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Keynote Address

Keynote Address. Onno van den Brink President and Chief Executive Officer, transavia.com. Transforming the business model. Airline Distribution 2006 Onno van den Brink President & CEO transavia.com Dublin 30 March 2006. Transforming the business model. About transavia.com.

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Keynote Address

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  1. Keynote Address Onno van den Brink President and Chief Executive Officer, transavia.com

  2. Transforming the business model Airline Distribution 2006 Onno van den Brink President & CEO transavia.com Dublin 30 March 2006

  3. 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%) Distribution 2006

  4. Transforming the business model Position year 2000 vertical integration CHARTERS TRANSAVIA low cost airlines SCHEDULED SERVICES Profitability Transavia under pressure! Strategic reorientation! Distribution 2006

  5. Transforming the business model Position year 2000 Travel agencies(retail) Components Touroperators • Neckermann Travel • Broere Travel • Holidayland • ... Neckermann(C&N) • Arke/Holland Int. • Travelplanet.nl • Lastminute.nl • ... TUI(Preussag) Sudtours 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 Distribution 2006

  6. Transforming the business model Introduction of low-cost in the Netherlands Marketsharetraffic segments Schiphol (O&D Europe) 40.0% 37.2% 36.7% 36.0% 37.8% 35.0% 30.0% 29.0% 30.5% 25.0% 20.0% 15.9% 15.0% 10.4% 10.0% 4.6% 5.0% 2.5% 1.9% 1.4% 0.0% 1997 1998 1999 2000 2001 2002 Hub (lscheduled) Charters (HV/MP) OC (scheduled) OC (charter) LCLF Source: Amsterdam Airport Schiphol, own analysis Distribution 2006

  7. Transforming the business model Cost development Basiq Air versus competition Model Cost reduction ‘04/05 versus ’00/01 Virgin Express -7% Basiq Air -22% Easyjet -9% Ryanair -25% Source: McKinsey, HSH Nordbank, Annual reports Distribution 2006

  8. Transforming the business model Cost per seat flown Basiq Air versus competition ’04/05 Model Source: McKinsey, HSH Nordbank, Annual reports Distribution 2006

  9. Transforming the business model Standardization low-cost concept for both B2B and B2C • 2000/01 2004/05 • Low faresV V • No refunds V V • - 1 type of aircraftV • 1 class concept V V • Max # seats per aircraft V • - No transfer/interline V • - No FFP/lounges V • - Short segments*v • Short turnaroundsvV • Average utilization act > 12hV • - 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 crewv v leaded to... merging the 2 brands in 2004 * Scheduled services only Distribution 2006

  10. Transforming the business model Traffic development (passengers carried x ‘000) Average growth over the past 5 years 6.5 % is too limited *Basiq Air dec 2000- dec 2004 Distribution 2006

  11. Transforming the business model Development of low-cost competition in the Netherlands 591 (# of flights perweek) 481 Others 168 102 20 AirBerlin 24 274 28 SkyEurope 19 7 Ryanair 25 150 170 182 166 easyjet 94 184 transavia.com 154 97 56 2002 2004 2005 2001 Distribution 2006

  12. 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 Distribution 2006

  13. 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 Distribution 2006

  14. Transforming the business model Further change is necessary • 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 Distribution 2006

  15. Transforming the business model Being big is not the issue, but the ability to adapt fast to changing market circumstances!! Distribution 2006

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