Good Afternoon!

1. Good Afternoon! • John H. Jackson • Senior V. P Marketing • AvGroup, Inc • Specialist in Latin American Aviation since 1988. • www.avgroupinc.com

2. Latin American Low Cost Carriers! • A success in The Making!

3. Low cost Single a/c type Secondary airports 10.7 hr a/c utilisation Point to point No freebies Limited agents sales Mostly paperless No IATA 5,500 pax per employee Full service Multiple fleet Types Primary airports 8.3 hr a/c utilisation 30% interline Full service 80% agent sales 70% paper tickets IATA 736 pax per employee What’s the Difference!

4. Low Cost Carriers - Young - Enthusiastic - Motivated - “Nothing is Impossible”

5. Low Cost Carriers Advantages • Point to point routes • Unified fleet • High aircraft, crew and personnel utilization • Low unit costs • No intermediaries • New direct channels for sells (internet) • Secondary airport use

6. Low Cost Carriers Disadvantages • Dependant on: • High volumes • “Substantial” growth • Slots at major airports • Salary Developments • Avoidance of Unions • Ability to stay “Low cost” over time

7. The Growing LCC Network

8. Traditional “Flag” Carriers - Flat Life Cycle - Mature Staff – High Average Age - Old fashioned union agreements

9. Traditional “Flag” Carriers Advantages • Well known and respected brands • Large Customer Base – Strong Loyalty Programs • Experienced management and staff • Developed network (connections) • Developed technology • Developed Revenue, Capacity and Yield Management and Distribution Systems • “Grandfather rights” for slots • Fleet capacity

10. Traditional “Flag” carriers Disadvantages • Diversified company structure • “High Responsibility” towards the society • Complicated network operations – need for feed • Complicated price structure • Mixed fleet with low seating density • Aircraft, crew and personnel low utilization • Diversified products • Too high unit costs

11. Latin America & Caribbean... • 5% worldwide traffic • 39 states • 574 airports • 100 airports moving 85% of traffic • In which over 100 airlines operate • Transporting over 100 million passengers

12. LCCs in Latin America • Slower growth than other regions • Two major LCCs in Latam • GOL • UAIR • Low Cost – Full Service? • TACA • LAN

13. Industry in Crisis… • Worldwide airlines that have disappeared: • Panam - Swissair • Laker - Airways • Eastern - Braniff • Sabena • In “Chapter 11” or similar: • United - US Airways • Avianca - Alitalia • SW - VASP • ATA - Aerocontinente • Azteca

14. Industry in Crisis… • Latam airlines that have disappeared: • Aces (Colombia) - AeroPeru (Peru) • Transbrasil (Brazil) - LAPA (Argentina) • Cruzeiro do Sul (Brazil) - Taesa (México) • Avant (Chile) - National (Chile) • VIASA (Venezuela) - Saeta (Ecuador) • SAN (Ecuador) - Avensa (Venezuela) • Ecuatoriana de Aviación - Faucett (Peru) • LAP (Paraguay)

15. Our region presents LCC opportunities; • In theory, our region is “low cost” due to: • Low level of salaries • Low costs of living • Traffic growth • Low penetration of air transport But unfortunately….

16. There is Lack of: • Long term policies that stimulate a healthy and sustained growth of Air Transport. • Governmental understanding of the importance of Air Transport for Regional economies as an engine of Regional / Worldwide Integration. • Understanding of the need for a low cost industry by our main partners (airports, ATS providers, suppliers, etc.) • Incentives to foreign investment due to high protectionism to locals…which results in less competitiveness for the airline industry. • Transparency

17. In our opinion! • The origin of Low Cost carriers has been the result of the critical situation faced by the airline industry worldwide. • Our industry is going through a strong restructuring due to the adverse business environment. • Airlines are being forced to migrate to a lower cost structure. • The impact!

18. Thank you for your very kind attention!!!