Crossing Modes and Destinations: The Future of Holland America Line

1. Crossing Modes and Destinations: The Future of Holland America Line

2. Strategy recommendations Short term: Value Package and United-HAL Partnership Long term: Entry into China and expand Star Alliance partnerships

3. Agenda US Recession – what it means Short term strategy Long term strategy Marketing – why this will work

4. 1. US Economic Outlook: a V-shaped recovery GDP Growth The US recession is likely to bottom mid-year with recovery accelerating to +2.0/2.5% GDP growth (annualized) for 4Q09. We anticipate GDP +3.0/4.0% by 2010 Q4 on Q4 We also expect the US economy will recover sooner and somewhat more vigorously than much of the rest of the world. 0% 2009 2010

5. 1. The consumer - Lost wealth, uncertainty & less conspicuous consumption • The impact of US recession on HAL’s customer base: • According to a UNWTO study in previous crises: • Visitor, special interest and independent traveller segments were more resilient. • Average length of stay and travel expenditure fell. • Destinations offering value for money and favourable exchange rates benefited. • Late and web-based bookings dramatically increase.

6. 1. Who do our strategies target? 25 – 45 year old young professionals

7. 1. Tourism growth expected to be flat for 2009

8. 2. Short-Term Strategy for economic climate Value Package: two-tiered pricing Partnership with United Airlines

9. 2. Two-tiered pricing: Introduce a ‘Value’ package P P EXISTING: PREMIUM PACKAGE NEW: VALUE PACKAGE (for standard rooms only) Onboard expenses Onboard expenses Principal payment Principal payment Q Q The introduction of a second package creates choice and savings for consumers.

10. 2. Partnership with United Airlines • Establish joint discount package deals connecting flights and cruises where possible • Bookings can be made on both United Airlines and HAL websites as well as through agencies • Exclusive exposure for both parties • Mileage Plus (frequent flyer points)

11. 2. Financially Attractive Proposal • Delivers $118.9m over next 5 years • Resolves short-term capacity issues • Delivers revenue synergies • Significant optionality • Investment outlay of $60m over 2 years • Maintenance capex of $10m each year

12. A repeat customer who purchased the ‘Value’ package as a temporary measure 2. Post-Recession Profits A new customer who purchased the ‘Value’ package to experience a cheaper cruise Most likely switch back to the ‘Premium’ package Approximately 40-45% are likely to go on a cruise with HAL again. Those who do not purchase a ‘Premium’ package will increase onboard spending under the ‘Value’ package.

13. 2. Post Recession: Phasing out the ‘Value’ package • Phase out the ‘Value’ package by late 2011 by raising the price of its principal payment progressively until it becomes no longer of value to consumers to choose the ‘Value’ package over the ‘Premium’ package • Total amount paid by consumers on ‘Value’ packages will increase as incomes and marginal propensities to consume rise, shifting preferences to the ‘Premium’ package

14. 2. Long-Term Strategy focusing internationally Target China as a source market Partnership with Air China

15. 3. China as the future source market • Personal tourism demand expected to grow at 11.9% p.a. over 2009-19 • 2nd fastest in world; three times world average • 250 million upper and middle class with increasing wealth and disposable income • A base for targeting high growth potential countries in nearby South Asia (e.g. India)

16. 3. Destination: Europe • Europe remains the dream location • Lured by culture and shopping • Increasing attractiveness for Chinese investors • Euro has depreciated by 19.8% against RMB since last year • Most European countries have received Approved Destination Status (ADS) from Chinese government

17. 3. Pace of Progression in Chinese market Three stages of development • 2006-10: Large international events (e.g. 2008 Olympics) spark greater interest in cruise tourism into China and lead to investment in port facilities • 2011-15: Influx of Chinese mainland tourists partaking in outbound cruises • 2016-onwards: Facilities and cruise services become more standardized and accessible

18. 3. Penetrating the Chinese market • Create alliance with Air China • Similarly a member of the Star Alliance network • Develop JVs with government approved outbound travel agents • Leverage Costa Cruises’ (fellow subsidiary) existing position in the Chinese market • Moving from “Cruising Italian” style to an actual “Italian Cruise”

19. 4. Marketing – why this will work • What is the value these strategies create? • To whom are these services valuable? • How are we going to connect to our target consumer?

20. 4. Value-add: benefits for customers Benefits of the strategy Source: HAL’s ‘holiday package’ brochure • Many cruises are increasingly regionally-focused and destination-orientated

21. 4. Value-add: benefits for HAL North America: world’s biggest cruise market

22. 4. Value-add: benefits for HAL Google Trends, 2009

23. 4. Value-add: Expandability benefits HAL and clientele STAR ALLIANCE “ ” The Star Alliance network offers more than 16,500 daily flights to 912 destinations in 159 countries

24. 4. Value-add: Expandability benefits HAL and clientele Google Trends, 2009

25. 4. HAL’s new target consumer and marketing strategy • Target consumer 25-45 year old young professionals

26. 4. HAL’s new target consumer and marketing strategy Source: Cruise Lines International Association 2008

27. Six Stage Execution Timeline • Stage One • Establish alliance with United Airlines • Launch “Value Packages” Threat New Entrants • Stage three • Evaluate effectiveness of alliance • Stage five • Begin servicing Chinese outbound travel in Europe 2009 2011 2012 2013 2014 2010 • Stage four • Establish alliance with Air China • Develop JVs with Chinese travel agents • Stage six • Expand network with Star Alliance • Stage two • Launch United-HAL Partnership program

28. Key Takeaways (1/2) What are we doing? • NOW: The United-HAL Partnership and Value Packages • Partnering with United Airlines to develop value-oriented fly/cruise packages through HAL’s and United’s websites • FUTURE: Entry into China and building Star Alliance network • Entry into Chinese outbound cruise tourism market and continue building partnerships with Star Alliance airlines

29. Key Takeaways (2/2) Why are we doing this? • Optimize capacity in declining times and delivering greater value to our customers • Exploiting exponential interest in Asian countries towards international cruise travel and tourism

30. Questions? APPENDIX A APPENDIX B Recent Dynamics in Cruise Industry US economic outlook Global economic outlook Incentives for United US forecast assumptions Risks of Short Term Strategy Financial Calculation APPENDIX C APPENDIX D Changing face of Chinese travel Factors allowing for cost reduction Why not Europe? Benefits for customers Why not India now? Destination-orientated travel Roadblocks to entry into China Star Alliance Frequent Flyer network

31. APPENDIX A Return

32. a. US Economic Outlook: historical comparison Peterson Institute for International Economics, ‘World Recession and Recovery,’ April 2009, p.16

33. US Economic Outlook: historical comparison M. Mussa, ‘World Recession and Recovery,’ Global Economic Prospects, April 7 2009, p. 14

34. a. US Economic Outlook: fiscal stimulus • Federal Reserve Monetary Response: • Cash rate 0.0~0.25% • Federal Reserve announced plans to purchase up to US$300b of longer-term Treasury securities in addition to increasing its total purchases of GSE debt and mortgage-backed securities to up to US$200b and US$1.25 trillion, respectively. • Congress Fiscal Response: • US$787b stimulus package

35. a. US Economic Outlook: versus consensus The Blue Chip Consensus forecast of 51 economists median projection shows GDP growth at approximately +1.0% Q409 annualized Russel Research, ‘Investment Manager Outlook,’ March 2009, p.16

36. a. US Economic Outlook: versus consensus

37. a. US Economic Outlook: versus consensus CBO anticipates that the current recession will last until 2Q09

38. a. US Economic Outlook: versus consensus IMF forecasts growth is expected to turn positive in 3Q of 2010 Return

39. b. Global Economic Outlook: slower recovery The IMF is projecting a global slowdown of -0.5% to +1.0% growth in global GDP. They expect this trend to reverse over 2010.

40. b. Global Economic Outlook: commodity rally Return

41. c. US Economic Outlook: forecast assumptions

42. c. US Economic Outlook: forecast assumptions

43. c. US Economic Outlook: forecast assumptions

44. c. US Economic Outlook: forecast assumptions

45. c. US Economic Outlook: forecast assumptions Return

46. Forecasts for tourism mostly bearish

47. APPENDIX B Return

48. Locations HAL Destinations: • Alaska • US • Canada • Europe • Pacific Northwest • Caribbean • Panama Canal • Asia Pacific • South America • Australia and New Zealand • Mexico • Hawaii United Airlines • 210 destinations in 30 countries

49. What incentives are there for United Airlines? • United Airline difficulties at present • March traffic fell 13.6% to 9.58b revenue passenger miles • Capacity in March dropped 9.9% in seat miles • Load factor (percentage of available seats filled with passengers) in March decreased to 78.7% from 82% last year. (Marketwatch) • Appeal of connecting with HAL but more importantly Carnival Corp at this point in time. Return

50. Market Share