IPREO REGIONAL FLOW OF FUNDS SERIES

Western Europe

Passenger Airlines

Q2 2017

Flow of Funds: WEU Passenger Airlines

Market Overview

Institutional Investment Flow Highlights

-500

-400

-300

-200

-100

0

100

200

300

400

N. A

mer

ica

UK

& Ir

elan

d

W. E

uro

pe

Scan

din

avia

Asi

a

E. E

uro

pe

Oth

er

Net Change ($M Value) by Region

Q3-16

Q4-16

Q1-17

Q2-17

-800

-700

-600

-500

-400

-300

-200

-100

0

100

200

300

Agg

Gr.

/Gro

wth

Dee

p V

al./

Val

ue

Ind

ex

GA

RP

Spec

ialt

y

Yiel

d

Alt

ern

ativ

e

Net Change ($M Value) by Style

Q3-16

Q4-16

Q1-17

Q2-17

N. America 39.6%

UK & Ireland 25.8%

W. Europe 23.4%

Scandinavia 10.4%

Asia 0.4%

E. Europe 0.3%

Other 0.2%

Ownership by Region

Agg Gr./Growth 22.9%

Deep Val./Value 48.0%

Index 16.8%

GARP 4.8%

Specialty 0.6% Yield

2.0%

Alternative 5.0%

Ownership by Style

• “Airlines are defining a new epoch in industry profitability. For a third year in a row we expect returns that are above the cost of capital. But, with earnings of $7.69 per passenger, there is not much buffer. That’s why airlines must remain vigilant against any cost increases, including from taxes, labour and infrastructure,” says Alexandre de Juniac, IATA`s director general and chief executive officer. (IATA Jun-17)

• European Airlines enjoyed a solid performance this quarter (Q2-17) with the players posting increased revenue due to a rare period of rising ticket prices. “Air France-KLM

SA said its second-quarter profit rose strongly, bolstered by higher airfares. The strong earnings underpin a plan by Chief Executive Jean-Marc Janaillac to more aggressively fight low-cost and foreign rivals for market share. British Airways parent company International Consolidated Airlines Group SA said second-quarter net profit surged 20%, with the carrier benefiting from rising ticket prices, in common with its European and U.S. rivals. Ryanair Holdings PLC, Europe's largest airline, posted strong profit growth on Monday and Air France-KLM said airfares had performed well particularly for lucrative premium seats", MarketWatch Jul-17.

Fund Flows • Q2-17 investor sentiment continued to show US equities out of favour. "US equities were judged “by far” the most overvalued globally, with a net 84pc saying they are

overvalued. Three quarters of respondents said US and global internet stocks were either “expensive” or “bubble like”, according to Bank of America Merrill Lynch (BAML) survey results for June 2017. The tech-heavy Nasdaq share index was seen as the “most crowded trade”, followed by Eurozone equities, which had enjoyed a lift after Emmanuel Macron’s victory. France was the most popular equity market in Europe in the same survey followed closely by Germany. French carrier Air France-KLM benefited from inflows in-line with market sentiment whilst investors shied away from German carrier Deutsche Lufthansa.

• Ipreo's analysis of Q2-17 funds flows showed, net inflows into Western European equities continued to grow for the third successive quarter nearly tripling to +$29.9B currently vs +$9.2B in the preceding quarter. The bulk of net inflows into the region continued to be driven by North American managers, particularly Index investors.

• WEU Passenger Airline equities have experienced net investment outflows in the past 12 months -$1.2B. Whilst the last half of 2016 saw -$839M outflows the pace of selling slowed to -$353M in the first six months of 2017. The brakes were evidently applied by WEU investors turning bullish on the sector in H1-17. The top 3 most bought stocks were Wizz Air, Air France-KLM and SAS, whilst the most sold stocks were IAG, Deutsche Lufthansa and Air Berlin. Air Berlin ouflows perhaps telegraphed impeding issues at carrier formerly backed by Etihad Airways PJSC.

• In Q2-17, the WEU Passenger Airline sector saw net outflows of -$122M which were mainly driven by investors from two regions N. America -$206M and UK & Ireland -$164M. In the past 12 months, North America has been a net seller -$456M, recording its highest outflows in the current quarter of -$206M. Templeton , Morgan Stanley Investment Management and Grantham Mayo Van Otterloo were the key drivers of the massive outflows in the current quarter. North America was selling across all quarters save for Q4-16 where it recorded +$44M net inflows. UK & lreland recorded the highest outflows in Q1-17. Q2-17 saw the pace of UK & Ireland outflows halve to -$164M, this inspite of the current top seller hailing from Edinburgh, Standard Life Investments.

• Scandinavian investors were the strongest buyers by region +$152M. Q2-17 inflows from the region rose sevenfold compared to the previous quarter, favouring IAG, Deutsche Luthansa, Aerofloat, Eastjet whilst selling Wizz Air in general.

• In Q1-17, Value investors were the biggest net buyers +$168M but turned bearish Q2 -17 becoming the top sellers, taking profits from general strong performce of the sector Q2-17.

• Standard Life Investments (Growth) and Templeton Global Advisors (Value) feature amongst the Top 10 holders in Q2-17, but both also feature amongst the top sellers of the sector, -$439M and -$423M respectively. Standard Life Investments Global Absolute Return Strategies Fund managed by Brian Fleming, Neil Richardson and Guy Stern reduced significantly its position in IAG. Templeton sold significant exposure to Deutsche Lufthansa across a number of funds, amongst them the Templeton Growth Fund.

• "The ice cold investor sentiment towards legacy European carriers is steadily thawing – short sellers have been aggressively covering their positions across many of ...

©2017 Ipreo. All rights reserved. None of Ipreo, its affiliates, or any of their third party providers is liable for any informational errors, incompleteness, or delays, or for any actions or decisions taken by any person as a result of any information contained herein.

Flow of Funds: WEU Passenger Airlines

Country / City

Total Equity Assets

($M)

Value

($M)

Activity

($M)

#

Firms Country / City

Total Equity

Assets ($M)

Value

($M)

Activity

($M)

#

Firms

United Kingdom (London) 1,638,684 2,834 215 59 United Kingdom (London) 1,638,684 2,834 215 59

United States (Los Angeles) 1,098,843 1,954 0 3 Spain (Madrid) 56,801 246 -13 42

Germany (Frankfurt) 310,030 1,168 109 19 France (Paris) 291,388 756 -11 40

United States (New York) 1,589,970 968 117 16 Finland (Helsinki) 44,808 170 3 22

Norway (Oslo) 663,707 820 -3 10 Germany (Frankfurt) 310,030 1,168 109 19

France (Paris) 291,388 756 -11 40 Sweden (Stockholm) 145,451 354 155 18

United States (Boston) 2,068,520 493 -17 11 United States (New York) 1,589,970 968 117 16

United Kingdom (Edinburgh) 243,681 428 -424 6 Japan (Tokyo) 599,012 10 -0 15

Sweden (Stockholm) 145,451 354 155 18 Canada (Toronto) 370,348 82 -5 14

Bahamas (Nassau) 42,084 316 -424 1 Luxembourg (Luxembourg) 21,047 11 1 14

Excludes Passive/Index Investors 10,091 -283 183 Excludes Passive/Index Investors 6,600 570 259

Top Holders Country Turnover Value ($M) Change ($M) % Port.

% Port.

Chg

Capital World Investors (U.S.) United States Low 1,861.4 0.0 0.3 0.0

Deutsche Asset Management Investment GmbH Germany Low 779.8 150.6 0.6 23.9

Norges Bank Investment Management (Norway) Norway Low 512.7 0.0 0.1 0.0

Lansdowne Partners (UK) LLP United Kingdom Medium 465.3 0.0 2.9 0.0

J.P. Morgan Asset Management (UK), LTD United Kingdom Medium 406.5 172.5 0.4 73.7

Standard Life Investments, LTD (U.K.) United Kingdom Medium 401.6 -439.2 0.6 -52.2

Donald Smith & Company, Inc. United States Low 347.0 -7.2 8.4 -2.0

INVESCO Asset Management, LTD (U.K.) United Kingdom Low 341.2 -3.6 0.4 -1.0

Templeton Global Advisors, LTD Bahamas Medium 315.5 -423.8 0.7 -57.3

SEB Investment Management AB Sweden Medium 247.6 135.5 0.7 120.9

4,025.6 323.0

Top Buyers Country Turnover Value ($M) Change ($M) % Port.

% Port.

Chg

J.P. Morgan Asset Management (UK), LTD United Kingdom Medium 406.5 172.5 0.4 73.7

Deutsche Asset Management Investment GmbH Germany Low 779.8 150.6 0.6 23.9

SEB Investment Management AB Sweden Medium 247.6 135.5 0.7 120.9

Goldman Sachs Asset Management, L.P. (U.S.) United States Medium 208.5 88.3 0.2 73.5

Artemis Fund Managers, LTD United Kingdom Medium 103.9 41.2 0.4 65.7

Amundi Asset Management S.A. France Medium 81.8 35.3 0.1 76.0

NNIP Advisors B.V. Netherlands Medium 25.9 24.3 0.1 1,506.3

Lazard Asset Management, LLC (U.S.) United States Medium 68.5 22.3 0.1 48.3

Handelsbanken Asset Management (Sweden) Sweden Medium 43.5 19.3 0.1 80.1

Pictet Asset Management S.A. Switzerland Low 23.3 16.0 0.0 217.5

1,989.3 705.3

Top Sellers Country Turnover Value ($M) Change ($M) % Port.

% Port.

Chg

Standard Life Investments, LTD (U.K.) United Kingdom Medium 401.6 -439.2 0.6 -52.2

Templeton Global Advisors, LTD Bahamas Medium 315.5 -423.8 0.7 -57.3

Deka Investment GmbH Germany Low 119.7 -49.1 0.3 -29.1

Templeton Investment Counsel, LLC United States Low 158.7 -27.6 0.6 -14.8

Fidecum AG Germany Medium 17.9 -24.6 3.0 -57.9

Lazard Frères Gestion France Medium 41.2 -22.5 0.5 -35.4

DNCA Finance S.A. France Low 127.9 -20.7 0.8 -13.9

Morgan Stanley Investment Management Inc. United States Medium 0.1 -16.8 0.0 -99.5

Rothschild et Cie Gestion France Medium 61.7 -16.2 1.2 -20.8

Franklin Templeton Investment Management, LTD (U.K.)United Kingdom Medium 35.9 -14.1 0.7 -28.2

1,280.2 -1,054.7

BOUGHT Securities Country

Wizz Air Holdings Plc Switzerland

Air France-KLM France

SAS AB Sweden

Aegean Airlines S.A. Greece

Finnair Oyj Finland

SOLD Securities Country

International Consolidated Airlines Group S.A.Spain

Deutsche Lufthansa AG Germany

Air Berlin PLC & Co. Luftverkehrs KG Germany

Value 35,813

GARP 65,921

Value 77,133

Value 32,154

Value 89,803

66,215

Value

Value

Value

Growth

Value 36,090

42,084

82,896

4,129

Style

Alternative

Value

Value

Value

Style

Growth

Value

Value

Growth

Deep Value

Deep Value

GARP

Most Invested Most Investors

Top Holders, Buyers & Sellers

Top Invested Cities

Growth

Style

Growth

Change ($M)

-343.3

-3.9

-0.2

1.9

2.7

9.6

79.6

131.1

Most Bought & Sold Stocks

Change ($M)

Value

Value

Equity Assets ($M)

111,932

15,781

613,536

125,569

636,273

Equity Assets ($M)

111,932

125,569

36,090

121,030

24,620

603

27,880

Equity Assets ($M)

66,215

42,084

44,477

Value 5,089

Value 5,079

Value 7,775

Deep Value 15,575

Growth 63,581

or for any actions or decisions taken by any person as a result of any information contained herein.

©2017 Ipreo. All rights reserved. None of Ipreo, its affiliates, or any of their third party providers is liable for any info rmational errors, incompleteness, or delays, or for any actions or decisions taken by any person as a result of any information contained herein.

• ... the sector’s heavily shorted names. Faced with relentless pressure from low -cost domestic upstarts and Middle Eastern carriers in the lucrative high end long haul space, Air France KLM and Deutsche Lufthansa have been some of the most consistently shorted stocks over the last few years; however, th is status quo is rapidly changing as a sustained bout of covering has taken shorting activity for these two firms to levels not seen in several years", S.Colvin - Analyst, Markit Jul-17.

-400

-300

-200

-100

0

100

200

Switzerland France Sweden Greece Finland Norway Germany Spain

$M

Ch

ange

Most Bought & Sold Countries

Flow of Funds: WEU Passenger Airlines

> Visit Ipreoink.com for more regional flow of funds reports and other insightful articles

ABOUT IPREO

We work as an extension of our clients' Investor Relations team

Ipreo is a leading global provider of financial services technology, data and analytics. We support all participants in the capitalraising

process including banks, public and private companies, institutional and individual investors, as well as research, asset

management and wealth management firms. Our extensive suite of investor relations services provides our corporate clients with

unparalleled cross-asset class surveillance, investor targeting, buy-side perception studies, transaction analysis and predictive

analytics. Additionally, Ipreo’s BD Corporate IR workflow platform offers the most accurate and comprehensive database covering

global institutional contacts, profiles, and ownership data. Our critical insights and flexible solutions help our clients run more

effective investor relations programs. Ipreo is private-equity held by Blackstone and Goldman Sachs Merchant Banking Division, and

has more than 1,000 employees, supporting clients in every major financial hub around the world.

GET IN TOUCH Tel: +44 (0)20 7665 9741 or email us at callmenowIR@ipreo.com

for any actions or decisions taken by any person as a result of any information contained herein.