 12 - 13 7 - 14 2 - 15 - - 16 - - 17 - - 18 - - 19 - -

Boeing 777-300ER 3 53 48 3.7 57 44 4.2 64 37 4.7 71 30 4.9 83 18 4.8 101. - 5.8 99 - 6.8 92 - 7.8 84 - 8.8 78 - 9.8 72 -

Boeing 744ERF 3 3 0 4 3 - 5 3 - 6 3 - 7 3 - 8 1 - 9 - - 10 - - 11 - - 12 - - 13 - -

Boeing 744F 10 3 0 11 3 - 12 2 - 13 1 - 14 - - 15 - - 16 - - 17 - - 18 - - 19 - - 20 - -

Boeing 777LRF 1 2 6 1.3 3 5 1.4 5 3 1.7 7 1 2.4 8 - 3.4 8 - 4.4 8 - 5.4 8 - 6.4 8 - 7.4 8 - 8.4 8 -

Boeing 747-8F 0 15 - - 15 - - 15 - - 15 - 2 13 - 5 10 - 8 7 - 11 4 - 14 1 - 15 - - 15 -

Total 5.70 151 217 6.25 155 210 60 165 191 5.85 175 172 5.43 184 147 4.66 196 113 4.32 208 84 4.78 220 65 5.20 230 47 5.46 239 27 5.76 245 10

Change

Airbus A330-200 -2 -10 -10 -7 0 0

Airbus A340-300 -1 -3 -4

Airbus A340-500 -5 -5

Airbus A350-1000 5 5 5 5

Airbus A350-900 5 13 5 4 8 11 4

Airbus A380-800 2 10 10 10 8 8 6 6 6 6 6

Boeing 777-200 -2 -1

Boeing 777-200ER -4 -2

Boeing 777-200LR -5 -5

Boeing 777-300 -5 -5 -2

Boeing 777-300ER 4 7 7 12 18 -2 -7 -8 -6 -6 -6

Boeing 744ERF 0 -2 -1

Boeing 744F -1 -1 -1

Boeing 777LRF 1 2 2 1

Boeing 747-8F 2 3 3 3 3 1

Total

Close

Airbus A330-200 9 29 0 10 29 0 11 27 0 12 17 0 13 7 0 14 0 0 15 0 0 16 0 0 17 0 0 18 0 0 19 0 0

Airbus A340-300 14 7 0 15 4 0 16 0 0 17 0 0 18 0 0 19 0 0 20 0 0 21 0 0 22 0 0 23 0 0 24 0 0

Airbus A340-500 7.5 10 0 8.5 10 0 9.5 10 0 10.5 10 0 11.5 5 0 12.5 0 0 13.5 0 0 14.5 0 0 15.5 0 0 16.5 0 0 17.5 0 0

Airbus A350-1000 0 20 0 20 0 20 0 20 0 20 1 5 15 1 10 10 1.3 15 5 1.8 20 0 2.8 20 0 3.8 20 0

Airbus A350-900 0 50 0 50 0 50 0 50 1 5 45 0.6 18 32 1.2 23 27 1.9 27 23 2.2 35 15 2.5 46 4 3.2 50 0

Airbus A380-800 1.7 14 76 1.6 24 66 1.8 34 56 2.2 44 46 2.7 52 38 3.2 60 30 3.8 66 24 4.4 72 18 5 78 12 5.6 84 6 6.1 90 0

Boeing 777-200 15 1 0 16 0 0 17 0 0 18 0 0 19 0 0 20 0 0 21 0 0 22 0 0 23 0 0 24 0 0 25 0 0

Boeing 777-200ER 14 6 0 15 2 0 16 0 0 17 0 0 18 0 0 19 0 0 20 0 0 21 0 0 22 0 0 23 0 0 24 0 0

Boeing 777-200LR 3 10 0 4 10 0 5 10 0 6 10 0 7 10 0 8 10 0 9 10 0 10 10 0 11 5 0 12 0 0 13 0 0

Boeing 777-300 10 12 0 11 12 0 12 12 0 13 7 0 14 2 0 15 0 0 16 0 0 17 0 0 18 0 0 19 0 0 20 0 0

Boeing 777-300ER 3.7 57 44 4.2 64 37 4.7 71 30 4.9 83 18 4.8 101 0 5.8 99 0 6.8 92 0 7.8 84 0 8.8 78 0 9.8 72 0 10.8 66 0

Boeing 744ERF 4 3 0 5 3 0 6 3 0 7 3 0 8 1 0 9 0 0 10 0 0 11 0 0 12 0 0 13 0 0 14 0 0

Boeing 744F 11 3 0 12 2 0 13 1 0 14 0 0 15 0 0 16 0 0 17 0 0 18 0 0 19 0 0 20 0 0 21 0 0

Boeing 777LRF 1.3 3 5 1.4 5 3 1.7 7 1 2.4 8 0 3.4 8 0 4.4 8 0 5.4 8 0 6.4 8 0 7.4 8 0 8.4 8 0 9.4 8 0

Boeing 747-8F 0 15 0 15 0 15 2 13 5 10 8 7 11 4 14 1 15 0 15 0 15 0

Total 6.25 155 210 60 165 191 5.85 175 172 5.43 184 147 4.66 196 113 4.32 208 84 4.78 220 65 5.20 230 47 5.46 239 27 5.76 245 10 6.33 249 0


Airlines | Disclosures Appendix | 26 January 2011

Recommendation structure Absolute performance, short term (trading) recommendation: A Trading Buy recommendation implies upside of 5% or more and a Trading Sell indicates downside of 5% or more. Thetrading recommendation time horizon is 0-60 days. For Australian coverage, a Trading Buy recommendation implies upside of 5% or more from the suggested entry price range, and a Trading Sell recommendation implies downside of 5% or more from the suggested entry price range. The trading recommendation time horizon is 0-60 days. Absolute performance, long term (fundamental) recommendation: The recommendation is based on implied upside/downside for the stock from the target price and, except as follows,only reflects capital appreciation. A Buy/Sell implies upside/downside of 10% or more and a Hold less than 10%. For research produced by Nedbank Capital, a Buy implies upside in excess of 20%, A Sell implies an expected return less than 10%, and a Hold implies a return between 10% and 20%. For UK-based Investment Funds research, the recommendation structure is not based on upside/downside to the target price. Rather it is the subjective view of the analyst based on an assessment of the resources and track record of the fundmanagement company. For research produced by Nedbank Capital and for research on Australian listed property trusts (LPT) or real estate investment trusts (REIT), the recommendation is based upon total return, ie, the estimated total return of capital gain, dividends and distributions received for any particular stock over the investment horizon. Performance parameters and horizon: Given the volatility of share prices and our pre-disposition not to change recommendations frequently, these performance parameters should beinterpreted flexibly. Performance in this context only reflects capital appreciation and the horizon is 12 months. Market or sector view: This view is the responsibility of the strategy team and a relative call on the performance of the market/sector relative to the region. Overweight/Underweight impliesupside/downside of 10% or more and Neutral implies less than 10% upside/downside. Target price: The target price is the level the stock should currently trade at if the market were to accept the analyst's view of the stock and if the necessary catalysts were in place to effectthis change in perception within the performance horizon. In this way, therefore, the target price abstracts from the need to take a view on the market or sector. If it is felt that the catalystsare not fully in place to effect a re-rating of the stock to its warranted value, the target price will differ from 'fair' value.

Distribution of recommendations The tables below show the distribution of recommendations (both long term and trading). The first column displays the distribution of recommendations globally and the second column shows the distribution for the region. Numbers in brackets show the percentage for each category where there is an investment banking relationship. These numbers includerecommendations produced by third parties with which RBS has joint ventures or strategic alliances.

Valuation and risks to target price British Airways (RIC: BAY.L, Rec: Buy, CP: £2.83, TP: £3.50): The risk of ifalling away from our DCF-based target price could arise from a weakening revenue environment, spiking fuel costs, further strike action or logistical problems in the Iberia merger. Air France-KLM (RIC: AIRF.PA, Rec: Buy, CP: €13.65, TP: €17.50): Downside risks to our DCF-based target price are most clearly macro, such as weakening global economies, rising oil prices, industrial unrest or new aviation taxation. Deutsche Lufthansa (RIC: LHAG.DE, Rec: Buy, CP: €15.83, TP: €19.00): The risk of Lufthansa falling below our DCF-based target price might arise from surprisingly weak monthly or quarterly results, or industrial unrest. Other industry risks include a double-dip recession, spiking fuel prices, and excessive return of capacity to the industry leading to a wilting yield recovery. The German avaition tax could weigh on the stock. Iberia (RIC: IBLA.MC, Rec: Buy, CP: €3.42, TP: €3.80): The risks of Iberia falling away from our DCF-based target price arise from any challenges to the merger, signs of industrial unrest, indications that LATAM is veering towards competing alliances, or the usual airline risks of deteriorating revenues, spiking fuel or geopolitical instability.

British Airways coverage data

Stock performance, recommendations and coverage (as at 25 Jan 2011)

Andrew Lobbenberg started covering this stock on 29 Oct 02. Moved to new recommendation structure between 1 November 2005 and 31 January 2006. Source: RBS

Long term recommendations (as at 25 Jan 2011)

Global total (IB%) Europe total (IB%)Buy 733 (14) 243 (36)Hold 444 (7) 172 (17)Sell 114 (1) 34 (3)Total (IB%) 1291 (10) 449 (26)

Source: RBS

Trading recommendations (as at 25 Jan 2011)

Global total (IB%) Europe total (IB%)Trading Buy 1 (0) 0 (0) Trading Sell 0 (0) 0 (0)Total (IB%) 1 (0) 0 (0)

Source: RBS

Trading recommendation history (as at 25 Jan 2011) Date Rec Analyst n/a

Source: RBS


Air France-KLM coverage data



Deutsche Lufthansa coverage data



Iberia coverage data



Regulatory disclosures None

Trading recommendation history (as at 25 Jan 2011) Date Rec Analyst 22 May 2008 n/a CA 14 Apr 2008 Trading Sell CA

Source: RBS


Source: RBS


Source: RBS


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