1. Changing Markets, Changing Times Peter Morris Peter Morris, Chief Economist, Ascend Peter.morris@ascendworldwide.com

2. DEMAND Changing size and demographics of markets Changes in Income Changes in price sensitivity Business structure/ practice SUPPLY Impact of technology Changes in products Aircraft Classes of service Hubs/ connections Flexibility Off aircraft services Changes in Customer Trends The Golden rule is: There is no golden rule. G. B. Shaw

3. The Challenges for Airlines • Customers are generally: • Numerous, intelligent • have increasingly unlimited channels of: • advice • comparison • communication. • And some customers are NOT….... • They will ignore meaningless ‘improvements’ in technology or redundant channels • Genuine communication valued, but has a cost • Vast behavioural database generated - but how many airlines actually make cost effective use of the information? • Technology a given- how do you use it against your competition?

4. Aviation Corporate Travel Trends Observed • Gradual tightening of Corporate travel policies seen since 2000 (accelerated by downturns) • Class of travel criteria • Range of airlines used • Self booking increased, especially on short haul, LCC • Widening absolute differentials on C/Y create market for premium economy on medium/ long haul • Corporate TA’s holding significant share of value market due to ancillary services (enforcement, reporting, corporate discounts) • SME’s find attraction in LCC sites

5. Benefits of Technology • To whom? • ‘I tried to use the Delta version of this...but I was glad I also had the print out because the TSA agent did not have the "special scanner" to read my cell phone ‘ DL Pax • ‘However, the delay could have been more substantial if multiple passengers had used mobile boarding passes and had all experienced similar issues.’ AA Pax Problem of multiple systems and continuing need for ‘fallback’ solutions – for non users or for systems failures

6. Give them what they want, - what they really, really want….. Sample of 269 regular global business air travellers, Ascend, March 2010

7. What do customers think has got worse about air travel in last 2 years? Percent of respondents rating items most disliked • Other items (in order) • Planes more crowded • Higher fares • Having to travel economy • Decline in off aircraft services • Using Low Cost airlines Sample of 269 regular global business air travellers, Ascend, March 2010

8. Conclusions • The ‘new consumer’ is just the ‘old consumer’ using technology when it suits • The core needs are just the same - good value, faster service, better products • A real challenge for airlines with ‘sophisticated pricing’ to thrive in a full information economy • A real chance to use market information for competitive advantage • A possible ‘Bow tie’ of success, with larger conglomerate carriers having critical mass, and smaller ‘fleet-footed’ players directing efforts at markets they understand and give just what they want

9. Changing Markets, Changing Times Peter Morris Peter Morris, Chief Economist, Ascend Peter.morris@ascendworldwide.com