Keynote address: The Future of the Travel Industry Dermot Mannion – Chief Executive

1. Keynote address:The Future of the Travel IndustryDermot Mannion – Chief Executive International Society of Tourism and Travel educators Annual Conference

2. The Future of the Travel Industry….?

3. Key issues……present and future…… • Sustained ultra-high fuel prices • Slowing consumer demand in key markets • Intensifying competition • Industry consolidation • Environmental issues . .

4. The credit grenade and its consequences Housing/Consumer Slowdown Huge Volatility In Commodities Credit Crunch Banking Crisis Falling Asset Prices Interest Rates $/£/€ FX Western Economies In Sharp Slowdown

5. Jet fuel velocity • Rate of increase, not actual price, has undermined airlines

6. The stock market reacts • Travel companies and airlines capitulate on all stock markets

7. Airline Industry Response • Step 1 - Hold firm, take market share • Step 2 - Curb capacity growth and raise yield • Step 3 - Restructure costs and rationalise • Step 4 - Survive, merge or capitulate • Consolidation phase accelerating amid current crisis

8. Challenges amplifies in Ireland • Economy at centre of Anglo-American crisis • Open economy with heavy $/£ exposure • Short-haul – Direct fight with lowest cost provider • Long-haul – Fast changing transatlantic alliances Aer Lingus under extreme market pressures

9. What faces Aer Lingus ? • Sharp slowdown in home market + $/£ revenue pressure • Unit costs rising – labour, fuel, airports • Short-haul - key competitor expanding – 15% pa minimum • Long-haul - competitors merging to cut costs, exploit market share. Open Skies a game changer. Star, Skyteam, OneWorld = 70% transatlantic market • Rapidly changing environment creates real threats

10. The European Airline Industry in 2015 2015 2008 Scenario A Scenario B British Airways British Airways/IB British Airways/IB Lufthansa Lufthansa Lufthansa AF/KLM AF/KLM AF/KLM Ryanair Ryanair Ryanair easyJet easyJet easyJet Air Berlin Finnair Iberia Aer Lingus SAS Virgin Atlantic Alitalia Austrian Finnair Aer Lingus BMI Virgin Atlantic Brent per Barrel $125 $100 $200 Source Goldman Sachs

11. The Original Challenge for Aer lingus • Preparing for an IPO • Major expansion • Compete on short haul and long haul • Deliver a consistent product to the customer • Low prices on direct flights • Extras that make flying easier • High level of customer service • An experience with a human touch • Grow profit

12. The new Challenge……(or is it really a “New” challenge • Survive • Innovate • Compete • Exploit opportunities • Remove cost from the business • Deliver a consistent product to the customer • Low prices on direct flights • Extras that make flying easier • High level of customer service • An experience with a human touch • Return to profit

13. 2008 and beyond - Changing perceptions • Since 2001 Aer Lingus has had to change to remain (become?) relevant • “Aer Lingus Brand” still has natural advantages • Customers still have high expectations…… • ….at very Low fares • Post IPO, Aer Lingus has a greater number of constituencies/Audiences • Customer • Staff • Market • Regulators • Shareholders • Airline needs to drive the business profitably forward • While retaining all that sets Aer Lingus apart from the rest

14. Network Development 2001- 2008 2001 | Short Haul Point-to-Point 2008 | Short Haul Point-to-Point 2008 2001 Change Routes 86 31 + 55 Aircraft types 1 4 (3)

15. Positioning Full Frills Impressive Sophisticated Flexible Expensive Few Frills Friendly Practical Fair Relevant No Frills Cranky Basic Unapologetic Tolerable Pricey and smart Cheap and cheerful Cheap and nasty

16. Operational focus on cost reduction Key aspects of service delivery differentiation Low fares at the core of all communication … based on “value-for-money” positioning Cost focused Customer focused Economy pricing Premium pricing

17. How our Customers currently perceive us: Warm, welcoming (typically Irish) Professional, punctual, safe. In the Irish market: Expect our brand to deliver higher levels of service and customer care. Arguably a hangover from past experience/communication ? A real alternative to traditional Low cost carriers Markets outside of Ireland (e.g. NI, GB, Ger, USA) Stronger on aspects of service and customer care. Often aligned with traditional carriers rather than Low cost carriers. 16

18. The message….Consumer • Low Fares • Direct services to popular destinations • Professional and efficient customer service delivered with a human touch • Central city airports • Allocated seating • One-way fares (short-haul and long-haul) • e-booking • Efficient check-in (FastPass kiosks) • Frequent Flyer programme • Customer care in event of disruption • Although the Airline has changed, the primacy of the customer remains

19. The message….Market/Investors • Profitable enterprise • Well run company • Strong management team that are on top of the significant issues that the company and industry face • Robust business model • Continues to compete strongly in all markets • Investors are comfortable with Aer Lingus' hedging approach to fuel • Management has a clear plan and is executing it well

20. The message…..Staff • Customer is at the centre of everything we do • The airline is well placed to grow for the benefit of all stakeholders • Progressive organisation • Rewarding and fulfilling place to work • Management has a clear plan and is executing it well • Change has been, and will be ever present

21. Innovation

22. To Drive Revenues without driving Cost • Expand network reach into new markets • Leverage our “Know-how” bulit up over many years – aerlingus.com • Selectively leverage other distribution channels in existing markets • www.aerlingus.com • Travel Agent Consolidators • Dot.Coms etc. • All to be achieved without adding infrastructural cost or complexity Sum of Sectors (EI Short-Haul and Long-Haul networks) jetBlue Farelink (EI Long-Haul and B6 Short-Haul networks) United Codeshare

23. Sum-Of-Sectors • To access bigger markets - connect Europe to North America. • To leverage connection opportunities between our 2 standalone networks • To use Sum of Sector technology on the website to ensure that both LH and SH component of connected product are sold at the optimum yield. Avoid cross-subsidisation • To leverage existing Sales and Marketing efforts in US and Europe to sell Europe out of the US and US out of Europe

24. Sum of Sectors - What is it? • We conducted an analysis of connecting possibilities from Short Haul to Long Haul • In many cases, there were no valid connections (without adjusting schedules) or a strong direct incumbant existed • In the case of 28 cities, connections existed, incumbants were expensive or in some cases, no direct services existed For Example • JFK & BOS •  BCN, MAD, CDG, NCE, LIN, MAN, GLA, LGW • JFK Only •  FCO, NAP, WAW, KRK • BOS Only •  DUS, FRA, BRU, BHX, CPH

25. How we sell it - Search Engine Marketing • Strategy is to bring customers to aerlingus.com through Search Engine Marketing • (above) UK customers search for Manchester to New York

26. Driving Passenger Revenue through partnership • Linking Aer Lingus lowest fare short-haul and long-haul sectors to offer customers seamless connections • Industry first partnership with jetBlue to offer connections between Ireland and 40 destinations in the US - seamless booking process on aerlingus.com • New codeshare agreement with United Airlines commencing Nov 2008 covering all of Aer Lingus’ US gateways with access to over 200 additional UD destinations • The codeshare which will apply to all Aer Lingus transatlantic flights to and from Shannon and Dublin will also result in simplified reservations, ticketing, through check-in and coordinated baggage handling for passengers.

27. United Network

28. JFK Connections With JetBlue Services

29. Long Haul Product Enhancement • Long Haul Product needs to be relevant • Current product is inconsistent • Recent new aircraft arrivals set the new standard • Major retrofit programme underway • At least 80% of Long Haul fleet at new standard by Summer 2009 • New seats in both cabins • Enhanced Premier Inflight Entertainment system (IFE) • Video on Demand in Economy • Other misc. cabin enhancements

30. Driving Revenue through Ancillary Revenue • Baggage Charges introduced with 60% of customers pre-paying online • Introduction of Seat Selection fees on Short Haul and Orlando • New Travel Insurance option at point of booking provided by Mondial • Improved Car Hire proposition through dynamic packaging at point of booking • New hotel provider, lastminute.com contributing increased hotel bookings

31. Delivering Growth | New Bag Tag Kiosk Bag Weighing Scale

32. The Environment

33. Aviations contribution to climate change • Aviation accounts for about 2% of total anthropogenic CO2 emissions • Domestic aviation is included in Kyoto – commitment to find a solution through ICAO for international air transport Contribution to man-made carbon dioxide emissions according to different key studies Sources: IPCC, UNFCCC, IEA and DLR

34. 2007 | Reducing Fuel Consumption

35. 2007 | Reducing Fuel Consumption – New Aircraft Fuel burn - kilos of fuel, per seat, per flight hour 19.0 18.1 Reducing fuel burn and emissions 17.2 15.4 A350-800 A350-900 A330-300 A330-300 Enhanced (OG)

36. Emission Trading Contd • This amount of CO2 must be purchased from the open market • CO2 can only come from other industries which can reduce their CO2 below the cap CO2 production / tonnes CAP This amount of CO2 is allowed without charge 2009 2012 2008 2010 2011 2013 2005 2006 2007

37. Outlook

38. 2008 First Half | Financial Summary • Loss reflects difficult consumer and fuel environment • Delivery on cost saving initiatives through PCI and maintenance contracts • Worsening market conditions call for a fundamental overhaul of our cost base €m 2008 2007 Change Total revenue 632.9 574.1 + 10.2% EBITDAR 36.0 56.5 (36.0%) Operating (loss)/profit (before profit share) (22.3) 2.6 NM Return on Invested Capital (%)** 17.4% 17.3% +0.1pt **As measured by EBITDAR/Replacement Value on 12 month-rolling basis.

39. Future imperatives • Economic outlook in main markets uncertain - exacerbated by continuing rise in oil prices • 64% of 2008 fuel exposed to market • US$5 change in the price per tonne of jet fuel has US$1.5m impact on cost of unhedged fuel requirements for the period March to December 2008. • Key focus will be to increase awareness and traffic on new gateways while continuing to drive performance on current gateways • Open skies now offers us the means of supplying the market purely against demand and market dynamics • Sum of Sectors allows us to harness demand to/from 17 of our Short haul points feeding into our long haul • Our new relationships with United and Jetblue give us the opportunity of significantly increasing our footprint in the US market • Open Skies offers us new and exciting opportunities for growth

40. Outlook • Difficult market conditions will continue • Significant cost pressures in all areas of the model • Further fare reductions required to drive volumes • Driving value through active network and fleet management • Winter LH capacity will reduce by 11%; SH capacity will reduce by 1% • Deferral of delivery of new A330 aircraft from September 2009 to June 2010 • Operating environment and rising costs will continue to have a significant effect on the financial performance of the business • Aer Lingus will at best, break even in the second half, delivering a loss for the full year • Further fundamental changes needed to operating cost base to minimise losses in 2009 and to ensure the long term viability of the business