Adria Airways Slovene Airline Company 4th Vienna Economic Forum Toma

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Adria AirwaysSlovene Airline Company4th
Vienna Economic Forum Tomaž ŠkoficDepuity V.P.
Sales Marketing

• Vienna, 6 November 2007

2
Company history

• 1961 ? establishment of the charter airline Adria
  Aviopromet, operating DC-
• aircraft, end of the sixties purchase of DC-9
  aircraft.
• 1984 Adria becomes a member of the IATA. Starts
  developing scheduled services with DC-9,
  MD-80 and Dash 7 aircraft. Fleet DC 9, MD 80,
  Dash 7 aircraft.
• 1989 ? Purchase of first Airbus A320 aircraft.
• 1991 ? On 25 June, the Republic of Slovenia
  declares independence, for political reasons
  Adria is grounded for three months.
• 1992 ? End of January operations restarted in a
  significantly reduced market. The structure of
  operations is markedly changed, from primarily a
  charter airline to a mainly scheduled service
  carrier.

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Company history

• 1995 ? Start of cooperation with Lufthansa,
  inclusion in European integration
  processes.
• 1998 ? Purchase of three new CRJ 200 aircraft.
• 2000 ? Purchase of fourth CRJ 200.
• 2001 ? The first scheduled flight in the EU, from
  Vienna to Frankfurt.
• 2002 ? Adria selected as first European
  authorised Bombardier maintenance
  centre for CRJ aircraft.
• 2004 ? Adria joins the global association of
  airlines, Star Alliance, as a regional
  member.
• 2005 ? Purchase of fifth new CRJ 200 aircraft
  opening of a new hangar.
• 2006 ? In November, Adria starts introducing
  e-ticketing.
• 2006 ? In December, Adria carries more than one
  million passengers for the first
  time in the independent Slovenia.
• 2007 ? Purchase of two new CRJ 900 aircrafts.

4
Start
Reorganisation Future of
business operation

• 2005

2006 2007

• 2008

• Problems
  Solutions Stabilized
• operating,
• further experience based
  development

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• Difficult situation in 2005
• Extensive loss in the amount of 9,6 mio EUR
• Inadequate fleet (gap between the 48-seater and
  the 162-seater )
• Global drop in ticket prices
• Global increase in oil prices
• Lack of controling of financial risk
• Lack of planning and creating of reserves for
  aircraft investment maintenence
• High operating costs (airport handling, catering)
  
• High financial costs
• Cash flow problems

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• Measures for the improvement of business
  operation
• Measures for increasing the revenues
• Revenues from scheduled passenger services
• Stop further decreasing of the value of passenger
  coupon (sticter limitation of promotional fares,
  general fare increase, increase of tariff
  add-ons, RSFs and No-show control)
• Reorganization of revenue management process
• Insateing new routes
• Adding new frequencies

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• Measures for increasing the revenues
• Revenues from charter services
• Charter services remain complementary services to
  the scheduled services and are aimed at
  optimising returns and not primarily at
  increasing the volume.
• Revenues from maintaining aircraft for third
  parties
• Maintain the leading position in maintenance of
  CRJ 100/200/700/900
• Expansion on the C-checks market for Airbus
  A-319/320/321 aircraft
• Building of a new hangar.

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• Measures for increasing the revenues
• Other operating revenues
• More active and inovative approach to marketing
  of our own media (the In-flight magazine and
  aircraft interior and exterior)
• Active markting of Adria Airways web site
• Further developement of our own pilot training
  resources and facilities

9

• Cost Management
• Direct operating costs
• Fleet optimisation
• - Lease of two A320 aircraft in wet lease
• - Due to too large gap between the Canadair
  CRJ-200 and the Airbus
• A320 aircraft, we leased two intermediary
  capacity aircraft with crew
• - Purchase of two new CRJ 900 aircrafts.
• - Lower operating expenses
• - Better occupancy of the aircraft
• - Options for CRJ900 and CRJ1000

10

• Cost Management
• Direct operating costs
• Mitigating high prices of kerosene through
  certain measures
• - selecting the most competitive offer
• - planning the use of aircraft appropriate to the
  number of passengers
• - adding of fuel surcharge
• - use of financial derivatives
• Reviewing contracts with individual airports to
  achieve significant savings in airport charges

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• Cost Management
• Direct Operating costs
• Maintenance costs
• - Challenge of cost management in fleet
  investment maintenance
• - Signing a contract with the manufacturer of the
  engines for the A320,
• IAE, to maintain engines and for payment of
  costs by engine flight hours
• advantages
• An easing of cashflows
• Equal distribution of costs over years
• Lower maintenance costs

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• Cost Management
• Indirect operating costs
• reduction of cabin services
• rationalisation of distribution network
• reorganisation of company structure and job
  descriptions (introducing stimulating salary
  system with variable part of he salary)
• outsourcing of certain activities (maintenence of
  IT systems, general purchasing, cleaning)

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• Cost Management
• Non operating result
• Refinancing of the majority of long-term foreign
  currency loans replacing fixed high-interest
  Dollars loans to Euros and cheaper sources of
  finance
• cash-flow was improved due to the moratorium on
  repayment of the principal
• Savings in financial costs
• Adoption of a financial risk management strategy
  in order to achieve effective and systematic risk
  management
• - interest rate risk
• - currency risk
• - risk associated with fuel price changes.

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• Miscellaneous
• Intensively progressing with the electronic
  ticket project
• Continuing with the trend of encouraging internet
  sale and other modern sales channels.
• Building new headquarters and centraliseing the
  company in one location.
• Organisation of effective controlling primarily
  by establishing profit and cost centres.
• Effective management of IT system.

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• Results
• Continuous improving of load factors.

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• A growing number of passengers carried

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• Growth of the scale of operations of Adria
  Airways d.d.

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• Net profit of Adria Airways d.d.

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• Summery
• Striving to became leading carrier in the
  Balkans
• Striving to expend and optimize the fleet
• Remain the main maintenance centre for CRJ
  aircraft
• Profiting Slovenias forthcoming EU Presidency
  for proving our excellence and improving our
  business results

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Adria Airways Fleet
3 Airbus A320
2 Canadair Regional Jet 900
7 Canadair Regional Jet 200
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The Adria Airways network of scheduled and
charter flights
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Thank you for your attention