LP AV

Market Review

March 2009

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Key topics• IATA

– Passenger traffic dropped by 10,1% in February Vs Feb 08, following a drop of 5,6% in January.– Fall equally spread across the zones (Asia-Pacific -12,8%; Europe -10,1%; North Am -12%) … only Middle East

increased by 0,4%– Cut in capacity continues in Feb (-5,9%; 3 major zones above -7%) after a -2% in Jan– As a consequence load factor decreased by 3,2 points at 69,9%.– End of this trend for passenger traffic not seen yet– Freight: expecting a recovery after reaching a floor: -22,1%, after a -23,2% in January

• OEM– EADS confirms that it remains fully committed to the construction of the A400M but ……

• Client info: – AIR FRANCE will receive its first A380 in 10/09…when Emirates slowdown its deliveries and potentially becoming a

lessor– Lufthansa will be the launch customer for the C-series (order 60 operated by Swiss)– Tough time in Asia for Qantas, Kingfisher and Shanghai Airlines– The FAA predicts the aviation downturn will weaken by the year's end and that growth will resume in 2010

Information sources:• Speednews – Main source used when no reference mentioned• Bulletin hebdomadaire d’informations Michelin and Bibznews - Collection of articles published in different newspapers/magazines – Information will be reported with accurate reference (mainly in french)• Weekly reports from Zones – Quoted as “Internal info”

Periodicity• LP AV Market review will be issued 1st week every month

LP AV – Market Intelligence – JP GrandMarch 19, 2009

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Indicators

Source: Banque de France

Source: IATA

Source: IATA

Source: Pricing Dept

LP AV – Market Intelligence – JP GrandMarch 19, 2009

Parité Euro-USD(2/01/08-31/03/09)

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Traffic analysis – February 2009 – Source: IATA economics – 26/03/09KEY POINTS

– There was an accelerated decline in passenger travel during February leaving revenue passenger kilometers 10.1% below levels a year earlier, compared to the 5.6% decline seen in January. By contrast there are tentative signs of a floor having been reached in the air freight market. Freight tonne kilometers were 22.1% down on the previous year, after the 23.2% decline in January. The level of freight volumes has moved sideways since December.

– Freight may have reached bottom as manufacturers end their aggressive inventory cuts. However, there are no signs yet of a recovery in shipments beyond the ending of destocking and there is no guarantee that a further round of destocking will not take place. The decline in passenger travel is being driven by the impact on consumer confidence of the loss of jobs in many economies, and that process has further to go before a floor is reached.

– The fall in February air travel was spread equally across the major three markets. The 12.8% decline in traffic carried by Asia Pacific airlines was exaggerated by the timing of the Chinese new year, which fell in January this year rather than February. However, the 10.1% decline in traffic carried by European airlines and 12% fall for North American airlines is more clearly reflective of the depth of the recession. Only airlines in the Middle East are seeing any growth and that was barely positive at 0.4% in February.

– The industry is shrinking fast in response to this slump in demand for travel and air freight. Passenger capacity was cut 5.9% in February compared to the 2% cut in January. In all three major regions there were cuts in excess of 7%. Only the Middle Eastern airlines are adding capacity. However, there is no region where airlines have been able to resize their industry quickly enough to make lower demand. Load factors were down 3.2% points on average in the year to February, with the largest decline of 4.7% points in the Middle East. Lower utilisation across international markets will increase downward pressure on yields and on profitability during the first quarter.

LP AV – Market Intelligence – JP GrandMarch 19, 2009

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Traffic analysis – February 2009

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Traffic analysis – February 2009

INTERNATIONAL PASSENGER TRAFFIC SHRINKING AT FASTER RATE

– There was an accelerated decline in passenger travel during February leaving revenue passenger kilometers 10.1% below levels a year earlier, compared to the 5.6% decline seen in January. We have seen 20%+ declines in particular months after the shocks of the 9-11 terrorist attacks and SARS but recovery on international markets was quite rapid after these events. The largest annual average decline in international traffic seen in both 1991 and 2001 were 3-4%, which highlights the severity of the decline we are currently experiencing.

– After removing the very large seasonal fluctuations in passenger demand, the chart below shows that there was an accelerated decline during February. Passenger traffic was down 1% during January from December but was down 2% during February over January, an annualised rate of over 20%.

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Traffic analysis – February 2009

– This accelerated decline was widespread across the three largest markets. Asia-Pacific markets were distorted downwards in February by the comparison with February 2008, when Chinese travel was boosted by the Chinese New Year falling in February whereas this holiday travel took place in Jnauary this year. Nonetheless, the European airlines saw their passenger volumes fall 10.1% and North American airlines saw a 12% decline. Clearly there was a significant underlying deterioration in air travel in February.

– This accelerated fall in travel matched the further decline in consumer confidence in February, which reached all time lows in the US and fell further in Europe and elsewhere. Job losses in the US eased slightly in February, though only to 651,000, but it may be the rate (and risk) of unemployment that is having a larger impact on consumer confidence, and that rose further to 8.1% in February.

– In the smaller markets there was substantial divergence of performance. The Middle Eastern airlines stand out as the one region where capacity and services are still expanding and where passenger travel is still growing, though at 0.4% in February passenger growth has virtually ground to a halt there. At the other extreme African airlines suffered the largest decline with a 13.7% fall in RPKs, a marked deterioration from January. It is not clear at present where this reflects a further loss of market share by the African airlines or a sharp fall in air travel. In January the continent was still generating reasonable growth in passenger travel within Africa and on some intercontinental markets. Latin American markets have been less severely affected but are now suffering from recession in their main trading partners and traffic slipped 3.8% in February.

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Traffic analysis – February 2009AIR FREIGHT VOLUMES SHOW TENTATIVE SIGNS OF REACHING A FLOOR

– The chart below shows that, once seasonal weakness is stripped from the data, there are tentative signs that a floor has been reach in the past three months, following the precipitous decline in air freight volumes at the end of last year. Air freight was down 22.1% in February following the 23.2% decline in January. However, month to month there has been a very minor rise since December.

– The precipitous decline of air freight in November and December was due to the deepening of the recession, but more specifically the emergence of a very large inventory overhang in manufacturing. The shipment of components, such as semi-conductors and car parts, slumped as a result. Surveys of purchasing managers in manufacturing have shown a modest improvement in orders and output in the past three months. This may indicate that the inventory correction has run its course. This would be consistent with the flattening out of air freight volumes seen in the past couple of months. However, we cannot be sure that another bout of destocking will not take place in the absence of further measures to stimulate a sustained economic recovery.

– What had been a crisis of the banking sector has now spread into a manufacturing crisis, causing a major contraction in world trade, hitting air freight but also those economies reliant on exports for growth. As a result the recession has spread worldwide and all regions, except for the Middle East, saw air freight down by more than 20% in February.

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Traffic analysis – February 2009

LOAD FACTORS DOWN AS FALLING DEMAND OUTPACES CAPACITY CUTS – The airline industry is shrinking as airlines attempt to resize their businesses to match the slump in demand for

both air travel and freight. On US domestic markets the US airlines started cutting early and substantially, and they have shrunk their industry in line with the recession-reduced demand. However, on international markets this has not been possible. Consolidation through merger is not possible cross-border because of regulatory restrictions on ownership and control, while slots regulation in crowded airports hampers the reduction of services. As a result the 5.9% cut in passenger capacity on international markets, even though it was a much greater reduction than the 2% cut in January, lagged significantly behind the 10.1% slump in demand. Load factors fell 3.2% points as a result.

– As the chart shows there has been a trend decline in load factors through 2008 and into 2009, as traffic growth first slowed and then fell sharply ahead of moves in capacity. Although capacity shrinkage has accelerated there is no sign as yet that the fall in load factors, and resulting downward pressure on yields, has come to an end.

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OEM infoAIRBUS• EADS confirms that it remains fully committed to the construction of the A400M

– The A400M is a 20 billion euro military program that is running 3-4 years late, according to the manufacturer, and 5 years late according to at least one of the 7 European NATO nations that ordered the plane to renew ageing transport fleets.

– 'The group reaffirms that the contract signed in 2003 does not provide the necessary conditions for the successful development of the program,' EADS said, citing an 'unrealistic timetable.'

BOEING• Federal Express (United States) has a clause in its contract with Boeing to cancel fifteen firm and fifteen options for the 777-

200LR Freighter. The clause will be enforced if Federal Express loses a political battle to prevent a powerful US union gaining recognition at the company. The threat of canceling such a large order for American aircraft and engines has gained the support of Boeing, GE and some politicians. If the order is cancelled it is likely that Federal Express would turn to Airbus and become the launch customer (again) for the A380-800 Freighter, which is currently on hold

LP AV – Reiner OttMarch 19, 2009

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OEM info (cont’d)BOMBARDIER• Bombardier reported a better-than-expected quarterly profit on Thursday, but said it would cut another 3,000 jobs and scale back

production of its business jets this year due to dwindling orders.• The job cuts will take place at facilities in Canada, the United States, Mexico and Northern Ireland by the end of 2009 and result in

severance costs of about USD$30 million, said Bombardier, the world's No. 3 civil aircraft manufacturer.• The job losses are in addition to the 1,360 layoffs announced February 5, when the company adjusted production rates of its Learjet and

Challenger aircraft.• Demand for business planes deteriorated rapidly in the last six months of 2008 and is likely to remain weak for the foreseeable future,

Bombardier said.• The company now expects to deliver 25 percent fewer business planes this fiscal year, but repeated its forecast for a 10 percent

increase in commercial plane delivery.

EMBRAER• EMBRAER recorded net profits of US$111.7m in 4Q08 (vs US$200.9m in 4Q07) and US$388.7m for 2008 (vs US$489.3m in 2007); • Sales rose 20% for the year 2008, despite a 3% drop in 4Q08.

DASSAULT• DASSAULT AVIATION reported net profit of EUR373m for 2008 (vs EUR382m in 2007) on 8.2% fewer sales, and says it expects

cancellations to outpace new orders in 2009.

GULFSTREAM • Gulfstream is reducing 2009 production of large cabin jets from 94 to 73 and of mid-size cabin jets from 30 to 24 as a result of a

deterioration in its backlog, particularly in the month of February, and a continued weak demand.

LP AV – Reiner OttMarch 19, 2009

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EMA Top 40AIR FRANCE-KLM:• Will receive their first A380 in October 09. The aircraft will fly from Paris to New York City and will replace two current afternoon flights by one.

Expected cost saving is 15% (Le Figaro 10/03/09).• May be interested in buying Czech Airlines. This would give Air France a much better access to Eastern European routes.(Les Echos 17/03/09) AIR

FRANCE-KLM, AEROFLOT, ODIEN (private equity), and a consortium that includes TRAVEL SERVICE were among four bidders that submitted non-binding expressions of interest for stake in CZECH AIRLINES.(Sp 24/03/09)

• Expects €200m operating loss for year ended March 31; it has €3.5b-€4b cash. It further reduced pax capacity by 3.4%/cargo by 13% to result in 6% fewer revenues in FY09/10 to be offset by expected 20% lower fuel bill.(Sp 26/03/09)

• Plans to establish Premium Voyageur cabin (between Business and Economy) from late 2009 on 777s, A330s and A340s (Sp 26/03/09)

BRITISH AIRWAYS• Following a drop in traffic, BA reduced its capacity. Result is an improved load factor to 72% (+0.5 points). However business class profits plummeted

by 20% compared with February 08, and on average, the revenue per passenger dropped 8.3% compared to the same period last year. (The Wall Street Journal 05/03/09)

• Announced that the year 2008-2009 would show a loss of around 150 million euros despite a turnover 3.5% above previous year’s. BA is looking at a potential 2% decrease in capacity and likely job losses. For 2009-2010, BA anticipates a drop of 5% of its turnover and a loss equivalent to this year’s. (Les Echos - The Wall Street journal - Financial Times 06/03/09)

• Took delivery of a new 777-200ER from Boeing, its first new long haul aircraft since 2001; aircraft is to enter service in June 2009 following interior installation at Cardiff. British Airways now has three -200ERs and two -300ERs on order. (Sp 26/03/09)

EMIRATES AIRLINES• Would envisage to shift deliveries of several A380s…6 instead of 7 in 2009 and a postponement would be likely for the 8 deliveries planned in 2010.

(Les Echos 13/03/09)• Confirmed that it will stop using A380s on the Dubai New York route due to a rapid fall in demand. It would re-deploy the two A380s onto twice daily

routes between Bangkok/Dubai and three times a week between Dubai/Toronto with effect from 1st June 2009. Emirates will now use Boeing 777s on the New York/Dubai route. (sp 23/03)

• On the question of funding aircraft we have to consider if the orders form the Middle East will turn into deliveries.(…) With Dubai in terrible trouble at the moment, (….) some are openly asking if Emirates is set to destroy itself by taking delivery of all the aircraft that it has on order? It may well be the case that Emirates ordered aircraft at prices so low, or even non-existent, that they cannot lose, this being the case Emirates is a global lessor in waiting! (sp 23/03)

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LUFTHANSA• Bombardier Aerospace announced that Lufthansa, the launch customer for the CSeries aircraft program, has signed a

firm purchase agreement for 30 CSeries model CS100 single-aisle aircraft. These aircraft will be operated by Swiss International Air Lines from 2014 as replacements for its fleet of 20 Avro RJ100s, with remaining 10 to permit further growth in SWISS’s European operations. The agreement also includes options on an additional 30 CSeries aircraft (…) (Sp 13/03/09)

ZOOM ON LUFTHANSA TECHNIK (MRO)• In 2008, Germany's Lufthansa Technik Group, was able to increase its revenues and results in the face of a generally

shrinking market. The 2008 annual report submitted for the 20 companies that make up the Lufthansa Technik Group showed a €295m pre-tax profit, equivalent to an increase of 2.6% year on year.

• "In view of reduced demand from airlines and the generally shrinking market for maintenance, repair and overhaul services (MRO), Lufthansa Technik closed 2008 very successfully," "Healthy growth in the currently stagnating maintenance sector enabled us to further stabilize our leading position in the world market."

• Alongside the Group's global presence, this can be attributed to substantially improved productivity and efficiency as well as the successful acquisition of new contracts. In 2008 the Group gained a further 37 customers, reaching a current total of 668 customers worldwide. 502 new contracts were signed, representing a total volume of €3.2b over their entire contractual period (of up to ten years).

• Lufthansa Technik considers its international network - with 32 production locations worldwide and a workforce of over 26,000 in the vital aviation markets - to be an important factor in its good market position.

• This year the global downturn will have more of an effect on Lufthansa Technik than previously. But Lufthansa Technik sees itself well-armed to meet the challenges of an extremely depressed market environment. Cost-effective locations plus programs to enhance our efficiency and flexibility give us reason to believe that we will get through the crisis of the aviation industry without major damage." (sp 13/03/09)

EMA Top 40 (cont.)

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EMA-Other market info customer/prospectAUSTRIAN AIRLINESRecord losses of 430 million euros have been announced for 2008. Being currently bought by Lufthansa, Austrian is going to proceed to 2600 partial layoffs for six months starting April 1st (Les Echos 16/03/09)

OLYMPIC AIRLINESThe new private owners of Olympic Airlines are set to revamp and renew every aspect of the airline in the coming years. One of the first tasks will be to renew the fleet. Up to twenty firm Boeing 737NG Family aircraft or twenty Airbus A320 Family aircraft are required to replace one Boeing 737-300 and sixteen 737-400s. Up to fifteen new turbo-props are required to replace thirteen ATR42/72s and four Bombardier DHC8-100s. The ATR42/72-500 family or ATR42/72-600 family are likely to be more suitable than the larger Bombardier DHC8-400Q. (ACAS News bulletin 11/03/09)

AIR BERLIN, TUIfly near deal for 20% stake swaps• Confirmed that they are in discussions regarding a long-awaited alliance. TUI Travel will take 20% of AB through a capital increase with AB acquiring the same percentage of TUIfly.If the deal goes through, TUIfly will transfer its loss-making scheduled shuttle services to AB along with 19 of its 38 operating aircraft, which will fly under the AB brand but with TUIfly crews. TUIfly's fleet is too large for its needs and the reduction would allow it to concentrate on its profitable European charter operation.(ATW online 18/03/09). • AIR BERLIN and TUI TRAVEL finalized strategic cooperation agreement for their German flight business based on cross ownership of 19.9%.(Sp 30/03/09)

FLYDUBAI’s (United Arab Emirates) first Boeing 737-800 has rolled out of the factory at Renton and will be delivered in the coming weeks. Fly Dubai commences operations in June. (ACAS News bulletin 26/03/09)

RYANAIR took delivery of its 200th new 737-800; it has 138 remaining on firm order.

ROYAL AIR MAROC ordered six ATR -600 Series turboprops for delivery from early 2011 for a new regional subsidiary to be launched in mid-2009 with four ATR 72-200s on lease from ATR.(Sp 30/03/09)

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EMA MiscellaneousMilitary:• France is in negotiation with Abu Dhabi for the potential sale of 63 Rafale aircraft. However France would have to take back the 60 UAE Air Force Mirage 2000 (Le Monde 06/03/09) • Rafale orders expected: several selling campaigns are ongoing with the UAE, Lybia, Brazil and Switzerland. (Les Echos 20/03/09)

Regional:First Sukhoi Superjet delivery is planned in December 2009 to Aeroflot. (Les Echos 05/03/09)

General Aviation:According to PMI Media’s latest study (The very Light Jet Market 2008-17: the impact of the Global finanacial crisis), the market for Very Light Jets (VLJs) is set to dip significantly as recession sweeps across Western economies. Some 4610 VLJs will be delivered during this 10-year period. This is almost 23% down on the 5970 deliveries the UK-based company predicted in the October 2007 edition of its VLJ market report. (Aviation Int”l News – Jan09)

Airport TrafficParis airports’ traffic keeps going downwards from 7,1% in January to 8,1% in February (-8,8% for Paris-CDG). Although this trend is general , the strongest traffic drops are expected on European routes (-11,2%). (Les Echos 17/03/09)

Time Slot Allocation in EuropeUsually time slots allocated to European airlines are renewed from one year to another provided they have been used at least 80%. The general traffic slowdown obliged airlines to down their requests. However, the EC agreed to let these airlines have the same number of slots in 2010 vs 2009, whether used or not.(GIFAS synthèse de la presse / 11/03/09)

Airfares increase despite fuel cost droppingFuel price dropped significantly and however airfares remain high, say the International Herald Tribune. It suggests airlines try to preserve their margin. Facing important traffic downturn, airlines have no real adjustment variables: they are deprived of their « high contribution » customers. Passengers who keep using air transport pay for those who stopped using it. (International Herald Tribune – 18/03/09).

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EMA Miscellaneous (cont.)IATA raises loss factor• Demand is projected to fall sharply with passenger traffic expected to contract by 5.7% over the year. Revenue implications of this fall will be exaggerated by an even sharper fall in premium traffic. Cargo demand is expected to decline by 13.0%. Both are significantly worse than the December forecast of a 3.0% drop in passenger demand and a 5.0% fall in cargo demand. Yields are expected to drop by 4.3%.

• Europe: Europe’s carriers are expected to lose US$1b in 2009. A forecast 2.9% fall in the continent’s GDP is expected to result in a drop in demand of 6.5%. Capacity cuts of 5.3% will not keep pace with the fall in demand, driving yields and profitability down.• Africa: African carriers are expected to produce 2009 losses of US$600m. This is six times the US$100m lost in 2008. The continent’s carriers are losing market share on long-haul routes. Demand is expected to drop by 7.8% with only a 6.0% fall in capacity.• Middle East: Middle East will be the only region with demand growth in 2009 (+1.2%). But this will be overshadowed by the impact of a 3.8% increase in capacity. While this is significantly below the double-digit growth of previous years, the region continues to add capacity ahead of demand. The result is expected to be a loss of US$900m (a slight deterioration from the US$800m loss recorded in 2008).

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FEO Top 40

• Thai Airways International (THAI) has completed the transfer of all remaining flights from Bangkok’s Don Mueang airport to the city’s new Suvarnabhumi hub. A total of 23 domestic services have been rerouted, in a move expected to save the national carrier an estimated THB600 million (US$17 million) a year Don Mueang airport will remain open, catering for the domestic services of low-cost carriers Nok Air and One-Two-Go. (CAPA 23/03/09)

• Shanghai Airlines has won CNY10 billion (US$1.5 billion) of credit from Bank of Communications Co. and Agricultural Bank of China to help finance aircraft purchases. According to a Bloomberg report, the investment adds to the CNY8 billion credit line received from the Bank of China last week, to help the struggling carrier. The airline has cut management salaries and plans to delay plane deliveries this year as slowing economic growth hits travel demand, the report said. (CAPA 25/03/09)

• Air New Zealand (New Zealand) is shortly expected to begin an aircraft evaluation to replace its current fleet of sixteen Boeing 737-300s. Larger aircraft are expected to be bought, and it will come down to a straight fight between the Airbus A320 and Boeing 737-800. (Tr : Fleet & Orders Gossip Shop, Issue 338)

• Kingfisher Airlines (India) is soon to cancel two of the three remaining Airbus A340-500s it has on order, as it is believed that Airbus has found two new customers for one A340-500 each. Kingfisher Airlines ordered five A340-500s, all of which have been built but with the airlines international expansion plans on hold it has no need for the aircraft. (Tr : Fleet & Orders Gossip Shop, Issue 338)

LPAV – FEO Zone marketing – Artika TanapongpipatApril 2, 2009

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FEO Other Sichuan Airlines • Private Chinese carrier,United Eagle Airlines, has been taken over by state owned Sichuan.Sichuan Airlines has injected

CNY188 million (US$27.5 million) into the Chengdu based airline to expand its stake from 20 to 76%. United Eagle has reportedly suspended 14 of its 23 domestic routes since January due to “management problems”. “United Eagle was affected by the Sichuan earthquake last year, which was followed by the rising price of aviation fuel and the global financial downturn,” Li Haiying, former General Manager of United Eagle was reported saying. Sichuan Airport Group said in December that United Eagle was CNY30.5 million in debt, the report said. Many Chinese private airlines have been struggling with the slowdown in travel demand. The General Administration of Civil Aviation of China (CAAC) recently ordered Wuhan-based East Star Air to suspend flights due to financial and management problems, while OK Air temporarily suspended services in December.

Qantas• Qantas Airways may cut as many as 100 senior executive jobs in a restructuring process, Bloomberg reported citing the

Australian Financial Review. The review is being completed by Boston Consulting Group and will be implemented by the airline in coming weeks, report stated. The management reorganisation comes after Qantas said last year it would reduce 1,500 jobs across the company.

Chongqing Airlines• China's Chongqing Airlines has taken delivery (24-Mar-09) of the first of three Airbus A319s it has agreed to lease from ILFC.

Chongqing Airlines was set up in Oct-07 jointly by China Southern Airlines and Chongqing International Invest Co. The company currently operates four A320s. From March to May 2009, the company will receive three new leased A319s. The new aircraft will help Chongqing Airlines expand its network and open up new routes in the country.

Goair• India’s low-cost carrier, GoAir,has announced expansion of its services to south and north India. GoAir Chief Executive Officer

Edgardo Badiali has also dismissed reports of the airline’s merger with SpiceJet as “rumours”. According to Badiali, GoAir was about to conclude its efforts to replace leased aircraft with brand new ones. The last of the leased Airbus A320s would fly back later this week with the introduction of two new aircraft by June and two more in November and December this year, the report said. Badiali has reported saying that with the new connections, the total flights each week would go up to 474 from 248 at present.

LPAV – FEO Zone marketing – Artika TanapongpipatApril 2, 2009

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FEO General & Forecast Trends• Hit by the global economic crisis, high-flying executives are turning away from the ultimate luxury accessory – the private jet.

Manufacturers Bombardier, Cessna and Hawker Beechcraft, have announced layoffs as they report a lag in new orders and a surge of cancellations, the Straits Times reported. “We’ve barely sold any Falcons since January,’ Serge Dassault, of French plane maker, Dassault Aviation was reported saying, adding that around 8% of his orders had been cancelled. Private planes cost between US$4-40 million according to the report. (26/03/09 CAPA)

• The world’s airline industry is heading for more consolidation because of the global recession and drop in air travel. James Hogan told the Australian Broadcasting Corp.’s Inside Business program that combinations such as Air France-KLM Group will probably become more common as companies seek to cut costs. Hogan added that Abu Dhabi-based Etihad is seeking ways to work more closely with Qantas, following recent code share deals. “We are already seeing a number of airlines under huge pressure. Airlines will have to make decisions as any other business does with regard to their network, their fleet and whether they rationalize, consolidate or continue to invest in expansion,” Hogan was quoted saying He added that the Gulf region’s aviation market was “still strong,” but that Etihad was still “under pressure” to achieve its target of becoming profitable in 2010 .( CAPA28/03/09)

• China will reopen Tibet to foreign tourists on 5 April, after easing restrictions imposed during the anniversary of a failed uprising against Chinese rule. State news agency, Xinhua, reported the region’s head of tourism, named only as ‘Bachug’ as saying that Tibet was closed in March due to safety fears. “Tibet will resume receiving foreign tourists as of 5 April, and we warmly welcome them,” Bachug was quoted saying. “Tibet is harmonious and safe now. Travel agencies, tourist resorts and hotels are well prepared for tourists,” he said, adding that so far more than 100 foreign tourist groups had signed-up to visit the region.

LPAV – FEO Zone marketing – Artika TanapongpipatApril 2, 2009

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NAM Top 40

Frontier• Frontier Airlines Holdings has received a firm commitment for $40 million in post-petition debtor-in-possession (DIP) financing

from Republic Airways Holdings, an airline holding company based in Indianapolis, Ind. The DIP facility is subject to bankruptcy court approval and other pre-closing conditions.

• Upon court approval, Republic will provide immediate funding of $40 million to refinance the expiring DIP facility and to support Frontier's additional working capital needs. Furthermore, as a condition to the loan, Frontier has agreed to allow Republic a stipulated damage claim in the amount of $150 million.

• Frontier and its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code on April 10, 2008. The Company received a total of $30 million in DIP funding from Republic as well as Credit Suisse Securities and AQR Capital in August 2008. The Company will retire that debt by the end of March.

Continental• Continental Airlines reported in March a consolidated (mainline plus regional) load factor of 79.4 percent, 2.9 points below the

March 2008 consolidated load factor, and a mainline load factor of 79.9 percent, 2.7 points below the March 2008 mainline load factor. In addition, the carrier reported a March domestic mainline load factor of 84.3 percent, 0.9 points below the March 2008 domestic mainline load factor, and a March international mainline load factor of 75.8 percent, 4.2 points below March 2008.

• Continental ended the first quarter 2009 with an unrestricted cash, cash equivalents and short-term investments balance of approximately $2.65 billion.

Air Canada• Air Canada shares were down more than 10% in early trading on Tuesday amid fears that the company is set to file for

bankruptcy protection." If Air Canada does seek bankruptcy protection, it would be the carrier's second bankruptcy in six years

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NAM Other Atlantic Southeast Airlines• Atlantic Southeast Airlines, a major regional carrier for Delta Air Lines grounded 60 of its 110 50-passenger jets after an

internal audit raised safety concerns. The groundings were expected to cause some flight delays for passengers flying ASA. It could take 36 to 42 hours to complete the inspections, company spokeswoman Kate Modolo said."

• The number of grounded jets represents about 40% of the company’s fleet. AP adds "the paperwork audit raised questions about whether the engines on Bombardier CRJ200 jets had been properly inspected according to the guidelines provided by the engines' manufacturer"

AirTran• AirTran Airways, a subsidiary of AirTran Holdings, Inc. reported traffic for the month of March 2009 and the airline's load factor

80.7% represents a new all-time company record for the month of March and for the first quarter.

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General & Forecast Trends• The Federal Aviation Administration is the latest to weigh in with bad news about demand for air travel. The agency "predicts

nearly 9% fewer passengers will board major U.S. airlines for domestic flights this year, and that traffic on international flights will also decline as the bleak economy curbs business travel and vacation plans," The Associated Press writes.

• AP writes the FAA's projections for this year match the "grim outlook" issued by the airline industry, where "major carriers have been cutting capacity in the face of a travel slowdown blamed on the recession." But, in a sliver of optimistic news, the FAA predicts the aviation downturn will weaken by the year's end and that growth will resume in 2010. 

• The struggling U.S. airline industry is likely to buy less jet fuel for the fourth year in a row as the recession keeps passengers away from boarding gates and cargo from loading docks.

• That will put more pressure on an already gloomy market for petroleum distillates, the refined products that also include diesel fuel, which analysts say could slip in value below gasoline this year for the first time since 2007.

• A sharp drop in jet fuel prices has let carriers cut air fares in hopes of enticing business and pleasure travelers into the air. But bargains at the ticket counter have not been enough to trump job-loss worries and economic malaise.

• "The economy is a big driver," said John Maples, a long-term forecaster for the U.S. Energy Information Administration. He bases his jet-fuel demand estimates on disposable income, jet fuel prices and air fares.

• According to government estimates, passenger travel between January 2008 and January 2009 fell about 5 percent despite lower ticket prices, cutting estimates for jet fuel demand for the period by about 6 percent.

• The EIA sees 2009 U.S. jet fuel demand at 1.43 million barrels per day in 2009 versus the 1.52 mmbpd used in 2008, which was lower than 2007 due to mothballing of older, less efficient planes.

• Airlines are losing the battle for dwindling consumer dollars, while businesses faced with falling revenues are cutting back on shipping and corporate travel.