Keynote Address

Onno van den BrinkPresident and Chief Executive Officer,

transavia.com

Transforming the business model

Airline Distribution 2006Onno van den Brink

President & CEO transavia.comDublin 30 March 2006

Transforming the business model

About transavia.com

• Founded in 1966

• Ownership: independant division of the Air France-KLM group

• Operating revenues ‘04/05: € 521 mln.

• Pretax income ‘04/05: € 28 mln.

• Profitable: 27 years in a row since ‘77/78

• Number of aircraft: 27 (10 B737-700, 17 B737-800)

• Average number of employees: 1,482

• Passengers carried ’04/05: 4,5 mln.

• Bases: 2 (Amsterdam Airport Schiphol and Rotterdam Airport)

• Two main businesses: B2B (charter) 60%, B2C (low-cost scheduled) 40%

• Marketleader in the Netherlands in both B2B (55%) and low-cost (32%)

Transforming the business model

CHARTERS

TRANSAVIA

SCHEDULED SERVICESlow cost airlines

Strategic Strategic reorientation!reorientation!

Profitability Transavia under pressure!

vertical integrati

on

Position year 2000

Transforming the business model

Components TouroperatorsTravel agencies

(retail)

Neckermann(C&N)

TUI(Preussag)

Sudtours

•Neckermann Travel•Broere Travel•Holidayland•...

•Arke/Holland Int.•Travelplanet.nl•Lastminute.nl•...

Touroperator market Great-Britain:4 touroperators own 75% of the

touroperator market. All have their own charter-company and in total more than 3500 travel agencies

Position year 2000

Transforming the business model

Marketshare traffic segments Schiphol (O&D Europe)

29.0%

1.4% 1.9%2.5%

4.6%

10.4%

15.9%

30.5%

36.0%37.8%

37.2%36.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

1997 1998 1999 2000 2001 2002

LCLF Hub (lscheduled) Charters (HV/MP) OC (scheduled) OC (charter)

Introduction of low-cost in the Netherlands

Source: Amsterdam Airport Schiphol, own analysis

Transforming the business model

Cost development Basiq Air versus competition

Cost reduction ‘04/05 versus ’00/01

Virgin Express -7%

Basiq Air-22%

Easyjet -9%

Ryanair -25%

I ndex ('00/ 01 = 100) cost development per seat flown(Stagelength 850 km)

0

20

40

60

80

100

120

2000/01 2001/02 2002/03 2003/04 2004/05

Inde

x

Virgin Express Basiq Air easyjet Ryanair

Model

Source: McKinsey, HSH Nordbank, Annual reports

Transforming the business model

Cost per seat flown Basiq Air versus

competition ’04/05

Index cost per seat flown (Basiq Air = 100) (stagelength 850 km)

0

20

40

60

80

100

120

140

Virgin Express Basiq Air easyjet Ryanair

Inde

x

Model

Source: McKinsey, HSH Nordbank, Annual reports

Transforming the business model

2000/01 2004/05- Low fares V V - No refunds V V - 1 type of aircraft V - 1 class concept V V - Max # seats per aircraft V - No transfer/interline V- No FFP/lounges V- Short segments* v- Short turnarounds v V- Average utilization act > 12h V- Internet sales > 92% V- Ticketless* v- Fees for Changes V- Fee For Credit Cards V- Paid for catering/no frills v V - Additional Income V - Productivity cockpit/cabin crew v v

Standardization low-cost concept for both B2B and B2C

leaded to...

merging the 2

brands in 2004

* Scheduled services only

Transforming the business model

Traffic development (passengers carried x ‘000)

*Basiq Air dec 2000- dec 2004

Average growth over the past 5 years 6.5 % is too limited

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

LDCH

Transforming the business model

94170 182 166

7

274

481

102

24

1925

28

20

168

591

150

2001 2002 2004 2005

easyjet

Ryanair

SkyEurope

AirBerlin

Others

Development of low-cost competition in the Netherlands

(# of flights perweek)

56 97

184154 transavia.com

Transforming the business model

Profitability under pressure

• Increased competition from both low-cost and flag carriers

• Pressure on yields

• High fuel prices

• Flying becomes a commodity

• Market is price driven

• Very limited differentiation between carriers

• Limited customer loyalty

• Difficult to drive cost further down

Transforming the business model

Further change is necessary

Branding

• Low cost with attention

• From product oriented to customer oriented

• Increase customer loyalty through CRM

• Brandstretch: move from airline brand to travel brand

• Selling travel related products and services

• Selling holiday packages

• Adjusting the internet look & feel to the new strategy

• Increase travel partner loyalty by improving the E-infrastructure

Transforming the business model

Business economics• Decrease unit cost

• Additional income from ancillary products and services

• Economies of scale by further growth in – and outside the Netherlands

• Interline/transfer with KLM (group)

• Cooperation with other low-cost airlines

Further change is necessary

Transforming the business model

Being big is not the issue, but the ability to adapt

fast to changing market circumstances!!