Has Cargo Become the Dominant cousin of the Aviation Industry ?

1. Has Cargo Become the Dominant cousin of the Aviation Industry ? Sushil Baguant Chief Business Support Executive Air Mauritius Ltd 17th November 2006

2. Agenda • About Mauritius and Air Mauritius • Cargo Business in Perspective • Passengers and Cargo Businesses are they Rivals, Brothers or Cousins • Cargo Business at Air Mauritius • Conclusion

3. About Mauritius…

4. Dot in Indian Ocean Dakar Mauritius

5. Visit us @ www.airmauritius.com

6. Republic of Mauritius - Island Nation • Mission of National Carrier • Air Links • Geographical Position - A strategic Hub in Indian Ocean • Assist in developing International Trade and links • Sustain Tourism Industry • Promote Up-market and Selective Tourism • Export/Import of Goods • Airline to run on a Commercially Viable Basis • Annual average air traffic growth of 9% since 1980 • Preserve Environment/Ecology of the Island • Aligned Interest : Country and Airline

7. Republic of Mauritius – Fact Sheet • Main Pillars of the Economy • Agricultural mainly Sugar, Tourism Industry, Manufacturing Sector mainly Textiles and Garments, Financial Services, Information Technology and Services • Moving to Service Economy • New emerging pillars – ICT, Seafood Hub and Offshore development • Main Exports : • Clothing & Textiles , Sugar, Flowers, etc. • Main Imports : • Manufactured Goods, Capital Equipment, Foodstuffs, petroleum products, etc. • Member of the SADC and COMESA • Promote bilateral and regional trade

8. Past Successes Do Not Guarantee Future ones

9. Competitive Environment More sophisticated & Knowledgeable customers Deregulation Liberalisation eBusiness Increased Competition Mergers & Acquisition New Entrants Privatisation Global Alliances Regulatory Barriers Increased Capacity Globalisation Ecological Pressure Increasing costs Worldwide Economic Changes

10. Radical Change to adapt in new aviation landscape arising from technological innovations and new policies • Streamlining Business Processes through BPR • New cost- efficient fleet , adaptable and responsive organisation structure, cost effectiveness, yield management • E business and Technology adoption

11. Competition and New Policy • Liberalisation Waves a worldwide phenomenon getting to our shores • More frequencies and bigger aircraft by existing operators: AF, BA, EK, SAA • New players with new business rules • Corsair • LTU • Comair • Air Europe • Lauda Air • Virgin • Condor

12. Resistance to change Technical/Functional Security / Comfort Zone

13. About Air Mauritius

14. Air Mauritius Vision To Be a World Class Airline

15. Air Mauritius International Airline operating out of Mauritius Staff Force of 2800 2005/ 2006 Fleet of 7 Wide-bodied + 2 A319 Aircraft 2 ATR 42 + 1ATR 72 Aircraft 3 Helicopters 1,156,820 Passengers 35,666 Tons Cargo Euro 416.6 million Turnover 28 Destinations 4 continents About 100 weekly frequencies

16. Fleet 5 Airbus A340-300 2 Boeing B767 ER 2 Airbus A319-100 1 DC8-63 Freighter Aircraft (leased) 2 ATR 3 Bell Jet Rangers

17. New Fleet Acquisition • 2 A340-300E in Nov/Dec 2006 • 2 A330 (One in 2007/8 and the other in 2009)

18. Route Network

19. Cargo Business in Perspective

20. Economic Growth as driver of Air Cargo Growth Source: Boeing World Cargo Forecast 2006-2007 • Strong correlation between GDP evolution and Air Cargo Growth during the past decades

21. Opportunities & Constraints for MK Cargo Operations Industry Trade Quotas delocalisation & Restrictions New Export Freighter Products Promotion Operations Currency Fluctuations New Trade Open Skies Market Relationships Policy Intelligence & AGOA World and National GDP Renegotiated Growth Government SPAs Initiatives Agents Eductours Competition Strikes Time D definite Products ‘Just - in - time’ concepts Directional Renegotiated Imbalances Bilaterals Aircraft Type & Configuration Opportunities Constraints

22. Passengervs. Freight Growth Source :IATA Passenger and Freight Forecast 2005-2009 Higher Growth for Freight as compared to Passenger!

23. Expected Growth for 2006 • World Economy – 3.1% • Passenger Travel – 4.9% • FREIGHT – 6.1% (source : Boeing 2006 Market Outlook) Higher Predicted Growth in Freight compared to PAX business!

24. Type of Products • Growth of air-freight due to time sensitive products

25. World Freighter Fleet Source: Airbus Global Market Forecast 2004-2023 • Number of freighters expected to exceed 3,500 by 2023, representing an annual growth of 4.3% p.a.

26. Conversions of aircraft to cater for increasing freight demand According to Airbus, higher rate of conversion for regional freighter fleets to cater for the rapidly growing Asian Market.

27. Relationship Pax and Cargo

28. Similarities & differences between PAX and Cargo PAX CARGO • Bilateral talks • Airline to Airline Agreements • Fleet Planning • Route Deployment/Profitability • Bilateral talks • Airline to Airline Agreements • Fleet Planning • Route Deployment/Profitability • Distribution Channels: • Shipper – Freight Forwarder – Consignee • Emergence of Consolidators! • Logistics: • Warehousing • Product definition: • Destination + Connection + Rates +Timings • Development Strategy: • Transshipments • Distribution Channels: • Tour Operators – Travel Agents – PAX • Logistics : • Check-in counter • Product definition: • Travel Packages • Development Strategy: • Stop over

29. PAX vs Cargo - Technology PAX CARGO • Inventory • Booking Engine • Fares • Decision Support System • Yield Management • Technology E business • Inventory • Booking Engine • Fares • Decision Support System • Yield Management • Customer self-service • Track and trace facilities to know shipment status • Online Sales – B2B • Handling and Warehousing System • ULD Management • Customer self-service • Flight and Booking status prior to uplift • Online Sales – B2C • Departure Control System

30. CUSTOMS CUSTOMS OTHER OTHER MEANS TRANSPORT TRANSPORT MEANS GROUND GROUND SHIPPER SHIPPER FORWARDER FORWARDER HANDLING HANDLING CARRIER CARRIER FORWARDER FORWARDER CONSIGNEE CONSIGNEE HANDLING HANDLING MULTIPLE MULTIPLE HANDLING HANDLING CARRIER CARRIER AIR MAURITIUS IN THE CARGO VALUE CHAIN

31. Sources of Rivalry • Route definition • Days of operations and Timing of operations • Capacity deployment • Offloading priority • Type of Aircraft • Distribution/ Choice of GSA • Funds for development • Resources • Alliances and Partnerships

32. Sources of Partnership • Significantly contributes to the Socio economic development of a Country • Tourism • Manufacturing Services • Transhipment • Bilateral Talks/ Airline to airline talks/ Holistic approach • Contribution to overall Route /Network Profitability • operations • Fleet investment • Economies of scale for Handling cost • Treated on Basis of Marginal Costing for mixed flights • Increase Asset Utilisation by operating Pax aircraft for freight only on short sectors • Compensating for seasonality • Security

33. Summary • Cargo is a significant contributor to the Overall Aviation Industry • Fleet development • Aircraft Manufacturers New and conversions • Handling Agents • Airports • Airlines • Supports the Passenger business both in terms of Logistics and Economic Justification • Competes with the Passenger Business for resources and often differs in Schedules, route planning and choice of Aircraft • Has a roadmap of development which can be mainly based on Mixed aircraft but also dedicated Freighters • Has its own needs of People skills Procedures , Security needs, Yield management process and Logistics facilities

34. Cargo Business at Air Mauritius

35. Air MauritiusCargo Objective TO MAKE CARGO BUSINESS A SIGNIFICANT CONTRIBUTOR TOWARDS THE PROFITABILITY OF AIR MAURITIUS BY ENSURING OPTIMUM USE OF CARGO CAPACITY AND PROVIDING HIGHLY RELIABLE, INNOVATIVE & COST-EFFECTIVE SOLUTIONS TO OUR CUSTOMERS

36. Strategic Intents • To optimise the use of belly capacity throughout the network as established by passenger operations & complement with freighter operations • To have a Revenue Management process optimising capacity through a dynamic pricing policy based on demand • To closely monitor Sales performance/Route contribution and take proactive actions • To develop Mauritius Cargo Hub through regional freighter operations • To build loyalty with all stakeholders of the industry • Develop Incentive mechanisms to promote both volume sales and growth • Gear the organisation structure to provide personalised services to main distribution channels • Develop an effective and efficient Customer Relationship Management for personalised services to shippers and consignees • Develop Partner Programs with stakeholders • To Streamline and improve processes ie Quality

37. Strategic Intents • To develop new products attractive to the customers • Time-definite services • Deferred services for price-sensitive customers • Multi-modal services and Partner Programs to extend our reach • To develop Product specific expertise • To develop a flexible Organisation Structure that promotes accountability, collaboration and teamwork which fosters decision-making through the empowerment and continuous development of staff • Leverage on modern Technologies to develop systems & tools that will enhance processes thereby bringing us closer to the market and be more responsive in meeting customers’ needs. • Information management • To Develop Modern Logistics Infrastructure

38. 36,717 35,706 34,836 31,290 1,608 28,824 28,596 1,551 1,448 1,340 1,185 1,144 Evolution of Cargo Business at MK Weight (Tons) Revenue (MUR m) CARGO REPRESENTS 13% OF MK’s TURNOVER

39. Cargo Business @ Air Mauritius • CARGO CONTRIBUTION • Cargo represents 13% of the company’s turnover & our operations are primarily based on belly-hold passenger aircraft though increasing importance of freighter operations.

40. Cargo Revenue Breakdown 22%

41. Cargo Revenue inc Surcharges on Freighter and Pax flights – Eur M Note: Cargo revenue includes Freight Revenue, Mail and Courier and Surcharges

42. Fleet Cargo Capacity

43. Air Mauritius - Cargo Worldwide Offices US/Canada No of Offices: 2 Asia/Middle East No of offices:15 Europe No of offices: 25 Dakar Mauritius Africa/ Indian Ocean Is. No of offices: 7 Australia No of offices: 3 Worldwide Summary: No of offices: 52

44. Whatever Your Direction… Mauritius is the Hub Europe 24 Flights/Week Capacity: 305 Tons Europe India 9 Flights/Week Capacity: 110Tons Far East Dubai India Dakar Madagascar 8 Flights/Week Capacity: 31 Tons Nairobi Australia 3 Flights/Week Capacity: 33Tons Madagascar Mauritius Johannesburg South Africa 12 Flights/Week Capacity: 80 Tons Reunion Perth Cape Town Reunion Island 10 Flights/Week Capacity: 120 Tons Durban Melbourne HUB STRATEGY

45. Enabling Systems for Cargo Business at Air Mauritius • To optimise our aircraft cargo capacity… • Implemented a Cargo Reservation System across the Air Mauritius network. • To provide better customer service… • Integrated to a number of Cargo Community Systems worldwide. • To better control our revenue processes… • Developed a Cargo Revenue Accounting System. • To assist decision making processes… • Implemented a Decision Support System.

46. MK Cargo Challenges • NEW MASTER AIR TERMINAL PLAN • Creation of an AIR CARGO LOGISTICS CENTRE • Increased Capacity for DRY WAREHOUSING SYSTEM • Centralised COURIER CENTRE • NEW COLD ROOM Facilities with Extra Space • Permanent DISPLAY CENTRE of Products

47. Summary • Cargo is a significant contributor to the Overall Aviation Industry • Fleet development • Aircraft Manufacturers New and conversions • Handling Agents • Airports • Airlines • Supports the Passenger business both in terms of Logistics and Economic Justification • Competes with the Passenger Business for resources and often differs in Schedules, route planning and choice of Aircraft • Has a roadmap of development which can be mainly based on Mixed aircraft but also dedicated Freighters • Has its own needs of People skills Procedures , Security needs, Yield management process and Logistics facilities

48. Cargo has indeed become a major player of the Aviation Industry --- Dominant Cousin--- Sushil Baguant Chief Business Support Executive Air Mauritius Ltd 17th November 2006

49. Thank You